As summarized by the Company’s FORM 10-Q For The Quarterly Period Ended March 30, 2008, [several] actions have been consolidated into a single action—In re Wireless Facilities, Inc. Securities Litigation, Master File No. 04CV1589-JAH. Plaintiffs filed a First Amended Consolidated Class Action Complaint on April 1, 2005. Defendants filed their motion to dismiss this first amended complaint on April 14, 2005. The plaintiffs then requested leave to amend their first amended complaint. The plaintiffs filed their Second Amended Complaint on June 9, 2005, this time on behalf of those who purchased, or otherwise acquired, the Company's common stock between May 5, 2003 and August 4, 2004. Defendants filed their motion to dismiss this Second Amended Complaint on July 14, 2005. The motion to dismiss was taken under submission on October 20, 2005 and on March 8, 2006, the Court granted the Defendants' motion. However, plaintiffs were granted the right to amend their complaint within 45 days and subsequently filed their Third Amended Consolidated Class Action Complaint on April 24, 2006. Defendants filed a motion to dismiss this complaint on June 8, 2006. On May 7, 2007, the Court denied the Defendants' motion to dismiss. Defendants' filed their answer to the plaintiffs' complaint on July 13, 2007. In February 2008, following a voluntary mediation of the matter, the parties reached a tentative agreement to settle the class action. Under the tentative settlement, plaintiffs and the class will dismiss all claims, with prejudice, in exchange for a cash payment in the total amount of $12 million. The Company's directors' and officers' liability insurers will pay the settlement amount in accordance with the Company's insurance policies, less any applicable retention or co-insurance obligations that are expected to be paid directly by the Company. The Company estimates that the amount of its payment toward the settlement will be approximately $2.4 million. The Company has accrued approximately $2.4 million as of March 30, 2008 related to this matter. The parties currently are in the process of documenting their agreement and, if agreement terms are reached, will seek a determination by the Court that the proposed settlement is fair, reasonable and adequate.
The original Complaint alleges that defendants violated federal securities laws by issuing a series of material misrepresentations to the market during the Class Period, thereby artificially inflating the price of Wireless Facilities securities. The Complaint alleges that the company and certain of its officers and directors issued materially false statements concerning the Company's financial condition. Specifically the Complaint alleges that Wireless failed to disclose and misrepresented that the Company materially underreported its foreign tax costs and that as a result had inflated its net income or loss by 3% to 8% or $10 to $12 million and that the Company lacked adequate internal controls and was unable to ascertain its true financial condition.
The complaint further alleges that on August 4, 2004, Wireless reported results for the second quarter of fiscal 2004. It also announced that it intends to restate its financial results filed on Form 10-K for the years 2001 through 2003 to accrue for certain foreign tax contingencies. On this news, shares of Wireless plummeted to $5.02 per share, representing a decline of approximately 28%.
Note: The class includes all persons who purchased the publicly traded securities of Wireless Facilities, Inc. ('Wireless') during the class period specified below, and it also includes all those who acquired Wireless' shares through its acquisitions of Questus, Davis Bay, Defense Systems, High Technology Solutions, Telia Academy and Telia Contracting.