As reported by the Company’s FORM 10-K For The Fiscal Year Ended June 30, 2002, Following the remand to the District Court, the parties engaged in extended settlement negotiations, including a mediation and a neutral evaluation proceeding and executed a stipulation of settlement. By order entered July 22, 2002 the District Court approved the settlement, which is to be funded through insurance proceeds.
According to the same SEC filing, in January, February and March 1998, ten substantially similar complaints were filed against the Company, its former Chairman and its former Chief Executive Officer, and in certain actions, its former Chief Financial Officer, in the U.S. District Court for the Southern District of New York. The plaintiffs, in general, purport to sue on behalf of a class of persons who purchased shares (and as to certain complaints, purchased call options or sold put options) of the Company during the period from December 15, 1995 through December 12, 1997. In their consolidated and amended complaint, the plaintiffs allege that the Company violated the federal securities laws by making misrepresentations and omissions of material facts that allegedly artificially inflated the market price of the Company's common stock during the class period. The plaintiffs further allege that the Company failed to expense properly certain prepaid royalties for software products that had been terminated or had failed to achieve technological feasibility, or had overstating the Company's net income and net assets. By Order dated January 23, 1999, the plaintiffs were granted leave to file a second consolidated and amended complaint, which added claims under the federal securities laws against the Company's former independent auditors, Arthur Andersen LLP. The Company and Arthur Andersen LLP each filed motions to dismiss the second consolidated and amended complaint. By Order and opinion dated November 29, 1999, the District Court granted the motion to dismiss. Plaintiffs appealed from the dismissal of the action, and on July 11, 2000, the Court of Appeals for the Second Circuit issued an opinion and judgment reversing the dismissal of the complaint as to the Company and individual defendants (but not as to Arthur Andersen LLP) and remanding the action to the District Court. On July 21, 2000, the Company filed with the Court of Appeals a petition for rehearing with suggestion for rehearing en banc. On September 1, 2000, the Court of Appeals denied the petition for rehearing and suggestion for rehearing en banc.
The complaint alleges that purchasers of GTIS securities were induced by fraud to pay too much for their shares. The complaint further alleges violations of the federal securities laws on behalf of GTIS securities purchasers during the period Aug. 1, 1996 through Dec. 12, 1997. The complaint alleges that GTIS and certain of its top officers improperly capitalized research and development expenses for projects that were discontinued or for which technological feasibility had not been achieved. In addition, the complaint charges that defendants failed to write off impaired assets. The effect of these improper practices, according to the complaint, was to artificially inflate GTIS' reported earnings and the price of its securities. During the period of this artificial inflation, certain defendants are alleged to have sold large amounts of shares from their personal portfolios.