Capstone Turbine Corporation

The action alleged that between at least November 2013 and October 2015, certain officers and directors caused Capstone Turbine Corporation (“Capstone”) to make repeated false and/or misleading statements about Capstone’s business and business prospects that led stockholders and the investing public to believe Capstone was on an upward trajectory. The alleged false and misleading statements issued by Capstone failed to disclose: (1) BPC Engineering (“BPC”), one of Capstone’s main Russian distributors, was unlikely to be able to fulfill many of its legal and financial obligations to Capstone; (2) Capstone failed to make appropriate adjustments to its accounts receivable and backlog to account for BPC’s inability to fulfill its obligations to Capstone; (3) as such, Capstone issued financial statements in violation of Generally Accepted Accounting Principles; (4) Capstone lacked adequate internal controls over accounting; and (5) as a result of the foregoing, Capstone’s financial statements were false and misleading and/or lacked a reasonable basis.

Hynes & Hernandez, LLC, acting as Co-Lead Counsel, crafted a settlement comprised of substantial and comprehensive reforms to Capstone’s corporate governance processes and procedures. The corporate governance measures of the settlement were specifically designed to address the alleged wrongdoing in the action by, among other things, increasing board independence requirements; enhancing the board-level Audit Committee’s supervision and oversight duties and responsibilities, including in connection with the Capstone’s recognition of revenue and Whistleblower Policy; enhancements to the duties and responsibilities of the management-level Disclosure Committee to ensure sufficient oversight of and to ensure the timeliness and accuracy of Capstone’s public disclosures; the separation of the positions of Chief Financial Officer and Chief Accounting Officer; the appointment of a new Chief Accounting Officer; enhanced monitoring and disclosure practices and requirements relating specifically to Capstone’s key distributors; new written policies and requirements relating to Capstone’s sales backlog to ensure accurate disclosures concerning Capstone’s true revenue and business prospects; additional procedures related to the credit extended by Capstone to its customers; and improvements to Capstone’s Whistleblower Policy.