A plague of lawyers?
Of course it's by now cliche to make fun of lawyers and their penchant for bottom-feeding, but to paraphrase that old saying about paranoia, it's not cliche if it's true. As I report more and more on public companies being bought, I have now been introduced to the practice of lawyers just about always putting out a press release that they're "investigating potential claims" that board members neglected fiduciary duty by not shopping the company around enough, etc. Does "investigating potential claims" actually mean anything? Well, no. I'm "investigating potential claims" that the Red Sox might be a decent baseball team, but I've thus far come up with no evidence of that. Similarly, these lawyers are essentially ambulance chasing, throwing stuff against the wall and seeing what sticks. Take today's bit from Rigrodsky & Long. They're doing some investigating. Here's the evidence they use to show there might be some fire following that smoke:
As recent as March 23, 2010, the Company reported its fourth quarter and annual 2009 financial results wherein Protection One announced significant improvements to operating income. Indeed, Richard Ginsburg, Protection One's President and CEO, said, "[w]e are very pleased with the Company's operating and financial improvements during 2009 and our net income of $17.5 million for the year. Despite the challenging economic environment this past year, we continued to invest in developing our commercial capabilities and alternate channels of distribution for our industry-leading eSecure interactive service. We also achieved greater operational efficiency through continued focus on controlling costs, completed a refinancing of our debt structure and successfully negotiated a tax-related settlement with our former parent. As a result of these accomplishments, we ended the year with a strengthened balance sheet with reduced leverage and an extension of our debt maturities."Wow! So, let's see $17.5 million in net income on $368 million in revenue? Yeah, that's a whopping 4.76 percent profit margin. Can't believe the board was only able to get more than 1x trailing 12 month revenues and more than nine times EBITDA and a buyer willing to pick up its entire $450 million debt load. What a robbery!!! Remember that "unfair" transaction that Broadview and ADT entered into? That doesn't seem to have gone anywhere. While the original link to the investigation has expired, here's the original release from the law firm's web site. If you move back one level, you'll see all of Finkelstein Thompson's news releases. Let's count the number of investigations and compare them to the number of things that actually happened: Investigations: 89 Lawsuits: 8 Announcements of some kind of successful lawsuit: 1 Maybe they're winning some cases and just not crowing about it, but that doesn't seem to be their style. However, I really am hoping that their investigations into allegations that the bass drum foot pedal for the video game Rock Band is defective pans out. I feel completely violated by that defective bass drum foot pedal. Completely violated. Rigrodsky & Long also do a lot of investigating, though with a little more filing. Not sure how much success they have, though. They do let us know that they were ranked number 35 out of the top 50 law firms for plaintiffs suing over securities fraud, but I guess I'm not impressed by the list. Check out this pdf. One successful settlement gets you into the top 50? Isn't that the definition of throwing stuff up against the wall and seeing what sticks? You land that one $14 million settlement and take a third of it and the firm continues on for another year of investigations? Maybe that's cynical of me. Maybe these guys are defending the rights of shareholders everywhere. No doubt, shareholders are probably getting screwed left and right. Wall Street doesn't seem to have covered itself in ethical and legal glory lately. But doesn't all this wolf-crying make a shepherd like me kind of skeptical?