The complaint is against the company and certain officers and directors with violations of the Securities Exchange Act of 1934. CompuCredit provides credit and related financial services and products to underserved and un-banked consumers.
Specifically, the complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company's business and financial results. As a result of defendants' false statements, CompuCredit stock traded at artificially inflated prices during the Class Period, reaching its Class Period high of $40.61 per share in December 2006.
Then, on June 10, 2008, The Wall Street Journal reported that federal regulators were expected to seek more than $100 million in fines and restitution against CompuCredit related to deceptive credit-card marketing tactics and abusive debt-collection practices. On this news, CompuCredit's stock dropped $2.49 per share to close at $6.30 per share on June 10, 2008, a one-day decline of 28% on
extremely high volume.
According to the complaint, the true facts, which were known by the defendants but concealed from the investing public during the Class Period, were as follows: (a) the Company's assets contained millions of dollars worth of impaired and risky securities, many of which were backed by loans to subprime borrowers; (b) the Company was not adequately accounting for its provision for loan losses in violation of Generally Accepted Accounting Principles, causing its financial results to be materially misstated; (c) the Company's improper marketing and collection practices would lead to large fines and would harm the Company's future results; (d) the company had far greater exposure to anticipated losses and defaults related to its subprime customers than it had previously disclosed; (e) given the deterioration in the market for asset-backed securities related to subprime consumers, the Company would be forced to reduce its lending operations due to liquidity concerns as it relied upon the sale of its asset-backed securities to fund its ongoing operations; and (f) given the increased volatility in the subprime market and increased level of delinquencies and defaults that CompuCredit was experiencing, the Company had no reasonable basis to make projections about its financial results.
On October 22, 2008, Judge Thomas W. Thrash, Jr. granted the motion to consolidate two related actions and further granted the motion to appoint the City of Pontiac General Employees' Retirement System as lead plaintiff and Coughlin Stoia Geller Rudman & Robbins LLP and Holzer Holzer & Fistel LLC as co-lead counsel. On December 24, 2008, the lead plaintiff filed a Consolidated Class Action Complaint. On March 18, 2009, the defendants filed a motion to dismiss a Consolidated Class Action Complaint. On December 4, 2009, Judge Thomas W. Thrash, Jr. granted the defendants’ motion to dismiss. The plaintiff had 30 days to file an amended complaint. On January 13, 2010, the case was dismissed with prejudice and the civil case was terminated.