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LI's FalconStor settles with ex-CEO's estate

Melville-based FalconStor's settlement was disclosed after the close

Melville-based FalconStor's settlement was disclosed after the close of trading on June 12, 2014. Pictured is headquarters as seen on Nov. 8, 2011. Credit: Steve Pfost

The estate of the late ReiJane Huai, founder and former chairman and chief executive of FalconStor Software Inc., has agreed to give at least 3 million shares of company stock to resolve claims arising from Huai's improper payments to a customer of the Melville data-storage company.

FalconStor's shares closed Thursday at $1.76, down three cents on the Nasdaq Market. The settlement was disclosed after the close of trading.

Huai and two former salesmen were accused of paying $300,000 in bribes to executives at JPMorgan Chase & Co. in exchange for $12 million in contracts. Huai resigned from the company in September 2010. He committed suicide in 2011, the day before he was scheduled to plead guilty in court.

The company paid $5.8 million to the Securities and Exchange Commission in criminal and civil penalties to settle the charges of improper payments and also paid $5 million to settle a class-action shareholder lawsuit stemming from the bribery scheme.

FalconStor said Thursday that Huai's widow, ShuWen Huai, as executor of her husband's estate, had agreed to transfer company common stock to FalconStor, with the number of shares to be determined by dividing $5.25 million by the average price of the stock for the 10 trading days immediately following the execution of the new agreement.

Upon transfer of the shares to FalconStor, the company said it will dismiss its lawsuit against Huai's estate. FalconStor will have the right of first refusal to buy the remaining shares if the estate proposes to sell them in private transactions.

Company chief executive Gary Quinn said in a statement, "This settlement compensates our stockholders and the company for damage caused by the improper payments."

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