This article is from today's Providence Journal:
2.28.98 00:09:53
$7 million settlement reached in APC suits
The agreement, details of which have not been made public, would
settle two lawsuits filed on behalf of shareholders in the West Kingston
company in 1995 and 1996.
By TIMOTHY C. BARMANN
Journal-Bulletin Staff Writer
American Power Conversion has agreed to pay $7 million to settle a
federal lawsuit and a state class-action lawsuit brought against the
company alleging that it had misled shareholders, and that certain
company executives had illegally profited from insider knowledge about a
production problem in 1995.
The settlement, which must be approved by a judge, would be paid to
anyone who purchased APC shares between April 26 and July 27,
1995, according to Barry J. Kusinitz, a Providence lawyer who has
served as the plaintiff's local counsel.
APC, which is based in West Kingston, makes devices that act as a
back-up power supply for computers and related equipment. The
products -- called UPSs, or uninterruptible power supplies -- can keep a
computer running temporarily during a power outage.
The settlement has not yet been made public, but APC announced that it
had been reached in a statement the company issued Thursday evening.
''While APC and its officers and directors continue to believe that the
suits are without merit, settlement at this stage is clearly in the company's
best interests,'' Rodger B. Dowdell Jr., APC's president and chief
executive officer, said in the statement.
In a telephone interview, Donald Muir, APC's chief financial officer, said
the company had agreed to pay $7 million to settle the pending
shareholder suits.
''After two-plus years of going through this process, all parties decided
to settle it and put it behind us,'' Muir said. ''Now we can get on with
focusing on our business.''
Muir said that APC's insurance company, National Union Fire Insurance
Co. of Pittsburgh, Pa., would pay the full amount of the settlement.
''There is no financial impact on APC,'' he said.
The lawsuits arose out of problems -- involving a defective component --
that temporarily halted production of APC products and caused
company inventory levels to become abnormally high in 1995.
A lawsuit was filed by several individuals, in August 1995, in U.S.
District Court, Providence, against Dowdell and company executives
Edward W. Machala, Neil E. Rasmussen, David P. Vieau and Asa S.
Davis III.
A derivative lawsuit was filed in state court in Suffolk County, Mass., in
February 1996.
The proposed settlement would end both the federal and the state
lawsuits.
The federal suit claimed, among other allegations, that APC knew about
the component defect and the resulting production problems, but failed to
tell shareholders. The suit alleged that APC made misleading statements
about its inventory levels and that certain company executives, who
allegedly knew about the component problem, sold $11 million worth of
stock at premium prices before the problem was made public.
After the component problem was disclosed, APC's stock fell 17.5
percent in one day, and a total of about 27 percent over the next five
trading days.
The settlement -- which would end both the federal lawsuit and the state
lawsuit -- must be approved by a judge, and also is subject to other
conditions, APC said.
Kusinitz said that part of the settlement would go to pay legal fees and
the remainder would go to the shareholders who purchased stock during
the three-month time period in question.
About 10 different law firms represented the plaintiffs in this case, he
said. They will submit statements to the judge of the time they spent on
the case, and request a certain amount of the judgment, Kusinitz said.
The two firms that served as lead counsel for the plaintiffs were Wolf
Haldenstein Adler Freeman & Herz, and Milberg Weiss Bershad Hynes
& Lerach. Both firms are located in New York.
It is not unusual for the legal fees to amount to a third of such a
settlement, Kusinitz said.
If a judge approves the agreement, those stockholders who are eligible to
share in the settlement will receive a notice in the mail, Kusinitz said. They
probably will be required to prove that they purchased APC shares
during those three months.
It won't be known how many shares were purchased during that period
until the plaintiffs review the transfer records of the company, said Neil L.
Zola, of the Wolf law firm, one of the plaintiffs' lawyers.
APC's stock, which is traded on the Nasdaq market under the symbol
APCC, fell $1 a share yesterday to close at $29 a share.
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