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| 2001 News and Press Releases |
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HEADLINE ARCHIVED:
Stockholders Alleged Valid Securities Fraud Claim Against Book Publisher That Concealed Increased Returns From Retailers
Entertainment Law Reporter. November 2001
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Excerpt: Stockholders in Scholastic Corporation alleged a valid securities fraud claim against the book publishing company and one of its officers, the Second Circuit Court of Appeals has held. Scholastic, like other book publishers, sells books to retail stores with a full right of return. Scholastic, however, treats the wholesale price of those books as "income" when books are shipped to stores, even though they may later be returned. In a class action lawsuit against Scholastic, shareholders alleged that Scholastic's vice president for finance and investor relations made misleading public statements about the company's financial condition by concealing the fact that returns from book stores had increased - thus reducing Scholastic's actual income. A federal District Court had dismissed the stockholders' complaint for failing to state a valid claim under the Private Securities Litigation Reform Act. But in an opinion by Judge Richard Cardamone - which characterized Scholastic's alleged practices as "an unusual business model" - the Court of Appeals has reversed and has remanded the case for further proceedings.
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