www.bethelfinance.com
Bethel Finance news:
Mind CTI Ltd. (Nasdaq: MNDO) is suing its former accountant pwc Israel - Kesselman & Kesselman for NIS 8 million for alleged breach of contract, negligence, and breach of fiduciary duty. The lawsuit relates to the company's bad investments in auction rate securities (ARS), several years ago. The company settled with the banks in 2009.
Mind CTI, founded by president and CEO Monica Jancu, provides billing and customer care software solutions. In 2006, after a bad bet on interest rates, the company did not receive $30 million in interest on deposits, and it decided to change its investment policy, investing in what at the time were called risk-free bank deposits. They weren't.
In practice, however, $20.3 million of the company's money was invested in long-term private ARS whose interest rate changed on the basis of monthly tenders. The 2008 financial crisis affected ARS liquidity, and Mind, along with many other companies, was forced to write off the investment.
Mind CTI accused Credit Suisse Group AG (NYSE: CS; SWX: CSGN; XETRA: CSGZ) of investing the ARS against the company's instructions. Mind CTI was awarded $18.5 million in arbitration in 2009.
Mind CTI's basic claim against Kesselman and Kesselman is that its negligence caused it great economic and reputation damage. Mind CTI contends that Kesselman was negligent when it approved the classification of the ARS investment as "cash and cash equivalents", rather than as "short-term investments", in violation of US Securities and Exchange Commission (SEC) rules, because the ARS investment was not a liquid investment.
Mind CTI contends in its statement of claim, "Only after the company was notified of the error in classification… did the defendant recognize their error and publish a report about the error in classification."
Mind CTI says that at a board of directors meeting in 2007, a Kesselman accountant recognized the error and said that the firm would bear the cost of the correction.
Mind CTI calculates the damage as the difference between the compensation it received on the original investment, the cost of the class-action suit filed against it, and the loss of return, economic activity, and goodwill. The total is $5 million. The company is claiming $1.8 million for the investment that was written off, $150,000 in costs related to claims by investors, over $2 million for loss of interest and yield, and $1 million for loss of business, goodwill, and waste of administrative resources.
In 2009, Mind severed its ties with Kesselman, after 12 years of working with the accounting firm, and switched to Ernst & Young Israel Brightman Almagor Zohar. Mind CTI's expanded financial report for 2009, prepared by the new accountants, states that in 2007-08, it paid Kesselman $180,000. The report also states, "Since January 2007, there were no disagreements Kesselman and Kesselman on any accounting issue or financial report."
pwc Israel Kesselman and Kesselman said in response, "This is a baseless and fictitious claim, which causes its reader to rub his eyes in incomprehension."
Mind CTI's share price rose 0.5% yesterday to $1.90, giving a market cap of $35.6 million.
No comments:
Post a Comment