Florida, Louisiana Funds Sue Sykes Enterprises Over Losses
The motion pits the two plan sponsors against 200 small investors, who have launched a class-action suit against Sykes over the same allegations. By prominently speaking out as large institutional investors, the plan sponsors hope to recuperate more of their losses. They believe that their interest will not be served as well by the competing class action suit.
“On suits like this, the typical return is 14 cents on the dollar,” Horace Schow, General Counsel for Florida State Board of Administration, told PLANSPONSOR.com. ” By having institutional investors as lead plaintiffs, we could improve our receipt of damages. We hope to see at least 25 cents on the dollar.”
The two funds hope to attract other institutional investors in the class action.
The suit charges Sykes and two of its senior officers with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, namely:
- improperly recognizing revenues
- inflating financial results
- iolation of Generally Accepted Accounting Principles (GAAP).
These allegations cover actions during the last three quarters of 1999. In February, Sykes announced that it had restated its previously reported financial results for the second and third quarters of 1999.
Florida claims estimated losses of $900,000 on 55,600 shares and Louisiana of over $1 million on 70,000 shares. The funds seek full restitution, damages, and attorneys’ fees.
Florida’s defined benefit fund holds $103 billion, and Louisiana’s 401(a) defined benefit plan holds $6 billion.
The competing class action suit brought by law firm Pomerantz Haudek Block Grossman & Gross LLP represents 200 non-institutional investor plaintiffs. A hearing some time in the next four months will decide the appointment of the lead plaintiffs between these and the Florida/Louisiana motion.
Several other class actions suits are pending against Sykes over its accounting practices. The company said in February that the lawsuits were without merit. Sykes said it could not comment on the allegations Wednesday.
“We are surveying our counterparts to avoid conflicts among public funds regarding lead plaintiff status,” Kevin Torres, General Counsel of Louisiana State Employees’ Retirement System, told PLANSPONSOR.com. “We encourage other public and corporate funds to join us if they invested in Sykes stock and experienced losses in 1999.”
Torres said they’ve made inquiries through the National Association of Public Pension Attorneys and the Council of Institutional Investors to find other institutional plaintiffs.
Interested funds can call:
- Florida State Board of Administration counsel Michael J. Pucillo of Burt & Pacillo, LLP in Florida at 561-835-9400, or
- Louisiana’s counsel Steven Singer of Bernstein Litowitz Berger & Grossman LLP in New York at 212-554-1400
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