According to the Final Judgment and Order of Dismissal, entered on April 28, 2008, from U.S. District Judge Honorable Petrese B. Tucker, the case was settled. The case was dismissed with prejudice and the case was closed.
In a press release date March 4, 2008, a hearing will be held on April 25, 2008, at 9:00 a.m., before the Honorable Petrese B. Tucker, at the James A. Byrne U.S. Courthouse, 601 Market Street, Philadelphia, Pennsylvania 19106, for the purpose of determining: (1) whether the proposed settlement of the Litigation for the sum of $8,750,000 in cash should be approved by the Court as fair, reasonable and adequate; (2) whether, thereafter, this Litigation should be dismissed with prejudice against the Defendants as set forth in the Stipulation of Settlement dated as of November 2, 2007; (3) whether the Plan of Allocation of settlement proceeds is fair, reasonable and adequate and therefore should be approved; and (4) the reasonableness of the application of Lead Counsel and the Lead Plaintiffs for the payment of attorneys' fees and expenses incurred in connection with this Litigation, together with interest thereon.
On January 22, 2007 granted in part motions for consolidation and the appointments of lead plaintiff and lead counsel. On March 19, 2007 plaintiffs filed their consolidated class action complaint against the company. The defendants followed up with motions to dismiss on June 1, 2007. According to the docket, both parties moved for private mediation in lieu of a settlement conference. Those motions were granted on August 17, 2007.
The original complaint alleges that defendants, GMH Communities Trust and certain of its officers and directors, disseminated false and misleading financial statements in a scheme to inflate the earnings of the Company and issued dividends in violation of loan covenants in order to drive the price of its stock higher. The higher stock price allowed the Company to sell a secondary offering in October 2005 on more favorable terms. Defendants portrayed the Company as a growing real estate investment trust in a particular niche market, student and marketing housing and military housing, paying high dividends. Unbeknownst to the market, the Company's strong earnings were the result of accounting fraud. As part of the Company's closing of its books on fiscal year 2005, GMH's chief financial officer wrote to the Audit Committee indicating that there were problems with the "tone at the top" of the Company's management. In response to the letter, the Audit Committee conducted an investigation which indicated, among other things, material weaknesses in internal controls, pressure by key executives on the accounting function and the need for adjustments in the financial statements in current and prior accounting periods. In addition, the Company's issuance of $0.91 in 2005 dividends exceeded the 110% of funds from operations per share limitation under the loan covenants of its credit facility. The stock dropped 23% on the news from a close of $16.83 on March 10 to close at $12.90 on March 13. On March 31, 2006, the Company announced the continued delay in filing its 2005 annual report and that it expected to restate its prior previously reported financial results due to improper capitalization of expenses and the improper timing of recognition of revenue and expenses. Since the initial disclosure of the audit committee investigation, the Company has lost almost $224 million in market capitalization, closing at $11.21 on April 3, 2006 following the March 31, 2006 disclosure.