Cauley & Geller, LLP Announces Class Action Lawsuit Against Pacificare Health Systems, Inc.

Business Editors & Legal Writers

BOCA RATON, Fla.--(BUSINESS WIRE)--Dec. 1, 2000

Seeking Damages On Behalf Of Shareholders

The Law Firm of Cauley & Geller, LLP announced today that it has filed a class action in the United States District Court for the Central District of California on behalf of all individuals and institutional investors that purchased the securities of Pacificare Health Systems, Inc. ("PacifiCare" or the "Company" ) (Nasdaq:PHSY) between October 27, 1999 and October 10, 2000, inclusive (the "Class Period").

The complaint charges that the Company, certain of its officers and directors and one of its largest shareholders violated the federal securities laws by providing materially false and misleading information about the Company's financial condition, and as a result of these false and misleading statements the Company's stock traded at artificially inflated prices during the class period. Specifically, the complaint alleges that PacifiCare's interim results were false and materially misstated due to its failure to properly record medical expenses, particularly its under-accrual of incurred but not reported costs ("IBNR"). In order to inflate the price of PacifiCare's stock, defendants caused the Company to falsely report its results for Q3 1999, Q4 1999, Q1 2000 and Q2 2000 by misstating its results through its deliberate under-accrual of medical expenses and its reserves for doubtful accounts receivable, all of which resulted in artificially inflating PacifiCare's earnings per share ("EPS"). The complaint further alleges that defendants misrepresented that the revenues PacifiCare was reporting were consistent with Generally Accepted Accounting Principles ("GAAP"), which, together with defendants' false representations that PacifiCare would post Q3 EPS of $1.90, operated to artificially inflate the price of PacifiCare stock to a Class Period high of $72-5/16 on June 16, 2000. While PacifiCare's shares were inflated, defendants sold approximately $50,000,000 worth of PacifiCare stock. On October 10, 2000, PacifiCare revealed that it was in fact suffering a huge decline in revenues, was not posting EPS growth as earlier represented, and contrary to defendants' repeated assurances, PacifiCare was forced to reveal the problems it had been experiencing during the Class Period in attempting to grow its business. This announcement caused its stock price to drop to as low as $14-5/8 (or over $18 per share) on record volume of 5.6 million shares on October 11, 2000, causing tens of millions of dollars in damages to members of the Class.

Cauley & Geller, LLP has substantial experience representing investors in securities fraud class action lawsuits such as this. The firm has offices in Florida, Arkansas and California, but represents shareholders from throughout the nation. If you have any questions about how you may be able to recover for your losses, or if you would like to consider serving as one of the lead plaintiffs in this lawsuit, you must meet certain requirements and take appropriate action by January 29, 2001. You are encouraged to call or e-mail the Firm or visit the Firm's website at www.classlawyer.com.