UTStarcom Inc. Case 09/04/2007

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Company Name(s): 
UTStarcom
Case Name: 
UTStarcom Inc. Case 09/04/2007
Case Status: 
Lawsuit Filed
Case Status: 
Settlement Proposed
Affected Securities
NASDAQ: UTSI
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
09/04/2007
Class Period Begin: 
07/24/2002
Class Period End: 
09/04/2007
Summary: 

UTStarcom Inc. Case 09/04/2007 : UPDATE

According to a press release from July 17, 2009 "Plaintiff's Lead Counsel has announced, pursuant to Rule 23 of the Federal Rules of Civil Procedure and an Order of the United States District Court for the Northern District of California, that a hearing will be held at 9:00 a.m. on September 18, 2009 at the United States District Court for the Northern District of California, 450 Golden Gate Avenue, San Francisco, CA 94102, for the purpose of determining (1) whether the proposed Settlement of the claims in the Litigation for the sum of $9,500,000 in cash should be approved by the Court as fair, reasonable and adequate; (2) whether, thereafter, this Litigation should be dismissed with prejudice as against the Defendants and a judgment entered releasing all Released Claims against Defendants and each of their respective Related Parties as set forth in the Stipulation of Settlement dated as of May 14, 2009; (3) whether the Plan of Allocation is fair, reasonable and adequate and therefore should be approved; and (4) whether the application of Lead Counsel for the payment of attorneys' fees and reimbursement of expenses incurred in connection with prosecuting this Litigation against the Defendants should be approved."

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According to a press release dated September 5, 2007, the Complaint alleges that, throughout the Class Period, Defendants misrepresented and omitted material facts concerning the Company’s backdating of stock option grants to its officers and executives. Specifically, Plaintiff alleges that at all times during the Class Period, UTStarcom represented that the exercise price of all stock options would be no less than the fair market value of the Company’s common stock, measured by the publicly traded closing price for UTStarcom stock on the day of the grant.
 
However, in reality, options granted in 2002 were backdated so their exercise price correlated to a day on or near the day UTStarcom’s stock hit a significantly low price for the year, or directly in advance of sharp increases in the price of UTStarcom stock.
 
The complaint further alleges that the truth regarding the Company’s option granting practices was revealed on July 24, 2007. On that date, UTStarcom announced that a review of the Company’s historical stock option grant practices uncovered evidence that stock option grants were backdated. As a result of these findings, the Company further announced that its previously issued financial statements for the years 2000 through 2006 should no longer be relied upon, and would be restated by at least $28 million. In response to this news, UTStarcom’s share price fell 22%, from a close of $4.73 on July 23, 2007 to a close of $3.70 on July 25, 2007. The share price continued to decline thereafter.