Stockholders v Descartes Systems Group, Inc.
Descartes Systems Group in Trouble Over Misstated Finances
Several class actions have been filed against network solutions company Descartes Systems Group, Inc. (Nasdaq:DSGX, TSE:DSG) and certain of its officers and directors by stockholders who purchased the company's common stock between June 4, 2003, and May 6, 2004. The actions claim that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.
The action alleges that Descartes failed to disclose and misrepresented the following material adverse facts: (1) that the company had materially inflated its financial results; (2) that it maintained insufficient reserves for doubtful accounts, in light of the fact that it knew that it was having difficulties in collecting receivables especially in the Asia-Pacific Region; (3) that it had overstated its revenues by at least $1.1 million by recognizing revenues from a significant contract with a customer in China that was impaired by regulatory action of the Chinese government; (4) that it had failed to take sufficient write-downs on assets that it had determined to be impaired; (5) that it lacked adequate internal controls and was therefore unable to ascertain its true financial condition; and (6) that as a result, the value of Descartes' net income and financial results were materially overstated at all relevant times.
On May 6, 2004, after the markets had closed, Descartes announced that its revenues and loss per share for the three months ended April 30, 2004, would be materially below the expectations set forth in its March 10, 2004, press release. News of this shocked the market, shares of Descartes falling $0.76 per share, or 38.97%, to close at $1.19 per share on May 7, 2004.
If you purchased securities issued by Descartes Systems Group during the applicable period, you may request appointment by the court as a lead plaintiff if you do so by July 19, 2004. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the court must determine that your claim is typical of the claims of other class members, and that you will adequately represent the class. Under certain circumstances, one or more class members may together serve as lead plaintiffs. Your ability to share in any recovery is not affected by the decision whether or not to serve as a lead plaintiff. You may retain any counsel of your choice to serve as you in this action, or you may choose to do nothing, and remain in the class as a silent member.
