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SALT LAKE CITY (AP) -- A federal judge has tentatively approved a settlement in a securities fraud suit filed by shareholders against Novell Inc. more than five years ago.
U.S. District Judge Tena Campbell on Wednesday agreed to the proposed $13.9 million settlement and ordered that notices be mailed to Novell shareholders for their final approval.
Campbell set a May 26 hearing to finalize the settlement, which would bring to an end a case first filed against the networking software and Linux distribution giant in December 1999.
In its stipulation to the settlement, Novell said it had agreed to end the case in order to avoid further "protracted and expensive" litigation.
"This was an anticipated step in the process, and financially this is something we've been anticipating and accounting for already," Novell spokesman Bruce Lowry said Thursday. He said insurance will cover most of the payout.
Richard Burbidge, a Salt Lake City lawyer representing plaintiffs Domenico Pirraglia, Bella Pasternak and other shareholders, did not return a message left Thursday at his office by The Associated Press.
Attorneys representing shareholders had initially been rebuffed by Campbell in an April 2002 dismissal, but the 10th Circuit Court of Appeals partially restored the case and sent it back to district court for trial.
In its ruling, the three-judge panel found shareholders should be allowed to take to trial allegations regarding "various accounting shenanigans" that purportedly boosted the company's financial reports -- and subsequently caused investor losses when Novell stock slipped from $13 to $7 between Nov. 1, 1996 and April 22, 1997.
Specifically, the company's shareholders are entitled to a trial on claims that former Novell President Joseph Marengi, then-board Chairman Robert Frankenberg and ex-Chief Financial Officer James Tolonen, among others, created a fictional "in transit" category and improperly recorded shipments to third-party retailers and resellers as revenue, the 10th Circuit ruled.
Including $484 million from a recent out-of-court settlement with Microsoft, Novell reported a net profit of $392 million on revenue of $290 million -- or 90 cents per diluted share -- for the quarter ended Jan. 31.
Novell and Microsoft announced the settlement last November, ending a long-running antitrust case involving alleged unfair competition in the mid-1990s with Novell's NetWare operating system.
Without the settlement, Novell's quarter ended with a profit of $10 million and 3 cents per share -- about $130,000 less than at the same time last year.
(Copyright 2005 by The Associated Press. All Rights Reserved.)