RALEIGH — Some members of the Red Hat board of directors are reviewing a proposed settlement in the massive series of lawsuits filed against 309 companies and 55 brokerage firms that took them public between 1998 and 2000.

The tentative settlement was disclosed earlier today in a press release from the law firm Milberg Weiss Bershad Hynes & Lerach LLP. Melvyn Weiss leads the court-appointed executive committee handling the lawsuits which have been coordinated before U.S. District Court Judge Shira Scheindlin in the Southern District of New York.

The proposed settlement calls for the 309 companies to “guarantee at least (or the first) $1 billion to investors.” Costs would be covered by the companies’ insurance firms unless further litigation against the underwriters secures more than $1 billion.

Legal action will continue against the investment banks, the statement said.

SciQuest, which went public in the same timeframe, also is reviewing the proposed settlement, The News & Observer reported.

According to the lawsuit, “IPO offerings were manipulated by the investment banks to artificially inflate the market price of those securities and to conceal the amounts of compensation actually received by the underwriters.”

“We do not have a comment right now,” said Gabriel Szulik, who handles investor relations for Red Hat. “We have not seen the plaintiffs’ press release.”

However, Szulik did say Red Hat has been reviewing an offer.

“I can tell that a special committee of our board of directors is reviewing a proposal,” he said, “and we expect a decision in the near future.”

The law firm statement said negotiations with the 309 companies involved had been taking place for more than a year.

“If more than $5 billion dollars are recovered from the underwriter defendants, the settling defendants and their insurers will be able to recover various expenses incurred in connection with the litigation,” the statement pointed out.

In February, the federal judge handling the case refused to dismiss the lawsuit.

“This scheme offends the very purpose of the securities laws, namely ‘to provide investors with full disclosure of material information concerning public offerings of securities,'” he wrote, according to TheStreet.com.

Red Hat was hit with a class action suit in April of 2001. Red Hat went public on Aug. 11, 1999 at $14 a share. It’s stock closed at $52.06 that first day. Among the underwriters handling the IPO were Goldman Sachs and Merrill Lynch.

Red Hat stock closed at $7.96 Thursday, up 12 cents.

To see the full statement, go to: www.newsalert.com/bin/story?StoryId=CpVPVWbWbtLLusda5n&FQ=IPO%20lawsuit&Nav=na-search-&StoryTitle=IPO%20lawsuit

Rick Smith is managing editor of Local Tech Wire.