According to a Business Wire article dated Feb. 13, 2001, Corrections Corp. of America, formerly Prison Realty Trust, Inc., announced that it received final court approval of the revised terms of the settlement of a series of class action and derivative lawsuits brought by current and former stockholders.
CCA will issue an aggregate of 46,900,000 shares of CCA's common stock and a subordinated promissory note in the aggregate principal amount of $29.0 million. Other than with respect to the issuance of the common stock and the promissory note by CCA, the original settlement agreements have not been altered by the terms of the revised settlement agreements, including the requirement that CCA pay approximately $47.5 million in cash insurance proceeds to the plaintiffs. The promissory note will be due January 2, 2009, and will accrue interest at a rate of 8.0% per annum. All principal and interest due under the note will be payable in one lump sum at maturity.
According to a Press Release dated June 10, 1999, the Complaint alleges that Prison Realty and certain of its officers and directors violated Sections 11, 12(a), and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well as Rule 10b-5 promulgated thereunder, by engaging in a scheme to conceal material information from shareholders of Old CCA and CCA Prison Realty Trust in connection with the merger that created Prison Realty and spun-off a new, privately held CCA ("New CCA") on December 31, 1998. The false and misleading statements of the defendants also served, before and after the merger, to artificially inflate the price of the Company's securities and those of its predecessors throughout the Class Period. The Complaint further charges that -- in order to gain shareholder approval of the merger and spin-off -- the defendants concealed their intent to substantially increase the amount of fees that Prison Realty, the new public company, would pay to the privately held New CCA after the merger closed. The Complaint also charges that the defendants misrepresented New CCA's ability to pay fair market rents to Prison Realty after the merger. The individual defendants, in addition to being officers or directors of Prison Realty, are also officers of New CCA or own a substantial portion of its stock. On May 14, 1999, the Company disclosed that it had retroactively increased the fees that Prison Realty pays to New CCA by approximately $80 million per year. Additional details were contained in a Form 10-Q filed with the SEC on May 16, 1999, including that fact that Prison Relaty had increased the fees on May 4, 1999, but did not disclose that event until ten days later. The disclosures caused the price of Prison Realty to plunge from $19 3/4 on Friday May 14, 1999 to a closing price of $13 3/8 on May 18, 1999.