Hertz Shareholders Can't Show Execs Had Advance Knowledge of $215M Accounting Gaffe, Circuit Rules
The Third Circuit ruled that the company's 2014 restatement of accounting results, which reduced 2011-2013 pretax income by $215 million and net income by $132 million, provided "at most, some inference of scienter but not a strong inference" on the part of three company executives.
September 20, 2018 at 05:17 PM
4 minute read
The U.S. Court of Appeals for the Third Circuit has upheld dismissal of a shareholder class action against Hertz Global Holdings stemming from a large-scale accounting debacle.
The company in the fall of 2013 announced that it had grossly overstated revenue and profits for fiscal years 2011 through 2013. The plaintiff-appellants, two labor union pension funds, filed suit in November 2013, claiming the company gave overly rosy assessments of its finances because several investors were planning to sell large blocks of shares.
The appeals court affirmed a U.S. District Court judge's ruling that the plaintiffs failed to sufficiently demonstrate that three top company executives knew about accounting problems before those problems became public knowledge. The plaintiffs alleged that former Hertz CEO Mark Frissora, former CFO Elyse Douglas and former controller Jatindar Kapur violated securities laws by making materially false and misleading statements about the company's finances.
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