According to the Company’s FORM 10-Q For The Quarterly Period Ended June 30, 2006, the Company elected to participate in the Third Circuit's mediation program through which a settlement of this litigation was negotiated. Following the conclusion of these negotiations, the Company received a letter dated December 8, 2005 from the Director of the Appellate Mediation Program for the United States Court of Appeals for the Third Circuit, confirming the settlement terms for this class action litigation, to which all parties have agreed, which are: (1) a cash payment on behalf of defendants in the total amount of $1,000, inclusive of all of the fees and expenses of plaintiffs' counsel, and (2) the dismissal of all claims against the Company and the other defendants on a class-wide basis. The entire $1,000 payment will be funded by the Company's insurance carrier. The agreed settlement terms have been embodied in a formal settlement agreement that has been submitted to the United States District Court for the District of New Jersey. The Court of Appeals remanded the case to the District Court for consideration of the settlement and on August 1, 2006, the District Court held a fairness hearing with respect to the settlement where the judge announced in an oral ruling that the settlement had been approved and will be followed by a written order shortly.
As summarized by the same SEC filing, in February and March 2004, several lawsuits were filed in the United States District Court for the District of New Jersey, by purchasers of the Company's common stock naming the Company and certain of its present and former executive officers and directors as defendants. The complaints alleged violations of the federal securities laws relating to the Company's reported Consolidated Financial Statements for the years ended December 31, 2000 and 2001 and the nine months ended September 30, 2002, which the Company announced in March 2003 would require restatement. Each of the complaints purported to be a class action brought on behalf of persons who purchased the Company's securities during a specified period. In April 2004, the lawsuits, which seek unspecified amounts of compensatory damages and costs and expenses, including legal fees, were consolidated into a single action with lead plaintiffs and lead counsel having been appointed. The plaintiffs filed a consolidated amended complaint in September 2004, which includes allegations of purported misstatements and omissions in the Company's public disclosures throughout an expanded purported class period from March 31, 1999 through December 26, 2003. In November 2004, the Company filed a motion to dismiss the amended complaint. The motion to dismiss was granted by the District Court on August 18, 2005, dismissing the plaintiffs' claims in their entirety and with prejudice. On September 19, 2005, the plaintiffs filed a notice of appeal of the dismissal order, thereby initiating a review of the District Court's decision by the United States Court of Appeals for the Third Circuit.
The original Complaint alleges that defendants violated the Exchange Act by issuing
material misrepresentations concerning its reported financial results. The Company has seriously deficient or non-existent internal controls relating to the accounting for direct finance leases, the policies for complex transactions, communications of complex
transactions, adequate staffing within the accounting department, accounting
for income taxes, communication of information regarding related party
transactions, security of information technology, accounting for inter-company
eliminations, and record keeping by various internal departments. As result of
the Company's numerous accounting improprieties, Interpool had overstated its
net income during the Class Period as well as had overstated its shareholders'
equity during the Class Period. Therefore, its reported financial results did
not fairly present the results of its operations and were not prepared in
accordance with GAAP. On December 29, 2003, Interpool announced an additional
delay in the completion of its restated 2000 and 2001 and first three quarters
of 2002 financial statements and 2002 financial statements. The additional
delay was necessary to complete further analysis of the accounting for a
pending claim by Interpool under its insurance policy covering leaded faults.
Due to this delay, the Company stated that it did not know if it would meet
certain covenants and waivers as well as the potential to have a greater
reduction on Interpool's restated stockholders equity. Also on this date, the
New York Stock Exchange announced that it would suspend trading in Interpool's
common stock and commenced delisting proceedings. As a result of this
announcement, Interpool common stock dropped from $19.26 adjusted close on
December 26, to an adjusted close on December 29 of $12.00, a 37% drop.