Natural Health Trends Corp. Case 09/11/2006

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Company Name(s): 
Natural Health Trends Corp.
Case Name: 
Natural Health Trends Corp. Case 09/11/2006
Case Status: 
Lawsuit Filed
Case Status: 
Judgment Issued
Case Status: 
Settlement Proposed
Case Status: 
Settlement Approved
Affected Securities
NASDAQ: BHIP
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
09/11/2006
Class Period Begin: 
04/16/2002
Class Period End: 
11/15/2005
Court of Filing: 
U.S. District Court for the Northern District of Texas
Date Settled: 
03/30/2009
Settlement Amount: 
$2,750,000
Deadline to Participate in Settlement: 
06/26/2009
Summary: 

The original complaint charges that Natural Health and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities Exchange Act by issuing materially false and misleading statements about key characteristics of the Company's multi-level marketing business model, violations of GAAP, and the Company's financial condition. In particular, the Complaint alleges that during the Class Period the Company's: (1) reported revenues and earnings were artificially inflated due to phantom sales; (2) internal controls and procedures were inadequate and enabled and assisted the Defendants in engaging in improper transactions; (3) earnings were significantly impacted from returns by its distributors which reflected the true market penetration and acceptance of the Company's products; and (4) the Company's financial statements filed with the SEC were not prepared in accordance with GAAP.

On December 20, 2006, U.S. District Judge Sidney A. Fitzwater granted the motion to appoint The Kelly Group as lead plaintiff and approved lead plaintiff’s choice of the Rosen Law Firm, P.A. as lead counsel. On February 20, 2007, the lead plaintiffs filed an Amended Class Action Complaint. The defendants responded by filing motions to dismiss the Amended Complaint on April 23, 2007. On March 26, 2008, Judge Fitzwater issued the Memorandum Opinion and Order denying the defendants’ motions to dismiss. On April 25, 2008, the lead plaintiffs filed a Second Amended Class Action Complaint. According to an Order dated June 27, 2008, on May 13, 2008 the court ordered counsel and their clients to appear before a mediator of their mutual choosing and participate in mediation. The parties have agreed to conduct the court ordered mediation no later than September 30, 2008, and the court approves the agreement. On September 2, 2008, the mediator advised the court that the parties have settled this case. The case is administratively closed for statistical purposes without prejudice.

On March 30, 2009, a Stipulation and Agreement of Settlement was filed. The proposed settlement is in the amount of $2.75 million, with $2.5 million to be paid by Lloyd's and $250,000 to be paid by NHTC. On April 6, 2008, the settlement was preliminarily approved. A Settlement Fairness Hearing set for July 17, 2009.