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Christian v. BT Group PLC

United States District Court, D. New Jersey

August 28, 2017

JAMES CHRISTIAN, Individually and on behalf of all others similarly situated, Plaintiff,



         Before the Court in this putative federal securities class action are competing motions of

         (1) a group of individual plaintiffs consisting of Gary Classen, Alice Korenblat, Robert Korenblat, and Pierre-S. Lefebvre (collectively, the "Classen Plaintiffs") (ECF No. 11); and

         (2) plaintiff PAMCAH-UA Local 675 Pension Fund (the "Pension Fund") (ECF No. 10).

         Each seeks appointment as lead plaintiff and appointment of its counsel as lead counsel.[1]

         I. BACKGROUND

         The underlying securities class action is brought on behalf of purchasers of the securities of defendant BT Group PLC ("BT Group") between May 24, 2012 and January 23, 2017 (the "Class Period"). The plaintiffs allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78t(a), as amended by the Private Securities Litigation Reform Act of 1995 (the "PSLRA"), 15 U.S.C. § 78u-4, et seq., and of the Securities and Exchange Commission (the "SEC") Rule 10b-5 promulgated thereunder, 17 C.F.R. §§240.10b-5.

         BT Group is a communications services company whose securities are publicly traded on the New York Stock Exchange ("NYSE"). Named plaintiff James Christian, on behalf of a putative class, alleges that from 2012 through 2016 BT Group issued annual reports that summarized balance sheets of company operations. Those annual reports stated that the company maintained adequate internal controls over its financial reporting. Those reports also contained Sarbanes-Oxley Act ("SOX") certifications "attesting to the accuracy of the financial statements, the disclosure of any material changes to the Company's internal controls over financial reporting and the disclosure of all fraud." (Compl. ¶¶ 16-30)

         The plaintiffs allege that statements made in BT Group's 2012-16 annual reports were materially false or misleading because they failed to disclose adverse facts known to or recklessly disregarded by BT Group and its officers at the time. More specifically, the plaintiffs allege that BT Group's 2012-16 annual reports misstated earnings, failed to disclose improper accounting practices, sales, and transactions in BT Group's Italian operations, and failed to disclose that BT Group's internal controls were ineffective. (Compl. ¶ 31). The plaintiffs say these truths first emerged through two press releases published in late 2016.

         A. BT Group's First Corrective Disclosure

         First, the plaintiffs cite an October 27, 2016 press release which announced BT Group's results for the second quarter and half year to September 30, 2016. That press release revealed a write-down of the value of items on its balance sheet by £145 million. The press release stated, in part:

Specific items Specific items resulted in a net charge after tax of £151m (Q2 2015/16: £52m charge). See Note 4 for a breakdown.
BT Italia investigation Following allegations of inappropriate management behaviour in our BT Italia operations, we have conducted an initial internal investigation. This included a review of accounting practices during which we have identified certain historical accounting errors and reassessed certain areas of management judgement.
We have written down the value of items on the balance sheet by £145m. This is our current best estimate of the financial impact based on our internal investigation. The write down relates to balances that have built up over a number of years and our assessment is that the errors have not materially impacted the group's reported earnings over the previous two years. The amount has been charged as a specific item in our results for the quarter. As a non-cash item in the period it does not impact normalised free cash flow.
A full investigation of these matters is ongoing and we have appointed external advisers to assist with this. Appropriate action will be taken as the investigation progresses.
Our outlook is not affected.

(Compl. ¶ 32 (emphasis in Complaint)).

         Following this press release, shares of BT Group fell $0.57 per share, representing a 2.39% drop from its previous closing price of $23.25 on October 27, 2016. (Id. ¶ 33; IM Opp. 5)

         B. BT Group's Second Corrective Disclosure

         Second, on January 24, 2017, BT Group issued a press release announcing an update on its investigation into its Italian ...

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