California investors might be interested in a recent wave of criticisms and complaints lodged against Groupon, the online daily deal coupon service. After revealing accounting problems in last year’s annual report, Groupon’s CEO and CFO have been named in a shareholder’s lawsuit alleging the executives acted fraudulently by making false and misleading statements and keeping adverse company information away from investors.
Just last week the company admitted errors it made in accounting for refund reserves. The lawsuit was filed by a single plaintiff, however according to the report more lawsuits are likely to come. The complaint also names Groupon executives, board members and financial institutions it claims provided the company with services and underwriting.
The suit claims the financial institutions and other defendants were complicit in the alleged fraud, however does not name the company’s accounting firm, Ernst & Young in the suit. In last week’s 10-K filing report, the accounting firm stated Groupon has fundamental weaknesses in its controls of internal financial reporting. The 10-K filing had revised figures previously reported by executives by reducing its fourth quarter revenue by more than $14 million.
The Securities and Exchange Commission is looking into these latest developments at the company after pressuring the company to stop using a questionable accounting metric just before the company went public. The company admitted in its S-1 filing that one of its risk factors was the executive team’s limited experience managing publicly traded companies and complying with the increased complexities in financial disclosure laws.
Dealing with shareholder disputes can be difficult for a new company to address, especially if the executives have little experience in complying with the ever-changing complex financial disclosure laws for publicly traded companies. It can be even more difficult for a shareholder to understand what his or her rights are in terms of required disclosures. If you are a shareholder and feel you may have been mislead, consult with an experienced shareholders rights attorney to help you understand your rights and steps you can take to ensure your investments are secure.
The attorney for the plaintiff in the lawsuit claims the company’s prospectus misled investors with false statements regarding material facts and omitted important information in its financial reporting.
Source: CFO.com, “Groupon Shareholder Cries Foul,” Sarah Johnson, April 4, 2012