According to a press release dated May 21, 2007, Immucor, Inc. (Nasdaq: BLUD), a global leader in providing automated instrument-reagent systems to the blood transfusion industry, reported it has entered into an agreement to settle the previously reported class action lawsuits against the company and certain of its current and former directors and officers consolidated as In re Immucor, Inc. Securities Litigation in the United States District Court for the Northern District of Georgia (the "Court"). The lawsuit alleges that Immucor stock prices were inflated during part of 2004 and 2005 as a result of material misrepresentations or omissions in the company's financial statements and other public announcements. The company continues to deny any liability or wrongdoing and has vigorously defended the lawsuits. Under the settlement agreement, the company's insurance carrier has agreed to pay $2.5 million to the plaintiff class in consideration of an absolute and unconditional release of all claims against the company and the individual defendants. The only costs to the company are legal expenses, which have been expensed as incurred. The Court has given its preliminary approval to the terms of the settlement. The settlement is contingent upon various conditions, including but not limited to final approval by the Court after notice to the class and a hearing scheduled for September 20, 2007. It is not certain the settlement will receive final approval from the Court nor be upheld if challenged on appeal.
As summarized by the Company’s FORM 10-Q for the quarterly period ended August 31, 2006, between August 31 and October 19, 2005, a series of ten class-action lawsuits were filed in the United States District Court for the Northern District of Georgia against the Company and certain of its current and former directors and officers alleging violations of the securities laws. The Court has consolidated these cases for disposition under the caption In re Immucor, Inc. Securities Litigation, File No. 1:05-CV-2276-WSD, designated lead plaintiffs, permitted the filing of an amended consolidated complaint, and established a schedule for briefing the Company’s motion to dismiss the claims. The consolidated complaint, brought on behalf of a putative class of shareholders who purchased Immucor stock between August 16, 2004 and August 29, 2005, alleges that the Company’s stock prices during that period were inflated as a result of material misrepresentations or omissions in the Company’s financial statements and other public announcements regarding its business. On March 7, 2006, the Company timely moved to dismiss the consolidated complaint. On October 4, 2006, the Court denied the Company’s motion to dismiss.
The original Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), and Rule 10b-5 promulgated thereunder. During the Class Period, the complaint claims that Defendants misrepresented that Immucor's financial statements and disclosures fairly and accurately reflected the Company's results of operations as required by Generally Accepted Accounting Principles ("GAAP") and the Exchange Act. The Complaint also charges that Defendants' Sarbanes-Oxley certifications during the Class Period were also false and misleading, as the Company, knowingly or with severe recklessness, lacked adequate internal controls and failed to keep proper books and records in violation of their well publicized Code of Corporate Conduct.
The nature of Defendants' fraud began to come to light on August 26, 2005 when the Company was forced to announce that the Securities and Exchange Commission (the "SEC") had launched a formal investigation into payments made by its Italian unit and its president, Defendant De Chirico, in October 2003 to a physician connected with a hospital with which the Company was doing business. After the market closed on August 29, 2005, the Company revealed further that its Chief Financial Officer had resigned, that it would be revising its previously issued results for at least two quarters in order to account for a previously unrecorded accrued bonus, and that its Form 10-K for fiscal year 2005 would be further delayed due to additional accounting and auditing procedures the Company claimed was necessary to properly reflect the accrued bonus and to render the internal controls report required by Section 404 of Sarbanes Oxley.
In response to this news, the price of BLUD common stock dropped from a closing price of $28.61 on August 25, 2005 before the market learned of the SEC's formal investigation to close at $24.00 per share on August 30, 2005. A staggering 6 million shares of BLUD common stock were traded on August 30, 2005 alone. This volume is nearly ten times the average daily volume.
The complaint further alleges that during the first six months of 2005, Immucor insiders sold approximately 186,000 shares for proceeds of about $4,970,000. During this time, Defendants led the market to believe that the internal control issue involving the Italian subsidiary was "an isolated event" that was not expected to lead to more than a $350,000 fine and increased investigation expenses that had already been factored into the Company's bottom line. In fact, however, the opposite was true. Immucor's internal control problems, as the market later learned, were not confined to its Italian subsidiary and did not center solely around this alleged "isolated event."