SOURCE: Kahn Gauthier Swick, LLC

August 19, 2006 00:53 ET

Notice of Filing Securities Class Action Against Witness Systems, Inc., David B. Gould, Nicholas Discombe, William Evans, Joel G. Katz, Thomas J. Crotty, and Loren Wimpfheimer

NEW ORLEANS, LA -- (MARKET WIRE) -- August 19, 2006 -- Kahn Gauthier Swick, LLC ("KGS") announces that it has filed a class action lawsuit in the United States District Court for the Northern District of Georgia, against Witness Systems, Inc. ("Witness Systems" or the "Company") (NASDAQ: WITS), David B. Gould, Nicholas Discombe, William Evans, Joel G. Katz, Thomas J. Crotty, and Loren Wimpfheimer on behalf of shareholders who purchased, exchanged or otherwise acquired the common stock and other securities of Witness Systems between April 23, 2004, and August 11, 2006.

The complaint alleges that the defendants violated the Securities Exchange Act of 1934 (the "Exchange Act") by failing to disclose that they had engaged in the backdating of stock options grants to certain officers of the Company and by failing to account properly for expenses arising from the backdating. The complaint further alleges that defendants violated Generally Accepted Accounting Principles and filed false and misleading reports with the Securities and Exchange Commission. Finally, the complaint asserts that one or more of the defendants engaged in substantial and suspicious insider trading while in possession of material, non-public knowledge of the alleged backdating scheme.

On July 27, 2006, defendant Evans, the Company's Chief Financial Officer, disclosed that the Company was reviewing its stock options grants. On August 8, 2006, the Company announced that its Board of Directors had formed a special committee to investigate the stock option practices because the Company had identified some "discrepancies." The Company delayed the filing of its Form 10-Q for the period ending June 30, 2006, pending the outcome of the investigation. The Company admitted that it "believes it will need to record additional non-cash charges for stock-based compensation expense in prior periods . . . (which) will total approximately $10 million." As a result of the internal investigation, the Board stated that the Company's previously issued financial statements from February 2000 through June 30, 2006, should no longer be relied upon. Just three days later, on August 11, 2006, the Company disclosed that it intended to restate its prior financials and revealed that Nasdaq informed it on August 11 that the Company may be subject to delisting as a result of the matters disclosed thus far.

The price of Witness Systems common stock has fallen from its July 27, 2006, closing price of $18.19 per share to as low as $12.76 per share. The stock closed at $12.91 per share on August 11, 2006.

If you wish to serve as lead plaintiff, you must move the Court no later than October 16, 2006. Any member of the purported class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. If you would like to discuss your legal rights, you may e-mail or call KGS, without obligation or cost to you. You may contact Managing Partner Lewis Kahn of KGS direct, toll free 1-866-467-1400, ext., 100, or by email at lewis.kahn@kglg.com.

Contact Information

  • Contact:
    Lewis Kahn
    Kahn Gauthier Swick, LLC
    650 Poydras St.
    Suite 2150
    New Orleans, LA 70130
    1-866-467-1400, ext. 100
    email: lewis.kahn@kglg.com