A federal judge has ruled that an insurance carrier does not have to help ClearOne Commun-ications cover a $10 million settlement with its shareholders.
U.S. District Court Judge Tina Campbell said ClearOne, a maker of audio and video conferencing equipment, had provided the National Union Fire Insurance Co. of Pittsburgh the same doctored financial statements that it gave the Securities and Exchange Commission and its stockholders.
Under Utah law, an insurance provider can rescind its coverage if it relied on such misrepresentations in issuing its policy.
“We were reasonably confident going in that the court would ultimately grant a recession (of the policy),” said Salt Lake City attorney Phillip S. Ferguson, who represents National Union.
The SEC filed a lawsuit three years ago alleging the company and two of its top executives schemed to inflate ClearOne’s share price by doctoring its books.
ClearOne eventually settled that dispute without receiving a fine or admitting wrongdoing.
However, a class-action lawsuit by shareholders raised many of the same allegations as the SEC’s action. ClearOne agreed to pay $5 million in cash and issue an additional 1.2 million shares to settle with it stockholders.
ClearOne recently received a notice from the SEC’s Salt Lake City that it wants to revoke the registration of the company’s stock because if failed to file current annual and quarterly reports. If SEC officials in Washington adopt the recommendation of the Salt Lake City office, ClearOne’s stock will no longer trade.
ClearOne filed a statement with the SEC detailing its reasons why it believes it isn’t necessary for regulators to revoke its stock to protect shareholders.
It has not made the statement public or revealed it to its shareholders.
“That is private information,” ClearOne spokeswoman DeLonie Call said. “We’re not going to make it public.”
The company has promised its shareholders that it will complete the audit of its 2004 financial results before year end and that it will submit its 2005 documents by the end of the first quarter in 2006.
In August, ClearOne finally filed its financial reports for the years questioned by the SEC in its lawsuit. The reports revealed the company had gone from a $3.6 million profit in fiscal 2001 to a $35.9 million loss in fiscal 2003.
Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Was this article valuable?
Here are more articles you may enjoy.