Lake Mary, FL: (Feb-26-08) A consolidated class action securities fraud lawsuit was brought against FARO Technologies, Inc., the world market leader in portable computer-aided measurement arms and laser tracker sales, and certain of its current and former officers and directors. The suit, filed in the United States District Court for the Middle District of Florida, alleged that the defendants made misrepresentations and omissions related to the value of the company's inventory and consequently to the amount of the company's gross margins and profits. It stated that the misappropriations included the amount of the 2005 selling expenses that the company had accrued and expected; payments made in connection with certain of the company's Asian sales were in possible violation of the Foreign Corrupt Practices Act. The plaintiffs questioned the effectiveness of the company's systems of internal controls in light of the above and other circumstances.
In a recent development in the case, sources confirmed that the company had entered into a Memorandum of Understanding to settle the consolidated class action securities fraud lawsuit. Under the terms of a settlement reached, the issuer of the FARO's directors and officers insurance policy will pay $6.875 million into a settlement fund that will be distributed to members of a class of all persons who purchased the company's common stock from Apr. 15, 2004 through Mar. 15, 2006 and to the lead plaintiff's counsel. The settlement will also cover other costs associated with the suit. The Memorandum of Understanding provides that the parties to the Securities Litigation will file with the court a Stipulation and Agreement of Settlement seeking the court's preliminary and final approval of the terms of the proposed settlement. Company spokespersons stated that the $6.875 million is within the coverage limit of the directors and officers insurance policy, and thus the settlement requires no payment by either the company or the individual defendants. [
