A Pennsylvania law firm has filed a class action claiming that the Atlanta payments software company CheckFree Corp. misled investors last summer ahead of an earnings shortfall.
Schiffrin Barroway Topaz & Kessler LLP of Radnor announced Friday that it had filed the lawsuit in the U.S. District Court for the Northern District of Georgia in Atlanta and was seeking investors to join the class and to serve as lead plaintiff.
The firm did not specify a dollar amount in its complaint, but it demanded compensatory damages, to be determined at trial.
From April to August 2006, CheckFree was projecting increases in transaction volume and earnings growth, and analysts were making bullish recommendations about its stock, the suit said. However, when CheckFree reported its fiscal fourth-quarter results Aug. 1, "the company shocked investors and financial analysts" by saying transaction volume fell from the previous quarter, missing its own guidance and analysts' projections.
During the period leading up to the report, corporate insiders, including CheckFree's chairman and chief executive Pete Kight, sold $17.5 million of stock "at artificially inflated prices," the suit said.
A CheckFree spokeswoman said Monday that the company had not yet been served, and that standard policy is not to comment on such matters.
During an earnings call in October, Mr. Kight attributed the transaction shortfall to a change in the way banks execute payments through the CheckFree system, shifting to a "risk model" that recognizes payments as they are made, rather than when they settle.
Under that model, weekend payments are recorded as having taken place in the previous week, and the first days of April fell on a weekend, Mr. Kight said. Because the start of April was also the start of a new quarter, "we actually shifted transactions out of Q4 and back into Q3."
