eTrade 2002 Annual Report Download - page 34

Table of Contents
Index to Financial Statements
• By a complaint dated October 4, 2001, a lawsuit was filed in the United States District Court for the Eastern District of Pennsylvania
entitled, “Fiserv Securities Inc. v. E*TRADE Securities, Inc.” Fiserv filed an amended complaint dated July 2, 2002, seeking $27 million
in damages plus interest, punitive damages, attorney fees and other relief from E*TRADE Securities for breach of contract, conversion
and unjust enrichment. On July 17, 2002, E*TRADE Securities filed an amended answer denying Fiserv’ s claims and asserting
affirmative defenses. The matter is currently set for trial on May 12, 2003. At this time, the Company is unable to predict the ultimate
outcome of this dispute.
• By a complaint dated October 22, 2001, a lawsuit was filed in the United States District Court for the Southern District of New York
entitled, “Nomura Securities International, Inc., v. E*TRADE Securities, Inc.” 01-CV-9280 (AGS)(MHD). Nomura filed an amended
complaint dated October 29, 2001, seeking approximately $10 million in damages plus interest, unspecified punitive damages, attorney
fees and injunctive and other relief from E*TRADE Securities for conversion and breach of contract. On November 19, 2001,
E*TRADE Securities filed an amended answer and interposing affirmative defenses and three counterclaims for conversion, money had
and received, and unjust enrichment seeking to recover approximately $5 million in damages plus interest, punitive damages, attorneys
fees and other relief from Nomura. On June 5, 2002 Nomura filed a motion for summary judgment asking that it be awarded summary
judgment on its claim for breach of contract and on E*TRADE Securities’ counterclaims for conversion, money had and received, unjust
enrichment and punitive damages. On June20, 2002, E*TRADE Securities cross-moved for partial summary judgment and in opposition
to Nomura’ s Motion for Summary Judgment. E*TRADE Securities sought summary judgment on Nomura’ s breach of contract claim,
arguing that the alleged contract between Nomura and E*TRADE Securities did not apply to the transaction at issue in the case. Both
Nomura’ s motion for summary judgment and E*TRADE Securities cross-motion for partial summary judgment are currently pending
before the court. On February 7, 2003, the Court dismissed E*TRADE Securities’ demand for punitive damages but otherwise denied
Nomura’ s motion to dismiss E*TRADE Securities’ counterclaims. At this time the Company is unable to predict the ultimate outcome of
this dispute.
As discussed above, the Company is unable to predict the ultimate outcome of these disputes. The Company, based on information available,
does not believe that an estimable loss is probable. However, the ultimate resolution of these matters may be material to the Company’ s
operating results or cash flows for any particular period. The Company is confident that E*TRADE Securities has sufficient capital in excess of
regulatory requirements to cover any potential exposure arising from these matters.
On September 25, 2002, the Company filed an action in the United States District Court for the District of Minnesota entitled “E*TRADE
Securities LLC v. Deutsche Bank AG et al.”, Civil No. 02-3711 (RHK/AJB), alleging, among other things, that Deutsche Bank AG, Nomura
Canada, Inc., and others participated in a stock lending fraud and violated Section 10(b) of the Securities Exchange Act, Rule 10b-5 thereunder,
Sections 5 and 12 of the Securities Act, and other provisions of state and federal law, by among other things: distributing unregistered securities
beneficially owned by insiders of the issuers, disguising those distributions as routine securities lending transactions, manipulating the prices of
the securities in question, and concealing material information including the real parties in interest and the underlying scheme. Through this
lawsuit, the Company seeks, among other things, compensatory damages for all expenses and losses that it has incurred to date or may incur in
the future in connection with the stock lending litigation described above and a declaration that defendants are liable for any further expenses or
losses the Company may incur in that litigation, including by way of judgment or settlement. Deutsche Bank AG, Nomura Canada, Inc., and
certain other defendants have filed motions to dismiss the Company’ s complaint in whole or in part. The Company intends to oppose those
motions. At this point, the Company is unable to predict the ultimate outcome of this dispute.
By a Complaint dated December 28, 2001, Thomas Barry, a shareholder, filed a shareholder derivative action on his own behalf and
purportedly on behalf of E*TRADE Group, Inc. itself as a Nominal Defendant, against Christos M. Cotsakos, the Company’ s Former Chairman
of the Board and Chief Executive Officer, and
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2003. EDGAR Online, Inc.