On August 1, 2006, the Court entered the Final Judgment and Order of Dismissal with Prejudice of All Claims. The settlement, in the amount of $2,179,538.91 in cash, with the plaintiffs and two remaining individual defendants was approved.
According to the latest docket posted on February 26, 2002, the Court entered the Final Judgment and Order of Dismissal with Prejudice of all claims against the settling defendants Arthur Anderson, Merrill Lynch & Co., Alex Brown & Sons, Inc. and Morgan Stanley & Co. The case against the settling defendants was administratively terminated. The case continued as to the remaining individual defendants. On August 2, 2002, the plaintiffs filed Second Consolidated and Amended Class Action Complaint and the remaining individual defendants responded by filing a motion to dismiss on October 4, 2002. On June 3, 2005, an updated Stipulation of Settlement was filed between plaintiffs and two individual defendants.
In a press release dated December 15, 2001, a $20 million settlement from the defunct Golden company's underwriters and Big Five accountants appears imminent, say attorneys working on a class-action securities case initiated four years ago. A total of 24 class-action complaints have been filed in Colorado courts against Boston Chicken's underwriters, accountants and top executives. They accuse them of concealing huge loan losses and weak sales that torpedoed the company's high-flying stock and sent the company into bankruptcy. Attorney Karl Barth said Friday that proceeds of the pending settlement from accounting giant Arthur Andersen and investment bankers Merrill Lynch, Morgan Stanley and Alex Brown & Sons will be distributed to qualified shareholders who acquired the company's stock between Feb. 6, 1995, and Oct. 4, 1998.
The Complaint alleged claims for violation of certain federal and state securities laws. Plaintiffs sought damages based upon allegations that the defendants issued false and misleading public statements relating to BCI’s business position and future prospects, and that certain of BCI’s financial statements and public offering documents were materially inaccurate and/or failed to reflect all required information. Specifically, Plaintiffs alleged that defendants devised and executed a scheme to take a business—fast food stores in this case—and structure it in a fashion that permitted them to: (i) hide $155.5 million in losses during 1996 and $325 million during 1997 while (ii) retaining the revenues for BCI long enough to lure in investors’
monies with reports of sensational profits. The mechanism used to further this alleged scheme was a number of purportedly independent marketing affiliates commonly referred to as Financed Area Developers (“FADs”) that conducted BCI’s retail business of selling fast food. Supported by “loans” from BCI, these affiliates paid back huge fees and royalties to BCI—BCI reported nearly $800 million in
revenues for 1996—but kept their losses to themselves. Plaintiffs alleged
that by excluding these enormous losses from its own books in 1996 and 1997, and failing to recognize $128 million in bad loans throughout almost the entire Class Period, BCI used this arrangement to report false “profits” and prime the securities market for a quick series of public offerings.
Plaintiffs also alleged that, as investors discovered only later, BCI’s financial statements were fraudulent. Throughout the Class Period, BCI listed the fees and royalties from the FADs on its income statements and loans to the FADs as an asset. Plaintiffs alleged that at no point during the Class Period, however, did BCI disclose any information about the individual financial status of the FADs, such as
losses or their ability to pay fees, royalties and loan payments back to BCI without first borrowing more money from BCI. Significantly, Plaintiffs alleged that BCI’s financial statements and public offering documents failed to disclose the enormous losses that the FADs incurred as BCI’s expansion plan unfolded. Indeed, Plaintiffs alleged that in just 1996 alone, these losses totaled $155.5 million, and that investors knew nothing of this until later.
NOTE:The claims against Boston Chicken, Inc., were stayed when BCI commenced bankruptcy proceedings in the United States Bankruptcy Court for the District of Arizona.