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Network Associates settles shareholder lawsuit

$30m payment to stock holders hit by accounting changes

Network Associates has settled a lawsuit with shareholders who alleged that the security giant pushed up its share price by not accounting for acquisitions properly.

According to Associated Press, the settlement means that 80,000 to 100,000 shareholders who felt they were financially hurt by the practice will receive a settlement of $30 million between them.

The case is interesting because it involves NAI booking the cost of acquisitions as valueless "in-process research and development", a common practice in the 1990s until the Securities and Exchange Commission got tough on the practice in 1998.

In the case of Network Associates, the firm restated its revenues off its own back after it was contacted about the issue by the SEC. This resulted in recorded sales falling from $245.2 million to $25.2 million for the firm's subsequent quarter.

The restatement had an effect on share value which provoked a class action lawsuit by shareholders. In settling their claim Network Associates is not admitting any fault on its part and has said it did so simply to stop "protracted and expensive" litigation. ®

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