The two suits, both filed in the United States District Court for the Eastern District of New York, allege that Acclaim "issued numerous statements which described the Company's increasing income and improving financial performance." Both lawsuits claim that the company engaged in the following:
1) Channel stuffing. They claim that Acclaim convinced retailers to order more products that they wanted or could sell in the short term, which boosted the publisher's short-term financial picture.
2) Inadequate disclosure of internal business operations. The suits claim that the company is experiencing "severe and continued operating problems" at its internal studios regarding the development, content, cost, market testing, distribution and sales of its games.
3) Inadequate disclosure of sales results. The suits allege that Acclaim did not fully disclose the extent to which its games, notably Turok: Evolution
and Aggressive Inline
, were underperforming in the market, and how that affected Acclaim's ability to meet revenue and earnings guidance for fiscal 2002 and beyond.
4) Inadequate disclosure about the company's distribution and retails sales tracking information systems. The lawsuits claim that that these systems were inadequate and caused Acclaim to underestimate its allowances for sales returns and price concessions.
5) Inadequate disclosure about the company's plans to publish games with mature themes. The suits claim that the development of games like BMX XXX
had "materially impeded the Company's ability to access broad-based retail channels" and hurt revenue projections.
The Class Period ends on September 19, 2002 -- the date when Acclaim issued a press release announcing that it expected to report an operating loss for the 4th quarter of 2002 and lowered guidance for the first and second quarters of its 2003. Acclaim shares lost 29% of their value that day.