Class Action Lawsuit Filed Against Zale Corporation
July 20, 06
A class action lawsuit has been filed against Zale Corporation. The suit has been launched on behalf of those who purchased or otherwise acquired publicly traded securities of Zale Corporation between February 18, 2005 and May 5, 2006, inclusive.
The complaint alleges that Zale “issued a series of material misrepresentations to the market which had the impact of artificially inflating the market price of their securities. Unbeknownst to investors, the representations in the company's reported results of operations materially overstated Zale's net cash flows and free operating cash flows, which are important measures of cash generating abilities. In addition, the company improperly accounted for extended service agreements, leases and accrued payroll,” says a press release from Labaton Sucharow & Rudoff LLP, one of the firms filing the suit.
On April 10, 2006, Zale announced that the SEC had initiated a broad investigation into many aspects of their accounting, operations, and disclosure practices, including the company's accounting for extended service agreements, leases and accrued payroll, executive compensation and severance, earnings guidance, stock trading, and the timing of vendor payments.
On Friday, May 5, 2006 Zale announced that it had replaced its Chief Financial Officer, Defendant Lenz, after discovering that the company improperly inflated its reported net cash flows and free cash flows.