NEW YORK (CNNfn) - Waste Management Inc.'s board of directors launched an investigation Tuesday into allegations of insider trading at the nation's largest trash hauler and named an acting chairman to oversee the company while the current chairman, John Drury, recovers from brain surgery.
In a statement issued after the markets had closed, the company also provided additional details on last week's second-quarter profit warning, saying the $250 million second-quarter revenue shortfall was the result of aggressive forecasting.
Analysts had speculated the company was suffering from a number of problems, including intense price pressures in the Northeast, customer defections or some other operational problems.
However, in a brief statement, Waste Management said the revision was "not the result of pricing policies, system failures, customer dissatisfaction, receivables issues or any other operational failures."
A spokesman for Waste Management was not available to elaborate on the statement or the reasons why the original revenue forecasts were too aggressive. Analysts speculated the company may hold a conference call on Wednesday to provide more information.
Waste Management shares have dropped sharply since the company issued a profit warning last week.
The Houston-based firm has been named as the plaintiff in at least three class-action lawsuits filed in the last two days, each of which cited alleged securities fraud committed by certain Waste Management (WMI) officers and directors.
One suit charges that Waste Management officials made a series of false and misleading statements about the company's financial position to inflate its stock price, enabling its officers and directors to sell their stocks at prices as high as $56.41 a share.
In an effort to restore credibility with investors, the company said Roderick Mills, chairman of Waste Management's audit committee, will direct the investigation into insider trading allegations. Mills is also a former Securities and Exchange Commission chairman.
Separately, Waste Management's board named Ralph Whitworth, acting chairman of the company. Whitworth, who holds 1.1 million Waste Management shares, replaces Chairman and Chief Executive John Drury, who is receiving medical treatment related to previous brain surgeries.
Waste Management shares rose 7/8 to close at 34-5/8 in Tuesday trade.