Recoton Corporation manufactures and distributes consumer electronics products and accessories.
The original Complaint charges that the Company violated federal securities laws by falsely assuring the marketplace that it had adopted a "strategic business plan designed to improve operating efficiencies," as required by the Company's creditors as a condition to restructuring the Company's debt. Beginning in November 1999, the Company repeatedly reaffirmed that it had implemented its "strategic plan" and emphasized its success at improving operating efficiencies. The Company also stressed that it had established "a more incentive-based method of compensation" and "stringent financial controls." On May 8, 2002, however, the Company partially disclosed that it "did not anticipate the full implementation of the strategic plan until the end of May 2002." On August 19, 2002, the end of the class period, the Company revealed information showing that, contrary to its earlier statements on awarding only incentive-based compensation to management, bonuses had been paid to executives in advance of the Company's achievement of certain goals. The Company also revealed that it had granted additional price concessions to customers "on products previously purchased." The Complaint alleges that Defendants materially overstated revenue during the class period and failed to timely take material write-downs of inventory.
NOTE: Recoton is not named a Defendant in this action because it filed for bankruptcy protection on April 8, 2003.
On September 29, 2003, the Court entered the Order granting the motions for consolidation. On November 25, 2005, the Court entered the Order adopting and confirming the magistrate judge’s November 5, 2005 Report and Recommendation for the appointment of lead Plaintiff and lead Counsel. The Court appointed Glenn Costoff as lead Plaintiff and the law firms of Shalov Stone & Bonner LLP of New York and Vianale & Vianale LLP of Boca Raton, Florida, as co-lead Counsel. On April 5, 2004, a Consolidated Amended Class Action Complaint was filed, and on June 30, 2004, the Defendants filed motions to dismiss the Complaint. On February 23, 2005, the Court entered the Order signed by Judge John Antoon II granting the Defendants' motions to dismiss without prejudice, allowing Plaintiffs to file a second amended Complaint. On April 1, 2005, the Plaintiffs filed a Second Amended Consolidated Class Action Complaint. A motion to dismiss the Complaint was filed on May 6, 2005. On May 26, 2005, the Court entered the Final Judgment of Dismissal with Prejudice in favor of two individual Defendants.
On January 26, 2006, the Court entered the Order granting in part and denying in part the motion to dismiss. According to the Order, the Motion is granted with prejudice as to the claim of Artificially Inflated Accounts Receivable Balances contained in Counts I and III. The Motion is also granted with prejudice as to Count II. The Motion to Dismiss is denied as to the claim of Artificially Inflated Inventories at InterAct contained in Counts I and III. The case has been referred to mediation. On May 2, 2006, the Plaintiff filed a motion to certify class.
On December 7, 2006, the Court granted the motion to certify the class and further granted the motion for entry of judgment in favor of Defendant Deloitte & Touche LLP. On February 1, 2007, the remaining two individual Defendants filed three motions for summary judgment. The motions were never ruled on as the parties participated in mediation which resulted in a settlement of the litigation.
On June 18, 2007, the parties entered into a Stipulation of Settlement. On June 20, 2007, the Court granted preliminary approval of the Settlement. On September 27, the Court granted final approval of the Settlement, including an award of Attorneys’ Fees and Expenses, and entered Final Judgment.
On May 8, 2009, the Court authorized distribution of the Settlement.
