On January 31, 2007, the Court entered one Judgment settling the action as to KPN, Willem Ackermans, Eelco Blok, Joop Drechsel, Martin Pieters, and Rhett Williams. The Court further entered a second Judgment, settling action as to Qwest Communications International Inc., and Individual Defendants Brendan Keating, Joseph Nacchio, Jeffrey Von Deylen, John McMaster, Drake Tempest, and Robert Woodruff. On February 1, 2007, the Court entered two Orders approving the settlements, the plan of allocation, and attorneys’ fees and expenses and also dismissing all pending motions as moot. The case is now closed.
According to a press release dated September 5, 2006, pursuant to Court order, a hearing will be held for the proposed settlement of this action on January 4, 2007, at 10:00 a.m., before the Honorable Peter K. Leisure. At the hearing, the Court will determine: (1) whether the settlement of claims in the action against Qwest Communications International Inc., Brendan Keating, Joseph Nacchio, Jeffrey Von Deylen, John McMaster, Drake Tempest, and Robert Woodruff in the amount of Five Million, Five Hundred Thousand Dollars (US $5,500,000) in cash, plus accrued interest (the "Qwest Settlement Cash"), and the number of freely tradable shares of common stock of Qwest Communications International Inc. that equate to Five Million, Five Hundred Thousand Dollars (US $5,500,000) in value based on the closing price of such common stock on the New York Stock Exchange on the trading day immediately following the Court's entry of final settlement approval (the "Qwest Settlement Stock" and collectively with the Qwest Settlement Cash, the "Qwest Settlement Fund"), should be approved as fair, reasonable and adequate; (2) whether the settlement of claims in the action against Koninklijke KPN N.V. ("KPN"), Willem Ackermans, Rhett Williams, Joop Drechsel, Martin Pieters and Eelco Blok in the amount of Four Million, One Hundred Seventy Five Thousand Dollars (US $4,175,000.00) in cash , plus accrued interest (the "KPN Settlement Fund" and collectively with the Qwest Settlement Fund, the "Settlement Fund"), should be approved as fair, reasonable and adequate; (3) whether the claims against Defendants in this action should be dismissed with prejudice as set forth in the Stipulation of Partial Settlement dated as of February 3, 2006 and filed with the Court (the "Qwest Stipulation") and in the Stipulation of Settlement dated as of June 20, 2006 and filed with the Court (the "KPN Stipulation"); (4) whether the application of Lead Plaintiff's counsel for an award of attorneys' fees and expenses should be approved; (5) whether the application of Lead Plaintiff for reimbursement of his reasonable time and expenses should be approved; and (6) whether the deposit, distribution, and any sale of the Qwest Settlement Stock is subject to exemption from registration under Section 3(a)(10) of the Securities Act of 1933, as amended.
In a press release dated June 22, 2006, Dutch telecoms group Royal KPN has settled a securities class action procedure in the USA, related to the bankruptcy of KPNQwest in 2002, for $4.175 mln (3.3 mln euro), KPN said on June 21, 2006. The settlement concerns KPN, its subsidiaries and a number of individuals. The global settlement applies to everyone, who bought shares in KPNQwest between November 9, 1999 and May 31, 2002. The lawsuit was handled at the Southern District Court of New York and the settlement is pending approval by this court.
As summarized by the Notice Of Pendency And Proposed Settlement Of Class Action, fter the Lead Plaintiff was appointed to represent the Settlement Class, and Lead Plaintiff’s selection of Schiffrin & Barroway, LLP and Glancy, Binkow & Goldberg, LLP was approved by the Court as “Lead Plaintiff’s Counsel”, Lead Plaintiff filed a consolidated class action complaint on January 9, 2004. Lead Plaintiff then filed a Second Amended Consolidated Class Action Complaint (the “Second Amended Complaint” or “SAC”) on October 15, 2004. In the SAC, Lead Plaintiff asserted claims for alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. More specifically, the SAC alleged that Defendants issued false and misleading statements and omissions regarding KPNQwest’s revenue and its financial condition during the Settlement Class Period. The SAC alleged that as a result of the false and misleading statements, the value of KPNQwest Securities was inflated and that members of the Settlement Class who purchased these securities were damaged when the truth about KPNQwest’s ongoing revenue stream and financial condition was revealed and the value of its securities dropped. Defendants moved to dismiss the SAC and Lead Plaintiff opposed Defendants’ motions. All such motions are currently pending before the Court. During the pendency of Defendants’ motions to dismiss, certain of the Defendants and Lead Plaintiff began discussing the possible resolution of the Action. After many months of negotiations, Lead Plaintiff reached a proposed agreement with Qwest Communications International Inc. and certain individuals. Following that tentative agreement, negotiations commenced and, after several more months, a tentative resolution of the Action was reached with respect to the remaining Defendants, KPN and certain individuals.
The original complaint alleges that during the Class Period, the Defendant, KPNQwest’s Executive Vice President and CFO, portrayed KPNQwest as a booming company which was experiencing and would continue to experience rising revenue, even while the telecommunications market in Europe began to collapse under the weight of bandwidth capacity that far outstripped demand. In order to continue portraying KPNQwest as a successful company and maintain their illusion of earnings growth, the Defendant resorted to utilizing misleading accounting practices and “hollow capacity swaps” (also known as “round-tripping”), which provided no commercial benefit other than to artificially inflate the Company’s sales and revenue. This case centers around the Defendant’s failure to disclose the Company’s misleading accounting practices, and Defendant’s material omissions and the dissemination of materially false and misleading statements concerning KPNQwest’s business operations, revenue and earnings. By the end of the Class Period, after KPNQwest’s inability to maintain its inflated revenue numbers was revealed, its stock price dropped 46% in one day.
KPNQwest is not named as a defendant herein because the Company filed for bankruptcy protection on May 31, 2002 in the district court in Harleem, Netherlands.