According to the Company’s FORM 10-K For The Fiscal Year Ended April 30, 2002, the district court, upon the defendants’ motions, dismissed the lawsuit with prejudice in February 2001. The lead plaintiffs appealed the dismissal order to the United States Court of Appeals for the Sixth Circuit in March 2001. In order to avoid the risks, costs, and distraction of burdensome, protracted litigation, including the pending Sixth Circuit appeal, the Company and the individual defendants, after extensive negotiations, reached an agreement with the lead plaintiffs to settle the lawsuit. Under the terms of the settlement, the Company, through its insurer, paid $2.1 million into a settlement fund to be administered under the supervision of the district court for the benefit of the plaintiff class. In reaching the settlement, the Company and the individual defendants denied and continue to deny each and every claim of alleged violations of law made by the plaintiffs in the lawsuit. The district court preliminarily approved the settlement on December 7, 2001. After conducting a final settlement hearing on March 15, 2002, the district court approved the fairness of the settlement. The 30-day period in which a party with standing to appeal the district court’s approval of the settlement could do so expired on April 15, 2002, without any appeal having been filed. As to the Company and the individual defendants, the case has now been concluded.
The original complaint alleges that throughout the Class Period, defendants violated the federal securities laws by participating in a scheme to materially misstate the Company's revenues and earnings. It is further alleged that as a result of accounting irregularities the price of SCB stock traded at artificially inflated levels during the Class Period. Defendants' fraudulent scheme came to an end on April 14, 2000, when the Company revealed that the Audit Committee of its Board of Directors is conducting an independent investigation into allegations of potential accounting irregularities affecting SCB's financial statements. The Company further revealed that as a result of the allegations and investigation proceedings to date, Ernst & Young LLP resigned as SCB's independent auditor effective as of April 10, 2000, and that SCB anticipates that it will restate its audited financial statements for fiscal 1998 and 1999 and its unaudited financial statements for the first three quarters of fiscal 2000. In response to these revelations, Nasdaq halted trading in SCB securities on April 14, 2000.