As summarized by the co-lead counsel's website, a Final Approval Hearing, to determine, among other things, whether the proposed settlement is fair, reasonable and adequate was held on November 6, 2006 and Judge Federico Moreno signed a Final Judgment on November 7, 2006 granting final approval of the Settlement.
According to a press release dated September 29, 2006, a hearing will be held on November 6, 2006 at 2:00 p.m. (the "Settlement Hearing") before the Honorable Federico A. Moreno, in the United States District Court, Southern District of Florida, located at 99 N.E. 4th Street, Courtroom 4, Miami, Florida 33132, for the purpose of determining: (1) whether the proposed settlement of the Litigation for $10,000,000 in cash should be approved by the Court as fair, reasonable and adequate; (2) whether the Litigation should be dismissed on the merits and with prejudice pursuant to the terms of the Stipulation; (3) whether the proposed Plan of Allocation should be approved as fair and reasonable; (4) whether Lead Plaintiffs' Counsel's application for fees and expenses, including any award of reasonable costs and expenses (including lost wages, directly relating to the representation of the Settlement Class to any Lead Plaintiff serving on behalf of the Settlement Class) and interest thereon should be approved; and (5) whether the releases provided for in the Stipulation should be approved as fair, reasonable and adequate to the Members of the Settlement Class.
In a press release dated April 17, 2006, the Court-appointed Co-Lead Counsel for the Class in In re MasTec Securities Litigation, announced that MasTec, Inc. and certain of its current and former officers and directors have agreed to settle all claims asserted against them in this Action for the sum of $10 million in cash. The settlement is subject to Court approval, after notice to the members of the Class. Previously, according to the same press release, Lead Plaintiffs filed their Consolidated Second Amended Class Action Complaint on behalf of the Class on February 22, 2005. In September 2005, the Court denied Defendants' Motion to Dismiss the Action in its entirety. Since that time, Lead Plaintiffs have engage in intensive discovery. The case was set for trial beginning in September of this year.
As reported by the Company’s Form 10-K for the fiscal year ended December 31, 2005, in the second quarter of 2004, complaints for a purported class action were filed against the Company and certain of its officers in the United States District Court for the Southern District of Florida and one was filed in the United States District Court for the Southern District of New York. These cases have been consolidated by court order in the Southern District of Florida. The complaints allege certain violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, related to prior period earnings reports. On January 25, 2005, a motion for leave to file a Second Amended Complaint was filed by Plaintiffs which motion the Court granted. Plaintiffs filed their Second Amended Complaint on February 22, 2005. Plaintiffs contend that the Company’s financial statements during the purported class period of August 12, 2003 to May 11, 2004 were materially misleading in the following areas: 1) the financial statements for the third quarter of 2003 were allegedly overstated by $5.8 million in revenue from unapproved change orders from a variety of the Company’s projects; and 2) the financial statements for the second quarter of 2003 were overstated by approximately $1.3 million as a result of the intentional overstatement of revenue, inventories and work in progress at the Company’s Canadian subsidiary; all of which are related to the restatements the Company announced in its annual report on Form 10-K for the year ended 2003.
The original complaint charges MasTec and certain individuals with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The complaint alleges that defendants made material misstatements with respect to the Company's financial results. More specifically, the Complaint alleges that defendants failed to disclose and indicate the following: (1) that the Company was materially inflating its financial results; (2) that the Company was prematurely recognizing revenue on various contracts; (3) that the Company's practice of improperly recognizing revenue was in violation of Generally Accepted Accounting Principles ('GAAP'); (4) that the Company overstated its inventory; (5) that the Company failed to have adequate reserves for bad debts, inventory, cost overruns, and projected losses on certain projects; and (6) as a result, the Company's financial results were materially inflated at all relevant times.
The complaint further alleges that the Company's inflated financial results began to emerge on March 10, 2004, when MasTec announced that the filing of its 10-K would be delayed past the March 15th deadline. On news of this shares of MasTec fell $2.00 per share or 16.75 percent on March 10, 2004 to close at $9.94 per share. On March 18, 2004, MasTec further declined $2.31 per share, or 23 percent, to close at $7.75 per share when Standard & Poor's Rating Services put the Company's BB credit rating on watch for a downgrade. Then on April 13, 2004, MasTec announced its 2003 operating results and disclosed material problems that may result in a restatement of its previously announced financial results. More specifically, the Company announced a net loss of $39.7 million ($0.83 per share) on revenue of $873.9 million for the year. Additionally, the Company disclosed that during its review and analysis of the Company's annual results, MasTec's management identified a number of matters that impacted current and prior-period operating results. These included additional reserves for bad debts and inventory, cost overruns and projected losses on certain projects, valuation reserves for state deferred tax assets, revenues recognized on various contracts, work in progress and inventory overstatements at a Canadian subsidiary, the closing of Brazilian operations, the accrual for certain insurance reserves which was complicated by the receivership of a prior insurance carrier, and other items. Defendants concluded that these matters required a detailed analysis and evaluation to determine the appropriate accounting treatment. Some of these issues may require restatements of amounts previously reported. The complaint alleges that when this news shocked the market, shares of MasTec's stock price dropped $1.50 per share, or 15.5 percent, on April 13, 2004 on unusually large trading volumes.