EZCORP Inc (NASDAQ:EZPW) Investor Investigation Concerning Possible Breaches Of Fiduciary Duties Announced

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Company Name(s): 
EZCORP
Affected Securities: 
NASDAQ: EZPW

August 28, 2015 (Shareholders Foundation) - An investigation on behalf of current long-term investors in shares of EZCORP Inc (NASDAQ:EZPW) concerning potential breaches of fiduciary duties by certain EZCORP directors and officers that caused damages to the company and EZPW shareholders.

The investigation by a law firm for current long term investors in NASDAQ:EZPW stocks follows a lawsuit filed recently against EZCORP Inc over alleged securities laws violations. The investigation on behalf of current long term investors in NASDAQ:EZPW stocks, concerns whether certain EZCORP officers and directors are liable in connection with the allegations made in that lawsuit.

According to that complaint filed in the U.S. District Court for the Western District of Texas the plaintiff alleges that between October 27, 2014 and July 16, 2015 defendants made allegedly false and/or misleading statements and/or failed to disclose, among others that EZCORP Inc improperly recognized particular structured assets sales, that EZCORP Inc improperly classified certain loans, that, as a result, EZCORP Inc overstated its gains on assets sales and accrued interest revenue, that, as such, EZCORP Inc’s financial statements were not prepared in accordance with Generally Accepted Accounting Principles, that EZCORP Inc lacked adequate internal and financial controls, and that, as a result of the foregoing, defendants’ statements were materially false and misleading at all relevant times.

On April 30, 2015, EZCORP announced a delay in its earnings release for the second quarter of fiscal 2015 due to an ongoing review of the Company's Grupo Finmart loan portfolio. On this news, shares of EZCORP fell from $9.20 to close at $8.41, representing a decline of $0.79 per share, or 8.59%. Subsequently, on May 20, 2015, the Company announced it had received a notice of noncompliance with NASDAQ's listing requirements due to its failure to timely file its 10Q, causing the stock price to fall 7.3% to close at $8.33 on May 21, 2015.

Then, on July 17, 2015, EZCORP announced it will restate its financial statements for fiscal 2014 and the first quarter of fiscal 2015. The restatement pertains to six structured asset sales, pursuant to which a portion of the Grupo Finmart loan portfolio was sold to a special purpose trust (the "Asset Sales"). Due to certain control rights that Grupo Finmart retained as servicer of the loans, the trusts should have been accounted for as "variable interest entities" and, thus, the Asset Sales should not have been accounted for as sales. Approximately $40 million in gain will be eliminated. EZCORP also failed to adequately identify out-of-payroll loans and to track the aging of non-performing loans. According to the Company, the foregoing issues indicate material weaknesses in EZCORP's internal control over financial reporting and deficiencies in the Company's disclosure controls and procedures. On this news, shares of EZCORP fell from $6.72 to $6.48, representing a loss of $0.24 per share or approximately 3.57%.