In a press release dated July 5, 2005, SkillSoft PLC announced that it has concluded negotiations with its lead director and officer insurance carrier, AIG, with respect to AIG's contribution to the settlement of the 2002 securities class action lawsuit, the related litigation and certain costs related to the SEC investigation. The parties have entered into an agreement that provides for the payment by AIG to the Company of $15 million in exchange for a release and other customary terms and conditions. The Company anticipates receiving the payment before July 31, 2005. The Company settled the 2002 securities class action in March 2004 for $30.5 million.
According to the Plaintiff's Co-Lead Counsel's website, Lead Plaintiffs, Defendant SkillSoft and the Individual Defendants agreed to settle the claims against these Defendants and, on July 22, 2004, entered into a Stipulation of Settlement. On July 29, 2004 Chief Judge Paul Barbadoro signed an order granting preliminary approval of the proposed partial settlement and certifying, for purposes of this settlement, the Class. Pursuant to the terms of the proposed partial settlement, a Settlement Fund in the amount of $30,500,000, plus interest that accrues on the fund prior to distribution, has been created for the benefit of the Class. A hearing to determine, among other things, whether the proposed partial settlement is fair, reasonable and adequate was held on September 29, 2004. Judge Barbadoro signed Orders granting Final Approval of this partial Settlement and awarding Attorneys' fees and reimbursement of expenses that same day.
The case is continuing against Defendants Ernst & Young Chartered Accountants ("EYCA") and Ernst & Young, LLP
On October 31, 2003, Lead Plaintiffs filed Consolidated Class Action Complaints for violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. The 1933 Act Consolidated Complaint allegations arise from the September 2, 2002 merger of SkillSoft Corp. and SmartForce PLC, which resulted in a combined company named SkillSoft PLC, and is brought on behalf of a class consisting of all persons who exchanged their shares of SkillSoft Corp. for SmartForce ADSs and continued to hold those ADSs as of November 18, 2002 and were damaged thereby. The 1934 Act Consolidated Complaint is brought on behalf of persons or entities who: i) purchased SmartForce (or its predecessor company CBT Group PLC) ADSs trading on NASDAQ under the ticker symbol SMTF or CBTSY from April 27, 1999 through September 6, 2002; ii) exchanged common stock of SkillSoft Corp. for ADSs of SmartForce in connection with the merger between SmartForce and SkillSoft Corp. on September 6, 2002; or iii) purchased or acquired SmartForce PLC and/or SkillSoft PLC ADSs from September 6, 2002 through and including November 18, 2002.
The original complaint charges that during the Class Period, the defendants and its predecessors issued and/or failed to correct false and misleading financial statements and press releases concerning the Company's publicly reported revenues and earnings directed to the investing public. Specifically, (1) SmartForce improperly recognized revenue under a reseller arrangement, resulting in the booking of revenue before it was received from the resellers; (2) SmartForce recognized revenue for software sales upon shipment, even though the payment schedules for those contracts extended over several years; (3) SmartForce recognized revenue in connection with other customer contracts upon execution of those contracts, even though the terms were four to five years in length; (4) lastly, SmartForce improperly accounted for bad debt, causing an increase in its reserve. On November 19, 2002, SmartForce shocked the market by announcing that it intended to restate the historical financial statements of SmartForce for 1999, 2000, 2001 and the first two quarters of 2002. In the process of preparing the closing balance sheet of SmartForce as of September 6, 2002, SmartForce identified several accounting issues that required the pre-merger SmartForce financial statements to be restated. In response to this announcement, the market reacted sharply and swiftly. The shares of SmartForce dropped 33.7% to close at $3.07. As a result of the restatement, SmartForce was forced to delay the release of its operating results for the quarter ended October 31, 2002. SmartForce stated that it could not currently determine when it would be in a position to file the Form 8-K amendment and report its third quarter results.