Monday, February 19, 2007

Rambus Inc., backdating class action

The Consolidated Amended Class Action Complaint For Violation Of Federal Securities Laws weighs in at 124 pages without exhibits.

In short, it alleges that Rambus Inc., certain of its officers, directors and Rambus' public accountant during the period, mislead the investing public.

The class period is December 4, 2001 - July 18, 2006, inclusive.

The class members (victims) are those "persons who suffered damages through the purchase of securities of Rambus Inc., including sellers of Rambus put options during the Class Period."

" . . . long running practice, which began in 1998, resulted in, among other things, drastic and material overstatement . . ."

" . . . the enormity of the amounts of money involved, in relation to the size of the Company's revenues, the audacious way it was conducted by the top executives of the Company . . . "

" . . . an immediate profit without having to work to improve the Company's stock price performance."

" . . . Plaintiffs intend to further amend and/or supplement their complaint to plead new and supplemental facts concerning the restated financial statements for the financial results during the Class Period once such documents are filed by Rambus and made publicly available."

" . . . PWC (Pricewaterhouse Coopers) was paid in excess of $2.5 million for the period of 2001 through 2005 for its auditing, accounting and consulting work for Rambus . . . "

"PWC knew, or recklessly disregarded, that Rambus' financial statements were false and misleading and contained material departures from GAAP."

"The staggering materiality is underscored by contrasting the $200 million understatement of expense related to improperly backdated options with the less than $120 million in cumulative net income (before taxes) reported by Rambus from 1998 through the most current 2006 quarterly report."

"This is exacerbated by the fact that PWC was hired specifically to audit the deficient internal controls and, despite being paid more than $1 million for those audits, failed to raise any red flags whatsoever regarding Rambus' manifestly flawed control system."

"But for the gross negligence and/or reckless disregard of the accountant defendant, PWC, Rambus would have been required to correct the overwhelmingly material misstatements and omissions attributable to is misconduct regarding the option backdating scheme."

Donkey Notes:

Complaint alleges certain insiders sold approximately 2,295,099 shares "while in possession of materially adverse non-public information regarding the backdating stock options scheme . . ."

Naughty knowledge is naughty knowledge.

Total proceeds (complaint describes as "spectacular proceeds") $177,101,582. It should be noted that this is gross proceeds. Gross indeed . . .

And remember, when Martha Stewart went up the river, she went for the cover up that ensued following her trade of ImClone shares - not for the trade itself. I have it on good authority, Lompoc is beautiful outside the walls, but not a heck of a lot of beauty within.

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