Yesterday, I received an important legal document from a law firm called Lerach, Couglin, Stoia, Geller, Rudman & Robbins LLP. It is a notice of a lawsuit filed against Yahoo! (NASDAQ:YHOO), Semel, Decker et al and that I am a member of the class of people who were allegedly damaged by the actions of the accused.
Looking more closely, I see that this law firm is claiming that the accused were 1) generating fraudulent revenue; 2) making false, misleading and deceptive representations and were influencing people to buy the stock; and that 3) Yahoo's advertising technology was operationally defective.
Law firms are not supposed to file lawsuits in Federal Court unless the lawyers have researched the law and the facts before filing the claim. So if the allegations are true, the alleged actions of Semel, Decker et al may cause them to worry about criminal prosecutions under the Securities and Exchange Act of 1934, the Sarbanes-Oxley bill and state fraud statutes.
Now why would Semel want to put out exaggerated earnings moving the stock higher? Why would he want the stock higher?