Audit Integrity Seeks SEC Investigation of Hertz's Attempts to Induce 19 Companies to Sue the Firm for Critical Research
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LOS ANGELES--(BUSINESS WIRE)-- Audit Integrity, an independent financial research publishing and risk modeling firm, announced today that it has asked the Securities and Exchange Commission to investigate Hertz Global Holdings, Inc.'s "blatant" attempts to induce 19 companies to consider filing lawsuits because of the firm's recently issued bankruptcy model.
In an October 5 letter sent via overnight delivery to SEC Chairman Mary L. Schapiro, Audit Integrity Chairman and founder James A. Kaplan disclosed that Hertz sent his firm a threatening letter signaling its possible intent to sue his company unless it retracted a critical report identifying Hertz and 19 other publicly traded companies as being statistically more at risk than their peers to file bankruptcy in the next 12 months. The letter was signed by Jeffrey Zimmerman, General Counsel and Secretary of Hertz, and the corporate counsels of the other 19 companies identified in the report were copied.
Audit Integrity recently released the findings of its newly launched bankruptcy model, which calculates the statistical likelihood that publicly-traded companies will file for bankruptcy. The model is designed as a risk measurement tool for insurance companies, auditors and institutional investors, who have a greater concern about companies' financial solvency risks. The model uses objective information and a proven modeling approach that has yielded highly predictive results.
Hertz on September 25 sued Audit Integrity in Superior court of New Jersey for defamation and trade libel. Although no other companies have sued Audit Integrity for its bankruptcy risk report, a Hertz spokesman was quoted in a September 30 Dow Jones story as saying it's "still early."
"As Hertz's ultimate goal was to silence an independent research firm calling regulatory and investor attention to the company's real and material financial risk, the matter warrants an investigation by the Securities and Exchange Commission," Mr. Kaplan says. "Hertz's lawsuit is frivolous and without merit, and we are confident it will be dismissed. Our findings are objective and verifiable, and we stand by them."
Audit Integrity is an independent firm that focuses on developing quantitative risk models for the financial markets. Its statistical models are entirely objective and use publicly-available data. The firm receives no compensation for its ratings. Its clients are highly-regarded firms in the investment industry, national regulatory agencies in the U.S. and Canada, the largest pension plans, several of the "Top Four" auditing firms, and the largest insurance companies. Its quantitative research has proven to be quite useful to its clients. Audit Integrity was among the first to issue warnings about Bank of America, Lehman Brothers, Bear Stearns, and Countrywide Financial. It also warned about Huron Consulting, a company founded by former Arthur Andersen employees, whose recently issued major restatement has provoked an SEC investigation.
"Mr. Zimmerman has offered no evidence of factual errors or inaccuracies in our analysis," Mr. Kaplan says. "In maligning our research, Mr. Zimmerman also charges that we "ignored qualitative information" and notes that various equity analysts support his company. The fact that analysts who make qualitative judgments support his company is meaningless since in fact we intentionally do not engage in this type of analysis."
Mr. Kaplan notes that Hertz's most recent 10-K contains two dozen pages of financial and business continuity warnings.
Mr. Kaplan's letter, and Hertz's lawsuit, can be found at www.auditintegrity.com.
About Audit Integrity
Founded in 2002, serving investors, insurers, auditors and corporate finance professionals, Audit Integrity is a leading independent publishing research firm that rates more than 12,000 public companies in North American and Europe based on their corporate integrity. In addition to its flagship Accounting and Governance Risk (AGR) ratings, Audit Integrity also forecasts bankruptcy risk, class action litigation risk, material financial restatement risk, and equity performance risk. The statistical correlation of these ratings has been confirmed by internal and third-party tests. Audit Integrity has offices in Los Angeles and New York City. For more information, please visit www.auditintegrity.com.
Source: Audit Integrity
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