Overview
On May 6, 2011, United States District Judge for the Northern District of Illinois Elaine E. Bucklo granted final approval of a settlement in this alleged securities fraud class action. The settlement consists of $27 million in cash plus 474,547 shares of common stock, valued at $13,292,061 as of the market’s close on May 6, 2011, totaling more than $42 million.
Originally filed in 2009, investors who purchased or acquired the common stock of Huron Consulting Group, Inc. between April 27, 2006, and July 31, 2009 (the “Class Period”) brought this securities class action lawsuit against Huron Consulting Group, Inc. and Huron’s former Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer to hold them accountable for this fraud under Securities Exchange Act of 1934.
Plaintiffs allege that after the market closed on July 31, 2009, Huron admitted that its impressive reported results were the result of improper accounting and that it was required to restate its financial statements from 2006 through the first quarter of 2009, thereby reducing net profit by a total of $57 million. Huron further disclosed that, following an investigation by Huron’s Audit Committee, Huron’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer would immediately resign their positions without severance. Those officers, who were accounting experts, either knew about or, at a minimum, recklessly disregarded, an ongoing accounting fraud. Following these disclosures, Huron’s stock dropped 70% in a single day.
Cohen Milstein was served as co-lead counsel, representing the co-lead plaintiffs, the Public School Teachers’ Pension & Retirement Fund of Chicago and the Arkansas Public Employees Retirement System.
Case Background
Huron Consulting Group, Inc. was founded in 2002 by former Arthur Andersen partners and provides accounting, finance and corporate transaction consulting services. From 2005 through 2007, Huron grew in large part by acquiring other consulting firms in large, multimillion dollar transactions.
This action arises from an alleged scheme to inflate Huron’s reported profits by deliberately accounting for certain acquisition-related payments as goodwill instead of compensation expenses. Allegedly, Huron and its senior management used the inflated profits to tout Huron’s results to investors and analysts during the Class Period. As a result, Huron’s reported income often exceeded analysts’ expectations and analysts frequently noted how Huron’s margins were superior to its competitors, reflecting the company’s profitability.
Plaintiffs allege that after the market closed on July 31, 2009, Huron admitted that its impressive reported results were the result of improper accounting and that it was required to restate its financial statements from 2006 through the first quarter of 2009.
The company ultimately admitted that Huron made multimillion dollar payments to Huron employees – including to selling shareholders of acquired companies who, with knowledge of senior management, “reallocated” such payments to Huron employees – in connection with at least four different transactions. Under plain and longstanding accounting rules, these payments were expenses that reduced Huron’s profits, and Huron was required to record them as such. On July 31, 2009, Huron disclosed that it had failed to do so and that it was therefore required to restate its reported financial statements for thirteen consecutive quarters to reduce net profit by a total of $57 million. Huron further disclosed that, following an investigation by Huron’s Audit Committee, Huron’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer would immediately resign their positions without severance. Those officers are accounting experts who knew about, or at a minimum recklessly disregarded, the ongoing accounting fraud, and they were forced to resign for cause. Following these disclosures, Huron’s stock dropped 70% in a single day — from $44.35 to $13.69 per share.