Update on UniTek Global Services, Inc. (UNTK) and Its Listing on the NASDAQ

May 24, 2013 By Jay Eng

UniTeck Global Services, Inc. (UNTK), which has been sued in federal court for violations of federal securities laws, has issued a press release providing an update concerning its listing on NASDAQ.  According to the release:

As previously announced, on April 16, 2013, the Company received a letter from NASDAQ stating that the Company is not in compliance with NASDAQ Listing Rule 5250(c)(1) (“Rule 5250(c)(1)”) because the Company did not timely file its Annual Report on Form 10-K for the year ended December 31, 2012 (the “Form 10-K”).

The Company subsequently submitted to NASDAQ a plan to regain compliance with Rule 5250(c)(1), and on May 14, 2013, NASDAQ notified the Company that NASDAQ had determined to grant the Company an exception, through October 14, 2013, to regain compliance with the rule.

On May 20, 2013, the Company received an additional letter from NASDAQ stating that the Company also failed to comply with Rule 5250(c)(1) because the Company did not file its Quarterly Report on Form 10-Q for the quarter ended March 30, 2013 (the “Form 10-Q”). The Company has submitted an update to NASDAQ confirming that it expects to file the Form 10-Q before the October 14, 2013 exception deadline already granted for the filing of the Form 10-K. NASDAQ has advised the Company that it has also been afforded an exception until October 14, 2013 to file the Form 10-Q.

Neither notification of non-compliance has an immediate effect on the listing or trading of the Company’s common stock on The NASDAQ Global Market.

(Emphasis added).  It is not clear at this time whether the Company will need the full extension of time until October 14,. 2013 to come back into compliance.

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).

Charles Schwab Backs Down on Class Action Waivers in Client Account Agreements

May 17, 2013 By Jay Eng

Reuters is reporting that the brokerage firm of Charles Schwab Corp. is backing down on its requirement that account holders waiver class action lawsuits.  Reuters reports

Charles Schwab Corp has temporarily reversed its requirement that clients waive their right to bring class-action lawsuits, adding a new twist in a battle closely watched by the securities industry and plaintiffs’ attorneys.

“Effective immediately, Schwab is modifying its account agreements to eliminate the existing class-action lawsuit waiver for disputes related to events occurring on or after May 15, 2013 and for the foreseeable future,” the San Francisco-based brokerage company said in a statement that was posted on its website on Wednesday.

Schwab still believes that arbitration is the best forum for clients to resolve disputes with the firm, but said it was backing off the litigation ban in deference to clients who are uncertain about their rights as it fights to defend its original ban.

Schwab’s attempt to curtail consumer rights has drawn broad attention in recent months and has been cited as a principal reason by lawmakers to entirely abolish the mandatory pre-dispute arbitration provisions in customer account agreements.   Section 921 of Dodd-Frank Act provided the SEC with the discretionary rulemaking authority to restrict mandatory pre-dispute arbitration.  However, the SEC has taken no action on this issue to date.

 

 

Attorneys File Securities Fraud Class Action Complaint Against UniTek Global Services UNTK

May 7, 2013 By Jay Eng

Securities attorneys have filed a class action complaint against UniTek Global Services, Inc. in connection with its recent 50%  stock drop.   According to the complaint,

On April 12, 2013, UniTek issued a press release (the “April 12 Press Release”) announcing that the Company was being forced to restate its financial results for the interim periods ended March 31, 2012, June 30, 2012 and September 29, 2012,  the fiscal year ended December 31, 2011 and the interim period ended October 1, 2011. Further, “[a]s a result of an ongoing  internal investigation being conducted by the Audit Committee of the Company’s Board of Directors … it was determined that several employees of the Company’s Pinnacle Wireless subsidiary engaged in fraudulent activities that resulted in improper revenue recognition.” (Emphasis added). The Company also stated that the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 would be late.

***

The April 12 Press Release also revealed that that Ronald J. Lejman (“Lejman”), Chief Financial Officer and Treasurer was terminated, effective immediately and that “[i]n connection with the internal review and based on the recommendation of the Audit Committee, the Company also announced the termination of Kevin McClelland (“McClelland”), Controller and Chief Accounting Officer, as well as the terminations of Michael Hayford (“Hayford”), President of the Pinnacle Wireless division, several other employees of Pinnacle Wireless and an employee of the UniTek finance department. None of the terminated individuals will receive severance.” (Emphasis added).

On this news, UniTek’s stock price fell from its prior trading day close of $3.01 to close at $1.52 (a decline of nearly 50%) on April 15, 2013, on heavy trading volume.

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.).

Credit Suisse Asks Maryland Federal Court to Stop FINRA Arbitration Concerning TVIX Investments

April 24, 2013 By Jay Eng

Attorneys for Credit Suisse Securities (USA) LLC (“Credit Suisse”) and VLS Securities LLC (“VLS”) have filed a lawsuit in federal court in Maryland seeking to enjoin a group of investors who allegedly “have no prior or current relationship with either Credit Suisse or VLS, from pursuing an arbitration proceeding they have filed against Plaintiffs before the Financial Industry Regulatory Authority (‘FINRA’).”  The investors purportedly sustained losses in connection with “the offering of VelocityShares Daily 2x VIX Short Term Exchange Traded Notes (“TVIX”), a financial product issued by Credit Suisse
AG”.’  However, Credit Suisse argues that the investors are not its customers or customers of VLS and cannot be compelled to arbitrate the dispute.

You can see the federal court complaint and statement of claim here.

Credit Suisse Securities (USA) LLC v. Fesenko, Case No. 13-CV-01187 (District of Maryland).

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.

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