New Oriental Education & Technology Group, Inc.
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New Oriental Education & Technology Group, Inc. Securities Settlement
The lawsuit was settled for $250,000 in cash. The following is a summary of the proceedings in the lawsuit: ‘This lawsuit (the Action) is a class action alleging violations of the federal securities laws by New Oriental and certain members of its senior management. Plaintiff Second Amended Class Action Complaint (the Complaint), which was filed in the Action on January 30, 2014, alleges that the Defendants violated the federal securities laws by improperly consolidating the financial results of Beijing New Oriental Education & Technology (Group) Co., Ltd. (New Oriental China), a variable interest entity (VIE) incorporated in the People Republic of China, in violation of U.S. generally accepted accounting procedures, and that this improper consolidation caused New Oriental published financial statements for fiscal years 2009, 2010, 2011, and 2012 to be materially false and misleading. As alleged in the Complaint, on July 17, 2012, New Oriental issued a press release disclosing that the U.S. Securities & Exchange Commission had issued a formal order of investigation as to whether there was a sufficient basis for consolidating the financial results of New Oriental China. On the following day, the research firm Muddy Waters released a report containing additional allegations that New Oriental VIE accounting was improper. The Complaint asserts fraud-based claims under the Securities Exchange Act of 1934 (Exchange Act) against the Defendants. The Complaint alleges that the Defendants knew or should have known in the exercise of due diligence that consolidating New Oriental China was improper and violated U.S. accounting principles. The Complaint alleges that Defendants made materially false and misleading statements by including New Oriental China assets, earnings, and liabilities on New Oriental balance sheet, and that these false and misleading statements caused the price of option contracts on New Oriental ADS to be artificially inflated (in the case of call option contracts) or deflated (in the case of put option contracts), causing investors who transacted in such securities during the Class Period to suffer damages.’