The complaint alleges that Powerwave and certain of its officers and directors are charged with issuing a series of materially false and misleading statements in violation of Section 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. On October 9, 2006, investors learned that Powerwave's 2006 third quarter results would be only $155 million, significantly lower than the $230-$250 million previously forecast. This sudden and shocking disclosure, in the face of repeated Company reports of "record" setting growth and profitability, had an immediate impact on the price of Powerwave stock, which declined almost 20% in the single trading day -- marking a decline of almost $10 per share from the Class Period high reached only several months earlier.
The Complaint further alleges that Powerwave materially misrepresented and failed to disclose numerous conditions that adversely affected the Company, permitting defendants to: (1) deceive shareholders concerning the business, operations, management and the intrinsic value of Powerwave common stock; (2) artificially inflate the price of the Company's shares, ultimately purchased by misled shareholders; (3) register for sale with the SEC millions of shares of stock that were sold to the public or used to acquire assets of other unwitting companies; (4) make it possible for Company insiders to sell millions of dollars of their privately held shares while in possession of material adverse non-public information.
According to the Company’s Form 10-Q for the quarterly period ended June 28, 2009, in the first quarter of 2007, four purported shareholder class action complaints were filed in the United States District Court for the Central District of California against the Company, its President and Chief Executive Officer, its former Executive Chairman of the Board of Directors and its Chief Financial Officer. The complaints were Jerry Crafton v. Powerwave Technologies, Inc., et. al., Kenneth Kwan v. Powerwave Technologies, Inc., et. al., Achille Tedesco v. Powerwave Technologies, Inc., et. al. and Farokh Etemadieh v. Powerwave Technologies, Inc. et. al. and were brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In June 2007, the four cases were consolidated into one action before the Honorable Judge Philip Gutierrez, and a lead plaintiff was appointed. In October 2007, the lead plaintiff filed an amended complaint asserting the same causes of action and purporting to state claims on behalf of all persons who purchased Powerwave securities between May 2, 2005 and November 2, 2006. The essence of the allegations in the amended complaint was that the defendants made misleading statements or omissions concerning the Company’s projected and actual sales revenues, the integration of certain acquisitions and the sufficiency of the Company’s internal controls. In December 2007, the defendants filed a motion to dismiss the amended complaint. On April 17, 2008, the Court granted defendants’ motion to dismiss plaintiffs’ claims in connection with the Company’s projected sales revenues, but denied defendants’ motion to dismiss plaintiffs’ other claims. On August 29, 2008, the defendants answered the amended complaint. On May 14, 2009, the parties executed a stipulation of settlement to resolve the consolidated action. According to the terms of the proposed settlement, the settlement payment will be funded by the Company’s directors and officers liability insurance. The Court granted preliminary approval of the proposed settlement and provisionally certified a settlement class on June 22, 2009, and set a hearing for final approval of the settlement for October 19, 2009.
The proposed settlement is in the amount of $3,150,000 in cash. On October 13, 2009, the plaintiff filed a motion for settlement approval. On October 19, 2009, the Settlement Judge Philip S. Gutierrez granted motion to award Plaintiffs' Co-Lead Counsel attorneys' fees of 33-1/3% of the Settlement Fund, or $1,050,000, and reimbursement of litigation expenses in the amount of $275,418.49. Judge Gutierrez approved the settlement and dismissed the action with prejudice.
On December 28, 2011, the Court issued an Order Authorizing Distribution Of The Net Settlement Fund.