Posts Tagged ‘ China Integrated Energy ’

Insecurities: Securities Fraud Roundup 3.30.11

March 30th, 2011. By LucyC

Top Securities Fraud Stories…

This week’s catch phrase—”False and Misleading Statements”…In our last edition of Insecurities, the recurring theme was ‘failure to disclose’—which led us to the Madoff Meter. Well, seems the idea of Bernie kind of stuck. So he’s back…

Though he never did really leave did he? Case in point, his yacht (or the ability to sell it in order to drum up some quid to help those who’d invested with him) was in today’s news—as well as the fact that three former Madoff employees lost their bid to have criminal charges dropped against them. The grounds for their request? That the charges should be dropped because the government had frozen their assets—assets they need to pay their lawyers. It didn’t fly with U.S. District Judge Laura Taylor Swain, who rejected the bid.

Enough about Bernie (or, more about him later)—starting off this edition of Insecurities is Elan Corporation…

Company:        Elan Corporation

Ticker:              ELN

Class Period:     Jul-2-09 to Aug-5-09

Date Filed:        Mar-1-11

Court:               Southern District of New York

Madoff Meter: 

The Allegations:

What’s that crashing sound I hear? Elan got hit with a securities class action lawsuit earlier this month over allegations that it and certain of its officers and directors made  false and misleading statements regarding the July 2, 2009 sale of the Company’s rights to its Alzheimer Immunotherapy Program (“AIP”) to Johnson & Johnson (“JNJ”).

The allegations stem from Elan’s failure to disclose that a provision in their definitive agreement with JNJ would violate the terms of an existing agreement between the Company and Biogen Idec Inc. (“Biogen”) related to their joint development and sale of multiple sclerosis drug Tysabri. Hey—maybe they just forgot about their deal with Biogen.

As a result of the violation, Elan was forced to renegotiate the terms of its sale of AIP, whereby JNJ paid $115 million less to Elan than previously agreed. Ouch.

Predictably, once Elan issued its press release disclosing the breach of their agreement with Biogen to the public, share prices of Elan common stock fell about 11%, according to the lawsuit, on abnormally high trading volume. That would make a difference to retirement funds, no doubt.

Next up: China Integrated Energy…

Company:                      China Integrated Energy, Inc.

Ticker:                           CBEH

Class Period:                  Mar-30-10 to Mar-16-11

Date Filed:                      Mar-26-11

Lead Plaintiff Deadline:  May-25-11

Court:                            Central District of California

Madoff Meter:

The Allegations:

Determining fact from fiction. This one involves China Integrated Energy—and allegations that it also issued materially false and misleading statements to investors, because it concealed related-party transactions.

The alleged facts—that the transactions between the Company and its officers and directors had the effect of funneling cash to these officers and directors. The alleged fiction—that the company’s Chinese SAIC filings misrepresented its financial performance, business prospects, and financial condition to investors.

So, the only people making the kind of money advertised were CBEH’s officers and directors. Not the investors. The alleged violations were uncovered in a report by Sinclair Upton, most of which CBEH denied. However, they did ‘fess up to having engaged in an undisclosed related party transaction with the CEO’s 22 year old son? Where’s Bernie? This could be a 3 or 4 on the Madoff meter…

On to Finisar Corporation…

Company:                     Finisar Corporation

Ticker:                           FNSR

Class Period:                  Dec-2-10 to Mar-8-11

Date Filed:                     Mar-15-11

Lead Plaintiff Deadline:    May-14-11

Court:                           Northern District of California

Madoff Meter:

The Allegations:

Was Finisar doing a little too much networking maybe? It’s also accused of issuing false and misleading statements resulting in investor losses.

Finisar provides optical subsystems and components that connect short-distance local area networks, storage area networks, longer distance metropolitan area networks, fiber-to-the-home networks, cable television networks and wide area networks. A growth industry one would figure—especially in emerging markets.

The complaint alleges that the company failed to disclose that its recent revenue growth was due to an oversupply of inventory in the market and that the Company would be unable to sustain its strong growth due to increased pricing pressures and a slowdown in business from China. As a result of defendants’ false statements, Finisar’s stock traded at artificially inflated prices during the Class Period, reaching a high of $43.23 per share on February 14, 2011.

Then, on March 8, 2011, after the market closed, Finisar issued a press release announcing its third quarter fiscal year 2011 results—reporting earnings of $18.8 million, or $0.22 diluted earnings per share, and revenue of $263.0 million. The Company further reported its fourth quarter 2011 revenues would be in the range of $235 to $250 million, lower than analysts’ estimates. On this news, Finisar’s stock fell $15.43 per share to close at $24.61 per share on March 9, 2011, a one-day decline of nearly 39%—it went straight through the floor and kept on going…

Top Securities Settlements…

Countrywide Financial

Madoff Meter:

A couple of settlements registering on our Madoff meter this month. I’d give this first one a 5. It Read the rest of this entry »

Tags: Bernie Madoff, China Integrated Energy, Countrywide, Credit Suisse, Elan Corporation, Finisar, GT Solar, Insecurities, Securities Fraud, Securities Lawsuits, Securities Settlements
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