Network Associates Inc. has agreed to pay US$30 million to settle a class-action lawsuit by shareholders. The payment will settle claims by investors who bought the company's stock between Jan. 20, 1998 and April 6, 1999, and who alleged violations of US Federal securities law, Network Associates said in a statement Thursday.
Insurance will cover most of the payment, said the company, which is best known for software security products including the McAfee anti-virus and PGP encryption software.
The plaintiffs had accused Network Associates management of using questionable accounting practices in a "scheme to improperly and fraudulently manage the reporting of the company's financial results in order to maintain an artificially high price for the company's stock," according to a statement from the San Francisco law firm of Lieff, Cabraser, Heimann & Bernstein LLP.
The company's stock rose to a high of US$66.25 per share on Dec. 31, 1998, but collapsed to $11.06 by April 20, 1999, after "the defendants' fraud had been fully revealed," the attorneys said. But during the same period, company executives Prabhat Goyal, Bill Larson, Zach Nelson, and Peter Watkins, also named as defendants, sold over 1 million shares of the Network Associates stock they held for proceeds in excess of $39 million.
Goyal, Larson, and Watkins announced their resignations as chief financial officer, chief executive officer, and president, respectively, late last year, though Goyal is still serving until a replacement is named. [See "Network Associates Taps New CEO," Jan. 4.] Nelson currently serves as president and chief executive officer of Network Associates subsidiary myCIO.com.
Network Associates, in Santa Clara, California, can be reached at +1-408-988-3832 or on the Web at http://www.nai.com/. Lieff, Cabraser, Heimann & Bernstein can be reached at +1-415-956-1000 or at http://www.lchb.com/.