I'm not having any luck getting the PDF on my system.
Bob, I didn't having any problem downloading and opening it in Adobe Acrobat 3.0. Although I did hear that the attorneys may be updating to a later version of the file, but that shouldn't affect the PDF download.
BTW, I only posted in my "Parts 2-6" about 1/3 of the entire lawsuit document. There is much more in the full legal filing.
Regarding your question about any allegations of "channel-stuffing," I don't recall any reference to that term specifically. However, among some of the alleged things that I found the most shocking in the lawsuit (excluding the MER/INSP stuff, "insider selling" stuff, false projected earning stuff, etc..), was the amazing allegations of things like "revenue purchasing." For example, among other things the lawsuit claims, INSP would take their own funds and/or stock (which to me is like just printing your own money), and "invest" in some "strategic" company (as they like to call it), with the requirement that the company would have to "purchase" back services or advertising from INSP, as part of those "deals." In other words, as I understand it, INSP was listing those "investments" in BOTH their asset column, AS WELL AS also claiming that same money (their money) coming back to them as "income," thus listing it in their "revenue" column. The allegations also seem to indicate that sometimes absolutely no "goods or services" were provided at all, just INSP apparently (for all intents-and-purposes), essentially writing checks to itself (passing through the "stategic partner"), and calling it "income. According to the lawsuit, apparently this is a complete sham, blatantly illegal, and in violation of a long list of GAAP reporting requirements, as well as SEC rules.
If just a small fraction of the shenanigans alleged in the lawsuit are true, it shouldn't surprise anyone as to why this stock has tanked 99.46% in value, in just over 26 months. And why it had the worst 2-year drop of any stock in the entire NASDAQ (with a "starting" market cap of $500 million or more). This "It's the economy, stupid" crap just won't cut it, if the "Defendants" actually did what is alleged. BTW, it's my understanding that most litigation insurance policies (which I'm sure INSP has), doesn't cover court-proven "intentional deception" or "fraud."
Here's just a few quotes from my "Part Five" post
(from pgs. 66-81, in case you didn't get that far <VBG>):
193. In order to improperly inflate InfoSpace's revenues, earnings and assets during the Class Period, Defendants undertook a scheme whereby they improperly booked as revenue sales which they were not entitled to claim as revenue because the revenues had been "purchased" by the Company, and failed to recognize expenses that had accrued.
194. These improper accounting practices and manipulations were in direct violation of InfoSpace's stated revenue recognition policies, GAAP and SEC rules,...
198. During the Class Period, InfoSpace (through the InfoSpace Venture Capital Fund) made significant investments in numerous start-up companies. These start-up companies were required to spend between 50-80% of the proceeds of these "investments" in services purchased from InfoSpace. In Essence, InfoSpace was "purchasing" this revenue stream in violation of GAAP and SEC Regulations, and specifically FAC 5.
199. Further, InfoSpace was aware that many of these start-up companies were in extreme financial difficulty at the time the investments were made, and that the InfoSpace Venture Capital Fund would almost certainly take significant losses from these "revenue purchasing" or "Lazy Susan" transactions.
200. Ultimately, InfoSpace was forced to "bail out" the InfoSpace Venture Capital Fund at significant cost to the Company, further confirming the fact that the revenues from these "Lazy Susan" transactions were recognized in violation of GAAP.
201...Defendants improperly recognized revenue (i) by recording revenue on "tradeout" deals where InfoSpace would merely swap check payments with another company without any exchange of goods/services; (ii) by recording revenue on transactions with subsidiaries and other related parties where InfoSpace gave the parties the funds to pay for the product or service; and (iii) by artificially inflating revenue from barter transactions in which InfoSpace inflated the value of the non-monetary assets. These improper accounting practices and manipulations were in direct violation of GAAP and SEC rules.
203...InfoSpace entered into "trade out" deals whereby it would receive monthly checks from companies and within days after the cash receipt, InfoSpace would issue a check back to the company for the same dollar amount. These sham transactions were structured and entered into for no other reason than to give the false appearance that InfoSpace had made sales to legitimate paying customers. InfoSpace improperly recorded advertising revenues on these deals despite the fact that no such advertising had been sold and thus no revenue had actually been earned.
205...InfoSpace also undertook a separate scheme to inflate its revenue during the class period whereby it purchased its own revenue from certain affiliated parties. Internally, InfoSpace referred to these transactions as "lazy Susan" or "roundtrip" deals. InfoSpace's "lazy Susan" investment scheme involved conditional cash investments made by InfoSpace (or InfoSpace Venture Capital Fund) in exchange for that companies business.
208...InfoSpace recognized revenues from barter transactions based on trumped-up calculations of the value of the advertising it was giving or receiving, neither of which had any reasonable basis in the true fair market value of these services. Accordingly, this improperly recognized barter income served to materially overstate InfoSpace's revenues during the Class Period.
213. The bogus revenues InfoSpace recorded associated with the "trade out" transactions, and the "Lazy Susan" transactions described above could not be recognized under SOP 97-2 as no product or service had been delivered and/or collectability was not assured as the customer would not pay unless InfoSpace gave them the resources by which to do so.
234. Defendant Jain used both his inside knowledge of the actual conditions at InfoSpace and his ability to mask those conditions to the investing public to unload more than 3 million shares of InfoSpace stock during the Class Period, reaping illegal insider trading proceeds of more than $192 million. |
