On January 5, 2007, the Court entered the Order and Final Judgment signed by U.S. District by Judge Mark W. Bennett approving the settlement and dismissing the complaint with prejudice. On January 8, 2007, the Court entered Judgment in favor of Plaintiffs against Defendants.
As summarized by the docket, on September 15, 2006, a Joint Motion for Preliminary Approval of Class Action Settlement was filed. According to the Stipulation and Agreement of Settlement, the settlement fund is in the amount of $30 million. On September 19, 2006, the Court entered the Order signed by U.S. District Judge Mark W Bennett granting the motion.
Previously, in February 2002, McLeod USA, Inc. filed a petition for relief in the bankruptcy court, and Chief Magistrate Judge John A. Jarvey stayed the action as to McLeodUSA. On April 16, 2002, the Court entered the Order consolidating the actions, appointing lead plaintiffs, and approving lead plaintiffs’ selection of lead and liaison counsel. On June 17, 2002, the plaintiffs filed a Consolidated Amended Class Action Complaint. Due to the McLeodUSA bankruptcy, McLeod was not named a defendant in the Consolidated Amended Complaint. On August 30, 2002, the defendants filed a motion to dismiss the consolidated amended class action complaint. On August 8, 2003, a Report and Recommendation was issued denying the defendants’ motion to dismiss. On March 31, 2004, the Court entered the Order accepting the Report and Recommendation and the motion to dismiss was denyied. On August 17, 2004, the plaintiffs filed a motion to certify the class which was denied without prejudice by the Order entered on January 21, 2005. On November 1, 2005, McLeodUSA filed a second voluntary petition for relief under Chapter 11 of the bankruptcy code. As a result, on December 20, 2005, the Court entered the Order denying without prejudice defendants’ two previous motions for Judgment on the Pleadings and denied without prejudice the motion to certify the class. On February 10, 2006, the parties filed a motion to lift the bankruptcy stay and for refilling of lead plaintiffs’ motion for class certification and defendants’ motion for Judgment on the Pleadings. The motion was granted on March 16, 2006. On February 23, 2006, the Court entered the Stipulation of Dismissal of claims against McLeodUSA and the case continued against the remaining individual defendants.
The original complaint charges that defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between January 30, 2001 and December 3, 2001. The complaint alleges that McLeodUSA issued a series of materially false and misleading statements regarding its business, operations and financial statements that failed to disclose: (i) that the Company was failing to timely and properly recognize hundreds of millions of dollars in impairment losses in connection with certain acquisitions, such as Splitrock Services, Inc. and Caprock Communications Corp.; (ii) that the Company did not have the funds necessary to complete its National network and that it would soon have to abandon its plans to finish the network; and (iii) that the Company was unable to service its substantial debt and lacked the financial flexibility necessary to avoid a restructuring. During the Class Period, prior to the disclosure of the true facts about the Company, McLeodUSA purchased Intelispan for $40 million in McLeodUSA stock.