Judge Joanna Seybert of the U.S. District Court for the Eastern District of New York has preliminarily approved a settlement in a securities class action filed by former Allou Healthcare Inc. shareholders alleging fraud by Allou's officers and directors and further alleging that Allou's auditors, which included KPMG LLP and Arthur Andersen LLP, knowingly or recklessly disregarded the falsity of Allou's financial statements. The suit arose from the alleged misconduct of a number of the officers and directors of the now-bankrupt distributor of consumer personal care products and prescription pharmaceuticals. Specifically, the plaintiffs allege that between June 22, 1998 and April 9, 2003, Allou's finances were not accurately disclosed due to the fraudulent activities of certain Allou officers and directors.

Under the terms of the settlement agreement, KPMG will pay $700,000 to the settlement fund and Arthur Andersen will pay $500,000. KPMG and Arthur Andersen continue to deny the allegations set forth in the complaint.

The court previously approved settlements with the outside directors and with Allou auditor Mayer Rispler & Co. for $300,000 and $250,000, respectively. Together with the newly approved settlements, the combined payments to the fund will total $1.75 million plus interest. Order.