According to the firm's 10-K filing date 3/31/1999, the suit and others were consolidated before the U.S. District Court in Phoenix, Arizona. In November 1998, the Company entered into a settlement agreement calling for the claims against the Company and all other defendants to be dismissed with prejudice without presumption or admission of any liability or wrongdoing. Final terms of the settlement call for payment to the plaintiffs of $13.8 million in cash and $1.2 million in shares of the Company's Common Stock. A substantial majority of both the cash portion of the settlement and litigation-related expenses have been paid by the Company's directors and officers' insurance carriers. The Court approved the settlement agreement on March 11, 1999.
The original complaint alleged that Employee Solutions, Inc. ("ESI") violated sections 10(b) and 20 of the Securities Exchange Act of 1934 by, among other things, misrepresenting and/or omitting material information concerning ESI's reported operating results for the year ending 1996, and its quarterly reporting periods during 1996. The complaint also alleged that, on March 13, 1997, ESI cancelled a scheduled analyst teleconference and delayed reporting its results for the year ended December 31, 1996. The complaint also alleged that on March 14, 1997, ESI disclosed that it had materially understated its reserves throughout 1996. In addition, a press release stated that on March 14, 1997, Financial World Magazine reported that ESI had been materially underreserving for insurance risks, that its CEO had been consorting with a convicted felon, and had engaged in undisclosed insider trading on behalf of family members during the class period. Further, the complaint alleged that EMI's stock price plummeted "due to the immediate adverse impact of these disclosures and the surprise to the market."