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A federal judge last week approved a $5.75 million settlement in a shareholders’ suit against Unisys Corp. and awarded the plaintiffs’ lawyers one-third of the fund, or nearly $1.9 million. Senior federal Judge Clarence C. Newcomer of the U.S. District Court for the Eastern District of Pennsylvania also awarded the plaintiffs’ team in In Re: Unisys Corp. Securities Litigation more than $572,000 in costs. The suit was filed by Philadelphia-based attorneys Sherrie R. Savett and Arthur Stock of Berger & Montague and Robert M. Roseman and Beth M. Rosenthal of Spector & Roseman on behalf of anyone who purchased Unisys common stock between May 4, 1999, and Oct. 14, 1999. The suit accused Blue Bell, Pa.-based Unisys and several of its top executives — Larry Weinbach, its chairman and chief executive officer; Jack McHale, the vice president in charge of investor relations; and Gerald Gagliardi, the executive vice president — of issuing misleading statements about the expected profits from long-term contracts with British Telecom that falsely inflated the stock price. According to the suit, Unisys has enjoyed great success since Weinbach became CEO in September 1997, announcing regular revenue increases and higher profits. Stock prices rose during his reign from $12 to more than $30 per share in early 1999. On May 4, 1999, the suit said, Unisys issued a pair of press releases that described the extensions of two major contracts. The first focused on British Telecom and said Unisys had been awarded a five-year service management contract estimated to be worth more than $200 million. According to the press release, Unisys would be working with BT Business Systems to design, supply and install cabling infrastructure for BT and its customers. The second press release announced that Unisys was awarded a contract with the U.S. government’s General Services Administration that would be worth $445 million over 10 years. Stock prices immediately shot up on the news, gaining nearly $3 per share by the close of the next business day. But the suit alleged that the press releases were “materially misleading” because they failed to disclose that both of the contracts were not irrevocable commitments since they were subject to contingencies and would not contribute to Unisys corporate revenues and profits for several quarters, if ever. The British Telecom contract could not provide substantial work for Unisys until government approval was obtained — which might never be received — and the contract with the U.S. government was already facing delays in funding that were not disclosed in the press release, the suit said. In mid-July 1999, the suit said, Unisys compounded the misleading information by issuing another press release that said its second-quarter earnings per share had increased 58 percent and its revenue had grown 9 percent. The suit alleged that the press release reiterated the misleading remarks about the two contracts as evidence that the company’s “inch-wide, mile-deep strategy was working.” The second press release also had an immediate effect on stock prices, the suit said, artificially inflating the price of Unisys stock as high as $50 per share. But on Oct. 14, 1999, the suit said, investors learned the harsh truth when Unisys announced that its third-quarter performance was substantially below expectations. In a conference with stock analysts later that day, Weinbach blamed the poor results on the fact that work on the British Telecom contract had been delayed due to the need for government approval and was not expected to produce substantial revenue until 2001 and that the U.S. government contracts had also been delayed in the third quarter and would be producing less profit than expected. Market reaction was swift. The closing price Oct. 13 was more than $42 per share, but it opened at just $35.50 Oct. 14 and plummeted to less than $24 after the news conference, the suit said. Over the next few days, it continued to fall, closing at less than $22 per share Oct. 19. Although the suit contains no allegations of insider trading, plaintiffs’ lawyers allege that certain trades made by Unisys executives should be considered “circumstantial evidence of fraudulent intent.” Gagliardi sold 56,250 shares of his personal holdings in mid-August 1999 at prices ranging from $37 to $40, and McHale sold 76,000 shares on Aug. 2, 1999, at $42 per share, the suit said. However, Unisys’ acceptance of the settlement was no admission of wrongdoing, according to the settlement. In last week’s opinion, Judge Newcomer found that the proposed settlement satisfied all of the factors outlined by the 3rd Circuit in Girsh v. Jepson. Without discussing all nine factors, Newcomer found that the plaintiffs may have faced problems establishing damages because “it would have been difficult to prove what portion, if any, of the drop in Unisys’ stock price at the close of the class period was attributable to the allegedly misleading statements.” The plaintiffs’ lawyers, he said, conceded in a hearing last week that sometime near the end of the class period, Unisys had announced a major reorganization that likely also had a negative impact on Unisys’ stock price. Newcomer said the plaintiffs also faced significant risks in establishing liability because Unisys “vigorously disputed” whether the statements were misleading. Finally, Newcomer noted that there were more 68,000 members of the class and that none had objected to the settlement, and only three members elected to opt out. “Thus, the reaction of the class weighs heavily in favor of approving the settlement,” Newcomer wrote. ATTORNEY FEES Turning to the attorney fees, Newcomer found that the plaintiffs’ team deserved the 33 percent they requested. “Counsel has conducted this litigation with skill, professionalism and extraordinary efficiency,” Newcomer wrote. The judge noted that the plaintiffs’ team reviewed and analyzed more than 1 million pages of Unisys’ documents, survived a motion to dismiss and had logged more than 8,700 hours.

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