On April 15, 2013, the Hotel Trades Council and Hotel Association of New York City, Inc. Pension Fund was appointed lead plaintiff and CMST was appointed lead counsel in a derivative action pending in the Northern District of Georgia against nominal defendant Ebix, Inc., a publicly traded company, and its directors. The derivative action alleges that Ebix’s board of directors breached their fiduciary duties to shareholders in connection with its disclosures regarding financial results and internal controls over financial reporting. In particular, the derivative complaint alleges that Ebix:
(1) misrepresented the source of its purportedly organic revenue growth; (2) suffered from material internal control weaknesses; and (3) employed a manipulative, unsustainable tax avoidance scheme involving its foreign subsidiaries to reduce tax liability and inflate earnings.
The derivative complaint further alleges that by breaching their fiduciary duties to stockholders, the Board has damaged the company by exposing it to potentially massive liability in pending securities class actions and increased regulatory scrutiny by government agencies.