According to the firm's 10-Q filing dated May 17, 1-999, the parties in this action, which was consolidated with similar actions, have reached a settlement in principle. The settlement includes a cash payment by the Company's primary insurer amounting to $4.25 million and 1,000,000 shares of old Common Stock. Under the Plan, old Common Stock was converted into warrants; under the proposed settlement, class members who are to receive RainTree (formerly Unison Healthcare) shares will receive a pro rata share of such warrants. The settlement was approved by the Bankruptcy Court on December 30, 1998 and by the district court in the Federal Action on April 28, 1999.
The original complaint alleges that during the Class Period, the defendants made a series of materially false and misleading public statements about the Company's profitability and financial condition. More specifically, defendants recklessly or knowingly caused or permitted the Company to issue financial statements which materially misrepresented and overstated the Company's financial results for the nine months ended September 30, 1996 and to tout revenue and income increases, when in fact the Company had suffered a substantial loss for the period. During the Class Period, Unison filed with the Securities and Exchange Commission ("SEC") its reports on Form 10-Q for the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996, and made various other public announcements regarding its financial condition and results as described herein. Each of these public statements was false and misleading. Defendants recklessly or knowingly violated generally accepted accounting principles ("GAAP"), and materially misled the public, when they issued financial statements materially overstating the Company's financial results. Defendants engaged in this fraud in order to foster the illusion of growth and profitability, and in order to effectuate the Company's ongoing acquisition program. These false financial reports operated to inflate artificially the market price of the Company's common stock during the Class Period, thereby damaging plaintiff and the Class, who purchased the Company's common stock relying on the market price thereof to reflect accurately its true value.
The complaint further alleges that when defendants belatedly disclosed to the unsuspecting public on March 11, 1997 that (1) Unison expected to restate its previously issued results for the nine months ended September 30, 1996, and (2) that defendants estimated that the restatement will have a negative impact on year-to-date results of approximately $5 to $6 million pre-tax, or $3 to $3.6 million after tax, the price of Unison common stock dropped close to 50% on extraordinarily heavy trading. Unison further announced that it expected that its announcement of financial results for the year ended December 31, 1996 will be delayed, and that, although the Company will request a 15-day extension for the filing of its annual report on Form 10-K, it is possible that such an extension may not be sufficient.