ATLANTA, Sept. 12, 2002 (PRIMEZONE) -- Notice is hereby given that a class action lawsuit has been filed in the United States District Court for the District of Minnesota on behalf of all persons who purchased or otherwise acquired the securities of PEMSTAR, Inc. ("PEMSTAR" or the "Company") (Nasdaq:PMTR) between June 8, 2001 through May 3, 2002, inclusive (the "Class Period"). The lawsuit asserts securities fraud claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and alleges that PEMSTAR and certain of its officers and directors caused PEMSTAR's shares to trade at artificially inflated levels through the issuance of false and misleading statements.
The complaint charges that the Registration Statement and Prospectus for the Secondary Offering and other public statements were materially false and misleading when issued, as they misrepresented and/or omitted one or more of the following adverse facts which then existed and disclosure of which was necessary to make the statements made not false and/or misleading. Principally, in order to attract and maintain the appearance of a diverse customer base, PEMSTAR: (i) executed orders from customers without industry track records or acceptable financial conditions; and (ii) had a liberal policy of accepting and holding inventory for and from existing and prospective customers (often without ever obtaining a written contract), increasing its costs and forcing it to write down obsolete inventory. In addition, due to a lack of internal controls, PEMSTAR's "cash conversion cycle" and its "days of sales outstanding," were much longer than its competitors, meaning that PEMSTAR had to wait a long time between the time it sold inventory until it collected payment. During this extended time, PEMSTAR carried the totals as accounts receivables, hiding the fact that payment was unlikely and delaying disclosure of that fact until PEMSTAR finally did write down material amounts of accounts receivables.
The complaint further claims that the true facts which were known to the defendants but concealed from the public following the Secondary Offering include the following: (a) The Company was in violation of its financial loan covenants; (b) The Company's inventory and accounts receivables valuations were grossly overstated; and, (c) Defendants needed to keep the Company's shares artificially inflated to complete the Company's convertible offering. On May 3, 2002, the Company issued a press release entitled, "PEMSTAR Revises Estimates for Fourth Fiscal Quarter 2002 Results and Announces Private Placement of Up to $50 Million." On this news, the Company's share price plunged more than 60% on May 6, 2002 .
If you bought the securities of PEMSTAR during the Class Period, you may, no later than September 23, 2002, join in the action and/or move for appointment as lead plaintiff. In order to serve as lead plaintiff, you must meet certain legal requirements.
Plaintiff is represented by Chitwood & Harley, a law firm that concentrates its practice in representing victims of securities fraud and corporate mismanagement, as well as other complex litigation. Chitwood & Harley has been appointed lead counsel in major actions throughout the United States in both federal and state courts and has been instrumental in recovering billions of dollars on behalf of its clients.
If you wish to discuss this action or have any questions concerning this notice or your rights with respect to this matter, you may contact Nikole Davenport at 1-888-873-3999 (toll-free) or by e-mail at nmd@classlaw.com, CHITWOOD & HARLEY, 2900 Promenade II, 1230 Peachtree Street, N.E., Atlanta, Georgia 30309. For more information about Chitwood & Harley, please visit our website at www.classlaw.com.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca.