NEW YORK, Sept. 12, 2002 (PRIMEZONE) -- Group Management Corp (OTCBB:GPMT) of Houston, Texas, has filed litigation in United States District Court in the Southern District of New York against Alpha Capital Aktiengesellschaft, Amro International S.A., Markham Holdings, LTD. and Stonestreet Limited Partnership.
The Group Management Corp. suit alleges fraud, federal securities fraud, and manipulation of the Company's stock to intentionally drive down the share price from $4.00 to .06.
The four defendants are offshore "investment funds" represented by domestic agents or counterparts in New York, Atlanta, Los Angeles, Toronto, Vancouver, and via the Internet, among other venues. The GPMT suit alleges that each fund and its domestic partners conspired to induce the Company to enter into a stock-secured loan with a convertible note or debenture, which is also called "Toxic Convertible" or "Death Spiral" financing. In "Death Spiral" financing, the stock is sold short against the collateral stock or unconverted debentures to lower the stock price. In many cases licensed brokers or traders may conceal illegal short positions for months. Then, either conversion to tradable stock can be made at an artificially low price to cover the shorts, or the low market cap ultimately drives the company out of business so the short sale never has to be covered at all.
The suit alleges the funds, their affiliates or agents manipulated GPMT stock through an organized campaign of short selling to collapse the share price. The suit further alleges collusion, posting artificial bid prices and boxing or controlling the market in GPMT stock. The impact on Group Management Corp. and its shareholders is a documented loss of over $100 million in market capitalization, and has deprived GPMT of acquisitions and other opportunities.
Eric Bauchman, Managing Director of Concord Business Development US (www.concordbusiness.com) in Chicago, acting as spokesperson for client Group Management Corp. in this matter, said, "The suit is filed based on our extensive forensic investigation of a pattern of trading activities by the funds, NASD Market Makers, brokerage firms, their affiliates and their principals in related financings through NASD trading records and subpoenaed documents. Initial investigations uncovered more than 25 other companies similarly affected. Evidence shows GPMT and others have been victimized and damaged by predatory financing, collusion, and 'naked shorting' involving various funds, NASD Market Makers, brokerage firms, and others, running into billions of dollars each year.
"We have requested criminal investigation by the FBI, including under Rico statutes, and are furnishing evidence to other regulatory agencies. For the stock exchanges to work for the greater good, there has to be proactive ethical and legal participation by all concerned; not only the firms engaged in trading, but also the NASD and regulatory agencies charged with oversight. It has obviously not been so in this and many other cases, to the detriment of many growing companies with great potential and their shareholders. There was no alternative but to seek timely relief and remedy through the Judicial Branch of the United States Government. We invite calls from similarly affected companies. Such predatory lenders must be stopped, once and for all."
Safe Harbor for Forward-Looking Statements: Except for historical information contained herein, the statements in this press release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the company's actual results in the future periods to differ materially from forecasted results. These risks and uncertainties include, among other things, product price volatility, product demand, market competition, risk inherent in the company's domestic and international operations, imprecision in estimating product reserves and the company's ability to replace and expand its holdings.