At the Friday night dump…
Late on Friday, right around the time I was beginning what turned into a 24-hour quest to get home from Phoenix via US Air (LCC), Hewlett-Packard (HPQ) filed its third quarter Q, which had this new (and interesting) disclosure about the U.S. Department of Justice:
“On April 12, 2007, the U.S. Department of Justice intervened in the qui tam action and filed a complaint against HP and four other companies on behalf of the United States containing more specific allegations that HP violated the False Claims Act and the Anti-Kickback Act of 1986 by providing millions of dollars in kickbacks to its alliance partners, including “influencer fees” and “new business opportunity rebates.” The U.S. complaint further alleges more specifically that HP violated the False Claims Act and the Anti-Kickback Act, breached its federal government contracts, induced the federal government to make payments to HP to which HP was not entitled to receive under those contracts, and was unjustly enriched by expressly or impliedly making false statements, records or certifications to the federal government that it complied with and would continue to comply with the Anti-Kickback Act and by submitting claims to the government that allegedly were inflated because they included the amounts of the influencer fees and new business opportunity rebates. The U.S. complaint seeks treble damages plus civil penalties in connection with the alleged violations of the False Claims Act, double damages plus civil penalties in connection with the alleged violations of the Anti-Kickback Act and disgorgement of profits earned in connection with the breach of contract and unjust enrichment claims.”
Besides the claim at hand, what’s odd is the the Justice Department issued this release on April 19 (picked up by Marketwatch), but that it took another seven weeks for any mention of the issue to find its way into HP’s SEC filings. The Justice Department release also names Sun Microsystems (SUNW) and Accenture (ACN). Of the three, Sun was the first to disclose any hint of the issue back in the Q it filed on Feb. 9. Investors in Accenture appear to be still waiting for that disclosure, based on a quick skim of their filings.
Now, I’ve been getting some feedback from readers — mostly securities lawyers — saying that late Friday filings aren’t always nefarious. That sometimes they’re simply due to all of the pieces coming together late in the day. Agreed. But just because something isn’t nefarious doesn’t mean that it wasn’t specifically designed to avoid any attention. How else to explain an April 19 press release that doesn’t find its way to HP investors until late on June 8?
What’s also interesting here is that just two weeks ago (May 23), the SEC slapped HP for failing to disclose in an 8K the reasons behind director Thomas Perkin’s resignation, which had to do with HP’s infamous leak investigation.
As for me, I finally made it back to JFK at 11 pm on Saturday night — exactly 24 hours after I was supposed to land in Newark. After reading this story two weeks ago about USAir’s over-booking problems in Phoenix, I knew I was in for a special experience. I just didn’t realize how much time it was going to take me — and how everything US Air employees promised to ease my inconvenience was just a lot of hot air.
RSS
June 11th, 2007 at 9:52 am
I’d be interested to know if anyone else has ever wound up missing a plane because the information on the airport’s own departure boards was inaccurate. My plane was supposed to take off at 3:08 pm and was listed as delayed until 5:08 on multiple departure screens around the airport. But the plane actually pushed back from the gate at 4:20. Given USAir’s penchant for overbooking, this “mistake” seemed like an easy way to get people to miss the flight, since at least five of us were left behind.
June 11th, 2007 at 7:49 pm
Michelle:
One might say the security lawyers might be predisposed to bias w. their contrary opinions. Any late Friday filing I have ever come across was always a precursor to bad news for shareholders.
To wit: “Cell Therapeutics (CTIC-$4.17) waited until after the close of trading on Friday to announce its filing for a $150 million mixed shelf registration statement….
On Monday, the share price of CTIC dropped 10.1% on the news….”
http://10qdetective.blogspot.com/2007/06/best-in-excuses-lies-by-cell.html
KEEP UP WITH THE GREAT DISCLOSURES!
Warmly,
David J Phillips, Publisher
http://www.10qdetective.blogspot.com
June 12th, 2007 at 7:44 am
David, did you ever consider the fact that by waiting to file until the close of trading on a Friday, the company is ensuring that the news (especially bad news) is widely disseminated by the time trading opens on Monday, and therefore no investor has an informational advantage? I believe it is almost universal practice to avoid issuing a significant press release while trading is ongoing, for this reason.
And Michelle, the reason HP did not disclose until June 8th is that there was no obligation to do so until their Form 10-Q was due (as opposed to the director resignation, which is specifically a disclosable event on Form 8-K). Given that the DOJ had already announced it, it wasn’t even non-public information. And I really don’t think HP believed it could “sneak” the info. by the analyst community; I’m pretty sure those people have access to the internet and other news sources, even on the weekend and early Monday.
June 12th, 2007 at 7:52 pm
Um…OK. So they weren’t obligated by the letter of the law to disclose it. But then why did Sun disclose the issue in its Q even before the Justice Dept. came a-calling?
June 13th, 2007 at 8:55 am
Actually, as I read Sun’s disclosure, it looks like they were tipped off in December that the DOJ had filed a complaint under seal, so they did know the DOJ was involved when they filed their Q in Feb. It’s possible HP did not have that knowledge, and determined that, prior to the DOJ joining the suit and making more specific allegations, the case by the two private plaintiffs had no merit and was not material to HP. Once the DOJ publicly revealed it joined the action and HP could review the complaint, they apparently made the assessment that it was potentially material and should be disclosed in the financial statements and the legal proceedings section of its next quarterly filing.
But you’re probably right, they thought they could fool all of the people all of the time by simply waiting to file late on a Friday. Just like they did with their 2nd Quarter 10-Q last year…no, wait, they filed that on June 8th also, which was a Thursday. And in 2005, they filed on June 8th again, a Wednesday. Hmm, maybe they chose their Q2 filing date based on something like a consistent number of days after the close of the quarter, which would give them enough time to collect the information, draft and review before filing? Nah, it’s probably just a big conspiracy. Sells more papers.
June 13th, 2007 at 9:25 am
Well, I’m not exactly selling papers and I don’t consider myself to be a conspiracy freak. And I also believe the filing deadlines for Qs have changed since 2005, so it’s hard to put that kind of significance on the June 8th date. But perhaps we should just agree to disagree.
June 20th, 2007 at 12:12 pm
I wonder if some hybrid of JetBlue’s policy and the current refundable ticket might ease the problem of business travelers who do not show.
Perhaps instead of a fully refundable ticket, you only get 50% or 75% of the face value back. This would reduce bumping and probably net more income for the airline as those who missed flights had to rebook them.