Because the Charleston Post and Courier chose to report the SEC's suit against GOE and Bill Carraway on their web site but chose not to mention his response or the fact that the SEC has settled with GOE, I hereby am posting selected portions of a suit filed against Gambrell and Stolz, the law firm GOE used before and during the SEC's investigation and temporary halting of GOE's trading in May, 1997. The suit was filed Tuesday, August 25, pre-Bonnie. I will save myself the typing of the legal boiler plate and will post the important parts from this public document.
Plaintiffs: William D. Carraway, Mary Ann Carraway, Jessica Dees, and Green Oasis Environmental, Inc.
Defendants: GAMBRELL & STOLZ, L. L. P., and JON L. ANDERSON
LLP means a limited liability partnership.
6.
Plaintiffs are claiming damages in an amount in excess of $75,000.
The actual amount of damages is left open ended to allow G&S to contemplate how long they want to drag out this process and run up more costs on themselves. But think about the amount of stock outstanding in May, 1997, and how far it has dropped. Think about all the business GRNO could have done by this time, having proven that the technology works but having all its capital destroyed. They are being given an opportunity to negotiate a way out of having the actual damage figure published - the damage they caused one of their clients. Not a good thing to have bandied about in public.
13.
GOE sold shares of stock to investors to finance its operations. For this purpose, Plaintiffs retained the services of Defendant Jon L. Anderson, an Atlanta attorney and member of the law firm of Defendant Gambrell & Stolz. Jon L. Anderson was the Gambrell & Stolz attorney responsible for advising and representing Plaintiffs in all matters concerning securities laws. Plaintiffs were also represented by other members and employees of Gambrell & Stolz.
14.
Mr. Anderson personally represented and advised Plaintiffs for a period of over four and a half years. He also served as a director of GOE. Both he and Gambrell & Stolz owned a considerable amount of GOE stock. Mr. Anderson resigned as a director of GOE on or about May 20, 1997.
15.
As attorneys retained to represent the plaintiffs, the defendants were to undertake all actions and exercise due care necessary to guide plaintiffs through any securities and corporate matters encountered.
16.
During the Fall of 1996, GOE created a homepage on the World Wide Web where it published information about the company and its products. From time to time, press releases were posted on this page detailing recent events and developments that occurred within the company. These press releases were prepared by a public relations firm and sent to the defendants for review.
17.
Neither Mr. Anderson, nor any other attorney at Gambrell & Stolz, ever made any comments about the accuracy of these press releases and the defendants allowed them to be posted unedited on the World Wide Web. Due to defendants' purported knowledge of securities law, the plaintiffs relied on the defendants to fully scrutinize them for any possible Securities and Exchange Commission ("SEC") violations. However, defendants failed to perform this function and several of the press releases were published containing information that has been alleged to violate SEC rules, regulations and United States securities laws. Defendants additionally failed to reconcile the information contained in these press releases with information contained in quarterly and annual filings made to the SEC by the defendants on behalf of the plaintiffs.
18.
The GOE web site attracted the attention of the SEC. Such attention ultimately prompted the SEC to initiate an informal investigation of GOE.
19.
Shortly after investigation proceedings commenced, plaintiffs were advised by defendants that such SEC involvement should be kept confidential and not disseminated to GOE stockholders.
20.
The SEC held a hearing on March 18, 1997. Immediately prior to this hearing, Mr. Anderson filed to prepare the Carraways as witnesses or review the documents that plaintiffs turned over to the SEC. As a result of this negligence, plaintiffs presented testimony and documents that incorrectly cast them in an unfavorable light.
21.
Following this informal hearing, the plaintiffs sold a portion of their GOE stock holdings in order to meet the costs of operation. Not only did Mr. Anderson fail to counsel the plaintiffs that they should not sell any stock under the circumstances, but Mr. Anderson also personally prepared the necessary documents for the security transaction. As a result of these acts of legal malpractice, the SEC elevated its informal investigation to a formal investigation and on or about May 9, 1997 ordered the temporary suspension of trading of GOE's stock.
Note that Bill Carraway was completely lulled into thinking that he had done nothing wrong in the management of GOE, and apparently was led to believe the SEC investigation would amount to nothing. He was selling stock so that he could maintain GOE, not to skip the country as GIFS CEO did a couple weeks previously.
22.
The SEC has brought a civil action against GOE, William Carraway and Mary Ann Carraway for alleged violations of SEC regulations.
23.
Due to the defendants' numerous acts of malpractice during their representation of the plaintiffs, the plaintiffs have incurred substantial damages, including but not limited to legal fees, loss of stock value, loss of customers, loss of sales volume, loss of specific sales, inability to raise additional capital, loss of goodwill of the company, loss of warrant and option value, and government fines.
FOR A FIRST CAUSE OF ACTION
(RESPONDEAT SUPERIOR)
26.
The legal representation provided by the defendants' employees and/or agents fell below the standard of care due to the defendants' failure to adequately advise plaintiffs so that SEC violations and sanctions could be avoided and subsequent failure to take corrective measures to lessen the punishment ordered by the SEC.
27.
Because the defendants' employees and/or agents contractual representative were acting within the scope of their employment and/or agency and/or contractual relationship, their negligence is imputed to their employer.
That is why Mr. Anderson is not mentioned in the SEC suit.
28.
Consequently, the defendants are liable for the acts of its employees and/or agents and/or contractual representatives under the theory of respondeat superior.
FOR A SECOND CAUSE OF ACTION
(PROFESSIONAL NEGLIGENCE, NEGLIGENT MISREPRESENTATION and FAILURE TO DISCLOSE)
31.
The defendants represented that they were qualified to represent and counsel the plaintiffs in legal matters that arose, when in fact, they lacked the knowledge, skill, and experience to provide the legal services promised.
32.
The above-mentioned acts and omissions collectively, as well as separately, constitute a breach of the generally accepted standard of care of attorneys handling similar matters in the legal profession.
33.
Due to the defendants' acts and omissions, the plaintiffs have incurred substantial damages, including but not limited to legal fees, loss of stock value, loss of customers, loss of sales volume, loss of specific sales, inability to raise capital, loss of goodwill of the company, loss of warrant and option values, and government fines.
FOR A THIRD CAUSE OF ACTION
(BREACH OF CONTRACT)
Here I am not typing in paragraphs already done above.
FOR A FOURTH CAUSE OF ACTION
(FRAUD)
40.
The defendants represented and held themselves out to the plaintiffs as knowledgeable and skilled securities lawyers competent to adequately counsel plaintiffs on securities matters.
41. The defendants' representations were false and defendants knew the representations were false or were reckless in making the representations.
42. The defendants representations were material in that the plaintiffs were seeking knowledgeable and skilled securities lawyers competent to adequately counsel plaintiffs on securities matters.
43.
The defendants intended for the plaintiffs to act on the representations.
44.
The plaintiffs were unaware that the representations were false.
45.
The plaintiffs relied on the representations as being truthful.
46.
The plaintiffs had the right to rely upon the representations.
47.
Due to the defendants' acts and omissions, the plaintiffs have incurred substantial damages, including but not limited to legal fees, loss of stock value, loss of customers, loss of sales volume, loss of specific sales, inability to raise capital, loss of goodwill of the company, loss of warrant and option values, and government fines.
FOR A FIFTH CAUSE OF ACTION
(UNFAIR TRADE PRACTICES)
49.
The defendants are, and were at all time relevant hereto, engaged in trade and commerce within the State of South Carolina as defined in the South Carolina Unfair Trade Practices Act, paragraph 39-5-20(a), Code of Laws of South Carolina, 1976, as amended.
50.
While engaging in trade and commerce within the State of South Carolina, defendants employed methods and engaged in acts which were unfair and deceptive in direct contravention of paragraph 39-5-20(a), Code of Laws of South Carolina, 1976, as amended, as is set more fully herein.
51.
The deceptive and unfair acts and methods of defendants include, but are not limited to, engaging in a course wherein defendants misrepresented their level of legal skill and expertise with regard to handling legal matters about which they knew they had not handled in the past and were unqualified to handle on behalf of the plaintiffs.
52.
On information and belief, the acts and methods of defendants have a direct and significant impact on the public interest in that they have the potential for repetition and, most likely, have been repeated in the past and will continue to be repeated in the future.
53.
The defendants's unfair and deceptive acts and methods were willfully and knowingly in direct contravention of paragraph 39-5-20(a), Code of Laws of South Carolina, 1976, as amended, thus entitling the plaintiffs to treble damages and an award of attorneys' fees and costs associated with bringing this action.
Guess which paragraph is my favorite.
FOR A SIXTH CAUSE OF ACTION
(BREACH OF FIDUCIARY DUTY)
55.
At all times relevant to this complaint, a fiduciary relationship existed between the parties with the defendants owing the plaintiffs a fiduciary duty. Under this fiduciary duty, defendants were required to promote and protect the best interests of the plaintiffs.
56.
The defendants breached this fiduciary duty in a number of ways, including to adequately review the press releases issued by GOE, failing to properly prepare for the sEC inquiry, and failing to counsel plaintiffs against selling any stock following the initiation of the sEc investigation. Defendants additionally failed to reconcile the information contained in GOE's press releases with information contained in quarterly and annual filings made to the SEC by the defendants on behalf of the plaintiffs.
57.
Due to the defendants' acts and omissions, the plaintiffs have incurred substantial damages, including but not limited to legal fees, loss of stock value, loss of customers, loss of sales volume, loss of specific sales, inability to raise capital, loss of goodwill of the company, loss of warrant and option values, and government fines.
The rest of the publicly available document asks for actual damages in excess of $75K, punitive damages, reimbursed attorneys' fees, a jury trial, and for the court to add on any other relief it deems fit and proper. This part is signed by 2 lawyers with Georgia Bar numbers from a Savannah law firm and two more with Federal I. D. numbers from a North Charleston law firm (I assume they filed the suit.)
Also attached is an affidavit of a Richard W. Jones, a Georgia attorney who practices SEC law and who says he is familiar with the standard of care of legal practitioners specializing in securities law before the SEC. He backs up claims in the suit. Also included is his resume.
Then another addendum includes responses to "Local Civil Rule 26.03" which furnishes a detailed factual basis for each claim in the suit, describes by name and citation the statutes, decisions ordinances acts, codes regulations legal principles, standards, and customs or usages which apply to each section of the suit. It gives the addresses and phone numbers of all expert witnesses and participants
Plaintiffs estimate it will take 12 to 15 months to complete discovery and are amenable to mediation upon substantial completion of discovery. They do not request an expedited trial at this time.
Charles |
