(Reuters) — A U.S. appeals court on Tuesday revived a lawsuit that alleged HP Inc defrauded shareholders by secretly using unprofitable tactics to boost sales of its printing supplies in 2015 and 2016.
The 9th U.S. Circuit Court of Appeals in San Francisco overturned a judge’s decision to dismiss the lawsuit because it was filed too late. Investors said they did not discover the alleged fraud until the US Securities and Exchange Commission fined HP $6 million for its disclosures of sales practices in September 2020.
Darren Robbins, a lawyer for the pension fund leading the case, said the opinion will help investors.
“By their very nature, misrepresentations prevent investors from detecting corporate wrongdoing,”
; he said.An HP spokesperson did not immediately respond to a request for comment.
The SEC said in 2020 that some HP regional executives used incentives to accelerate sales they expected to materialize in later quarters. It also said sales managers sold heavily discounted items to distributors known to sell HP products outside their own territories, “cannibalizing” sales from local distributors and violating company policy.
The SEC said HP failed to disclose to investors in a timely manner how these practices reduced margins and increased inventory at the Palo Alto, Calif.-based technology company.
The company did not acknowledge or deny the SEC’s findings.
Investors sued weeks after the SEC settlement, alleging that HP and its top executives defrauded investors by hiding the effects of the practices until 2016.
On June 21, 2016, HP announced a plan to reduce inventory in its distribution channels and estimated that it would reduce net revenue from shipments by $450 million over two quarters. Its share price fell 5.4% the next day.
U.S. District Judge Jeffrey White in Oakland, California, dismissed the case in March 2022, saying investors should have filed suit within two years of the statements being made.
Circuit Judge Jay Bybee wrote for the appeals court that Judge White had overlooked the shareholders’ claim that the SEC settlement “put HP’s previous statements in a new context and revealed that seemingly innocuous statements were actually intentional misrepresentations.”
Source link