By the Order and Final Judgment, signed by U.S. District Judge Joseph L. Tauro on September 7, 2005, the Court hereby approves the settlement set forth in the Securities Stipulation. The Court hereby dismisses the Securities Action with prejudice and without costs (except as otherwise provided in the Securities Stipulation). The Plan of Allocation is approved, and Plaintiffs' Counsel are hereby awarded 25% of the Settlement Fund in attorneys’ fees and $2,472,092.30 in reimbursement of expenses.
In a press release dated, June 7, 2005, CVS Corp. has agreed to pay
$110 million to shareholders to settle a lawsuit that claimed the company violated federal securities laws by making false and misleading statements to artificially inflate stock prices, according to a proposal filed yesterday in US District Court in Boston. The lawsuit alleges that CVS, the largest chain pharmacy by number of stores, violated accounting practices by delaying discounts on merchandise in an effort to prop up earnings.
According to the docket posted, on February 13, 2002, the Court entered the Order signed by U.S. District Judge Joseph L. Tauro granting the motion to consolidate the cases, and to appoint lead plaintiffs and approve selection of lead counsel and liaison counsel. On April 8, 2002, the plaintiffs filed an amended complaint, and the defendants responded by filing a motion to dismiss on June 7, 2002. On December 18, 2002, the Court entered the Order denying the motion to dismiss the consolidated and amended class action complaint. On January 14, 2005, the defendants filed a motion for Summary Judgment, which Judge Joseph L. Tauro denied in an Order entered on March 9, 2005. On June 6, 2005, a Stipulation and Agreement of Compromise, Settlement and Release of Securities Class Action was filed by the Lead Plaintiffs.
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 a series of material misrepresentations to the market between February 6, 2001 and June 27, 2001, thereby artificially inflating the price of CVS securities. The complaint alleges that, throughout the Class Period, CVS issued positive statements concerning its business and operations which failed to disclose, among other things, that the Company was unable to successfully address the national shortage of pharmacists and that this shortage was negatively impacting CVS's business and that the Company's expansion plans would have to be scaled back in light of the difficulties facing the Company. When this information became publicly known on June 27, 2001, the price of CVS common stock dropped sharply, falling from $44.10 per share to $36.51 per share on extremely heavy trading volume. During the Class Period, CVS insiders were able to dispose of shares of their personally-held stock for gross proceeds in excess of $8 million and CVS was able to raise $300 million through the issuance of notes on highly favorable terms.