The action alleges that in 2000, Acterna Corporation, formally known as Dynatech Corporation, went on a buying spree in an effort to grow its communications testing business - a sector that accounted for approximately 91% of the company's total revenues. It merged its existing subsidiary, TTC, with Wavetek Wandel Golerman (WWG), the number two and number three companies in the communications testing market. Later in 2000, the company again beefed up its communications testing capabilities by purchasing Superior Electronics Group, Inc., for a purchase price of $171.5 million. Market response to these events was very positive-- in a span of seven months, the stock price soared from $10.37 on February 14, 2000 (the date of the announcement of the merger with WWG), to a peak of $41.38 on August 29, 2000.

In conjunction with these acquisitions, Acterna assumed a tremendous amount of goodwill-- quantified as the excess of purchase price over fair market value of net assets acquired under the purchase method of accounting. Between the WWG and Superior Electronics Group acquisitions alone, the company purportedly acquired over $600 million in goodwill.

Over the next year, the telecom industry entered a freefall which included many of Acterna’s customers. New orders for Acterna’s products began to slip. While the company was able to ward off massive losses due to its backlog of orders, its stock price fell within the intervening year from $41.38 to $6.03.

Throughout the applicable period, the defendants issued numerous statements and filed quarterly reports with the SEC which described the company's financial performance. The statements were materially false and misleading because they failed to disclose or misrepresented the following facts, among others: (1) that in light of the significant adverse change in the company's business climate, Acterna’s goodwill was seriously impaired; (2) that the company lacked adequate internal controls and was therefore unable to ascertain its true financial condition; and (3) as a result, the value of the company's net income and financial results were materially overstated at all relevant times.

On October 31, 2002, Acterna issued a press release announcing a financial results for the second quarter of 2002. In addition to reporting yet another disappointing quarter of sales, the company finally took a charge of $388 million for impaired goodwill stemming from its acquisitions in the communications test sector. Moreover, instead of experiencing a gain of $155-165 million as predicted, the company announced a loss of $284 million.