Lattice Semiconductor Corporation ("Lattice" or the Company) designs, develops and markets programmable logic devices (PLDs) and related software. PLDs are semiconductor components that can be configured by end customers as specific logic circuits and thus enable shorter design cycle times and reduced development costs. The Company also offers programmable analog and mixed signal products, such as ispPAC products. Lattice's end customers are primarily original equipment manufacturers in the communications, computing, industrial, automotive, medical, consumer and military end markets.
The original Complaint alleges that Defendants Lattice and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities Act of 1934 and Rule 10b-5 promulgated thereunder. Specifically, the Complaint alleges that in knowing or reckless disregard of the truth and/or as part of their ongoing efforts to continue the illusion of Lattice's growth in the semiconductor industry, Defendants issued and or participated in the issuance of materially false and misleading statements and financial information. More specifically, the Complaint alleges that during the Class Period Defendants: 1) materially understated its accounts payable balance; 2) overstated earnings by a material amount; 3) falsely represented that the Company's financial results during the Class Period had complied with Generally Accepted Accounting Principles ('GAAP').
Beginning on January 22, 2004, Lattice began to issue press releases indicating that it had potentially overstated its deferred income account. Shares began to tumble in reaction to the news, falling from $12.36 on January 22, 2004 to close at $11.73 the following day. Shares traded as low as $10 the following week. Then on March 18, 2004, Lattice issued a press release indicating that it anticipated restating its first, second and third quarters of its 2003 financial statements as it had likely overstated the Company's Deferred Income Account, an account that represents the Company's judgment as to the potential gross margin on inventory held by the Company's distributors. On March 24, 2004, Lattice finally released its financial results for the fourth quarter and year ended December 31, 2003. The restatement reduced 2003 revenue by approximately 7% over the nine-month period and increased the Company's net loss by an additional $9 million. In its March 24, 2004 press release, the Company attributed the restatement to "inappropriate accounting entries made by an individual in the Company's finance department and deficiencies in the design and operation of internal accounting controls related to the deferred income account." Shares of Lattice continued to sink, falling to $8.95 on April 19, 2004 when it finally amended its Form 10-Q, representing a decline of approximately 27.5% since the overstatement was first announced.
On January 13, 2005, the Court entered the Order granting the motion to appoint lead Plaintiff. On January 27, 2005, a Consolidated Class Action Complaint was filed. The Defendants responded by filing motions to dismiss the Consolidated Class Action Complaint. On January 3, 2006, the Court entered the Order denying the motions to dismiss the Consolidated Complaint.
According to a press release dated March 16, 2006, Lattice announced that it has reached an agreement in principle with Plaintiffs to settle the consolidated class action lawsuit filed in 2004 against the Company and certain of its current and former executive officers. The agreement does not contain any admission of fault or wrongdoing on the part of Lattice or any of the individual Defendants in the litigation. The agreement in principle contemplates that Plaintiffs will receive a payment of $3,500,000 in exchange for a release of the Company and the individual Defendants from all claims asserted in the litigation. Lattice expects that the entire amount of the settlement will be paid by its insurer under the terms of its director and officer liability insurance policy, and that payment of the settlement amount will not affect Lattice's current or future financial results. The agreement in principle is subject to the negotiation and completion of the usual and customary documentation for such a settlement, including a Stipulation of Settlement, and is subject to and conditioned upon final court approval.
On November 6, 2006, the Court granted the motion for settlement. That day, the Court entered the Final Judgment and Order of Dismissal with Prejudice signed by U.S. District Judge Ann L. Aiken.
According to an article dated October 31, 2007, the U.S. District Court for the District of Oregon granted approval of a request for attorneys' fees equal to 25% of a $3.5 million settlement, finding that it was reasonable. The district court denied the attorneys' request to recover expenses in the amount of $100,000. Lattice entered into an agreement with shareholders to settle a securities fraud class action for $3.5 million.
