How Did R.H.Donnelley Failed to Account for Its Bad Debt Expense During Class Action Law Suit

Investors in the R.H. Donnelley Corporation have filed a class-action lawsuit in the United States District Court for the District of Delaware on behalf of purchasers of R.H. Donnelley Corp. publicly traded securities during the period between July 26, 2007 to May 28, 2009, against specific R.H. Donnelley’s officers and directors because R.H. Donnelley failed to account for its bad debt.

R.H. Donnelley’s directors and officers are charged with violating the Securities Exchange Act of 1934, because they issued false statements and materials connected with the companies financial situation. In the complaint, it alleges that the companies directors and officers caused the company to not accurately account, in a timely fashion, for their bad debt. The complaint specifically alleges that because the directors and officers issued misleading, false statements and failed to disclose that its bad debt was not only due to lower advertising revenue, but also because of a shift in their customer’s move away from using the yellow pages for advertising. Plus, it is alleged that the directors and officers not only understated their exposure to liquidity possibilities and of a possible downgrading of their Stock Exchange rating, they allegedly created an erroneous support statement for their financial projections into the Class period that artificially inflated prices of the companies stock value.

However, beginning in February of 2008, R. H. Donnelley’s directors and officers did start to acknowledge their financial woes with the company’s operations and with the financial results, so on March 12,2009, they publicly made an announcement that they had retained a financial advisor in order to assist with new evaluations of the companies capital, which would include the restructuring of various balance sheets. Then, only 2 months later, R. H. Donnelley filed for Chapter 11 bankruptcy protection in a debt-restructuring move that would wipe out existing shareholders. Leaving shareholders with stock trading at 6 cents per share.

This entry was posted on Wednesday, March 17th, 2010 at 1:27 pm and is filed under Corporate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.


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