NEW YORK, June 22, 2006 (PRIMEZONE) -- Pomerantz Haudek Block Grossman & Gross LLP (www.pomerantzlaw.com) ("Pomerantz") has filed a class action lawsuit in the United States District Court, Southern District of New York, against Escala Group, Inc. ("Escala" or the "Company") (Nasdaq:ESCL) and certain of its officers and directors, on behalf of purchasers of the common stock of the Company during the period from September 5, 2003 -- May 10, 2006, inclusive (the "Class Period"). The complaint alleges violations of Section 10(b) and Section 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder.
Escala, a Delaware corporation with its principal place of business located in New York City, operates as a global collectibles merchant and auction house network with operations in North America, Europe, and Asia, as well as on the Internet. The Company was created in September 2003 through the integration of the auction businesses of Greg Manning Auctions, Inc., a stamp and coin auction house, and Auctentia, S.L. of Spain ("Auctentia"). Auctentia is the wholly owned subsidiary of privately-owned Afinsa Bienes Tangibles, S.A. ("Afinsa"), the largest shareholder of Escala as well as one of its most important sources of revenues.
Specifically, the complaint alleges that, during the Class Period, defendants issued numerous materially false and misleading statements which caused Escala's securities to trade at artificially inflated prices. As alleged in the Complaint, these statements were materially false and misleading because they misrepresented and failed to disclose that: (1) the Company's business model was based on a fraud; (2) specifically, that Afinsa, Escala's majority shareholder, was overvaluing its stamp inventory in order to attract investors and paying its investors with money from newly-arrived investors rather than generated revenue; (3) Afinsa's revenues were generated through fraudulent activities; (4) the Company lacked adequate internal controls; and (5) as a result, the Company's financial statements were materially false and misleading when made.
On May 9, 2006, while the market was open, Escala announced that Spanish judicial authorities, as part of what appeared to be an investigation into the Company's stamps-collectibles sector, collected documents from Afinsa, the company's majority shareholder. Also on May 9, 2006, before the market closed, Spanish police announced that they had arrested nine people in an anti-fraud swoop. The police stated that the people under investigation were suspected of pocketing a "substantial" amount of the money that investors put into guaranteed-return funds run by Forum Filatelico and Afinsa. On this news, shares of Escala plummeted $19.77, to close at $12.23 per share. On May 10, 2006, the price of Escala common stock fell an additional $5.68, to close at $6.55 per share. On May 11, 2006, Spanish authorities charged 11 people for their involvement in the pyramid scheme, including 5 Afinsa executives, and the price of Escala common stock declined another $2.21 to close at $4.34 per share.
If you purchased the securities of Escala during the Class Period, you have until July 10, 2006 to ask the Court to appoint you as lead plaintiff for the Class. Lead plaintiffs must meet certain legal requirements. Shareholders outside the United States may also join the action, regardless of where they live or which exchange was used to purchase the securities. If you wish to review a copy of the Complaint, to discuss this action, or have any questions, please contact Teresa L. Webb (tlwebb@pomlaw.com) or Carolyn S. Moskowitz (csmoskowitz@pomlaw.com) of the Pomerantz Firm at 888.476.6529 (or 888.4-POMLAW), toll free. 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. For more information about the Firm, visit our web site at www.pomlaw.com.
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