According to the docket, on July 22, 2004, the Court entered the Order by U.S. District Judge Dana M. Sabraw for Judge Judith N. Keep, granting the motion for approval of settlement, granting the motion for approval of plan of allocation of settlement proceeds, and granting the motion for the award of attorney fees and reimbursement of expenses. The Court awarded lead plaintiffs' counsel 25% of the settlement fund and reimbursement of expenses in the amount of $150,369.55. The case was dismissed on the merits and with prejudice and terminated.
By the Notice of Pendency and Proposed Settlement, the parties reached an agreement-in-principle to settle the action. The proposed settlement creates a fund in the amount of $3,000,000 in cash (the "Settlement Fund"). Depending on the number of eligible shares purchased by Settlement Class Members who elect to participate in the settlement and when those shares were purchased and sold, the estimated average recovery per share will be approximately $0.14 before deduction of Court-approved fees and expenses.
On September 13, 2002, the Court entered the Order by Judge Judith N. Keep granting the plaintiff’s motions and appointed lead plaintiff and lead counsel. The First Amended and Consolidated Complaint was filed. On October 6, 2003, the defendants filed a motion to dismiss the complaint, and on November 7, 2003, the Court dismissed with prejudice the first and second causes of action for violation of the Securities Exchange Act of 1934 against defendant Mutual Risk Management. The Court also dismissed without prejudice the first and second causes of action against remaining defendants and the case was terminated. On April 13, 2004, a Stipulation of Settlement was filed and the case was reopened. On June 29, 2004, the Court entered the Order by U.S. District Judge Napoleon A. Jones, Jr. for Judith N. Keep, preliminarily approving the settlement and providing for notice.
The original complaint charges Mutual Risk and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that during the Class Period, Mutual Risk and its most senior officers and directors disseminated materially false financial statements for each of Mutual Risk's interim quarters during that period and for the years ended December 31, 2000 and 2001, which materially overstated the Company's cumulative revenues and its net income. Defendants also made a series of other materially false and misleading statements about Mutual Risk and its financial condition and performance. As a result of the materially false and misleading statements and omissions described herein, Mutual Risk stock was inflated to an all-time high of $23.75 per share. Mutual Risk also represented in each of its quarterly and annual filings with the SEC that the financial statements included therein had 'been prepared in conformity with generally accepted accounting principles' and 'reflected all adjustments necessary for a fair presentation of results for such periods.' In reality, each of Mutual Risk's financial statements violated GAAP by understating reserves for potential claims. The financial results included in Mutual Risk's SEC filings during the Class Period were thereby rendered materially false and misleading. Then, on April 2, 2002, the Company admitted that even its disastrous Q4 2001 results (announced February 19, 2002) were not accurate, putting the Company's shares into another free fall, trading at just pennies per share following the April 2, 2002 admission.