Trinity Industries Inc. was sued by shareholders alleging the company failed to disclose it made changes to its guardrail safety system without government review.
At least two lawsuits were filed in federal court in Dallas accusing the company of making materially false and misleading statements. The lawsuits are the first to follow news of a federal criminal investigation into the use of Trinity’s ET-Plus system, which has been linked to at least nine deaths. The system is meant to blunt the impact of cars that crash headlong into guardrails.
Trinity deliberately understated its liabilities and overstated its financial projections, investor Paul Panes said in a complaint filed Tuesday in Dallas. The company misled investors for three years leading up to news of the criminal probe, thereby artificially inflating the stock price, lawyers for the White Family Trust, another shareholder, said in a lawsuit filed Monday.
Trinity shares fell as much as 10 percent on April 22 after news that investigators from a public corruption and special prosecutions unit of the U.S. Justice Department subpoenaed documents involving Trinity’s ET-Plus on behalf of a grand jury.
The company has been under scrutiny in courts and from states over the performance of its ET-Plus system. In October, a Texas jury ruled in a whistle-blower lawsuit that Trinity had cheated taxpayers of $175 million by changing certain dimensions of the ET-Plus in 2005 without telling the Federal Highway Administration, the government agency that certifies the safety of roadside hardware. Those cost-cutting alterations caused the unit to malfunction, plaintiffs have said in more than a dozen lawsuits.
In the new lawsuits, shareholders are seeking to recover money allegedly lost as a result of Trinity’s omissions.
Trinity said in a regulatory filing that it was aware of the lawsuits.
“The company believes each of these lawsuits is without merit and intends to vigorously defend against all allegations,” it said in the filing.
Jeff Eller, a spokesman for Dallas-based Trinity, said in an e-mail that it “would not be proper” to comment on the shareholder suits at this time. The complaints also name as defendants Chief Executive Officer Timothy Wallace and Chief Financial Officer James Perry.
After the Texas jury verdict, Trinity announced that it would stop shipping the ET-Plus to customers pending further safety findings. In March, the system passed a set of crash tests ordered by the FHWA. Trinity said it will wait to potentially resume ET-Plus shipments until the highway agency completes further analysis of the system early this summer.
There are about 200,000 Trinity units along U.S. roadsides, the FHWA has said. ET-Plus sales revenue totaled $35.1 million in 2014, or 0.6 percent of Trinity’s consolidated revenue, according to the company’s most recent quarterly filing with the U.S. Securities and Exchange Commission.
The cases are Panes v. Trinity Industries Inc., 15-cv-1316; and The White Family Trust v. Trinity Industries Inc., 15-cv-1304, U.S. District Court Northern District of Texas (Dallas)