According to a press release dated July 16, 2004, a US District Court judge has dismissed all counts in a multidistrict class action lawsuit alleging securities fraud and other claims against US Office Products and its founder. Plaintiffs seeking to represent classes of shareholders filed the original complaints against US Office Products (USOP) and its founder in 1998, claiming the company had made a series of materially false and misleading statements in violation of Sections 10(b), 14(a) and 20 of the Securities Exchange Act in connection with a major restructuring and stock buy-back completed in June 1998, which included spin-offs of four of the company's divisions. Share prices of USOP and certain of the spin-off companies subsequently faltered, leading to the filing of the class action lawsuits and five other lawsuits brought by individuals who had merged their companies with USOP in 1997. USOP subsequently went into bankruptcy and was liquidated. The Court had dismissed two of the lawsuits brought by individual shareholders in 2003.
As summarized in an article dated December 15, 1999, individuals purporting to represent various classes composed of stockholders who purchased shares of US Office Products common stock between June 5, 1997 and November 2, 1998 filed six actions in the United States District Court for the Southern District of New York and four actions in the United States District Court of the District of Columbia in late 1998 and early 1999. All of these actions have been consolidated and transferred to the United States District Court for the District of Columbia. A consolidated amended complaint was filed on July 29, 1999, naming the Company and the Company's former Chairman and Chief Executive Officer as defendants.
The original Complaint charges that defendants, the founder of USOP and its former Chairman of the Board and Chief Executive Officer, acting on behalf of USOP and in concert with defendant Sands Brothers & Co., Ltd. ("Sands"), a private investment banking and brokerage firm, made a series of materially false and misleading statements in contravention of Sections 10(b), 14(a) and 20 of the Securities Exchange Act. Specifically, defendants' affirmative misrepresentations and omissions were designed to inflate the price of USOP stock prior to consummation of a corporate restructuring (the "Restructuring"), the principal purpose of which was to effectuate a buyback of USOP securities (the "Buyback") owned by the founder of USOP and its former Chairman of the Board and Chief Executive Officer and his financial backers at a significant premium to market. By at least June 1997, Ledecky had devised a scheme to create and manage additional roll-ups in industries other than the office products industry and to extract a significant profit from the USOP roll-up, from which he would step down.