According to a press release dated March 26, 2007, Carrier Access Corporation (NASDAQ: CACS), a leading provider of wireless and converged access solutions, announced today that the Securities and Exchange Commission (SEC) has closed its formal inquiry related to the Company's restatement of financial statements for fiscal years 2003 and 2004. The SEC's notification to the Company confirmed that no enforcement action would be recommended. In addition, the Company announced that it had reached agreement in principle for settlement of its outstanding class action securities-related litigation filed in June 2005 against the Company and certain of its executive officers and directors upon the Company's announcement that it would restate financial statements. While Carrier Access continues to deny any wrongdoing, it believes the settlement is in the best interest of the Company and its shareholders to avoid the distraction and expense of continued litigation. The settlement is subject to court approval. Under the terms of the proposed settlement, Carrier Access would pay $7.4 million in satisfaction of the claims, all of which would be funded by proceeds of the Company's directors and officers insurance policy.
According to the Company’s FORM 10-Q for the quarterly period ended September 30, 2006, beginning on June 2, 2005, three purported shareholder class action lawsuits were filed in the United States District Court for the District of Colorado against Carrier Access Corporation and certain of the Company’s officers and directors. The cases, captioned Croker v. Carrier Access Corporation, et al., Case No. 05-cv-1011-LTB; Chisman v. Carrier Access Corporation, et al., Case No. 05-cv-1078-REB, and Sved v. Carrier Access Corporation, et al., Case No. 05-cv-1280-EWN, have been consolidated and are purportedly brought on behalf of those who purchased our publicly traded securities between October 21, 2003 and May 20, 2004. Plaintiffs allege that defendants made false and misleading statements, purport to assert claims for violations of the federal securities laws, and seek unspecified compensatory damages and other relief. The consolidated complaint is based upon allegations of wrongdoing in connection with the Company's announcement of its intention to restate previously issued financial statements for the year ended December 31, 2004 and certain interim periods in each of the years ended December 31, 2004 and 2003. On July 18, 2006, the Court denied defendants’ motions to dismiss the consolidated complaint. No trial date has been set for this matter.
Several purported shareholder class action lawsuits have been filed against Carrier Access Corporation and certain of its present and former executive officers with violations of the Securities Exchange Act of 1934. Specifically, the Complaint alleges that the defendants made materially false and misleading statements during the Class Period concerning the Company's financial results and business prospects. This allowed the defendants to (i)acquire Paragon Networks using inflated Company stock, (ii) sell 6 million shares of the Company to the public in January 2004, raising $78 million,(iii) obtain listing on the Russell 3000 Index, and (iv) enable the Individual Defendants to sell nearly 1.3 million personally held shares in the Company, reaping nearly $15.8 million.
The complaint further alleges that on or around May 5, 2005, Carrier Access announced that it received a Nasdaq Staff Determination letter, indicating that the Company's stock was subject to delisting from the Nasdaq. On May 20, 2005, Carrier Access announced that it was reviewing revenue and cost recognition issues. The press release stated that "certain revenues and direct costs have been recorded in incorrect periods. The amounts that have been quantified to date are significant..." On this news, Carrier Access's share price fell to a close of $4.61 per share on May 20, 2005.
Also included in this case are all shareholders who acquired Carrier Access stock as Paragon Networks shareholders or in the January 29, 2004 Carrier Access public offering.