Investors have sued Huron Consulting Group, Inc. (Nasdaq: HURN) and its top directors and officers for securities fraud. Huron admitted on July 31, 2009 its financial statements for the fiscal years 2006, 2007 and 2008 and the first quarter of 2009 were false, and announced Huron’s CEO and CFO were resigning.
In an August 3, 2009 press release, Huron said it needs to “correct the Company’s accounting” for acquisitions and payoffs Huron made in connection with the purchase and sale of businesses that were “subsequently redistributed among themselves and to other select Huron employees.” Shareholder class actions, filed on behalf of Huron security purchasers between April 2006 and July 31, 2009, allege Huron and its top management violated Section 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder.
Shareholders allege Huron’s public financial statements were false and misleading, and allege defendants made false and misleading statements concerning Huron’s acquisition of four businesses, acquired between 2005-2007, which resulted in acquisition-related payments among themselves and to certain Huron employees. As a result, Huron falsely understated its non-cash compensation expenses. Shareholders further allege Huron’s public financial statements were not prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), and allege Huron lacked adequate internal and financial controls. Huron’s July 31, 2009 admission its financial statements from 2006-2009 cannot be relied on and must be restated was caused by Huron’s failure to properly account for acquisition-related payments received by the sellers in connection with the redistribution of the four businesses in 2005-2007, which under accounting rules should have been classified as non-cash compensation expenses.
Huron was formed in March 2002 by two-dozen former accountants from Arthur Andersen LLP. The same month Huron was formed, Andersen was indicted for its role in energy-trading giant Enron Corp.’s accounting and securities fraud.
In response to Huron’s admission its financial statements cannot be trusted, on August 3, 2009 Huron’s shares declined $30.66 per common share, or 69.13%, to close at $13.69 per share, on unusually heavy trading volume. Huron shareholders have until October 5, 2009 to submit their application for lead plaintiff in the securities class action.
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