Editor's note: iMergent announced that it entered into a final judgment with the state of California on the morning of Tuesday, September 5th, rather than over the Labor Day weekend as we originally reported. We regret the error.
When companies have bad news to release, or uncomfortable stuff they would prefer investors to overlook, they send it out after the market closes, often on the weekend, when fewer people are looking. This "cover of darkness" release may satisfy the letter of SEC disclosure regulations, but certainly not its spirit. With that in mind, here are four companies that released news over the long Labor Day weekend, perhaps hoping you wouldn't notice.
- Avocado distributor Calavo Growers
(NASDAQ:CVGW)rewarded its CEO with a $140,000 bonus for contract negotiations, on top of a two-part $300,000 stay-bonus awarded earlier this year.
- Image-sensor maker OmniVision
(NASDAQ:OVTI)handed out bonuses to top executives, despite reporting first-quarter revenues and earnings that fell below estimates, and projecting second-quarter sales and profits to also come in below expectations.
(NYSE:MIK)filed a preliminary proxy statement that rewards the founding Wyly brothers with more than $30 million in vested and unvested stock options as a result of a private-equity buyout of the arts-and-crafts retailer.
- On Tuesday morning, after the long weekend, e-commerce software provider iMergent
(AMEX:IIG)entered into a final judgment with the state of California, agreeing to pay $550,000 for violating various consumer-protection laws.
Legal costs are a part of doing business .our only part
Running a business is bound to cost you some money on the legal front. Heck, you might even being sued a time or two. But the legal department seems to have has a lock on job security at e-commerce software provider iMergent. During a conference call last year, iMergent's counsel said that "issues with AGs [attorney generals] and governmental agencies are part of our business."
If you're doing business with the government, sure, you might have "issues," even regular contact, but not always on the back end of lawsuits. That kind of business plan isn't going to work over the long haul. This company has had lawsuits filed against it by the states of California, Texas, Utah, Indiana, and Washington, plus the Securities and Exchange Commission and various foreign governmental agencies, to name but a few.
So what is it that iMergent does that attracts so much government interest? The company helps businesses open up websites. To do so, it conducts seminars selling software packages through its StoresOnline division, which supposedly assists businesses in creating their sites. Yet according to the many complaints filed against the company, the software not only doesn't work, but the technical support iMergent supposedly offers doesn't exist, either.
"Fraud" is a word that pops up in many of the allegations, and while iMergent ultimately never admits or denies the charges, it always ends up agreeing not to break the law in the future. And it has to pay out to reimburse customers and the states -- as seen in the $550,000 it is paying to California, nearly $500,000 to Australian authorities, and $400,000 to Texas.
Legal fees continue to spiral for iMergent, rising from $228,000 in 2003 to $845,000 in 2004. It didn't break out its legal costs in 2005, but it did note that general and administrative expenses, where it previously had reported legal fees, had jumped 40% for the year.
While sales have been rising for iMergent, a better bet for investors might be in backing its legal team's next court appearance.
You'll find us back again next week, bringing to light more SEC reports filed under the cover of darkness.
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