(CN) – Investors claim in a class action that marketing firm InnerWorkings filed false statements with the Securities and Exchange Commission for three years, overstating income by millions, sending the stock down 6 percent on the news.
Lead plaintiff Errol Brown filed the complaint in the U.S. District Court for the Central District of California on behalf of investors who bought the firm’s shares from August 2015 to May 2018. The lawsuit also names CEO Eric Belcher, past interim CEO Ryan Spohn, past CFO Jeffrey Pritchett and current CFO Charles Hodkins as defendants.
The company bills itself as a provider of “marketing execution solutions” in North America and internationally. During fiscal 2015, 2016 and 2017, InnerWorkings’ quarterly and fiscal year ending statements omitted adverse facts about the company’s standing, according to the lawsuit. After the market closed on May 7, 2018, InnerWorkings put announced it was postponing release of its first quarter 2018 statement due to “errors” in past years’ financial statements.
“The accounting errors relate primarily to recording a portion of costs of goods sold in the wrong period, and have no material impact on InnerWorkings’ cash flow, revenue, or liquidity,” the company said.
Nonetheless, shares fell 6.4 percent the next day, the lawsuit alleges.
“As a result of the defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the company’s securities plaintiff and other class members have suffered significant losses and damages,” (Pg. 9, No. 31) the complaint states.
The class is represented by Laurence M. Rosen of the Rosen Law Firm in Los Angeles.