Cohen Milstein Sellers & Toll PLLC is conducting an investigation to determine whether ModusLink Global Solutions, Inc. (“ModusLink” or the “Company”) and certain of its officers and directors made false and misleading statements and/or omissions in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
Class action lawsuits were filed in the U.S. District Court for the District of Massachusetts by other law firms on behalf of purchasers of the common stock of ModusLink Global Solutions, Inc. (NASDAQGS: MLNK) between September 27, 2007 and June 8, 2012, inclusive (the “Class Period”).
The complaints allege that defendants misrepresented and/or failed to disclose that: (1) the Company's accounting for rebates associated with volume discounts provided by vendors was improper and misleading; (2) the Company's financial statements did not provide a fair presentation of the Company's finances and operations and were not prepared in accordance with GAAP; (3) the Company lacked adequate internal and financial controls; and (4) as a result of the foregoing, the Company's financial statements during the Class Period were materially false and misleading.
After the market close on March 12, 2012, ModusLink filed its Form 10-Q for the second quarter of its 2012 fiscal year in which it revealed that in response to an SEC inquiry the Company was evaluating whether certain rebates should be shared with its clients, and whether the Company’s accounting for such rebates had been correct.
On June 11, 2012, ModusLink issued a press release announcing that it would restate its financial results from its 2007 fiscal year through the first two quarters of its 2012 fiscal year after discovering that “
certain client contracts have not been aligned consistently with ModusLink’s practice of retaining volume discounts
.” The Company also reported that it was delaying the filing of its Form 10-Q for the third quarter of fiscal 2012 ended April 30, 2012. According to the press release, the restatement was expected to lower ModusLink’s previously reported revenues for the affected periods by $20 to $30 million. At the same time, the Company announced the “retirement” of its President and CEO, Joseph Lawler, and its President of Global Operations, William McLennan, effective immediately. ModusLink also reported:
“Management is continuing to assess the Company’s internal control over financial reporting and its disclosure controls and procedures, and expects to conclude that the Company has a material weakness in its internal control over financial reporting. Management will report its conclusion on internal control over financial reporting and disclosure controls and procedures upon completion of the restatement process…In conjunction with the Company’s inability to timely file its Form 10-Q, ModusLink expects to receive a letter from NASDAQ notifying the Company that it is non-compliant with NASDAQ Listing Rules, which require listed companies to timely file all required periodic financial reports with the SEC.”
The price of ModusLink shares fell from $4.26 to $2.78 on June 11.