Case settled for those who (1) PURCHASED THE TITAN CORPORATION SECURITIES BETWEEN JULY 24, 2003 AND JUNE 25,
2004, INCLUSIVE, OR (2) HELD TITAN COMMON STOCK AT ANY TIME FROM AUGUST 3, 1999 THROUGH
AND INCLUDING JULY 23, 2003 AND CONTINUED TO HOLD SUCH STOCK ON JUNE 26, 2004, YOU COULD
GET A PAYMENT FROM A CLASS ACTION SETTLEMENT. Claim period expired January 9, 2006.
Securities and Time Period: The Titan Corporation (“Titan”) common stock, preferred stock, 8% Senior
Subordinated Notes, call options and put options purchased between July 24, 2003, and June 25, 2004 (“Securities
Class”), and Titan common stock held at any time from August 3, 1999 through July 23, 2003 and continually held to
June 26, 2004 (“Holder Class”).
Settlement Fund: $61,500,000 in cash. If you are in the Securities Class, your recovery will depend on the
type and amount of securities you purchased and the timing of your purchases and any sales. Depending on the
number of eligible shares that participate in the settlement and when those shares were purchased and sold, the
estimated average recovery per share of common stock for members of the Securities Class will be approximately
$0.78 before deduction of Court-approved fees and expenses. Up to $3 million out of the $61.5 million Settlement
Fund will be used to pay Holder Class claims (“Holder Fund”).
This is a securities fraud class action arising out of defendants’ scheme and wrongful course of business, which involved defendants’ use of bribes and illegal payments to win contracts with foreign governments, and ultimately generate revenue and profits. This action is being brought on behalf of investors who purchased the common stock of The Titan Corporation (“Titan” or the “Company”) at artificially inflated prices between July 24, 2003 and June 25, 2004, inclusive (the “Class Period”). Defendants are Titan and certain of the Company’s key officers and directors.
With the Company’s common stock price inflated and wanting to sell Titan to “cover their tracks in the sand,” on September 15, 2003, defendants announced that the Lockheed Martin Corporation (“Lockheed”) would acquire the outstanding shares of Titan. Lockheed would pay consideration valued at $22 per share, comprised of a mix of cash and Lockheed stock. In connection with the negotiation of this merger, defendants caused Titan to agree to pay them millions of dollars in separation benefits, premature vesting of stock options, retention bonuses and extra bonuses for arranging the merger. The September 15, 2003 news of the proposed acquisition of Titan by Lockheed once again caused the Company’s stock to spike from $17 to $21 per share on extremely high volume. Concealment of the illegal payment of the “consulting” fees to foreign governments was necessary until the merger was complete. 6.
On February 13, 2004, defendants disclosed that Lockheed was delaying consummation of the acquisition until it could investigate possible payments made by Titan to foreign officials through consultants. It was also revealed that the Securities and Exchange Commission (the “SEC”) and the U.S. Department of Justice (the “DOJ”) had begun an inquiry into the illegality of the payments and Titan’s disclosure of the payment. On this news, the price of Titan’s common stock declined sharply from a February 12 close of $21.80 to a February 13 close of $20.49 on heavy volume of over 8.5 million shares. Defendants tried to obfuscate the impact of the news in an ongoing effort to keep Titan’s stock price up so they could complete the merger and issued a statement indicating that they had investigated the transactions in connection with Lockheed’s due diligence and affirmatively falsely denied any wrongdoing, stating that “[n]either Lockheed nor us have found anything wrong.”
On March 5, 2004, it was disclosed that the DOJ had opened a formal criminal investigation into whether illegal payments were made by Titan in violation of the Foreign Corrupt Practices Act of 1977, 15 U.S.C. §§78dd-1, et seq. (“FCPA”). Lockheed told The Wall Street Journal that the allegations of illegal payments, if true, could constitute violations of the FCPA. Both companies indicated that delays occasioned by their own internal investigations – including investigations into whether Titan properly accounted for the payments in its financial statements – the SEC investigation and now the DOJ’s formal criminal investigation would likely prevent the merger from closing prior to the March 31, 2004, so-called “walkaway” termination date at which point either party not then in breach could terminate the merger.
On April 7, 2004, Lockheed announced that it was reducing its offer to purchase Titan from $22 per share to $20 per share, thus costing shareholders $200 million.
While Titan’s shareholders approved the revised terms of the merger on June 7, 2004, Titan was unable to resolve the investigation with the DOJ. Rather, on June 4, 2004, Titan received a “Wells Notice” from the SEC notifying Titan that the SEC staff intended to recommend action against Titan for violation of U.S. securities laws. Thus, on June 26, 2004, Lockheed notified Titan that it was terminating the merger agreement, sending Titan’s stock plummeting as low as $11.74 per share on July 2, 2004.
Since then, Titan has written-down or taken loss allowances relating to these African, Middle Eastern and Asian operations where the illegal acts took place. For the 2Q04 ending June 30, 2004:
(a) Titan recorded an aggregate after-tax loss of $11.4 million pertaining to its long discontinued Titan Wireless, Inc. (“Titan Wireless”) activities in Benin, Africa including a full allowance for the $14.351 million remaining on a receivable for the Benin contract, and $2.3 million (after-tax) relating to a contingent liability with a subcontractor on the project;
(b) Titan took approximately $10 million in charges pertaining, in part, to impairment of two large computer systems in Saudi Arabia, and, in part to termination of a program by an undisclosed “civilian government agency” (most likely the Federal Aviation Administration (“FAA”));
(c) Titan recognized approximately $5 million in losses resulting from its contract in Saudi Arabia for a National Identification Card Project (“National I.D. Card Project”); and
(d) Titan recorded an after-tax loss of $24.6 million related, in part, to discontinued operations of its Datron World Communications (“Datron”) division in Asia, mostly to “goodwill” and “fixed asset values not expected to be recovered.”
Most recently, Titan has settled a complaint filed by the SEC for almost $30 million for resolution of the government’s FCPA investigations – one of the biggest FCPA penalties ever.
Defendants’ misconduct throughout the Class Period was designed to perpetuate the perception of Titan as a company that was poised for continued growth and whose stock would soon be acquired by Lockheed at a substantial premium to its pre-merger announcement trading price. The statements made by defendants during the Class Period were each false and misleading when made. The true facts, known only to defendants, were that by means of defendants’ undisclosed, improper and illicit practices Titan and defendants:
(a) Inappropriately inflated revenue and accounts receivables, and failed to timely write-off assets, in violation of GAAP ;
(b) Violated the FCPA, in violation of 15 U.S.C. §§78dd-1, et seq., and Titan’s own publicly stated Code of Ethics ostensibly designed to assure the investment community that Titan would not violate these laws;
(c) Made Titan’s financial results look better than they actually were prior to and during the Class Period;
(d) Exposed Titan to huge civil and criminal penalties for its unlawful conduct, the potential liability of which was not adequately reserved for or disclosed in the Company’s audited financial statements;
(e) Successfully negotiated a merger with Lockheed on favorable terms and kept Lockheed bound to the merger contract through the end of the Class Period; and (f) Falsely denied any illegal or wrongful conduct.