By Dan Levine
SAN FRANCISCO Dec 21 A U.S. appeals court on
Friday revived a proposed securities class action against
VeriFone Systems Inc over its 2007 restatement of
results, ruling that the lawsuit properly alleged VeriFone Chief
Executive Douglas Bergeron was "reckless" as to the truth of
A three-judge panel from the 9th U.S. Circuit Court of
Appeals in San Francisco unanimously reversed a lower court
decision dismissing the litigation.
Representatives from VeriFone could not immediately be
reached for comment.
VeriFone, a San Jose, California-based electronic payments
company, facilitates secure transactions between consumers,
merchants, and financial institutions. In November 2006, it
acquired Lipman Electronic Engineering Ltd, an Israeli company,
and began integrating its business with that of Lipman.
In three consecutive quarters, VeriFone's preliminary
internal reports accurately showed it had fallen short of its
earnings and gross margins forecasts, the 9th Circuit panel
wrote. Bergeron and the company's former chief financial officer
supervised accounting staff as they made "baseless multi dollar
adjustments," the court wrote.
"Each time, the CEO and CFO accepted the adjustments without
question," the court wrote, "representing publicly that a recent
merger was driving the company's success even as the adjustments
grew in size and negatively impacted key metrics."
VeriFone eventually restated results and argued that it was
victim of a difficult acquisition complicated by incompatible
systems, the court wrote, while a proposed class of plaintiff
investors alleged fraud.
Sandy Svetcov, an attorney for the plaintiffs, said in an
email that the Friday ruling was particularly welcome given his
own deteriorating health.
"The court didn't know, but this is a wonderful holiday gift
for a guy whose just been told he has six months to live due to
pancreatic cancer," wrote Svetcov.
The case in the 9th Circuit is In Re: VeriFone Holdings Inc.
Securities Litigation, 11-15860.