Securities Sleuth: Trouble for Black Box Investors

Mark McNair
0 Comments|June 13, 2007

Three strikes for Black Box and its investors.



Three strikes for Black Box and its investors.

Since November of last year investors in Black Box (NASDAQ: BBOX, BullBoards) have been stung by a series of revelations by the company.

First, on November 17, 2006, the company, a distributor of technical network services, disclosed that it had received a letter of informal inquiry from the SEC requesting documents related to the company's stock option practices from January 1, 1997 to the present.

Second, on March 20, 2007, the company disclosed it expected to restate nearly 15 years of financial statements due to improper accounting for stock option grants.

Third, on May 22, 2007, the company's CEO resigned and the company did not provide a reason.

Finally, on June 1, 2007, the Company disclosed that the SEC had commenced a formal investigation of the company relating to its stock option grant practices.

Beside Black Box's ongoing problems related to stock options backdating, the company also has suffered from alleged improper conduct at a foreign operation. Specifically, on June 1, 2006, Black Box disclosed that during the fourth quarter of fiscal 2006, it incurred a pre-tax charge of $7.1 million related to an adjustment of earnings. The company explained the adjustment was due to intentional misconduct by certain management at the company's Italian operations.

It appears that investors who purchased Black Box between August 2, 2002 and May 21, 2007 are affected.

Investigation at CTS Corp

Indiana-based CTS Corp. (NYSE: CTS, BullBoards) is a designer and manufacturer of electronic components. On February 9, 2007, CTS announced before the opening of trading an investigation of accounting issues identified while reconciling accounts related to payables and inventory. As a result, the company stated that its full year 2006 diluted earnings per share will be significantly below its previously disclosed estimates. The company also disclosed that these accounting issues may affect multiple quarters in 2006 and, as a result, management determined that the company's financial statements for the first three quarters of 2006 should not be relied upon.

It appears that investors who purchased CTS between April 25, 2006 and February 8, 2007 are affected.

We are investigating both of these cases and if you are an affected investor you may want to contact us at 202 338 1756 or info@securitiesleuth.com.


Mark McNair is an attorney in private practice who represents investors in securities litigation and was formerly an attorney at the Securities and Exchange Commission. For additional information, go to securitiessleuth.com


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