NEW YORK, June 26, 2003 (PRIMEZONE) -- Pomerantz Haudek Block Grossman & Gross LLP (www.pomerantzlaw.com) has filed a class action in the United States District Court for the Northern District of Illinois (Eastern Division), case number 03 C 4100, against four Directors and/or Officers of Divine, Inc. ("Divine" or the "Company") (Pink Sheets:DVINQ), on behalf of investors who, during the period between November 12, 2001 and February 18, 2003, inclusive (the "Class Period"), either (i) purchased or otherwise acquired Divine common stock, (the "Class") or (ii) exchanged Viant Corp. ("Viant") common stock for Divine shares in the merger of Viant and Divine, which was completed on or about September 27, 2002 (the "Viant Sub-Class").
The Complaint alleges that defendants Andrew J. Filipowski, Michael P. Cullinane, Alexander Szlam, and Jude M. Sullivan violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing a series of material misrepresentations to the market, which served to artificially inflate the price of Divine securities. It is alleged that as Divine's cash position deteriorated in late 2002, defendants caused Divine to cannibalize one of its acquisitions, RoweCom.
In the 4th Q of 2002, defendants caused RoweCom to collect and transfer to Divine $65 million in pre-payments from RoweCom's customers and to divert at least $73.7 million in funds from RoweCom's accounts to Divine between April 2002 and December 2002. As a result, RoweCom was forced into bankruptcy in January 2003 and its estate filed a fraudulent transfer action against Divine at the same time in the bankruptcy proceeding.
As alleged in the complaint, defendants failed to disclose and misrepresented that (1) by purchasing income streams with artificially inflated stock, defendants were building a financial house of cards that would crumble once the pool of willing investors and acquisition targets willing to sell to Divine on the terms Divine's management sought dried up; (2) by collecting $65 million in prepayments from customers of RoweCom in late 2002 with no intention of completing their sales and by diverting over $73 million in cash from RoweCom's accounts, defendants were destroying the Company's largest source of revenue and subjecting the Company to great potential civil and criminal liability; and (3) by operating the Company and its subsidiaries without adequate financial and internal controls, defendants lacked a reasonable basis to project profitability and to report accurate financial results and caused the Company to engage in criminal conduct.
On February 18, 2003, Divine announced that "despite efforts over the past several months to minimize operating expenses and various liabilities, its board of directors had determined to "seek alternatives to protect the value and viability of its operations." As a result, Divine advised that it engaged Broadview International LLC as advisors to assist in exploring strategic options, which could include asset divestitures, comparable transactions, and/or the filing of a voluntary petition under Chapter 11 of the United States Bankruptcy Code. As a result of this announcement, the price of Divine stock fell dramatically.
Thereafter, Divine was forced to seek protection under the federal bankruptcy statutes and according to its bankruptcy filings, the Company then had only approximately $25 million in cash left on hand. On March 4, 2003, the Nasdaq Stock Market delisted Divine's stock and defendants disclosed that a federal grand jury was investigating Divine's receipt of the $65 million in pre-payments.
If you purchased the common stock of Divine during the Class Period or exchanged Viant Corp. common stock for Divine shares in the merger of Viant and Divine, you have until July 28, 2003 to ask the Court to appoint you as lead plaintiff for the Class. In order to serve as lead plaintiff, you must meet certain legal requirements. If you wish to review a copy of the Complaint, or if you would like to discuss this action or have any questions, please contact Andrew G. Tolan, Esq. of the Pomerantz firm at 888-476-6529 (or (888) 4-POMLAW), toll free, or at agtolan@pomlaw.com by e-mail. Those who inquire by e-mail are encouraged to include their mailing address and telephone number.
The Pomerantz firm, which has offices in New York, Chicago and Washington, D.C., is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, the Pomerantz firm pioneered the field of securities class actions. Today, more than 50 years later, the Pomerantz firm continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca