A class action lawsuit was filed against Quality Distribution Inc (QDI) February 24 on behalf of shareholders by the law firm of Schiffrin & Barroway LLP. The suit alleges that QDI, parent company of Quality Carriers Inc, overstated its financial results and presented financial results statements that were not prepared in accordance with generally accepted accounting principles. Thomas L Finkbiner, QDI chairman, president, and chief executive officer, and Samuel M Hensley, QDI chief financial officer, were named in the lawsuit, according to a Schiffrin & Barroway press release.
The lawsuit follows a QDI announcement February 2 that it expected to take a fourth-quarter 2003 charge and restate its financial results back to 2001 after discovering insurance law violations at Power Purchasing Inc (PPI), one of its subsidiaries. The fourth-quarter charge reportedly will be between $3 million and $6 million. Net income for the quarter will be negatively impacted, according to QDI.
QDI said its own internal investigation indicated that the irregularities resulted from unauthorized actions by PPI's former manager. The former manager allegedly failed to renew certain insurance policies for PPI's customers yet continued to collect premiums in violation of insurance laws. The former manager allegedly concealed these activities from QDI. Based on the investigation to date, according to QDI officials, the former manager appears to have been the only person engaged in these irregularities, which were limited to PPI.
The problems at Power Purchasing Inc reportedly were not discovered until after QDI completed its initial placement offer in November 2003. QDI raised approximately $110.7 million in that IPO by selling seven million shares of common stock at $17 a share