On April 26, 2002, Wolf Haldenstein Adler Freeman & Herz LLP filed a class action lawsuit in the United States District Court for the Southern District of New York on behalf of purchasers of FLAG Telecom Holdings, Ltd. ('FLAG' or the "Company") [NASDAQ: FHTL] securities between March 23, 2001 and February 13, 2002, inclusive (the "Class Period"), against defendants FLAG and certain of its officers and directors.
The original case name and index number are McNeely v. FLAG Telecom Holdings, Inc., et al., 02 CV 3234. If you wish to read a copy of the initial complaint Wolf Haldenstein filed in this action, please click the link to the right.
The complaint alleges that defendants violated the federal securities laws by issuing materially false and misleading statements throughout the Class Period that had the effect of artificially inflating the market price of the Company's securities.
During the Class Period, FLAG accounted for strong year-over-year revenue growth. The complaint alleges that FLAG was actually experiencing decreasing revenue growth. FLAG undertook a series of mutual transactions labeled the 'dark-fiber' swap. Dark fiber was fiber optic cable installed in the earth in multiple places, yet the cable was not used by customers, and therefore not able to provide revenues. Instead of generating revenues from customers, the dark-fibers were utilized in a series of reciprocal transactions with competitors for the purchase and sale of fiber optic cable. As a result of these transactions, FLAG was able to mask the eroding growth it was experiencing.
Generally, these mutual transactions occurred in late quarter 'swap' transactions. The Company would exchange capacity and/or use commitments ('IRUs' or 'Indefeasible Rights of Use') with its supposed rivals, nearly simultaneously and for identical, though undisclosed, sums of money, which would allow defendants to reach their financial goals. However, the 'dark-fiber' swap materially misled investors about the operating performance of FLAG.
Additional cases were filed on behalf of investors. On June 3, 2002, motions were made to consolidate the various cases and appoint lead plaintiff and counsel. On October 18, 2002, the Court entered an order consolidating the various actions under the caption In re Flag Telecom Holdings, Ltd., Securities Litigation, Master File No. 02-CV-3400 (WCC), and appointing lead plaintiff and counsel. Plaintiffs filed a Consolidated Amended Class Action Complaint on March 20, 2003. On April 15, 2003, plaintiffs filed a Corrected Consolidated Class Action Complaint. Defendants moved to dismiss the corrected complaint on July 7, 2003. Plaintiffs opposed the motion to dismiss on August 11, 2003. Defendants filed replies in support of their motions to dismiss on September 26, 2003 and October 2, 2003.
On December 1, 2003, prior to a ruling on defendants' motions to dismiss, plaintiffs filed a Second Amended Complaint. On February 25, 2004, the Court granted defendants' motions to dismiss, which had been applied to the new complaint, but granted plaintiffs leave to replead.
On April 14, 2004, plaintiffs filed their Third Consolidated Amended Complaint. On June 23, 2004, defendants filed a new round of motions to dismiss. On August 23, 2004, plaintiffs opposed defendants' new motions to dismiss. On October 6, 2004, defendants filed replies in support of their motions to dismiss. On January 12, 2005, the Court issued an order: granting the motions to dismiss filed by the Company, Verizon and Andrew Evans, dismissing the claims against them; granting in part and denying in part the motion to dismiss filed by Larry Bautista; and denying is their entirety motions filed by the remaining individual defendants and Citigroup, allowing the action to proceed against remaining defendants.
On February 11, 2005, plaintiffs filed a motion for class certification. On September 4, 2007, the motion for class certification was granted. Class representatives and lead counsel have been appointed.
Wolf Haldenstein has extensive experience in the prosecution of securities class actions and derivative litigation in state and federal trial and appellate courts across the country. The firm has approximately 60 attorneys in various practice areas and offices in Chicago, New York City, San Diego, and West Palm Beach. The reputation and expertise of this firm in shareholder and other class litigation have been repeatedly recognized by the courts, which have appointed it to major positions in complex securities multi-district and consolidated litigation.
If you wish to discuss this action or have any questions, please contact Wolf Haldenstein Adler Freeman & Herz LLP at 270 Madison Avenue, New York, New York 10016, or by telephone at (800) 575-0735 (Fred Taylor Isquith, Esq., Thomas Burt, Esq., Gustavo Bruckner, Esq., Michael Miske, Esq., George Peters, Esq., or Derek Behnke).