Acclaim Entertainment, Inc. ("Acclaim" or the Company) is an American video game publisher.

The Complaint alleges Defendants issued numerous statements which described the Company's increasing income and improving financial performance. As alleged in the Complaint, 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 was engaging in aggressive sales practices, known as channel stuffing, whereby it induced customers to take product that they neither wanted, needed or could sell in the short-term.; (ii) that the Company was currently experiencing severe and continued operating problems at the Company's internal studios regarding
the development, content, cost, market testing, distribution and sales of the Company's products; (iii) that the Company was currently experiencing decreased demand for the Company's products, including Turoc: Evolution and Aggressive In-Line, among others, resulting in the Company's inability to meet revenue and earnings guidance provided by Defendants for fiscal 2002 and beyond; (iv) that the Company's distribution and retails sales tracking information systems were inadequate, causing the Company to materially underestimate the Company's allowances for sales returns and price concessions; (v) that the Company's development of computer games with mature themes, including BMX XXX, among others, had materially impeded the Company's ability to access broad-based retail channels for the Company's products, thus impeding the Company's ability to meet revenue and earnings forecasts; and (iv) based on the foregoing, Defendants' opinions, projections and forecasts concerning the Company and its operations were lacking in a reasonable basis at all times.

The Class Period ends on September 19, 2002, when Acclaim shocked the market by issuing a press release announcing that the Company now expected to report an operating loss for the 4th quarter of 2002, primarily because of sharply lower revenues that fell below Defendants' guidance by 25%, among other reasons. In addition, the Company lowered its guidance for the first and second quarters of its 2003 fiscal year, as well as for the 2003 fiscal year.

Market reaction to Defendants' belated disclosures was swift and severe. Upon hearing the news, the market for Acclaim common shares collapsed, losing over 29% of their value in a single day's trading to close at $1.56 per share on September 19, 2002 and losing over 73% of their value when compared to the Class Period high of $5.85 per share reached on April 19, 2002.

As previously disclosed by the Company’s FORM 10-K For the fiscal year ended March 31, 2004, in 2003, fourteen class action Complaints asserting violations of federal securities laws were filed against the Company and certain of its officers and/or directors. By order dated July 3, 2003, the Court consolidated all fourteen actions into one action entitled In re Acclaim Entertainment, Inc. Securities Litigation, Master File No. 2, 03-CV-1270 (E.D.N.Y.) (JS) (ETB), and appointed class members Penn Capital Management, Robert L. Mannard and Steve Russo as lead Plaintiffs, and also approved lead Plaintiffs’ selection of Counsel. Plaintiffs served a Consolidated Amended Complaint on or about September 1, 2003. The Defendants in the consolidated action are the Company, Gregory Fischbach, Edmond Sanctis, James Scoroposki and Gerard F. Agoglia. The Consolidated Complaint alleges a class period from October 14, 1999 through January 13, 2003. The Consolidated Complaint alleges that the Company engaged in a variety of wrongful practices which rendered statements made by the Company and its financial statements to be false and misleading. Among other purported wrongful practices, the Consolidated Complaint alleges that Acclaim engaged in “channel stuffing,” a practice by which Acclaim allegedly delivered excess inventory to its distributors to meet or exceed analysts’ earnings expectations and inflate its sales results; entered into “conditional sales agreements” whereby Acclaim’s customers allegedly were induced to accept delivery of Acclaim products prior to a quarter-end reporting period on the condition that Acclaim would accept the return of any unsold product after the quarter-end, and that Acclaim falsified sales reports and manipulated the timing and recognition of price concessions and discounts granted to its retail customers. The Consolidated Complaint further alleges that Acclaim engaged in improper accounting practices, including the improper recognition of sales revenue; manipulation of reserves associated with concessions, chargebacks and/or sales discounts granted to customers; and the improper reporting of software development costs. The Consolidated Complaint alleges that as a result of these practices, Defendants violated § 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, and that the individual Defendants violated § 20(a) of the 1934 Act. The Consolidated Complaint seeks compensatory damages in an unspecified amount. On December 3, 2003 the Company moved to dismiss the Consolidated Complaint. Plaintiffs opposed the motion to dismiss on January 20, 2004, and the Company submitted its reply papers on February 20, 2004. The court denied the motion. A scheduling conference was scheduled for August 9, 2004.

NOTE: Acclaim has no longer been named as a Defendant because it filed for bankruptcy in September 2004.

On August 30, 2004, the Plaintiffs filed a motion to certify the class. On March 9, 2005, the Plaintiffs filed a Second Consolidated Amended Complaint, and five days later filed a Revised Second Consolidated Amended Complaint. The Defendant KPMG LLP and the four individual Defendants filed motions to dismiss the Revised Second Consolidated Amended Complaint on June 15, 2005. On March 24, 2006, the Court entered the Memorandum and Order signed by Judge Joanna Seybert denying the Defendants’ motions to dismiss.

On August 7, 2006, a Report and Recommendations was filed regarding the Plaintiffs’ previous motion to certify the class. For the reasons stated in the Report and Recommendation, it is recommended that Plaintiffs' motion to amend this Court's February 14, 2005 Order should be granted. The February 14, 2005 Order should be amended to add KPMG LLP as a Defendant, to drop Acclaim as a Defendant, and to extend the class period through July 1, 2004. Defendants' motion to de-certify the class should be denied. On September 25, 2006, the Court entered the Order by U.S. District Judge Joanna Seybert adopting the Report and Recommendation.

According to the latest docket, the parties entered a stipulation of settlement on May 16, 2007 agreeing to settle the claims for a total of $13.65 million. Per the agreement, the D&O insurance providers will pay $10 million on behalf of the Company's officers and directors, while KPMG will pay $3.65 million.