Raytheon Watch

It's Not the Crime in the Streets,
It's the Crime in the Corporate Suites

Shareholders' Class Action Lawsuits

Updated October 26, 1999

BACKGROUND ON RAYTHEON SHAREHOLDER SECURITY FRAUD CLASS ACTION LAWSUITS

The first shareholders' class action lawsuits against Raytheon were announced October 14, 1999, arising from its plummeting stock prices beginning on October 12, 1999. As of October 26, 1999, at least ten shareholder lawsuits had been filed against Raytheon. The class of plaintiff's identified in the lawsuits has expanded. For example, the lawsuit initiated by the firm of Abbey, Gardy & Squitieri http://www.a-g-s.com has been expanded to include all persons who purchased Raytheon Company common stock during the period from March 30, 1998 through and including October 11, 1999. Two other firms, Stull, Stull & Brody, Weiss and Yourman and Kantrowitz, Goldhamer & Graifman filed suit on October 26, 1999 alleging a Class Period as early as January 28, 1999.

Shareholders rights in class action lawsuits are protected whether or not they initially "sign up" as a class member. If a shareholder purchased during the applicable time frame or "class period," the shareholder will become a member of the class (assuming the action is successful).

Shareholders can participate as "named plaintiffs" in a lawsuit by contacting a law firm that has filed a suit or that handles such cases and would be willing to file such a lawsuit.

Legal fees for lawyers representing plaintiffs in a securities class action lawsuit must be approved by the court. The typical fee award in a securities fraud class action is 10-20% of the settlement fund. A very high award would be in the 33% range. The bulk of settlement proceeds goes to the shareholders who are members of the class.

According to J. Whitfield Larrabee, an attorney and founder of Raytheon Watch, "the value of these class action lawsuits could be astronomical, given the huge losses suffered by shareholders. Based on comments of Raytheon President Daniel Burnham, losses suffered in some divisions of the company may have been improperly concealed from investors. These disclosures provide some basis for the allegations that Raytheon concealed from investors that its 1999 third quarter charge would be materially higher than originally disclosed."

Larrabee added, "the secret disclosure of insider information may also form a basis for shareholder lawsuits. The sell-off was triggered by reports in the Wall Street Journal. If newspaper reporters were able to obtain this type of insider information, then it may have obtained by investors as well. If investors obtained this information prematurely, and used it to unfair advantage, selling their stock before the prices for ordinary investors plummeted, then Raytheon could be liable for the wrongful disclosure of this information."

For more information Raytheon's stock crisis, see: http://www.gis.net/~larrabee/raytheonstock.htm

SPECIFIC LAWSUIT INFORMATION

According to a complaint filed by the law firm of Pomerantz, Haudek, Block, Grossman & Gross, http://www.pomerantzlaw.com/ Raytheon and two of the company's senior officers allegedly omitted to disclose in its financial statements that it was violating Generally Accepted Accounting Principles (``GAAP'') by engaging in a systematic contract ``acceleration'' policy, under which the Company was prematurely recording revenue on contingent sales contracts prior to actual performance. As a result, the Company's 1997 and 1998 revenues were materially overstated in violation of GAAP and its financial results for the period were materially inflated. The firm alleged, "Raytheon omitted to disclose in its financial statements that the Company was behind schedule and experiencing significant cost overruns on several fixed price defense contracts, which led to Raytheon taking a significantly higher material charge against 1999 third quarter earnings than was previously announced. Raytheon allegedly issued a series of materially false and misleading statements during the Class Period (March 30, 1998 and October 11, 1999, inclusive) in order to conceal negative trends in the Company's business to support the company's acquisition of several companies using company
stock as consideration. As a result of these materially false and misleading statements and omissions, the price of Raytheon's common stock was artificially inflated during the Class Period."

According to to the firm of Abbey, Gardy & Squitieri, http://www.a-g-s.com its complaint "charges Raytheon and certain of its officers with violating the federal securities laws. The plaintiff claims that defendants misrepresented and concealed material facts concerning the Company's operations and misled investors about the size of its restructuring charge, cost overruns and delays in certain defense contracts as well as its statements about expected 1999 financial results. Plaintiff seeks to recover damages on behalf of all purchasers of Raytheon's common stock during the Class Period. Excluded from the Class are the defendants and members of their immediate families, any entity in which a defendant has a controlling interest and the heirs of any such excluded party."

A suit initiated by the firm Berman, DeValerio & Pease LLP http://www.bermanesq.com , alleges that Raytheon "concealed from investors that its 1999 third quarter charge would be materially higher than originally disclosed and that Raytheon was experiencing problems in its defense business'' said Jeffrey C. Block, one of the partners at Berman, DeValerio & Pease LLP which is representing the plaintiffs.

A second suit, initiated by Milberg, Weiss, Bershad Hynes & Lerach LLP http://www.milberg.com , "charges Raytheon and certain of its officers and directors with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 as well as Rule 10b-5 promulgated thereunder. The complaint alleges that defendants issued a series of materially false and misleading statements regarding trends in the Company's business and failed to disclose the problems it was experiencing concerning the integration of its acquisitions. As a result of these materially false and misleading statements and omissions, plaintiff alleges that the price of Raytheon common stock was artificially inflated during the Class Period," according to the firm's release.

Another lawsuit was filed by Wolf Popper, LLP http://www.wolfpopper.com , which alleged, "On September 16, 1999, defendants represented to the investing public that Raytheon expected to take a pretax $350 to $450 million restructuring charge in the third quarter 'related to further cost reduction opportunities,' but led the market to believe that its fundamental business was operating well and that Raytheon was not experiencing contract performance problems. This was not the case. Indeed, as a result of a meeting the Company had with the Pentagon on September 11, 1999, defendants knew that they were experiencing problems with its programs. On October 12, 1999, Raytheon announced, among other things, that it would be taking a $668 million third quarter charge -- with $320 million of the charge relating to write-offs due to problems the Company purportedly had not been experiencing with its programs. The effects of the Company's statement regarding the third quarter were staggering, as the Company's news triggered its biggest stock drop in at least two decades. Raytheon's Class A shares fell $19-1/2, or approximately 46 percent, from $42 to $22-1/2. Additionally, Raytheon's Class B shares plunged from $43 on October 11, 1999, to close at $24-1/4 on October 12, 1999, a drop of $18-3/4, or 44 percent, erasing almost $4.5 billion in market value."

On October 15, 1999, the law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C. http://www.cmht.com/ filed a Class Action Suit Against Raytheon Company.

On October 18, 1999, the law firm of Levy & Levy, P.C http://www.levylawfirm.com announced the filing of a class action lawsuit against Raytheon alleging violations of federal and/or state securities laws.

Also on October 18, 1999, the law firm of Schiffrin & Barroway, LLP http://www.sbclasslaw.com/ filed a class action lawsuit against Raytheon.

On October 19, 1999 the law firm of Barrack, Rodos & Bacine, http://www.barrack.com/ , commenced a law suit against Raytheon in the Federal District Court for the Eastern District of Massachusetts. According to the firm, "The complaint alleges that Raytheon and certain of its officers and directors violated Section 10(b) of the Securities Exchange Act of 1934 as well as Rule 10b-5 promulgated thereunder. The complaint alleges that defendants issued a series of materially false and misleading statements about trends in the Company's business and failed to disclose the problems it was experiencing in integrating its acquisitions. As a result of these materially false and misleading statements and omissions, plaintiff alleges that the price of Raytheon common stock was artificially inflated during the Class Period."

On October 26, 1999, Berger & Montague, P.C. http://home.bm.net announced that it was filing a class action lawsuit against Raytheon.

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