On May 31, 2006, the Court and Final Judgment and Order Approving Partial Settlement. According to the Order, the partial settlement is approved. The settlement does not settle claims against the non-settling defendant, KPMG LLP. Further that day, the Court entered the Order awarding lead plaintiff’s counsel $2,056,807.09 in reimbursement of expenses and attorneys’ fees in the amount of $31,675,404.03.
According to a press release dated January 12, 2006, Tenet Healthcare Corporation (NYSE: THC) announced today that it has reached agreements in principle to settle federal securities class-action lawsuits brought against the company on behalf of certain purchasers of Tenet securities as well as shareholder derivative litigation brought by certain stockholders of Tenet for the benefit of the company. If approved by the courts, the agreements would settle the litigation entitled In Re Tenet Healthcare Corporation Securities Litigation and In Re Tenet Healthcare Corporation Derivative Litigation, pending in the U.S. District Court in Los Angeles and California Superior Court in Santa Barbara, respectively.
As part of the agreements, Tenet will pay $215 million in cash to settle the securities class-action litigation, to be paid into an escrow account within 10 days after the federal and state courts grant preliminary approval. The funds will be disbursed to certain purchasers of Tenet securities according to a distribution plan to be devised and approved by the federal court.The company said it expects that its insurance for directors and officers will contribute approximately $75 million toward the total cost of the settlements. Taking into account the insurance contribution, the net cost of the settlement to the company should be approximately $140 million, which the company will record as a charge in its fourth quarter ended Dec. 31, 2005.
As reported by the Company’s Form 10-K for the fiscal year ended December 31, 2004, on February 10, 2003, the State of New Jersey was appointed "lead" plaintiff in the consolidated actions and its counsel, the law firm of Schiffrin & Barroway, was appointed as lead class counsel. On January 15, 2004, after the court granted in November 2003 defendants' motion to dismiss plaintiffs' first amended complaint for failure to plead fraud with the required particularity, plaintiffs filed their second amended complaint. Defendants' motions to dismiss were filed on March 1, 2004. On May 24, 2004, the court heard, and denied, defendants' motions to dismiss. On July 6, 2004, all defendants filed answers to the second amended complaint denying all allegations of wrongdoing, setting forth various affirmative defenses and denying any liability for any and all of the causes of action set forth. On December 21, 2004, the court granted plaintiffs' motion to certify the class and subclass. Discovery has commenced, and the court has set May 2, 2006 as the date the jury trial will begin.
According to an earlier Form 10-Q, all securities actions from November 2002 through January 2003 were consolidated under case number 02-8462 RSWL in the United States District Court for the Central District of California. The complaints that have been filed allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10(b)-5. The complaints seek compensatory damages, attorneys' fees and injunctive relief. While the specific factual allegations vary slightly in each case, the complaints generally allege that defendants falsely represented the Parent's financial results by failing to disclose that they were inflated by (i) allegedly wrongfully inducing patients into undergoing unnecessary invasive coronary procedures at Redding Medical Center, alleged to be a "key profit center" for the Parent and (ii) the Parent's alleged policy of charging "too aggressive" prices that enabled it to obtain excessive Medicare outlier payments.
The factual allegations and legal claims that are asserted in the Consolidated Amended Complaint are not known.
On January 16, 2003, the U.S. District Court for the Southern District of New York entered the Order transferring the two New York actions to the U.S. District Court for the Central District of California.
The first complaint was filed alleging that defendants knew on October 30, 2002, that forty agents from the FBI, Office of Inspector General and Internal Revenue Service had executed search warrants on Tenet's Redding Medical Center, but failed to disclose this information to investors. Defendants had a duty to promptly disclose this material information to investors for the following reasons: (i) As of October 28, 2002, Tenet was already under a cloud of suspicion after an analyst at UBS Warburg downgraded its rating on the Company and issued a report calling into question Tenet's Medicare outlier payments; (ii) On October 28, 2002, defendants proclaimed to investors in no uncertain terms that "Tenet is confident that its hospitals are fully compliant with Medicare rules and regulations, including those governing outlier payments"; (iii) On October 29, 2002, defendants proclaimed, "(W)e are confident that Tenet hospitals are fully compliant with Medicare rules and regulations;" and (iv) On October 30-31, 2002, defendants continued making analyst presentations, and publicly discussed the Company's business, prospects, revenues and earnings from Medicare, and results of operations, with full knowledge of what had transpired on October 30, 2002, and after making the conscious decision to withhold from the market the existence of the FBI raid on one of its hospitals. The complaint is on the behalf of purchasers of THC securities from the opening of trading on October 31, 2002 through the halt of trading on October 31, 2002 at 2:41 p.m. (EST) (the "Class Period").
Several purported class action complaint with similar allegations were also filed in the U.S. District Court for the Central District of California.