According to the June 12, 2003 docket, the court entered its Order and Final Judgment dated June 12, 2003. The case is closed.
Following the October 27, 1997 decline in the price per share of the Company's common stock, purported securities class action lawsuits were filed on October 28, 29, and 30, 1997 against the Company and certain of its officers in the United States District Courts for the Eastern District of New York, the Southern District of New York and the District of Connecticut. After that time, plaintiffs filed additional securities class actions against Oxford and certain of its directors and officers in the United States District Courts for the Southern District of New York, the Eastern District of New York, the Eastern District of Arkansas, and the District of Connecticut.
The complaints generally allege that defendants violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder by making false and misleading statements and failing to disclose certain allegedly material information regarding changes in Oxford's computer system, and the Company's membership enrollment, revenues, medical expenses, and ability to collect on its accounts receivable. Certain of the complaints also assert claims against the individual defendants alleging violations of Section 20(a) of the Exchange Act and claims against all of the defendants for negligent misrepresentation. The complaints also allege that certain of the individual defendants disposed of Oxford's common stock while the price of that stock was artificially inflated by allegedly false and misleading statements and omissions
On October 2, 1998, the co-lead plaintiffs filed a consolidated amended complaint ("Amended Complaint") in the securities class actions. The Amended Complaint names as defendants Oxford, Oxford Health Plans (NY), Inc., KPMG Peat Marwick LLP (which was Oxford's outside independent auditor during 1996 and 1997) and several current or former Oxford directors and officers (Stephen F. Wiggins, William M. Sullivan, Andrew B. Cassidy, Brendan R. Shanahan, Benjamin H. Safirstein, Robert M. Smoler, Robert B. Milligan, David A. Finkel, Jeffery H. Boyd, and Thomas A. Travers). The Amended Complaint purports to be brought on behalf of purchasers of Oxford's common stock, purchasers of Oxford call options or sellers of Oxford put options during the period from November 6, 1996 through December 9, 1997 ("Class Period") and on behalf of persons who, during the Class Period, purchased Oxford's securities contemporaneously with sales of Oxford's securities by one or more of the individual defendants. The Amended Complaint alleges that defendants violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated thereunder by making false and misleading statements and failing to disclose certain allegedly material information. The Amended Complaint also asserts claims against the individual defendants alleging violations of Sections 20(a) and 20A of the Exchange Act by virtue of the individual defendants' sales of shares of Oxford's common stock while the price of that common stock was allegedly artificially inflated by allegedly false and misleading statements and omissions. The Amended Complaint seeks unspecified damages, attorneys' and experts' fees and costs, and such other relief as the court deems proper.
The defendants filed motions to dismiss the Amended Complaint which were later defeated. Discovery commenced in 1999. On Januay 10, 2003, the defendants filed motions for summary judgment. Their motions were terminated by the Memorandum and Order dated March 7, 2003. Just as trial was about to begin, the parties decided to settle the action.
On April 14, 2003, the Company, the director and officer defendants and the plaintiffs entered into a stipulation setting out the terms of the Settlement and the Court entered an order preliminarily approving the Settlement, subject to a settlement fairness hearing to be held before the Court on June 11, 2003. Also, in connection with the Settlement: (i) plaintiffs settled the class's claims against KPMG LLP for $75 million and (ii) a derivative shareholder action against KPMG LLP in the name of the Company pending in state court is to be dismissed with prejudice.
On April 17, 2003, the Company deposited $100 million into the escrow account established to hold its portion of the settlement funds; the Company will deposit its remaining obligation on the balance of the $225 million settlement into the escrow account on or before May 6, 2003. The Company previously incurred a pretax charge of $151.3 million, representing a previous $161.3 million settlement offer net of $10 million in primary directors and officers insurance coverage, and a $20 million charge for additional legal expenses related to trial. In connection with the Settlement, the Company incurred an additional pretax charge of $45 million in the first quarter of 2003, which charge, along with prior charges, fully covers all of the Company's expenses relating to the Settlement, and related legal fees and expenses.
Under the insurance carriers' interpretation of the Excess Insurance policies, the Company must pay a $161.3 million retention and the additional $8 million premium, and, if the Excess Insurance carriers fully participated in the Settlement, the Company would have to pay approximately $6.4 million in co-insurance. Under the Company's interpretation of the Excess Insurance policies, the Company must pay a $151.3 million retention, the additional $8 million premium and approximately $7.4 million in co-insurance if the insurance carriers fully participated in the Settlement.