On May 20, 2002, motions were made to consolidate the various cases and appoint lead plaintiff and counsel. Pursuant to an order dated July 17, 2002, the various cases were consolidated under the caption of In re L90, Inc. Securities Litigation, Master File No. C-02-02329-ABC. Lead plaintiff and counsel were appointed pursuant to an order entered July 23, 2002. Plaintiffs filed a consolidated amended class action complaint on September 20, 2002. Defendants filed a motion to dismiss. On March 18, 2003, the Court granted the Company’s motion to dismiss. Because the suit was dismissed without prejudice, plaintiffs had the opportunity to amend the complaint against the defendants.
As a result of mediation, the parties reached a settlement in this action on June 2, 2003. Plaintiffs filed a second amended class action complaint in connection with the settlement on August 18, 2003. Pursuant to a stipulation of settlement filed on December 2, 2003 and approved by the Court on December 8, 2003, defendants agreed to establish a settlement fund of $5 million for the benefit of a class of all persons who purchased L90 common stock during the modified class period from April 28, 2000 through May 09, 2003, inclusive. The Court granted final approval to the settlement and entered final judgment on March 15, 2004. The settlement was disbursed on November 17, 2004. The action is now concluded.
The complaint charges L90 and certain of its officers with violations of the Securities Exchange Act of 1934. L90 is a provider of marketing services. The complaint alleges that as part of their effort to boost the price of L90 stock, defendants misrepresented L90's true prospects in an effort to conceal L90's improper acts until they were able to conceal their fraud by selling the Company to a third party prior to filing the Company's 10-K (due March 31, 2002). In order to overstate revenues and assets in its second and third quarters of 2001, L90 violated Generally Accepted Accounting Principles and SEC rules by engaging in improper 'roundtrip'transactions with HomeStore.com and its customers. These transactions had the effect of dramatically overstating revenues and assets. On February 4, 2002, L90 issued a press release entitled, ``L90 Reports Regulatory Inquiries.'' The press release stated in part: ``L90, Inc., an online media and direct marketing company, today announced that the Company has received notice from the Securities and Exchange Commission that the Commission is conducting an investigation into the Company. In connection with this investigation, the Commission has issued the Company and one of its directors subpoenas requesting documents related primarily to the Company's financial records.'' On this news the Company's shares plummeted by more than 50% the following trading day and continued to plummet further in the weeks that followed and defendants revealed further incriminating facts. On March 12, 2002, L90 issued a press release entitled, ``L90 Provides Additional Information on Internal Investigation.'' The press release stated in part: ``L90, Inc., an online media and direct marketing company, today provided additional information on the status of the ongoing internal investigation by the Company and the Audit Committee of its board of directors in response to the previously announced Securities and Exchange Commission investigation of the Company, and the request for information from Nasdaq Listing Investigations.''