WASHINGTON LAWFUEL – Press Release Service June 8, 2006–The law firm Cohen, Milstein, Hausfeld & Toll, P.L.L.C. has filed a lawsuit in the United States District Court for the Southern District of New York on behalf of its client and on behalf of other similarly situated purchasers of Escala Group, Inc. (“Escala” or the “Company”) (NASDAQ:ESCL) common stock between September 5, 2003 through and including May 10, 2006 (the “Class Period”). The Company was created in September 2003 through the integration of the auction businesses of Greg Manning Auctions, Inc., a stamp and coin auction house, and Auctentia, S.L. of Spain (“Auctentia”). Auctentia is the wholly owned subsidiary of privately-owned Afinsa Bienes Tangibles, S.A. (“Afinsa”), the largest shareholder of Escala as well as one of its most important sources of revenues. Several of Afinsa’s officers are also officers and/or directors of Escala. Escala, in turn, is the primary supplier of the stamps sold by Afinsa.
The complaint charges Escala and certain of its officers and directors with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). The Complaint alleges that defendants omitted or misrepresented material adverse facts about the Company’s financial condition, business prospects, and revenue expectations during the Class Period.
Specifically, the complaint alleges that, during the Class Period, defendants issued numerous materially false and misleading statements which caused Escala’s securities to trade at artificially inflated prices. As alleged in the Complaint, these statements were materially false and misleading because they misrepresented and failed to disclose that: (1) the Company’s business model was based on a fraud; (2) Afinsa was overvaluing its stamp inventory in order to attract investors; (3) Afinsa was paying its investors with money from newly arrived investors rather than generated revenues; (4) Afinsa’s revenues were generated through fraudulent activities; (4) the Company lacked adequate internal controls; and (5) as a result, the Company’s financial statements were materially false and misleading when made.
According to the complaint, on May 9, 2006, Escala issued a press release announcing that it had been advised that Spanish judicial authorities, as part of an investigation into its stamps-collectibles sector, had collected and were reviewing documents from Afinsa and also Escala’s offices in Madrid. In addition, the Company announced that certain members of the board of directors of Afinsa, including an Afinsa representative on Escala’s board, were being questioned.
The complaint alleges that in response to the Company’s announcements, the price of Escala stock dropped from $32.00 to $12.23 per share and then to $6.55 per share on May 10, 2006. Then, on May 11, 2006, Spanish prosecutors charged 11 people involved in the scheme, including five individuals affiliated with Afinsa, and Escala’s stock collapsed to as low as $4.01 per share, before closing at $4.34 per share.
If you are a member of the class, you may, no later than July 10, 2006 request that the Court appoint you as Lead Plaintiff of the class. Any member of the purported class may move the Court to serve as Lead Plaintiff through counsel of their choice or may choose to remain an absent class member.
Cohen, Milstein, Hausfeld & Toll, P.L.L.C. has significant experience in prosecuting investor class actions and actions involving securities fraud. The firm has offices in Washington, D.C., New York, Philadelphia and Chicago, and is active in major litigation pending in federal and state courts throughout the nation. You may visit the firm’s website at www.cmht.com.
The firm’s reputation for excellence has been recognized on repeated occasions by courts which have appointed the firm to lead positions in complex multi-district or consolidated litigation. Cohen, Milstein, Hausfeld & Toll, P.L.L.C. has taken a lead role in numerous important cases on behalf of defrauded investors, and has been responsible for a number of outstanding recoveries which, in the aggregate, total in the billions of dollars.
If you have any questions about this notice or the action, or with regard to your rights, please contact either of the following:
Steven J. Toll, Esq.
Cohen, Milstein, Hausfeld & Toll, P.L.L.C.
1100 New York Avenue, N.W.
West Tower, Suite 500
Washington, D.C. 20005
Telephone: 888-240-0775 or 202-408-4600
Email: [email protected] or [email protected]