NEW YORK, Jan. 19, 2006 (PRIMEZONE) -- Wechsler Harwood LLP today announced that it has filed a class action suit on behalf of all securities purchasers of Faro Technologies, Inc. (Nasdaq:FARO) ("Faro" or the "Company") between May 6, 2004, and November 3, 2005, inclusive (the "Class Period").
The action, entitled, Johnson v. Faro Technologies, Inc. Case No. 6:06-cv-57-ORL-18DAB, is pending in the United States District Court for the Middle District of Florida, and names as defendants, the Company, its Chief Executive Officer and Chairman, Simon Raab, its Executive Vice President, Secretary, Treasurer and a director, Gregory A. Fraser, and its Chief Financial Officer, Barbara R. Smith. A copy of the complaint can be obtained from the Court or can be viewed on Wechsler Harwood web site at: www.whesq.com.
FARO and its subsidiaries develop, manufacture, market and support software-based three-dimensional measurement devices for manufacturing, industrial, building construction and forensic applications. The complaint charges FARO and with violations of the Securities Exchange Act of 1934, and alleges that throughout the Class Period, these defendants directly participated in accounting fraud which materially misrepresented the Company's financial results in violation of Generally Accepted Accounting Principles ("GAAP").
The Complaint charges defendants with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. More specifically, the complaint alleges that, at or about the beginning of the Class Period, the defendants represented that the Company had implemented practices that purportedly increased the Company's production capacity by, among other improvements, eliminating overproduction, wait time, inefficient processes, and product defects. During the Class Period, defendants issued strong results and positive guidance which they attributed in material part to the Company's purported implementation of adequate controls and more efficient practices. The Complaint alleges that defendants' Class Period representations regarding the Company's financial performance and prospects were materially false and misleading when made because the Company's internal inventory and accounting controls and procedures were wholly defective and inadequate during the Class Period.
The truth began to emerge on July 18, 2005. On that day, the Company issued a press release revealing that it had a backlog of unfilled customer orders that had grown significantly in the second quarter of 2005 and that, as a result, the Company significantly lowered its earnings guidance for that quarter. Further, on November 3, 2005, after the market closed, the Company announced that it had incurred $1.6 million in "inventory costing and consumption variances" related to the implementation of a new accounting and inventory management system. Defendant Simon Raab later admitted that the Company had not been able to keep up with customer orders which resulted in "substantially more complex inventory management situations, and . . . substantial inventory increases." In reaction to this news, the price of FARO stock plummeted $4.39, or 19.6%, from its closing price of $22.38 on November 3, 2005, to finally close on November 4, 2005, at $17.99, on unusually heavy trading volume.
The Complaint also alleges that during the Class Period, before the truth was revealed to investors, defendants sold or caused to be sold more than 1.48 million of their own shares of FARO stock, for net proceeds of approximately $40.9 million, including through the use of highly complicated forward sales transactions that allowed defendants to both realize immediate profits and avoid current tax liabilities.
If you are a member of the class described above, you may, not later than February 6, 2006, move the Court to serve as lead plaintiff of the class. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Wechsler Harwood, or other counsel of your choice, to serve as your counsel in this action.
Wechsler Harwood has taken a leading role in many important actions on behalf of defrauded shareholders, employee investors and consumers and is responsible for hundreds of millions of dollars in recoveries. You can obtain a copy of the complaint by visiting the Wechsler Harwood website at http://www.whesq.com or by contacting the firm directly. The Wechsler Harwood website contains detailed information regarding this matter and additional information about the firm. If you wish to discuss this action with us, or have any questions concerning this notice or your rights and interests with regard to the case, please contact plaintiff's counsel Jeffrey M. Norton at 877-935-7400 (ext. 286) or a firm representative.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca