According to Pediatrix Medical Group, Inc.’s Form 10-K for the fiscal year ended December 31, 2002, on May 3, 2002, the United States District Court for the Southern District of Florida entered an Order and Final Judgment approving the settlement of the class action litigation filed against the Company and certain of its officers. Under the terms of the settlement, the plaintiffs' claim was dismissed with prejudice in exchange for a cash payment of $12.0 million, which was covered by insurance policies.
The original class action suit charges defendants Pediatrix Medical Group, Inc. and certain of its officers with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Specifically, the Complaint alleges that throughout the Class Period, Pediatrix overstated its earnings by at least $1.3 million by capitalizing bonuses paid to its acquisition team instead of treating those payments as expenses. The Complaint also alleges that Pediatrix issued false and misleading statements concerning its accounts receivable. Further, the Complaint alleges that Pediatrix recently engaged a new auditor because the SEC found that its former auditor had violated auditor independence rules. Problems were identified during the new auditor's audit of Pediatrix' 1998 financial statements.