On September 25, 2006, the Court entered the Orders approving the Plan of Allocation and awarding attorneys’ fees and reimbursement of expenses. The Court further entered the Final Judgment and Order of Dismissal approving the settlement and dismissing the action with prejudice.
According to a press release dated May 26, 2006, pursuant to Rule 23 of the Federal Rules of Civil Procedure and an Order of the Court that a hearing shall be held before the Honorable Gerard E. Lynch on September 22, 2006, at 2:00 p.m. in Courtroom 6B of the United States District Court for the Southern District of New York, The Daniel Patrick Moynihan Courthouse, 500 Pearl Street, New York, NY 10007, to determine whether an order should be entered: (i) finally approving as fair, reasonable and adequate the proposed settlement of the claims asserted by Plaintiffs in the captioned consolidated class action (the "Action") against Defendants GCL, John Legere ("Legere"), and Daniel P. O'Brien ("O'Brien") (collectively "Defendants") for the sum of $15,000,000 in cash, pursuant to the terms set forth in the Stipulation and Agreement of Settlement dated as of March 20, 2006 (the "Settlement Agreement"); (ii) dismissing the Action with prejudice as to the Defendants; (iii) approving the Plan of Allocation of the Net Settlement Amount; and (iv) awarding counsel fees and reimbursement of expenses to counsel for Lead Plaintiffs and the Class.
As summarized by the Notice of Pendency of Class Action and Proposed Settlement, beginning in April 2004, eight putative class actions were filed by purchasers of GCL common stock against GCL and certain of its officers and directors alleging securities law violations. These actions were consolidated into In re Global Crossing Access Charge Litigation, Case No. 04 MD 1630 (GEL). At the same time, the Court appointed Alaska Electrical Pension Fund, Locals 302 and 612 of the International Union of Operating Engineers-Employers Construction Industry Retirement Trust and Chou Associates Management, Inc. as Lead Plaintiffs in the Action and Lerach Coughlin Stoia Geller Rudman & Robbins LLP and Schiffrin & Barroway, LLP as Lead Counsel. Lead Plaintiffs filed a Complaint on or about February 18, 2005, naming GCL and the Individual Defendants as Defendants.
The original Complaint names as defendants Global Crossing and certain individual defendants. The Complaint alleges that defendants issued a series of materially false and misleading statements that operated as a fraud on purchasers of Global Crossing common stock during the Class Period. More specifically the Complaint alleges that on December 9, 2003 Singapore Technologies Telemedia (ST Telemedia) and Global Crossing announced that they have consummated their purchase agreement, allowing a newly restructured Global Crossing to emerge from Chapter 11 proceedings. The December 9, 2003 press release stated that Global Crossing's plan of reorganization included the cancellation of existing preferred and common stock. The holders of these previously publicly traded securities received no consideration under the company's plan of reorganization. Global Crossing also reported that it, together with its independent auditor, Grant Thornton LLP, had finalized its audit of financial results for the years ended December 31, 2001 and December 31, 2002.
The complaint further alleges that on January 22, 2004, Global Crossing announced that its new common stock would begin trading on the NASDAQ National Market, under the trading symbol GLBC. On March 10, 2004, Global Crossing reported its preliminary financial results for the fourth quarter and year ended December 31, 2003. In addition, the company announced several key milestones in 2003 and offered an outlook for 2004 'Today Global Crossing is a company with a clean balance sheet, minimal debt, strong corporate governance and a seasoned management team that will steer the company into a leadership position within the telecommunications industry,' said John Legere, Global Crossing's chief executive officer. On March 26, 2004, Global Crossing filed its 2003 annual report on Form 10-K with the Securities and Exchange Commission. On April 27, 2004, Global Crossing shocked the investing public by announcing that it plans to restate results for 2003 because it understated costs by at least $50 million to $80 million. Global Crossing said in the statement its previously reported results for 2002 and 2003, and its 2004 forecasts should be disregarded pending the outcome of its review. The company also said that it is assessing the internal control issues believes that these issues constitute a material weakness in its internal controls. Finally the Company said that pending the ongoing review and the restatement, Global Crossing is postponing its June 2004 shareholders meeting, the filing and mailing to shareholders of its proxy statement, and its earnings release and Quarterly Report on Form 10-Q for the first quarter of 2004. The market's reaction to Global Crossing's disclosures was swift and severe. Following these disclosures, shares tumble $5 to $13.20. Volume, at 4.19 million shares, was more than six times the three-month daily average.
A class action complaint was also filed in the U.S. District Court for the District of New Jersey. That case was later transferred to the U.S. District Court for the Southern District of New York.