Securities Sleuth

TOP Tankers (NASDAQ: TOPT) Auditor Resigns

TOP Tankers, Inc. (NASDAQ: TOPT), a Greek shipping company, provides worldwide seaborne transportation services, carrying refined petroleum products and crude oil worldwide. Today before the opening of the market, it announced some rather unpleasant news for its investors.  First, the Company disclosed that Ernst & Young had resigned as the Company's independent auditor.  Second, the Company announced that it will restate its interim unaudited financial statements for the first and second quarters of 2006, in accordance with E&Y's recommendations.  It appears that the restatement relates to possible improper accounting treatment of “certain aspects of the sale and leaseback of thirteen vessels that closed in March and April 2006.” 

Not surprisingly the market reacted very negatively to this news.  It appears that investors who purchased TOPT between March 13, 2002 and November 29, 2006, are affected.

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Options Woes for Affiliated Computer Services, Inc. (NYSE: ACS)

Affiliated Computer Services, Inc. provides business process and information technology outsourcing solutions to commercial and government clients.  After Thanksgiving the Dallas-based Company’s CEO, Mark King, and its CFO, Warren Edwards, both resigned.  The Company’s internal investigation concluded that the duo had backdated options in a number of cases.  Moreover, the investigation concluded that Mr. King and Mr. Edwards had misled ACS’s directors and lawyers regarding the backdated options. 

It isn’t surprising that the internal investigation concluded that the CEO and CFO had lied.  What is somewhat surprising is how long it took the internal investigation to reach that conclusion.  As you may recall, in March of this year ACS was one of the first companies that the Wall Street Journal identified based on statistical analysis as probably backdated its options. Specifically, as the Wall Street Journal noted this Monday its March “analysis concluded that the odds were one in 300 billion that the pattern of past stock option grants to Mr. Rich, the company’s former CEO, was chosen by chance.”  That is likely winning the PowerBall lottery twice in a week.

With those odds you would have thought that the internal investigation would have been accelerated.  At least now the ACS can move forward, but it would have been better for shareholders if the matter had been resolved months ago. 

Trident Microsystems (NASDAQ: TRID)

Trident Microsystems indicated on June 16 it had received a subpoena from the U.S. Attorney's office in New York.  The Company also indicated that on May 26 its Board set up a special committee to examine past options grants from 1995 to 2004.  On Sept. 11, Trident Microsystems said certain stock-option grants may have differed from the recorded grant dates, possibly resulting in additional charges. Based on preliminary findings, the company expects it will "likely" have to restate financials "for at least some periods."

On November 20, Trident said a special committee found the Company used incorrect measurement dates when accounting for option grants. Finally, Frank Lin resigned as the Company’s CEO and Chairman, effective November 15, 2006.

Presstek, Inc. (NASDAQ: PRST)

On September 29, 2006, Presstek disclosed its preliminary financial results for the quarter ended September 30, 2006, which revealed that the Company did not expect to reach its previously projected 10% annual revenue growth target for 2006. As a result, the price of Presstek stock dropped sharply, opening at $4.95 a share at the start of trading on September 29, down $1.28 or 20% from the previous day’s closing price of $6.23 a share. Investors who purchased stock between July 27, 2006 and September 29, 2006 are affected.

HCC Insurance Holdings (NYSE: HCC)

On November 17, 2006, after the close of trading, Houston-based HCC Insurance Holdings disclosed that the investigation of the Company’s stock option granting practices revealed that the Company used incorrect measurement dates for certain stock option grants covering a significant number of employees during the period from 1995 through 2006.  The Company also disclosed that the Company’s CEO and founder had resigned as well as the Company’s General Counsel.  The Company also disclosed that the SEC is conducting an informal inquiry into this matter.  It appears investors who purchased HCC stock between October 1, 2005 and November 17, 2006, are affected. 

Tier Technologies, Inc. (TIER.PK)

On December 14, 2005, Tier Technologies announced that its financial statements for fiscal years ended September 30, 2002 through September 30, 2004 and quarterly periods through June 30, 2005, should no longer be relied upon and announced that a restatement of those financial statements would be required.

On April 19, 2006, the Company announced that an internal investigation revealed a "number of serious new allegations relevant to the restatement-related issues." On May 24, 2006, the Company announced that its stock would be de-listed from NASDAQ. Investors who purchased stock between November 29, 2001 and October 25, 2006, are affected.

Bodisen Biotech, Inc. (AMEX: BBC)

On November 12, 2006, Bodisen Biotech issued a press release that it received a letter from the AMEX "warning that it is out of compliance with certain listing standards." It is alleged that the Company had hired stock promoter Benjamin Wey, an individual with prior securities violations that ultimately led to fines and suspension of Wey's securities license. News reports revealed that Wey, through his company New York Global, issued analyst reports and other statements to the investing public touting the Company's stock without disclosing that they were being paid by the Company. News reports also indicate that during this time, millions of shares of the Company stock were sold by or through persons who were affiliated with NYGG and its related entities. 

Investors who purchased between August 26, 2005 and November 14, 2006, are affected.

Ikanos Communications (NASDAQ: IKAN)

A critical element assuring the integrity of U.S. securities markets is the accuracy of Registration Statements and Prospectuses in connection with public offerings.  If these documents contain untrue statements of material facts, then investors have a cause of action under U.S.securities laws.

A current example of a company that allegedly prepared improper and misleading documents is Ikanos Communications (NASDAQ: IKAN).  Ikanos engages in the development and provision of programmable semiconductors that enable fiber-fast broadband services over telephone companies existing copper lines.  It has been alleged in actions brought on behalf of Ikanos shareholders that the Company’s Registration Statement and  Prospectus for both its IPO on September 22, 2005 and its secondary offering on March 8, 2006 contained untrue statements of material facts and omitted facts necessary to make the other statements not misleading.

Specifically, it is alleged that the documents represented that the Company’s business had grown due to successful deployments in Japan.  In truth, however it is alleged that the deployments in Japan had grown because the Company had shipped excessive product to Japanese customers in excess of those customers’ needs.  This practice is sometimes referred to as “channel stuffing.”

As is typical in channel stuffing situations when the true facts are revealed the stock collapses.  In this case the stock plummeted well under $8 per share after the true condition of the Company was revealed.  Specifically, on October 4, 2006, Ikanos announced that its revenue expectation were $4 to 6 million lower than expected and its fourth quarter revenue results would be adversely affected due to, among other things, “carriers in Japan currently working through their existing equipment levels.”

Investors who purchased Ikanos common stock pursuant to and/or traceable to its September 22, 2005 IPO or its March 8, 2006 secondary public offering are affected.    

Quest Software (NASDAQ: QSFT)

Quest Software (NASDAQ: QSFT) is one of the dozens of companies that are under scrutiny for improperly backdating stock options to enrich themselves at the expense of shareholders.

One of the latest companies to be scrutinized is California-based Quest Software, Inc. (NASDAQ: QSFT).  The Company engages in the design, development, distribution, and support of application management, infrastructure management, and database management software products.

It is alleged that the Company recklessly and intentionally instituted deficient internal controls surrounding the administration of the Company’s stock option plan which enabled certain employees to enrich themselves by knowing and fraudulently changing the stock option grant dates to dates on which the Company’s stock price was lower than the actual grant date.

It appears that investors who purchased Quest Software between November 9, 2001and July 3, 2006, are affected.

Warner Chilcott (NASDAQ: WCRX)

Sometimes when an IPO is issued, investors realize several months later that they didn't get the true facts.  But finding out one week after the IPO is issued that the stock has tanked because the Registration Statement omitted key facts.   That really hurts.

That what appears happened to investors in Warner Chilcott Limited (NASDAQ:WCRX).  The company is engaged in the development, manufacture, sale, and marketing of branded prescription pharmaceutical products in women's healthcare and dermatology primarily in the United States.

It is alleged that the Registration Statement issued in connection with the IPO contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading and was not prepared in accordance with the rules and regulations governing its preparation. On September 26, 2006, Warner Chilcott announced developments in a lawsuit brought against it by the Federal Trade Commission and filed a supplement to the Registration Statement in which it disclosed that, among other things, it had ceased shipments of Ovcon 35 in September 2006 when it launched Ovcon Chewable. In response to these disclosures the price of Warner Chilcott common stock dropped from $15.00 per share to $12.60 per share on extremely heavy trading volume.

Investors who purchased shares  pursuant and/or traceable to the Company's initial public offering on or about September 20, 2006 through September 26, 2006, are affected.