Cohen, Milstein, Hausfeld & Toll, P.L.L.C. Announces Class Action Lawsuit on Behalf of Investors of Faro Technologies
11 January 2006 - 6:32AM
Business Wire
The law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C. has
filed a lawsuit on behalf of its client and on behalf of purchasers
of the securities of Faro Technologies, Inc. (Nasdaq:FARO) ("Faro"
or the "Company") between May 6, 2004, and November 3, 2005,
inclusive (the "Class Period"), in the United States District Court
for the Middle District of Florida. The Complaint charges Faro and
certain executive officers of Faro with violations of federal
securities laws. FARO and its subsidiaries develop, manufacture,
market and support software-based three-dimensional measurement
devices for manufacturing, industrial, building construction and
forensic applications. The complaint charges FARO and Simon Raab
(Chief Executive Officer and Chairman), Gregory A. Fraser
(Executive Vice President, Secretary, Treasurer and a director),
and Barbara R. Smith (Chief Financial Officer) with violations of
the Securities Exchange Act of 1934, and alleges that throughout
the Class Period, these defendants directly participated in
accounting fraud which materially misrepresented the Company's
financial results in violation of Generally Accepted Accounting
Principles ("GAAP"). More specifically, the Complaint alleges that
at or about the beginning of the Class Period, the defendants
represented that the Company had implemented practices that
purportedly increased the Company's production capacity by, among
other improvements, eliminating overproduction, wait time,
inefficient processes, and product defects. During the Class
Period, defendants issued strong results and positive guidance
which they attributed in material part to the Company's purported
implementation of adequate controls and more efficient practices.
The Complaint alleges that defendants' Class Period representations
regarding the Company's financial performance and prospects were
materially false and misleading when made because the Company's
internal inventory and accounting controls and procedures were
wholly defective and inadequate during the Class Period. The truth
began to emerge on July 18, 2005. On that day, the Company issued a
press release revealing that it had a backlog of unfilled customer
orders that had grown significantly in the second quarter of 2005
and that, as a result, the Company significantly lowered its
earnings guidance for that quarter. Further, on November 3, 2005,
after the market closed, the Company announced that it had incurred
$1.6 million in "inventory costing and consumption variances"
related to the implementation of a new accounting and inventory
management system. Defendant Simon Raab later admitted that the
Company had not been able to keep up with customer orders which
resulted in "substantially more complex inventory management
situations, and ... substantial inventory increases." In reaction
to this news, the price of FARO stock plummeted $4.39, or 19.6%,
from its closing price of $22.38 on November 3, 2005, to finally
close on November 4, 2005, at $17.99, on unusually heavy trading
volume. The Complaint also alleges that during the Class Period,
before the truth was revealed to investors, defendants sold or
caused to be sold more than 1.48 million of their own shares of
Faro stock, for net proceeds of approximately $40.9 million,
including through the use of highly complicated forward sales
transactions that allowed defendants to both realize immediate
profits and avoid current tax liabilities. If you purchased or
acquired Faro stock during the Class Period, you may, no later than
February 6, 2006, move the court to be appointed as Lead Plaintiff.
There are certain legal requirements to serve as Lead Plaintiff.
Any member of the purported class may move the court to serve as
Lead Plaintiff through counsel of their choice or may choose to
remain an absent class member. Your ability to share in any
recovery is not, however, affected by the decision whether or not
to serve as Lead Plaintiff. To be a member of the class, you need
not take any action at this time. Cohen, Milstein, Hausfeld &
Toll, P.L.L.C. has significant experience in prosecuting investor
class actions and actions involving securities fraud. The firm has
offices in Washington, D.C., New York and Chicago, and is active in
major litigation pending in federal and state courts throughout the
nation. You may visit the firm's website at www.cmht.com. The
firm's reputation for excellence has been recognized on repeated
occasions by courts which have appointed the firm to lead positions
in complex multi-district or consolidated litigation. Cohen,
Milstein, Hausfeld & Toll, P.L.L.C. has taken a lead role in
numerous important cases on behalf of defrauded investors, and has
been responsible for a number of outstanding recoveries which, in
the aggregate, total in the billions of dollars. If you have any
questions about this notice or the action, or with regard to your
rights, please contact either of the following: -0- *T Cohen,
Milstein, Hausfeld & Toll, P.L.L.C. Steven J. Toll, Esq. Audrey
Braccio 1100 New York Avenue, N.W. West Tower - Suite 500
Washington, D.C. 20005 Telephone: 888-240-0775 or 202-408-4600
E-mail: stoll@cmht.com or abraccio@cmht.com *T
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