Re: 9/28/06 - [GLKCE] Complaint: Global Links Corporation v. The Depository Trust & Clearing Corporation
COMPLAINT
David R. Koch (Bar No. 8830)
TURNER GREEN AFRASIABI & ARLEDGE LLP
535 Anton Boulevard, Suite 850
Costa Mesa, California 92626
Telephone: (714) 434-8750
Facsimile: (714) 434-8756
Attorneys for Plaintiff Global Links Corporation
UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA
GLOBAL LINKS CORPORATION, a
Nevada Corporation,
Plaintiff,
v.
THE DEPOSITORY TRUST &
CLEARING CORPORATION, a New York
Corporation; and DOES 1 through 10,
Defendants.
Case No. 2:06-CV-01213
COMPLAINT FOR DEFAMATION
DEMAND FOR JURY TRIAL
Global Links Corporation, by and through its attorneys of record, complains against The Depository Trust & Clearing Corporation (“DTCC”) and Does 1 through 10 (“Does”)(collectively “Defendants”), alleging as follows:
JURISDICTION AND VENUE
1. This is a civil action by a Nevada corporation against Defendants DTCC (a New York corporation) and Does 1 through 10 for defamation. This Court has subject matter jurisdiction pursuant to 28 U.S.C. 1332(a), as the amount in controversy exceeds $75,000.
2. Venue is proper in this district pursuant to 28 U.S.C. §1391(a) because a substantial part of the events giving rise to the claim occurred in this district – the publication of the statements at issue in this dispute were directed at a Nevada corporation located in Las Vegas, and the statements at issue were disseminated nationwide, including in Nevada, through the Business Wire and via the Internet.
PARTIES
3. Plaintiff Global Links Corporation is a Nevada corporation with its principal place of business located at 3571 E. Sunset Road, Las Vegas, Nevada 89120.
4. Global Links is informed and believes, and on that basis alleges, that defendant DTCC is a New York corporation with its principal place of business in the State of New York.
5. The true names or capacities, whether individual, corporate or otherwise, of the Defendants named herein as Does 1 through 10, inclusive, are unknown to Global Links, who therefore sues said Defendants by such fictitious names. Global Links will ask leave of Court to amend this Complaint and insert the true names and capacities of said Defendants when the same have been ascertained.
6. Global Links is informed and believes and, upon such, alleges that each of the Defendants designated herein as a “Doe” is legally responsible in some manner for the events and happenings herein alleged, and that Global Links’ damages as alleged herein were proximately caused by such Defendants.
COMMON ALLEGATIONS
I. DTCC Undertakes Campaign to “Correct the Record” on Naked Short Selling
7. For several years, the practice of “naked short selling” shares of stock has plagued small, publicly traded companies. Proper short selling involves borrowing stock one does not own, selling it into the market, and buying it back and returning it at a later date. Naked short selling, in contrast, involves selling stock one does not own, but never borrowing or attempting to borrow the stock in order to ensure delivery to the buyer.
Naked short selling thus results in failed deliveries of stock and tends to drive down the price of the stock in question.
8. While the practice of naked short selling is illegal, DTCC and its subsidiaries have been accused in various venues of permitting and potentially facilitating the execution of naked short sales. DTCC, through its subsidiaries, provides clearance, settlement, and information services for various financial products, such as equities, corporate and municipal bonds, government and mortgage-backed securities, and credit derivatives. DTCC provides these services through its subsidiaries to Nevada corporations, businesses, and residents. The “Stock Borrow” program provided by a DTCC subsidiary has often been targeted as the culprit in facilitating naked short selling.
9. In attempt to counteract these charges, in 2005 the DTCC announced an “Effort to Correct Record on its Stock Borrow Program and Naked Short Selling.” Through a series of press releases distributed on its Internet website and through other distribution channels, the DTCC has challenged claims that it has been complicit in permitting or encouraging the practice of naked short selling. DTCC has devoted an entire section of its website to respond to the claims and allegations of naked short selling.
II. Global Links Victimized by Naked Short Selling
10. Global Links operates as a “real estate information hub,” specializing in real estate acquisitions and development, developing innovative housing concepts, as well as providing comprehensive real estate information services. The company’s common stock is traded on the over-the-counter bulletin board under the trading symbol “GLLC.”
11. During approximately the last 18 months, Global Links has been a victim of the practice of naked short selling. In February 2005, when Global Links had approximately 1.1 million common shares outstanding, trading volume in the stock for a single day exceeded 47 times the total number of outstanding shares and in excess of 200 times the outstanding shares for a single month. Unless naked short selling is taking place, this type of volume would be impossible to achieve. For its part, the DTCC admits that naked short selling occurs but disputes the extent of the practice.
III. DTCC Issues “Media Statement on Global Links” Containing False Statements
12. As part of DTCC’s campaign to “correct the record” on naked short selling, on August 31, 2006, the DTCC issued a press release entitled “MEDIA STATEMENT ON GLOBAL LINKS.” The press release is currently posted on the front page of the DTCC’s Internet website: www.dtcc.com, and was also disseminated via the Business Wire, a commercial news distributor. A true and correct copy of the press release is attached to this Complaint as Exhibit A.
13. The press release purports to describe historical activities of Global Links with respect to its shares of common stock. Namely, the press release states that Global Links engaged in three reverse stock splits, including a 350-to-1 reverse split. The press release goes on to assert: “This type of activity is quite rare and unusual for mainstream securities. However, among sub-penny stocks, these activities may occur more often to try and artificially raise the stock’s price.” DTCC continues in the statement to claim that Global Link’s stock was trading at $0.10 before the reverse split “and Global Link’s aim was get [sic] the price up to $35.”
14. Global Links has demanded that DTCC withdraw these claims that Global Links is somehow attempting to “artificially raise” the price of the company’s stock, but DTCC has refused to do so.
15. The press release remains posted to this day on the DTCC’s website. It is prominently featured in a separate column under the “What’s New” section of the site. Articles that are more than three months old also remain posted on “What’s New” frontpage section of the site.
16. The press release also wrongly claims Global Links made specific statements regarding the root cause of millions of shares in failed trades during 2005. In describing the cause of the failed trades, the press release contends that “Global Links itself stated, this was ‘a simple error’.” Global Links did not make the referenced statement. In fact, no one did. DTCC fabricated the quote to suit its purposes in the press release. DTCC’s motivation for wrongly fabricating the quote and attributing it to Global Links is clear – it is attempting to downplay allegations that naked short selling is actually occurring by arguing that even the victim of the practice, Global Links, admits that naked short selling is not to blame. In doing so, the DTCC gives license to naked short sellers to continue the illegal practice while hiding behind the explanation that failed trades are due solely to “simple error.”
17. The press release also wrongly calculates the value of millions of shares worth of failed trades in attempt to limit the damage of reports of the DTCC’s inability to control naked short selling. The press release claimed that “the value of the 27 million in failed trades described in the media report was less than $38,000, which hardly constitutes the threat to the capital markets that the article implied.” Based upon the numbers contained within the press release, however, the true value of the failed trades would equate to over $100 million. By misstating the value of the failed trades and downplaying the “threat to the capital markets,” the DTCC has misstated facts in order to protect its own interests.
FIRST CAUSE OF ACTION
(Defamation against All Defendants)
18. Global Links realleges and incorporates by reference all previous allegations in this Complaint as if set forth in full herein.
19. DTCC has published its “Media Statement on Global Links” press release through its publicly available and publicly disseminated website, www.dtcc.com. DTCC has also caused the press release to be published and disseminated through the Business Wire.
20. The press release contains false statements about Global Links. Namely, in the press release DTCC: (1) directly implies that Global Links purposefully engaged in a reverse stock split “to try and artificially raise the stock’s price” to a certain level, and (2) claims that Global Links itself stated that millions of shares in failed trades were the result of “simple error.”
21. The above statements were made to third parties other than Global Links, and the statements continue to be published on the DTCC’s website to this day.
22. All of the above statements were false and untrue statements of fact about Global Links.
23. The public and third parties have reasonably understood these statements to mean that Global Links has engaged in improper stock manipulation and has made statements regarding the naked short selling of its stock that are not true. As such, the statements have damaged Global Links’ reputation and its ability to raise funds through the sale of its common stock, as investors are unwilling to invest in a company accused of artificially inflating the price of its stock. Global Links, like many small companies, is reliant upon its ability to raise funds for operations through the sale of equity in the company, and a depressed stock price caused by accusations of stock manipulation directly impacts Global Links’ current and future business prospects.
24. Global Links has been damaged in an amount in excess of $75,000 and further requests injunctive relief to remove the offending statements from the Internet and all points of distribution. The continued publication of the defamatory statements described above will cause great and irreparable harm to Global Links, and its business reputation will continue to be harmed and Global Links will continue to suffer harm to its business.
25. The acts and omissions of DTCC, as alleged above, were willful, oppressive, fraudulent and malicious. Global Links is therefore entitled to recover punitive or exemplary damages from DTCC.
PRAYER FOR RELIEF
WHEREFORE, Global Links prays for relief as follows:
1. An award of actual and compensatory damages in excess of $75,000;
2. An award of punitive damages according to proof;
3. Temporary and permanent injunctive relief ordering Defendants to remove the Media Statement on Global Links from publication and issue a retraction;
4. An award of its costs of suit in pursuing this action; and
5. For such other relief as the Court deems proper.
DEMAND FOR JURY TRIAL
Plaintiff Global Links demands trial by jury of all issues so triable under the law.
Dated: September 28, 2006 TURNER GREEN AFRASIABI & ARLEDGE LLP
By: /s/ David R. Koch
David R. Koch
Attorneys for Plaintiff Global Links Corporation
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