The original complaint charges Accredited and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Accredited operates as a mortgage banking company in the United States and Canada.
The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results. As a result of defendants’ false statements, Accredited stock traded at artificially inflated prices during the Class Period, reaching a high of $58.45 per share on May 11, 2006.
On February 14, 2007, the Company issued a press release announcing disappointing profitability. Then, on March 12, 2007, after the market closed, the Company issued a press release announcing that the Company was exploring various strategic options. The Company reported that it had paid approximately $190 million in margin calls on its facilities since January 1, 2007. In addition, Accredited was seeking waivers and extensions of waivers of certain financial and operating covenants under its warehouse and repurchase facilities. On March 13, 2007, Accredited’s stock collapsed $7.43 per share to close at $3.97 per share, a one-day decline of 65% on volume of 41.9 million shares, 20 times the average three-month volume.
According to the complaint, the true facts, which were known by the defendants but concealed from the investing public during the Class Period, were as follows: (a) the Company lacked requisite internal controls, and, as a result, the Company’s projections and reported results issued during the Class Period were based upon defective assumptions and/or manipulated facts; (b) the Company’s financial statements were materially misstated due to its failure to properly account for its allowance for loan repurchase losses; (c) given the deterioration and the increased volatility in the sub-prime market, the Company would be forced to tighten its underwriting guidelines which would have a direct material negative impact on its loan productions going forward; and (d) given the increased volatility in the sub-prime market, the Company had no reasonable basis to make projections about its 2007 results. As a result, the Company’s projections issued during the Class Period about its 2007 results were at a minimum reckless. As a result of defendants’ false statements, Accredited’s stock price traded at inflated levels during the Class Period. However, after the above revelations seeped into the market, the Company’s shares were hammered by massive sales, sending them down more than 65% from their Class Period high.
On June 26, 2007, the Court entered the Order consolidating the related cases, appointing lead plaintiff and appointing lead counsel. On August 24, 2007, the plaintiff filed a Corrected Consolidated Class Action Complaint for Violations of the Federal Securities Laws. On November 2, 2007, the defendants filed a motion to dismiss then Consolidated Class Action Complaint.
On January 4, 2008, the Court entered the Order signed by U.S. District Judge Marilyn L. Huff denying the motion to dismiss. To summarize, the Court denies the motions to dismiss except as follows: 1. The REIT and individual defendants Gunderson, Pratt, Erickson, Espy and Berglund are dismissed from Plaintiffs first claim for relief; 2. Individual defendants Gunderson, Pratt, Erickson, Espy and Berglund are dismissed from Plaintiffs third claim for relief; and, 3. All defendants except Accredited are dismissed from Plaintiffs sixth claim for relief. The Court grants Plaintiff leave to amend the complaint to address the deficiencies identified by this Order. The parties soon after engaged in discovery proceedings.
On February 20, 2009, the lead plaintiff filed a motion to certify the class. On April 16, 2009, the parties notified the Court that a settlement had been reached. As a result, the discovery hearing set for April 20, 2009 and the discovery status conference set for May 4, 2009 are hereby vacated. The parties were directed to file a joint motion to vacate the hearing on the motion for class certification and the scheduling order, and to submit a proposal to District Judge Huff for a further scheduling of settlement procedures.
According to an article dated July 16, 2009, Plaintiffs have reached a $22 million cash settlement in their proposed class action against bankrupt subprime lender Accredited Home Lenders Holding Co. and its directors and officers, whose alleged book-cooking burned shareholders. After over 4 million discovery documents, 17 depositions and two days of talk, the parties have reached an equitable agreement, the lead plaintiffs said in an unopposed motion for preliminary approval of the settlement filed Wednesday in the U.S. District Court for the Southern District of California. With the San Diego-based Accredited having filed for Chapter 11 bankruptcy, insurers will foot the bill, the parties said in their stipulation of settlement.
On August 4, 2009, Judge Marilyn L. Huff preliminarily approved the settlement. The Final Settlement Hearing is scheduled on November 2, 2009. On November 4, 2009, Judge Marilyn L. Huff signed the Final Order Approving Settlement and Plan of Allocation and Granting Plaintiffs' Motion for Award of Attorneys' Fees and Other Expenses. The Court grants the attorneys’ fees in the amount of $5,317,936.16, and reimbursement of litigation expenses in the amount of $728,255.35.