Saratoga Advantage Trust, Et Al. V. International Coal Group, Inc., Et
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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF WEST VIRGINIA AT CHARLESTON SARATOGA ADVANTAGE TRUST and ) THEODORE HYER, On Behalf of ) Civil Action No. 2:08-ev-0011 Themselves and All Others Similarly ) Situated, ) FIRST AMENDED CLASS ACTION ) COMPLAINT FOR VIOLATION Plaintiffs, ) OF FEDERAL SECURITIES LAWS vs. ) ) ) ICG, INC. a/k/a INTERNATIONAL COAL ) DEMAND FOR JURY TRIAL GROUP, INC., WILBUR L. ROSS, ) BENNETT K. HATFIELD, WENDY L. ) TERAMOTO, and WILLIAM D. ) CAMPBELL, ) ) Defendants. ) ) Lead Plaintiff Saratoga Advantage Trust, and co-plaintiff Theodore Hyer, by their undersigned attorneys, individually and on behalf of the Class described below, makes the following allegations in support of their First Amended Class Action Complaint based upon, inter alia, the investigation of Plaintiffs' counsel, that included: an analysis of publicly available news articles, press releases and reports, public filings, securities analysts' reports and advisories about ICG, Inc., a/lc/a International Coal Group, Inc. ("ICG" or the "Company"); press releases and other public statements issued by, and media reports about the Company; and, the belief that substantial additional support exists for the allegations set forth herein upon a reasonable opportunity for discovery. NATURE OF THE ACTION 1. This is a securities class action on behalf of all persons and entities who purchased securities of ICG between April 28, 2005 and June 6, 2006, inclusive (the "Class Period"), against ICG seeking to pursue remedies under the Securities Exchange Act of 1934 (the "Exchange Act") [15 U.S.C. §§78j(b) and 78(a)], and Rule 10b-5 promulgated thereunder by the SEC [17 C.F.R. §240.10b-5]. 2. ICG is a leading producer of coal in Northern and Central Appalachia. With approximately 25 coal mines and mining operations in West Virginia, Kentucky, Maryland and ICG markets a broad range of low sulfur steam coal and metallurgical grade coal to a customer base consisting largely of major electric utilities, as well as domestic and international industrial customers. 3. During the Class Period, ICG and the Individual Defendants issued a series of false and misleading statements in filings with the Securities and Exchange Commission ("SEC"), and made materially incorrect public statements while issuing press releases and shareholder reports that artificially inflated the price of the Company's stock prior to, and after, ICG's November 21, 2005 Reorganization and Stock Exchange (the "Reorganization") and the December 8, 2005 Initial Public Offering of ICG common stock (the "IPO"). Indeed, it was only as a result of the Defendants' ability to artificially inflate the Company's stock price that ICG was able to effectuate the Reorganization and thereby acquire (via merger) the operations and assets of Anker Coal Group, Inc. ("Anker") and CoalQuest Development LLC ("CoalQuest") to establish ICG as a significant actor in the U.S. domestic coal production industry and raise capital through the IPO sufficient to retire burdensome corporate debt. 4. Throughout the Class Period, the Defendants failed to disclose material adverse facts and publicly issued false information in public filings and other statements to the investment 2 community by misrepresenting the Company's coal production operations, woeful safety record and historical environmental non-compliance. As a result, the Company's operations and financial performance were deteriorating and Defendants' statements to the contrary in ICG's public filings concerning the Company's current and future business prospects were false, lacking any reasonable basis in fact, and made by Defendants in knowing disregard of the true facts. 5. Attributing lowered guidance by analysts in news services to the January 2, 2006 Sago mine tragedy and other subsequent mine mishaps resulting from ICG' s woeful safety conditions and maintenance record, the decrease in coal production caused ICG to lower its 2006 financial projections after the close of trading on June 6, 2006, the end of the Class Period. On this news, the price of ICG stock tumbled downward 16.5% to close at $7.10 per share on June 7, 2006 on extremely heavy trading volume - a whopping 45.2% below the share price following the Reorganization. JURISDICTION AND VENUE 6. The claims asserted herein arise under §§10(b) and 20(a) of the Exchange Act [15 U.S.C. §§78j(b) and 78(a)], and Rule 10b-5 promulgated thereunder by the SEC [17 C.F.R. §240.10b-5]. 7. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C.§§1331 and 1337 and § 27 of the Exchange Act [15 U.S.C. §78AA] . 8. Venue is proper in this District pursuant to § 27 of the Exchange Act, and 28 U.S.C. §§1391(b). Substantial acts in furtherance of the alleged fraud, including the preparation and dissemination of materially false and misleading information, occurred within this District. 9. In connection with the acts alleged herein, Defendants directly or indirectly, used the 3 means and instrumentalities of interstate commerce, including but not limited to the U.S. mails, interstate telephone communications, and the facilities of the national securities markets. THE PARTIES 10. Plaintiffs, Saratoga Advantage Trust and Theodore Hyer (respectively, "Saratoga" and "Hyer" or, jointly as "Plaintiffs"), purchased ICG securities during the Class Period and were damaged thereby as set forth in their attached Certifications. 11. Defendant, ICG, Inc., a/k/a International Coal Group, Inc. ("ICG"), is a top tier holding corporation which maintains its executive offices at 300 Corporate Centre Drive, Scott Depot, West Virginia. ICG, by and through its subsidiaries, engages in the production, processing and marketing of coal. The Company's stock is traded on an efficient market, the New York Stock Exchange, under the ticker symbol "ICO." 12. Defendant Wilbur L. Ross, Jr. ("Ross") was at all relevant times Chairman of the Board of Directors of ICG. In that position, Ross signed ICG's Form S-1 and Form S-4 Registration Statements (and amendments thereto) pertaining to the Company's Reorganization and IPO public filings (and amendments thereto), as well as the Company's 2005 Form 10-K issued on March 30, 2006, each of which contained false and misleading statements and/or omitted material information necessary to render such statement not false and misleading, as hereinafter detailed. In addition, since April 2000, Mr. Ross has also served as the Chairman and Chief Executive Officer ("CEO") of WL Ross & Co. LLC, a merchant banking firm ("WL Ross"), and was the managing partner of WLR Recovery Fund L.P. ("WLR I") and WLR Recovery Fund II, L.P. ("WLR II"). 13. Pursuant to a contract dated as of October 1, 2004 between ICG and WL Ross, the latter is paid a quarterly fee of $500,000 and reimbursed expenses in exchange for providing strategic 4 and financial planning, investment management and administrative "advisory services" to ICG. Collectively, WL Ross, WLR I and WLR II have owned and are believed to hold slightly more than 20.9 million shares of ICG stock (13.72% of all outstanding shares and ICG's largest shareholder after the Company's Reorganization during the Class Period). Defendant Ross also exerted voting and dispositive power over these ICG shares throughout the Class Period. 14. Defendant Ross also served as the executive managing director for Rothschild Inc., the U.S. affiliate of the Rothschild family merchant banking firm for approximately 26 years prior to foiming WL Ross. In fact, WL Ross originated in 1997 as the Rothschild Recovery Fund, a fund investing in the securities of distressed companies. In April 2000, Ross purchased the firm's distressed investment section, recruited senior officers of Rothschild, Inc., and established WL Ross & Co. as a "boutique" private equity firm looking for "opportunities" among distressed companies. These opportunities generally involved companies in Chapter 11 bankruptcy proceedings having a non-union work force and "guaranteed" health benefits to retired employees and their families that could be eliminated through the bankruptcy process. 15. WL Ross now specializes in investing in distressed businesses throughout the world on behalf of partnerships funded by major U.S. institutional investors. Since April 2000, the firm has opened offices in New York City, Tokyo and Seoul and has sponsored more than $2.0 billion in investment partnerships on behalf of domestic and foreign institutional investors. In recent years, WL Ross received notoriety by acquiring Bethlehem Steel Corporation, LTV Steel Co., Weirton Steel Corporation, and several smaller steel companies out of bankruptcy between 2002 and 2004, and selling them as a "package" to Mittal Steel Co. of the Netherlands in early 2005 for a reported 11-fold profit. 5 16. Defendant Bennett K. Hatfield ("Hatfield") at all relevant times served as President, CEO and a director of ICG. In addition, during the Class Period defendant Hatfield was and/or remains a manager of, inter alia, ICG Hazard, LLC, and ICG Illinois, LLC which entities directly operated ICG's individual mines within their respective territories. Also during the Class Period defendant Hatfield was and/or remains a director of ICG subsidiaries Vindex Energy Corporation ("Vindex") and Wolf Run Mining Company ("Wolf Run"). 17. As a manager and/or officer of ICG's subsidiary operators of individual mining operations, Hatfield received daily Section Foreman reports and weekly (and monthly) summaries of, at least, that particular operator's coal production, equipment failures, worker accidents and injuries, production downtime, MSHA safety citations and abatement efforts (and MSHA fine assessments), and updated year-to-date comparisons of actual production vs. internal forecast. In addition, as the President and CEO of ICG, Hatfield received weekly, monthly and quarterly report summaries that contained this same infoimation for all of ICG's mining operations and which also included budgetary and performance analysis of such operations broken down by division, mining operator and/or individual mine.