On August 17, 2007, the Court entered the Final Judgment and Order of Dismissal with Prejudice and approved the final settlement. That day, the Court also entered Orders approving the Plan of Allocation and awarding attorneys’ fees in the amount of $1,800,000.00 and expenses in the amount of $273,796.81.
On July 9, 2007, the lead plaintiff filed a motion for Final Approval of Settlement. The judge granted motions for preliminary approval on May 16, 2007.
According to a press release dated March 28, 2007, on March 23, 2007, MedQuist entered into a Memorandum of Understanding ("MOU") with Lead Plaintiff in which it agreed to pay $7.75 million to settle all claims, throughout the Class Period, against all defendants in the action. The settlement is subject to formal documentation by the parties and conditioned on final approval by the Court after notice to the putative Class. Neither MedQuist nor any of the individually named defendants has admitted or will admit to liability or any wrongdoing in connection with the proposed settlement.
According to an article dated October 6, 2006, the court finds that plaintiffs have pleaded their securities fraud claims against the corporate defendant and its six officials with the requisite level of particularity and specificity, and denies the motions to dismiss filed by these defendants. However, the court finds the complaint deficient as to the auditor-defendants and grants their dismissal motions. [Filed Sept. 29, 2006.]
In a press release dated January 19, 2006, on August 16, 2005, a First Amended Complaint in the Shareholder Putative Class Action was filed against the Company in the United States District Court District of New Jersey. The First Amended Complaint named additional defendants, including certain current and former directors, certain former Company officers, the Company's former and current external auditors and Koninklijke Philips Electronics N.V. ("Philips"). Like the original complaint, the First Amended Complaint asserted claims under Sections 10b and 20(a) of the Securities and Exchange Act of 1934 (the "Act") and Rule 10b5 of the Act. The Class Period of the original complaint was expanded 20 months and now includes the period from March 29, 2000 through June 14, 2004. Pursuant to an October 17, 2005 consent order approved by the Court, Lead Plaintiff Greater Pennsylvania Pension Fund filed a Second Amended Complaint on November 15, 2005. The Second Amended Complaint dropped Philips as a defendant, but alleges the same claims and the same purported class period as the First Amended Complaint. Plaintiffs seek unspecified damages. Pursuant to the provisions of the Private Securities Litigation Reform Act, discovery in the action is stayed pending the filing and resolution of the defendants' motions to dismiss, which were filed on January 17, 2006, and will be fully briefed by May 1, 2006.
The original complaint alleges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Specifically, the complaint alleges that Defendants issued a series of materially false and misleading statements regarding the financial condition of the Company. More specifically, the complaint alleges that Defendants statements were materially false and misleading because the Company's financial statements for 2002 and 2003 were the result of fraudulent financial manipulations, including ambiguous billing to clients which resulted in the overstatement of the Company's revenue and earnings by a material amount. Moreover, the complaint alleges that the Defendants indicated that Company's financial statements complied with Generally Accepted Accounting Principles ("GAAP") when they did not.
The complaint further alleges that on November 2, 2004, MedQuist announced that on October 29, 2004, the Company's Board of Directors concluded that the Company's previously issued financial statements, including the 10-K reports for 2002 and 2003, as well as the encompassed Forms 10-Q for the corresponding periods, and all earnings releases and communications should no longer be relied upon. These statements by the Company followed the conclusion of Debevoise & Plimpton LLP and PricewaterhouseCoopers LLP, that the way MedQuist billed for services created ambiguities in how client accounts were calculated. This in turn led to incorrect billing and inflated revenues. Shares of MedQuist traded to approximately $13.00 per share in reaction to the news, nearly 53% below the Class Period high of $29.13 per share.