According to the Company’s Form 10-Q for the quarterly period ended March 31, 2005, the Company obtained approval of the memorandum of understanding (MOU) in the NorthWestern and Netexit bankruptcy cases on October 7, 2004 and September 15, 2004, respectively. Final approval of the consolidated securities class action settlement was granted by the federal District Court at a hearing on December 13, 2004, with a written order issued on January 14, 2005. No timely appeal has been filed from such order. On April 26, 2005, the district court in the consolidated derivative litigation issued an order granting the motion for approval of the settlement, and also issued a final judgment and order of dismissal with prejudice.
The Company's Form 10-Q for the quarterly period ended September 30, 2004, reported that the settlement fund established was in the amount of $41 million.
The Complaint charges NorthWestern and certain of its executive officers with violations of federal securities laws. Among other things, plaintiff claims that defendants' material omissions and the dissemination of materially false and misleading statements concerning NorthWestern's business operations and financial performance caused
NorthWestern's stock price to become artificially inflated, inflicting damages on investors. NorthWestern provides value-added energy and communications services, including air conditioning, heating, ventilation, plumbing and related services to residential and business customers nationwide. The complaint alleges that during the Class Period defendants misrepresented the Company's revenue and earnings by maintaining insufficient reserves for accounts receivables at the Company's communications subsidiary Expanets, and by failing to make full disclosures of problems with the implementation of a new "information technology system infrastructure." NorthWestern's problems were revealed on December 13, 2002, when the Company issued a press release disclosing that NorthWestern would dramatically miss its earnings estimates for 2002. The press release blamed the earnings shortfall on "the need to significantly increase reserves for accounts receivable" and "billing adjustments" at the Company's communications subsidiary, Expanets. Moreover, the Company press release revealed that defendants estimated the NorthWestern would need to increase its reserves "by at least $50 million" and that financial results for 2002 could not be reported until a year-end audit was completed. On the same
day as these disclosures, NorthWestern's stock plummeted 37% from the previous day's close, on higher than normal trading volume.