Investigation regarding Renewable Energy Group’s internal control over financial reporting and the material weakness related to biodiesel tax credit payments on sold biodiesel.
The Renewable Energy Group discloses the need to restate its financials for the fiscal years 2018, 2019 and most of 2020, stating that “the restatement is the result of the Company not being the proper claimant for certain biodiesel mixture excise tax credit (“BTC”) payments on biodiesel it sold between January 1, 2017 and September 30, 2020.”
The company further explains: “To claim the BTC, a taxpayer must be the first to blend petroleum diesel into the biodiesel. Due primarily to failures in the petroleum diesel additive system at the Company’s facility in Seneca, Illinois, petroleum diesel was periodically not added to certain loads. As a result, the Company’s customers who received these loads and subsequently added petroleum diesel are the proper claimants on these biodiesel gallons rather than the Company’s REG Seneca subsidiary. In some instances, the relevant customer and proper claimant was an REG subsidiary. The Company has consented to additional tax liability, including interest, assessed by the U.S. Internal Revenue Service due to the incorrect BTC filings. The impact on the Company’s financial statements for the Relevant Periods is to decrease Biomass-based diesel government incentives revenue and increase interest expense (thereby increasing accounts payable and accrued expenses and other liabilities on the related balance sheets). While the BTC adjustment in each year is not material, the Company determined that the aggregate BTC adjustment is material in 2019.”
See more on Factual Timeline
Plaintiff brings this securities class action against all persons and entities that purchased or otherwise acquired Renewable Energy securities between May 3, 2018 and February 25, 2021, inclusive.
According to the complaint, defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the company’s business, operations, and prospects. Specifically, defendants allegedly failed to disclose to investors:
(1) that due to failures in the diesel additive system, petroleum diesel was not periodically added to certain loads by the Company and was instead added by the Company’s customers;(2) that, as a result, Renewable Energy was not the proper claimant for certain BTC payments on biodiesel it sold between January 1, 2017 and September 30, 2020;
(3) that, as a result, Renewable Energy’s revenue and net income were overstated for certain periods;
(4) that there was a material weakness in the Company’s internal control over financial reporting related to the purchase and use of the petroleum diesel gallons when blending with biodiesel; and
(5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.
The court issued an order appointing the lead plaintiff and lead counsel.
Lead plaintiff brings this securities class action on behalf of a class consisting of all persons and entities that purchased or otherwise acquired Renewable Energy securities between March 8, 2018 and February 25, 2021, inclusive.
A motion to dismiss was filed with the court.
Court Granted the motion to dismiss.
On 01/20/2022, the court dismissed the complaint .
According to the plaintiff, defendants’ statements about the adequacy of its controls artificially inflated the price of REG’s stock between March 8, 2018 and February 25, 2021 (the “Class Period”). The defendants have moved to dismiss for failure to state a claim. Defendants’ motion is granted.
Order on Motion to Dismiss
A securities class action lawsuit is a lawsuit on behalf of investors considered in a similar position, who purchased or sold securities of a company during a certain period and suffered losses because of an alleged wrongdoing. Security is often broadly defined to include bonds, stocks, options, derivatives, and other instruments.
Section 10b of the Securities Exchange Act of 1934 makes it unlawful to “use or employ, in connection with the purchase or sale of any security” a “manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe.” 15 U.S.C. § 78j(b). It is therefore forbidden to: employ any device, scheme, or artifice to defraud; make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made not misleading; or engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
Generally, to be successful, the plaintiff must plead the following:
We invite you to read this article from the American Bar Association which, although from 2014, provide ample information to explore the world of class actions brought under section 10b of Securities Exchange Act of 1934.
Section 11 of the Securities Act of 1933 provides “an express right of action for damages . . . when a registration statement contains untrue statements of material fact or omissions of material fact.” (Thomas Lee Hazen, Treatise on the Law of Securities Regulation, §7.3 at 581 (4th ed. 2002)). Practically, buyers in an initial public offering (IPO), relying on the registration statement and prospectus, are given the right to file a complaint against the company and other signatories for losses sustained as a result of the deficient registration statement and prospectus.
Generally, at least four elements must be plead for the claim to survive:
A shareholder derivative lawsuit is a lawsuit brought by a shareholder of a company, on behalf of the company, against an insider (director, board of directors, executives) or a third-party to redress wrongs and harms to the company. Simply speaking, this mechanism exists because one cannot expect directors and insiders to sue themselves for harms they have done to the company.
The Private Securities Litigation Reform Act (PSLRA) of 1995 was enacted to tighten requirements for securities class actions to be brought in the United States. One of the mechanism put in place was a 60-day period, following the filing of the initial securities class action, for any shareholder considered in similar position to the one filing the initial class action complaint, to ask to be named lead plaintiff. Practically, any time a securities class action falling under the PSLRA is filed with a court, law firms advertise their willingness to pursue the case and invite other investors similarly situated to contact them.
The lead plaintiff in a securities class action is a shareholder who suffered losses related to the purchase or sale of a company’s security during a certain period of time, that is appointed with its choice of counsel to represent the rest of the similarly situated shareholders. To be appointed lead plaintiff, you need to contact a law firm, have them examine your losses and agree to be represented by them and ask to make a motion with the court to be appointed lead. The court will then look at all the motions from the different shareholders and make its decision based on a certain set of criteria. Your inability to be lead plaintiff shall not prevent you from any potential recovery in the event of a settlement.
A class period is a set period of time during which the purchasers or sellers of a company’s security claim in a class action lawsuit to have suffered losses. Class periods are based on the merits of the case and may evolve with the litigation.
A class action complaint will define the initial class of investors: the class period and the persons included in the class. You should look at the definition of the class to determine whether you are included or not. However, the class definition will evolve with the litigation. Its definition is very likely to change between the initial complaint filed and the possible settlement. Generally speaking, you should rely on the definitions of the class stated in a stipulation of settlement to determine whether or not you will be entitled to any recovery (see below about the opting-out mechanism).
You may. The mechanism is called opting-out of class. A lead plaintiff will agree on the potential recovery ratio in a settlement. You may have an interest in opting-out of a class if you have sustained large losses and believe bringing a separate lawsuit would entitle you to a larger ratio of recovery.
You may be able to bring a claim to arbitration in certain scenarios. We encourage you to contact a law firm of your choice to inquire about such alternative dispute resolution mechanism.
We have temporarily disabled auto-updates, the information on this page may not be up to date.