The original complaint claims that, during the Class Period, Stone & Webster and the defendants assured investors that the Company's earnings were increasing each quarter. Indeed, the defendants stated that Stone & Webster was experiencing record revenues and income. On April 30, 2000, the Company dropped a bombshell on investors when it was disclosed that it will restate its 1999 financial results. In truth, the Company's earnings were not in the amounts that had been represented by the Company during fiscal 1999 because defendants had improperly allocated revenue and expenses in violation of Generally Accepted Accounting Principles ("GAAP").
As summarized by the liaison counsel’s website, on August 9, 2000, Judge Lindsay entered an Endorsed Order appointing Lead Plaintiffs and their selection of Lead Counsel. All related cases were consolidated on September 25, 2000. On January 4, 2001 Lead Plaintiffs filed their Consolidated and Amended Complaint (the “Amended Complaint”). The Amended Complaint names Stone & Webster’s auditors PricewaterhouseCoopers (“PwC”) as an additional Defendant and extends the Class Period to include purchasers of Stone & Webster securities during the period January 22, 1998 through May 8, 2000. The case against the Company has been stayed due its filing for bankruptcy protection. PwC and the individual defendants, H. Kerner Smith (“Smith”) and Thomas Langford (“Langford”), filed Motions to Dismiss the Amended Complaint. Lead Plaintiffs and the Defendants briefed the issues and on March 28, 2003 Judge Lindsay granted in part and denied in part Defendants’ Motions to Dismiss. On April 23, 2003 Defendants Smith and Langford filed their answers to the Amended Complaint and on May 19, 2003 filed a Joint Motion for Summary Judgment. On September 23, 2003 the Judge issued an Order granting Smith’s and Langford’s Joint Motion for Summary Judgment and entered Judgment in favor of the Defendants, including PwC, on September 24, 2003. On October 14, 2003, Lead Plaintiffs/Appellants filed a Notice of Appeal with the United States Court of Appeals for the First Circuit appealing, among other things, (i) the District Court’s March 28, 2003 Order granting in part and denying in part Defendants’ Motions to Dismiss the Amended Complaint and, (ii) the District Court’s Order granting Smith’s and Langford’s Joint Motion for Summary Judgment. On July 14, 2005, the Court issued its decision, affirming the lower Court’s ruling in part and vacating it in part. Namely, the Court affirmed the District Court’s dismissal of Plaintiff’s claims against Defendants for violations of section 10b-5 of the Exchange Act and vacated the District Court’s dismissal of Plaintiff’s claims against Defendants for violations of sections 20(a) and 18 of the Exchange Act.
In a press release dated October 15, 2005, the First U.S. Circuit Court of Appeals denied a petition for rehearing by Stone & Webster Inc. and its executives in their defense of a securities fraud class action by investors, holding the surviving securities fraud claims against the corporation provided a sufficient basis for control person liability against the executives to survive dismissal. Adele Brody and other investors sued Stone & Webster and certain executives for securities fraud, seeking control person liability against the Company’s Chairman, President, and CEO and the Company’s Executive VP and Principle Financial Officer. The First Circuit vacated the district court's order dismissing certain claims of controlling person liability while affirming the district court's dismissal of the other claims. Stone moved for rehearing. Section 20(a) of the Securities Exchange Act of 1934 provides that a person who controls another person who violates the Exchange Act shall be liable to the same extent as the controlled person unless the controlling person acted in good faith and did not induce the misconduct by the controlled person. The First Circuit noted this provision does not require proof of a state of mind.
According to a press release dated August 15, 2006, the U.S. District Court for the District of Massachusetts dismissed a securities fraud class action as untimely, ruling that the plaintiffs' amended complaint included a new allegation that was time-barred and did not relate back to the original complaint. Shareholders sued Stone & Webster (SW) for violating § § 10(b) and 20(a) of the Securities Exchange Act of 1934, alleging that SW fraudulently concealed the loss of a contract with another company and inflated revenues. The district court dismissed the shareholders' original complaint, and the shareholders appealed. The shareholders were then allowed to submit an amended complaint on remand. The shareholders moved to file a motion for leave to file an amended complaint. In the proposed amended complaint, the shareholders alleged that SW paid an undisclosed $147 million kickback to a third party in a contract that SW signed with them. Section 10(b) violations must be brought within one year of alleged fraud. … The court noted that the kickback allegations were new and did not relate back to save the claim. The district court denied the shareholders' motion to amend their complaint, ruling that the new claim was time-barred, and the original claims were insufficient.
On October 26, 2006 a Motion for Judgment on the Pleadings was filed by Defendants with respect to certain claims. On November 6, 2006 Plaintiffs filed their Second Amended Consolidated Complaint. A motion hearing on Class Certification was held November 28, 2006. A hearing on the Motion for Judgment on the Pleadings was held on January 24, 2007 and the Judge took the motion under advisement.
On March 20, 2009, an Order Of Preliminary Approval And Providing Notice Of Final Fairness Hearing was scheduled to review the settlement negotiations. The Individual Defendants agreed to settle for $6.5 million, all of which was funded by insurers. The settlement was approved on August 13, 2009.