May 10, 2004 by Canadian Underwriter
Toronto-based Danier Leather says it will appeal an Ontario Superior Court verdict which could amount to a $15 million payout.
The verdict stems from a 1998 initial public offering (IPO), which spawned a class action suit alleging the company and two of its senior officers had disclosed an incorrect financial forecast at the time.
The Superior Court noted that although Danier CEO Jeffrey Wortsman and CFO Bryan Tatoff had an honest belief in the forecast, and the forecast had been substantially achieved, a proper review had not been conducted at the time of the IPO, and if the review had been undertaken the forecast would have been found to be unachievable.
If paid today, Danier predicts the verdict, which includes Canadian purchasers of subordinate voting shares from the IPO, would amount to $10 million in payouts, plus potentially $5 million more in interests and costs. Joint and several responsibility goes to the company and the two senior officers, who are covered by directors’ and officers’ insurance, Danier reports. The company expects to be fully able to pay its portion of the verdict.
However, payment of the award is deferred pending Danier’s appeal. Danier chairman Jeffrey Wortsman says, “The IPO prospectus contained actual results for the first three quarters and a forecast for the final quarter (of 1998). We then went on to achieve the results we had forecast. In short, we did what we said we would do.”