A class action was commenced in the United States District Court for the District of Nevada, Case No. CV-S-97-01579-PMP (RJJ), on behalf of purchasers of Teletek, Incorporated (NASDAQ: TLTK) ("Teletek") common stock between March 20, 1994 and March 20, 1997, inclusive (the "Class Period"). The complaint asserts claims for violations of the federal securities laws (Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5) against Thomas A. Mills, former secretary and director of Teletek and former President of Teletek's wholly-owned subsidiary, Hi-Rim Communications, Inc.; Nathan W. Drage, legal counsel for Teletek during part of the Class Period; and KPMG Peat Marwick LLP ("KPMG"), Teletek's independent auditor during part of the Class Period (collectively, the "defendants"). The action is related to another class action currently pending in the District of Nevada, Seoane, et al. v. Swan, et al., Case No. CV-S-96-01114-HDM (the "Related Action"), which named Teletek and certain of its officers and directors as defendants. Further investigation during the pendency of that litigation uncovered evidence implicating the additional parties, necessitating the filing of this current action. An amended complaint was filed in this action on December 23, 1997.
The complaint alleges, among other things, that during the Class Period defendants issued false and misleading press releases and annual and quarterly reports filed with the Securities Exchange Commission ("SEC") misrepresenting Teletek's financial performance and condition, its costs of operation, and its business prospects, while failing to disclose that the price and trading volume of Teletek stock was manipulated through an ongoing scheme of bribing stock brokers. The complaint further alleges that KPMG was engaged by Teletek to provide independent auditing, accounting and consulting services, including auditing Teletek's financial statements for the fiscal year ended June 30, 1996, and that Drage was engaged to provide independent legal advice and opinions in connection with the company's filings with the SEC. The complaint alleges that each of the defendants participated in the preparation of, and/or sanctioned the public statements and official filings while having access to, and willfully or recklessly disregarding, contradictory material non-public information. These false and misleading statements artificially inflated the price of Teletek stock. On November 7, 1996, when a federal grand jury announced the indictment of certain Teletek officers and directors in connection with these charges, and again, on March 20, 1997, when Teletek announced the discovery of accounting "irregularities" and the resignation of a company officer and director, Teletek's stock price plummeted. As a result, Teletek shareholders who had purchased the stock at artificially inflated prices suffered millions of dollars in damages.
Plaintiffs seek to recover damages on behalf of class members and are represented by the law firms of Weiss & Yourman, Stull Stull & Brody, and Milberg Weiss Bershad Hynes & Lerach LLP, which concentrate in litigating class actions on behalf of investors and shareholders.
Your name will automatically be included in the list of class members and you need do nothing further at this time to protect your rights. If and when the Court awards any compensation based on damages to the class, notice will be given to the class, at which point you will be given the option to opt out of the award or participate in the award. If you choose to participate in the award, any compensation awarded will be divided among the members of the class under court supervision and on a proportionate basis determined by the loss incurred by each class member.
If you did not purchase or otherwise acquire stock during the class period, but simply held the stock, you are not eligible to participate in the suit. Also excluded from the class are the defendants, officers and directors of the company, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which any defendant has or had a controlling interest.
This action has been undertaken by plaintiffs' counsel on a contingency fee basis. As such, you will not be responsible for payment of any legal fees or costs incurred in prosecuting this action.
Case Update
On July 29, 1998, Weiss & Yourman was appointed by the Court as lead counsel for plaintiffs in this action. On April 15, 1999, the Court denied defendants' motions to dismiss plaintiffs' Second Amended Complaint (the "Complaint"). On June 1, 1999, defendant KPMG answered the Complaint and filed a cross-complaint against defendants Thomas Mills and Nathan Drage, and a third party complaint against John Vergiels, Teletek, Inc., Dwight Wenger, Wayne Godbout, Swidler & Berlin, Chtd. and Sherwood Cook. Third party defendant Swidler & Berlin moved to dismiss KPMG's complaint on August 18, 1999. On September 1, 1999, Magistrate Johnston issued an order staying discovery pending the resolution of any motions to dismiss directed to KPMG's complaint.
On April 13, 2000, the Court granted plaintiffs’ motion for certification of this action as a class action and appointed nine class representatives. Also on April 13, 2000, the Court granted in part and denied in part the motion to dismiss defendant KPMG’s third-party complaint filed by third-party defendant Swidler & Berlin. Following that order, the parties conducted their required early meeting of counsel, the Court entered a scheduling order governing the action and certain parties exchanged their initial disclosures required by the local rules. On August 31, 2000, cross-defendants Thomas Mills and Nathan Drage filed their Answer to defendant KPMG’s cross-complaint and filed a cross-claim against KPMG.
Discovery has commenced in this action. In addition to discovery conducted among other parties, plaintiffs have responded to document requests and interrogatories served by defendant KPMG. Pursuant to the Court’s order, discovery is scheduled to be completed on or before September 4, 2001.
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