According to a law firm’s website, pursuant to the terms of the proposed partial settlement, a Settlement Fund in the amount of $5,400,000, plus interest that accrues on the fund prior to distribution, will be created for the benefit of the Class. A hearing (the "Settlement Fairness Hearing") to determine whether the proposed partial settlement is fair, reasonable and adequate was held on November 23, 2004. On November 29, 2004, Judge John E. Sprizzo granted Final Approval of this partial settlement and thereafter issued an Order and Final Judgment.
Earlier, Lead Plaintiff opposed Defendants' motions and on November 3, 2003, Judge John E. Sprizzo heard oral arguments on Defendants' motions. Prior to ruling on Defendants' Motions to Dismiss, Lead Plaintiff and the Company, the Individual Defendants and the Underwriter Defendants agreed to settle the claims against these Defendants and filed a Stipulation of Settlement with the Court. On June 28, 2004 the Court issued an order granting preliminary approval of the proposed partial settlement and certified the class.
As reported by the Company’s FORM 10-K/A For The Fiscal Year Ended June 30, 2003, between May 15, 2002 and July 3, 2002, ten class action lawsuits were filed against the Company and certain of its officers and directors in the United States District Court for the Southern District of New York. On October 29, 2002, the Court consolidated all ten actions and appointed Hawaii Electricians Annuity Fund as lead plaintiff and Milberg Weiss Bershad Hynes & Lerach LLP as lead counsel. On April 7, 2003, plaintiffs filed a consolidated amended class action complaint. The lawsuit alleges that the Company and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12(a)(2) and 15 of the Securities Act of 1933. The lawsuit seeks unspecified compensatory damages, rescission and/or rescissory damages, costs and expenses related to bringing theaction, and injunctive relief. Plaintiffs allege that the Company's public disclosures from November 1999 to May 2002 regarding its financial condition were materially false and misleading because the Company allegedly improperly inflated its total revenues by including certain payments, including payments for teacher salaries, that were paid directly to third parties by local school districts and charter school boards that contracted with the Company, accelerated revenues on an unexecuted contract with one school district, and failed to timely recognize losses related to contracts with two school districts. The lawsuit further alleges that the Company lacked adequate internal accounting controls, manipulated the test scores of its students in order to demonstrate improvement in the students' academic performance, and failed to disclose that the Company agreed to fulfill the final two years of its contract with the Sherman, Texas school district without pay. The lawsuit also mentions three restatements of the Company's financial statements, one regarding a warrant purchased in 1998 by a philanthropic organization, one regarding a severance agreement between the Company and one of its senior officers, both of which were made by the Company as a result of the SEC's May 14, 2002 cease-and-desist order, and another regarding stock based compensation the Company granted to one of its senior officers. On August 1, 2003, the Company and certain of its officers and directors filed a motion to dismiss the consolidated amended class action complaint. Plaintiffs had until September 26, 2003 to file any opposition to the motion to dismiss.