Cessna Maker Textron Sued for Misrepresentation of Backlog and Financial Segment Deterioration

Cessna maker Textron (TXT), whose stock has gotten bombed over the past year after the very public bashing of any and all private jet purchases, might be in more hot water. After briefly making the press in relation to speculation that it could be an acquisition target, which subsequently turned out to be a large insider trading leak that subsequently led to the suicide of the alleged perpetrator, Textron is now being sued by the City of Roseville Employees' Retirement System for business condition misrepresentations. Among the allegations cited in the suit (09-367 Filed in District Court of Rhode Island), are the following:

• The company accepted orders for business jets from a growing number of customers who were start-up companies or financially distressed fleet operators who either didn't intend to or couldn't pay for aircraft to be delivered.
• Hundreds of orders for Cessna aircraft were subject to deferral or cancellation. The result was an inflated order book for jets at Cessna.
• Textron's finance segment incurred material losses in the fair market value of its finance receivables and other financial assets, but the unrealized losses were omitted or misrepresented in earnings and income reports.

Additionally, the suit alleges that company executives, including CEO Lewis Campbell and CFO Ted French, illegally profited from inflated stock prices when they sold shares of Textron stock, which generated $67.1 million in proceeds.

The lawsuit, which plaintiffs are seeking class action status for, will likely end up in some form of settlement. However, one good thing that may come out of it, is an investigation into backlog reporting not just for Textron, but for many companies whose P&L depends on a stable future order book, and more specifically, what public visibility (and attributed confidence) is imparted to it. Names like Boeing (BA) and Airbus, as well as specialized vehicle manufacturers are the first entities that come to mind, and even more so if these have captive financing units which can do much to mask the deteriorating conditions of their potential customers.

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Comments

[Leftfield:]

Too bad for Cessna and the other companies mentioned that they can't inflate their order book like Wall St: By flipping marked-to-magic "assets" to each other and booking nice bonuses. With taxpayer backing when the music stops.

Aug 19 05:31 PM

[John Galt:]

Put the thieves in jail and throw away the key.

Aug 20 08:15 AM

[TeresaE:]

Why is it the government is more interested in jailing pot smokers, than these corporate thieves?

Could it be corporate thieves pay the largest share of taxes?

I wouldn't doubt that at all.

Fubar for the average Joe and good times for the corrupt & ruling elite.

Aug 20 10:19 AM

[snogfondle:]

i used to work for cessna and it seemed a little strange that when i hired there in 05 , they said that they had a 15.3 billion, that's billion with a "b", and then 4 years later they lost it all. looks very suspicious to me, i hope they put campbell in jail. but in the end they won't, because of all the high priced lawyers. and we know now how it goes. the rich get richer and the working man, whom campbell relies for his salary, get poorer or totality broke.

Aug 20 11:18 AM

[Real News:]

And, how can Cessna emloyees, current and former, get any relief in this lawsuit ? Our retirement is tanked as well !! Why can we not all get on the list with the plaintiffs ??


On Aug 20 11:18 AM snogfondle wrote:

> i used to work for cessna and it seemed a little strange that when
> i hired there in 05 , they said that they had a 15.3 billion, that's
> billion with a "b", and then 4 years later they lost it all. looks
> very suspicious to me, i hope they put campbell in jail. but in the
> end they won't, because of all the high priced lawyers. and we know
> now how it goes. the rich get richer and the working man, whom campbell
> relies for his salary, get poorer or totality broke.

Aug 22 11:46 AM

[Nonymoussurfer:]

As long as Lew owns the BOD, no harm will come his way-at least from within TXT... This assclown's decision to get in the sub-prime mortgage game cost THOUSANDS their jobs. Can someone explain to me why Lew still has his? I guess what they say is true: it's good to be king...

Aug 24 09:20 PM