PR Firm for SA’s Net 1 Describes US-Based Law Firms As ‘Ambulance Chasers’

0
Ambulance.
Ambulance. Riccardo Piccinini / Shutterstock.com

The public relations (PR) firm for Net 1 UEPS Technologies is not happy with the U.S-based law firms that are investigating the JSE-listed controversial company.

So irritated is Burson Cohn & Wolfe, South Africa (bm-africa.com), that it has described U.S-based law firms AS “ambulance chasers”.

The term “Ambulance Chaser” is a derogatory term for attorneys, often personal injury lawyers, who aggressively solicit recently injured clients.

These lawyers then tend to seek a beneficial settlement, including legal fees, from the opposing party’s insurance company.

This is how Investopedia describes “ambulance chasers”.

Commenting on behalf of Net 1, Burson Cohn & Wolfe likened investigations into their client’s affairs by four US-based law firms – detailed by TechFinancials on Wednesday – to “ambulance chasers”.

Burson Cohn & Wolfe was responding to TechFinancials article stating that their local client Net1 was under investigation by U.S law firms over “securities fraud claims”.

Net 1 is also listed on the Nasdaq stock exchange in the U.S.

Several US-based law firms announced investigations on behalf of Net 1 investors.

Bragar Eagel & Squire, Kirby McInerney LLP, Bernstein Liebhard, and Glancy Pogay & Murray have disclosed that they are investigating Net1 over “securities fraud claims”

The investigations by the law firms vary and concentrate on concerns whether Net 1 has violated the federal securities laws and/or engaged in other unlawful business practices, potential securities fraud claims, and possible violations of federal securities laws.

For more read: SA’s Net1 Under Investigation By U.S Law Firms Over “Securities Fraud Claims”

After this TechFinancials’ article, Net1’s PR agency, which was represented by its Business Director, Bridget Von Holdt, responded in an email saying: “It is also important to understand what constitutes a class action lawsuit in the U.S. and how they come about.

“Any company that has a significant reduction in share price almost always attracts the attention of securities law firms (a little bit like the ambulance chasers), as they view it as an opportunity to build a case and perhaps be paid in the form of a settlement.

“The majority of class actions do not materialise because there is no merit to the claims. For reasons outlined in point … above, we believe these law firms searching, or as they call it “investigating”, for investors who are aggrieved due to the share price decline based on fraud, are unequivocally without merit.”

TechFinancials surmises that perhaps this is why Net I did not bother to tell its local investors that it was being probed in the U.S.

TechFinancials Get A Tongue Lashing

Various letters and the word Public Relations. Bartolomiej Pietrzyk / Shutterstock.com
Various letters and the word Public Relations. Bartolomiej Pietrzyk / Shutterstock.com

Von Holdt added that Net 1 is disappointed by the coverage being given by TechFinancials without understanding the facts or nuances, which the company would have readily offered if approached.

“The repeated sensationalistic headlines and stories over the past week do nothing but further cause unwarranted reputational damage to the company,” said Von Holdt.

Actually, Von Holdt and Burson Cohn & Wolfe South Africa are right about somewhat comparing U.S.-based law firms to ambulance chasers.

However, this does not change the fact that ambulances only go where they are needed by people in distress.

TechFinancials is of the opinion that Net 1 is in such distress that it may, in fact, need an ambulance, to take it to the ICU.

We can point to Net 1’s error of epic proportions – the JSE and Nasdaq-listed firm only discovered months later that it erroneously listed an acquired company as a “For Sale Asset”, the disclosure of which caused it to shed 46% of its market value in one day.

TechFinancials reported on Thursday that the shares of Net dipped a further 14.5% at R64 by 15.55 on Wednesday after the company announced it had experienced unexpected delays in the filing of its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018.

For more read: Net1 Shares Plunges Again On Delayed Filing of Restated Quarterly Report

The Nasdaq and JSE-listed firm informed the United States Securities and Exchange Commission that it expects that it will be able to conclude the remaining work in time to file the Form 10-Q within the five-day extension period.

PR Firm’s Burson Cohn & Wolfe said: “It appears the U.S. law firms (and by referencing them by association the author) have arrived at a conclusion that the misstatement was the cause of the decline in the share price.

“This is not accurate.

“We believe, and supported by feedback we have received from many shareholders, that the negative reaction to our share price was as a result of Net 1 reporting a loss in the quarterly period due to the losses incurred in the final three months of our CPS contract, and as a result of SASSA’s actions to open SAPO accounts without any beneficiary consent, thereby violating their constitutional right to choose.”

The company did not inform JSE investors about the delay in publishing restated financials and the investigations by US law firms.

For more read: SA’s Net1 Announces Delayed Filing of Restated Quarterly Report

The company added that the restatement was a classification error and did not have any impact on the company’s equity, asset value, cash flow or fundamental earnings per share. “The related adjustment will, in fact, increase our reported GAAP EPS and HEPS.”

Net1, a shareholder in South Africa’s mobile phone firm Cell C, announced last Friday that it will restate its financial earnings for the year ended June 2018 due to an accounting error.

For more read: SA’s Net1 Will Restate FY Earnings; Cites Cell C’s Accounting Error


Herewith Attached Below Email Sent To TechFinancials by Von Holdt

Hi Gugu

We are concerned that your articles are not accurate and we have provided clarity for you below.  Should you wish to have clarity in future, please do get in touch as our client is always willing to offer clarity and answer questions. 

  1. The restatement was a classification error and did not have any impact on the company’s equity, asset value, cash flow or fundamental earnings per share. The related adjustment will in fact increase our reported GAAP EPS and HEPS.
  2. It appears the US law firms (and by referencing them by association the author) have arrived at a conclusion that the misstatement was the cause of the decline in the share price. This is not accurate. We believe, and supported by feedback we have received from many shareholders, that the negative reaction to our share price was as a result of Net 1 reporting a loss in the quarterly period due to the losses incurred in the final three months of our CPS contract, and as a result of SASSA’s actions to open SAPO accounts without any beneficiary consent, thereby violating their constitutional right to choose.
  3. It is also important to understand what constitutes a class action lawsuit in the US and how they come about – any company that has a significant reduction in share price almost always attracts the attention of securities law firms (a little bit like the ambulance chasers), as they view it as an opportunity to build a case and perhaps be paid in the form of a settlement. The majority of class actions do not materialise because there is no merit to the claims. For reasons outlined in point 2 above, we believe these law firms searching, or as they call it “investigating”, for investors who are aggrieved due to the share price decline based on fraud, are unequivocally without merit.

Net 1 is disappointed by the coverage being given by you without understanding the facts or nuances, which the Company would have readily offered if approached. The repeated sensationalistic headlines and stories over the past week do nothing but further cause unwarranted reputational damage to the company.


Herewith Below TechFinancials Response

Hi Bridget,

  1. You say the “articles are inaccurate”. Which articles and what precise inaccuracies?
  2. Thank you for the education on US class action lawsuits. Maybe South Africans could adopt similar approaches to keep corporates honest and transparent. However, when a journalist quotes anyone it does not imply that they agree with their views or conclusions. Journalism 101. But your PR company is welcome to express its and its client’s own conclusions. I am happy to publish your letter and its conclusions in full.
  3. Why is the lawyers’ conclusion wrong? Have you written to them? Is your client planning to sue them?
  4. Please advise whether you will be assisting the US lawyers (ambulance chasers) with their “investigation” and, if so, if you will be sharing the corrected version of Cell C’s financial statements and the financial aspects of the violation of CPS’s clients’ constitutional rights so that they can arrive at their own conclusions. Please share this information with me so that I can evaluate your position and report on it.
  5. I sympathise with your disappointment but it is based on wrong conclusions by Net 1, and by you, as an author of this letter. It is not correct that I do not understand “the facts or nuances”. I do. I reported purely based on reports, SEC filings, etc, by Net 1 and press releases by lawyers, etc, and only expressed those facts and nuances.
  6. Which “repeated headlines or stories” over the past week are sensationalist and how have they damaged your client’s reputation? Are you aware of the fact that I did not publish any stories in the US? Am I the only publication to report your accounting errors and a sharp decline in share price? Have you addressed similar letters of clarity and dissatisfaction to them as well? Are you planning to issue a public statement or simply to leave it at rebuking my small publication through a letter reminding me of everyone’s disappointment?

In this regard, are you aware that the majority of South Africans are disappointed in Net 1 and that they do not trust you? Net 1’s disappointment in me is misdirected. Perhaps you could do more to address the South African public’s disappointment.

In order to assist me with my next story, could you please advise why it took so long to discover and report these financial inaccuracies and why Net 1 required 5 extra days to give a corrected report. 

I will be publishing your letter in full in order to give your version of the story and am happy to receive any further factual information you may wish to add to this opinion letter, to back up your views. 

Regards,

Gugu


TechFinancials is still waiting for a response from Von Holdt and Burson Cohn & Wolfe South Africa.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.