The original complaint charges Beazer and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Beazer designs, sells and builds primarily single-family homes in various locations within the United States and provides mortgage origination and title insurance services to its homebuyers.
Specifically, the complaint alleges that during the Class Period defendants issued false and misleading statements regarding the Company's business and prospects and failed to disclose to the investing public the following adverse facts: (a) the Company lacked requisite internal controls over its lending practices, which, as a result of its improper lending practices prior to and during the Class Period, would lead to numerous foreclosures and other problems; (b) the Company's business was growing in large part due to its improper lending practices to low-income borrowers; (c) many of the Company's buyers would not be able to pay their loans after the first two years, which would lead to decreased sales and earnings and numerous foreclosures; and (d) given the increased volatility in the lending market, the Company had no reasonable basis to make projections about its 2007 results and as a result, the Company's 2007 projections issued during the Class Period were at a minimum reckless. As a result of defendants' false statements, Beazer stock traded at artificially inflated prices during the Class Period, reaching a high of $48 per share in December 2006, and the Company's CEO and CFO were able to sell over $9.7 million worth of their Beazer stock.
The complaint further alleges that on March 18, 2007, The Charlotte Observer reported that federal housing officials were reviewing whether Beazer complied with federal rules in arranging government-insured loans for buyers in its subdivisions. On March 21, 2007, Beazer announced the resignation of its CFO. Then, on March 27, 2007, after the market closed, the Company issued a press release responding to media reports and inquiries into the possibility of a federal investigation of the Company in connection with alleged mortgage fraud. On this news, Beazer's stock fell $2.64 per share to close at $28.77 per share on March 28, 2007, a one-day decline of 9% and a 40% decline from its Class Period high of $48 per share.
On August 8, 2007, the Court entered the Order signed by Judge Clarence Cooper granting the motion for consolidation, appointment as lead plaintiff and approval of lead plaintiff's selection of co-lead counsel. According to the Order, several actions were consolidated under "In re Beazer Homes USA, Inc. Securities Litigation,” File No. 1 :07-CV-725-CC. Further, Glickenhaus & Co. is appointed lead plaintiff and Chitwood Harley Harnes, LLP, Milberg Weiss LLP, and Bernstein Liebhard & Lifshitz, LLP is appointed co-lead counsel.
On June 27, 2008, the plaintiffs filed an Amended and Consolidated Class Action Complaint. On November 3, 2008, the defendants filed several motions to dismiss the Amended and Consolidated Complaint. Before any ruling on the motions, the lead plaintiffs filed a motion for settlement on May 5, 2009. According the Stipulation of Settlement, the proposed settlement is in the amount of $30,500,000 and settles claims with the Beazer Homes USA, Inc., the individual defendants and Deloitte & Touche LLP.
On May 12, 2009, Judge Cooper preliminarily approved the settlement. On July 15, 2009, the plaintiffs filed a motion for final approval of settlement and motion for attorney's fees and expenses. On September 15, 2009, Judge Cooper signed the Order and Final Judgment approving the settlement and approving the motion for attorney's fees and expenses.