To pass the time, there was some recent info posted on PACER about the Class settlement. Basically, there was concern that the only money available for settlement was going to come from the $5M insurace policy. So if the lawyer's and plaintiffs wanted to come away with something, they should settle and get something now rather than risk getting nothing at a later date.
Some other points are:
1) Out of the 2.3M, the Plaintiff's attorneys are asking for $690,000.
2) There are 16,000 potential class members who were mailed the notice of claim, and the 5 plaintiffs could each get an additional $2000 each.
So without taking share allocation into account, if all 16,000 people filed for a claim, that amounts to about $100 per person. I'll probably fill out the forms just to see if I can get some pizza money.
History of the Settlement Negotiations
30. The parties agreed to hold the mediation in New York on August 23, 2007, and
agreed to invite counsel for the plaintiffs in the related shareholder derivative action so as to be able
to achieve a global settlement. The parties further agreed to submit pre-mediation statements to the
mediator.
31. To assist us in the preparation of our pre-mediation statement and to evaluate the
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potential damages involved, we retained Candace Preston, a Chartered Financial Analyst and wellregarded
economic analysis expert, to conduct a preliminary damage study. Ms. Preston compared
the stock price of GlobeTel during the Class Period and the alleged false statements to determine
each false statement’s relative impact on the Company’s stock price. Ms. Preston arrived at an
estimated damages number of $53 million (the Settlement thus represents almost 4.5% of this
maximum damages number). We used Ms. Preston’s analysis in preparing our pre-mediation
statement. As with the Complaint and our opposition to the motions to dismiss, Co-Lead Counsel
discussed the substance of our pre-mediation brief and delegated the responsibility of preparing the
first draft to SSB&R.
32. On August 23, 2007, the mediation took place and we were informed that over $1
million had already been spent on attorneys in connection with the SEC’s investigation of GlobeTel
and its directors and officers. In addition, counsel for the insurer indicated that the SEC’s
investigation would cost even more money in the future and that it would have to set aside hundreds
of thousands of dollars to ensure that those legal costs would be covered.
33. As a result of the past and future costs associated with the SEC’s investigation, we
determined that there was considerably less money available for the Class than previously
understood. In addition, GlobeTel’s stock trades in the pennies and it continues to have significant
cash flow problems. We also received written confirmation that Huff--the sole remaining individual
defendant--did not possess the financial ability to pay a meaningful judgment if one were to be
obtained against him. As a result, we determined that if any monetary recovery was to be obtained
to benefit the Class, it would have to be done quickly and well-within policy limits.
34. At that point, over $1 million had already been spent on various defense costs.
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GlobeTel and its directors and officers further estimated that they would require nearly $1 million
more in insurance proceeds to defend themselves in connection with the SEC’s investigation as well
as pay defense costs associated with the settlement of this and the derivative claims. That would
leave less than $3 million to settle these claims as well as those asserted by the derivative plaintiffs.
35. With the aid of the mediator, we were able to secure the vast majority of the
remaining $3 million, representing an excellent recovery given the very real possibility of no
recovery at all.
AI
