UniTek (UNTK) Faces July 31, 2013 Refinancing Deadline by DIRECTTV

May 20, 2013 By Jay Eng

In addition to the class action lawsuit against UniTek concerning the restatement of UniTek’s financials and purported “fraudulent activities that resulted in improper revenue recognition,“  the Company is now facing pressure from one of its business partners.  In a press release from last week, UniTek disclosed in relevant part that:

[I]ts subsidiary, DirectSat USA, LLC, has received a letter from DIRECTV, LLC providing 180-day notice of the termination of its master services agreement with DirectSat, effective November 8, 2013. Shortly following receipt of the notice, DirectSat entered into an agreement with DIRECTV providing that the 180-day notice of termination will be automatically withdrawn upon the Company’s refinancing, by July 31, 2013, of its debt on terms that satisfy certain financial requirements, the continued work on completion of its financial statements and the satisfaction of other conditions.

DIRECTV has informed the Company that it intends to continue working with the Company as UniTek addresses the issues it currently faces related to the previously disclosed accounting matters.

(Emphasis added).

SEC Brings Enforcement Action Against City of Harrisburg, PA for Securities Fraud in Connection with Municipal Bond Sales

May 6, 2013 By Jay Eng

The Securities and Exchange Commission (“SEC”) has charged the City of Harrisburg, PA with securities fraud in connection with its issuance of municipal bonds.  According to the SEC’s press release:

[The] SEC investigation found that the misleading statements were made in the city’s budget report, annual and mid-year financial statements, and a State of the City address. This marks the first time that the SEC has charged a municipality for misleading statements made outside of its securities disclosure documents. Harrisburg has agreed to settle the charges.

The SEC found that Harrisburg failed to comply with requirements to provide certain ongoing financial information and audited financial statements for the benefit of investors holding hundreds of millions of dollars in bonds issued or guaranteed by the city. As a result of Harrisburg’s non-compliance from 2009 to 2011, investors had to seek out Harrisburg’s other public statements in order to obtain current information about the city’s finances. However, very little information about the city’s fiscal situation was publicly available elsewhere. Information that was accessible on the city’s website such as its 2009 budget, 2009 State of the City address, and 2009 mid-year fiscal report either misstated or failed to disclose critical information about Harrisburg’s financial condition and credit ratings.

(Emphasis added).

See In the Matter of THE CITY OF HARRISBURG, PENNSYLVANIA, SEC Release No. 69515 (May 6, 2013).

SEC Issues Investor Alert Concerning Fraud in Private Securities Offerings for Oil & Gas Investments

May 3, 2013 By Jay Eng

The Securities and Exchange Commission has issued an investor alert as a result recent fraud cases relating to investments in private securities offerings for oil and gas ventures.  The SEC identifies the following Common Red Flags:

  • Sales pitches referring to recent news events like high oil or gas prices.
  • “Can’t miss” wells and “guaranteed” returns, including claims that major oil and gas companies are drilling nearby.
  • Abnormally high rates of return.
  • Unsolicited materials.
  • Sales tactics that pressure you to decide, like “limited” or “once-in-a-lifetime” opportunity.
  • Sales pitches touting new technology, especially if it relates to getting higher production out of low-producing wells (sometimes called “stripper” wells).
  • Salesperson claims to be an investor.
  • Being asked to sign documents acknowledging that the securities laws do not apply to the investment.

Further,

Even if you are working with a registered broker or adviser, it is not a seal of approval. Oil and gas offerings present many investment risks, and working with a registered individual is not a guarantee that the offering is a sound investment. Ask about any prior history of selling oil and gas offerings and if those offerings failed, the vetting or due diligence process for such offerings, and the risks of the particular investment you are considering.

 

You can see the alert here.

Senator Al Franken Urges SEC to Act to Curtail Mandatory Pre-Dispute Arbitration Provisions in Investor Account Agreements

May 1, 2013 By Jay Eng

On the heals of SEC Commissioner Luis A. Aguilar’s comments supporting the curtailment of mandatory pre-dispute arbitration provisions in investor account agreements, Reuters is now reporting that a group of federal lawmakers have urged the SEC to take action on the issue of mandatory pre-dispute arbitration.  According to Reuters,  lawmakers have sent a letter to SEC Chair Mary Jo White expressing a “deep[] concern[] that the commission’s failure to respond to the dangers posed by widespread forced arbitration will weaken existing investor protections.”

The lawmakers signing the letter were led by Democratic Senator Al Franken of Minnesota, and include Sens. Patrick Leahy (D-Vt.), Tom Harkin (D-Iowa), Bernie Sanders (I-Vt.), Richard Blumenthal (D-Conn.), Dick Durbin (D-Ill.), Sheldon Whitehouse (D-R.I.), Jeff Merkley (D-Ore.), Mazie Hirono (D-Hawaii), Sherrod Brown (D-Ohio), Martin Heinrich (D-N.M.), Frank Lautenberg (D-N.J.), Robert Menendez (D-N.J.), Ron Wyden (D-Ore.) and Elizabeth Warren (D-Mass.) joined Franken in signing the letter, along with 22 House Democrats.

For more information concerning the issue pre-dispute arbitration click here.

Massachusetts Securities Law Firm Files Class Action Against Atlantic Power Corporation (AT) to Recover Investor Losses from Dividend Cut

April 25, 2013 By Jay Eng

A securities class action lawsuit has been filed against Atlantic Power Corporation (NYSE: AT)(“Atlantic Power”) and certain of its officers. The lawsuit alleges federal securities violations on behalf of purchasers of Atlantic Power securities from July 23, 2010 through and including March 4, 2013. The complaint alleges that

Unlike other publicly-traded utility companies, which typically pay out no more than 4% of profits as dividends, Atlantic paid an outsized 10% dividend during the Class Period. As detailed below, Atlantic fed its investors with multiple shareholder presentations, press releases, and other SEC filings that omitted crucial and relevant information regarding the safety of its dividend.   On February 28, 2013, the Company disclosed that it was cutting the Company’s monthly dividend, starting in March 2013, by 65%.

The complaint was filed April 23, 2013 in the United States District Court for the District of Massachusetts.  See the press release here and the complaint here.

See Dornan v. Atlantic Power Corporation et al., Case No. 1:13-cv-10991 (D. Mass.).

Harvest Natural Resources (HNR) Securities Class Action Complaint Filed

March 29, 2013 By Jay Eng

As previously noted, Harvest Natural Resources (NYSE HNR) announced that HNR would be restating its financial results.  On March 22, 2013, securities attorneys filed a class action complaint in the United States District Court in the Southern District of Texas.  The class action complaint is brought “on behalf of a class consisting of all persons other than defendants who purchased Harvest Natural Securities between May 7, 2010 and March 18, 2013, both dates inclusive,” and seeks to recover damages caused by defendants alleged violations of federal securities laws.

Phillips v. Harvest Natural Resources Inc., et al, 13-CV-00801 (Southern District of Texas).

Clearwater, Florida-Based Tech Data Corp. (Nasdaq: TECD) Announces It Will Restate Financials Over 3 Years — Stock Drops 9% In After-Hours Trading

March 21, 2013 By Jay Eng

Tech Data Corp. (Nasdaq: TECD) (the “Company” or “TECD”), a Florida corporation based in Clearwater, Florida, has announced that the Audit Committee of its Board of Directors, on the recommendation of management, and after consultation with  its auditor Ernst & Young LLP, will

restate some or all of its previously issued quarterly and audited annual financial statements for the fiscal years 2011 and 2012, and some or all of the quarters of fiscal year 2013, including our fourth quarter and fiscal year 2013 earnings release dated March 4, 2013. Accordingly, investors should no longer rely upon the Company’s previously released financial statements and other financial data relating to these periods.

***

The Company anticipates that the restatement will be made to correct improprieties primarily related to how the Company’s U.K. subsidiary reflected vendor accounting. The Company estimates that the restatement will reduce previously reported consolidated operating income by an aggregate amount of approximately $30 million to $40 million, and consolidated net income by an aggregate amount of approximately $25 million to $33 million, over the three fiscal year periods.

(Emphasis added).  In response to this revelation, securities of TECD were trading down over 9% to 45.00 in after hours trading on March 21, 2013.  Shares of TECD stock traded as high as $57 in February 2012.  The Company has a float of 36 million shares.

TECD is a worldwide distributor of technology products.  TECD is managed in two geographic segments: the Americas (including North America and South America) and Europe.   According to TECD’s website, it fiscal year 2011, it sold “$24 billion of IT products to more than 125,000 technology resellers in over 100 countries.”  TECD’s CEO joined the Company in 2006.

Class Action Lawsuit Filed Against Great Lakes Dredge & Dock (GLDD) in Illinois Federal Court

March 20, 2013 By Jay Eng

Following up on a prior post,  securities attorneys have filed a class action lawsuit in the Northern District of Illinois against Great Lakes Dredge & Dock Corporation (GLDD), Jonathan W. Berger, William S. Steckel, and Bruce Biemeck.

The lawsuit is “brought on behalf of all persons or entities who purchased or otherwise acquired shares of Great Lakes securities between August 7, 2012 and March 14, 2013, inclusive (the “Class Period”), seeking to pursue remedies under §§10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).”  (Emphasis added).

The Complaint asserts:

During the Class Period, Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts concerning Great Lakes’ business, operations and prospects. Specifically, Defendants made false and misleading statements and failed to disclose that it had recognized revenue in a manner not consistent with its accounting policy in that certain pending change orders where client acceptance was not finalized were included as revenue. In addition, the Company failed to disclose material weakness in its internal controls to detect or prevent misstatements in its financial statements.

(Emphasis added).

United Union of Roofers, Waterproofers & Allied Workers Local Union No. 8 v. Great Lakes Dredge & Dock Corporation, et al., Case No. 13-CV-2115 (Northern District of Illinois).

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