According to a press release dated August 6, 2007, EVCI Career Colleges Holding Corp. (EVCI) announced that the United States District Court for the Southern District of New York has approved the settlement of the class action securities litigation pending against EVCI since December 2005. No stockholders objected to, or opted out of, the proposed settlement, which was filed with the Court on April 13, 2007. The Court's approval was entered on August 1, 2007 and makes the settlement final and binding on all class members. The settlement is being funded by EVCI's insurance carriers and includes the dismissal of all claims without any liability or wrongdoing attributed to EVCI or any other defendant.
In a press release dated May 21, 2007, the action has been certified as a class action for purposes of a proposed settlement valued at $7.725 million in cash. A hearing will be held before the Honorable Colleen McMahon, in the United States District Court for the Southern District of New York, Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, Courtroom 21-B, New York, New York, 10007-1312 at 9:30 a.m. on July 27, 2007 to determine whether the proposed Settlement should be approved by the Court as fair, reasonable, and adequate and to consider the application of Lead Counsel for attorneys' fees and reimbursement of litigation expenses.
On December 15, 2006, the Court entered the Decision and Order denying the motion to dismiss. On April 13, 2007, a Stipulation of Settlement was filed.
On May 10, 2006, the Court entered the Decision and Order signed by U.S. District by Judge Colleen McMahon consolidating seven pending actions, and designating Arkansas Teachers as Lead Plaintiff and appointing its chosen counsel, Bernstein, Litowitz, Berger & Grossman, L.L.P. On July 21, 2006, the plaintiff filed a Consolidated Amended Class Action Complaint, and on September 15, 2006, the defendants filed a motion to dismiss the Consolidated Amended Class Action Complaint.
The original complaint alleges that in an effort to further increase enrollment during the Class Period, EVCI had sought extension center status for its Yonkers site. The New York State Education Department ("NYSED") requires that an instructional location that offers more than 15 credit-bearing courses be approved as an extension center. The NYSED conducted a review of the Company's Yonkers site to determine if the location's facilities and resources were adequate to sustain the increased enrollment. In addition, the NYSED conducted a review of all of EVCI's facilities and resources as a result of the Company's extraordinary growth in enrollment since it first received NYSED non-probationary accreditation status in the year 2003.
Plaintiff alleges that during the Class Period, the defendants misrepresented EVCI's business conditions, financial results and prospects to public investors by touting the Company's strong revenue, earnings, and student enrollment growth while failing to disclose that EVCI's growth could not be sustained because it was enrolling more students than its resources and teaching staff could handle and that it would not receive extension center status from the NYSED. The true facts were revealed to the market on October 19, 2005, when EVCI issued a press release announcing that it received a draft review of a compliance review undertaken by the NYSED which included assertions of irregularities in its admissions practices and a proposed determination to deny extension center status for one of EVCI's college site, located in Yonkers, New York. The press release also revealed that the NYSED recommended that EVCI increase the number and percent of full-time faculty, improve its libraries, facilities and equipment resources, and improve the quality of student learning.
The complaint further alleges that EVCI' s announcement caused the Company's common stock to plummet 55.69% to $2.45, from its previous days closing price of $5.53. On December 6, 2005, EVCI announced that the NYSED's final determination was to deny extension center status for its's Yonkers location. In addition, the Company announced that the NYSED required EVCI to downsize its student enrollment at all of its college site locations in New York City. In immediate response to this news, EVCI's share price continued to downward spiral, falling to a low of $1.81 on December 6, 2005.
EVCI purports to provide on-campus career college education through various locations throughout New York and Pennsylvania. Almost all of the Company's revenue is derived from its New York City locations. Moreover, almost all of its revenue is derived from government sponsored financial aid programs established to help low income students pay for college.