MURRAY, FRANK & SAILER LLP ANNOUNCES THE FILING OF A SHAREHOLDER CLASS ACTION AGAINST ESCALA GROUP, INC. - ESCL
New York, NY May 30, 2006- Murray, Frank & Sailer LLP has filed a class action lawsuit in the United States District Court for the Southern District of New York on behalf of all who purchased shares of Escala Group, Inc. (Nasdaq: ESCL) ("Escala" or the "Company") between September 5, 2003 and May 10, 2006, inclusive (the "Class Period"). The Complaint alleges violations of both the Securities Exchange Act of 1934.
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Specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company's business model was based on a fraud; (2) specifically, that Afinsa Bienes Tangibles, S.A. ("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) that Afinsa's revenue was generated through fraudulent activities; (4) that the Company lacked adequate internal controls; and (5) that, as a result of the above, the Company's financial statements were materially false and misleading.
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, Escala's majority shareholder. In what the Company believed was an extension of this process, Spanish authorities also collected documents at Escala offices in Madrid, during which time normal operations at these locations were suspended. The Company also reported that it had been advised that certain members of the board of directors of Afinsa, including Carlos de Figueiredo, an Afinsa representative on Escala's board, were being questioned. Also on May 9, 2006, before the market closed, Spanish police announced that they had arrested nine people in an anti-fraud swoop. Spanish 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, or 61.78 percent, to close, on May 9, 2006, at $12.23 per share, on heavy trading volume. Shares of Escala sank an additional $5.68, or 46.44 percent, the next day, to close, on May 10, 2006, at $6.55 per share, on heavy trading volume.
On May 11, 2006, Spanish authorities charged 11 people for their involvement in the pyramid scheme, including 5 Afinsa executives. On this news, shares of Escala dropped $2.21, or 33.74 percent, to close, on May 11, 2006, at $4.34 per share, on heavy trading volume.
Murray, Frank & Sailer LLP and its predecessor firms have devoted its practice to shareholder class actions and complex commercial litigation for more than thirty years and have recovered hundreds of millions of dollars for shareholders in class actions throughout the United States.
If you purchased or otherwise acquired Escala stock between September 5, 2003 and May 10, 2006 and sustained damages, you may, no later than July 10, 2006, move the Court to serve as lead plaintiff. Shareholders outside the United States may also join the action, regardless of which exchange was used to purchase the securities. You can join this class action as lead plaintiff online at http://www.murrayfrank.com/CM/NewCases/NewCases.asp. If you would like to discuss this action, this announcement, or your rights and interests, please contact plaintiff’s counsel Bradley P. Dyer of Murray, Frank & Sailer LLP.
Murray, Frank & Sailer LLP
Bradley P. Dyer
Fax: (212) 682-1892
Email: [email protected]