A shareholder derivative lawsuit was filed on Dec. 1 against board members and executive officers of Conn’s, an electronics and appliance store chain, claiming breaches of fiduciary duties, unjust enrichment, gross mismanagement and insider trading.
Filed in U.S. District Court for the Southern District of Texas by plaintiff Robert Hack on behalf of Conn’s, Inc., the lawsuit names chairman of the board Theodore M. Wright; board members Bob L. Martin, Jon E.M. Jacoby, Kelly M. Malson, Douglas H. Martin, David Schofman, Scott L. Thompson; Chief Financial Officer and Vice President Brian Taylor; and Chief Operating Officer Michael J. Poppe.
The lawsuit claims the defendants were aware that Conn’s lowered its underwriting standards and was offering lines of credit to unqualified customers. They allegedly violated federal securities laws by failing to disclose that Conn’s was increasing sales revenues through methods that weakened its portfolio quality, was experiencing rising delinquencies and that the practice threatened the company’s financial performance.
While Conn’s stock was trading at what the lawsuit calls “artificially inflated prices,” five of the defendants – Wright, Jacoby, Douglas Martin, Thompson and Poppe – sold more than 1.3 million shares for more $66 million, allegedly using non-public information. During the period in question, Conn’s stock rose from $39.01 per share to $79.24 per share.
Based in Texas, Conn's operates 89 stores in 10 states.
Attorneys Francis A. Bottini of Bottini & Bottini, Inc. and Roger B. Greenberg of Schwartz, Junell, Greenberg & Oathout, LLP are representing the plaintiff.
U.S. District Court for the Southern District of Texas case number 4:14-cv-03442.