Securities Archive
Week Adjourned: 12.23.11
December 23rd, 2011. By LucyC
Top Class Actions
Another Corny Lawsuit? Ummm—you decide. A consumer fraud lawsuit was filed this week—testing the boundaries of food labeling vis-a-vis PepsiCo’s snacks business, Frito-Lay. The issue? Frito-lay is misleading consumers by making claims that its products, which contain genetically modified corn and vegetable oils, are all-natural, according to the lawsuit. (All natural corn=all natural chips? Really?)
Specifically, the lawsuit claims that by labeling some of its Tostitos and SunChips products as “made with all-natural ingredients” Frito-Lay is misleading consumers because genetically modified corn and vegetable oils are also present in the product. “The reasonable consumer assumes that seeds created by swapping genetic material across species to exhibit traits not naturally theirs are not ‘all natural’,” the claim states.
The claimant is pursuing the case on the basis of a violation of California and federal laws relating to unfair and fraudulent claims. I’m still struggling with the thought of any of this type of “food” being ok on any level—never mind whether or not it’s genetically modified. Bah humbug!
Top Settlements
Diamonds are Forever. So’s the De Beers Price Fixing Settlement now. The U.S. Court of Appeals for the Third Circuit has issued an opinion today upholding the settlement in the antitrust class action litigation against the South African company De Beers, the world’s largest diamond supplier, for allegedly conspiring to monopolize the sale of rough diamonds.
The appellate court affirmed an order by U.S. District Judge Stanley R. Chesler of the District of New Jersey that approved a settlement under which De Beers agreed to pay $295 million to U.S. jewelry makers, retailers, and consumers who purchased diamonds and diamond jewelry beginning in 1994.
The settlement also prevents De Beers from continuing its illegal business practices and requires De Beers to submit to the jurisdiction of the Court to enforce the settlement. Ouch! That’s a wee bit more than a wrist slap —but hey—that tennis bracelet sure looks good…
Talk about Soaring Gas Prices… More price fixing—this time in the stock market (now there’s a surprise)—and this time the guilty party is Amaranth Advisors LLC. They got hit with a $77.1 million settlement in a securities lawsuit brought by traders who allege the hedge fund manipulated the natural gas market. Whoa Nelly!
According to Businessweek, Amaranth collapsed in 2006 after losing $6.6 billion on natural gas trades. In August 2009, the Commodity Futures Trading Commission announced that Amaranth paid $7.5 million to settle market manipulation allegations however, in their lawsuit, the traders presented an expert who estimated damages at $3.5 billion.
Then, in April of this year, the Federal Energy Regulatory Commission issued a $30 million civil penalty against Brian Hunter, an Amaranth trader accused of manipulating the natural gas market in 2006.
FYI—the settlement isn’t final yet—a hearing on final approval of the class-action, or group, accord is reportedly scheduled for March 27 and, if approved, could pave the way for investor reimbursement.
Ok—That’s a wrap for this week. Merry Christmas—Happy Hanukkah—and Season’s Greetings—have a wonderful holiday everyone…
Week Adjourned: 12.9.11
December 9th, 2011. By LucyC
Top Class Actions
Seems Green Mountain may have been Roasting More Than Coffee. The company got hit with a securities class action lawsuit this week alleging it has been cooking the books.
The class action is brought against GMCR, certain of its officers and directors, and the underwriters of the Offering for violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. GMCR, based in Waterbury, Vermont, is a leader in the specialty coffee and coffee maker businesses.
FYI—GMCR produces coffee, tea and hot cocoa from its family of brands, including Tully’s Coffee(R), and manufactures the popular Keurig single-cup brewing systems that use “K-Cup” portion packs.
The lawsuit alleges that, during the Class Period, certain defendants systematically and strategically manipulated GMCR’s revenues. To do so, defendants used one of GMCR’s key fulfillment vendors, M. Block & Sons (“MBlock”), as a captive warehouse to harbor expired, excessively manufactured, or otherwise unsold product. Pursuant to the fraudulent scheme, GMCR improperly booked revenues associated with falsified sales orders for hundreds of millions of dollars in K-Cup and Keurig Brewer products, which resulted in the material overstatement of the Company’s profits, inventory, and product demand levels. GMCR also fraudulently overstated its assets in proportion to its fictitious revenues by carrying the proceeds of phantom sales as assets on its balance sheet throughout the Class Period.
On October 17, 2011, David Einhorn, a prominent activist investor, released a comprehensive report, including witness testimonials by former GMCR and MBlock employees, disclosing GMCR’s misconduct and questionable relationship with MBlock. Following the release of the report, the price of GMCR shares fell approximately 10% from its closing price of $92.09 on October 14, 2011 to close at $82.50 on October 17, 2011, the next trading day, on unusually heavy trading volume.
On October 19, 2011, after Einhorn’s presentation was more widely distributed, the price of GMCR common stock fell another 15% to close at $69.80 on October 19, 2011, on unusually heavy trading volume.
Finally, on November 9, 2011, GMCR announced disappointing earnings results and skyrocketing inventory. On this news, GMCR shares dropped 40%, from a close of $67.02 on November 9 to a close of $40.89 on November 10, 2011, on extremely heavy trading volume.
The securities lawsuit has been brought on behalf of purchasers of the common stock of Green Mountain Coffee Roasters, Inc. (“GMCR” or the “Company”) between February 2, 2011 and November 9, 2011, inclusive (the “Class Period”), including purchasers of GMCR’s common stock pursuant and/or traceable to the Company’s public offering on or around May 5, 2011 (the “Offering”).
Top Settlements
HRT Breast Cancer Settlement. This one was all over the news this week. Three women who filed lawsuits against Wyeth Pharmaceuticals and Pharmacia Upjohn alleging that their diagnoses of breast cancer were directly attributable to their use of Hormone Replacement Therapy (HRT) drugs, were awarded $72.6 million by a jury in Philadelphia hearing their consolidated lawsuit. The jury awarded $20 million to Ms. Elfont, $27.85 million to Ms. Kalenkoski and $24.75 million to Ms. Mulderig, according to the plaintiffs’ attorneys.
The three women filed individual lawsuits in July 2004 against Wyeth Pharmaceuticals and Pharmacia Upjohn, both of which have since been acquired by Pfizer.
The back story, in brief, is that Elfont, 66, had taken hormone therapy drugs for over two years before being diagnosed with breast cancer in 1997. Sixty-eight year old Kalenkoski was diagnosed with breast cancer in 2002, having taken Prempro for over four years, while Mulderig, also 68, took Premarin and Provera for 11 years before she received her breast cancer diagnosis, the PennRecord reported. It’s tragic and shocking.
According to a Bloomberg News report, Pfizer’s Wyeth and Upjohn units have lost 10 out of the 18 hormone therapy cases against them in civil court trials since 2006. Earlier this year Pfizer announced it had settled a third of the pending Prempro cases, it had set aside $772 for related claims, Bloomberg reported.
Another Bank Biggie this Week… Bank of America (BofA) agreed a $315 million settlement in a securities fraud class action lawsuit that alleged the bank was misled about mortgage-backed investments sold by its Merrill Lynch unit. The settlement needs court approval in order to fly–and guess who’s making that decision? US District Judge Jed Rakoff–so all bets are off that this one get’s approved…
The Public Employees’ Retirement System of Mississippi pension fund led the lawsuit, alleging that the investments contained questionable subprime mortgages written by lenders Countrywide Financial Corp., First Franklin Financial, and IndyMac Bancorp – IndyMac went under in 2008.
Ok – That’s enough for this week. See you at the bar.
InSecurities: Securities Fraud Roundup 7.5.11
July 5th, 2011. By LucyC
Top Securities Fraud Stories
By now you know the script. InSecurities takes a look at some of the latest securities fraud happenings—where folks who thought they’d made some secure investments have found those investments, well, a bit insecure due to fraudulent—or alleged fraudulent—activity. So be prepared for those omnipresent words and phrases—like “materially false and misleading statements”. They tend to pop up here with some regularity, as you’ll see…
New Securities Lawsuits Filed
Our first Madoff Meter contender is Deutsche Bank AG. And DB brings us another of those omnipresent securities fraud phrases: “mortgage-backed securities” (you’ve heard that one before, right?)…
Company: Deutsche Bank AG
Ticker: DB
Class Period: Jan-3-07 to Jan-16-09
Date Filed: Jun-21-11
Lead Plaintiff Deadline: Aug-20-11
Court: Southern District of New York
Madoff Meter: 
The Allegations:
Not to be left out of the fray, Deutsche Bank (DB) is facing a securities class action brought on behalf of an institutional investor. Details above, and we’re talking big bucks, allegedly lost on ordinary shares during the period between January 3, 2007 and January 16, 2009 (the “Class Period”).
The complaint alleges that during the Class Period, DB issued materially false and misleading Read the rest of this entry »
InSecurities: Securities Fraud Roundup 6.7.11
June 7th, 2011. By LucyC
Top Securities Fraud Stories
So here we go…another roundup of all the securities fraud lawsuits that’ve recently cropped up and have hit our Madoff meter. So without further ado, let’s get straight to them…
New Securities Lawsuits Filed
What was that Eurythmics Song?—Here Comes That Sinking Feeling Again…ok, so maybe Annie was singing about rain and whatever it represents and not about quicksand. But you can bet your bottom dollar that the folks who invested in WMS Industries during the class period here were probably feeling a bit under the weather with this one: WMS Industries Inc. Securities Fraud…
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Company: |
WMS Industries Inc |
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Ticker: |
WMS |
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Class Period: |
Nov-1-10 to Apr-11-11 |
|
Date Filed: |
May-25-11 |
|
Lead Plaintiff Deadline: |
Jul-24-11 |
|
Court: |
Northern District of Illinois |
|
Madoff Meter: |
|
The Allegations:
WMS Industries, which designs, manufactures and distributes both video and mechanical slot machines and video lottery terminals, got hit with a securities class action in the latter half of May alleging materially false and misleading statements. Yes, that old chestnut.
The allegations state that WMS has not been successful in living up to claims that it would continue to post sales revenue and margin gains “without the benefit or need for the recovery of overall demand or the casino gaming replacement cycle.”
For those of us not following the ups and downs of the electronic gaming industry—it’s in a down Read the rest of this entry »
InSecurities: Securities Fraud Roundup 4.28.11
April 28th, 2011. By LucyC
Top Securities Fraud Stories
The securities fraud story that’s got the attention of most folks right now is the Erica P. John Fund v. Halliburton case—which the Supreme Court has been hearing oral arguments on this week. Not because any of us held any Halliburton stock—and not even because it’s related to Halliburton’s liability to asbestos-related lawsuits, though asbestos is a hot topic here at LawyersandSettlements.com. No, this one’s a biggie because it has to do with whether a plaintiff can only obtain class action certification by establishing a preponderance of the evidence that shows that a corporation’s correction of its false statements made its stock price tank thereby screwing its investors.
The Halliburton case is actually from way back in 2002. The plaintiff, Erica P. John Fund, claimed that at the time, Halliburton understated its liability exposure to asbestos-related lawsuits and overstated its revenues—then, came out later correcting those statements at which point Halliburton’s stock price declined. The question at the heart of the matter pertains to loss causation—i.e., the plaintiffs’ ability to link their losses to a particular statement made by the company. After the Halliburton case had initially been thrown out by a Texas federal court—meaning that the court found the plaintiffs did not show causation of loss—an appeals court upheld the decision. And here we are awaiting the Supreme Court’s decision which is sure to have a major impact either way on how securities cases are handled in the future.
So, be that as it may, the theme for this month’s InSecurities column is entitled “In violation of federal securities laws” and you’ll find the specific allegations—chapter and verse—below. So let’s get started with our first securities suit: Rosetta Stone…
Company: Rosetta Stone, Inc
Ticker: RST
Class Period: Feb-25-10 to Mar-1-11
Date Filed: Mar-31-11
Lead Plaintiff Deadline: May-30-11
Court: Eastern District of Virginia
Madoff Meter:
The Allegations:
Nothing like learning first hand, as Rosetta Stone is finding out. They got hit with a securities lawsuit at the end of March, alleging—everyone sing along—you know the words—”certain of its officers and directors violated federal securities laws.” Very nice. Nothing like a good harmony.
The class period is practically 12 months—from February 25, 2010 to March 1, 2011, inclusive (the “Class Period”). The specific allegations—from the top—are (i) that Rosetta Stone was facing intense competition for its products, including free competitive product offerings; (ii) that the free and lower priced competitive product offerings, not a temporary reduction in advertising, was having a material adverse effect on the Company’s Class Period revenues, particularly U.S. consumer revenues; (iii) that the favorable sales booking numbers Rosetta Stone reported during the Class Period was the result of key retail partners maintaining inventory of the Company’s products well above historic levels; and (iv) that Rosetta Stone’s reported sales bookings and revenues during the Class Period were the product of manipulation.
But of course, the truth comes home to roost eventually, and on February 28, Rosetta Stone announced fourth quarter revenue of $74.3 million, a 5% decrease from the prior year, net income on a GAAP basis of $5.0 million, a decrease of 60% from the 2009 fourth quarter. On this news, shares of Rosetta Stone fell $1.77 to $13.19 per share. Ker plunk. I think this gets a 3 Bernie rating on our trusty Madoff meter.
Next up: 1st Centennial Bancorp…
Company: 1st Centennial Bancorp
Ticker: FECN
Class Period: Apr-13-06 to Jan-23-09
Date Filed: Apr-19-11
Lead Plaintiff Deadline: Jun-18-11
Court: —
Madoff Meter:
The Allegations:
Weary investors in 1st Centennial Bancorp filed a securities class action on April 19, in hopes that they may get some of their hard earned dollars back from a less than stellar investment. As the class period runs from April 13, 2006 to January 23, 2009, there could be quite a line-up for payouts.
Here’s the nitty-gritty—during the Class Period, 1st Centennial was a bank holding company for the 1st Centennial Bank (the “Bank”). During that period, the bank misled investors and Read the rest of this entry »
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