Slater & Gordon
(ASX:SGH) is currently being sued by more than 3,000 of its shareholders in a class action led by its rival law firm, Maurice Blackburn.
In August 2016, Slater & Gordon reported a $1 billion net loss, but reassured investors that it would recover. In the 12 months prior to today, the embattled law firm’s share price plummeted by 72%. In February, the firm experienced its biggest one-day fall when its share price fell almost 60%.
Maurice Blackburn’s case is essentially that Slater & Gordon misrepresented its financial prospects, causing financial loss to its shareholders.
However, Maurice Blackburn may need to broaden its class action to also sue Slater & Gordon’s former auditors. Last week, ASIC reopened its investigation into Slater & Gordon, requesting its financial documents to see whether the firm’s records were "deliberately falsified or manipulated".
This complicates Maurice Blackburn’s class action because if it’s proven that Slaters’ executives falsified the documents, then its insurers will not be liable. Instead, Maurice Blackburn will have to pursue recovery from Slater’s auditors, advisors and directors.
Slater & Gordon reported a net loss of $1 billion at 30 June 2016.
