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Rocket Docket Case of Accounting Fraud Lands a $97.5 Million Recovery

In re Computer Sciences Corporation Securities Litigation

This is a case of old-fashioned accounting fraud, with a slight twist: no "smoking gun" and the venue of a "rocket docket" jurisdiction, the Eastern District of Virginia.

Labaton Sucharow served as lead counsel to the class and lead plaintiff, Ontario Teachers' Pension Plan Board, one of Canada's largest pension funds. The case was brought against Computer Sciences Corporation ("CSC"), an IT consulting and outsourcing company, concerning its $5.4 billion contract with the U.K. National Health Services ("NHS"). Internally, CSC knew that it could not deliver the proposal, but it hid this issue from investors through improper accounting practices and making misleading statements about its ability to meet contract deadlines and on the adequacy of its internal controls. The revelation of the truth led to a 50% drop in CSC's stock value.

Labaton Sucharow developed facts through the help of its expert in-house investigative team. They uncovered that defendants knew from internal documents that the NHS contract was not achievable and that the company's internal accounting controls were inadequate. The intelligence gathered by the investigators was critical in surviving defendants' motion to dismiss.

During discovery, Labaton Sucharow filtered through millions of pages, produced documents for defendants' review, took almost 30 depositions on two continents, and engaged in substantive expert discovery, all within the extremely compressed timeframe set by the court.

"We had five months to do all of that, and certainly I found [they were] able to meet those deadlines with first-rate work," Jay Kasner, head of the securities litigation practice at Skadden Arps, who represented CSC, said to Law360.

With a threat of a trial one month away, defendants agreed to settle the case for $97.5 million, which was granted final approval on September 20, 2013. The settlement, the third largest all cash recovery in a securities class action in the Fourth Circuit and the second largest all cash recovery in such a case in the Eastern District of Virginia, resolved all claims in the action.

 

Please visit the Computer Sciences Corporation case abstract for more details and case materials.