HOUSTON — Tidel Technologies, Inc. (Other OTC: ATMS) has reached an agreement in
principle to settle securities class action lawsuits filed against it in the aftermath of the Credit Card Center scandal.
The cases were consolidated under the caption George Lehocky v. Tidel Technologies, Inc., James T. Rash, Mark K. Levenick, James L. Britton III and Jerrell G. Clay; Civ. Act. No. H-01-3741 in the United States District Court for the Southern District of Texas.
According to a news release, the proposed settlement, in which the shareholder class will receive a cash payment of $3 million, is subject to a definitive agreement and court approval. The settlement will be funded by Tidel's directors and officers liability insurance, and a stock payment of two million shares of Tidel common stock.
In late 2001, New York law firm Schoengold & Sporn filed a lawsuit on behalf of all persons and entities that purchased Tidel's publicly traded securities from April 6, 2000 through Feb. 8, 2001. The firm alleged that Tidel falsely reported its sales of ATMs at a "record" pace. According to the complaint, the claims and consequent artificial inflation of the company's stock price allowed Tidel to begin trading on Nasdaq, which would have been impossible without the misleading information.
The suit claimed that when Tidel disclosed that orders from its onetime largest customer, now-bankrupt ISO Credit Card Center, would be at "substantially reduced levels for the quarter ending March 31, 2001," Tidel's stock price declined precipitously. The lawsuit alleges that Tidel knew during the time period but did not disclose that CCC was in the process of switching to competing manufacturer NCR and reducing its ATM orders.
Tidel and Rash, its chairman and chief executive, were named as defendants in the suit, along with Levenick, its chief operating officer, and Britton and Clay, both directors of the company.
In the agreement, Tidel and the men named in the lawsuits continue to deny any wrongdoing; they will receive a full release of all claims asserted in the litigation.
"While we were prepared to mount a vigorous defense, management concluded that settlement was in the best financial interest of the company," said Rash.
Tidel's stock no longer trades on Nasdaq following its March 2003 delisting due to its failure to provide a 2002 annual report and other financial statements.
However, the company closed a $6.85 million round of financing with Laurus Master Fund, a New York investment firm, in late December. At that time, Tidel said it intended to apply for listing on Nasdaq.
(See related stories: Nasdaq delists Tidel stock and Tidel improves its balance sheet with refinancing)
