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Thursday, June 13, 2024 | Back issues
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Verifone Settles Class Action for $95 Million

(CN) - Shareholders and securities regulators will accept $95 million to settle claims over share prices in Verifone that dropped 45 percent, a federal judge ruled.

After shares in Verifone dropped over 45 percent in one day in December 2007, the San Jose-based maker of electronic-payment systems admitted that it had misstated earnings for three consecutive quarters.

Nine groups of investors immediately filed suit for securities fraud, and the Securities Exchange Commission followed suit in 2009. Those cases were eventually consolidated with the National Elevator Industry Fund as lead plaintiff.

The action alleged that former CEO and chairman Douglas Bergeron, and former CFO and executive vice president Barry Zwarenstein, deliberately lied in public about the company's earnings to meet the expectations of a merger with Israel-based Lipman Electronic Engineering.

The executives had projected that the merger would spur a sharp increase in earnings, and when that didn't happen three quarters in a row they fudged the numbers to make it seem like a success, the class said.

After the San Francisco trial judge dismissed three amended complaints, the last with prejudice, the 9th Circuit reversed in December 2012, concluding that "lead plaintiff's third amended complaint adequately alleged scienter as to defendants Verifone, Bergeron and Zwarentsein."

The parties then entered mediation, revealing in a quarterly report earlier this month that it would pay the settlement class $95 million.

Insurance for the firm will cover approximately $34 million of that amount, according to the report. Verifone is responsible for the remaining $61 million.

Included in the settlement is a potential contingent adjustment, which provides changes if the company is acquired within six months from preliminary approval of the settlement.

Verifone noted that it continues to deny the allegations of the complaint.

U.S. District Judge Edward Chen gave the settlement preliminary approval last week.

The parties face a settlement hearing on Feb. 6, 2014.

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