According to the Company’s FORM 10-Q for the quarterly period ended February 28, 1999, on November 19, 1998, the Company entered into a Stipulation of Settlement resolving all claims pending in the suit. The settlement was approved by the
Court on January 25, 1999 and all remaining claims were dismissed. On March 1,
1999, the Company paid its portion of the settlement, $6.8 million, to the plaintiffs pursuant to the Stipulation of Settlement.
Earlier, according to the same SEC filing, in December 1996, defendants filed motions to dismiss all claims asserted in the Consolidated Amended Complaint. By orders dated August and September 1998, the Court (i) dismissed all claims as to defendants KPMG LLP and certain individual defendants; (ii) dismissed the claim alleging breach of fiduciary duty as to all defendants; and (iii) denied the motions to dismiss all other claims as to all other defendants.
During the period from May 1996 through July 1996, four purported class action lawsuits were filed in the United States District Court for the Northern District of Texas, Dallas Division. These four lawsuits were consolidated into the case styled State of Wisconsin Investment Board, Diane Larson, Martin Katz, Mostafa Aboul-Fetouh, Ahmed Aboul-Fetouh and Enass Aboul-Fetouh on behalf of themselves and others similarly situated v. Alan H. Goldfield, Terry S. Parker, Kenneth W. Sanders, John S. Bain, Evelyn M. Henry, Michael S. Hedge, Kenneth E. Kerby, Daniel T. Bogar, Leonard C. Ratley, James L. Johnson, Ronald J. Kramer, CellStar Corporation and KPMG Peat Marwick LLP, Civil Action No. 3:96-CV-1353-R. The State of Wisconsin Investment Board was appointed lead plaintiff in the consolidated action and filed a Consolidated Amended Complaint asserting claims against the Company and certain of its present and former officers and directors for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 10b-5 promulgated thereunder, Section 27.01 of the Texas Civil Statutes, common law fraud, negligent misrepresentation, and breach of fiduciary duty to disclose under Delaware common law. The Consolidated Amended Complaint alleged, among other things, that the defendants misrepresented or failed to disclose material facts regarding the business, financial condition, performance and future prospects of the Company and that, as a result of such statements or omissions, the value of the Company's Common Stock was artificially inflated. Claims were also asserted against the Company's auditors, KPMG LLP. The plaintiffs sought compensatory damages, exemplary damages and costs and expenses, including attorneys' fees and expert fees. Although the plaintiffs did not specify the amount of damages sought, they argued that the alleged class sustained damages in excess of $50 million.
The original complaint charged CellStar, certain of its officers and directors and the accounting firm of KPMG Peat Marwick LLP with violations of the federal securities laws (Section 10 (b) and 20 (a) of the Securities Exchange Act of 1934) and related Texas state law by, among other things, misrepresenting and/or omitting material information concerning CellStar's business, sales, earnings, inventories and internal financial and operating controls during the Class Period.