Although some noteworthy settlements from the subprime-related securities class action litigation wave have started to accumulate (refer for example here), there are still some impressive settlements coming in from the prior scandal.
In the third largest options backdating-related securities class action lawsuit settlement, Maxim Integrated Products has agreed to settle the claims against all defendants in the options-related securities suit pending against the company for a payment of $173 million. According to the company’s May 5, 2010 press release (here), the after tax cost to the company from the settlement, which is still subject to documentation and court approval, would be $110 million.
As detailed in a prior post (here), on February 6, 2008, plaintiffs’ lawyers announced (here) that they had initiated a securities class action lawsuit in the United States District Court for the Northern District of California against Maxim Integrated Products and certain of its directors and officers. The lawsuit relates to Maxim’s January 17, 2008 announcement (here) that, as a result of its Board’s special committee’s investigation of the company’s stock option practices, the company would be restating its financial statements to record non-cash, pre-tax charges of between $550 and $650 million for additional stock-based compensation expense. The company also announced that investors should not rely on the company’s financial statements for the fiscal years 1997 through 2005 and corresponding interim reporting periods through March 25, 2006.
In order dated July 16, 2009 (here), the court denied in part the defendants’ motions to dismiss, but perhaps more telling with respect to the timing and size of the securities lawsuit settlement, on April 23, 2010, following an eightday criminal trial, Maxim’s CFO Carl Jasper was found liable for securities fraud related to the backdating, as noted in this April 26, 2010 article by Zusha Elinson in The Recorder, here.
The SEC had previously sued the company and its CEO in an options backdating enforcement action (about which refer here). The CEO, Jack Gifford, who settled the SEC charges for a payment of $800,000 has since passed away.
The $173 million Maxim Integrated Product settlement is exceeded in dollar value among options backdating related securities lawsuit settlements only the $925.5 million total settlement of the UnitedHealth Group options-related securities lawsuit and the $225 million Comverse settlement. My complete tally of options related settlements and other case resolutions can be accessed here.
Adam Savett of the Securities Litigation Watch has also been tracking the options backdating related securities lawsuit settlements, and in his most recently updated tally (here), he reported that of the 39 total options backdating related securities class action lawsuits, 35 (not counting Maxim) have been resolved, with 8 dismissed and 27 settled (again, not including Maxim). Prior to the Maxim settlement, the 27 options backdating related securities class action lawsuits that had settled had been settled for an aggregate total of $2.15 billion and an average settlement of $79.7 million.
With the Maxim settlement, the aggregate is now $2.325 billion, and the average has also increased, as Savett’s forthcoming revised calculations undoubtedly will show. UPDATE: Savett has indeed updates his analysis, here. The updated average is $79.7 million, but if the outsized UnitedHealth Group settlement is excluded from the calculation, the average drops to $51.88 million. The median settlement is $16 million, and $14 million if the United Health Group settlement is excluded.