ProOne settles lawsuit for $7.5 million
TOPEKA, Kan.-Protection One announced in June that it had agreed to pay $7.5 million to a group of shareholders who sued the company in 2000 as a result of the company's restatement of earnings following a Securities and Exchange Commission inquiry into its company finances.
The group that the company reached a settlement with was originally four separate lawsuits consolidated into one action, said Richard Ginsburg, president and chief executive officer of Protection One. All the lawsuits were filed in response to the company's earnings restatement in April 1999. The restatement, which involved Protection One's financial results from 1997 and 1998, showed a reduced net income for 1998 of $13 million, leading the company to report a net loss of $2.6 million for the year.
"Our shareholders are very important," Ginsburg said. "Although we believe that these shareholders were mistaken in their allegations, we took the allegations very seriously. We are pleased to have reached a resolution."
Because of the incorrect financial statements, the shareholders alleged that company stock was sold to the public at inflated prices and was subsequently traded at inflated prices. The lawsuit was filed on behalf of all shareholders who purchased or acquired shares between Feb. 10, 1998 and April 1, 1999, Protection One officials said.
"Particularly in the current environment, any allegations relating to accounting issues must be taken seriously, even though we concluded that the allegations against us did not have any merit," Ginsburg said. The settlement of the lawsuit will enable the company to focus on more "positive matters for the company" in addition to continuing an ongoing campaign to stamp out fraudulent alarm dealers targeting Protection One. (See Security Systems News, March 2002)
The entire $7.5 million will be covered by the company's existing insurance, company officials said. Westar Industries and Western Resources,Ã‚Â Protection One's parent companies, were also named as co-defendants in the shareholder lawsuit.
The San Francisco law firm of Schubert & Reed LLP served as the lead counsel for the plaintiffs. Attorney Justice Reed said he and other attorneys for the plaintiffs were barred from making comments about the case until the settlement was approved by the U.S. District Court for the Central District of California, a process that Protection One expects to take up to several months.