MILWAUKEE, Jan. 14, 2002 (PRIMEZONE) -- Ademi & O'Reilly, LLP today announced that a class action has been commenced in the United States District Court, District of Colorado on behalf of purchasers of Rhythms NetConnections, Inc. ("Rhythms") common stock during the period between January 6, 2000 and April 2, 2001 (the "Class Period").
If you wish to serve as lead plaintiff, you must move the Court no later than March 11, 2002. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact Plaintiff's counsel, Guri Ademi of Ademi & O'Reilly at 866/264-3995 or via e-mail at rhythms@ademilaw.com. Any member of the purported class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.
The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, by issuing materially false and misleading statements to the market. Throughout the Class Period, Rhythms portrayed itself as a fast-growing and expanding provider of DSL services and repeatedly represented that it could continue to expand its broadband network throughout the United States and reassured investors that it was financially able to continue this expansion. As alleged in the Complaint, defendants' statements issued throughout the Class Period were materially false and misleading when made as they failed to disclose the following adverse facts which were then known to defendants or recklessly disregarded by them: (i) that Rhythms lacked the financial resources necessary to execute its business plan of a full national network expansion; (ii) that Rhythms' efforts to scale back its expansion plans were not meeting with success as Rhythms was unable to generate the necessary financing; (iii) that Rhythms was not well-funded or well-positioned to continue its growth, as the Rhythms' expenses, including its ongoing debt payment obligations, were far outpacing its revenues and rapidly depleting Rhythms' cash reserves; (iv) that the Company did not have adequate cash reserves and was not sufficiently "stable" and "financially strong" that it would be able to fund Rhythms' operational needs into the first quarter of 2002, as defendants repeatedly promised investors -- defendants were not even able to keep Rhythms running though 2001, as it had earlier guaranteed; and (v) that without the influx of additional capital, Rhythms would be forced to seek bankruptcy protection, which would render Rhythms common stock worthless. While in possession of the true facts about Rhythms and its business, the Individual Defendants and other Rhythms insiders collectively sold 600,000 shares of Rhythms common stock for gross proceeds in excess of $16 million - of which over $12.6 million alone was received by defendant Hapka - and Rhythms raised hundreds of millions of dollars in preferred stock sales and debt issuances.
Plaintiff seeks to recover damages on behalf of all purchasers of Rhythms common stock during the Class Period, including those who purchased shares directly from Rhythms. The Plaintiff is represented by Ademi & O'Reilly, LLP. The Ademi & O'Reilly, LLP website (http://www.ademilaw.com) has more information about the firm.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca