NEW YORK, Jan. 22, 2002 (PRIMEZONE) -- The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action lawsuit was filed on January 10, 2002, on behalf of purchasers of the securities of Rhythms NetConnections, Inc. ("Rhythms" or the "Company") (Nasdaq:RTHMQ) between January 6, 2000 and April 2, 2001, inclusive. A copy of the complaint filed in this action is available from the Court, or can be viewed on Milberg Weiss' website at: http://www.milberg.com/rhythmsnetconnections/
The action, numbered 02-K-0035, is pending in the United States District Court, District of Colorado, located at U.S. Courthouse, 1929 Stout Street, Denver, Colorado 80294, against defendants Catherine Hapka, Steve Stringer, Scott C. Chandler and John W. Braukman. The Honorable John L. Kane, Jr. is presiding over the case.
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 the Company's efforts to scale back its expansion plans were not meeting with success as the Company was unable to generate the necessary financing; (iii) that Rhythms was not well-funded or well-positioned to continue its growth, as the Company's expenses, including its ongoing debt payment obligations, were far outpacing its revenues and rapidly depleting the Company's 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 posession 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 the Company raised hundreds of millions of dollars in preferred stock sales and debt issuances.
If you bought the securities of Rhythms between January 6, 2000 and April 2, 2001, you may, no later than March 11, 2002, request that the Court appoint you as lead plaintiff. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiff." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Milberg Weiss Bershad Hynes & Lerach LLP, or other counsel of your choice, to serve as your counsel in this action.
Milberg Weiss Bershad Hynes & Lerach LLP, a 190-lawyer firm with offices in New York City, San Diego, San Francisco, Los Angeles, Boca Raton, Seattle and Philadelphia, is active in major litigations pending in federal and state courts throughout the United States. Milberg Weiss has taken a leading role in many important actions on behalf of defrauded investors, consumers, and companies, as well as victims of World War II and other human rights violations, and has been responsible for more than $30 billion in aggregate recoveries. The Milberg Weiss Web site (http://www.milberg.com) has more information about the firm.
If you wish to discuss this action with us, or have any questions concerning this notice or your rights and interests with regard to the case, please contact the following attorneys:
Steven G. Schulman or Samuel H. Rudman One Pennsylvania Plaza, 49th fl. New York, NY, 10119-0165 Phone number: (800) 320-5081 Email: Rhythmscase@milbergNY.com Website: http://www.milberg.com
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca