SeraCare Life Sciences Case 12/22/2005
Case Update - 02/21/2009
On December 17, 2008, an Order Preliminarily Approving Settlement and Providing for Notice was entered with the court.
Original Post - 11/25/2008
On March 14, 2008, the Court upheld the claims brought against the auditors and underwriters pursuant to Section 11 of the Securities Act and dismissed the Section 10(b) claims against the auditors. Both the auditors and the underwriters have asked the Court to reconsider that order.
On September 4, 2007, the settlement hearing was held and U.S. District Court Judge Marilyn L. Huff approved the partial settlement with SeraCare and the Individual Defendants. The Court issued the Orders granting the Plan of Allocation and the motion for award of attorneys’ fees in the amount of 25% of the settlement and reimbursement of expenses in the amount of $162,364.13. The case is continuing against the remaining defendants.
On June 11, 2007, the plaintiffs filed a First Amended Consolidated Complaint against the Company and certain of its officers and directors, KPMG and investment bankers. On July 16, 2007, remaining defendant KPMG filed a motion to dismiss the First Amended Complaint, and on September 4, 2007, remaining defendants William Blair and Co, Thomas Weisel and CIBC World Markets filed a motion to dismiss the First Amended Complaint.
On April 30, 2007, the Lead Plaintiffs filed a Motion for Preliminary Approval of Partial Class Action Settlement. According to the Motion, a proposed settlement in the amount of $3 million would resolve claims with SeraCare Life Sciences, Inc. and the Individual Defendants. The settlement would not resolve claims as to defendants CIBC World Markets Corporation, Thomas Weisel Partners LLC, William Blair & Co., LLC, and KPMG LLP. By the Order entered on May 30, 2007, the Final Fairness Hearing is set for September 4, 2007, at 10:30 AM in Courtroom 13 before Judge Marilyn L. Huff.
According to an article dated April 2, 2007, the U.S. District Court for the Southern District of California March 19 dismissed class securities fraud claims against KPMG LLP over its allegedly flawed audit of the financial statements of SeraCare Life Sciences Inc., now bankrupt biotechnology concern (In re SeraCare Life Sciences Inc. Securities Litigation, S.D. Cal., No. 05-CV-2335-H (CAB), 3/19/07). In other rulings, the court dismissed with limited exceptions the investors’ 1933 Securities Act Section 11 claims against SeraCare’s underwriters for a May 2005 secondary offering. … The court gave the plaintiffs 30 days to file an amended complaint.
On April 10, 2006, the Court entered the Order by Judge Marilyn L. Huff consolidating the cases and appointing lead plaintiffs and lead counsel. On July 17, 2006, a Consolidated Complaint was filed.
Several purported shareholder class action lawsuits have been filed against SeraCare and certain of its officers and directors charging the defendants with violations of the Securities Exchange Act of 1934. SeraCare engages in the manufacture and provision of biological products and services for diagnostic, therapeutic, drug discovery and research organizations worldwide. Specifically, the complaint alleges that defendants’ Class Period representations regarding SeraCare’s financial statements, business, and prospects were materially false and misleading when made. Specifically, the defendants failed to disclose: (1) that the Company, in violation of its own revenue recognition accounting policies and practices, improperly recognized revenue which served to materially inflate the Company’s financial results; (2) that the accounting for and valuation of the Company’s inventory was faulty; (3) that the defendants failed to prevent certain board members from exerting undue influence on the Company’s financial reporting process and on the audit process; (4) that throughout the Class Period, the timeliness, quality and completeness of the Company’s implementation and testing of its internal controls over financial reporting was lacking, such that the Company lacked adequate internal control; and (5) that the Company’s financial statements were presented in violation of Generally Accepted Accounting Principles (”GAAP”).
The complaint further alleges that on or around December 14, 2005, SeraCare filed a current report on Form 8-K wherein it stated that the Company was unable, without unreasonable effort and expense, to file its annual report on Form 10-K for its fiscal year ended September 30, 2005. Then, on December 20, 2005, before the market opened, the Company announced that “the chairman of the Company’s audit committee has received a letter from Mayer Hoffman McCann P.C. (MHM), the Company’s independent auditors, in which MHM raised concerns with respect to the Company’s financial statements, accounting documentation and the ability of MHM to rely on representations of the Company’s management.”
In reaction to this announcement, the price of SeraCare stock fell dramatically, from $19.30 per share on December 19, 2005 to $10.04 per share on December 20, 2005, a one-day drop of 47.98 percent on unusually heavy trading volume.
NOTE: SeraCare is no longer named a defendant because it filed for bankruptcy on March 22, 2006.