The class action bandwagon against Huffy Corp. is getting full after an initial class action suit was filed last wee alleging that Don Graber, Timothy Howard, Robert Lafferty and Paul DAloia, all current or former Huffy officers and directors, failed to disclose and misrepresented material adverse facts, “which were known to defendants or recklessly disregarded by them.”

Specifically, the suit claims that the company failed to effectively integrate the McCalla and Gen-X acquisitions; overstated its financial results by $3.5 to $5.0 million; used improper accounting practices in the company’s Canadian operations stemmed from improper customer deductions, credits and reserves for inventory valuation and doubtful accounts receivables; recorded both a write-off of certain intangible assets and a full valuation allowance for deferred tax assets, estimated at $53.0 million; had mounting financial problems, forcing Huffy to eventually file for bankruptcy; and as a consequence, defendants lacked a reasonable basis for their positive statements about the company’s growth and prospects.

Huffy recently stated that the company has been blocked from retaining its auditing firm, KPMG LLP, due to a petition by unsecured creditors. In light of these objections, Huffy withdrew its bankruptcy court application for the retention of KPMG. Since the company is now forced to hire a new auditing firm, the investigation into potential dubious accounting practices at Huffy Canada is being delayed (See SEW_0504).