Earlier this week a class action lawsuit was filed against ZAGG Inc. alleging that the board of directors hid stock pledges made by the recently retired CEO and Board Chair Robert J. Pedersen.
ZAGG manufacturers the popular protective coverings for Apple’s IPhone and IPad devices.
The alleged violation occurred when ZAGG issued a press release stating that Pedersen resigned. However, the press release did not mention that Pedersen sold about 515,000 shares of stock in order to meet margin calls three days before he resigned. A margin call is when a stock sale purchased with borrowed money decreased in value so much that an investor would have to either deposit more money in the account or sell the asset.
The lawsuit alleges that ZAGG, board members, and some company officials knew that Pedersen had undisclosed stock pledges going back to last year, including the sale of stock prior to his resignation. The only information Pedersen and the board provided was that the stock sales in December were made to meet financial obligations. However, the lawsuit alleges that the December stock sale was actually due to a margin call situation, which requires investor disclosure.
The complaint accuses that starting in December 2011 Pedersen borrowed substantial amounts of money, of which ZAGG stock was used as collateral. If this is true it would have violated US Securities law, even though Pedersen is no longer CEO of the ZAGG.
ZAGG’s attorney, Jeff Jones, responded to the lawsuit, stating that the claims are without factual basis, and that they will be defended vigorously.