Viisage Technology, Inc. ("Viisage" or the company) provides identity verification technology.
The original Complaint alleges Viisage was forced to borrow funds from its controlling shareholder, and was in dire need of a credit line adequate to finance its ongoing business needs. In order to secure such credit, the Defendants engaged in a scheme to artificially engineer a profit in the third quarter of 2004 (ending Sept. 26, 2004), and made earnings projections known by them to be baseless and unsupportable. The third quarter profit, which was reported on October 25, 2004, was only made possible through various accounting manipulations, whereby certain assets were prematurely recognized, while certain expenses were artificially deferred from the third quarter of 2004 into the fourth quarter of 2004.
The Complaint further alleges that after obtaining the desired credit line, the Defendants waited until February 27, 2005 to shock investors with the news of numerous fourth quarter charges and a significant asset impairment, all of which returned Viisage to substantial unprofitability. This news caused Viisage stock to drop over 20% on heavy trading. Then, on or around March 2, 2005, Defendants again shocked the market by announcing a "material weakness" in its internal financial controls, and that "management will be unable to conclude that the Company's internal controls over financial reporting are effective as of December 31, 2004. Therefore, BDO Seidman LLP, the Company's external accounting firm, will issue an adverse opinion with respect to the effectiveness of the Company's internal controls over financial reporting." As a result of this news, the stock dropped another 20%, closing on March 3, 2005 at $4.50 per share, down from almost $7 per share at the commencement of the Class Period.
According to the Company’s FORM 10-Q For the Quarterly Period Ended September 30, 2006, in March and April 2005, eight putative class action lawsuits were filed in the United States District Court for the District of Massachusetts. These lawsuits have been consolidated into one action under one case name: In re: Viisage Technology Securities Litigation, Civil Action No. 05-10438-MLW. The so-called Turnberry Group has been designated as lead Plaintiff and its Counsel has been designated as lead Counsel. The amended consolidated Complaint which was filed in February 2006 alleges violations of the federal securities laws by Viisage (now named L-1 Identity Solutions, Inc.) and certain officers and directors arising out of purported misstatements and omissions in Viisage’s SEC filings related to certain litigation involving the Georgia drivers’ license contract and related to the Viisage’s reported material weaknesses in internal controls over financial reporting, which allegedly artificially inflated the price of the Company’s stock during the period May 12, 2004 through March 2, 2005. In April 2006, the Company filed a Motion to Dismiss this case. On February 7, 2007, the Court issued an Order partially granting Defendants' Motion to Dismiss.
On July 23, 2007, the parties entered into a Stipulation of Settlement. The Court granted preliminary approval of the Settlement on August 17. On November 16, the Court granted final approval of the Settlement, including an award of Attorneys’ Fees and Expenses, and entered Final Judgment.
On May 22, 2009, the Court issued an Order authorizing distribution of the net Settlement fund.
