World Acceptance Corporation is a South Carolina based consumer finance company operating in 15 U.S. states and Mexico. It is also the parent company of ParaData Financial Systems, a provider of computer software solutions for the consumer finance industry.
Since late April, its stock price has been on a tear.
That ended yesterday as the company’s stock price fell approximately 12.4% upon disclosing that it would be unable to file its annual report due in large part to a Foreign Corrupt Practices Act investigation.
In pertinent part, the company’s disclosure states:
“The Company is conducting an internal investigation of its operations in Mexico, focusing on the legality under the U.S. Foreign Corrupt Practices Act and certain local laws of certain payments related to loans, the maintenance of the Company’s books and records associated with such payments, and the treatment of compensation matters for certain employees. Womble Carlyle Sandridge & Rice, LLP, the Company’s outside legal counsel, and Ernst & Young LLP have been retained to lead the investigation.
The Company commissioned the internal investigation in March 2017 after its independent registered public accounting firm received an anonymous letter regarding compliance matters, which letter was then forwarded to the Audit Committee of the Company’s Board of Directors. The Audit Committee reviewed and considered the complaint, and the Company promptly commenced its investigation.
The Company has voluntarily contacted the U.S. Securities and Exchange Commission and the U.S. Department of Justice to advise both agencies that an internal investigation is underway and that the Company intends to cooperate with both agencies. A conclusion cannot be drawn at this time as to whether either agency will open a proceeding to investigate this matter, or, if a proceeding is opened, what potential remedies these agencies may seek. In addition, although management will seek to avoid disruption to its operations in Mexico, the Company cannot determine at this time the ultimate effect that the investigation or any remedial measures will have on such operations.
As a result of the ongoing investigation, the Company is currently unable to file the Form 10-K until more information becomes available pursuant to the investigation, including for purposes of evaluating the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting. The Company expects to file the Form 10-K by June 29, 2017 …”.
It is virtually guaranteed that plaintiff shareholder law firms will begin to launch “investigations” and that securities fraud class actions will be filed shortly. [Update: sure enough about those “investigations” – see here, here and here].
Yet another example of “FCPA Ripples” (see here for the article) and further to the notion that settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement.
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