A class action lawsuit was filed in the United States District Court for the Southern District of Florida on behalf of all persons who purchased the common stock of CyberGuard Corp. ("CyberGuard" or the "Company") (Nasdaq: CYBG) from November 7, 1996 to August 24, 1998, inclusive (the "Class Period").
The complaint charges CyberGuard and certain of its officers and directors with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Specifically, the complaint alleges that during the Class Period, defendants concealed from their shareholders accounting irregularities which have caused an extraordinary overstatement of the Company's earnings.
On August 24, 1998, the Company shocked investors with an announcement that (i) it would restate its publicly reported financial results for the third quarter of 1998 because the Company improperly recognized revenue on products shipped to distributors and resellers and would likely restate its results for the first and second quarters of fiscal 1998 as well; (ii) as a result of the restatement, the Company was experiencing "significant pressures on its liquidity"; (iii) the Company's outside auditors, KPMG Peat Marwick LLP ("Peat Marwick"), had resigned; and (iv) the SEC was "monitoring" the restatement of revenue. The Company further disclosed that, as a result of these revelations, defendants Carberry and Murray had been suspended from their management duties and defendant Lesher had "retired."
Following these disclosures, the price of CyberGuard common stock plummeted 70 percent, to a price of $1-7/8 per share, on extraordinarily heavy volume of more than 5.8 million shares, almost 35 times the three-month daily average.

Update

This case has been settled. The Claims Administrator for this litigation is The Garden City Group, Inc. The parties have reached a tentative settlement of $10 million. Pending court approval, the settlement will permanently release all claims against defendants. In order to share in the recovery, you must be a qualified member of the class and file a valid proof of claim form no later than July 15, 2004. If you would like further information about the settlement or to download a copy of the Notice or Proof of Claim Form, please go to www.gardencitygroup.com.
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