China-Biotics Duped Investors With Fake Bank Statements and Contracts, Class Claims

China-Biotics Duped Investors With Fake Bank Statements and Contracts, Class Claims

By DEE MOORE 

     (CN) - A class action claims China-Biotics Inc. was infected with a toxic desire to artificially inflate its stock price and manipulate investors using a fake website and falsified bank statements and sales contracts.
     "It is clear from the above that the company fabricated a false sales contract; a false bank website and a false bank advice in furtherance of its scheme to fraudulently create the appearance of having achieved a 50% growth in 2011 revenue as announced on Feb. 9, 2011," the complaint states, citing information from the company's former independent auditor, BDO Limited.
     The auditors allegedly found gross irregularities that included a banking notice indicating math errors in the company's interest income because the company used different interest rates for deposits than those used by the national bank, and sales contracts with other companies that had the wrong purchaser's signatures affixed to them. While performing the audit, BDO claims that they were sent to a banking website created by the company to mislead them.
     According to the company website, China-Bionics is headquartered in Shanghi and is one of that country's "largest suppliers of probiotics. Probiotics are beneficial, live bacteria used as dietary supplements and food additives to improve intestinal health and digestion."
     However, when the company issued a press release announcing that it expected an incredible 50% increase in net sales for the 2011 fiscal year, things began to unravel. 
     "With our efforts and market prospects we are confident to achieve our full year sales target," the complaint states, quoting CEO Jinan Song.
     The company, however, was unable to file its annual 10-K form because irregularities and "serious issues" were found by the audit firm that would require the company "to take certain actions and provide additional information."
     China-Bionics filed a NT 10-K on June 10, 2011, explaining that it could not file a 10-K in a timely fashion and requested an extension for filing the 10-K.
     "The company cannot predict at this time when it will be in a position to take all the actions and provide all the information requested," China-Biotics stated in its NT 10-K.
     Plaintiffs claim that the company never intended to file a Form 10-K, and not "working to take all the actions and to provide the requested information" to its audit firm "as promptly as reasonably practical" as it claimed but rather "knew and concealed the fact that any bona fide earnings statement for the fiscal year ended March 31, 2011, would reflect a significant adverse change in the company's results of operations from the corresponding period for the previous fiscal year."
     On June 15, the NASDAQ halted trading of China-Biotics while waiting "for additional information." At the close of the day, shares were listed at $3.46. NASDAQ then sent a letter to the company five days later stating that because China-Biotics had yet to comply and file a 10-K, the company would no longer be listed, at which poing shares dropped to a $1.
     Though the company replied by filing a form 8-K and announced that it would be submitting a plan for compliance on or before July 15, 2011, the complaint states that this was never the board's intention because on June 23, they had "unanimously voted to voluntarily delist the company's common stock from the Nasdaq Global Stock Market." The company then received a letter from their audit firm resigning its position as independent auditor for China-Biotics.
     The suit names CEO Song Jinan, CFO Travis Tao Cai, COO Hui Chang and executive vice president Yan Li as well as numerous company board directors.
     The class is represented by Gregory Egleston in New York and Thomas McKenna of Gainey & McKenna also in New York.

Copyright Courthouse News Service 2012.

http://www.cnssecuritieslaw.com/2012/05/29/373.htm

GeoResources Accepted Bum $1 Billion Offer from Halcón Resources, Shareholders Claim

GeoResources Accepted Bum $1 Billion Offer from Halcón Resources, Shareholders Claim

By DEE MOORE 

     

      (CN) - GeoResources Inc. failed to "shop the company around" before accepting the $1 billion merger agreement proposed by Halcón Resources Corp., shareholders claim in a class action.
     "The Proposed Transaction is the product of a hopelessly flawed process designed to ensure the sale of GeoResources to Halcón. Primary beneficiaries of this deal are the company's largest shareholders who will be able to monetize their large otherwise illiquid GeoResources' holdings.
     "Additionally, management stands to gain extremely lucrative 'change of control payments' just for negotiating the proposed transaction and selling out the company's public shareholders," the complaint states.
     GeoResources and Halcón are independent oil and gas companies that develope and the acquire oil and gas reserves.
     The suit also names GeoResource president and CEO Frank A. Lodzinski as well as several members of the company's board and Halcón subsidiaries.
     "GeoResources stockholders will receive $20.00 in cash and 1.932 shares of Halcón Resources common stock for each share of GeoResources common stock they hold, representing consideration to GeoResources stockholders of $37.97 per share based on the closing price of Halcón Resources common stock on April 24, 2012," according to the complaint, citing the press release announcing the deal. .
     Last year, Geo saw a 43 percent increase in its adjusted net income over 2010 and "several analysts recently announced target price ranges for GeoResources of $39.00-$43.00."
     According to the complaint, the deal includes "onerous, preclusive deal protection devices that act collectively to prevent other bidders from making successful topping bids for the company," including a $27.8 million termination fee, a no shop/no talk clause and a matching rights provision.
     The suit was filed by Kip B. Shuman and Rusty E. Glenn of The Shuman Law Firm in Boulder, Colo. and Juan E. Monteverde and Shane T. Rowley of Faruqi & Faruqi LLP in New York.

Copyright Courthouse News Service 2012

http://www.cnssecuritieslaw.com/2012/05/22/361.htm

JP Morgan Faces Suit Over $2 Billion Loss

JP Morgan Faces Suit Over $2 Billion Loss

By DEE MOORE 

     (CN) - Shareholders hit JP Morgan Chase & Co. with a class action after the financial holding giant's announced $2 billion in losses during the first quarter of this fiscal year.
     The class claims JP Morgan failed to disclose risky trades while telling shareholders that its derivatives were "hedges" that would help offset overall portfolio risk.
     "Every bank has a portfolio; in those portfolios you make investments that you think are wise to offset your expenditures. Obviously, it's a big portfolio . . . but at the end of the day that is our job to invest that portfolio wisely, intelligently over a long period of time to earn income and to offset other exposures that we have," the complaint states, quoting CEO James Dimon. The bank failed to disclose just how much money it had lost before it held an investor conference call on April 13, after the release of the bank's first quarter earnings statement earlier the same day.
     "We invest those securities in high grade, low risk securities," CFO Douglas Braunstein said during the call. "The vast majority of those are government or government backed and very high grade in nature.
     "We invest those in order to hedge the interest rate risk of the firm as a function of that liability and asset mismatch."
     Shareholders claim the statements made during the call were "materially false and misleading" because they failed to reveal the truly dangerous nature of the company's speculative trades and the enormous losses it had already experienced.
     A month later when JP Morgan filed its 10-Q, it was déjà vu. When the company held another conference call with analysts and investors to reveal that it had sustained "a multi-billion dollar trading loss" Dimon stated that "the synthetic credit portfolio was a strategy to hedge the firm's overall credit exposure, which is our largest risk overall in a stressed credit environment. We are reducing that hedge, but in hindsight the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored."
     After the information was released, the company's stock fell $40.74 to $36.96 per share, according to the suit.
     Additionally, the Washington Post reported that the Justice Department has begun a probe into the bank's losses and the actions of its CEO. The investigation is supposedly in its early stages but sources told the Post that the feds are attempting to determine whether the losses were a result of a poorly executed hedge fund or if the bank was betting for its own profit.
     Regulators will be looking at the company to determine if it violated security laws by not writing down losses that resulted from trades.
     Lead plaintiff David Smith is represented by Samuel H. Rudman and David Rosenfeld of Robbins Geller Rudman and Dowd LLP of Melville, N.Y. and Darren J. Robbins and Dave Walton of Robbins Geller Rudman and Dowd LLP of San Diego.

Copyright Courthouse News Service 2012

http://www.cnssecuritieslaw.com/2012/05/21/353.htm

Imperial Sugar Buyout Deal Not So Sweet, Shareholders Claim

Imperial Sugar Buyout Deal Not So Sweet, Shareholders Claim

By DEE MOORE 

          (CN) - Imperial Sugar shareholders don't think Louis Dreyfus Commodities' $6.35 per share buyout offer is a very sweet deal since the company's shares were trading well above the offer price in the recent past while analysts have pegged Imperial shares at as much as $20.
     Louis Dreyfus Commodities wants to buy ouststanding Imperial stock for $6.35 per share, a 57% premium on the closing price the day before the sale was announced, but plaintiff claims that the company is worth much more.
     The sugar company's stocks sold for $7.03 just two months before the sale was announced and one analyst has valued the stock as worth as much as $20 a share.
     The all cash sale will cost the buyers $203 million. The agreement requires LD Commodities to pick up the company's tab for any outstanding debt or pension liabilities. The sale was approved by a unanimous vote of the board who agreed to recommend that all shareholders sell their common stock holdings, the complaint states..
     "In approving the proposed acquisition, however, the individual defendants have breached their fiduciary duties of loyalty, good faith, due care and disclosure by, inter alia, agreeing to sell without first taking steps to ensure that plaintiff and class members would obtain adequate, fair and maximum consideration under the circumstances and locking up the proposed acquisition with deal protective mechanisms which ensures a rival bidder is not likely to emerge with the cards stacked so much in favor of LD Commodities."
     Imperial has had a financially difficult time recently. For the six-month period ending March 31, 2012, the Company reported a net loss of $10 million, or $0.83 per diluted share, compared to a net loss of $4.8 million, or $0.40 per diluted share, for the same period last year. The company announced that its fiscal quarter losses totaled $6.5 million.
     The class is represented by Michael Ridulfo Kane Russell Coleman & Logan in Houston and Evan Smith and Marc Ackerman of Brodsky & Smith LLC in Bala Cynwyd, Pa. 

Copyright Courthouse News Service 2012

http://www.cnssecuritieslaw.com/2012/05/10/338.htm

Magna International Made Bogus Claims About European Profit Margins, Class Says

Magna International Made Bogus Claims About European Profit Margins, Class Says

By DEE MOORE 

     
     (CN) - Magna International made "materially false and misleading statements" and failed to disclose the company's true financial condition which resulted in weak European margins, pricing and operational issues, shareholders claim in a class action.
     Magna is one of the largest and most diversified suppliers of automotive components, systems and modules world-wide, the complaint states, and has manufacturing, engineering and sales operations in 26 countries. Its principal offices are in Ontario, Canada.
     Lead plaintiff City of Taylor General Employees Retirement Fund filed the action in the U.S. District Court Southern District of New York and named founder and former chairman of the board Frank Stronach, CEO Donald Walker and CFO Vincent Galifi as defendants.
     According to the complaint, while Magna's European market was floundering, company operatives continued to make positive and optimistic statements about the company's financial status, but "lacked a reasonable basis for their positive statements about the Company's European operations and business prospects."
     The complaint cites numerous examples of the company issuing mixed messages claiming that these "presented a misleading picture of Magna's business and prospects."
     Magna issued a press release in which Walker stated that, "As 2011 begins vehicle production is poised for future growth in a number of important markets for us . . . Accordingly our outlook reflects significant sales growth including expansion in high growth markets in the next few years ... We also have the balance sheet, cash flow generation, engineering and manufacturing, technologies and motivated workforce to support out growth initiatives around the world."
     Meanwhile that same day, CFO Galifi, who spoke at the January 2011 Deutsche Bank Securities Global Auto Industry Conference, had a very different message.
     "Our European segment has - underperformed recently and we're taking some actions to improve results there and we're going to see improvements in '11 and in the coming years ... In Europe, while we have returned to profitability margins in total have not met our expectations."
     When Magna's financial situation finally came to light, shares which had traded at $61.55 in January 2011 fell to $39.42 by August 2011.
     The class is represented by Samuel Rudman and David Rosenfeld of Robbins Geller Rudman & Dowd LLP of Melville, N.Y. and Thomas Michaud of VanOverbeke Michaud & Timmony of Detroit.

Copyright Courthouse News Service 2012 

http://www.cnssecuritieslaw.com/2012/05/10/337.htm

Logging Poses Risk to Owl and Salmon, Groups Say

Logging Poses Risk to Owl and Salmon, Groups Say

By DEE MOORE 

     EUGENE, Ore. (CN) - A Willamette National Forest logging plan will harm the already threatened northern spotted owl and Chinook salmon, two environmental groups claim.
     The U.S. Forest Service failed to "analyze the environmental effects," or address "the scientific controversy," of the Goose Logging Project in the McKenzie River Watershed, according to the federal complaint.
     Cascadia Wildlands and Oregon Wild say logging the 2,100-acre logging area, which includes the 9,700-acre Lookout Mountain area above McKenzie Bridge, would cause serious harm and ecosystem damage within streamside buffers and endangered species habitat.
     Any activity within the renowned McKenzie River basin should be for restorative purposes only, according to Cascadia Wildlands, which focuses on the forests along the Pacific Coast from northern California to south-central Alaska.
     Harvesting old growth trees in the forest could also harm the northern spotted owl, a threatened species that calls the area home, according to the groups.
     The U.S. Fish and Wildlife Service found that the northern spotted owl "occupies late-successional and old-growth forest habitat from southern British Columbia through Washington, Oregon and California," because these forests usually contain a moderate to high canopy which allow the birds to fly and have hollow trees or trees with cavities which makes for optimal roosting, according to the complaint.
     Its study allegedly found that the removal of old growth forests severely impacts these already threatened animals.
     "Logging, road building, and fuel treatments authorized by the Goose Project will remove or downgrade 454 acres of suitable nesting, roosting, and foraging habitat for the threatened spotted owl," the lawsuit states. "The Goose project would also remove 371 acres of spotted owl dispersal habitat."
     "The Forest Service acknowledges that seven spotted owl nest sites would be harmed by Goose Project activities," the complaint states.
     Since the spotted owl competes with the more aggressive barred owl for food, the threat is even greater, according to the groups.
     Barred owls are a fairly new addition to the Pacific Northwest, the complaint says. They are more adaptable, more aggressive, have a wider variety in diet, and will even attack and kill their cousins.
     "Northern spotted owl populations have declined at the greatest rate in the north where barred owls have been present the longest," the complaint states. "Although northern spotted owl populations have been declining for many years, the presence of barred owls likely exacerbates the decline."
     The proposed clearing of streamside buffers in the McKenzie River could also decrease the population of Chinook salmon, another threatened species, according to the groups.
     "The McKenzie River is the only waterway in the Upper Willamette Basin to sustain any significant level of spring Chinook salmon," the complaint states.
     Work on the Goose project began three years ago, according to the Fish and Wildlife Service.
     Promising that the Goose project will reduce fire risk, provide timber, create jobs and improve wildlife forage, the agency says it has "responded to the concerns raised by residents and made numerous adjustments to the project; including modifying the project near private property boundaries."
     "The harvest plans purposely exclude cutting larger, older trees that are present within the larger planning area," according to the agency's website. "Harvest will occur of trees that are from 40-120 years, with the bulk of the harvest occurring of trees that are 60-80 years old. While definitions of Old Growth vary by region and the scientist making the analysis, generally in the McKenzie Bridge area a tree is not considered Old Growth until it is 200 years old. Some people have told us they are not in favor of any logging or would prefer we only thin plantations under the age of 80."
     The agency says it launched the project after conducting an environmental assessment, but the preservation groups want a more thorough look.
     "The Forest Service's failure to disclose and analyze scientific information counseling against the activities proposed by the agency, or that call into question the expected environmental effects of the proposed action, and to insure that the proposed alternative supports the purpose and need, is arbitrary, capricious, and not in accordance with law," according to the complaint.
     Claiming violations of the National Environmental Protection Act (NEPA), the groups want an environmental impact statement and an injunction.
     "NEPA procedures must insure that environmental information is available to public officials and citizens before decisions are made and before actions are taken," the complaint states.
     Though the groups say some residents of the McKenzie Bridge area learned about the project only after seeing timber sale flagging near their properties, the government says it ran numerous notices in the local newspaper, The Register-Guard, held a public meeting, and made information available to interested parties.
     The groups are represented by Susan Jane M. Brown with Western Environmental Law Center in Portland. 

Copyright Courthouse News 2012

http://www.cnsenvironmentallaw.com/2012/05/10/808.htm

Allscripts Health Care Solutions Execs Failed to Warn of Post-Merger Growing Pains, Suit Says

Allscripts Health Care Solutions Execs Failed to Warn of Post-Merger Growing Pains, Suit Says

By DEE MOORE 

     (CN) - Allscripts Health Care Solutions Inc. faces a shareholder class action for allegedly misrepresenting the progress of its merger with Eclypsis Corp.
     Lead plaintiff Bristol County Retirement System claims company officials withheld information and deceived the investing public and artificially inflated its stock price.
     "Specifically, defendants made misleading statements regarding the company's progress in integrating AMHS' and Eclipsys' disparate systems and its ability to translate its fragmented product lines into revenues," the complaint states.
     The Delaware company provides healthcare-related information technology services and has its principal offices in Chicago. The complaint names current CEO Glen E. Tullman and CFO William J. Davis CFO as defendants.
     The company's chairman and CFO werdly e allegeaware of the problem but concealed it from shareholders and that there was in-fighting among various senior level management members following the merger.
     When Allscripts announced its First Quarter 2012 financial results on April 26 it delivered an unsettling blow to its investors. It then followed it up with additional bad news that the company's CFO had quit and its Chairman of the Board had been fired.
     "Allscripts filed a Form 8-K with the SEC previewing its operating results for the three months ending March 31, 2012. The Company reported non-GAAP diluted EPS of $0.12 - sharply below the trend implied by the Company's guidance of full-year EPS of between $1.06 and $1.12 for 2012 issued on February 16," the complaint states.
     The company held a conference call Q & A session later that day with traders and corporate officials hoping to mitigate the problems. It was at this time, according to the complaint that, the CEO finally let the cat out of the bag and revealed just how dire the situation is for investors.
     "Our overall results were primarily driven by lower than expected sales and an unfavorable sales mix. This directly impacted both revenue and profit," the complaint states. "In reaction to this news ... Allscripts' share price fell by $5.72 per share, or 35.70 percent, to close at $10.30 per share on volume more than 30 times greater than the average during the Class Period and six times greater than that of any other day during the Class Period."
     The company reported that its total revenues climbed from $548.44 million prior to May 31, 2009 to $1.44 billion as of Dec. 31, 2011.
     The complaint was filed in the Northern District of Illinois. Bristol County Retirement System is represented by John Tangren of Wolf Haldenstein Adler Freeman & Herz LLC in Chicago and Christopher J. Keller, Michael W. Stocker and Rachel A. Avan of Labaton Sucharow LLP in New York.

Copyright Courthouse News Service 2012

http://www.cnssecuritieslaw.com/2012/05/09/327.htm