The original complaint charges Force Protection and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Force Protection and its subsidiaries engage in the manufacture of ballistic and blast protected vehicles.
The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business, financial results and prospects. Specifically, defendants continually boasted Force Protection’s dominance in the Mine Resistant Ambush Protected (“MRAP”) market was due to its superior product design and rapid delivery rates. However, in a report dated June 27, 2007, the Inspector General of the Department of Defense questioned both of these claims and criticized the awarding of contracts to Force Protection on a sole source basis and without competitive bidding. Then, on February 29, 2008, after the market closed, Force Protection announced it would have to delay the release of its 2007 Form 10-K and restate its Form 10-Q for the period ended September 30, 2007. On this news, Force Protection’s stock collapsed to close at $3.58 per share on March 3, 2008, a one-day decline of 13% and an 88% decline from the Class Period high of $30.27 per share, prior to when Force Protection’s problems began to be revealed.
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) as a result of the Company’s ongoing problems in meeting contractual delivery deadlines, the Company would have trouble competing in the MRAP market; (b) in audit reports, the Defense Contract Audit Agency had been critical of the Company’s finances and financial accounting system, which threatened the Company’s eligibility to compete for government contracts; (c) the Company’s accounting department suffered from material weaknesses and deficiencies and lacked the necessary staff and resources to perform its required functions; (d) contrary to the representations contained in the Company’s SEC filings, the Company’s internal controls were inadequate and easily manipulated; (e) the Company lacked effective internal controls in its financial reporting process, required to enable it to properly analyze and/or estimate Force Protection’s future financial and operational performance; and (f) defendants had caused the Company to falsely report at least its third quarter 2007 financial results.
In April and May 2008, parties filed motions to consolidate the cases and motions to appoint lead plaintiff and lead counsel. On June 10, 2008, the Honorable C. Weston Houck granted the motions to consolidate the cases. On June 20, 2008, the judge also approved the Chicago Laborers Group's motion to be appointed lead plaintiff and approved the lead plaintiff’s selection of Berman DeValerio Pease Tabacco Burt & Pucillo and Pomerantz Haudek Block Grossman & Gross LLP as co-lead counsel. Plaintiffs filed their Consolidated Class Action Complaint on November 6, 2008. The defendants responded by filing a motion to dismiss the Consolidated Class Action Complaint on January 16, 2009. On September 30, 2009, the Court entered the Minute Entry of the proceedings held before Honorable C. Weston Houck, who denied the pending motion to dismiss. On November 16, 2009, the lead plaintiff filed a motion to certify the class.
According to a press release dated October 1, 2010, Force Protection Inc. announced that it has reached an agreement to settle the consolidated shareholder securities class action entitled In re Force Protection, Inc. Securities Litigation, Consolidated Civil Action No. 2:08-cv-845-CWH, pending in the U.S. District Court for the District of South Carolina against the Company and a number of the Company's former directors and/or officers. The settlement amount is $24 million, a majority of which will be covered by insurance. The settlement is subject to court approval and certain other conditions. In addition, an agreement has been reached to settle a related shareholder derivative action entitled In re Force Protection, Inc. Derivative Litigation, Civil Action No. 2:08-1907-CWH, which is pending in the same federal court. This settlement provides that the Company will adopt certain corporate governance practices, receive a payment of $2.25 million from insurance, and pay plaintiffs' attorney's fees and expenses in an amount not to exceed $2.3 million. The settlement is subject to court approval and certain other conditions.
The settlement was preliminarily approved on October 6, 2010. The Settlement Hearing was set for January 25, 2011. On March 9, 2011, the Court entered the Order and Final Judgment approving the settlement, and approving attorneys' fees and expenses. The action is now dismissed with prejudice.