CP Ships Ltd. Case 06/10/2008
According to a press release from a law firm a shareholder has filed a lawsuit alleging violations of federal securities laws that was filed on behalf of a proposed class of all investors who purchased CP Ships stock from January 29, 2003 through August 9, 2004. The suit was initially filed in 2004 in the U.S. District Court for the Middle District of Florida.
CP Ships was a containerized shipping services company whose stock was traded on the New York and Toronto stock exchanges. It was purchased in late 2005 by the parent of Hapag-Lloyd, TUI A.G., a German tourism and shipping company, and its stock is no longer publicly traded.
On August 9, 2004 the Company revealed that it had artificially inflated net income for the previous nine quarters (all of 2002 and 2003 and the first quarter of 2004) due to a massive underaccrual of costs. The Company further revealed that it would need to reduce net income for these periods a total of approximately $35 million to $40 million for the nine quarters. On this news the Company’s stock fell $3.70 per share on August 9, 2004, or 22.4%, to close at $12.85 on the New York Stock Exchange. The price of CP Ships shares also fell approximately 21.5% on the Toronto stock exchange.
The suit charges that CP Ships and three of its officers, Raymond Miles, Frank Halliwell, and Ian Webber, significantly underaccrued certain costs, thus falsely inflating CP’s net income, issued financial statements that violated Generally Accepted Accounting Principles (“GAAP”), and that, as a result of this misconduct, CP Ships’ financial statements were materially false or misleading at all times during the class period.
In early 2008, the parties reached a settlement to the case pursuant to which the Defendants would cause to be paid $1.3 million to resolve the claims against them. The settlement will not enter into force until and unless it is approved by the Court.