Your car salesman did it to you and betcha you didn’t get a penny. Puffery is a bad thing he says? OK smart guy, how in the world am I supposed to sell these Chryslers then? And don’t even talk to me about moving these Kia’s. Yes, of course they are all highway miles. Well, he might be able to get away with it on the lot, but when it comes to running a public company, it’s a different story. No exaggeration.
You see, the executives in the Uniroyal Technology securities class action basically tried to say we didn’t lie, we just “puffed” up the truth. At the worst your Honor. But his Honor, Judge James D. Whittemore (M.D. Fla.), didn’t go for it, holding that “while aspects of the alleged misstatements contain elements of corporate optimism, this Court cannot conclude, at this stage of the litigation, that Defendants' assurances regarding Uniroyal's progress in developing and producing [certain] products were clearly immaterial to investors. When the comments Defendants contend are mere puffery are read in context and in conjunction with Plaintiffs' other allegations, the Court cannot conclude that the alleged misstatements are merely general predictions and not material as a matter of law.”
Judge Whittemore also rejected Defendants’ argument that they forewarned investors of the trouble ahead, finding that “Defendants fail to sufficiently identify the cautionary language they rely on and fail to sufficiently link a cautionary statement to the projection about which Plaintiffs complain.” Finally, the Court also found that the GAAP violations were adequate, because “by failing to write down the inventory to the lower of cost or market value through a charge to earnings during the Class Period, Uniroyal's financial statements reflected grossly overstated assets, income, and net worth.”
Guess these execs' excuses are their own.
You can read Bellocco v. Curd, issued October 20, 2005, at 2005 U.S. Dist. LEXIS 24251.
Nugget: “The Court cannot conclude that these statements are so vague, exaggerated or unspecific that a reasonable investor would not rely on them.”