CompUSA 2007 Annual Report Download - page 97

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54
Litigation –
Kevin Vukson v. TigerDirect, Inc., OnRebate.com Inc. and Systemax Inc.
On October 18, 2007, Kevin Vukson filed a class action complaint in U.S. District Court (E.D.N.Y.) against TigerDirect,
Inc., OnRebate.com Inc. and Systemax Inc. on behalf of himself and all OnRebate customers whose rebates were denied or
delayed . (OnRebate.com Inc. is a rebate processing company owned by Systemax.) Vukson’s Complaint alleges that since
2004 Systemax, TigerDirect and OnRebate have conducted a deceptive and unlawful enterprise by failing to pay rebates that
should have been paid and delaying unnecessarily the payment of other rebates that were paid. Vukson alleges claims
arising under Florida’s Unfair, Deceptive Trade Practice Act, the federal RICO statute, along with claims for breach of
contract, conspiracy to commit fraud and unjust enrichment. Systemax, TigerDirect and OnRebate have moved to dismiss
the Complaint and to transfer the matter to the Southern District of Florida. The Court has not yet ruled on these motions
and has not yet certified a class. The Company intends to vigorously defend this case.
State of Florida, Office of the Attorney General Subpoena
On January 2, 2008 the Company received a subpoena for documents from the Florida Attorney General’s Office relating to
the payment and processing of rebates by the Company. On January 30, 2008 the Company received a second subpoena for
additional documents. The Company is cooperating with the Florida Attorney General’s Office to provide the requested
documents.
Other matters
Beginning on May 24, 2005, three shareholder derivative lawsuits were filed against various officers and directors of the
Company and naming the Company as a nominal defendant in connection with the Company’s restatements of its fiscal
year 2003 and 2004 financial statements. The defendants and the Company denied all of the allegations of wrongdoing
contained in the complaints. During 2006, the lawsuits were settled or dismissed. Pursuant to the settlement the defendants
are released from liability and the Company adopted certain corporate governance principles including the appointment of a
lead independent director to, among other things, assist the Board of Directors in assuring compliance with and
implementation of the Company’s corporate governance policies and paid $300,000 of the legal fees of the plaintiffs.
The Company has also been named as a defendant in other lawsuits in the normal course of its business, including those
involving commercial, tax, employment and intellectual property related claims. Based on discussions with legal counsel,
management believes the ultimate resolution of these lawsuits will not have a material effect on the Company’s
consolidated financial statements.
Contingency - The Company is required to collect sales tax on certain of its sales. In accordance with current laws,
approximately 17.3%, 17.9%, 17% of the Company’s domestic sales in 2007, 2006 and 2005 were subject to sales tax.
Changes in law could require the Company to collect sales tax in additional states and subject the Company to liabilities
related to past sales.
11. SEGMENT AND RELATED INFORMATION
The Company operates in one primary business as a reseller of business products to commercial and consumer users. The
Company operates and is internally managed in three operating segments, Technology Products, Industrial Products and
Hosted Software. The Company’s chief operating decision-maker is the Company’s Chief Executive Officer. The Company
evaluates segment performance based on income from operations before net interest, foreign exchange gains and losses,
restructuring and other charges and income taxes. Corporate costs not identified with the disclosed segments and
restructuring and other charges are grouped as “Corporate and other expenses.” The chief operating decision-maker reviews
assets and makes significant capital expenditure decisions for the Company on a consolidated basis only. The accounting
policies of the segments are the same as those of the Company described in Note 1.