According to the docket, on July 20, 2005, the Court entered the Report and Recommendations, recommending that the Settlement Agreement, the Plan of Allocation, and the Plaintiffs' Motion for Attorneys Fees and costs should be approved. On August 25, 2005, the Court entered the Order adopting the Report and Recommendations, the action was dismissed, and the Clerk’s Judgment was entered concurrently with the Order.
In a press release dated May 23, 2005, that Plaintiffs and Defendants have reached a proposed settlement (the "Settlement") of the class action lawsuit for $1,600,000 in cash. A settlement hearing will be held on July 13, 2005, at 9:00 a.m., before the Honorable Timothy S. Black, United States District Judge, United States District Court, Southern District of Ohio, Western Division, in Room 708 of the Potter Stewart U.S. Courthouse, 100 East Fifth Street, Cincinnati, OH 45202 to determine: (1) whether the Settlement consisting of $1,600,000 in cash, as more fully described in the Notice of Pendency of Class Action and Proposed Settlement, Motion for Attorneys' Fees and Settlement Fairness Hearing ("Notice"), should be approved as fair, reasonable and adequate under Rule 23 of the Federal Rules of Civil Procedure; (2) whether the class action should be dismissed as to Defendants on the merits and with prejudice pursuant to the terms of a Stipulation of Settlement; and (3) whether the application for an award of attorneys' fees and expenses made by Plaintiffs' counsel should be approved.
As reported by the Company’s FORM 10-Q For the Quarterly Period Ended March 31, 2004, the motion to dismiss the complaint was granted on March 9, 2004 and the Court dismissed all claims except those relating to the June 6, 2002 offering of 6,600,000 PRIDE securities. However, the Court’s order confined any later finding of damages to $0.70 per PRIDE security.
Earlier, according to the same SEC filing, several purported class-actions were filed against Provident on behalf of all purchasers of Provident common stock from March 30, 1998 through March 5, 2003 and on behalf of all purchasers of PRIDES in or traceable to a June 6, 2002 offering of those securities registered with the Securities and Exchange Commission and extending to March 5, 2003. The actions allege violations of securities laws by the defendants in Provident's financial disclosures during the period from March 30, 1998 through March 5, 2003 and in the June 2002 offering. These actions are based upon circumstances involved in the restatement of earnings announced by Provident on March 5, 2003 and allege violations of federal securities laws by the defendants in Provident's financial disclosures during the period from March 30, 1998 through March 5, 2003. They seek an unspecified amount of damages and, in two cases, reimbursement of all executive bonuses received during that period. These actions have been consolidated before Judge S. Arthur Spiegel of the United States District Court for the Southern District of Ohio under the caption, Merzin v. Provident Financial Group, Inc., consolidated Civil Action Master File No. C-1-03-165. The Amended Consolidated Complaint was filed on August 22, 2003. Provident and the other Defendants filed a Motion to Dismiss the Complaint on November 5, 2003.
The first complaint filed charges defendants with issuing false and misleading statements concerning its business and financial condition. Specifically, the complaint alleges that defendants issued numerous statements and filed quarterly and annual reports with the SEC that described the Company's increasing revenues and financial performance. The Complaint alleges that these statements were materially false and misleading because they failed to disclose and/or misrepresented the following adverse facts, among others: (i) that the Company had materially overstated its operating results by failing to properly account for certain off-balance sheet transactions. Specifically, the Company failed to properly account for auto financing leases which caused it to overstate its earnings; (ii) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (iii) as a result of the foregoing, the Company's financial statements issued during the Class Period were materially false and misleading. Indeed, the Company, by restating its financial statements, has now admitted that its previously issued financial statements were materially false and misleading.
The complaint further alleges that on March 5, 2003, before the open of the market, Provident shocked the market by announcing that it would be restating its financial results for fiscal years 1997 through 2002. The Company attributed the accounting issues to "nine auto lease financing transactions originated between 1997 and 1999." The Company also revealed that it had restated its total assets for 1997 through 2002 -- increasing its net assets for each year (by understating assets, the Company materially overstated its return on assets, a key operating metric for banks). In addition, the Company reported that it was reducing its earnings guidance for fiscal year 2003, as a result of the accounting problem. In response to the announcement of the earnings restatement, the price of Provident stock dropped from $28.07 per share to $22.46 per share in heavy trading.