Stockholders v Digimarc Corporation
Digimarc’s Accounting Practices Land Them in Hot Water
A class action has been filed against Digimarc Corporation, a supplier of secure media solutions used in security, identification and digital media applications based in Tualatin, OR, (NASDAQ: DMRC) and certain of its officers and directors by stockholders who purchased the company's common stock between April 17, 2002 and July 28, 2004. The action claims 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.
Specifically, the complaint alleges that under the direction of Chief Financial Officer, E.K. Ranjit, the Company inflated its profitability during the class period by maintaining insufficient accounting controls which created an environment where improper accounting could be used to manipulate the Company's financial results. In fact, the Company now admits that it improperly accounted for software development costs and project capitalization at its ID Systems business unit. In order to correct the financial statements previously issued, the Company has indicated that it will need to restate all of its financial reports for 2003 and 2004 and may also have to restate earlier periods as well.
In addition, the complaint alleges that Company insiders sold over $10 million of Digimarc stock and that the retirement of E.K. Ranjit is highly suspicious when considered in conjunction with his substantial insider selling of 110,000 Digimarc shares for proceeds of over $1.3 million – more than four times his annual salary.
