Desktop interface company TriTeal Corp has been slapped with a class action suit by shareholders who bought the company’s stock between September 1996 and October 1997. The complaint – filed in the US District Court for the Southern District of California – charges TriTeal and certain of its officers, directors and its underwriters with violations of the federal securities laws. The suit alleges that during the class period, TriTeal’s stock was artificially inflated to a high of $23.25 from $8 – a 200% increase in less than six months – as TriTeal reported its first profitable quarter in history, which it attributed to strong demand for its most important products. As TriTeal’s stock increased to its all-time high, TriTeal and its officers sold 1,365,000 shares and 345,381 shares of TriTeal stock to the public for $30.8m and $6m, respectively. However, after these stock sales were completed, TriTeal reported large reductions in revenue and huge losses that outstripped the small profits it had earlier reported, including massive write-downs of accounts receivable. The shareholders insist that they were false accounts receivable that were generated by TriTeal, which was recording millions in phony software license fees as revenues to create the apparent profits that enabled TriTeal and its insiders to cash in by their large stock sales. Upon these revelations of huge losses and write-offs, TriTeal’s stock dropped to just $3.3125, or 86% below its class-period high of $23.25.
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