It has been a tumultuous couple of months for Minnesota-based Navarre Corp., one the industry's largest independent distributors. In June, the company and key executives -- including chairman/CEO Eric

It has been a tumultuous couple of months for Minnesota-based Navarre Corp., one the industry's largest independent distributors. In June, the company and key executives -- including chairman/CEO Eric Paulson and CFO Jim Gilbertson -- became the targets of five lawsuits alleging federal securities violations. Then, on July 12, Gilbertson resigned.

The three class-action suits and two stockholder-derivative suits were filed in the U.S. District Court in Minneapolis and claim that the defendants profited by misstating company revenue and misleading investors.

Class-action lawyer Gregg Fishbein with Lockridge Grindal Nauen in Minneapolis tells Billboard that the claims are tied to the defendants' motive to profit, noting that Navarre "insiders," including Paulson and Gilbertson, sold nearly 1.3 million personal shares in the company during a two-year period for a total exceeding $16 million. "That's awfully high for any company, let alone a company the size of Navarre," Fishbein says.

Counsel for Navarre did not return calls for comment.

Fishbein's firm also handled a class-action suit filed in 1999 against Navarre on securities claims. The court dismissed the suit in 2001.

In August, the separate lawsuits may be consolidated into one, a standard practice under federal law. The court would then appoint a lead plaintiff and attorney to shape the litigation; the court generally chooses the party with the most shares of stock.

A number of class-action lawyers around the country have posted notice of the suits online, hoping to attract large, institutional investors so the attorneys could become lead counsel for a consolidated suit.

The legal actions followed Navarre's announcement that it would postpone the May 31 filing of its fourth-quarter results. In a statement, the company said the delay resulted from the amount and timing of a deferred-compensation expense relating to an employee agreement signed in 2001 by Paulson. Navarre said it was also "reviewing the recognition and classification of certain fiscal 2005 tax items."

In its June 2 filing, Navarre reported losses of $2.5 million, or 9 cents per diluted share, on sales of $141.9 million in the three-month period ended March 31. Still, the company had a record-breaking year in fiscal 2004, reporting $12.5 million in net income.

Sources close to the company hesitate to draw a connection between Gilbertson's departure and the class-action suits. "A class-action suit almost seems like a normal procedure any time a company has to refile a statement these days," one Navarre source says.

Navarre-distributed labels do not seem too concerned about Gilbertson's departure or the pending suits.

"I'm sure their CFO leaving isn't going to make our check bounce," says Vique Martin, a sales manager with Huntington Beach, Calif.-based Revelation Records. "We've been with them for about three years, and I still have nothing bad to say about them."

"It's off my radar," says Siddiq Sayers, CEO of Minneapolis-based label Rhymesayers. "I'm not noticing any sort of cause and effect since [Gilbertson] left."

Navarre has named VP/controller Diane D. Lapp interim CFO. A Navarre representative did not return calls by press time, but the company is said to be seeking a permanent replacement.

Additional reporting by Ed Christman in New York.