Legg Mason faces securities fraud suit
Last Update: 6:34 PM ET Oct 17, 2006
DOW JONES NEWSWIRES
Legg Mason Inc. (LM) is the target of a purported class-action lawsuit in the U.S. District Court for the Southern District of New York that alleges violations of the Securities Exchange Act of 1934.
A Legg Mason representative said the suit is without merit and the company plans to defend itself.
Lerach Coughlin Stoia Rudman & Robbins LLP said it is taking the action on behalf of those who purchased Legg Mason common stock between June 24, 2005 and July 24, 2006.
The firm alleges Legg Mason misled investors about its growth and performance and made false, but positive statements to support the company's stock price.
marketwatch.com
Some history:
Paul/Weiss Annual Review 2005 ...
Citigroup Completes
Innovative Sale Transaction
We advised Citigroup in its resale of
Legg Mason’s capital markets business
to Stifel Financial Corp. Citigroup
had originally acquired the capital
markets business as part of a swap of
Citigroup’s asset management division
for Legg Mason’s broker-dealer
business and other consideration.
The resale to Stifel was concluded
by Citigroup immediately following
the completion of the asset swap
transaction with Legg Mason.
page 22 of 50
paulweiss.com
that same firm 'Paul/Weiss' is representing SAC Capital:
Paul, Weiss, Rifkind, Wharton & Garrison LLP ...
Daniel J. Kramer is a leading trial lawyer and litigator, with extensive experience in securities matters and internal investigations. Mr. Kramer has been selected as one of the leading securities lawyers in the United States by Chambers’ Guide (2004-2006). He is a partner in Paul, Weiss' Litigation Department, which was named Litigation Department of the Year by The American Lawyer magazine in 2006. ...
Recent matters include representation of:
SAC Capital, in a lawsuit alleging that it improperly shorted the stock of Biovail Corporation. ...
Significant Matters (Partial List):
Biovail v. SAC (D.N.J. 2006): counsel to hedge fund in RICO action arising out of SAC's short sales of Biovail. ...
paulweiss.com
some more history shows:
10th International Conference on Hedge Fund Investments
Daniel J. Kramer
Date/Time
7/8/2003
Dan Kramer will be the moderator of a four-member panel at the "10th International Conference on Hedge Fund Investments" on September 8 at the Southampton Princess Hotel in Bermuda. The panel of experts will address the recent enactment of rules for hedge funds to comply with the money laundering provisions of the USA Patriot Act. They will explore the current regulatory environment and provide insights on what can be expected in the future. Other speakers include David Bloom of Rx Capital, Peter Nusbaum of SAC Capital and Steve Vine of Akin Gump Strauss Hauer & Feld LLP. To learn more about the program, visit marhedge.com.
paulweiss.com
Forensic Advisors appears!
Forbes.com
A bitter pill to swallow?
Brandon Copple, 03.18.02
...Forensic Advisors, a research firm in Maryland that picks apart corporate financial statements for money managers and short sellers, questions Biovail's expensing of advertising costs, $3.4 million in 2000, "upon the first showing of the product," rather than as the costs are incurred. Biovail says that it does so to match costs and revenue, booking expenses when sales are made....
forbes.com
A dose of reality
Kevin Libin
From the March 2003 issue of Canadian Business magazine
...It takes a little more number-crunching for investors to figure out whether or not Biovail is actually seeing any real, sustainable growth in its revenue, the kind that would ensure it lives a long life as a secure investment. Trouble is, once you account for all the top-line revenue that Biovail paid to get its hands on last year, it starts to look like the drugmaker's revenues are actually in decline, says Tim Mulligan, president of Forensic Advisors Inc. in Rockville, Md....
canadianbusiness.com
also at
portfoliodb.theglobeandmail.com
and
tdw2.globeinvestor.com
Here we have Herb Greenberg tauting Forensic Advisors:
No Accounting for Taste as Ernst Lauds Pre-Paid, Nautilus
By Herb Greenberg
Senior Columnist
06/20/2002 07:51 AM EDT
...Speaking of which, Ernst might want to get its hands on yesterday's 13-page issue of The Eyeshade Report from Forensic Advisors, which raises numerous issues about Nautilus....
thestreet.com
Biovail Files Lawsuit Alleging Stock Market Manipulation Scheme
TORONTO--(BUSINESS WIRE)--Feb. 22, 2006--Biovail Corporation (NYSE:BVF)(TSX:BVF) today filed a lawsuit seeking $4.6 billion in damages from 22 defendants who, the complaint alleges, participated in a stock market manipulation scheme.
The complaint, filed in Superior Court, Essex County, New Jersey, alleges violations of various state laws, including the New Jersey Racketeer Influenced and Corrupt Organizations Act (RICO), pursuant to which treble damages may be available.
Defendants include: S.A.C. Capital Management, LLC, S.A.C. Capital Advisors, LLC, S.A.C. Capital Associates, LLC, S.A.C. Healthco Funds, LLC, Sigma Capital Management, LLC, Steven A. Cohen, Arthur Cohen, Joseph Healey, Timothy McCarthy, David Maris, Gradient Analytics, Inc., Camelback Research Alliance, Inc., James Carr Bettis, Donn Vickrey, Pinnacle Investment Advisors, LLC, Helios Equity Fund, LLC, Hallmark Funds, Gerson Lehrman Group, Gerson Lehrman Group Brokerage Services, LLC, Thomas Lehrman, Patrick Duff, and James Lyle. ...
biovail.com
Forensic Advisors mentioned:
Facts get in the way of Biovail's good story
DEREK DeCLOET
Published: Tuesday April 4, 2006
Eugene Melnyk has learned a thing or two about courting the media. He once used Biovail's
corporate jet to fly a reporter to Barbados for a round of golf and dinner (barbecued dolphin), and
earned a fawning newspaper profile for his trouble.
But this latest campaign -- this is something else. When you can get a sympathetic ear from 60
Minutes, as Mr. Melnyk did last week, you have hit a public relations home run. The television
piece, titled "Betting on a fall," has put his enemies on the defensive. Gradient Analytics, the
research outfit that allegedly took dictation from hedge funds shorting Biovail stock, comes off
looking corrupt. SAC Capital Management founder Steven Cohen appears shady. Banc of
America Securities gets off with barely a scratch from CBS, but said Friday it will stop covering
the stock, to concentrate on defending itself against lawsuits by Biovail and a shareholder.
And Biovail? "One of the largest companies in Canada," 60 Minutes called it, fighting "a battle of
the titans" with SAC. Cue Mr. Melnyk and grab your handkerchief. "There's a group of people that
got together and essentially attacked the company by putting out false reports. And we're just
fighting back for our shareholders," he told correspondent Lesley Stahl.
"What do you say to people who say that Biovail was overvalued and that the hedge funds
actually performed a service here in pointing this out?" she asked him.
"I don't think there was any service that was performed here. . . . There is virtually no analyst out
there that thought that the stock was overvalued," he replied.
Well, he's got a point. Few analysts had "sell" ratings on Biovail when the alleged SAC-Gradient
plot was hatched. But that is as much a statement on the quality of sell-side research as anything
else, and it's also beside the point.
What matters is whether SAC and Gradient, by poking holes in Biovail's accounting, were
responsible for driving its share price to $22 from $68 in less than six months in 2003.
To believe that, you'd have to believe that Gradient's reports that summer -- reports Biovail calls
"bogus" -- were shocking enough to cause mass dumping of its shares. Mr. Melnyk believes this,
but is he right? Before Gradient, were investors oblivious to the company's accounting practices?
Let's examine the evidence.
Veritas Investment Research in March, 2001: "Considerably strange accounting must be waded
through with respect to Biovail."
Timothy Mulligan of Forensic Advisors, discussing the company's financials in January, 2002: "I'm
not saying this is a huge smoking gun, there's just some things that left me scratching my head."
Veritas again, November, 2002: "Accounting distortions, varying tax rates and the use of unique
pro forma performance measurements infect the earnings and beg the question: Should earnings
even be used as a metric?"
Douglas Miehm, RBC Dominion Securities, April, 2003: "The quality of Biovail's first-quarter
results were disappointing."
André Uddin, Research Capital, July, 2003, with the stock still near $65: "We believe Biovail has
been utilizing aggressive accounting and, unlike its peer group, has been funding its revenue
stream primarily via financings."
Yet Biovail's stock weathered this onslaught amazingly well. In fact, the shares were still above
$50 on Sept. 30, 2003. Few people, it seemed, were paying any attention to Gradient or anyone
else. Then, on Oct. 1, a truck carrying a large shipment of drugs crashed on a highway near
Chicago. Biovail, which had planned to book the revenue in the just-ended third quarter, was
forced into a profit warning, the stock plummeted, and all hell broke lose.
The next month the Securities and Exchange Commission began what is now a formal
investigation, and soon after, Biovail stopped its acquisition spree and repaid debt. Mr. Melnyk
stepped aside for an outside CEO with drug company experience and installed a new chief
financial officer. Veritas analyst Anthony Scilipoti says the accounting and the disclosure are "still
among the most aggressive we have seen" -- but the governance and balance sheet have
improved immensely. The new Biovail looks a lot better than the old one.
Yet, the stock, which closed at $28.59 yesterday in Toronto, is still miles below its value in the
spring and summer of 2003. Why? Stock manipulation? That hardly seems plausible now --
conspiracies tend to lose their punch once exposed. Because David Maris, Banc of America's
analyst, doesn't like the company? He changed his "sell" rating to "neutral" almost two years ago.
So, even if SAC and Gradient were playing loose with the facts, as Mr. Melnyk alleges, they
couldn't have caused the damage he claims. Biovail's stock fell because it was richly valued and
the market lost faith. It's too bad that doesn't make a very good tale for 60 Minutes.
veritascorp.com
BusinessWeek Online
APRIL 10, 2006
The Secret Lives Of Short-Sellers
The rise of hedge funds and indie research raises new questions about a shadowy world
..."forensic" firms, which look for suspicious accounting, and "direct research" outfits, which arrange confidential interviews with industry sources paid to answer questions posed by hedge funds and other institutional investors. It all adds up to more research highlighting potential problems with company financial statements or operations, and much of it is in the hands of hedge funds that sell short. Traders and analysts sometimes pass along such reports to the media, and that has led to harder-hitting coverage of some companies.
Biovail, in its suit filed...
businessweek.com
Financial newsletter entitled to news media privilege
A Maryland court rules that a newsletter president does not have to answer deposition questions covered by the state reporter's privilege law.
Sep. 21, 2006
...Still, the appeals court in Annapolis upheld the subpoena, stating that Mulligan's deposition would "go forward because it is clear that the subpoena issued to appellants [Mulligan] seeks much more information than is subject to protection under the act," wrote Chief Judge Joseph Murphy, referring to the state shield law...
(Forensic Advisors, Inc. et al. v. Matrixx Initiatives, Inc., Media Counsel: Tim Mulligan, Annapolis, M.D.)
rcfp.org
connecting the dots!
I understand why it's so very important that a certain subscribers list is under scrutiny!
lma(zz)o! |
