As stated in the docket, plaintiffs filed a motion for approval of settlement on November 2, 2006 which was preliminarily approved 5 days later. On March 1, 2007 the judge entered his Final Order awarding attorneys' fees and expenses while terminating the case. The settlement provides a $10.5 million fund, plus interest, to be paid to qualifying class members. Counsel was awarded 30% of the gross settlement in addition to roughly $200,000 of expense reimbursement.
According to the Company’s FORM 10-K/A for the fiscal year ended June 30, 2006, between March 2, 2005 and April 22, 2005, seven separate complaints were filed, each purporting to be on behalf of a class of Molex shareholders, against the Company, and certain of its officers and employees. The shareholder actions have been consolidated before Judge Ruben Castillo in a case pending in the United States District Court for the Northern District of Illinois Eastern Division entitled The Takara Trust v. Molex Incorporated, et. al., Case No. 05C 1245. The Consolidated Amended Complaint alleges, among other things, that during the period from July 27, 2004 to February 14, 2005, the named defendants made or caused to be made a series of materially false or misleading statements about Molex’s business, prospects, operations, and financial statements which constituted violations of Section 10(b) of the Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act. The complaint also alleges that certain of the named defendants engaged in insider trading in violation of Section 10(b) and Rule 10b-5. As relief, the complaint seeks, among other things, a declaration that the action be certified as a proper class action, unspecified compensatory damages (including interest) and payment of costs and expenses (including fees for legal counsel and experts). … On April 28, 2006, the Court denied defendants’ motion to dismiss the complaint. On July 6, 2005, the Court appointed City of Pontiac Group, Joan L. Weeks individually and as trustee, and James Baker as lead plaintiffs, and approved lead plaintiffs’ choice of lead counsel. On June 15, 2006, defendants answered the complaint, denying any liability to plaintiffs and asserting numerous defenses. Discovery is ongoing, and is scheduled to conclude in March 2007.
The original complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company hid $5.8 million in inventory expenses in order to inflate its earnings; (2) that as a result the foregoing Molex had to take an $9.1 million inventory charge; (3) that, in addition to hiding inventory expenses, the Company improperly accounted for its accrual for vacation pay, its recording of a contingent gain, and its recording of the first quarter profit-in-inventory charge; (4) that the Company's financial results were in violation of Generally Accepted Accounting Principles ("GAAP"); (5) that the Company lacked adequate internal controls; and (6) that as a result of the above, the Company's financial results were materially inflated at all relevant times.
The complaint further alleges that on or around November 11, 2004, Molex announced that it was delaying the filing of its Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 and that its Chief Financial Officer had been replaced. The Company also revealed that it identified certain improper accounting practices. On November 15, 2004, Molex issued a press release announcing that Deloitte & Touche LLP had resigned as the Company's independent auditor. On February 14, 2005, Molex released its financial and operational results for the second quarter ended December 31, 2004 and the restated results for the Company's first fiscal quarter ended September 30, 2004, which reflected the appropriate adjustments given the accounting irregularities. As a result of this news, shares of Molex fell $3.34 per share or 11.60 percent, on February 15, 2005, to close at $25.45 per share.