According to the firm's Form 10-Q for the quarterly period ended October 3, 1999, on June 17, 1999 the Company announced that it had entered into a settlement agreement with the Plaintiffs. The Settlement provides that the claim against PictureTel and Mr. Strauss will be dismissed. In agreeing to the proposed settlement, the Company and Mr. Strauss specifically deny any wrongdoing. The settlement provides for a cash payment of $12 million by the Company, plus interest, after the settlement is final. More than 75% of the settlement amount will be covered by the Company’s insurance. The settlement is subject to certain customary conditions, including preliminary and final approval by the United States District court for the District of Massachusetts, and notice to the class. On July 29, 1999, the court gave preliminary approval to this settlement, formal notices with details of the settlement will be sent to the purported class members by the Plaintiffs’ counsel. On November 4, 1999 the Court gave its final approval of the settlement.
The Complaint charges PictureTel and two senior officers with making a series of material misrepresentations and omissions regarding the Company's financial results for the third and fourth quarters of 1996 and the first quarter of 1997, including material overstatements of revenues, operating income and pre-tax and net income during each of these periods. On September 19, 1997, PictureTel revealed that it would be forced to restate its financial results for the three quarters at issue, and would be reversing or deferring a total of $13.5 million in revenues. This reduction in recognized revenues would have the further effect of materially lowering the Company's income from operations and pre-tax and net earnings for the three quarters. The Complaint further charges that Norman E. Gaut, the Company's former Chairman and CEO, and Les D. Strauss, the Company's former Chief Financial Officer, engaged in massive insider selling during the Class Period, during which they sold hundreds of thousands of shares at artificially inflated prices, for total proceeds of over $5 million.