The original complaint charges Leap and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Leap is a wireless communications carrier that offers digital wireless service under the Cricket Communications, Inc. and Jump Mobile brands in the United States.
Specifically, the complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business, prospects and financial results. As a result of defendants’ false statements, Leap stock traded at artificially inflated prices during the Class Period, reaching its all-time high of $98.33 per share in July 2007.
On August 7, 2007, Leap announced disastrous second quarter 2007 results, including missing its revenue projections, soaring expenses and a high customer turnover rate, causing its stock to decline from $80.36 per share on August 7, 2007 to $60.00 per on August 8, 2007 – a one-day decline of 25%. Then, on November 9, 2007, before the market opened, defendants disclosed that Leap would be required to restate its financial statements for fiscal years 2004, 2005, 2006 and for the first and second quarters of fiscal year 2007 to correct for errors in its previously reported service revenues, equipment revenues and operating expenses, causing its stock to drop $21.38 per share.
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’s financial statements were materially misstated due to its failure to properly account for its service revenue in violation of Generally Accepted Accounting Principles (“GAAP”); (b) the Company’s financial statements were materially misstated due to its failure to properly account for its equipment revenue and cost of equipment in violation of GAAP; (c) 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; and (d) given the Company’s exposure to subprime consumers and the intense competition in the low-cost cell carriers market Leap was facing, the Company had no reasonable basis to make projections about its ability to maintain its customer turnover rate and net customer additions. As a result, the Company’s projections issued during the Class Period were at a minimum reckless.
On May 22, 2008, U.S. District Judge Barry Ted Moskowitz granted the motions to consolidate several actions and granted the motions to appoint New Jersey Carpenters Pension and Benefit Fund as lead plaintiff and approving lead counsel selection. On July 7, 2008, the plaintiff filed a Consolidated Class Action Complaint. On August 28, 2008, the defendants PricewaterhouseCoopers LLP, Leap Wireless International, Inc., and the individual defendants filed three separate motions to dismiss the Consolidated Class Action Complaint. On January 9, 2009, District Court Judge Michael M. Anello issued three orders granting the defendants’ three motions to dismiss the consolidated class action complaint without prejudice. Amended pleadings are due by February 23, 2009.
On March 10, 2009, the lead plaintiff filed a Second Amended Consolidated Class Action Complaint. On May 1, 2009, Judge Michael M. Anello granted the Lead Plaintiff’s motion for substitution of Lead Counsel. According to the Order, the law firm of Cohen Milstein Sellers & Toll, PLLC is appointed and shall hereinafter serve as Lead Counsel for plaintiffs and the Class. On May 26, 2009, the defendant filed a motion to dismiss the Second Amended Class Action Complaint.
On November 13, 2009, Judge Michael M. Anello signed an Order setting hearing on the motion to dismiss the Second Amended Class Action Complaint. According to the Order, the Parties have informed the Court that they have reached a settlement. Accordingly, the Court hereby continues the hearing on Defendants' motion to dismiss to February 1, 2010, before Judge Michael M. Anello. Upon the parties' filing of the motion for preliminary approval of the class settlement, Defendants shall withdraw the motion to dismiss.
According to an article dated February 19, 2010, Wireless communications provider Leap Wireless International Inc. has struck a $13.75 million deal to resolve a putative securities class action accusing it and several executives of making misrepresentations and omissions that inflated its stock price and ended up costing investors hundreds of millions of dollars. Lead plaintiff New Jersey Carpenters Pension and Benefit Funds filed an "unopposed" motion Thursday in the U.S. District Court for the Southern District of California seeking preliminary approval.
On March 24, 2010, the settlement was preliminarily approved. A Settlement Fairness Hearing shall be held on Monday October 4, 2010, before the Honorable Michael M. Anello.
On October 14, 2010, Judge Anello approved the settlement and dismissed the action with prejudice. On October 15, 2010, the motion for attorneys' fees and reimbursement of expenses was approved.