Subject: [NEXTEL-1] Nextel Partners agrees to tentative partial settlement in securities litigation case.

From: [email-masked]
Date: Fri, 27 Jun 2003 04:34:17 -0400

Nextel Partners agrees to tentative partial settlement in securities litigation
case.

Friday, June 27, 2003

Insurers would pay investors $1 billion over inflated
tech IPOs

SEATTLE POST-INTELLIGENCER STAFF AND NEWS SERVICES

NEW YORK -- Insurers for hundreds of companies that staged hot initial
public offerings during the tech boom -- including 13 from the Seattle area --
could pay at least $1 billion to investors under a tentative partial settlement
announced yesterday, and cooperate in ongoing litigation against 55 brokerage
firms accused of funneling huge payoffs to insiders through secret deals.

The massive case involves 309 separate suits filed against 55 investment
banks, more than 300 companies that went public between 1998 and 2000,
and an unspecified number of their individual corporate officers and directors.

The total number of defendants could be more than 1,000; companies
involved include Global Crossing, MP3.com, Ask Jeeves Inc. and Red Hat
Inc. nationally and such well known Seattle brands as Expedia, drugstore.com
and F5 Networks.

Forty-two primary insurers are obligated to pay the companies' settlement of
at least $1 billion, though they aren't required to hand over any money until the
claims against the banks are resolved, said investor lawyer Rebecca Katz.

The plaintiffs hope that settling with the companies that issued the stock -- who
they say knew or should have known about the alleged misconduct -- will
strengthen their position as they continue negotiating with the investment banks.

"We have always been of the mind that the primary target in this case is the
underwriting community," said Melvyn Weiss, chairman of a committee of
attorneys representing the investors. "This gives us a huge booster shot in our
case against them."

The plaintiffs are looking to recover "many billions" of dollars from the
investment banks, Weiss said. The firms, including J.P. Morgan, Credit Suisse
First Boston, Morgan Stanley and Smith Barney, are accused of plotting to
artificially inflate the value of IPO stocks through a practice called
"laddering,"
in which larger shares are allocated to investors who promise to take bigger
stakes after the stock hits the open market.

In addition, some customers who invested in IPOs were compelled to give
extra compensation to the banks, sometimes through inflated commissions on
other trades. Later, after the so-called "quiet period" that follows IPOs,
analysts who worked for the banks issued favorable research to fluff up the
stocks, whether they were worthy or not.

As part of the settlement, the tech companies have agreed that any claims they
might have against the investment banks will be assigned to the plaintiffs' class.

Their cooperation could also help speed the discovery process, Weiss said.

"They participated in road
shows, they had
conversations with the
underwriters," Weiss said.
"They may have been
misled as to what
compensation the
underwriters were receiving.
... all of this is important to
us."

Most of those involved have
approved the settlement,
Weiss said, which also must
be approved by the court.

If more than $1 billion eventually is recovered from the banks, the tech
companies' will not have to pay anything, the lawyers said. If the award is
more than $5 billion, the tech companies and their insurers will be able to
recover expenses.

The settlement was reached after more than a year and a half of negotiation
between lawyers for the investors, the tech companies and at least 42 primary
insurers.

Attorneys involved agree it is among the most complicated cases in U.S.
history.

"This is by far the most complex securities litigation that has ever been brought,

and the settlement process is equally complex," said Jack Auspitz, a lawyer
with Morrison & Forester, who represents 30 to 40 of the internet companies.

In February, U.S. District Judge Shira Scheindlin decided the cases could go
forward, rejecting a bid by the investment banks to dismiss the case.

Scheindlin reviewed more than 1,000 suits and found that investors had
presented "a coherent scheme" in which the banks joined with Internet
companies to defraud the public by hiding secret deals and analyst conflicts to
artificially inflate new shares and deliver payoffs to insiders. If the
allegations
are true, she wrote in her 238-page ruling, "this scheme offends the very
purpose of the securities laws."

The Securities and Exchange Commission and the National Association of
Securities Dealers conducted an extensive investigation of Wall Street's
dealings in IPOs. Regulators have recommended strict limits on several
questionable practices popular during the tech boom, including laddering.

Ten of the largest investment banks agreed to change their research and IPO
practices in a $1.4 billion settlement reached with regulators earlier this year.

SEATTLE DEFENDANTS

drugstore.com Inc.: Shares of the Internet drugstore initially sold at
$18 on July 27, 1999. They rose to $70 on the first day of trading. The
suit contends the investment banks and investors who received IPO
shares received huge profits from such gains. Drugstore.com shares
traded yesterday at $5.76 on the Nasdaq Stock Market.

Other area defendants: Avenue A (now aQuantive), B Square,
Concur Technologies, Expedia, F5 Networks, Internap, Loudeye,
Metawave, Nextel Partners, Onvia.com, Onyx Software and Primus
Knowledge Solutions.

http://seattlepi.nwsource.com/business/128434_ipodeal27.html

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