Buca Inc. Case 12/18/2006
According to a press release a shareholders has filed a class action on behalf of persons who purchased the securities of Buca, Inc. from February 6, 2001 through March 11, 2005. The defendants are Buca and three of its former top executives.
Buca is a Minneapolis-based company that owns and operates over 100 restaurants nationwide. The complaint alleges that the defendants issued false and misleading financial statements throughout the class period. During that time, according to the complaint, Buca materially overstated its income, overstated its revenues, lacked adequate internal controls, and failed to follow generally accepted accounting practices. When Buca was ultimately forced to disclose these facts to the investing public and to restate its financial statements, the price of the company’s stock declined significantly. Two of the defendants in the case, Buca’s former Chief Executive Officer and its former Chief Financial Officer, have been convicted and sentenced to prison for committing mail fraud or wire fraud at Buca during the class period.
In August 2007, the district court dismissed the case because, according to the court, the plaintiffs had not adequately shown that the defendants had acted with scienter (an improper state of mind) and because the Court did not believe that the Plaintiffs’ had shown that the Defendants’ conduct harmed persons who bought Buca’s stock during the Class period. Lead plaintiffs appealed the district court’s decision to the United States Circuit Court of Appeals for the Eight Circuit.
Before the appeal was decided the parties agreed on a proposed settlement to the case. The settlement was preliminarily approved by the district court on May 28, 2008.