Monday, November 13, 2006

Gilat Drops Vigorous Defense, Settles Class Action

Today, Gilat Satellite Networks Ltd. (Nasdaq: GILT) announced that the company, along with certain former officers, had reached a proposed settlement in the consolidated securities class action lawsuit pending in the United States District Court for the Eastern District of New York.

While the amount of the settlement was not disclosed, according to the release, "the entire amount...will be covered by Gilat's insurance carriers."

The Leumi PIA Sector Fund, Leumi PIA World Fund, and Leumi PIA Export Fund were previously appointed lead plaintiffs and Bernstein Liebhard & Lifshitz, LLP, Cohen, Milstein, Hausfeld & Toll, P.L.L.C., and Glancy Binkow & Goldberg LLP were appointed lead counsel in the Gilat litigation.

The class action complaint alleged that the company's 1999-2001 revenues:
were fueled by knowing or reckless accounting practices that included: premature revenue recognition; boosting revenues with undisclosed related party income; failure to properly reserve for doubtful accounts; converting uncollectible accounts receivable into equity (and subsequently recording a capital loss); failing to write-off uncollectible accounts receivable as bad debts, and/or failing to timely do so.
A copy of the amended consolidated complaint is available here.

Daily Trivia: Shortly after the filing of the initial complaints back in 2002, Gilat issued an announcement that was both familiar and interesting. The familiar part:
The Company intends to vigorously defend its position in this litigation.
The interesting part:
The Company has not received the complaints to date but has reviewed one of the complaints available online and believes that the lawsuits are without merit.
While it is not uncommon for a company to say that it has not yet been served with a class action complaint, I cannot recall another example of a company affirmatively indicating that they had gone to a plaintiff-side firm's website to obtain a copy of a complaint.