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An investor sued McDermott International Inc. ("McDermott" or "Company") in federal court, accusing the company of violating securities laws by concealing construction delays on a pipeline project.
The class action complaint was filed November 17, 2008 in U.S. District Court for the Southern District of New York on behalf of shareholders who purchased McDermott stock between February 27, 2008 and November 5, 2008 and seeks damages for violations of securities laws under the Securities and Exchange Act of 1934. Based in Houston, McDermott is an international engineering and construction services company. Its clients include the U.S. government and companies in the oil and power industries.
The lawsuit claims that McDermott and two individual defendants, including former Chief Executive Officer Bruce W. Wilkinson, violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
According to the complaint, McDermott concealed from investors that its three large, ongoing construction contracts for the installation of marine oil and gas pipelines off the coast of Qatar were substantially delayed and that the delays caused the Company to incur major losses on those contracts. As a result, plaintiffs said, the Company's oil and gas division posted a $19.7 million loss during the third quarter of 2008, resulting from $90 million in contract losses related to delays on the three pipeline contracts. Investors finally learned of the severity of the production setback and the resulting negative impact to the Company’s earnings on November 5, 2008 when the Company filed its third quarter 2008 Form 10-Q with the SEC. McDermott's stock price plunged on the news, from $15.56 per share at close on November 5, 2008 to $10.39 per share at close on November 6, 2008 -- a loss of $5.17 per share, or 33%.
On January 20, 2009, competing motions for consolidation of all related cases and for the appointment of Lead Plaintiff and Lead Counsel were filed with the Court. On January 30, 2009, Judge Denny Chin issued an Order consolidating all related cases into one class action lawsuit captioned In re McDermott Int’l, Inc. Securities Litigation, 08 Civ. 9943 (S.D.N.Y.) and on March 6, 2009 issued an Order appointing Lead Plaintiffs and Lead Counsel.
Defendants filed a motion to transfer this case to the United States District Court for the Southern District of Texas. Briefing by the parties on this motion was completed April 1, 2009. On April 14, 2009, the case was transferred to the United States District Court for the Southern District of Texas. The case is now captioned Adams Family v. McDermott Int’l Inc., 09 Civ. 1209, Case. No. 09-cv-1248 and assigned to Judge Vanessa D. Gilmore.
On May 22, 2009, Lead Plaintiffs filed their Consolidated Complaint detailing their claims against the Defendants. Defendants filed their Motion to Dismiss the Consolidated Complaint on July 1, 2009. On August 3, 2009 Plaintiffs filed their response in Opposition to the Motion to Dismiss. Defendants filed their reply brief in support of their Motion to Dismiss on August 24, 2009.
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