Tech Firms Accused of Gross Exaggeration

SAN FRANCISCO (CN) - Insiders at tech company ServiceSource made millions of dollars pumping and dumping shares by exaggerating their money "under management" by 290,000 percent, a shareholder claims in a class action.

Lead plaintiff Scott Weller sued Scout Analytics, ServiceSource International, and ServiceSource CEO Mike Smerklo on Wednesday in Federal Court.

ServiceSource, a Delaware corporation, specializes in "recurring revenue management." Its shares trade on the NASDAQ.

"We close a renewal every 47 sec.!" it says on its website, checked this morning.

Scout Analytics specializes in "customer retention strategies," it says on its website, which adds, "Now part of ServiceSource."

Weller claims that Scout was running out of money in December 2013, so it agreed to sell itself to ServiceSource, which announced the merger in January 2014.

He claims the companies issued a joint press release on Jan. 22, 2014, which stated in part: "With more than $3.5 billion of recurring revenue under management, Scout Analytics extends ServiceSource's reach into new markets while increasing its footprint to now $14.5 billion under management across more than 200 customer engagements."

Weller calls that absolute hoo-hah: "Defendants have never held more than $5 million in gross revenues, and have never managed funds, let alone in the 10 figure range," he says in the complaint.

He claims that Smerklo "knew or recklessly disregarded" the truth when he issued the statement, and that the misrepresentations "allowed Smerklo and certain company insiders to collectively sell their personally held ServiceSource common stock for millions of dollars in proceeds," and to get "millions of dollars in cash bonuses and perks."

Weller and the class, however, bought ServiceSource stock at artificially inflated prices, he says.

He seeks class certification and damages for securities violations.

He is represented by John Du Wors with Newman Du Wors, of Seattle.

ServiceSource shares closed at $5.67 on Wednesday, according to publicly available information.

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