OUCH! Jan. 1, 1996 to Nov. 3, 1997 lawsuit.$3 here we come. Article follows:
O'Callaghan & Colleagues Files Class Action
PR Newswire, Tuesday, November 11, 1997 at 18:20
CHICAGO, Nov. 11 /PRNewswire/ -- Pursuant to 15 U.S.C. 78u-4(a)(3)(A) of
the Securities Exchange Act of 1934, the law firm O'Callaghan & Colleagues,
P.C., gives notice that a class action Complaint styled "Marc S. Roth v. S3
Incorporated (NASDAQ:SIII), Terry N. Holdt, Diosdado P. Banatao, Gary J.
Johnson, Harry L. Dickinson, George A. Hervey, Neal D. Margulis, Ronald T.
Yara, Dale R. Lindly and Deloitte & Touche, LLP.," has been filed in the
United States District Court for the Northern District of Illinois, Eastern
Division, on behalf of purchasers (the "Class") of the common stock of S3
Incorporated ("S3" or the "Company" or "SIII") during the period January 1,
1996 through November 3, 1997, inclusive (the "Class Period"). The Complaint
alleges that S3, together with its executive officers and outside auditors,
violated certain provisions of the Securities Exchange Act of 1934, and Rules
promulgated thereunder by the Securities and Exchange Commission ("SEC"), by
engaging in a fraudulent scheme and course of business which resulted, among
other things, in (1) deceiving the investing public regarding the true
financial condition and performance of S3 Incorporated, (2) artificially
inflating and maintaining the market price of S3 common stock so that S3's
officers and insiders would be able to sell their shares at inflated values,
and (3) deceiving the public and industry competitors into believing the
Company's operating margins and profits were greater than was truly the case.
By its own admission, as set forth in a November 3, 1997 press release
issued by the Company, S3 overstated its revenues by an amount between $40
million and $70 million (thereby grossly understating its inventories and
failing to account for the potential obsolescence thereof) for an unspecified
period of time. S3's press release was issued only 14 days after the
announcement of its results of operations for the third quarter of 1997. The
November 3 press release by the Company strongly implies the Company knew at
an earlier date that its third quarter results were inaccurate and should not
be relied upon, and Class members who purchased S3 common shares during the
period following the October 20, 1997 release of S3's third quarter earnings
were, in effect, induced to purchase those shares on the basis of financial
information which the Company knew or should have known to be inaccurate and
untrue.
The Complaint alleges that, during the Class Period, S3 -- at a minimum --
fraudulently or recklessly inflated its revenues, profits and assets by
engaging in deceptive practices which (1) ignored the revenue recognition
principles which the Company had adopted in prior accounting periods, and (2)
failed to properly account for its inventories, thereby creating the
impression that such products enjoyed a popularity and were being sold in
volumes which far exceeded their actual rates of sale. The Complaint goes on
to allege that, in clear violation of generally accepted accounting
principles, the Company ignored the requirement that it establish reasonable
reserves for the obsolescence of its inventories, thus deceiving Class members
and industry competitors into believing the Company was better situated to
withstand competitive pressures of the marketplace. The Complaint also
charges that, in admitting its fraudulent or reckless breaches of prior
accounting policies, the Company continues to engage in further deceptive
practices, since the November 3 announcement of S3's improper recognition of
sales revenue misstates the revenue recognition policies set forth in S3's
most recent filings with the SEC.
The Complaint alleges that the executive officers of the Company
specifically knew of (and that its auditors knew of or recklessly disregarded)
S3's accounting improprieties for a significant time period preceding the
Company's admissions on November 3, 1997. Indeed, commencing in August, 1996,
the Company has suffered the resignations of three Chief Financial Officers,
and in addition, each of the Company's founders has resigned or announced his
intention to resign from active employment as an executive officer with S3.
Notwithstanding this "revolving door policy" with respect to the executive
positions they maintained with S3, each resigning officer (and others) is
alleged to have sold a significant volume of the S3 common shares which he had
held, many of which were acquired through year-end stock bonuses based on the
Company's financial performance.
In light of the Company's announcement that its accounting procedures had
been disregarded by its officers and accountants, on November 4, 1997, the
value of S3 stock plummeted by more than 15%. During 1997, S3's stock had
traded at a high of $19.375 per share. By the close of business on November
4, 1997, S3's shares traded as low as $6.75. The Complaint alleges that S3's
officers enjoyed a market for their personal shares which replicated the
higher values obtainable during 1997, and this was due, in primary part, to
the fraudulent or reckless scheme to artificially inflate the Company's value
(and that of its underlying common shares) at the expense of Class members.
Plaintiff, represented by the firm O'Callaghan & Colleagues, P.C., seeks
to recover damages for the entire Class Period, on behalf of the Class
members. The Firm specializes in representing victims of fraud, breaches of
fiduciary duty, mismanagement and other forms of malpractice, both negligent
and deliberate.
If you are a member of the Class described above, you may be entitled to
move the Court to serve as lead Plaintiff or otherwise participate in the
class action lawsuit as a Class member. For further information regarding
your rights as a member of the Class of investors in S3 common shares during
the Class Period, please contact Joseph M. Callaghan at 312-332-1600, or by
fax at 312-236-0541.
SOURCE O'Callaghan & Colleagues
-0- 11/11/97
/CONTACT: Joseph M. Callaghan of O'Callaghan & Colleagues, 312-332-1600,
or fax: 312-236-0541/ |
