According to the Order, entered on May 31 2002, from U.S. District Judge Honorable Benson E. Legg, the case was settled. The Stipulation and Plan of Allocation were approved as fair, and the plaintiffs’ counsel was awarded attorneys' fees
of one-third of the settlement proceeds. Earlier, on October 2, 2000, per court order, the case was dismissed without prejudice to the right of a party to move for good cause within 45 days to reopen this action if settlement is not consummated. On October 16, 2000, the Court entered an Order directing the case to be reopened pending a hearing on the class settlement.
As reported by the Company's FORM 10QSB for the period ended September 30, 2001, a settlement has been reached between the Company and the shareholders. The agreement and its terms require approval by the Court. The settlement will provide for the dismissal of the shareholder suits against the Company and Grant Thornton. The settlement terms include a payment to the shareholders by the Company's insurer in the amount of $2.25 million. The shareholders will also receive $3 million in warrants in the Company's stock and a 3% interest in the Company's suit against Grant Thornton in the Baltimore City Circuit Court, described below. At a hearing on April 27, 2001 Grant Thornton raised questions concerning the effect of the PSLRA on future actions by Carnegie in the Maryland state court litigation commenced by Carnegie against Grant Thornton, described below. In an October 12 ruling, the Federal court denied Grant Thornton's motions to bar Carnegie's state court claims, and it cleared the way for approval of the settlement reached late last year. Certain procedural steps remain to be taken, in the typical process for approval of shareholder class action settlements through approval by the "class."
The Judge also granted the Company's motion to stay the federal court lawsuit filed by certain shareholders against Grant Thornton. As part of the settlement agreement in the class action litigation, Carnegie will be assigned any "class" rights against Grant Thornton which might exist that certain shareholders asserted against Grant Thornton in federal court.
On March 21, 2000, the Plaintiffs in the Maryland actions filed a consolidated
complaint, alleging violations of Sections 10(b) and 20(a) of the Securities
Exchange Act, 15 U.S.C. (S)(S) 78j(b) and 78t(a), as well as SEC Rule 10-b-5, 17
C.F.R. 240.10b-5. The consolidated complaint purports to be a class action filed
on behalf of non affiliates who purchased or acquired the Corporations Common
Stock in the period from September 15, 1998 to April 30, 1999.
Several lawsuits were filed in U.S. District Court for the District of Maryland and in the U.S. District Court in Oklahoma. The first of these suits, typical of the others, was filed in the U.S. District Court for the District of Maryland on or about June 11, 1999, titled Alan Genut, individually and on behalf of all others similarly situated v. Carnegie International Corporation, et al., Civil No. L-99-1688.
The original lawsuit charges Carnegie and several of its top officers with violations of the securities laws and regulations of the United States. On April 30, 1999, the last day of the Class Period, trading in Carnegie was suspended by the AMEX and has not yet resumed. It was only after trading was suspended that the investing public learned that the SEC had rejected Carnegie's financial statements on March 29, 1999 and again on April 29, 1999, during the Class Period. The complaint alleges that defendants issued a series of false and misleading statements concerning the Company's revenues during the Class
Period. The Company announced on May 21, 1999 that it would have to restate its 1997 and 1998 financial statements.
All the class actions allege violations of federal securities laws in connection with the Corporation's filing with the Securities and Exchange Commission of a Form 10-SB, on or about October 28, 1998. In particular, each of the complaints alleges that the Defendants improperly recorded certain transactions in violation of generally accepted accounting principles. The transactions in question are the sale of ECAC, and the purchase of its subsidiaries, PTT and Talidan.