On June 19, 2007, the Court entered the Orders granting the Motion For Approval of Plan of Allocation of Settlement Proceeds and the Motion For an Award of Attorneys Fees and Reimbursement of Expenses. Lastly, the Court entered the Final Judgment and Order of Dismissal with Prejudice.
On October 4, 2004, the plaintiff filed a Second Amended Complaint in violation of the Federal Securities Laws against remaining defendant PricewaterhouseCoopers LLP. The defendant filed a motion to dismiss on November 8, 2004. On August 26, 2005, a Memorandum and Recommendation was filed recommending that the PricewaterhouseCooper's motion to dismiss be granted in part and denied in part. On September 30, 2005, the Court entered an Order adopting the Memorandum and Recommendation. On February 16, 2007, a Stipulation of Settlement was filed. According to the Stipulation of Settlement, the settlement with PricewaterhouseCooper is in the amount of $2 million. On March 27, 2007, the Court entered a Partial Final Judgment and Order of Dismissal of §10(b) and Certain §11 Claims with Prejudice.
Pursuant to the Order and Final Judgment dated February 6, 2004, the Court certified the class period and approved the Securities Settlement as set forth in the Stipulation. The Consolidated Securities Action was dismissed with prejudice as to all defendants except PricewaterhouseCoopers. The Order and Final Judgment also released any remaining derivative and ERISA claims related to allegations in the Consolidated Securities Action. The case is still pending as to defendant PricewaterhouseCoopers LLP.
According to a Press Release dated December 9, 2003, Hanover Compressor Co. said that the company's proposed securities-related litigation settlement received
preliminary court approval on December 5, 2003. In a filing with the Securities and Exchange Commission, Hanover Compressor said the court set the final hearing date for Feb. 6. In October, Hanover Compressor entered into a stipulation of
settlement to fully and finally resolve all of the securities class actions,
Employment Retirement Income Security Act class actions, and shareholder
derivative actions previously filed against it. In May, Hanover Compressor announced the settlement agreement, under which it will make a cash payment of $30 million, and issue 2.5 million shares of common stock and a note worth up to $9.2 million.
According to a Press Release dated 5/13/03, the settlement of
shareholder litigation involving Houston-based Hanover Compressor
Company announced today contains groundbreaking reforms which add to the
recent trend of shareholders demanding and obtaining more accountability
from corporate boardrooms through shareholder litigation.
The Hanover settlement represents the first time a class action has
resulted in shareholders getting the power to fill board of directors'
seats. It is also the first time a company has agreed to rotate its
outside audit firm as part of a resolution of a shareholder class
The securities class action settlement provides for a recovery of more
than $80 million in cash, stock and debt for those who suffered damage
from the purchase of Hanover securities at inflated levels at a time
when Hanover and its former senior insiders were disseminating false
financial statements to investors. This settlement, if approved by the
Court, will be one of the top twenty largest securities class action
recoveries ever. The settlement includes a contribution of approximately
$20 million from a large shareholder affiliated with former senior
insiders who lead plaintiffs asserted had engaged in illegal insider
The securities action, led by five institutional and individual lead
plaintiffs, alleged that defendants engaged in insider trading while
causing Hanover to improperly report revenues and manipulate the value
of its stock through "sham" transactions, which were similar to the now
infamous off-the-books SPE deals used by Enron. Hanover restated its
financial results in 2002 to correct the accounting misstatements
contained in Hanover's 1999, 2000 and 2001 financial statements.
Litigation pending in the U.S. District Court for the Southern District
of Texas will continue against Hanover's accounting firm
PricewaterhouseCoopers, which has been charged with engaging in illegal
accounting practices that inflated Hanover's stock price, and which is
not part of this settlement. The settlement also imposes restrictions on Hanover's directors and officers concerning accelerated vesting of their stock options and
prohibits the use of derivative transactions to conceal insider stock sales.
The original complaint charges Hanover and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Hanover is a provider of natural gas compression, gas handling and related services in the United States and selected international markets. The complaint alleges violations of the federal securities laws arising out of defendants' issuance of false financial statements and other false and misleading statements about the Company's operating performance. The true facts, which were known by the defendants during the Class Period but concealed from the public, were: (a) the $16 million in revenue and $2.6 million in net income recognized in Q3 and Q4 associated with the Hampton Roads fabrication project should not have been recognized as it did not reflect the percentage of the project's completion; (b) Hanover's "former majority partner" in the Hampton Roads project was actually replaced on March 19, 2001, not July 2001; (c) defendants "paid off" the investor in Hampton Roads the sum of $1 million in exchange for the investor's signature on the sham transaction documents on or before Sept. 30, 2000, in order for the Company to use the same to inflate the Company's revenue and earnings as early as Q3 00; (d) defendants issued a "side letter" to the Hampton Roads investor offering to loan up to $40 million to the joint venture in order to induce the investor to enter into the agreement by Sept. 30, 2000; (e) in winter 2000, defendants actually knew that the Hampton Roads project completion date had been pushed out to 2003 or 2004, not 2001; (f) the Registration Statement omits the Hampton Roads project and incorporates the Company's false and misleading Q3 and Q4 2000 financial results; (g) the Company's financial statements for Q1-Q3 2001 were false in that the revenue and EPS were overstated and they failed to disclose the impact of the dubious Hampton Roads project. Moreover, these statements (in addition to the Registration Statement/Prospectus) concealed the fact that the investor in the transaction advised defendants in February 2001 that it sought to back out of the venture; and (h) on Feb. 6, 2001, the investor in Hampton Roads demanded a refund of his $4 million. Further, in a secret "behind-the-scenes" type transaction, the Company refused to refund the money directly to the investor. Instead, defendants forwarded the money to a company related to the investor so
that the transaction would go uncovered. Finally, defendants arranged for the
"related company" to issue a Promissory Note to Hanover in the amount of $4
million (the same amount as the refund) which it agreed in an oral "side
agreement" not to insist upon payment.