n the heels of Concord EFS, Inc.'s announcement of lower earning expectations and a succession plan for its current CEO, Dan Palmer (see "Appointments" in FYISOs, Page 60), a class-action lawsuit was filed against the company and seven of its officers and directors alleging the company violated the Securities Exchange Act of 1934.

On Sept. 5, 2002, Concord EFS announced that it expects its earnings to fall below Wall Street outlooks for both fiscal 2002 and 2003. In full-year 2002 Concord expects to realize revenue growth of 26% to 28% and diluted earnings per share growth of 16% to 20%, or between $0.68 and $0.70 per share, instead of $0.75 in 2002 as previously expected, and $0.95 per share in 2003.

In a press release, Concord President Edward A. Labry III said the change is because of "a number of temporary and external factors" such as acquisition-related increases in SG&A, a slower-than-expected pace of implementing a backlog of new business, low interest rates and economic weakness.

The parties involved in the filing of the lawsuit believe otherwise. The lawsuit, filed the day after Concord's earnings announcement, is on behalf of purchasers of Concord EFS common stock during the period between Oct. 30, 2001 and Sept. 4, 2002.

During this period, the complaint alleges, Concord EFS released false and misleading statements about the company's financial health in order to allow Concord stock to trade at higher levels. With an inflated stock price, Concord would be able to complete several acquisitions, using stock as currency. The lawsuit also alleges that an exaggerated stock price allowed several of Concord's executives to make $160 million from the sale of 5.4 million shares of their own stock.

In a recent press release, Concord stated that it believes the claims in the suit are without merit. "These types of lawsuits are typical of what often happens to public companies that experience a significant decline in share price, especially in today's business climate," Palmer said. "This lawsuit appears to be the direct result of the price decline in Concord's shares following our release of earnings guidance for 2002 and 2003. The reasons for Concord's estimates were provided in detail with the press release and subsequent conference call on September 5, 2002."