NEW YORK , April 22, 2004 (PRIMEZONE) -- Wechsler Harwood LLP today announced that it has filed a Federal Securities fraud class action on behalf of persons or entities who purchased or otherwise acquired the securities of NovaStar Financial, Inc., (NYSE:NFI) ("Novastar" or the "Company") between October 29, 2003 and April 19, 2004, both dates inclusive (the "Class Period").
The action, entitled Tinega v. NovaStar Financial, Inc., et al., Case No. not yet assigned, is pending in the United States District Court for the Western District of Missouri and names as defendants, the Company, its Chairman of the Board and Chief Executive Officer, Scott F. Hartman, its President, Chief Operating Officer and director, W. Lance Anderson, and its Vice President, Secretary, Treasurer, and Controller, Rodney E. Schwatken. A copy of the complaint can be obtained from the Court or can be viewed on Wechsler Harwood web site at: www.whesq.com.
The complaint charges defendants with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. More specifically, the Complaint alleges that defendants failed to disclose and misrepresented the following material adverse facts which were then known to defendants or recklessly disregarded by them: (1) that the Company was operating branches in various states without obtaining the necessary regulatory licenses. Accordingly, a material amount of the Company's branch offices were conducting business in violation of the applicable laws and regulations; (2) that the risk of the Company being subject to adverse regulatory action was heightened given the aforementioned facts. Accordingly, NovaStar's purported risk disclosures concerning regulatory oversight did not constitute meaningful cautionary language; and (3) that the Company was materially overstating the growth of its network of branches as many of those purported branches either did not actually exist or were operating in violation of applicable law.
On April 12, 2004, an article appeared in The Wall Street Journal entitled "Outside Audit: Novastar's Rise Has A Ring Of Deja Vu." The article reported that in February 2004, Nevada state authorities ordered Novastar to cease operations there after a finding that none of the Company's branches were licensed to do business in the state. Furthermore, according to the article, "Nevada's top mortgage-lending regulator said he found that most of the 15 branches that Novastar claimed to have in the state didn't actually exist."
In response to the facts revealed in The Wall Street Journal news article, the price of NovaStar common stock plummeted 31% from $54.18 per share to $37.50 per share on extremely heavy trading volume. Then, on April 19, 2004, the SEC announced that it has begun an inquiry into NovaStar's business practices. On news of the inquiry, Company shares took another beating, dropping $7.21, or 18.5%, to close at $31.80. During the Class Period, NovaStar stock had traded as high as $70.32 per share.
If you purchased or otherwise acquired NovaStar securities during the Class Period, you may request that the Court appoint you as lead plaintiff by June 14, 2004. 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 Wechsler Harwood, or other counsel of your choice, to serve as your counsel in this action.
Wechsler Harwood has taken a leading role in many important actions on behalf of defrauded shareholders and recovered hundreds of millions of dollars in aggregate damages. The Wechsler Harwood website (www.whesq.com) has more information about the firm and detailed information regarding this matter. 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 Wechsler Harwood LLP.