BellSouth Corporation is a telecommunications company based in Atlanta, Georgia.

The original Complaint charges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between January 22, 2001 and July 19, 2002, thereby artificially inflating the price of BellSouth securities. According to the Complaint, Defendants reported quarter after quarter of "record" financial results and financial growth despite a rapidly deteriorating market for telecommunications companies. However, unbeknownst to the investing public, (i) the Company had been recognizing advertising and publishing revenues, purportedly in connection with the performance of services for customers who had not been billed ("phantom customers"), and that $163 million of this revenue was required to be reversed; (ii) Generally Accepted Accounting Principles were violated because the transactions with "phantom customers" were not complete and there was not an "appropriate provision for uncollectible accounts." On July 22, 2002, Defendants revealed that BellSouth's earnings had dropped by 67% for the second quarter of 2002, missing Wall Street estimates. The Company revealed that weak economic conditions in Central and Latin America had been, and were continuing to have a material, adverse impact on the Company's earnings and profitability. In response to the Company's July 22, 2002 revelation, BellSouth stock dropped by more than 18% to $22 per share. BellSouth executives, privy to the truth regarding BellSouth's financial condition, did not share in these losses, having sold millions of dollars of BellSouth stock.

According to the Company’s FORM 10-K for the Fiscal Year Ended December 31, 2005, from August through October 2002, several individual shareholders filed substantially identical class action lawsuits against BellSouth and three of its senior officers alleging violations of the federal securities laws. The cases have been consolidated in the U.S. District Court for the Northern District of Georgia and are captioned In re BellSouth Securities Litigation. Pursuant to the provisions of the Private Securities Litigation Reform Act of 1995, the court has appointed a lead Plaintiff. The lead Plaintiff filed a Consolidated and Amended Class Action Complaint in July 2003 on behalf of two putative classes: (1) purchasers of BellSouth stock during the period November 7, 2000 through February 19, 2003 (the class period) for alleged violations of Sections 10(b) and 20 of the Securities Exchange Act of 1934 and (2) participants in BellSouth’s Direct Investment Plan during the class period for alleged violations of Sections 11, 12 and 15 of the Securities Act of 1933. Four outside directors were named as additional Defendants. The Consolidated and Amended Class Action Complaint alleged that during the class period, the Company (1) overstated the unbilled receivables balance of its Advertising & Publishing subsidiary; (2) failed to properly implement Staff Accounting Bulletin (SAB) 101 with regard to its recognition of Advertising & Publishing revenues; (3) improperly billed competitive local exchange carriers (CLEC) to inflate revenues; (4) failed to take a reserve for refunds that ultimately came due following litigation over late payment charges; and (5) failed to properly write down goodwill of its Latin American operations.

As summarized by the same SEC form, on February 8, 2005, the District Court dismissed the Exchange Act claims, except for those relating to the writedown of Latin American goodwill. On that date, the District Court also dismissed the Securities Act claims, except for those relating to the writedown of Latin American goodwill, the allegations relating to unbilled receivables of the Company’s Advertising & Publishing subsidiary, the implementation of SAB 101 regarding recognition of Advertising & Publishing revenues and alleged improper billing of CLECs.

According to a press release dated September 29, 2006, BellSouth has agreed to settle a consolidated class-action securities fraud suit for $35 million, according to federal court pleadings. In doing so, the Company has admitted no wrongdoing in the case, which originally accused Company executives of artificially inflating stock prices and then selling their own holdings, leaving unwitting stockholders with greatly devalued shares. U.S. District Court Judge William C. Duffey Jr. on Thursday signed off on the preliminary agreement, paving the way for settlement notices to be sent to a class including anyone who purchased BellSouth common stock between November 7, 2000 and July 22, 2002, or who participated in the company's direct investment plan between November 7, 2000 and Feb. 19, 2003. A settlement fairness hearing was scheduled for December 8, 2006.

On December 13, 2006, the Court entered the Order and Final Judgment approving the settlement as fair, reasonable and adequate. According to the Order, the motion for attorney fees and expenses is deferred. The Complaint is dismissed with prejudice.