The original complaint charges CBS and certain of its officers and directors with violations of the Securities Exchange Act of 1934. CBS operates as a mass media company in the United States and internationally. It operates in four segments: Television, Radio, Outdoor, and Publishing.
The complaint alleges that during the Class Period, defendants made materially false and misleading statements about the Company’s financial condition and operating results. Specifically, defendants failed to disclose: (i) that adverse market conditions had materially impaired CBS’s operations, expected cash flows and the value of its intangible assets, including goodwill; (ii) that the Company’s reported goodwill and intangible assets, which ranged between 69% - 73% of CBS’s total assets and 131% - 137% of CBS’s total equity during the Class Period, were materially overstated; (iii) that the Company reported equity capital during the Class Period that was materially overstated; (iv) that, as a result of its failure to timely write down impaired intangible and goodwill assets, the Company’s financial results during the Class Period were materially overstated; (v) that the Company’s financial statements were not prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) and, therefore, were materially false and misleading; (vi) that the Company’s balance sheet was not “pristine,” “extremely strong” or “extremely healthy;” (vii) that the Company’s cash flow from operations was declining at a significant rate; and (viii) that defendants’ positive statements concerning the Company’s free cash flow, including defendant Moonves’s representation that CBS “clearly has the right broad range of assets to produce outstanding free cash flow quarter after quarter, year after year,” were materially false and misleading and without reasonable basis.
According to the complaint, on October 10, 2008, CBS issued a press release announcing that it “expects to incur a non-cash impairment charge of approximately $14 Billion, in the third quarter of 2008.” In response to this announcement, the price of CBS common stock declined from $10.14 to $8.10, on very heavy trading volume.
On May 4, 2009, the Lead Plaintiffs, the City of Omaha, Nebraska Civilian Employees’ Retirement System and the City of Omaha Police and Fire Retirement System, filed an Amended Complaint. On July 13, 2009, the defendants filed a motion to dismiss the Amended Complaint. On March 16, 2010, Judge P. Kevin Castel signed the Memorandum and Order granting the motion to dismiss. Plaintiffs were given leave to file a Second Amended Complaint.
The plaintiffs filed the Second Amended Complaint on October 8, 2010. The defendants responded by filing a motion to dismiss the Second Amended Complaint on November 19, 2010. According to the Memorandum and Order entered on May 25, 2011, the defendants' motion was granted. The Clerk's Judgment was entered the next day.
On June 22, 2011, the plaintiffs filed a Notice of Appeal from the order and judgment dismissing the action. The appeal is currently pending in the Second Circuit Court of Appeals.