Investors in Barrett Business Services have filed a class-action lawsuit against the Vancouver-based provider of employment services, alleging the company violated federal securities laws by misleading shareholders about its market value.
The suit, filed on Nov. 6 in U.S. District Court in Tacoma, seeks an unspecified amount in compensatory damages, to be proved at trial, and other costs such as attorney fees. Three plaintiffs — Mitchell Arciaga, Joseph Masseli and Vimal Mathimaran — filed the complaint on behalf of investors who bought stock in Barrett between Feb. 12, 2013, and Oct. 29, 2014.
The suit names the company and two officers — CEO Michael Elich and Jim Miller, the company’s chief financial officer — as defendants. The company on Monday did not return phone calls seeking comment. Barrett, whose stock trades as BBSI on the Nasdaq exchange, provides temporary staffing, and employee recruitment and placement services. It also acts as a co-employer for clients, handling their human resources responsibilities.
Part of the class-action suit focuses on statements by Barrett during the company’s third-quarter earnings release on Oct. 28. That’s when the company said it showed a net loss of $37.8 million, largely because of an $80 million increase in its self-insured workers’ compensation reserve.
The company saw its stock price plummet nearly 60 percent, to $18.28 per share. The $80 million increase in the company’s self-insured workers’ compensation reserve “effectively wiped out the company’s past five years of pretax earnings,” according to the suit filed by three law firms: Clifford A. Cantor Law Offices of Sammamish; Glancy Binkow & Goldberg LLP of Los Angeles; and The Wagner Firm of Los Angeles.
Among other accusations, the suit alleges Barrett made false or misleading statements, and failed to disclose detrimental facts about its “business, operations and prospects.” The company “under-accrued” its self-insured workers’ compensation reserves, the suit asserts, and overstated its earnings. Barrett also “lacked adequate internal and financial controls,” the suit alleges.
As a result of the company’s “wrongful acts and omissions, and the precipitous decline in the market value” of its securities, according to the suit, shareholders have “suffered significant losses and damages.”
It’s unclear how many shareholders could be involved in the class action, according to the suit, but plaintiffs Arciaga, Masseli and Mathimaran “believe that there are hundreds or thousands” of them. “Millions of (Barrett’s) shares were traded publicly” between Feb. 12, 2013, and Oct. 29, 2014, according to the suit.
Since Barrett’s third-quarter earnings release, four other law firms have issued news releases announcing that a class-action lawsuit has been filed against the company and that they’re investigating potential violations on behalf of shareholders.
Barrett’s stock closed down 95 cents Monday, at $24.28 per share. The company’s shares have traded between $18.25 and $102.20 in the past 52 weeks.
