On July 9, 2007, the plaintiff filed a Notice of Appeal in the Sixth Circuit Court of Appeals.
According to a press release dated July 9, 2007, the U.S. District Court for the Northern District of Ohio June 11 dismissed a class securities fraud action claiming Ferro Corp. and officials created a "culture of fear" in which employees were forced to engage in accounting manipulations designed to meet market expectations (In re Ferro Corp. Securities Litigation, N.D. Ohio, Lead Case No. 1:04 CV 1440, 6/11/07). Judge John R. Adams concluded that the plaintiffs failed to meet the fraud and scienter pleading standards of the Private Securities Litigation Reform Act. The plaintiff's request for leave to amend was denied.
On May 4, 2006, the plaintiff filed a Second Amended Complaint. On July 7, 2006, the defendants filed a motion to dismiss with prejudice the plaintiff’s Second Amended Complaint. The motion is currently pending before the Court.
On January 5, 2005, the Court entered the Order consolidating two similar actions. On February 2, 2005, Judge John M. Manos granted the motion to appoint lead plaintiff and to approve choice of lead counsel. On June 20, 2005, a Consolidated Complaint was filed and the defendants responded by filing a motion to dismiss the Consolidated Complaint. Before any ruling on the motion to dismiss, the plaintiff filed a First Amended Complaint on October 20, 2005, and again amended the complaint on February 7, 2006. On March 13, 2006, the Court entered the Order and Notice of Party Dismissal as to one of the individual defendants.
The original complaint charges Ferro and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Ferro is a major international producer of performance materials sold to a broad range of manufacturers serving diverse markets throughout the world.
According to the complaint, on July 22, 2004, defendants revealed that the Company was slashing earnings expectations for the second quarter of fiscal 2004 by more than 70% based upon an internal review, purportedly conducted in conjunction with Ferro's closing its books for the quarter, which unearthed a multi-million dollar overstatement of earnings resulting from certain unspecified accounting manipulations. Upon this news, the price of Ferro shares fell by more than 16% to close at $20.68 per share.
The complaint alleges that defendants knew but concealed from the investing public, that (i) Ferro's polymer additives business was not profitable and was incurring greater losses than had been reported; (ii) that Ferro's efforts to raise the prices of its polymer additives to products to offset increasing 'raw materials' costs had been ineffective, further eroding the Company's revenues and profits; (iii) that the Company's purportedly improving cost controls, especially regarding the Company's polymer additives business, was, in fact, the product of accounting manipulations that deferred and/or materially understated the true operating costs of the business from Ferro's public investors the increasing losses the Company was actually incurring from its polymer additive business; and (iv) that the Company's disclosure controls and procedures were wholly ineffective contrary to defendants Ortino's and Gannon's representations to investors.