Securities class actions against Comverse Technology, Inc. have been filed in the U.S. District Courts for the Eastern and Southern Districts of New York.
The original Complaint alleges that defendants violated federal securities laws by issuing a series of materially false statements. Specifically, defendants failed to disclose information regarding the true timing of stock option grants made to key executives. This manipulation of the grant dates permitted the individual defendants to enrich themselves, while artificially inflating net income, operating income and retained earnings. Had the timing not been manipulated, and properly accounted for, these financial measures would have been materially lower.
The complaint further alleges that on or around March 14, 2006, Comverse announced the creation of a special committee of its Board of Directors composed of outside directors to review matters relating to the company's stock option grants, the accuracy of the stated dates of option grants and whether all proper corporate procedures were followed. Then, on April 17, 2006, Comverse revealed that it would restate its financial statements for the first three quarters of fiscal 2006, for the 2001-05 fiscal years, and possibly previous periods. The adjustments are expected to be material. On this news, Comverse stock dropped from $29.15 on March 13, 2006 to $23.31 on April 17, 2006, a decline of over 20%.
In an article dated March 6, 2007, the federal judge overseeing a class action lawsuit against embattled telecommunications company Comverse Technology has vacated a magistrate judge's decision recommending the appointment of Lerach Coughlin Stoia Geller Rudman & Robbins as lead plaintiff's counsel. Finding that Lerach Coughlin's client, Plumbers and Pipefitters National Pension Fund (P&P), did not in fact have the greatest financial interest in the litigation, Eastern District Judge Nicholas G. Garaufis, in In re Comverse Technology, Inc. Securities Litigation, 06-CV-1825, last week granted a request by Pomerantz Haudek Block Grossman & Gross to serve as lead plaintiff's counsel. In appointing the firm that role under the Private Securities Litigation Reform Act, the judge said Pomerantz Haudek's client, the Menorah Group, purchased "the greatest number of net shares" of Comverse stock, "expanded the greatest number of net funds" and suffered "the greatest loss."
Plaintiffs filed a Consolidated Amended Complaint on March 23, 2007. Defendants filed their first motions to dismiss the Consolidated Amended Complaint on July 30, 2008, while one individual defendant filed his motion to dismiss on August 21, 2007.
In an article dated February 26, 2008, Comverse Technology Inc., the world's largest maker of voice-mail software, lost a bid to dismiss a lawsuit filed by investors who said they were defrauded by an options-backdating scheme led by ex-Chief Executive Officer. United States District Court Judge Nicholas Garaufis, in Brooklyn, New York, denied a request by Comverse to dismiss a consolidated class-action, or group lawsuit, filed in 2006 against Comverse and other former top executives.
On March 5, 2008, the plaintiffs filed a Second Consolidated Amended Complaint and later filed a revised version of the complaint on April 10, 2008. On June 2, 2008, an individual defendant filed a motion to dismiss in part. On July 15, 2008, the lead plaintiffs filed a motion to certify the class. On July 18, 2008, the individual defendant’s motion to dismiss was granted and the claims against him were dismissed. On November 24, 2008, Judge Nicholas G. Garaufis terminated the pending motion to certify the class and directed the lead plaintiffs to re-file the motion once it is fully briefed. On January 16, 2009, the lead plaintiff re-filed a motion to certify the class.
On February 26, 2009, two Third Party Complaints were filed against Deloitte & Touche LLP, each filed by an individual defendant named in the action.
On February 27, 2009, the lead plaintiff filed a Third Consolidated Amended Complaint and filed a corrected version on March 10, 2009. The defendants filed answers to the Third Consolidated Amended Complaint. The parties soon after filed motions to stay the action which were granted.
On December 18, 2009, the lead plaintiffs filed a Settlement Agreement. The parties to the have agreed to settle the case for $225 million dollars. According to the Settlement Agreement, the company defendant Comverse Technology will pay $165 million and an individual defendant will cause to pay $60 million. On April 6, 2010, the settlement was preliminarily approved. The Fairness Hearing was set for June 21, 2010, before Judge Nicholas G. Garaufis. On June 24, 2010, the Court entered the Judgment and Order of Dismissal, approving the settlement and dismissing the action without prejudice. The Third Party Complaints are also dismissed with prejudice.
According to an article dated June 25, 2010, a federal judge in Brooklyn has approved a $56 million fee for Pomerantz Haudek Grossman & Gross for its work as lead counsel in a class action over alleged backdating against Comverse Technology Inc. Eastern District of New York Judge Nicholas Garaufis on Thursday approved a fee of 25 percent of a $225 million settlement, which the judge also signed off on in In re Comverse Technology Inc. Securities Litigation (pdf), 06-CV-1825. A state retirement fund in Pennsylvania had objected to the fees as too large (pdf), but the judge said he was unwilling to interfere with an award negotiated openly between the law firm and its client, lead plaintiff Menora Group.
On November 16, 2011, the Court granted the motion for distribution of settlement funds.