According to the Company’s Form 10-Q for the quarterly period ended August 28, 2004, the Company entered into an agreement with plaintiffs to settle the class action lawsuit on terms that require payment by the Company of amounts that, after taking into account certain insurance proceeds that the Company expects to receive, are not material to the Company's financial condition or results of operation. In September 2004, following a fairness hearing, the court approved the terms of the agreement with the class action plaintiffs, as was required to finalize the terms of settlement, and entered judgment in this matter incorporating the agreed terms. These developments effectively close this case.
By the Notice of Proposed Settlement of Class Action, the settlement fund was in the amount of $10,250,000 in cash, plus interest.
Earlier, according to the same SEC filing, the Company together with the Company’s former Chairman and Chief Executive Officer, the Company’s former President and Chief Operating Officer, and the Company’s former Chairman and current President and Chief Executive Officer, were named as defendants in a shareholder class action suit captioned Sandra Kafenbaum and Steven Schulman, individually and on behalf of all other similarly situated v. GTECH Holdings Corporation, et. al., which suit was filed in the U.S. District Court of Rhode Island in August 2000 and subsequently amended in February 2001. In September 2002, the court granted the Company’s motion to dismiss plaintiff's claim against the former Chairman and current President and Chief Executive Officer, holding that there were no actionable statements attributable to him.
The original complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing an series of material misrepresentations and omissions to the market between April 25, 2000 and July 25, 2000. For example, as alleged in the complaint, the defendants failed to disclose (i) that GTECH was suffering from an inability to close significant contracts, including contracts in Columbia, Italy, Portugal and Asia; (ii) that GTECH's inability to close contracts would negatively impact revenues by as much as $48 million dollars; (iii) that the Company's projections of success were lacking in a reasonable basis at all times because of defendants' inability to close the contracts GTECH highlighted during the Class Period; and (iv) that costs at GTECH were climbing at an alarming rate which in turn had significantly reduced earnings.