On September 5, 2006, a Second Consolidated Amended Class Action Complaint was filed. On August 31, 2007, an individual defendant was voluntarily dismissed from the case without prejudice. On September 19, 2007, the remaining defendants filed a motion for summary judgment. Discovery commenced. On February 27, 2008, the motion for summary judgment was dismissed without prejudice. On April 8, 2008, a Stipulation of Settlement was filed. The settlement fund is in the amount of $21.5 million in cash. On April 16, 2008, Judge Robinson preliminarily approved the settlement and provided for notice. A Settlement Hearing is set for July 31, 2008.
According to a press release dated June 15, 2006, the U.S. District Court for the District of Delaware denied a software company's motion to dismiss a securities fraud class action, ruling that the complaint was adequately pled with particularity and scienter. Shareholders of Veritas Software Corp. sued Veritas and its officers and directors for violations of the Securities Exchange Act of 1934 § 10(b) and Rule 10b-5, alleging that Veritas' officers and directors knowingly and fraudulently inflated revenues in violation of GAAP. In the complaint, the shareholders identified five confidential informants who stated that Veritas' officers knowingly included unsigned contracts with clients in calculating revenue for several quarters in 2003 and 2004. The shareholders claimed that such recognition of unsigned contracts was regular practice within Veritas and known throughout the company. Veritas moved to dismiss, arguing that it was protected by the safe harbor for forward-looking statements under the Private Securities Litigation Reform Act (PSLRA) and that the shareholders failed to meet the particularity requirements of the PSLRA and Fed. R. Civ. P. 9(b). … The district court denied Veritas' motion to dismiss, finding that shareholders adequately pled the securities fraud with particularity as required under the PSLRA.
On March 3, 2005, Judge Sue L. Robinson granted the motion to consolidate the cases and granted the motion to appoint lead plaintiffs and lead counsel. On May 27, 2005, a Consolidated Amended Class Action Complaint was filed. The defendants responded by filing a motion to dismiss the Consolidated Amended Class Action Complaint.
The original complaint alleges that during the class period Defendants had actual knowledge of or recklessly disregarded the fact that although the Company was involved in negotiations for significant contracts, those negotiations had not advanced far enough to reasonably conclude they would close. Despite the Defendants having no reasonable basis to do so, Defendants caused the Company to confirm expectations that its revenue for second-quarter 2004 would be $490 to $505 million and earnings per share for the quarter would be $0.21 to $0.23. The complaint also alleges that Defendants confirmed these earnings expectations without reasonable basis and in order to maintain the Company's share price and avoid the negative fallout that would occur as a result of an accurate disclosure of the Company's contractual prospects and financial condition.
Only three weeks after Defendants confirmed their second quarter 2004 expectations, on July 6, 2004, the Defendants shocked the market by suddenly announcing that the Company's second quarter 2004 revenues would actually be 'in the range of $475 million to $485 million' and that its GAAP earnings per share would, in fact, 'be in the range of $0.17 to $0.19.' As a result of this news, the Company's share price plunged from $26.55 to $17.00, or 36% in heavy trading volume.