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Banking Law Keyed to Barr, 3rd Ed.
In re Software Toolworks, Inc.
Citation:
38 F.3d 1078 (1994)Facts
In July 1990, Software Toolworks conducted a secondary public offering at $18.50 per share, raising over $71 million. By October 1990, the stock price had plummeted to $2.375 after the company announced substantial losses. Investors filed a class action alleging that Toolworks, its auditor Deloitte, and underwriters Montgomery Securities and PaineWebber had violated securities laws by issuing false and misleading statements. The plaintiffs claimed the defendants falsified financial statements by improperly recognizing revenue from OEM contracts, fabricated consignment sales to meet financial projections, and misled the SEC in pre-offering communications. Toolworks settled for $26.5 million, but the underwriters and Deloitte contested the claims. The case centered on whether the underwriters conducted sufficient due diligence and whether Deloitte acted with scienter in certifying financial statements and assisting with SEC communications.
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