Risk & Compliance

Insight Enterprises Hit with Investor Suits

Shareholder actions say that the computer products reseller didn't disclose alleged accounting improprieties.
Stephen TaubMarch 26, 2009

Computer products reseller Insight Enterprises Inc., which recently disclosed that it was the target of its second Securities and Exchange Commission probe in two years, is being sued by shareholders.

At least four law firms have announced the filing of class-action lawsuits in federal court for the District of Arizona on behalf of investors who purchased securities between Jan. 30, 2007, and this Feb. 6. In one complaint, Izard Nobel LLP accuses Insight and certain of its officers and directors of failing to disclose that Insight was improperly accounting for trade credits; that the company’s financial results did not follow GAAP; and that financial controls were inadequate. As a result, the company’s financial statements were materially false and misleading, the law firm asserted.

On Feb. 9 Insight announced that it would restate previously reported earning, and said that it expected to restate financial statements, including the company’s December 2007 annual report, and quarterly reports for the first three quarters of fiscal 2008. On the news, shares of the value of Insight shares fell nearly 50 percent, to $3.05.

Last week the company disclosed that it had received an informal SEC inquiry requesting documents and information relating to its historical accounting treatment of aged trade credits. The company said that it intends to cooperate with the request.

Earlier this month Insight said that it had received a Nasdaq “staff deficiency letter” indicating that the company had not complied with a rule requiring timely filing of all reports with the SEC, because the company has not yet filed its 2008 annual report. The letter said that rules required the company to submit a plan to regain compliance within 60 calendar days. If the plan is accepted Nasdaq can grant an exception of up to 180 calendar days from the due date, or until August 31, 2009, to regain compliance.

The company said that it intends to timely submit a plan to regain compliance.

In August the company said in a regulatory filing that an SEC investigation into the its stock-option grant practices had been completed, and that the regulator did not intend to recommend any enforcement action.