In re NetBank, Inc. Securities Litigation
Beginning in September 2007, two class actions were instituted on behalf of purchasers of NetBank common stock, alleging claims against NetBank and certain of its officers and directors for violations of the federal securities laws. By an Order of the Court dated April 21, 2008, the Court consolidated the class actions filed, appointed Robert A. Brown to serve as the Lead Plaintiff, and appointed Berger Montague as Lead Counsel for the Lead Plaintiff.
On July 3, 2008, the Lead Plaintiff filed a Consolidated and Amended Class Action Complaint on behalf of the Class (the “Complaint”) against certain of NetBank’s former officers and directors, including defendants Douglas K. Freeman, James P. Gross, Steven F. Herbert, Thomas H. Muller, Jr., Eula L. Adams and David W. Johnson, Jr. Former NetBank director Catherine Ghiglieri was also named as a defendant in the Complaint but was dismissed from the litigation, by agreement between counsel for Ms. Ghiglieri and counsel for Lead Plaintiff. The Complaint did not include NetBank as a defendant because NetBank had by then filed for bankruptcy and all further litigation against NetBank was stayed by the protections afforded under the federal bankruptcy laws.
The Complaint alleges two bases for relief: (1) violation of § 10(b) of the Securities Exchange Act of 1934 and the related SEC Rule 10b-5; and (2) violation of § 20(a) of the Securities Exchange Act of 1934. The Complaint alleges, among other things, that the Defendants artificially inflated the market price of NetBank common stock by making false and misleading statements during the years 2005, 2006 and 2007, regarding the financial results, operations and condition of the Company. Among other things, Plaintiff alleges that NetBank publicly issued false financial statements of its operating results and financial condition, as well as misrepresentations concerning its business operations, including its subprime mortgage exposure, deficient mortgage underwriting and risk control practices, inadequate reserves and controls, failure to comply with Generally Accepted Accounting Principles (GAAP) and regulatory requirements, the departure of its outside auditor, its inability to file accurate financial statements, its overstated and unreliable book value, and its true financial condition and results.
On August 7, 2009, the Court entered an Order certifying this Litigation as a class action for purposes of trial. The Class is defined as follows:
All persons who, during the period March 16, 2005 through and including May 21, 2007, purchased or otherwise acquired the publicly-registered common stock of NetBank, Inc., held such stock as of May 21, 2007, and were damaged as a result (“the Class”).
Excluded from the Class are defendants Douglas K. Freeman, James P. Gross, Steven F. Herbert, Thomas H. Muller, Jr., Eula L. Adams and David W. Johnson, Jr. (collectively, the “Defendants”), members of the immediate families of any Defendant, any entity in which any of the Defendants has or had a controlling interest, any person or entity affiliated with any of the Defendants, and the legal representatives, heirs, successors or assigns of any of the Defendants. The Court’s August 7, 2009 Order also appointed Robert A. Brown (“Lead Plaintiff” or “Plaintiff”) as the Class representative and designated the law firm Berger Montague as Lead Counsel for the Class.
On July 27, 2011, the United States District Court for Northern District of Georgia granted preliminarily approval of a $12.5 million cash settlement in In re NetBank, Inc. Securities Litigation, (N.D. Ga. 1:07-cv-2298-TCB). The proposed settlement is on behalf of all persons who purchased the publicly-registered common stock of NetBank, Inc. during the period beginning March 16, 2005 through May 21, 2007, and held those shares on May 21, 2007.
The following documents are available for download and review: