Ebix Inc (EBIXQ)

[TheFinalCD]

wow what a "V" formed off $9.54 I wish I had filled up the basket there...

but then again with this Investigation and allegations, its risky no matter how you slice it!

Its not like its just a blog or rumor

Its 4 real====>

Ebix Shares Hit 3-Year Low After Federal Probe Scuttles Buyout
http://blogs.wsj.com/moneybeat/2013/06/20/ebix-shares-hit-3-year-low-after-federal-probe-scuttles-buyout/


Ebix, Goldman affiliate scrap merger deal due to regulatory probe
http://www.reuters.com/article/2013/06/20/us-ebix-offer-idUSBRE95J00920130620?type=companyNews


For Some Reason Goldman Doesn’t Want To Buy Company Accused Of Accounting Fraud
http://dealbreaker.com/2013/06/for-some-reason-goldman-doesnt-want-to-buy-company-accused-of-accounting-fraud/


SEC Probe

Even as the company kept posting increases in revenues and earnings -- driven in part by a series of acquisitions -- Ebix failed in its attempts last year to get the lawsuits dismissed and the SEC began a probe of the company’s accounting practices.

The pressure mounted in February of this year when another short seller, Daniel Yu of Gotham City Research, published his own attack on Ebix’s financial statements, also on Seeking Alpha. In response, Raina held a conference call with an analyst in which he tried to refute some of the Gotham City claims, while avoiding any discussion of the SEC investigation.

A tennis buff and obsessive ping-pong player, Raina served up the Goldman Sachs buyout plan artfully, announcing the $20-per-share offer a week before disclosing to investors that his company was already being probed by the SEC and the Internal Revenue Service, facts that might have sent his company’s share price south had it not been for the Goldman Sachs deal. The IRS probe relates to Ebix’s use of off-shore subsidiaries in low-tax countries, two people familiar with the matter said last month. Ebix has said that it’s cooperating with the IRS, and that it’s regularly reviewed and audited by domestic and foreign tax authorities


Two Subpoenas

SEC investigators, who have issued two subpoenas to Ebix, according to the company’s latest quarterly statement, have also expressed interest in payouts that have been promised if acquired firms reach revenue targets, according to a person who has discussed the issue with the agency.

Investigators are examining the possibility that Raina’s preference for embedding an earnout in the acquisition price could create a ”cookie jar” that the company can later to use to boost income, according to the person, who requested anonymity because the matter is confidential.

For example, when Ebix announced the Peak acquisition in 2009, it set aside $8 million for the purchase, which consisted of a $6.5 million cash payment, and an accrual of $1.5 million from Ebix’s cash reserves to be paid out when Peak hit its revenue targets over a 12-month period.

Microsoft Lawsuit

In 2011, after concluding that Peak failed to achieve those targets -- a determination being contested by Peak in its lawsuit -- Ebix management reversed the $1.5 million accrual, which flowed directly to its bottom line. It didn’t adjust the goodwill associated with the original purchase downward. Thus, Ebix was able to convert $1.5 million from its cash reserve in 2009 into $1.5 million in net income for 2010.

The due diligence team at Goldman Sachs had an opportunity to review the claims made in the Peak lawsuit, as well as in a class-action suit filed two years ago. The Microsoft suit, however, was filed after the announcement of the LBO.

Microsoft claimed Ebix breached its licensing contract and ignored the company’s demand for an audit to determine the extent of overuse, according to the complaint. Ebix said it was using unlicensed copies of the company’s software products while putting off Microsoft’s attempt to conduct an independent audit, according to the filing. Keehner declined to comment on the suit.




reminds me of SNOFF & CCME Muddy Waters & Citron, but this time its Marc Cohodes & Daniel Yu

Marc Cohodes, a short-seller who helped expose accounting frauds at Lernout & Hauspie, Aremisoft and Computer Associates, questioned the quality of Ebix’s earnings and the motivations behind the deal.

“In my experience uncovering and dealing with some of the great software frauds in the past, Ebix could rise to that level,” Cohodes said.

Cohodes said he’d “never seen a company being investigated or sued on so many fronts” while it was a takeover target.