Suit Against KeySpan Alleges 'Fraudulent Scheme'
Claiming that KeySpan Corp. violated the Securities Exchange Act of 1934, the law firm of Weiss & Yourman said last week that it is bringing a class action lawsuit against KeySpan and certain individuals associated with the company in the U.S. District Court for the Eastern District of New York. The lawsuit is being brought on behalf of purchasers of KeySpan shares between April 26, 2000 and July 17, 2001.
The complaint alleges that the company and certain executives of the company are liable as participants in a course of business that operated as "a fraud or deceit" on purchasers of KeySpan common stock by releasing false material and misleading statements and/or concealing material adverse facts. Weiss & Yourman allege that KeySpan's scheme:
- deceived the investing public regarding KeySpan's business, operations, management and the intrinsic value of KeySpan common stock;
- enabled the individual defendants to sell their personally held shares of KeySpan common stock and reap proceeds of more than $29 million; and
- caused the plaintiff and other members of the lawsuit to purchase KeySpan common stock at artificially inflated prices.
On July 17, KeySpan reported that "accounting inaccuracies" existed and that they were of such a magnitude that in order to correct them KeySpan would incur a $30 million charge, turning what would have been (and what was expected to be) a second quarter profit into a second quarter loss, the lawsuit alleges. KeySpan's stock, which during the class period had traded at more than $40 per share, fell in response to this news to close at $32 per share.
Shortly prior to making this public revelation, however, numerous KeySpan officers and directors -- named as defendants in the complaint -- allegedly received millions of dollars from the insider selling of their KeySpan shares at prices artificially inflated by their failure to disclose material information. The lawsuit seeks to recover losses suffered by individual and institutional investors who purchased KeySpan's shares during the class period, excluding defendants and their affiliates.
Executives cited as defendants in the suit include: CEO Robert Catell; Craig Matthews, vice chairman and COO; Stephan L. Zelkowitz, executive vice president and general counsel; Robert J. Fani, president, KeySpan Energy Services and Supply; and William K. Feraudo, executive vice president, who heads the KeySpan Services Group.
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