According to an article dated May 31, 2007, the U.S. District Court for the Eastern District of New York granted preliminary approval of a securities fraud class settlement, finding there was evidence that the settlement was free of collusion, fair, reasonable and adequate. The district court allowed notice to be sent to the class. Shareholders of Gilat Satellite Networks Ltd. sued the company and its individual officers and directors, alleging securities fraud under §§10(b) and 20(a), and Rule 10b-5 of the Securities Exchange Act of 1934. The shareholders claimed that the defendants made materially misleading statements in connection with the company's financial health and violated GAAP. After the district court denied the defendants' motion to dismiss, the parties entered into mediation before a California state superior court judge. The parties entered into a proposed settlement agreement and plan of allocation. The parties moved for certification for the purposes of settlement and preliminary approval of the settlement agreement, plan of allocation, and manner of notice to the class. The settlement agreement provided that the defendants would pay $20 million to the class in exchange for the release of all claims related to Gilat's common stock during the class period.
Ino a press release dated November 13, 2006, Gilat Satellite Networks Ltd. (Nasdaq: GILT) announced that it, along with certain former officers of Gilat, reached a proposed settlement in the consolidated securities class action lawsuit filed in the US in 2002 without admitting to any wrongdoing, fault or liability. The parties agreed to the settlement, the entire amount of which will be covered by Gilat's insurance carriers. Gilat and the plaintiffs will file the settlement papers with the court, which will then hold a preliminary approval hearing. If the court preliminarily approves the proposed settlement, plaintiffs will provide notice to the class, which comprises all shareholders who purchased or otherwise acquired Gilat common stock between February 9, 2000 and May 29, 2002, inclusive. After a period of time in which class members will be given a chance to raise any objections to, or exclude themselves from, the proposed settlement, the court will hold a final approval hearing to determine the fairness of the proposed settlement.
As previously disclosed by the Company’s FORM 20-F for the fiscal year ended December 31, 2005, the complaint was the result of the court-ordered consolidation of nine separate similar actions filed in March 2002 in the United States District Courts. In addition, a request was made to file a class action lawsuit in the Tel Aviv, Israel, District Court, but this action was stayed pending the outcome of the class action proceedings in the United States. The Complaint asserts the claims of purchasers of the Company’s securities from February 9, 2000 and through May 29, 2002, and alleges violations of the federal securities laws and claims that the Company issued material misrepresentations to the market. The Company’s has filed a motion to dismiss the amended complaint, and on September 19, 2005, the court dismissed certain of the plaintiff’s claims. The plaintiffs have provided Gilat with a discovery demand. A conference with the plaintiffs has been scheduled for March to agree on the schedule and scope of the discovery.
The original action alleges violations of the securities laws of the United States (Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder) by Gilat, the Chairman of Gilat's Board of Directors and the Company's Chief Executive Officer, and Gilat's Chief Financial Officer. The lawsuit asserts claims against Gilat and its controlling officers and directors and seeks damages as well as an accounting. Among other things, plaintiff claims that defendants knew or recklessly disregarded, yet covered up the fact, that the demand for and acceptance of Gilat's products and the products of its subsidiary, StarBand Communications, Inc., were greatly overstated, that Gilat was having difficulty manufacturing and selling its chief product, Very Small Aperture Terminal (VSAT) profitably, that Gilat's purported gross profit margins were false, that Gilat was materially understating its costs and expenses and that Gilat, accordingly, would have to take massive charge-offs, numbering in the hundreds of millions of dollars in the future. Plaintiff claims that defendants' material omissions and the dissemination of materially false and misleading statements caused Gilat's stock price to become artificially inflated, inflicting enormous damages on investors.