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In re SmartForce PLC Securities Litigation
(United States District Court for the District of New Hampshire)
Securities fraud class action alleging that SmartForce PLC
("the Company"), and certain of its employees,
officers and directors, and its auditors, Ernst & Young Chartered Accountants (Ireland)
and Ernst & Young LLP (U.S.) (collectively, “Ernst & Young”) violated the federal
securities laws by making false and misleading statements regarding the company’s
financial performance and its compliance with U.S. Generally Accepted
Accounting Principles ("GAAP").
These misstatements were due, in large part, to improper recognition of revenue from the sale
of software licenses, the Company’s core business. As a result of these material misstatements,
the Company was required to restate its 1999-2002 financial statements.
On March 26, 2003, the Court appointed the Louisiana Sheriffs' Pension & Relief Fund and the Teachers'
Retirement System of Louisiana as Lead Plaintiffs for the Class. The Court also appointed BLB&G as
Co-Lead Counsel for the Class.
LEAD PLAINTIFFS OBTAIN SWEEPING CORPORATE GOVERNANCE REFORMS AND $30.5
MILLION PARTIAL SETTLEMENT WITH SKILLSOFT AND CERTAIN INDIVIDUAL DEFENDANTS
On March 23, 2004, Lead Plaintiffs, on behalf of the Class, reached an agreement in principle with
SkillSoft and its current and former employees, officers and directors to partially settle this
litigation. The settlement includes several valuable elements and provides for an excellent
monetary recovery for Class Members. Specifically, SkillSoft has agreed to pay the Class a total
of $30.5 million in cash. One-half of this monetary consideration will be paid shortly after
preliminary approval of the settlement. The balance, together with interest, will be due in
approximately one year.
The settlement also provides for the Company’s adoption of corporate
governance reforms. These reforms are designed to assure the independence of the Board of Directors
and several principle committees of the board. These measures are intended to prevent any future
violations of the Securities Laws like those alleged by Lead Plaintiffs.
The Court granted final approval of the settlement on September 29, 2004. Click
here to view the
full Corporate Governance Reforms in detail. Click
here for a
copy of the Lead Plaintiffs' press release regarding the settlement.
ERNST & YOUNG AGREES TO SETTLE FOR $8 MILLION
On August 29, 2005, Ernst & Young agreed to settle Lead Plaintiffs’ claims arising from their issuance
of unqualified auditor’s reports stating that the Company’s financial statements were in compliance with
U.S. generally accepted accounting principles. The Complaint
alleges that
Ernst & Young knew or was reckless in not knowing that SmartForce had misapplied the one accounting
provision that applied to its central business, the licensing of educational software.
The settlement requires Ernst & Young to pay $8 million for the benefit of the Class.
IN ORDER TO BE ELIGIBLE TO SHARE IN THE BENEFITS
OF THE SETTLEMENT, CLASS MEMBERS MUST HAVE ALREADY SUBMITTED A COMPLETED AND
SIGNED PROOF OF CLAIM FORM POSTMARKED NO LATER THAN JANUARY 23, 2006.
Proof of Claim Form
Notice of Proposed Settlement
BACKGROUND
On October 31, 2003, Lead Plaintiffs filed two Consolidated Class Action Complaints -
one for violations of the Securities
Act of 1933 and one for violations
of the Securities Act of 1934 - on behalf of all persons or entities who purchased
American Depository Shares ("ADSs")
of SkillSoft PLC beginning April 27, 1999 through and including November 18, 2002, and all
those who received the company’s ADSs in the September 6, 2002 merger in exchange for
SkillSoft Corporation shares. Violations of the Securities Act of 1933 were alleged
against SkillSoft PLC, certain of its current and former employees, officers and directors,
the company’s auditor during the period, Ernst & Young Ireland, and its corporate
sibling Ernst & Young LLP (U.S.). Allegations of securities fraud under the Securities
Act of 1934 were made against the company and certain of its employees, officer and
directors. In March 2005, Lead Plaintiffs filed a complaint alleging securities fraud
against Ernst & Young arising from its issuance of materially false and misleading auditor’s
reports attesting to the Company’s compliance with U.S. generally accepted accounting principles.
At the time, Ernst & Young was alleged to have known or was reckless in not knowing that the
Company had violated these principles by misapplying the one accounting provision that applied
to its central business and thereby artificially inflated revenues.
Firm partners Max Berger and
Jeffrey Leibell are responsible for prosecuting this action.
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