Tengasco Inc. shares were down 11% last Tuesday but rebounded 9% on Wednesday by noon to $1.31 after the company discounted a class action lawsuit brought against it on Monday. Tengasco said the lawsuit was initiated by common stock short-sellers, who profit when share prices decline.

The suit charges the company and its CEO with making false and misleading statements about production, drilling success, the prospects of Tengasco’s Swan Creek Field and the company’s earnings potential between August 2001 and April 2002. “The defendants were motivated to make such false and materially misleading statements in order to secure a multi-million-dollar loan from Bank One, certain of the proceeds of which were used to pay off loans made by Tengasco insiders,” the law firm of Robert C. Susser PC said in a statement.

The complaint alleges that as a result of the false and misleading statements, the price of Tengasco’s shares were “artificially inflated” throughout the class period causing investors to suffer damages. The complaint against the company and CEO M. E. Ratliff was filed on behalf of investors by the law firm in the U.S. District Court for the Eastern District of Tennessee, and titled Paul Miller v. M. E. Ratliff and Tengasco under case number 3-02-CV-644.

“We intend to take aggressive action against unscrupulous parties who are attempting to manipulate our stock for their own benefit,” said Jeffrey R. Bailey, Tengasco’s president. “We have made tremendous progress in improving our operations, and will not allow the actions of those attempting to orchestrate a smear campaign for personal benefit to initiate a baseless and frivolous lawsuit built upon deceit and misrepresentation.”

Tengasco said it plans to defend itself vigorously against the allegations and will seek all available remedies and sanctions for any damages. The Knoxville-based producer has operations in Tennessee and Kansas. Its most widely known property is the 50,500-acre Swan Creek Field, which produces oil and natural gas.

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