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Greenfield Finds Errors, Expects $3.5m Legal Bill
Greenfield Online is bracing itself for costs of up to $3.5m in the first quarter for legal and other fees relating to a pending lawsuit against it, as well as stemming from an investigation into its internal practices. The firm also says its own investigation has found some evidence of accounting errors.
Last summer, two lawsuits were filed on behalf of shareholders. One alleged that the size of an online panel was misrepresented, and the other suggested that financial projections in 2005 were 'false and misleading' (www.mrweb.com/drno/news7096.htm ).
Since this time, the firm says that an internal investigation led by the audit committee of its Board of Directors has found there was no evidence for the claim relating to the size of the panel.
However, Greenfield says that the investigation did reveal evidence that certain company employees engaged in 'inappropriate activity' that was inconsistent with its revenue recognition policies. While this activity resulted in accounting errors that affected Greenfield's previously reported financial statements, the company says that that the errors misstated net income by less than 1% in 2005, 2006 and 2007 and are 'inconsequential to annual financial statement'.
The firm will continue to defend itself against both complaints, but says that it does not believe that any adverse judgment against it in such proceeding will have a material adverse impact on the company. All defendants will respond to the complaint on or before April 3, 2008.
Meanwhile, Greenfield says that it intends to implement a remediation plan that will include additional training and other appropriate remedial actions in response to the findings.
The firm estimates that in the first quarter, the cost to defend the lawsuit will be between $200,000 and $250,000, while costs relating to the audit committee investigation will be about $3m to $3.5m. Part of the costs may be covered by insurance.
Web site: www.greenfield.com .
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