Billing giant Amdocs (NYSE:DOX) today announced that the US Court of Appeals for the Eighth Circuit has affirmed per curiam the dismissal of the securities class action lawsuits that had been pending against Amdocs and certain of its directors and officers since June 2002. The three judges hearing case ruled unanimously for dismissal. The ruling was made at an early stage, before testimony was given and evidence gathered. The case had previously been dismissed with prejudice in December 2003 by the US District Court for the Eastern District of Missouri.
Amdocs president and CEO Dov Baharav said, "We consistently held that the allegations made in the complaints were without merit and we are pleased that the three judges of the Court of Appeals has unanimously and so convincingly affirmed that these lawsuits should be dismissed."
The dismissal of the case does not change the fact that the Securities and Exchange Commission (SEC) is still investigating Amdocs. But the end of the class action suit against the company is presumably good news for the company, since the factual basis for the petitioners is probably the same as for the SEC investigation.
In early December, Amdocs announced that the US District Court for the Eastern District of Missouri had dismissed with prejudice the class action suit filed against the company and some of its directors and officers. The class action suit consolidated several class action suits filed against Amdocs in St. Louis, Missouri. The suits were filed after Amdocs published two consecutive severe profit warnings prior to the publication of its financial reports for the third fiscal quarter of 2002, in which Amdocs lowered its guidance for the 2002 fiscal year (the first profit warning was published in the last week of April 2002 and the second in June 2002).
Amdocs's severe profit warning published in June 2002 caused its share price to plummet over 40% in two days. As usual in cases of profit warnings, class action suits were quick to follow. Following the publication of two profit warnings within two months, then-Amdocs CEO Avi Naor resigned, three months before his scheduled retirement. Then-Amdocs CFO Dov Baharav was appointed president and CEO in Naor's place.
The consolidated class action suit relates to the period between July 2000 and June 2002. The suit claimed that Amdocs and its managers (Naor and Baharav) maliciously misled shareholders by publishing positive statements and guidance about the company's business, while ignoring the condition of Amdocs's market and the business condition of its customers.
Amdocs petitioned the court to dismiss the consolidated class action suit. In early December 2003, the US District Court for the Eastern District of Missouri accepted Amdocs's petition and dismissed the consolidated class action suit. The US Court of Appeals has now upheld the ruling.
When Amdocs published its financial report for the third fiscal quarter on July 23, 2004, the company's management announced that the SEC had informed the company that the SEC Midwest office was conducting a private investigation against the company.
Barahav told analysts at the time that he believed that the investigation was looking into the events that led to Amdocs's profit warning of June 2002 for the second half of the 2002 fiscal year. Baharav said at the time that the company had not been informed of the reason for the investigation, but that it believed that the investigation was focusing on the company's guidance for its revenue and profits published on April 23, 2002. This assumption was based on the fact that the SEC demanded that Amdocs provide documents and information relating mainly to its guidance methods.
Amdocs stated at the time that it believed that it could dispel any concerns raised by the SEC on this subject, but it could not predict the time-frame, scope, or results of the investigation.
Published by Globes [online] - www.globes.co.il - on December 6, 2004