Cessna Maker Textron Sued For Misrepresentation Of Backlog And Financial Segment Deterioration

Tyler Durden's picture

Cessna maker Textron, whose stock has gotten bombed over the past year after the very public bashing of any and all private jet purchases, might be in more hot water. After briefly making the press in relation to speculation that it could be an acquisition target, which subsequently turned out to be a large insider trading leak that subsequently led to the suicide of the alleged perpetrator, Textron is now being sued by the City of Roseville Employees' Retirement System for business condition misrepresentations. Among the allegations cited in the suit (09-367 Filed in District Court of Rhode Island), are the following:

  • The company accepted orders for business jets from a growing
    number of customers who were start-up companies or financially
    distressed fleet operators who either didn't intend to or couldn't pay
    for aircraft to be delivered.
  • Hundreds of orders for
    Cessna aircraft were subject to deferral or cancellation. The result
    was an inflated order book for jets at Cessna.
  • Textron's
    finance segment incurred material losses in the fair market value of
    its finance receivables and other financial assets, but the unrealized
    losses were omitted or misrepresented in earnings and income reports.

Additionally, the suit alleges that company executives, including CEO Lewis Campbell and
CFO Ted French, illegally profited from inflated stock prices when they sold
shares of Textron stock, which generated $67.1 million in proceeds.

The lawsuit, which plaintiffs are seeking class action status for, will likely end up in some form of settlement. However, one good thing that may come out of it, is an investigation into backlog reporting not just for Textron, but for many companies whose P&L depends on a stable future order book, and more specifically, what public visibility (and attributed confidence) is imparted to it. Names like Boeing and Airbus, as well as specialized vehicle manufacturers are the first entities that come to mind, and even more so if these have captive financing units which can do much to mask the deteriorating conditions of their potential customers. 

 

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Printfaster's picture

Send in the lawyers.

SDRII's picture

http://www.leap2020.eu/GEAB-N-36-is-available!-Global-systemic-crisis-in-summer-2009-The-cumulative-impact-of-three-rogue-waves_a3359.html

 

This about sums it up. The UK/US duopoly is working in concert -- will the new Japan regime fall in line?

ShankyS's picture

Excellent link - thanks - more negativity in the world is just what the dr. ordered - no green shoots there for sure.

thomd's picture
thomd (not verified) ShankyS Aug 19, 2009 6:34 PM

again, the truly wealthy don't do their own taxes, so they won't good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

be tripped

Rollerball's picture

End Game 101.  Saw the movie. 

Miles Kendig's picture

Just another misguided labor union effort to detract from the efforts of those that can lift consumer spending and save our economy.

deadhead's picture

Cash for Private Jets program being rolled out by Rahm in 5...4....3....

ShankyS's picture

LOL - nice one. You are kidding, right?

deadhead's picture

hey shanky!  I'll bet Pelosi is thinking it now that her last request for a couple of extra jets for congress  (read, her fat ass) got blown out by the media (drudge, i think).  i also loved how the politicians in the House tried to blame it on DoD.

seriously, here's one you probably haven't heard about.  approx one week ago, the NY Governor secretly kept $140 Million of stimulus money set aside with the plan to send it to current NY welfare recipients in the amount of $200 per child to be used for "back to school" purchases. Of course, the money was just put on the welfare recipients card with no restrictions.  anyways, they put the money on the cards before the letter was sent out (not that the letter would make any difference) and the people who got it were freaking out and buying beer, booze, lottery tickets, and cell phones (source was a local tv station in upstate NY). 

bottom line, at least in NY, we have Cash for Liquor, Cash for cell phones, you get the point.....i'd love to see wallstreetpro guy get a hold of this baby.

gridlocked's picture

Corporate fraud always dealt with by civil fines because in fact the companies are run by robots and ghosts. Robots and ghosts can't be jailed so we fine them.

No people actually make decisions, cut checks, draft and sign statements.

Anal_yst's picture

...and yet TXT is essentially flat today (and up slightly ytd)...

 

*shocking*

thomd's picture
thomd (not verified) Aug 19, 2009 6:33 PM

Small fry: the truly wealthy have their accounts set up thru multiple layers of lawyers and shell accounts/trusts. Lawyer 2 doesn't even know who hired lawyer.

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

Astute Investor's picture

The current modis operandi:  A small fine for TXT without admitting or denying wrongdoing.