PEC Solutions, Inc. is an IT contractor.

The Complaint alleges Defendants issued a series of materially false and misleading statements concerning the Company's business, operations and prospects. The Complaint alleges that these statements were materially false and misleading when made as they failed to disclose and misrepresented the following adverse facts, among others: (a) that the Company was experiencing declining demand for its products and services as the failure of Congress to approve a budget for 2003 was causing governmental agencies to delay projects; (b) that the Company was experiencing material problems with certain of its biometric identification contracts and would not be generating the revenue that it had anticipated from those contracts; and (c) as a result of the foregoing, the Company was materially overstating the strength of its pipeline of projects and its prospects. On March 14, 2003, after the close of the market, as alleged in the Complaint, PEC Solutions shocked the market when it issued a press release announcing that it was revising its guidance for the first quarter 2003 and for the year ending December 31, 2003. In response to this announcement, the price of PEC Solutions common stock declined precipitously falling from $15.80 per share to $9.81 per share, a decline of more than 37%, on extremely heavy trading volume. During the Class Period, prior to the disclosure of the true facts, the individual Defendants and other PEC Solutions insiders sold their personally held shares of PEC Solutions common stock to the unsuspecting public, reaping proceeds of more than $13 million.

As disclosed by the Company’s FORM 10-K/A for the fiscal year ended December 31, 2004, on and after March 18, 2003, several purported class action Complaints were filed against the Company and certain of its officers in the United States District Court for the Eastern District of Virginia. The Complaints allege that between October 22, 2002 and March 14, 2003, the Defendants made, or were aware of, false and misleading statements which had the effect of inflating the market price of the Company's common stock, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Complaints were consolidated into a single class action on September 13, 2003.

The class action was dismissed by the District Court on January 28, 2004. The Plaintiffs filed an appeal with the U.S. Court of Appeals for the Fourth Circuit on September 30, 2004. Oral arguments on the appeal were held on December 2, 2004, and on March 18, 2005, the Fourth Circuit affirmed the decision of the District Court. In addition, shortly after the class action Complaints were filed, a stockholder's legal Counsel sent a letter of demand that the Board of Directors investigate the same charges addressed in the class action suit. In late 2003 the Board concluded, after its investigation and based on its business judgment, to reject the demand letter.