SECURITIES LITIGATION / CORPORATE GOVERNANCE

False financial statements

Poor governance

Insider trading

These are some of the hallmarks of corporate wrongdoing that cause investors to lose billions and leave many asking how they can protect themselves and their beneficiaries. Think Enron, WorldCom, Parmalat, Royal Dutch Shell and other well-known corporate scandals.

False financial statements

Poor governance

Insider trading

These are some of the hallmarks of corporate wrongdoing that cause investors to lose billions and leave many asking how they can protect themselves and their beneficiaries. Think Enron, WorldCom, Parmalat, Royal Dutch Shell and other well-known corporate scandals.

False financial statements

Poor governance

Insider trading

These are some of the hallmarks of corporate wrongdoing that cause investors to lose billions and leave many asking how they can protect themselves and their beneficiaries. Think Enron, WorldCom, Parmalat, Royal Dutch Shell and other well-known corporate scandals.

Antitrust Class Action Attorneys

At SRK, we represent clients in securities litigation and other forums of investor protection matters.

In doing so, we have developed a record of obtaining excellent results for our clients, helping them recover billions of dollars and implement far-reaching corporate governance reforms. We have prosecuted some of the largest global securities fraud actions and obtained innovative results in the process. For example, we acted as co-lead counsel in the Converium/Scor action where we negotiated a $145 million recovery on behalf of a global class of investors. In an unprecedented move, the case was settled on two continents, in the Southern District of New York and the Amsterdam Court of Appeals.

More than 200 securities fraud class actions are filed each year by investors seeking to recover monies they lost.

This was the first such trans-Atlantic resolution to a securities class action. In the Parmalat action (Europe’s Enron), we have obtained settlements thus far valued at $90 million, as well as “first of its kind” governance reforms. We take a conservative approach to evaluating and recommending cases, but an aggressive stance when our trial-tested team litigates to recover monies on a client’s behalf.

For some clients, particularly institutional investors, success isn’t measured solely by the amount of money recovered. In shareholder derivative suits, for example, the goal is to enforce the rights of the corporation when it has been harmed by the misconduct of its officers or directors. In these cases, we are prepared to aggressively seek appropriate changes in corporate governance, such as strengthening the independence of the board of directors, altering the responsibilities of the board’s key committees, and funding an independent oversight committee and independent compliance counsel.

In doing so, we have developed a record of obtaining excellent results for our clients, helping them recover billions of dollars and implement far-reaching corporate governance reforms. We have prosecuted some of the largest global securities fraud actions and obtained innovative results in the process. For example, we acted as co-lead counsel in the Converium/Scor action where we negotiated a $145 million recovery on behalf of a global class of investors. In an unprecedented move, the case was settled on two continents, in the Southern District of New York and the Amsterdam Court of Appeals.

More than 200 securities fraud class actions are filed each year by investors seeking to recover monies they lost.

This was the first such trans-Atlantic resolution to a securities class action. In the Parmalat action (Europe’s Enron), we have obtained settlements thus far valued at $90 million, as well as “first of its kind” governance reforms. We take a conservative approach to evaluating and recommending cases, but an aggressive stance when our trial-tested team litigates to recover monies on a client’s behalf.

For some clients, particularly institutional investors, success isn’t measured solely by the amount of money recovered. In shareholder derivative suits, for example, the goal is to enforce the rights of the corporation when it has been harmed by the misconduct of its officers or directors. In these cases, we are prepared to aggressively seek appropriate changes in corporate governance, such as strengthening the independence of the board of directors, altering the responsibilities of the board’s key committees, and funding an independent oversight committee and independent compliance counsel.

We Take A Conservative Approach

How often do corporate scandals affect investors? More than 200 securities fraud class actions are filed each year by investors seeking to recover monies they lost. Of course, not all of these actions are meritorious. Investors lose money in the securities markets for many reasons, oftentimes having nothing to do with corporate fraud. But circumstances do arise when a company and certain of its officers and directors seek to artificially inflate the market price of a security by disseminating false and misleading statements (including financial statements) to securities analysts, brokers and investors at large. At times, a company’s auditors and underwriters may play an active role in the wrongdoing. Investors who purchase shares at artificially inflated prices are hurt once the fraud is revealed, and the stock price drops, often dramatically.

We place a premium on careful pre-litigation investigation and analysis. Our clients look to us to determine where corporate fraud or wrongdoing has caused their losses, including which of the 200+ securities class actions filed each year are meritorious and fit their particular litigation criteria. We use the experience of our securities litigation team, as well as investment bankers, forensic accountants and others to apply our conservative standards in evaluating shareholder actions. This means also identifying the risks of litigation as well as the likely range of outcomes.

Governance Through Action

We place a premium on enhancing shareholder value. Recovering assets our clients lose because of corporate wrongdoing is one way this can be accomplished. Ensuring that a company adheres to strong corporate governance standards is another. At SRK, we seek to infuse corporate governance enhancements into our overall class action strategy. Indeed, we have a long record of successfully demanding good governance changes when settling class and derivative actions. These measures are designed to help ensure that the future conduct of a company’s officers and directors will be in the best interest of its shareholders. The following are examples of governance enhancements obtained by SRK:

  • In the Archer Daniels Midland action we negotiated broad changes in the company’s board structure that were designed to strengthen its independence and diversity. These changes encompassed defining what constitutes an independent director and ensuring the inclusion of women and minorities on the board. We also created corporate governance and regulatory oversight committees at the board level and required the board to retain outside counsel to provide independent oversight of these committees. In addition, we created a vehicle requiring company directors to attend educational seminars to better understand their fiduciary obligations as directors. A leading corporate governance expert called these reforms “state of the art.”
  • In the Parmalat action we not only returned monies to investors, but also demanded and obtained an agreement by certain banks to adhere to key corporate governance principles designed to advance investor protection and minimize future misconduct – the first securities fraud action in which corporate governance reforms were achieved from a defendant beyond the issuer.
  • In the Pacific Enterprises derivative action, we negotiated a settlement that required a quasi-reorganization of the company, new guidelines on future diversification from its core businesses, and reinstatement of the company’s dividend.
  • In the Chicago Bridge action, we required implementation of governance measures to allow proper monitoring of insider trading in order to increase transparency for investors and promote better regulatory compliance.
  • In the Abbott Laboratories action we required the company to implement corporate governance reforms to strengthen the board of directors’ oversight of regulatory compliance, and required it to contribute $27 million to fund such compliance and regulatory measures.
  • In the Bristol-Myers Squibb action we required the company to implement numerous substantial governance enhancements to prevent future misconduct. These included various measures relating to the audit committee, the criteria under which directors are considered for reelection, the rotation of committee members on a periodic basis, and reports by the chief compliance officer and chief risk officer regarding ethics and non-financial compliance.
  • In Shaev v. Sidhu, we negotiated a settlement that entailed significant corporate governance reforms, including arriving at a definition of what constitutes director independence in the context of voting on transactions being considered by the company.
  • In the El Paso action, we obtained extensive corporate governance enhancements, including changes to the composition of the board of directors, appointment of key management positions, the adoption of corporate governance guidelines, and the formation of ethics and disclosure committees.

Our corporate governance focus begins not when a case approaches settlement, but rather when it is filed.

Federal Securities Actions

Scandlon v. Blue Coat Systems, Inc.
(United States District Court for the Northern District of California)

Securities fraud action on behalf of all those who purchased securities issued by Blue Coat Systems, Inc. (“Blue Coat”) between November 24, 2009 and May 27, 2010.

The Honorable Richard Seeborg appointed SRK’s client, an institutional investor, to serve as Lead Plaintiff and the Firm to serve as Lead Counsel in this securities class action involving false and misleading statements concerning its performance in certain markets and its transition into a new line of business.

The suit alleges that Blue Coat, a provider of web security products that was transitioning into wide-area network (WAN) optimization products, failed to alert investors that demand for its products in Europe was softening in the third fiscal quarter of 2010. This information would have been material to investors, as European sales historically accounted for forty percent of Blue coat’s global sales revenues. Despite the fact that the weaknesses in demand and the difficulty in transitioning into WAN optimization products were readily apparent to senior management at least several months earlier, Blue Coat did not advise investors of those facts until May 27, 2010, when announcing the company’s fourth quarter and fiscal year 2010 results.

When Blue Coat acknowledged the true state of its European performance, the stock reacted immediately, losing twenty-six percent of its value in a single day as it dropped $7.37 per share to close at $21.47. This allegedly belated disclosed cost investors approximately $103 million in one day of trading.

Briefing on defendants’ motion to dismiss is complete, and oral argument was held on October 4, 2012.

In re Parmalat Securities Litigation
(United States District Court for the Southern District of New York)

Securities fraud class action on behalf of purchasers of the securities of Parmalat Finanziaria, S.p.A. (“Parmalat”) and its subsidiaries during the period from January 5, 1999 through December 18, 2003.

On May 21, 2004, the Honorable Lewis A. Kaplan appointed SRK’s European institutional investor clients, Cattolica Partecipazioni, S.p.A., Capital & Finance Asset Management, Societe Moderne des Terrassements Parisiens, and Solotrat, as Co-Lead Plaintiffs.

The Complaint alleges that beginning in the early 1990s or before, Parmalat’s senior management and their U.S. operations, with their auditors, lawyers, and investment banks, masterminded a series of complex transactions that were designed to materially overstate Parmalat’s revenue, income and assets, and materially understate its debt. This scheme created a false picture to investors of the company’s finances.

In 2002 alone, Parmalat booked $1.42 billion of receivables when its entire gross revenue for the year was only $950 million. As of September 30, 2003, Parmalat’s actual consolidated debt was at least $14.3 billion — more than twice the $6.4 billion reported for that period, while total consolidated shareholders’ equity was no more than negative $11.4 billion rather than the positive $2.1 billion figure reported. Ultimately, Parmalat’s total reported debt was understated by nearly $10 billion and its consolidated total net assets (or shareholder equity) was overstated by $16.4 billion.

When Parmalat’s true financial condition was revealed, the company was driven into bankruptcy and became the target of a massive criminal investigation. As a result, its securities became worthless and investors sustained losses in excess of $10 billion. Parmalat thus became known as the “Enron of Europe.”

The Lead Plaintiffs have reached a proposed settlement with Parmalat S.p.A., which, if approved by the Court, will entail 10,500,000 shares of stock in the Parmalat entity that emerged from reorganization proceedings in Italy to be distributed among the class members. For more information about the settlement and the case, please visit the official website, www.ParmalatSettlement.com. You can also complete a claim form there. Previously, the Court approved a settlement with two bank defendants, Banca Nazionale del Lavoro (BNL) and several Credit Suisse entities (CSFB), for payment of $50 million ($25 million paid by each bank) and the implementation of certain corporate governance measures. The Court held a hearing on July 19, 2007 on the settlement with BNL and CSFB, and on a request by SRK and its co-counsel for reimbursement of certain of their expenses. The Court approved the settlement and the request for expenses.

In re SCOR Holding (Switzerland) (f/k/a In Re Converium Holding)
(United States District Court for the Southern District of New York)

Securities fraud class action on behalf of purchasers of Converium Holding AG (“Converium”) common stock and American Depositary Shares from January 7, 2002 through September 2, 2004.

On July 14, 2005, the Honorable Michael B. Mukasey appointed SRK’s institutional investor client, Avalon Holdings, Inc., as Co-Lead Plaintiff and further appointed SRK to serve as Co-Lead Counsel. The case was subsequently re-assigned to the Honorable Denise Cote.

In this class action, plaintiffs allege that defendant Converium, a global reinsurance company headquartered in Switzerland and New York, failed to properly record reserves for its underwriting losses, and failed to record the impairment of goodwill and deferred tax assets associated with the understated loss reserves. As a result, the company artificially inflated the price of its securities by issuing statements that falsely exaggerated the strength of the company’s business.

Ultimately, the company was unable to continue concealing its reserve deficiency and, on July 20, 2004, announced that Converium would take a charge of at least $400 million to increase its reserves. That disclosure caused the price of Converium’s American Depositary Shares, which traded on the New York Stock Exchange, to collapse nearly 50%. Subsequent disclosures by the company revealed that the charge would be more than $500 million, and drove the price of Converium’s ADSs down further. On September 2, 2004, Standard & Poor’s announced a downgrade of the company’s credit rating in response to the reserve increase. Shortly thereafter, Converium put its North American business into runoff.

The parties recently reached four settlements with SCOR (which acquired Converium in 2007) and Zurich Financial Services covering U.S. and foreign investors in the amount of $145 million. The portion of the settlement covering the claims of non-U.S. investors, will be approved in the Netherlands under the newly enacted Act on Collective Statement of Mass Claims. The other settlements, on behalf of U.S. investors, were preliminarily approval in the District Court for the Southern District of New York on August 6, 2008.

Operative Plasterers and Cement Masons International Association Local 262 Annuity Fund v. Lehman Brothers Holdings, Inc. et. al,
(United States District Court for the Southern District of New York)

Securities fraud class action on behalf of purchasers of the common stock of Lehman Brothers Holdings, Inc. (“Lehman Brothers”) between September 13, 2006 through June 6, 2008.

On July 31, 2008, the Honorable Lewis A. Kaplan appointed SRK’s institutional investor client, the Northern Ireland Local Governmental Officers Superannuation Committee (NILGOSC), as Co-Lead Plaintiff.

The class action arises from a series of false and misleading statements by Lehman Brothers — the fourth largest securities firm in the U.S. — and its officers and directors concerning its exposure to the sub-prime mortgage market’s deterioration and the losses that it would incur as a result of own collateralized mortgage obligations and other derivatives. Defendants repeatedly reassured investors that Lehman Brothers’ superior risk management and diversification had successfully insulated it from the turmoil that roiled the credit markets in 2007.

In truth, Lehman Brothers hid or recklessly ignored facts regarding its exposure in collateralized debt obligations (CDOs) and other products tied to the residential mortgage market. The truth regarding its financial condition was finally disclosed with the June 9, 2008. At that time, Lehman Brothers announced a nearly $3 billion loss reported in connection with its second quarter financial statements. Lehman Brothers’ shares plummeted to $28.47 — a stunning drop from the class period high of $86.18 — wiping out billions of dollars in shareholder value and causing substantial damage to the Class.

Welmon v. Chicago Bridge & Iron Co. N.V.
(United States District Court for the Southern District of New York)

Securities fraud class action filed on behalf of purchasers of stock in Chicago Bridge & Iron Co. N.V. (CB&I) between March 9, 2005 and February 3, 2006.

On June 20, 2006, the Honorable John E. Sprizzo appointed SRK’s institutional investor client, Fortis Investment Management N.V./S.A., a European asset manager, as Co-Lead Plaintiff, and further appointed SRK as Co-Lead Counsel.

This class action involved a global engineering, procurement and construction company specializing in fixed-price lump-sum turnkey projects related to major projects for customers in the energy, chemical, water and mining industries. The lawsuit alleged that CB&I manipulated its recording of costs for projects and revenues, which had the effect of deceiving the investing public regarding CB&I’s business, operations, management and the intrinsic value of CB&I common stock. Such deception caused investors to purchase CB&I securities at artificially inflated prices.

Ultimately, on February 3, 2006, the defendants could no longer conceal the truth and CB&I was forced to disclose the full extent of the serious problems facing the company. However, prior to informing the market of the accounting irregularities, the officers and directors of the company sold a substantial percentage of their holdings (600,000 shares) in CB&I stock, reaping proceeds, collectively, in excess of $13,658,000.

The Court recently approved a settlement in the amount of $10.5 million to resolve the class’ claims. In addition to the monetary settlement, the company agreed to implement corporate governance reforms pertaining to insider trading — one of the key allegations in the action.

Ong v. Sears Roebuck and Co.
(United States District Court for the Northern District of Illinois)

Securities fraud class action on behalf of all those who purchased securities issued by Sears Roebuck Acceptance Corporation (“SRAC”), a wholly-owned finance subsidiary of Sears, Roebuck & Co., between October 24, 2001 and October 17, 2002.

The Honorable Rebecca R. Pallmeyer appointed SRK to serve as Co-Lead Counsel and represent a class of bondholders in this class action involving false and misleading statements concerning Sears’ Credit and Financial Products division.

This class action arose out of numerous statements by Sears and its management claiming that that Sears Credit, particularly the Sears Gold MasterCard, was experiencing significant growth with “strong” and “stable” credit portfolio quality. The truth, however, was exactly the opposite, as credit portfolios were neither strong nor stable, and delinquencies and charge-offs for uncollectible credit accounts were, in fact, rising. Moreover, the portfolios were excessively weighted toward the subprime market, a market made up of consumers with weaker or damaged credit histories that rendered them a greater credit risk.

Rather than disclose the true extent to which Sears’ credit portfolios were subprime, Sears selectively disclosed misleading statistics and relied on accounting techniques that violated Generally Accepted Accounting Principles (“GAAP”) to avoid classifying accounts as delinquent. Through these misstatements, defendants were able to artificially inflate the market value of SRAC Notes and sell $1.85 billion of newly-issued Notes to the investing public. When the defendants finally revealed the truth in October 2002 — that Sears would be required to increase its loan loss reserves by $222 million and that it had fired the heads of Sears Credit and Risk Management — the market reaction was immediate and severe as the price and credit ratings of SRAC Notes plummeted.

After extensive negotiations, including several mediation sessions, the parties reached a settlement of all claims in the amount of $15.5 million, which the Court recently approved.

In re Ravisent Technologies Securities Litigation
(United States District Court for the Eastern District of Pennsylvania)

Securities fraud class action on behalf of all purchasers of the common stock of Ravisent Technologies, Inc. between July 15, 1999 and April 27, 2000 pursuant or traceable to the registration statement issued in connection with Ravisent’s initial public offering, effective July 15, 1999.

On May 26, 2000, the Honorable R. Barclay Surrick appointed SRK to serve as Co-Lead Counsel, and appointed its client to represent the class as Co-Lead Plaintiff.

In this securities class action, plaintiffs alleged that Ravisent and certain of its officers and directors engaged in a scheme to artificially inflate the company’s revenues and profits by improperly recording revenues on contracts in violation of GAAP, in order to accomplish the company’s IPO at the maximum price per share. Pursuant to their scheme, defendants determined to effectuate the IPO at a certain point in time during which no current period certified financial statements would be available.

On February 18, 2000, defendants announced that the release of its 1999 audited financial statements would be delayed. The delay was due to continuing discussions with the company’s independent auditors concerning inappropriate revenue recognition in 1999 on certain contracts. As a result of this announcement, Ravisent’s share price plunged $9 to close at $18 9/18 on traded volume in excess of 3,500,000 shares.

Through direct negotiations among counsel, parties reached a settlement of $7 million, which the Court approved on April 6, 2005.

In re PSINet Securities Litigation
(United States District Court for the Eastern District of Virginia)

Securities fraud class action brought on behalf of: (1) purchasers of common stock of PSINet, Inc. (“PSINet”) between March 22, 2000 and November 2, 2000; (2) purchasers of PSINet bonds between September 15, 2000 and November 2, 2000; (3) purchasers of PSINet preferred stock between August 3, 2000 and November 2, 2000; and (4) persons who acquired PSINet stock in connection with the acquisition of Metamor Worldwide, Inc.

On January 19, 2001, the Honorable Leonie Brinkema appointed SRK’s client as Co-Lead Plaintiff and SRK as Co-Lead Counsel.

This securities fraud case was brought on behalf of purchasers of several securities issued by PSINet, a provider of high-speed Internet access and related products and services. Plaintiffs alleged that PSINet and its senior management issued a false and misleading Prospectus and Registration Statement and other false and misleading statements in connection with PSINet’s acquisition of Metamor, as well as its 80% owned subsidiary, Xpedior, Inc. (“Xpedior”) for the purchase price of $1.9 billion. Seeking to demonstrate to the investment community that PSINet was a viable and growing company, defendants touted the benefits of the merger, despite knowing that PSINet and Metamor were not synergistic.

On September 15, 2000, defendants issued “financial guidance” to the investment community for the second half of 2000 and 2001, and addressed PSINet’s cash requirements, as well as the status of the integration of Metamor. PSINet unequivocally conveyed comfort with its ability to obtain the necessary funds to accomplish its plan. However, on November 2, 2000, in reporting a net loss for the third quarter, PSINet announced several pieces of negative information including among other things, that certain assets acquired in the Metamor transaction were identified as non-strategic, and were to be sold, and that as of September 30, 2000, the company had cash, restricted cash, and short-term investments of $1 billion, while its debt obligations were $3.6 billion.

Plaintiffs continued to vigorously pursue its claims against the defendants, even though PSINet filed for bankruptcy and eventually sold all of its assets during the pendency of the litigation. Following discovery and on the eve of trial, the parties engaged in mediation and settled the case for $17.8 million.

Manson v. Municipal Mortgage & Equity, LLC, et al.
(United States District Court for the District of Maryland and Southern District of New York)

Securities fraud class action on behalf of all purchasers of the common stock of Municipal Mortgage & Equity, LLC (“MuniMae”) between May 3, 2004 and January 29, 2008.

Motions for Lead Plaintiff and Lead Counsel are pending a ruling by the Multi-District Litigation Panel.

This lawsuit arises out of MuniMae’s overstatement of its financial results. Specifically, plaintiffs allege that MuniMae and its senior officers failed to: (a) consolidate on the company’s balance sheet hundreds of variable interest entities, as required by applicable accounting rules; and (b) timely write-down the fair value of impaired assets. Moreover, the suit alleges that MuniMae falsely reported strong performance and earnings growth when, to the contrary, the company was performing poorly and would be required to cut its dividend.

On January 28, 2008, MuniMae issued a press release announcing that it was cutting its quarterly dividend by 37%, from $0.5250 to $0.33 per share. MuniMae also revealed that it would not complete its previously announced restatement of financial results by the March 3, 2008 deadline imposed by New York Stock Exchange, and that its stock would be delisted by the Exchange. On this announcement, the price of MuniMae stock dropped from $17.20 per share to close at $9.19 per share on January 29, 2008, representing a 47% single-day decline.

Finally, on January 29, 2008, MuniMae provided additional details regarding its restatement, including the fact that it was required to consolidate on its balance sheet approximately 200 variable interest entities in which it holds minority interests, and it would be writing-down the fair value of certain assets held-for-sale including loans, bonds, derivatives, guarantee obligations, and mortgage servicing rights. On this disclosure, the price of MuniMae stock dropped an additional 22%, to close at $7.13 per share on January 30, 2008.

Hansen v. Wachovia Corp., et al.
(United States District Court for the Southern District of New York)

Class action lawsuit under the Employee Retirement Income Security Act of 1974 (“ERISA”) on behalf of all persons who were participants in or beneficiaries of the Wachovia National Corporation Savings Plan (the “Plan”) and whose accounts in the Plan were invested in Wachovia stock at any time during the period January 1, 2006 through the present.

Motions for Lead Plaintiff and Lead Counsel are currently pending.

On June 10, 2008, SRK was the first to file a lawsuit under ERISA to recover losses incurred by the Plan arising from the investment of Plan assets in Wachovia common stock when the plan fiduciaries knew or should have known that material adverse information about the company’s financial problems had not been disclosed, so that the Plan was purchasing shares at inflated prices.

The Wachovia ERISA lawsuit arises out of the Plan fiduciaries’ breaches of their fiduciary duties by causing participants’ retirement savings to be invested in Wachovia stock when doing so was imprudent. The fiduciaries knew or should have known that Wachovia was not properly reporting its financial condition and was not disclosing significant problems, all of which had the effect of inflating the value of the company’s stock. Defendants failed to disclose the following: (1) while claiming not to be involved in the subprime mortgage business, Wachovia Bank, National Association, a wholly-owned subsidiary of Wachovia, continued to issue non-conforming real estate mortgages to borrowers without considering their credit scores or verifying their assets or employment status; (2) that the company had understated its loan losses and delayed recognition of its loan losses, and took other action which has resulted in class action litigation being instituted against it by purchasers of Wachovia stock; (3) that Wachovia Bank failed to adjust its methodology for loss provisions in a manner that took into account known changes in the credit landscape; (4) that Wachovia misled investors as to its auction rate securities (ARS), and failed to disclose that these instruments, far from being highly liquid cash alternatives that were suitable for short-term investing, were actually long-term instruments that were not liquid, a misrepresentation that has resulted in class actions allegation violations of securities laws being filed against it by ARS customers and has caused the Securities and Exchange Commission (“SEC”) to issue subpoenas to Wachovia regarding its auction rate securities data; (5) that Wachovia was, due to its investment in hedge funds managed by Citigroup, heavily exposed in bank-owned life insurance policies, an investment which later caused it to report a $315 million write-down for the first quarter of 2008; and (6) that Wachovia failed to maintain sufficient management controls to timely address problems likely to affect the company’s reputation.

In re U.S. Healthcare Securities Litigation
(United States District Court for the Eastern District of Pennsylvania)

Securities fraud class action on behalf of all persons who purchased the Class A Common Stock of U.S. Healthcare, Inc. between October 5, 1994 and April 19, 1995.

SRK’s client was appointed to serve as Co-Lead Plaintiff, and SRK was appointed Co-Lead Counsel in this accounting fraud case.

This securities class action arose out of defendants’ misrepresentations as to, among other things, the fact that U.S. Healthcare would maintain its medical cost ratio at or below the levels achieved by the company in 1994; that the premiums charged to the company’s enrollees would increase during 1995; and that the company would achieve earnings growth substantially in excess of the range defendants knew could realistically be achieved. Defendants further concealed from the investing public their implementation of a new business strategy pursuant to which the company cut its premiums during the class period thereby substantially reducing revenues; increased the payments it was making to health care providers; and recruited higher cost providers to the company’s network. Alone, or in combination, these developments were exerting a significant negative impact upon the company’s profit margins and profitability at all relevant times.

While defendants were implementing profit-depressing changes to U.S. Healthcare’s business plan, insiders were unloading huge amounts of the company’s common stock upon unsuspecting class members. In total, defendants and other U.S. Healthcare executives sold over $50 million worth of U.S. Healthcare stock during the class period at prices artificially inflated by their misstatements and omissions. When defendants announced sharply lower financial results for the first quarter of 1995, U.S. Healthcare’s stock price declined dramatically from $39-3/4 to $29-5/16, a precipitous decline of over 25%.

Through extensive negotiation among counsel, the parties reached a settlement of $23 million on behalf of the class.

In re THQ, Inc. Securities Litigation
(United States District Court for the Central District of California)

Securities fraud class action on behalf of all purchasers of the common stock of THQ, Inc. (“THQ”) between February 7, 2000 and February 10, 2000.

SRK was appointed Co-Lead Counsel in this Section 10(b) securities class action.

Lead Plaintiffs in this case alleged that THQ and its senior officers knew that the first and second quarter earnings for 2000 were going to be materially below the first and second quarters of 1999. Although the defendants knew that the disclosure of this information would have an adverse affect on THQ’s stock price, rather than timely disclose this material information publicly, as required by the federal securities laws, on or about February 8, 2000, THQ selectively disclosed this information to certain analysts. As a result of this selective disclosure, the analysts who had this information were able to inform their “top” clients, who were then able to unload significant holdings in THQ’s stock while it was still artificially inflated.

After making this material disclosure to a limited number of analysts, on February 8, 2000, THQ’s stock price fell $2.2187, and on February 9, THQ’s stock price fell another $2.4688. Finally, on Febrauary 10, 2000, THQ’s stock price reached a low of $17.375 and closed at $18.25. Therefore, as a result of defendants’ affirmative decision to only disclose this material information to a limited or select group, and not disclose this information publicly, the price of THQ stock was artificially inflated.

Through mediation, the parties reached a settlement on behalf of the class in the amount of $10.15 million.

Harrison v. VeriSign, Inc.
(United States District Court for the Northern District of California)

Securities fraud class action on behalf of (1) all purchasers of the securities of VeriSign, Inc. (“VeriSign”) between January 25, 2001 and April 25, 2002 and, (2) all purchases made in connection with the company’s registration statement and prospectus on October 10, 2001, and amended on October 26, 2001.

SRK’s client was appointed one of the Lead Plaintiffs in this accounting fraud action by the Honorable James Ware.

This lawsuit arose out of a series of misrepresentations by senior management of VeriSign, which provides digital trust services to businesses engaged in securing digital commerce and communications. Plaintiffs alleged that during the class period, VeriSign and its officers and directors artificially increased the company’s revenue and margins, thereby creating the false perception that its deferred revenue growth was derived organically. As part of their effort to boost VeriSign’s stock price, defendants misrepresented VeriSign’s true prospects and concealed improper accounting activities so that they could sell at least $26 million worth of their own VeriSign stock

The truth began to materialize on April 25, 2002, as VeriSign reported substantial employee lay-offs and revenue well below previously represented forecasts. By the close of trading the following day, VeriSign stock had fallen $8.35 to close at $9.89, wiping out roughly $2 billion of the company’s market value.

Through mediation, the parties reached a settlement through which $78 million was obtained for the benefit of the class.

In re Leslie Fay Securities Litigation
(United States District Court for the Southern District of New York)

Securities fraud class action on behalf of all purchasers of the common stock of Leslie Fay Companies, Inc. between March 28, 1991 and April 5, 1993.

The Honorable William C. Conner appointed SRK to the Executive Committee of Plaintiffs’ Counsel in this complicated accounting fraud case.

Through negotiations among counsel, a settlement of $35 million was reached on behalf of the class.

Derivative Actions
In re Life Partners Holdings, Inc. Derivative Litigation
(United States District Court for the Western District of Texas)

Shareholder derivative action brought on behalf of Life Partners Holdings, Inc. (“Life Partners”) against the board of directors and certain individuals for breaches of fiduciary duties.

SRK was appointed Co-Lead Counsel in July 2011.

Life Partners operates in life settlements, which is the secondary market for life insurance. In a life settlement, an existing life insurance policy of one person is sold to another unrelated party. Life Partners acts as the broker in the sale of such policies. This shareholder derivative action arises out of allegations and reports in the media that the company has manipulated life expectancy data, which directly affects the amount at which a life settlement is sold and the profits recognized by the company.

Defendants filed motions to dismiss the complaint in December 2011. Thereafter, the parties negotiated the production of documents, as prescribed by the law of Texas, the state of incorporation of Life Partners. Currently pending before the Court is a motion to compel additional documents.

In re Alltel Corporation Shareholders Litigation
(Circuit Court of Arkansas, Pulaski County and Chancery Court of Delaware, New Castle County)

Class action alleging breaches of fiduciary duties filed on behalf of all holders of the common stock of Alltel Corporation in connection with a going private transaction.

SRK served as Co-Lead Counsel in the case, and its client, a union benefit fund, served as a representative plaintiff in the action.

This derivative transaction lawsuit arose out of a proposed merger involving Alltel, a company that provides wireless voice and data communications services to individual and business customers in the U.S. On May 20, 2007, Alltel announced that it had entered into a merger agreement with an affiliate of Goldman Sachs Capital Partners VI Fund, L.P. and TPG Partners V, L.P., pursuant to which such affiliate would acquire Alltel. Under the terms of the merger agreement, Alltel public shareholders would receive $71.50 in cash for each share of common stock. On behalf of its client, SRK filed a derivative transaction case against the company and its management, alleging that its directors breached their fiduciary duties to Alltel’s shareholders in not soliciting bids at auction for the company, and thus failing to obtain a fair price for its shareholders.

After extensive arms-length discussions, a settlement was reached on behalf of a class of Alltel’s public shareholders, which required, among other things, the inclusion of additional, material disclosures in Alltel’s proxy statement and the placement of certain voting restrictions on Alltel’s insiders. The settlement has been granted preliminary approval by the Circuit Court of Arkansas, Pulaski County and is awaiting a final settlement hearing in August 2008.

Felzen v. Andreas (Archer Daniels Midland Co. Derivative Litigation)
(United States District Court for the Central District of Illinois)

Shareholder derivative lawsuit on behalf of Archer Daniels Midland Co. (“ADM”) and its shareholders.

SRK served as Co-Lead Counsel on behalf of ADM and its shareholders.

In this shareholder derivative action, plaintiffs alleged that the company directors breached their fiduciary obligations by causing ADM to violate the federal antitrust laws, resulting in $100 million in fines and the prosecution and conviction by the federal government of numerous individuals.

SRK, as Co-Lead Counsel, negotiated a landmark settlement in terms of corporate governance measures to be implemented by the company. The settlement required the company to, among other things, strengthen the independence of the board of directors, revise the structure and responsibilities of key committees of the Board, create corporate governance and regulatory oversight committees, and diversify the membership of the Board to include women and minorities. The settlement also required defendants to pay $8 million, part of which the company used to retain independent outside counsel to assist the oversight committees, and to fund educational seminars for directors. These changes were made to the company’s by-laws and approved by the Court. At the time of this settlement, Professor John Coffee of Columbia University School of Law observed that the corporate governance reforms obtained in this case were “state of the art.”

In re Abbott Laboratories, Inc. Derivative Shareholder Litigation
(United States District Court for the Northern District of Illinois)

Shareholder derivative action brought on behalf of Abbott Laboratories, Inc. and its shareholders.

SRK served as Co-Lead Counsel in this action before the Honorable James B. Moran.

This derivative action brought against the officers and directors of Abbott Laboratories arose out of the company’s violation of FDA quality rules dating back to 1993, as well as the consent decree that Abbott entered into with the federal government on November 2, 1999. The misconduct of Abbott’s officers and directors subjected the company to a $100 million fine and to corrective changes at its manufacturing facilities. Ultimately, defendants’ breaches of fiduciary duty resulted in multi-million dollar fines to the company, the destruction of medical equipment, and the closing of a manufacturing facility, which cost the company hundreds of million of dollars in revenue.

In its capacity as Co-Lead Counsel, SRK litigated vigorously on behalf of the company and its shareholders. Plaintiffs’ claims were dismissed twice, and SRK’s appeals resulted in reversals of the adverse rulings.

Through extensive negotiations and mediation, the parties ultimately agreed to a settlement which required the company to implement corporate governance reforms to strengthen the Board of Directors’ oversight of regulatory compliance, and to pay $27 million for the new compliance and regulatory measures. The ABA’s Securities Litigation Journal called the Seventh Circuit’s opinion in this case the second most important decision in 2003.

Shore v. Ukropina (Pacific Enterprises, Inc.)
(Superior Court of California)

Shareholder derivative lawsuit on behalf of Pacific Enterprises, Inc. and its shareholders.

SRK served as Lead Counsel in this derivative action.

In this case, plaintiffs alleged that the directors violated their fiduciary duties of due care when they caused the company to embark on a diversification program which shifted its operations away from its core business. This shift in business strategy resulted in the loss of hundreds of millions of dollars, numerous lawsuits, and the elimination of the company’s dividend.

After extensive negotiations, which included a resolution of the securities class action, a settlement was reached resulted in a quasi-reorganization of the company, the implementation of new guidelines on future diversification programs, the reinstatement of the company’s dividend and $12 million.

In re Bristol-Myers Squibb Derivative Litigation
(United States District Court for the Southern District of New York)

Shareholder derivative lawsuit on behalf of Bristol-Myers Squibb (“BMS”) and its shareholders.

SRK served as Co-Lead Counsel in this derivative shareholder action.

This shareholder derivative action arose out of the alleged breaches of fiduciary duties on the part of BMS’s officers and directors. Specifically, plaintiffs alleged that BMS management disseminated misleading information regarding the company’s blood pressure drug Vanlev, representing it as a potential blockbuster drug and allocating significant amounts of research and development funds to it despite repeated negative results in clinical trials. The officers and directors further allowed the company to acquire a 19.9 percent interest in ImClone for over $1 billion, nearly double ImClone’s value, and agreed to pay an additional $1 billion in “milestone” payments to ImClone for Erbitux, a colorectal cancer drug that they knew was “very high risk” and for which FDA approval was “unlikely.”

Plaintiffs also alleged that the defendants breached their fiduciary duties to their shareholders in offering significant discounts on certain of BMS’s drugs in order to generate sales for 2001, which significantly exceeded patient demand, a practice known as “channel stuffing.” Eventually, this led to a restatement of over $2 billion in sales revenue, prompting the SEC and Justice Department investigations. Finally, the company engaged in unlawful conduct to suppress generic competition for the drugs Buspar and Taxol, resulting in payouts of $670 million to settle numerous antitrust actions.

After significant litigation and substantial discovery, a settlement was ultimately reached in which the company agreed to implement substantial governance enhancements to prevent future misconduct.

Shaev v. Sidhu
(Pennsylvania Court of Common Pleas, Philadelphia County)

Shareholder derivative action on behalf of the shareholders of Sovereign Bancorp, Inc.

SRK serves as liaison counsel to the putative class.

This shareholder derivative action arises from the October 24, 2005 announcement by Sovereign Bancorp’s board of directors that it planned to sell more than 20% of the company to Banco Santander Central Hispano, S.A., a large banking group based in Madrid. The transaction would normally require shareholder approval because Sovereign is a public company listed on the New York Stock Exchange. Under NYSE rules, Sovereign must obtain shareholder approval for transactions that constitute a change in control of 20% or more. Sovereign tried to side-step this rule by structuring the transaction as an initial sale of 19.8% of the company with the option to buy an additional 5% thereafter.

The Philadelphia Court of Common Pleas preliminarily approved the settlement, which included significant corporate governance reforms including defining what constitutes director independence especially involving a transaction to be undertaken by the company.

Brudno v. Wise (In re El Paso Corp. Derivation Action)
(Delaware Court of Chancery, New Castle County)

Shareholder derivative action on behalf of El Paso Corporation (“El Paso”) and its shareholders.

SRK served as Co-Lead Counsel in this action that the Firm filed in the Chancery Court in Delaware, but coordinated with other derivative litigation against El Paso occurring in state court in Texas.

In this derivative lawsuit, plaintiffs alleged that the senior management of El Paso caused the company to engage in anti-competitive behavior. Specifically, during the period of 1999 through 2003, the defendants manipulated natural gas prices, which contributed to one of the worst energy crises in California. Ultimately, El Paso was found guilty of anti-competitive conduct and agreed to pay more than $1.7 billion in fines. The lawsuit sought to recover damages from the individual defendants for the harm caused to El Paso.

As Co-Lead Counsel for the Class, SRK negotiated a settlement that entailed significant corporate governance measures.

For Securities Litigation Call 888-844-5862