On March 27, a Notice of Appeal of Appeal was filed by a member of the Class and an Objector to the Final Settlement, appealing the Order dated March 2, 2007 approving the Settlement. The appeal is currently pending in the Eighth Circuit Court of Appeals.
By the Memorandum and Order signed by U.S. District Judge Joseph F. Bataillon on March 2, 2007. According to the Order, several objections to the Stipulation of Settlement were overruled, the motion for settlement is granted, the plaintiffs’ motion for attorneys' fees and the Plaintiffs' proposed supplemental notice of class action settlement is approved. That day, the Court further entered the Judgment and Order of Dismissal.
According to a press release dated December 15, 2006, a Fairness Hearing will be held before the Honorable Joseph F. Bataillon, Jr., United States District Judge, on February 23, 2007 at 1:30 p.m. in Courtroom 3 of the United States District Court for the District of Nebraska, Roman L. Hruska United States Courthouse, 111 South 18th Plaza, Omaha, Nebraska 68102, to determine, among other things, whether (i) the proposed Settlement is fair, reasonable, and adequate and should be approved, and therefore, whether the action should be dismissed with prejudice, (ii) the Plan of Allocation of the Settlement Fund should be approved, and (iii) the application by Lead Counsel for Lead Plaintiff for an award of attorney's fees and reimbursement of expenses incurred by Plaintiffs' Counsel and the Lead Plaintiff in prosecuting the Action should be approved. The Court expressly reserves the right to adjourn the Fairness Hearing from time to time without any further written notice to Class Members.
According to a press release dated November 9, 2006, Labaton Sucharow & Rudoff LLP announces that it has signed a Stipulation of Settlement, on behalf of its client the Genesee County Employees' Retirement System, to settle the securities class action titled Desert Orchid Partners, L.L.C. v. Transaction Systems Architects, Inc., No. 02 CV 553 (D. Neb.), for $24.5 million in cash. The proposed Settlement is subject to Court approval.
As summarized by the Company’s FORM 10-Q for the quarterly period ended June 30, 2006, in November 2002, two class action complaints were filed in the U.S. District Court for the District of Nebraska (the “Court”) against the Company and certain individuals, none of whom are currently executive officers of the Company, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Pursuant to a Court order, the two complaints were consolidated as Desert Orchid Partners v. Transaction Systems Architects, Inc., et al., with Genesee County Employees’ Retirement System designated as lead plaintiff. The Second Amended Consolidated Class Action Complaint (the “Consolidated Complaint”) previously alleged that, during the purported class period, the Company and the named defendants misrepresented the Company’s historical financial condition, results of operations and its future prospects, and failed to disclose facts that could have indicated an impending decline in the Company’s revenues. The Consolidated Complaint also alleged that, prior to August 2002, the purported truth regarding the Company’s financial condition had not been disclosed to the market. The Company and the individual defendants initially filed a motion to dismiss the lawsuit. In response, on December 15, 2003, the Court dismissed, without prejudice the Company’s former president and chief executive officer, as a defendant, but denied the motion to dismiss with respect to the remaining defendants, including the Company. On July 1, 2004, lead plaintiff filed a motion for class certification wherein, for the first time, lead plaintiff sought to add an additional class representative, Roger M. Wally. On August 20, 2004, defendants filed their opposition to the motion. On March 22, 2005, the Court issued an order certifying the class of persons that purchased the Company’s common stock from January 21, 1999 through November 18, 2002. On January 27, 2006, the Company and the individual defendants filed a motion for judgment on the pleadings, seeking a dismissal of the lead plaintiff and certain other class members, as well as a limitation on damages based upon plaintiffs' inability to establish loss causation with respect to a large portion of their claims. On February 6, 2006, additional class representative Roger M. Wally filed a motion to withdraw as a class representative and class member. On April 21, 2006, and based upon the pending motion for judgment, a motion to intervene as a class representative was filed by the Louisiana District Attorneys Retirement System (“LDARS”). LDARS previously attempted to be named as lead plaintiff in the case. On July 5, 2006, the Magistrate denied LDARS’ motion to intervene, which LDARS has appealed to the District Judge. That appeal has not yet been decided. On May 17, 2006, the Court denied the motion for judgment on the pleadings as being moot based upon the Court’s granting the lead plaintiff leave to file a Third Amended Complaint (the “Third Complaint”), which it did on May 31, 2006. The Third Complaint alleges the same misrepresentations as described above, while simultaneously alleging that the purported truth about the Company’s financial condition was being disclosed throughout that time, commencing in April 1999. On June 14, 2006, the Company and the individual defendants filed a motion to dismiss the Third Complaint pursuant to Rules 8 and 12 of the Federal Rules of Civil Procedure. With the exception of one deposition, all discovery has been stayed in the case pending a ruling on the motion to dismiss.
The original action charges that Transaction Systems Architects, Inc. and several of its officers violated federal securities laws by issuing a series of materially false and misleading statements to the market throughout the Class Period which statements had the effect of artificially inflating the market price of the Company's securities. More specifically, on or around May 29, 2002, KPMG LLP replaced Arthur Andersen LLP as TSA’s outside auditor after Andersen lost its right to audit public companies. Only two and half months later, TSA announced that it would reaudit its financial statements for 1999, 2000 and 2001, the reaudits would likely result in the restatement of TSA’s financial statements, KPMG was not able to certify the accuracy of TSA’s interim financial statements for the third quarter of 2002, and TSA’s Chairman of the Board had resigned the day before. On November 19, 2002, TSA announced that it would restate its financial statements for the fiscal years ended September 30, 1999, 2000 and 2001, as well as its previously issued 2000, 2001 and 2002 quarterly results, because, among other things, it improperly recognized revenue in conjunction with its software licensing arrangements.
In its restatement filed on January 13, 2003, TSA essentially admitted that it violated more than a dozen provisions of GAAP, most of which are derived from very basic accounting principles such as revenue recognition. Cumulatively, from 1999 through 2001, TSA reduced its reported net revenue by more than $145 million.