Securities Class Action Lawsuit Filed Against Walter Investment Management Corp. (WAC)

On July 24, 2013, a securities class action was filed against Walter Investment Management Corp. (Walter Investment or WAC) in the Middle District of Florida.  The lawsuit alleges violations of federal securities laws against Walter Investment and certain officers and directors of the company.  The class action complaint is filed on behalf of persons who purchased Walter Investment Securities between March 9, 2012 and June 6, 2013, and alleges that

Throughout the Class Period, Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (1) the Company’s lacked adequate internal controls over financial accounting; (2) the Company’s internal controls were not effective; (3) the Company’s financial statements contained false and misleading statements; (4) the Company had failed to disclose material weaknesses in the internal controls of RMS; (5) the Company had overstated the value of its recent acquisition, RMS; and (6) as a result of the foregoing, the Company’s statements were materially false and misleading at all relevant times.

Walter Investment  is an asset manager, mortgage servicer and originator based in Tampa, Florida.  See the complaint here.

Don’t Blame the Assistant: Court Denies Late Request for Exclusion (Opt-Out) from Class Action in Bank of America Securities Lawsuit

A District Court Judge in the Southern District of New York has denied the request of KERS & Co. (“KERS”) to permit it to opt-out of the Bank of America Securities Litigation, Case No. 09-MD-2058.  According to the Court’s Order, the request for exclusion came 11 months after the date set by the Court for putative class members to request exclusion from the class action.

In its order the Court found that KERS had received notice and was aware of the opt-out procedure.  However, the claims administrator had no record of receiving a timely request for exclusion from KERS.  After reviewing the record, including affidavits from KERS, the Court found that “KERS has not satisfied its burden of coming forward with evidence establishing that  it communicated an intent to opt out of the class.”  Additionally, the Court found that KERS failed to establish that the failure to timely file a request for exclusion was the product of excusable neglect stating in relevant part as follows:

[The law firm] primarily blames an administrative assistant’s purported filing mishaps, even though its attorneys apparently showed minimal interest in taking corrective action or even following up on numerous red flags. [The law firm] places additional blame on opposing parties for not more diligently pressing [the law firm] on its failure to file the opt-out request. KERS and [the law firm] have not come forward with any meaningful explanation for the lengthy delay in acting, which was entirely within their control as was the failure to meet the original deadline. As noted, the Second Circuit has stated that the reason for the missing he neglected deadline is the most important factor in considering excusable neglect, and “that the equities will rarely if ever favor a party who fails to follow the clear dictates of a court rule ….” Silvanich, 333 F.3d at 366; see also In re Painewebber, 147 F.3d at 135-36 (movant’s hospitalization does not establish excusable neglect for subsequent nine-month delay in remedy failure to meet opt-out deadline).  For the foregoing reasons, KERS has not established excusable neglect for its failure to timely seek exclusion from the class.

See the Order here.

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

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

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

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

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

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

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).