World Acceptance Corp., based in Greenville, S.C., is seeking the dismissal of a lawsuit filed by a former investor.
Edna Selan Epstein, the plaintiff and former stockholder, failed to show in her complaint, filed in April, that the finance company made any fraudulent statements to inflate the price of its stock before the announcement of a federal investigation dropped share prices.
Epstein's lawsuit stems from an ongoing federal investigation of World Acceptances lending practices. News of the investigation sent the companys stock price dropping 20%. The lone plaintiff is seeking damages, including interest payments and legal fees. She sought class-action status, alleging World Acceptance misled investors and failed to disclose unfavorable business facts.
World Acceptance in a motion to dismiss notes the Consumer Financial Protection Bureau, which is investigating the company, has not found or alleged any wrongdoing. The CFPB is investigating World Acceptance for potential violations of the Truth in Lending Act and the Consumer Financial Protection Act. The investigation is ongoing.
World Acceptances motion says the plaintiff is using the federal investigation to allege that earlier company statements on financial performance and lending practices must have been false and misleading. Also, World Acceptance argues that Epstein has failed to connect a drop in share prices to any fraudulent activity.
"The announcement that the CFPB is investigating World Acceptance may indeed have been followed by a stock price decline, but that loss does not flow from any revelation that a prior statement by the company - much less one identified in the complaint - was false," according to World Acceptances motion for dismissal. "Instead, the adverse price reaction could arise from a multitude of non-fraud factors, including the cost and distraction of being embroiled in a potential investigation, being part of an industry segment coming under scrutiny by a powerful new regulator, or the potential for new regulatory restrictions or legislative changes that could adversely impact the companys current business model."
Along with World Acceptance, defendants in the case include Chairman and CEO Sandy McLean; Vice President, CFO and Treasurer John L. Calmes Jr.; Kelly M. Malson, who retired last September as the company's senior vice president, CFO and treasurer; and Mark Roland, who resigned as the companys president and COO in November.