Investor Sues CBL Alleging That It Did Not Properly Alert Stockholders About Costly Lawsuit

Thursday, May 23, 2019

An investor in Chattanooga-based CBL & Associates has filed a class action lawsuit, alleging that the firm did not properly notify stockholders of a costly lawsuit.

The suit was filed in Chattanooga Federal Court by Laurence Paskowitz.

It is also brought against CBL’s founder and Board Chairman Charles B. Lebovitz, Chief Executive Officer Stephen D. Lebovitz, Chief Financial Officer Farzana Khaleel, and Audit Committee Chairman A. Larry Chapman.

The suit says CBL’s 173.5 million common shares trade on the New York Stock Exchange, as do the shares of its two series of Preferred Stock, Series D and Series E.

It says, "Because it is a REIT, CBL must pay out 90% of its earnings as dividend distributions per the requirements of the Internal Revenue Service. This leaves CBL with relatively little in cash on its balance sheet at the end of each quarter. As of December 31, 2018, CBL’s balance sheet showed $25.1 million in cash.

"The company is subject to the federal securities laws and is obligated to follow generally accepted accounting principles as promulged by the Financial Standards Accounting Board. Thus, both the federal securities laws and GAAP require a public company to report threats to its business which could a result in a material change in the Company’s cash position in its quarterly and annual SEC filings.

"The material threats that must be fully disclosed include large lawsuits against the company. If such a lawsuit is filed, the company’s litigation must be discussed under a section entitled “Legal Proceedings” which must disclose: (a) the existence of the lawsuit; (b) the nature of the claims; (c) the potential materiality of a loss; and (d) the size of the claim, if such can be estimated. In addition, the financial statement must reflect a “reserve” against the contingency that the Company could pay out a substantial settlement or verdict, again to the extent an estimate can be made. Without such disclosures, investors were unable to assess the risks that CBL faced during the Class Period, and, as a result, its stock price was fraudulently inflated during the Class Period."

The suit says in 2016, a class action suit "that could result in tens of millions or even hundreds of millions of dollars in liability" was filed in Florida Federal Court. 

According to the complaint, "In the Overbill Litigation, the plaintiff alleged on behalf of a class of CBL retail tenants that CBL entered into leases providing that CBL would charge its tenants for electricity at cost, but rather engaged in theft by marking up the electricity bills by large amounts, and pocketing the difference. The plaintiff asserted numerous causes of action, including RICO claims, which were upheld in April 2017 against a motion to dismiss. The plaintiff’s class claims, if trebled, amounted to $180 million, not counting attorneys’ fees. Although CBL defended the Overbill Ligation for years, it turned out to have no true defense—it had been caught with its hands in the cookie jar."

It says earlier this year, CBL was forced to settle all claims by paying the Class 100 percent of damages ($60 million) and paying an additional $28 million to cover its adversary’s attorneys’ fees. No insurance covered these sums, as CBL’s insurer had disclaimed coverage, it was stated.

The suit states, "Because allegations of theft would have been viewed very unfavorably by both investors and potential mall tenants, Defendants herein embarked on a fraudulent scheme whereby they issued SEC reports that (until the tail end of the Class Period) simply pretended that CBL faced no material litigation at all. Indeed, Defendants made no mention of the Overbill Litigation at all. Thus, investors had no idea that there was a litigation."

The suit asks unspecified damages.

It was filed by attorneys Paul Kent Bramlett of Nashville as well as attorneys from New York City.  

 


Latest Hamilton County Arrest Report

Jemichael Powell Arrested For Aug. 26 Murder Of Quintasia Tate

County Commission Votes To Rezone Property On Ooltewah-Ringgold Road for 38 More Homes: Smedley Has Concerns About Lack Of Infrastructure


Here is the latest Hamilton County arrest report: BEARD, TAMERON DICENE 8815 FORREST POND DRIVE HARRISON, 37341 Age at Arrest: 48 years old Arresting Agency: Hamilton County LEAVING ... (click for more)

Jemichael Powell, 27, wanted in connection with the homicide of Quintasia Tate, 19, on Aug. 26, was located in Chattanooga on Wednesday and taken into custody by Chattanooga Police and U.S. Marshals. ... (click for more)

A vote by the Hamilton County Commission on Wednesday rezoned property at 3132 Ooltewah Ringgold Road from A-1 Agricultural and R-2 Residential to R-1 Single Family District. The commissioners ... (click for more)


Breaking News

Latest Hamilton County Arrest Report

Here is the latest Hamilton County arrest report: BEARD, TAMERON DICENE 8815 FORREST POND DRIVE HARRISON, 37341 Age at Arrest: 48 years old Arresting Agency: Hamilton County LEAVING SCENE OF ACCIDENT W/DAMAGE TO VEHICLE ---- BOSTON, BRANDON LEE 102 CHEROKEE STREET DUNLAP, 37327 Age at Arrest: 35 years old Arresting Agency: Hamilton County IN TRANSIT TO BLEDSOE ... (click for more)

Jemichael Powell Arrested For Aug. 26 Murder Of Quintasia Tate

Jemichael Powell, 27, wanted in connection with the homicide of Quintasia Tate, 19, on Aug. 26, was located in Chattanooga on Wednesday and taken into custody by Chattanooga Police and U.S. Marshals. He had been placed on the Tennessee Bureau of Investigation's Most Wanted List. He is charged with criminal homicide and unlawful possession of a firearm. Powell is in custody ... (click for more)

Opinion

Let The Water Company Pay The Bill - And Response

Tennessee American breaks a line and 35,000 people lose water for three days. Well they don’t exactly admit they broke it, they were working on it a few feet away and it just broke….so they say. One half of TAWC service area is out of water three days and nights, hospitals canceling surgery, schools closed and opened and then sending the children home, businesses shut down, government ... (click for more)

Gregg Gentry Says He Was Not At Meeting On Nurse Pay

Regarding Mr. Exum's claim in his Sept. 12 column that Erlanger Chief Administrative Officer Gregg Gentry attended his Sept. 4 meeting with Kevin Spiegel is not accurate. Mr. Gentry said he was not at this meeting. (click for more)

Sports

Mocs Football Set To Host 2nd Ranked James Madison Saturday

The University of Tennessee at Chattanooga football team has a chance to make history this weekend when second ranked James Madison visits the Scenic City. With the release of the FCS polls today, the Dukes are officially the highest ranked non-conference opponent to take on the Mocs in Finley Stadium. Kickoff is set for 4:00 p.m. (E.D.T.) on Saturday, Sept. 21. JMU (2-1, 0-0 ... (click for more)

UTC Women 7th At Mercedes-Benz Collegiate

--The Chattanooga Mocs women’s golf team’s posted their best season-opening score shooting 872 (+20) over 54 holes at Cherokee Country Club. That was good for a seventh-place finish in the Mercedes-Benz Collegiate after today’s 294. Maddy McDanel and Esme Hamilton tied for the team’s low card with level-par 71s. Rheagan Hall and Dorota Zalewska each tallied 76, while Kirsty ... (click for more)