GTT Communications and several executives were sued in a class-action complaint by a shareholder on Tuesday in the Central District of California for allegedly “publishing false and misleading statements to artificially inflate the Company’s stock price,” thus violating the Securities Exchange Act of 1934 (the Exchange Act).
The plaintiff stated that the defendants “operate( ) a global communications network, providing telecommunications services to large, multinational enterprises, carriers, and governments across five continents.” The plaintiff contended that during the Class Period of May 5, 2016, to and including November 9, 2020, GTT Communications claimed it had “effective” internal controls over its financial reporting and that this “provided ‘reasonable assurance’” that the necessary information was disclosed. However, the plaintiff alleged that, in actuality, the company’s “internal controls over financial reporting were inadequate, which led to years of inaccurate financial reporting, including failing to make adequate adjustments to the Company’s Cost of Telecommunication Services and failing to recognize certain expenses.”
Consequently, GTT Communications stated on August 10, 2020, after the market closed, that it would delay filing its Q2 2020 filings because it “identified ‘certain issues related to the recording and reporting of Cost of Telecommunications Services and related internal controls,” the complaint noted. Subsequently, the complaint proffered that company shares fell by more than 11 percent from the close of August 10, 2020, to the close of August 11, 2020. The company also announced in November that it would be delaying its Q3 filings as part of this ongoing review, which purportedly caused stock to decrease again. As a result, the plaintiff and the putative class claimed that they have “suffered significant damages” because of the defendants’ false and misleading statements and omissions.
The Class includes “all persons other than the defendants who acquired GTT securities publicly traded on the NYSE during the Class Period, and who were damaged thereby.” In sum, GTT Communications is accused of providing materially false and misleading statements during the Class Period in violation of the Exchange Act. In particular, the defendants allegedly violated Section 10(b) and Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act.
The plaintiff has sought for the court to declare this a proper class action and for the plaintiff and the plaintiff’s counsel to represent the putative class; an award for damages, costs, and fees; and other relief. The plaintiff is represented by The Rosen Law Firm, P.A.