According to the latest docket, on April 14, 2002, a Stipulation of Settlement was filed, and on April 22, 2002, the U.S. District Judge Todd J. Campbell preliminarily approved the settlement. The settlement hearing was set for July 26, 2002. At the hearing, Judge Campbell granted the motions for approval of the plan of allocation of the settlement and for approval of the application for an award of attorneys’ fees and reimbursement of expenses. Judge Campbell further issued the Order granting the motion for final approval of the settlement, the action was dismissed with prejudice, and the case was terminated.
As reported in a press release, stockholders of bankrupt PhyCor, Nashville, will receive 16 cents per share under settlement terms of a class-action lawsuit alleging that the company and its executives committed securities fraud and concealed information. The total payment to shareholders who purchased stock from April 22, 1997, to Sept. 22, 1998, will amount to $10 million, according to the agreement struck earlier this month in U.S. District Court in Nashville.
The original complaint names PhyCor and certain of the Company's officers and directors as defendants, alleging that these parties violated Sections 10(b) and 20(a) of the Exchange Act, as well as SEC Rule 10b-5 promulgated thereunder, by originating a series of materially misleading statements and omissions concerning the Company's acquisitions and operations during the Class Period. Plaintiff also alleges that PhyCor and its top executives falsified the Company's reported profits. Specifically, Plaintiff alleges, among other things, that the defendants misrepresented that the Company was successfully integrating the operations of various acquired companies, when, in fact, PhyCor was experiencing severe difficulties assimilating those acquisitions. In addition, Plaintiff alleges that PhyCor touted the Company's growth strategy and ability to achieve promised earnings per share, knowing that PhyCor lacked effective management structure and its business was failing. These misrepresentations and omissions had the aggregate effect of artificially inflating the share prices of PhyCor's stock, allowing PhyCor to continue its acquisition-based growth strategy and the Individual Defendants to sell their own stock for proceeds of more than $17 million. When defendants finally revealed the whole truth, that PhyCor could not grow at promised rates and would take another $65 million charge, PhyCor stock plummeted to $8-1/4, an almost 40% drop in one day.
NOTE: PhyCor and 48 of its subsidiaries filed for Chapter 11 bankruptcy protection in January 2002, listing about $29 million in assets and $339 million in liabilities.