Case Update - 05/05/2009
On March 23, 2009, Judge David C. Godbey preliminarily approved the proposed settlement. A Settlement Hearing is scheduled for July 23, 2009, to determine whether the proposed settlement of the Litigation on the terms and conditions provided for in the Stipulation would be fair, just, reasonable and adequate to the Class and should be approved by the Court.

Original Post - 11/26/2008

<p style= text-align: justify; >In response to the judge’s dismissal of defendants Sourcecorp and select individuals, plaintiffs filed a notice of appeal on December 7, 2006. However, on January 15, 2007 the US Court of Appeals denied the plaintiff’s attempts to appeal the judge’s ruling.</p>
<p style= text-align: justify; >According to the Rule 54(b) Final Judgment entered on November 7, 2006, by Order dated June 5, 2006 and Amended Order of this same date, the Court has granted Defendants Sourcecorp, Inc. (“SourceCorp”), Ed H. Bowman, Jr., Barry L. Edwards, and Image Entry, Inc.’s (“Image”) Motion to Dismiss [30] and denied Defendant Bill Deaton’s Motion to Dismiss [28]. The Court finds that there is no just reason for delay of entry of judgment on Plaintiffs’ claims against Defendants SourceCorp, Bowman, Edwards, and Image, and expressly directs entry of final judgment on those claims. Accordingly, it is ordered that Plaintiffs take nothing by their claims against Defendants SourceCorp, Bowman, Edwards, and Image, and that those claims are dismissed with prejudice. Court costs are taxed against Plaintiffs and in favor of Defendants SourceCorp, Bowman, Edwards, and Image. All relief not expressly granted as to Defendants SourceCorp, Bowman, Edwards, and Image is denied. This is a final judgment pursuant to Rule 54(b) of the Federal Rules of Civil Procedure.</p>
<p style= text-align: justify; >As disclosed by the Company’s FORM 10-Q for the quarterly period ended March 31, 2006, the four actions were transferred to a single judge in the Northern District of Texas, Dallas Division and consolidated into a single action styled In re Sourcecorp, Inc. Securities Litigation, Case No. 3:04-CV-2351-N. A lead plaintiff has been appointed for the consolidated action. In addition to the Company and its Chief Executive Officer and Chief Financial Officer, one of its subsidiaries and one of the former owners of that subsidiary are named as defendants in the consolidated action. The consolidated action is purportedly on behalf of all persons who purchased the Company’s common stock during the period between May 3, 2001, and October 27, 2004, and seeks unspecified damages. Defendants have all filed motions to dismiss the consolidated action and such motions are presently before the court.</p>
<p style= text-align: justify; >The original complaint charges SOURCECORP and certain of its officers with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company had materially overstated its net income and earnings per share; (2) that defendants prematurely recognized revenue in its Information Management and Distribution Division; (3) that the Company’s financial statements were not prepared in accordance with Generally Accepted Accounting Principles (”GAAP”); (4) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (5) that as a result, the value of the Company’s net income and financial results were materially overstated at all relevant times.</p>
<p style= text-align: justify; >The complaint further alleges that on October 27, 2004, SOURCECORP announced that based on information provided by, and the recommendation of, corporate management, the Company’s Audit Committee concluded on October 25, 2004 that the Company’s previously issued financial statements and related independent auditors’ report for the year ended December 31, 2003, as well as its previously issued financial statements for the 2004 quarterly periods ended March 31, 2004 and June 30, 2004, should no longer be relied upon. The Company, under the guidance of the Audit Committee, had initiated an investigation of the financial results of one of the Company’s operating subsidiaries in the Information Management Division of the Company’s Information Management and Distribution reportable segment. Following this announcement, shares of SOURCECORP fell $6.59 per share, or 29.67 percent.</p>