Jan 4, 2018 | Securities Class Action Archive
Intel Class Action Lawsuits Filed Just Days After First Reporting of Intel Processor Security Vulnerability
Gizmodo reported (“Intel Hit With Three Class Action Lawsuits Related to Security Vulnerability”) that only two days after “The Register first reported that all Intel x86-64x processors were subject to a severe security vulnerability, and already Intel has been hit with at least three separate class action lawsuits related to the vulnerability.”
According to Gizmodo:
All three complaints cite the security vulnerability as well as Intel’s failure to disclose it in a timely fashion. They also cite the supposed slowdown of purchased processors. However that is still up for debate. In a press release today, Intel claimed it has “issued updates for the majority of processor products introduced within the past five years.” Moreover, it says the performance penalty is not as significant as The Register initially claimed.
Intel Class Action Lawsuit – Class Action Complaint Filed for Damages & Equitable Relief
One Intel class action lawsuit, filed on January 3, 2018 in United States District Court, Northern District of California, San Jose Division, “on behalf of all individuals who purchased a defective Intel core processor,” stated that “[f]or at least 10 years, [Intel] has marketed, distributed, and warranted . . . defective Intel CPUs in California and throughout the United States.” [Emphasis added]
Intel Class Action Lawsuit – Intel Processor Design Defect’s Broad Scope
The Intel processor security defect, according to the class action lawsuit complaint, is in Intel’s x86-64x chip processor, the “most widely-used chips in virtually all desktop and laptop computers,” as well as “in most of the large, cloud based servers such as those from Google, Microsoft and Amazon.”
The Intel class action lawsuit complaint further states:
Defendant Intel’s x86-64x CPUs suffer from a security defect, which causes the CPUs to be exposed to troubling security vulnerabilities by allowing potential access to extremely secure kernel data (the “Defect”). The only way to “patch” this vulnerability requires extensive changes to the root levels of the Operating System which will dramatically reduce performance of the CPU. The Defect renders the Intel x86-64x CPUs unfit for their intended use and purpose. The Defect exists in all Intel x86-64x CPUs manufactured since at least 2008. The x86-64x CPU is, and was, utilized in the majority of all desktop, laptop computers, and servers in the United States[.] [Emphasis added]
To date, [Intel Corporation] has been unable or unwilling to repair the Defect or offer Plaintiffs and class members a non-defective Intel CPU or reimbursement for the cost of such CPU and the consequential damages arising from the purchase and use of such CPUs. Indeed, there does not appear to be a true “fix” for the Defect. The security “patch,” while expected to cure the security vulnerabilities, will dramatically degrade the CPU’s performance. Therefore, the only “fix” would be to exchange the defective x86-64x processor with a device containing a processor not subject to this security vulnerability. In essence, Intel x86-64x CPU owners are left with the unappealing choice of either purchasing a new processor or computer containing a CPU that does not contain the Defect, or continuing to use a computer with massive security vulnerabilities or one with significant performance degradation. [Emphasis added]
Intel Class Action Lawsuit – Defective CPUs Not Merchantable & Performance Degradation
The complaint also stated that Intel’s CPUs that were “. . . manufactured and sold to Plaintiffs and Class members were not merchantable and were not fit for the ordinary and particular purposes for which such goods are used in that the [Intel] CPUs suffer from a critical security defect, requiring an OS-level software patch that will degrade the performance of the CPU.”
Intel Chip Flaw Vulnerabilities – Meltdown & Spectre Security Vulnerabilities
Purchasers and consumers can find out more information about the two security vulnerabilities pertaining to Intel’s chip design flaw by reviewing PCMag’s “Chip Design Flaw Not Limited to Intel, Researchers Say,” and the Meltdown and Spectre-related website referenced in the article.
Image: Pixabay, Gerd Altmann (geralt), CC0 1.0 Universal
Intel Chip Processor (“CPU”) Purchasers
Purchasers of vulnerable Intel chip processors (“CPUs”), or computers which contained affected Intel chip processors, who have questions about the Intel CPU defect, the class action lawsuits or their potential legal rights or claims can speak privately with an attorney by completing the form above on the right or by e-mailing [email protected].
Jan 4, 2018 | Securities Class Action Archive
BANC Investigation – Banc of California Securities Investigation
Banc of California (NYSE:BANC)
The Kehoe Law Firm’s class action BANC investigation concerns whether Banc of California and certain of its officers and/or directors violated federal securities laws.
On December 8, 2017, Bloomberg reported that a former Banc of California employee had filed a whistleblower lawsuit against the bank alleging, in part, that: revenue generated by BANC in 2016 was improperly carried over to the following year in order to inflate 2017 profits; and BANC had ignored its former Chief Financial Officer’s use of Company funds to patronize strip clubs.
On this news, Banc of California stock dropped $0.60 per share, or 2.76%, to close at $21.15 on December 8, 2017.
According to the December 9, 2017 Los Angeles Times story:
Troubled Banc of California was a den of iniquity featuring on-premises sex, drugs and strippers, according to a lawsuit filed . . . by a former employee.
Heather Endresen, who was managing director of the bank’s small-business loan department, has charged that the company terminated her without cause, days after she took her concerns about activity at the Irvine home office to a corporate whistleblower hotline.
Her complaints included “male employees having sex with woman in their work offices,” “visiting strip clubs with employees” and “using company funds to pay for strippers.”
Endresen’s lawsuit, filed . . . in Los Angeles Superior Court, further alleged “illegal drug use” by former Executive Vice President and interim CFO Francisco Turner, and accused him of “having sex with certain employees.” Banc of California announced Turner’s resignation in June.
. . .
The suit filed by Endresen, who worked at the bank from 2014 through May 2017, alleges serious breaches of financial propriety as well as rampant sex and drug use. Endresen has charged that company officers engaged in a “sham” effort to shift millions of dollars in corporate revenues from late 2016 into early 2017 — partly to avoid paying bonuses earned by Endresen and others.
BANC Investigation – Banc of California Investors
If you are a Banc of California investor and have questions or concerns about the Banc of California class action investigation, please contact John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected], complete the form on the right or e-mail [email protected].
Jan 2, 2018 | Securities Class Action Archive
Apple Class Action Lawsuits & Apple’s Recent Apology Letter
A Newburgh Gazette article, “Apple Faces at least 12 different class-action lawsuits over iPhone slowdowns,” reported that Apple has issued a letter addressing the iPhone slowdown “controversial practice . . . created to offset errors caused by the aging batteries inside” iPhones.
According to Apple’s December 28, 2017 letter, “A Message to Our Customers about iPhone Batteries and Performance”:
We’ve been hearing feedback from our customers about the way we handle performance for iPhones with older batteries and how we have communicated that process. We know that some of you feel Apple has let you down. We apologize. There’s been a lot of misunderstanding about this issue, so we would like to clarify and let you know about some changes we’re making.
Apple’s letter also addressed how batteries age, preventing unexpected shutdowns, recent user feedback, and how Apple is addressing customer concerns. Apple’s letter also included a link to a new customer support page, “iPhone Battery and Performance.”
Apple Class Action Lawsuits – iPhone Slowdowns & Apple’s “Stark Reversal”
The Newburgh Gazette story also reported:
Earlier this month, users began noticing how their iPhones were slowing down over time, with benchmarking service Geekbench later concluding from its data that after iOS 10.2.1 previous year the iPhone 6, 6s, and SE encountered slow downs.”
. . . Apple said it’s been hearing the feedback. It’s a stark reversal for a company that once said iPhone users would never need to replace their batteries, and for a company that has always been suspected of slowing down their products to encourage users to upgrade to newer devices. While the company should address this problem by making the battery replacement free, we’ll acknowledge that cutting $50 off the out-of-warranty replacement fee is a step forward, at least. However, starting next month, Apple will offer a lower price: $29.
More recently with the introduction of iOS 11.2.0 similar throttling was discovered for iPhone 7 models with older batteries.
This means the price has dropped down from $79 to $29, and an iOS software update providing updates on iPhone battery health in early 2018 – though details on exactly how that will work have yet to be announced.
And the Newburgh Gazette story reported about multiple lawsuits Apple now faces “for not disclosing what it knew about its software updates ahead of time.”
Apple Class Action Lawsuits – Software Updates & Deliberate Slowdown of Older-Model iPhones To Make Batteries Last Longer
A Los Angeles Times story referenced in the Newburgh Gazette article, “Apple faces class-action lawsuits over slowed-down iPhones,” reported
iPhone owners from several states have filed at least nine class-action lawsuits against Apple Inc. for not disclosing sooner that its software updates deliberately slowed down older-model phones so batteries would last longer.
The lawsuits — filed in U.S. district courts in California, New York and Illinois — allege that Apple’s silence led the iPhone owners to wrongly conclude that they had to buy newer, pricier iPhones instead of simply replacing the battery.
Three of the lawsuits were filed by Los Angeles-area residents. One accuses Apple of fraud through concealment and unfair business practices. Another accuses Apple of breaching an implied contract — that is, it argues that when people buy iPhones, they do so with the assumption that Apple won’t “purposefully interfere with” the phones’ “usage or value.” The lawsuit says Apple did not get iPhone owners’ consent before meddling with the phones’ speed. The third alleges a slew of misdeeds, including fraud, false advertising and unjust enrichment.
. . .
The lawsuits came after Apple confirmed last week what high-tech sleuths outside the company had already observed: The company deployed software to slow some phones. Apple said the software was intended as a fix to deal with degraded lithium-ion batteries that could otherwise suddenly die. [Emphasis added]
Image: Pixabay, kropekk_pl, CC0 1.0 Universal
Apple Class Action Lawsuits – Apple iPhone Owners
If you own an iPhone 6, iPhone 6S, iPhone SE or iPhone 7 which was upgraded to iOS 10.2.1, or a later version, and have questions about your potential legal rights, please fill out the form above on the right or send an e-mail to [email protected]. For additional information, please click here or here.
Dec 31, 2017 | Securities Class Action Archive
Kobe Steel Products – Shanghai Issues Metal Products Safety Warning
On December 28, 2017, Reuters reported (“Shanghai cautions on products from scandal-hit Kobe Steel, tightens checks”) that
Shanghai has issued a warning on the safety of metal products manufactured by scandal-hit Japanese firm Kobe Steel Ltd . . . and strengthened scrutiny measures, state-owned Xinhua News Agency reported, citing the city’s inspection body.
Japan’s No.3 steelmaker, which supplies the makers of cars, planes and trains across the world, said in October that about 500 of its customers had received products with falsified specifications. The producer’s quality certifications at some domestic plants have already been suspended.
According to the Xinhua report, Kobe [Steel] shipped in 451,000 tonnes of metal products to China through its Shanghai units over September 2016 to August 2017. Of that, data on 1,420 tonnes of aluminium sheet and 116 tonnes of copper sheet had been tampered, it added, citing the Shanghai Entry-Exit Inspection and Quarantine Bureau.
While Kobe’s Shanghai units have been in touch with their customers to check on safety of the products, the inspection bureau has said it will continue supervising the units to protect interests of Chinese consumers, Xinhua reported.
The bureau will conduct checks on all products made in Japan by Kobe Steel and set up a special technical investigation team to check its products that are involved with data falsification and release results on a routine basis, the report added.
The bureau will also conduct regular checks on Japan-made metal products imported through the Shanghai port and has already made a full retrospective investigation on related operations by Kobe Steel’s units in the city.
Kobe Steel Products – Europe Warns Aviation Industry to Suspend Use of Kobe Steel Metal Products
In October 2017, CNN Money reported (“Europe to planemakers: Stop buying Kobe Steel products”) that “Europe has issued a warning to the aviation industry: Stop using metal from scandal-plagued Kobe Steel.” The CNN Money article reported that
[t]he European Aviation Safety Agency (EASA) advised manufacturers in a statement Wednesday to suspend their use of Kobe Steel . . . products after the Japanese firm admitted to falsifying data.
The regulator recommended that aircraft makers find alternative suppliers and conduct a “thorough review of their supply chain.”
It’s the first such advisory to be issued by a major regulator since Kobe Steel came clean . . . over faking strength and durability data on thousands of tons of aluminum and copper parts.
The revelation left plane, train and automakers across the world scrambling to gauge their exposure to the suspect parts.
Further, the CNN Money article reported that
Kobe Steel has warned that the practice of falsifying quality data, including on its steel products, could spread back 10 years or more. The company has apologized.
Around 500 customers are thought to be impacted, according to a Kobe Steel spokesperson.
Kobe Steel Products – European Aviation Safety Agency (“EASA”) Issues Safety Advisory
In October 2017, Nikkei Asian Review reported (“EU aviation regulator issues advice on Kobe Steel parts”) that
The European Aviation Safety Agency issued a safety advisory notice . . . to airlines operating in the region, recommending them not to use parts made by Japan’s Kobe Steel, which has admitted to falsifying quality data on its aluminum and other products.
The safety information bulletin, also issued to aircraft maintenance and relevant companies in the region, does not restrict air travel in the region.
The EASA is responsible for setting safety rules and approving aircraft parts as well as maintenance procedures, among other things.
In the notice, the EASA recommended relevant parties to first check any product made by Kobe Steel that is currently being used; review their supply chains for maintenance parts; report to relevant regulatory authorities if Kobe Steel products are used; and, if possible, use alternative suppliers until the safety of Kobe Steel products is confirmed.
Kobe Steel Products – EASA “Safety Information Bulletin”
The subject of the European Aviation Safety Agency’s Safety Information Bulletin, dated October 17, 2017, was titled “Kobe Steel Ltd. Material – Falsified Inspection Data.” According to the Safety Information Bulletin:
As reported in recent media articles, Kobe Steel Ltd., a Japanese metals producer, found that their workers have, possibly over a period of many years, fabricated the inspection data on certain parts and shipped those parts, possibly not meeting the customer’s specification, to a wide range of companies manufacturing a wide range of products, parts and appliances, and components thereof.
The EASA’s Safety Information Bulletin included the following recommendations:
All [organizations] that may have specified or used Kobe Steel products should do a thorough review of their supply chains in order to identify if, and when, Kobe Steel products have been used in their product designs and fabrications.
In addition to informing their customers, production and repair approval holders are advised to inform their competent authority of the use of such materials, if not already known by the competent authority.
Design approval holders are advised to establish the scope of use of affected parts in its products, paying particular attention to identifying such material usage in more critical applications, e.g. Primary Structure, Principal Structural Elements, Critical Parts and Systems. Where alternative suppliers are available, it is recommended to suspend use of Kobe Steel products until the legitimacy of the affected parts can be determined. [Emphasis added]
Kobe Steel Scandal: Profits & Demanding Corporate Culture
In November 2017, The Telegraph, among other things, reported (“Kobe Steel quality scandal driven by pursuit of profits and demanding corporate culture”) that “Scandal-hit Kobe Steel’s troubles were driven by a relentless focus on profits and the company’s regimented corporate culture, which led to more than decade of faked quality guarantees on its products.”
Kobe Steel Investors Who Purchased, or Otherwise Acquired, Kobe Steel American Depositary Receipts (“ADRs”)
Kehoe Law Firm recently reported about its securities investigation related to improper conduct concerning aluminum and copper products manufactured by Kobe Steel and the recently filed securities class action filed against Kobe Steel (OTCMKTS:KBSTY) and certain officers and/or directors, on behalf of all persons who purchased, or otherwise acquired, Kobe Steel ADRs between May 29, 2013 and October 12, 2017, inclusive (“Class Period”), for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
Kobe Steel Class Action Lawsuit
The Kobe Steel class action lawsuit complaint alleges that throughout the Class Period, Kobe Steel Defendants made materially false and misleading statements regarding Kobe Steel’s business, operational and compliance policies and/or failed to disclose that 1) Kobe Steel falsified data on many of its aluminum, copper and steel products sold to customers; 2) Kobe Steel sold products that in reality failed quality control tests in violation of laws and regulations; 3) Kobe Steel’s financial performance relied on selling products that did not meet quality standards in violation of laws and regulations; 4) Kobe Steel would incur significant costs and lose customers if customers became aware of the substandard quality of products they purchased; and 5) Kobe Steel’s compliance initiatives, corporate governance and risk management activities were ineffective and inadequate at preventing product data manipulation, fraud and other related misconduct.
The complaint also alleges that Kobe Steel’s internal reporting systems failed to foster employee participation and adequately address employee concerns, and there was an excessive propensity by senior management, including the individual Kobe Steel Defendants, to hyper-emphasize profitability at all costs, that promoted a pervasive culture of corner-cutting, and looking the other way in the face of compliance violations, as long as profits were achieved, which deterred employees from making claims over product quality for fear of retribution and/or management failing to properly investigate claims.
As a result of the foregoing, Kobe Steel’s ADRs traded at artificially inflated prices during the Class Period and class members suffered significant losses and damages.
Investors who purchased, or otherwise acquired, Kobe Steel American Depositary Receipts and wish to speak privately with a securities attorney about potential legal claims can complete the form above on the right; e-mail [email protected]; or contact John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected].
Dec 29, 2017 | Securities Class Action Archive
Ekso Bionics Holdings, Inc. (NASDAQ:EKSO)
According to Ekso Bionics Holdings, the Northern California-based company is a “worldwide pioneer in the field of robotic exoskeletons” which is “committed to developing the latest technology and engineering to help people rethink current physical limitations and achieve the remarkable.” Ekso’s “products unlock human strength, endurance, and mobility potential, with broad applications across medical and industrial markets.”
Ekso Bionics Holdings Concludes that Ekso Bionics’s Report on Effectiveness of Ekso Bionics’s Internal Control Over Financial Reporting as of December 31, 2016 Should No Longer Be Relied Upon
Ekso Bionics filed a Form 8-K, dated December 14, 2017, which stated:
On December 8, 2017, OUM & Co. LLP (“OUM”) notified Ekso Bionics Holdings, Inc. . . . that it had concluded that its report on the effectiveness of [Ekso Bionics’s] internal control over financial reporting as of December 31, 2016 should no longer be relied upon and that a material weakness in [Ekso Bionics’s] internal control over financial reporting existed as of such date. [Emphasis added]
The share price of Ekso Bionics Holdings, on this news, fell $0.15, or 6.17%, to close at $2.28 on December 15, 2017.
The Form 8-K filed by Ekso Bionics Holdings also stated:
As part of its original audit of [Ekso Bionics’s] financial statements included in the 2016 10-K, OUM assessed [Ekso Bionics’s] internal control over financial reporting as of December 31, 2016. At that time, OUM and [Ekso Bionics] concluded that [Ekso Bionics] maintained effective internal control over financial reporting as of December 31, 2016.
Subsequent to the issuance of the 2016 10-K, the Public Company Accounting Oversight Board conducted an inspection of OUM’s 2016 audit of [Ekso Bionics]. As a result, OUM reevaluated [Ekso Bionics] information technology (IT) general controls, and has now concluded that a “material weakness” existed as of December 31, 2016. [Emphasis added]
As a result of the identified material weakness, OUM has performed additional testing on [Ekso Bionics’s] financial statements as of and for the year ended December 31, 2016 to reconfirm their opinion on the fairness of the financial statements included in the 2016 10-K without reliance on the effectiveness of [Ekso Bionics’s] internal controls. As noted above, OUM has now reconfirmed its unqualified opinion on the fairness of [Ekso Bionics’s] financial statements included in the 2016 10-K.
After consultation with OUM, management has now concluded that [Ekso Bionics’s] internal control over financial reporting was not effective at December 31, 2016 and, accordingly, its disclosure controls and procedures were not effective at December 31, 2016 or for subsequent interim periods. As a natural course of business, management has, over the course of 2017, been working to further strengthen its internal controls. Specifically, [Ekso Bionics] has implemented a more robust accounting and enterprise resource planning system with software provided by Infor (which became operational in October 2017). [Emphasis added]
Ekso Bionics To Amend Its Filings To Reflect Material Weakness in Internal Control Over Financial Reporting
Ekso Bionics’s Form 8-K also stated that Ekso Bionics
. . . plan[s] to amend [its] Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and our Quarterly Reports on Form 10-Q for the periods ended March 31, 2017, June 30, 2017 and September 30, 2017 to reflect the conclusion by management that there was a material weakness in internal control over financial reporting and that [Ekso Bionics’s] disclosure controls and procedures were not effective as of the end of the periods covered by these reports. OUM’s auditor’s report on the Company’s internal control over financial reporting will also be revised to state that [Ekso Bionics’s] internal control over financial reporting at December 31, 2016 was not effective.
Ekso Bionics Amended Annual & Quarterly Reports & Stock Drop
Post-market, on December 27, 2017, Ekso Bionics filed an amended annual report (Form 10-K/A) for 2016 and amended quarterly reports for the first three quarters of 2017.
On this news, Ekso’s share price fell sharply during intraday trading on December 28, 2017.
According to Ekso Bionics’s amended annual report:
As previously disclosed in Item 8.01 of our Current Report on Form 8-K filed on December 14, 2017, [Ekso Bionics’s] independent registered public accounting firm, OUM & Co. LLP (“OUM”) notified management and the Audit Committee of Ekso Bionics Holdings, Inc. (the “Company”) that it had concluded that its report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016 should no longer be relied upon and that a material weakness in the Company’s internal control over financial reporting existed as of such date. [Emphasis added]
. . .
As part of its original audit of the Company’s financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “Original Filing”), OUM assessed the Company’s internal control over financial reporting as of December 31, 2016. At that time, OUM and the Company concluded that [Ekso Bionics] maintained effective internal control over financial reporting as of December 31, 2016.
Subsequent to the issuance of the Original Filing, the Public Company Accounting Oversight Board conducted an inspection of OUM’s 2016 audit of the Company. As a result, OUM reevaluated the Company’s information technology (IT) general controls, and has now concluded that a “material weakness” existed as of December 31, 2016. [Emphasis added]
After consultation with OUM, management also concluded that [Ekso Bionics’s] internal control over financial reporting was not effective at December 31, 2016 and, accordingly, its disclosure controls and procedures were not effective at December 31, 2016. [Emphasis added]
Ekso Bionics – Amended Quarterly Reports
Click 10-Q/A to review Esko Bionics’s 10-Q/A for the quarterly period ended March 31, 2017.
Click 10-Q/A to review Esko Bionics’s 10-Q/A for the quarterly period ended June 30, 2017.
Click 10-Q/A to review Esko Bionics’s 10-Q/A for the quarterly period ended September 30, 2017.
Ekso Bionics Holdings Investors
Kehoe Law Firm, P.C. is investigating whether Ekso Bionics Holdings and certain officers or directors engaged in securities fraud or other unlawful business practices. If you are an Ekso Bionics investor and have questions or concerns about Kehoe Law Firm’s investigation or your potential legal rights, please complete the form above on the right, e-mail [email protected] or contact John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected].
Dec 27, 2017 | Securities Class Action Archive
Kobe Steel Class Action Lawsuit on Behalf of Purchasers or Acquirers of Kobe Steel American Depositary Receipts (“ADR”) Between May 29, 2013 and October 12, 2017, Inclusive (“Class Period”)
On December 26, 2017, a securities class action lawsuit was filed in United States District Court, Southern District of New York, on behalf of all persons who purchased or otherwise acquired Kobe Steel’s American Depositary Receipts (“ADRs”) during the Class Period.
The Kobe Steel class action lawsuit was brought against Kobe Steel and certain of its officers and/or directors for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
Kobe Steel’s “Corporate Profile” reflects that
Kobe Steel, Ltd. is one of Japan’s leading steelmakers, as well as a major supplier of aluminum and copper products. Other business segments consist of wholesale power supply, machinery, construction machinery, real estate, and electronic materials and other businesses.
The Kobe Steel Group is comprised of numerous consolidated and equity-valued companies in Japan, the Americas, Asia and Europe.
KOBELCO is the corporate logo mark and brand name of the Kobe Steel Group.
Kobe Steel Class Action Lawsuit
According to the Kobe Steel class action lawsuit complaint:
At the beginning of the Class Period, Kobe Steel launched a new business plan ostensibly to make [Kobe Steel] more efficient and profitable for sustained growth. The progressive business strategy purported to “reduce fixed costs, procurement costs, quality error costs, and other costs.” Throughout the Class Period, Kobe Steel maintained that its business plan was “making steady progress” consistent with its “Core Values” of “provid[ing] technologies, products and services that win the trust and confidence of our customers we serve and the society in which we live” and “corporate philosophy” of “provid[ing] reliable and advanced technologies, products and services that satisfy customers.”
In tandem with its business plan, Kobe Steel repeatedly represented the quality of its products and integrity of its operations. Kobe Steel frequently emphasized [Kobe Steel’s] compliance with “the laws, corporate rules and societal norms” and that it fostered a culture of high ethical standards and corporate governance where it conducts its “corporate activity in a fair and sound manner with the highest sense of ethics and professionalism.” Throughout the Class Period, Kobe Steel represented its commitment to a strong corporate code of ethics as it “offer[s] excellent products and services” by “operat[ing] business fairly and honestly” and by “comply[ing] with applicable laws, rules and principles of society.” Kobe Steel represented that it prioritized its products and people by “pay[ing] special attention to product safety.” Notably, [Kobe Steel] represented to have “an organizational culture that is highly sensitive to compliance issues” and “[t]horoughly carry out compliance and contribute to society.” Moreover, Kobe Steel represented that its internal reporting system “prevent[s] risks associated with legal, ethical and other compliance-related issues from materializing and spreading.”
However, unbeknownst to the market, Defendants’ . . . Class Period statements pertaining to the specifications of its products and performance of its operations were materially false and misleading because [Kobe Steel] had falsified data on many of [its] products including its aluminum, copper and steel products; and sold products that failed quality control tests in violation of laws and regulations. [Emphasis added]
According to the Kobe Steel class action lawsuit complaint:
On Sunday, October 8, 2017, during the day, [Kobe Steel] issued a press release . . . disclos[ing] that certain of Kobe Steel’s products “did not comply with the product specifications” and “[d]ata in inspection certificates had been improperly rewritten etc., and the products were shipped as having met the specifications concerned.” [Emphasis added]
On this news, ADRs1 of Kobe Steel fell $0.62 per ADR or over 10% from its previous closing price to close at $5.30 per ADR on October 9, 2017. [Emphasis added]
According to the Kobe Steel class action lawsuit complaint:
On October 10, 2017, before the U.S. market opened, Reuters published an article . . . disclos[ing] that several major manufacturers had confirmed use of the affected Kobe Steel products.
On this news, ADRs of Kobe Steel plummeted throughout the trading day. Kobe Steel ADRs ultimately fell $1.30 per ADR or over 24% from its previous closing price to close at $4.00 per ADR on October 10, 2017. [Emphasis added]
Kobe Steel Class Action Lawsuit – Bloomberg: “Kobe Steel Scandal Expands Into Core Business Overseas”
According to the Kobe Steel class action lawsuit complaint:
After the market closed on October 12, 2017, Bloomberg published an article . . . which reported that [Kobe Steel’s] fake data scandal included its core business of steel to numerous international companies.
Bloomberg’s article also stated:
Kobe’s admission of misconduct in its steel business, which accounts for about a third of revenue, ratchets up the pressure on Japan’s third-biggest steelmaker. The company’s disclosures had up until now dealt with aluminum, copper and iron ore products used in everything from cars to computer hard drives to Japan’s iconic bullet trains, although there haven’t been any reports of products being recalled or safety concerns raised.
The deepening scandal “suggests that this is company culture, not just the actions of a few rogue employees,” Alexander Robert Medd, managing director at Bucephalus Research Partnership Ltd. in Hong Kong, said by email. The question to be resolved is “were they trying to save money or just unable to produce the right spec in the right quantities,” he said.
Kobe’s shares have plunged 42 percent this week, including a 9.1 percent drop on Friday, after it revealed on Sunday that it had fudged data on the strength and durability of metals supplied to as many as 200 customers around the world, including Toyota Motor Corp., General Motors Co. and space rocket-maker Mitsubishi Heavy Industries Ltd.
According to the Kobe Steel class action lawsuit complaint:
On October 13, 2017, during U.S. market hours, Kobe Steel issued a press release . . . provid[ing] updated information about an investigation into the falsified data and related wrongdoing and listed numerous nonconforming products [Kobe Steel] had identified to date. On the same day, several media outlets reported that the number of impacted customers had more than doubled from the initial estimates of 200 customers. [Emphasis added]
On this news, ADRs of Kobe Steel fell $0.40 per ADR or over 10% from its previous closing price to close at $3.55 per ADR on October 13, 2017. [Emphasis added]
Kobe Steel Class Action Lawsuit – Additional News
According to the Kobe Steel class action lawsuit complaint, “[s]ubsequent news reports and [Kobe Steel’s] own internal investigation revealed that Kobe Steel’s lack of quality controls and data tampering was a result of, among other things, wholly inadequate and ineffective corporate governance and compliance initiatives.”
Kobe Steel’s Update on Safety Verification Status
On December 22, 2017, Kobe Steel issued an “Update on safety verification status concerning improper conduct in the Kobe Steel Group.”
If you purchased or otherwise acquired Kobe Steel American Depositary Receipts (“ADRs”) and wish to speak privately with a securities attorney about your potential legal rights, please fill out the form above on the right or e-mail [email protected].
