Posts Tagged ‘ Securities Fraud ’
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 3.30.11
March 30th, 2011. By LucyC
Top Securities Fraud Stories…
This week’s catch phrase—”False and Misleading Statements”…In our last edition of Insecurities, the recurring theme was ‘failure to disclose’—which led us to the Madoff Meter. Well, seems the idea of Bernie kind of stuck. So he’s back…
Though he never did really leave did he? Case in point, his yacht (or the ability to sell it in order to drum up some quid to help those who’d invested with him) was in today’s news—as well as the fact that three former Madoff employees lost their bid to have criminal charges dropped against them. The grounds for their request? That the charges should be dropped because the government had frozen their assets—assets they need to pay their lawyers. It didn’t fly with U.S. District Judge Laura Taylor Swain, who rejected the bid.
Enough about Bernie (or, more about him later)—starting off this edition of Insecurities is Elan Corporation…
Company: Elan Corporation
Ticker: ELN
Class Period: Jul-2-09 to Aug-5-09
Date Filed: Mar-1-11
Court: Southern District of New York
Madoff Meter: 
The Allegations:
What’s that crashing sound I hear? Elan got hit with a securities class action lawsuit earlier this month over allegations that it and certain of its officers and directors made false and misleading statements regarding the July 2, 2009 sale of the Company’s rights to its Alzheimer Immunotherapy Program (“AIP”) to Johnson & Johnson (“JNJ”).
The allegations stem from Elan’s failure to disclose that a provision in their definitive agreement with JNJ would violate the terms of an existing agreement between the Company and Biogen Idec Inc. (“Biogen”) related to their joint development and sale of multiple sclerosis drug Tysabri. Hey—maybe they just forgot about their deal with Biogen.
As a result of the violation, Elan was forced to renegotiate the terms of its sale of AIP, whereby JNJ paid $115 million less to Elan than previously agreed. Ouch.
Predictably, once Elan issued its press release disclosing the breach of their agreement with Biogen to the public, share prices of Elan common stock fell about 11%, according to the lawsuit, on abnormally high trading volume. That would make a difference to retirement funds, no doubt.
Next up: China Integrated Energy…
Company: China Integrated Energy, Inc.
Ticker: CBEH
Class Period: Mar-30-10 to Mar-16-11
Date Filed: Mar-26-11
Lead Plaintiff Deadline: May-25-11
Court: Central District of California
The Allegations:
Determining fact from fiction. This one involves China Integrated Energy—and allegations that it also issued materially false and misleading statements to investors, because it concealed related-party transactions.
The alleged facts—that the transactions between the Company and its officers and directors had the effect of funneling cash to these officers and directors. The alleged fiction—that the company’s Chinese SAIC filings misrepresented its financial performance, business prospects, and financial condition to investors.
So, the only people making the kind of money advertised were CBEH’s officers and directors. Not the investors. The alleged violations were uncovered in a report by Sinclair Upton, most of which CBEH denied. However, they did ‘fess up to having engaged in an undisclosed related party transaction with the CEO’s 22 year old son? Where’s Bernie? This could be a 3 or 4 on the Madoff meter…
On to Finisar Corporation…
Company: Finisar Corporation
Ticker: FNSR
Class Period: Dec-2-10 to Mar-8-11
Date Filed: Mar-15-11
Lead Plaintiff Deadline: May-14-11
Court: Northern District of California
Madoff Meter:
The Allegations:
Was Finisar doing a little too much networking maybe? It’s also accused of issuing false and misleading statements resulting in investor losses.
Finisar provides optical subsystems and components that connect short-distance local area networks, storage area networks, longer distance metropolitan area networks, fiber-to-the-home networks, cable television networks and wide area networks. A growth industry one would figure—especially in emerging markets.
The complaint alleges that the company failed to disclose that its recent revenue growth was due to an oversupply of inventory in the market and that the Company would be unable to sustain its strong growth due to increased pricing pressures and a slowdown in business from China. As a result of defendants’ false statements, Finisar’s stock traded at artificially inflated prices during the Class Period, reaching a high of $43.23 per share on February 14, 2011.
Then, on March 8, 2011, after the market closed, Finisar issued a press release announcing its third quarter fiscal year 2011 results—reporting earnings of $18.8 million, or $0.22 diluted earnings per share, and revenue of $263.0 million. The Company further reported its fourth quarter 2011 revenues would be in the range of $235 to $250 million, lower than analysts’ estimates. On this news, Finisar’s stock fell $15.43 per share to close at $24.61 per share on March 9, 2011, a one-day decline of nearly 39%—it went straight through the floor and kept on going…
Top Securities Settlements…
Countrywide Financial
Madoff Meter:
A couple of settlements registering on our Madoff meter this month. I’d give this first one a 5. It Read the rest of this entry »
Week Adjourned: 3.4.11
March 4th, 2011. By LucyC
Top Class Actions
Glass Ceiling with a $100M Price Tag at CIGNA? Well, this has certainly been a time for discrimination class actions. Filed, that is. Topping the list—Cigna Health Care—based on the number of potential plaintiffs—dollars. This one’s all about gender discrimination—in the form of a hostile work environment and differential treatment of males and females occurs company-wide the suit alleges.
The complaint, filed by Ms. Bretta Karp, a long-time contracting manager with Cigna, claims that Ms. Karp and other female employees were disriminated against by treating them less favorably than male employees in similar positions and by subjecting all females to intentional, deliberate and wilful discriminatory denials of promotions and pay raises, discriminatory evaluations, disparate terms and conditions of work, harassment, hostile work environments, and other forms of discrimination in callous disregard of their rights.
The complaint further details that CIGNA has created a hostile work environment where male supervisors harass and intimidate female employees, where management has made clear that it favors male employees over women, and where company investigations into complaints made by female employees are either nonexistent or superficial and inadequate.
And the amount sought in damages? $100 million baby—along with litigation costs and Read the rest of this entry »
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