Case: Friedman v. Penson Worldwide, Inc., et al., No. 11-cv-2098 (N.D. Tex.)
Court: United States District Court for the Northern District of Texas
Class Period: March 30, 2007 - August 4, 2011
Attorneys: Frederic S. Fox, Laurence D. King, Jeffrey P. Campisi

Kaplan Fox is the court appointed co-lead counsel in the securities class action against Penson Worldwide, Inc. (“Penson” or the “Company”) and other related defendants in connection with Penson’s recent disclosure that it had materially misstated its financial results. In this case, Kaplan Fox represents the court appointed lead plaintiff, Reid Freidman.

The Complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements to investors by misrepresenting and failing to disclose that by at least the end of 2010 1) the Company had approximately $96-97 million in receivables (“Nonaccrual Receivables”) of which approximately $43 million were collateralized by illiquid securities and therefore unlikely to be collected; 2) the Company’s assets (Nonaccrual Receivables) were materially overstated and should have been written down at least by the end of 2010; 3) as a result, the Company’s reported income and EBITDA (earnings before interest, taxes, depreciation, amortization and stock-based compensation, and excluding certain nonoperating expenses) were materially overstated; and 4) the Company’s financial statements were not prepared in accordance with generally accepted accounting principles (“GAAP”).


It is further alleged that starting on May 9, 2011, Penson began to reveal the truth about its financial condition. On May 9, 2011, Penson disclosed it held Nonaccrual Receivables of approximately $97 million of which approximately $43 million were collateralized by illiquid securities issued by a troubled horse track and real estate project in Texas. Between May 9 and May 11, 2011, Penson shares declined from a close on May 9, 2011 of $5.45 per share to close at $3.93 per share on May 11, 2011, a decline of approximately 28%, on heavy volume.


Then, on May 12, 2011, the Complaint alleges that Penson disclosed the resignation of Company director Thomas R. Johnson, stating “[b]ased on Mr. Johnson’s position as chief executive officer of Call Now, Inc, a holder of a portion of the Retama related collateral, both Mr. Johnson and the Company felt it appropriate for him to resign his position at this time.” On May 12, 2011, Penson shares declined $0.81 per share further, or approximately 21%, to close at $3.12 per share, on heavy volume.


Finally, on August 4, 2011, it is alleged that after the close of trading, Penson disclosed that “the Company recorded a non-cash write down of $43.0 million, equal to $26.7 million or ($0.94) per share net of tax, against $96.6 million of nonaccrual receivables. The write down was recorded in conjunction with Penson’s initiation of foreclosure proceedings on the majority of the collateral underlying these receivables, including, but not solely related to, certain assets associated with the Retama Development Corporation, and shares of Penson Worldwide stock.” On August 5, 2011, Penson shares declined $0.49 per share or approximately 19% to close at $2.12 per share.


On August 23, 2013, Judge Reed O'Connor, U.S. District Judge for the Northern District of Texas, approved a settlement of $6.5 million for this action.


If you purchased the publicly traded common stock of Penson Worldwide, Inc. between March 30, 2007 and August 4, 2011 (the “Settlement Class Period”), or held Penson common stock as of the record date in 2009, 2010, and 2011 (March 23, 2009, March 29, 2010, and March 1, 2011, respectively) and were entitled to vote on the election of Penson’s directors, you are a member of the Settlement Class and could get a payment from the Settlement.


The settlement administrator ( is currently processing and valuating claims. All timely claims will be sent a status letter which may or may not require a claimant response. Claimants are required to inform the Settlement Administrator of any change of address. Subject to court approval, distribution is expected to occur by the end of the first quarter of 2014.