Vitesse Semiconductor Corp. Case 05/01/2006
On June 16, 2008, the parties filed a Stipulation of Settlement with remaining defendant KPMG LLP. According to the settlement terms, a settlement fund in the amount of $7,750,000 in cash has been established. On November 17, 2008, the Settlement Hearing was held before Judge Manuel L. Real who granted the motion for final approval of the KPMG class action settlement as well as the motion for award of attorney’s fees and reimbursement of expenses. According to the Order approving attorney fees and reimbursement of expenses, the Court awards Plaintiffs’ Counsel: a. attorneys’ fees in the amount of 25% of the $17,950,000 cash portion of the Settlement Fund; and 25% of the 3,922,669 shares of Vitesse common stock from the Vitesse Settlement Fund (or the cash equivalent thereof if said shares are sold pursuant to an order of the Court), together with interest on the cash portions thereon for the same period and at the same rate as that earned by the Vitesse Settlement Fund and KPMG Settlement Fund until paid; and b. reimbursement of litigation expenses incurred in the amount of $591,989.46, which amounts the Court finds to be fair and reasonable.
Several actions were consolidated for all purposes by an order filed June 30, 2006. On September 26, 2006, The Rodriguez Group was appointed Lead Plaintiff, and Paul O. Paradis was appointed as Lead Counsel for The Rodriguez Group. The operative complaint in the Litigation is the Consolidated Amended Class Action Complaint for Securities Fraud, filed by The Rodriguez Group on October 4, 2007. The Complaint alleges violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder on behalf of a class of purchasers of Vitesse common stock. Named as defendants in the Complaint were Vitesse, certain Individual Defendants, Silicon Valley Bank, Nu Horizons Electronics Corp., Titan Supply Chain Services, Corp. and KPMG LLP. On October 5, 2007, Lead Plaintiff, Vitesse and the Individual Defendants entered into an Amended Stipulation of Settlement settling the claims asserted in the action against Vitesse and the Individual Defendants. On January 7, 2008, the Court entered an Order preliminarily approving the Vitesse Settlement. Pursuant to an Order dated January 28, 2008, the Court dismissed with prejudice the claims asserted in the Complaint against Silicon Valley Bank, Nu Horizons Electronic Corp. and Titan Supply Chain Services Corp.On April 7, 2008, the Court finally approved the Vitesse Settlement. The Settlement consists of $10,200,000 in cash $8,750,000 from the Defendants' directors' and officers' liability insurers, $1,200,000 from Louis R. Tomasetta, and $250,000 from Eugene F. Hovanec. Also part of the settlement is 3,922,669 shares of Vitesse common stock comprised of 2,650,000 shares of Vitesse common stock transferred from Vitesse, 814,655 shares of Vitesse common stock transferred from Louis R. Tomasetta, and 458,014 shares of Vitesse common stock transferred from Eugene F. Hovanec.
The complaint filed against Vitesse Semiconductor Corporation, certain of its officers and directors and the Company's auditors, alleges violations under the Securities Exchange Act of 1934, 15 U.S.C. Section 78(i)(b), 78(t) and 78t-1(a) and Rule 10b-5, promulgated thereunder, 17 C.F.R. Section 240.10b-5 (the "Class"). Specifically, the Complaint alleges that throughout the Class Period, defendants issued numerous, positive press releases, statements and quarterly financial reports filed with the SEC that described the Company's financial performance. These statements were materially false and misleading because they failed to disclose and misrepresented the following adverse facts, among others: (a) that there were issues concerning the credits issued to or requested by customers (for returned products or otherwise) and the related accounting treatment; (b) that the Company improperly applied payments received to the proper accounts receivable; (c) that the Company's accounts receivable and revenues may have been misstated; (d) that there was misuse of stock option grants, the timing of such grants, and other related accounting and documentation issues; (e) that the Management Report on Internal Control over Financial Reporting as of September 30, 2005 could not be relied upon; (f) that the Company lacked adequate internal controls and was therefore unable to ascertain its true financial condition; and (g) that as a result of the foregoing, defendants engaged in improper accounting practices.