AmTrust accused of improperly recognising revenue and bonuses in class action

Shareholder rights law firm Robbins Arroyo announces that a class action complaint was filed against New York-based property and casualty insurance AmTrust Financial Services in the US District Court for the Southern District of New York.

The complaint is brought on behalf of all purchasers of AmTrust securities between March 2, 2015 and March 16, 2017, for alleged violations of the Securities Exchange Act of 1934 by AmTrust's officers and directors.

According to the complaint, in a series of filings with the US Securities and Exchange Commission, AmTrust officials falsely attested to the accuracy of the financial statements, the disclosure of any material changes to the company's internal controls over financial reporting, and the disclosure of all fraud. In particular, the complaint alleges that AmTrust officials failed to disclose that AmTrust had ineffective assessment of the risks associated with its financial reporting. In addition, it alleges that AmTrust had an insufficient complement of corporate accounting and corporate financial reporting resources within the organization. Also, the company did not appropriately recognize its warranty contract revenue; did not recognize expensed bonuses in the appropriate year; and failed to maintain effective internal controls over financial reporting, according to the allegations.

On February 27, 2017, AmTrust revealed that it had identified material weaknesses in its internal control over financial reporting that existed as of December 31, 2016, according to the law firm. The company further disclosed that the weaknesses were related to ineffective assessment of the risks associated with the financial reporting and an insufficient complement of corporate accounting and corporate financial reporting resources. AmTrust also stated that it would correct certain financial statements for fiscal years ended December 31, 2015 and 2014, and certain financial information for fiscal years ended December 31, 2013 and 2012. Then, on March 16, 2017, the company announced that its previously issued financial statements for 2014, 2015, and 2016 should no longer be relied upon due to errors related to revenue recognition and the accrual of bonuses. On this news, AmTrust's stock fell nearly 19 percent to close at $17.58 per share on March 17, 2017, the law firm said.

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