According to the docket posted, on April 1, 2003, the Court entered the Order approving the settlement. The Order was signed by U.S. District Judge Jan E. Dubois and was entered as the Final Judgment as to Resource America defendants and Grant Thornton. The case is closed.
As reported by the Company’s FORM 10-K/A for the fiscal year ended September 30, 2002, the Company is a defendant, in consolidated actions that were instituted on October 14, 1998 in the U.S. District Court for the Eastern District of Pennsylvania by stockholders, putatively on their own behalf and as class actions on behalf of similarly situated stockholders, who purchased shares of the Company’s common stock between December 17, 1997 and February 22, 1999. Also named as defendants in the suit are the Company’s executive officers and directors, the Company’s former executive officers and directors, and Grant Thornton, LLP, the Company’s independent auditor. The consolidated amended class action complaint seeks damages in an unspecified amount for losses allegedly incurred as the result of misstatements and omissions allegedly contained in our periodic reports and a registration statement filed with the SEC. The Company has agreed to settle this matter for a maximum of $7.0 million plus approximately $1.0 million in costs and expenses, of which $6.0 million will be paid by two of the Company’s directors' and officers' liability insurers.
The complaint alleges defendants misstated the Company's revenues and net income throughout the Class Period, in part, by (i) using the accretion-of-discount method of recognizing revenue on distressed loans that the Company purchased at a discount, and (ii) failing to discount cash flows on subordinated interests in loans that it refinanced with other lenders when the Company was not entitled to do so according to Generally Accepted Accounting Principles ("GAAP"). As a result, the price of REXI's common stock was artificially inflated during the Class Period. Defendants' false and misleading statements and/or omissions concerning REXI inflated the price of the Company's common stock at a crucial time in the Company's history, and allowed REXI to engage in a critical secondary public offering of 1.75 million shares. During the class period, defendants' representations caused REXI's stock price to jump to an all-time high of $37.5 per share (adjusted for a 3-for-1 split). After an independent consultant publicly questioned the propriety of REXI's methods of accounting, the Company's stock price plunged to as low as $7.75 per share.