According to a press release dated June 9, 2004, the amended consolidated complaint in the securities class action lawsuits filed against the Company and two of its senior executives in the United States District Court for the District of Massachusetts has been voluntarily dismissed by the plaintiffs without prejudice to the plaintiffs' ability to re-file a complaint. The Company and its insurers made no payment in connection with the dismissal of these lawsuits and have no obligation to make payments in the future.
The original complaint alleges that Defendants violated Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, and rule 10b-5 promulgated thereunder, by
issuing false and misleading statements concerning the Company's business. The action charges that defendants violated federal securities laws by issuing a series of materially false and misleading statements to the market throughout the Class Period which statements had the effect of artificially inflating the market price of the Company's securities.
Specifically, the complaint alleges that the Defendants issued false and
misleading statements and had a duty to correct such statements concerning
Boston Communications' relationship with Verizon Wireless. In particular, analysts had raised concerns regarding the company's ability to
maintain relationships with its primary customers, which accounted for the
majority of the Company's revenue. Moreover, such concerns included the
propensity for its customers to take services outsourced to Boston
Communications, in-house. To allay investor fears concerning Boston
Communications's customer concentration, the Company attempted to reassure
investors that contract negotiations with Verizon Wireless, and other
customers, were continuing as planned, despite a company policy not to do so.
The complaint further alleges that on July 16, 2003, after the market had closed, Boston Communications announced
the truth about its contract negotiations with Verizon. The Company stated that
its contract with Verizon is scheduled, according to its terms, to be
renegotiated in 2003. The Company is currently in contract discussions with
Verizon. The terms and conditions, including the length of the contract and
pricing have not yet been determined. Verizon has also requested that Boston
Communications provide support services to assist Verizon in testing its own
internal prepaid platform in 2004 which could potentially displace prepay
services currently being provided by Boston Communications. None of the
Company's contracts are exclusive and its carrier customers have and continue
to use and/or test competing products in certain markets. The market reacted swiftly to this news, with the Company's stock falling 39%,
or $8.46 from a closing price of $21.16 on July 16, 2003 to close at $12.70 on
July 17, 2003.