LOS ANGELES (CN) – Executives of online jewelry retailer Bidz.com post shill bids to boost revenue, keep company with shady characters, and routinely sell mislabeled junk, a shareholder says in a federal derivative complaint.
Bidz sells its own products through an online auction format similar to eBay, says named plaintiff Farris Hassan.
He claims Bidz used an appraiser who does not follow standard industry practices, used an independent auditor that has been severely criticized by the Public Company Accounting Oversight Board, and sells mislabeled, poor quality products.
Hassan claims that founding CEO David Zinberg maintains relationships with a number of felons, including Saied Aframian, Bidz’s largest jewelry supplier.
After a November 2007 report by the Web site Citron Research accused Bidz of sketchy practices, Bidz’s share price dropped by about $5, resulting in a market capitalization loss of around $107 million, Hassan says.
He claims that Bidz director Gary Itkin co-managed an illegal strip club in Los Angeles in 1999 while he was Bidz’s CFO.
And he says that the self-proclaimed largest brand name jewelry auction has a consistent “F” rating with the Better Business Bureau.
Also sued are current CFO Lawrence Kong, Chief Operating Officer Claudia Liu, President and Chief Technology Officer Leon Kuperman, and directors Peter Hanelt and Man Jit Singh. Hassan alleges breach of duty, inside selling, waste of corporate assets, and unjust enrichment. He is represented by Brian J. Robbins, with Robbins Umeda of San Diego.