Rent-A-Center faces stockholder suits
By Furniture Today Staff -- Furniture Today, January 27, 2002
PLANO, Texas — Rent-to-own giant Rent-A-Center is facing class-action lawsuits charging the company with making false and misleading statements about its condition last year when it announced first-quarter results without disclosing rising costs.
The suits, filed in U.S. District Court in Texarkana, Texas, by law firms from several states, names as defendants former Chairman and Chief Executive Officer Ernest Talley, President Mitch Fadel, Chief Financial Officer Robert Davis and Director Mark Speese.
The actions charge that on April 25, 2001, Rent-A-Center issued a press release announcing record first-quarter results and "highlighting the company's resilience in a weakening economy," according to the law firms.
The representations were false and misleading "because the company did not disclose that its expenses were rising dramatically as Rent-A-Center attempted to combat weakening demand with deep discounts and promotions," according to law firm Schiffrin & Barroway.
The law firms said RAC completed a secondary stock offering of 3.2 million shares at $42.50 a share while possessing this "adverse non-public information." Talley sold 1.7 million shares, grossing more than $72 million. Speese sold 500,000 for more than $21 million. Talley later sold nearly 2 million more shares, grossing an additional $78 million, Schiffrin & Barroway said.
Rent-A-Center reported in October that third- and fourth-quarter earnings would be significantly less that previous guidance due to rising expenses, and its stock price dropped 19% in one day, the law firms said.
The suits seek to recover damages for those who purchased RAC stock from April 25 through Oct. 8.
Fadel discounted the charges, saying the company doesn't believe it has done anything wrong. "We are going to vigorously defend ourselves," he said. "We believe we have complied with all applicable securities laws at all times."
As first reported in eDaily
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