4. F I LED
IN THE UNITED STATES DISTRICT COU ' • 7...— MN FOR THE SOUTHERN DISTRICT OF WEST VI' A AT CHARLESTON 47e, RESAL. DEPPNER, CLERK US. District Court District of West Virginia SARATOGA ADVANTAGE TRUST, On ) Southern Behalf Of Themselves And All Others ) Civil Action No. a . 06- 00 Similarly Situated, ) ) CLASS ACTION COMPLAINT ) FOR VIOLATION OF FEDERAL Plaintiff, ) SECURITIES LAWS vs. ) ) ) ICG, INC. a/Ida INTERNATIONAL COAL ) DEMAND FOR JURY TRIAL GROUP, INC., WILBUR L. ROSS, ) BENNETT K. HATFIELD, WENDY L. TERAMOTO , WILLIAM D. CAMPBELL, ))',/,1 501 ) Defendants. ) ) ) Plaintiff Saratoga Advantage Trust, by their undersigned attorney, individually and on
behalf of the Class described below, makes the following allegations based upon, inter alia, the
investigation of Plaintiffs counsel, which investigation included analysis of publicly available
news articles, press releases and reports, public filings, securities analysts' reports and advisories
about ICG, Inc., a/k/a International Coal Group, Inc. ("ICG" or the "Company"), press releases
and other public statements issued by, and media reports about the Company, and believing 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 8, 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 thereafter 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
Illinois, 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, defendants' issued a series 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"). 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. and CoalQuest Development LLC to establish ICG as a significant actor
in the U.S. domestic coal production industry.
4. Specifically, the defendants failed to disclose material adverse facts and publicly
issued false information in public filings and other statements to the investment community by
misrepresenting the Company's 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 concerning its 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 to the Sago mine tragedy and other mine mishaps
resulting from ICG's woeful safety conditions and maintenance record, the decrease in coal
production caused ICG to lowered its 2006 financial projections after the close of trading on
June 8, 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 9, 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 thereafter by the SEC [17 C.F.R.
§240.10b-5] .
3 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. §78A/k] .
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 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. Plaintiff Saratoga Advantage Trust ("Plaintiff' or "Saratoga") purchased ICG securities during the Class Period and was damaged thereby as set forth in the attached
Certification.
11. Defendant, ICG, Inc. is a 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. Ross signed the ICG's Form S-1 and Form S-4 Registration
Statements pertaining to the Company's November 21, 2005 Reorganization and December 8,
2005 Initial Public Offering (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
4 Chief Executive Officer 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"). 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 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 exerted voting and dispositive power over these ICG shares.
13. Defendant Ross 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 forming 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.
14. 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
5 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.
15. Defendant Bennett K. Hatfield ("Hatfield") at all relevant times served as
President, Chief Executive Officer ("CEO") and a director of ICG. Hatfield signed the
Company's Form S-1 and Form S-4 Registration Statements (and amendments thereto), the
Company's 2005 Form 10-K, and ICG's First and Second Quarter 2006 Form 10-Q's issued on
May 12, 2006 and August 10, 2006, respectively. In addition, defendant Hatfield caused to be
issued during the Class Period certain press releases and public statements on ICG's behalf
which, together with its SEC filings, contained false and misleading statements and/or omitted
material information necessary to make such statements not be false and misleading as detailed
herein.
16. Defendant Wendy L. Teramoto ("Teramoto") at all relevant times served as a director of ICG. Teramoto has served as a Director of ICG since October 2004 and was
Secretary of ICG from October 2004 until April 2005, concurrent in time with the Company filing of its Form S-1 in connection with the Reorganization. Currently, Ms. Teramoto is also a
Senior Vice President at WL Ross and, prior to that, was a Vice President at WL Ross from April
2000 through July 2005. Prior to joining WL Ross, Ms. Teramoto worked at Rothschild Inc. with defendant Ross. Defendant Teramoto served as chairman of the board of Anker Coal
Group, Inc., and was sole manager and chief executive officer of CoalQuest Development LLC at the time of their acquisitions pursuant to ICG's Reorganization. Defendant Teramoto signed
ICG's Form S-1 and Form S-4 Registration Statements (and amendments thereto), and the
Company's 2005 Form 10-K, each of which contained false and misleading statements and/or
6 omitted material information necessary to make such statements not be false and misleading as further detailed herein.
17. Defendant William D. Campbell ("Campbell") at all relevant times served as Vice
President and Treasurer of ICG, and was its designated principal accounting and financial officer in the Company's SEC fillings. Defendant Campbell signed the Company's Form S-1 and Form
S-4 Registration Statements (and amendments thereto), the Company's 2005 Form 10-K, and
ICG's First and Second Quarter 2006 Form 10-Q's issued on May 12, 2006 and August 10, 2006, respectively, each of which contained false and misleading statements and/or omitted material information necessary to make such statements not be false and misleading as further detailed herein
18. The individuals named as defendants above are sometimes referred to herein as the "Individual Defendants." At all times material hereto, each of the Individual Defendants was the agent of the Company, and at all times acted within the course and scope of said agency.
19. Each of the Individual Defendants participated in the drafting, preparation, and/or approval of various untrue and misleading statements contained in SEC Form S-1 and Form S-4 filings (and amendments thereto) in connection with ICG's November 21, 2005 Reorganization
(the "Reorganization Documents") and December 8, 2005 IPO (the "Offering Documents"), and in relevant SEC filings, press releases and other public statements issued thereafter during the
Class Period. Because of their Board memberships, executive and managerial positions, and/or extensive holdings of ICG securities, each of the Individual Defendants is responsible for ensuring the truth and accuracy of the various statements contained in the Company's SEC filings, press release(s) and other public statement(s) but failed to do so.
7 20. The Individual Defendants, because of their management positions, membership
on the ICG Board of Directors and/or their extensive ownership of ICG's common stock, had the
power and influence to direct the management and activities of ICG and its employees.
Accordingly, the Individual Defendants were able to, and did, control the contents of the
Company's SEC filings, press releases and other public statements as complained of herein. Each
defendant, as signatory to many of the Reorganization and Offering Documents and ICG's 2005
Form 10-K filed with the SEC, was provided copies of the untrue and misleading documents
prior to their issuance and had the ability and opportunity to prevent their issuance or cause them
to be corrected but failed to do so. In addition, defendants Hatfield and Campbell were
signatories to the Company's First and Second Quarter Form 10-Q's filed with the SEC and had
the ability and opportunity to prevent their issuance or cause them to be corrected so as to not include the untrue and misleading documents complained of herein prior to their issuance.
21. It is appropriate to treat the Defendants as a group for pleading purposes under the federal securities laws and the Federal Rules of Civil Procedure and to presume that the false and misleading information complained of herein was disseminated through the collective actions of the Defendants. Defendants were involved in the drafting, producing, reviewing, and/or disseminating of the false and misleading information detailed herein, knew that such materially misleading statements were being issued by ICG, and/or approved or ratified these statements in violation of the federal securities laws. Defendants' false and misleading statements and omissions of fact consequently had the effect of, both on their own and in the aggregate, artificially inflating the price of the common stock of ICG at times relevant to this action.
8 THE COAL INDUSTRY
22. Coal represents over 25% of the world's primary source of energy. The United
States burns roughly 1 billion tons of coal every year and produces about 35% of the world's
coal, having more than 250 billion tons of recoverable coal reserves. Coal is essential, it is used
to generate more than half of all the electricity produced in the U.S. In 2006, coal-fired plants
generated approximately 50% of the electricity produced in the United States.
23. The United States' trend in coal utilization has been rising for decades. Since 1950 through the present, both coal production and coal consumption in the United States have more than doubled. More than half of the coal currently mined in the United States, however, comes from surface mines in the Powder River Basin located in western part of the country (primarily
Wyoming and Montana), while the Central and Northern Appalachian region accounts for approximately one-third of U.S. coal operations, mainly from underground mines. The remaining coal producing area in the U.S. is primarily the Illinois Basin, an area that includes
Illinois, Indiana and western Kentucky.
24. There are four major uses of coal in the U.S. Electric power generating plants burn coal to make steam. The steam turns turbines which generate electricity. Electric utility companies consume about 90% of the coal mined in the U.S. Coal is used for certain industries, such as concrete and paper production, and ingredients of coal, such as methanol and ethylene are used in making plastics, tires, synthetic fibers, fertilizers, and medicines. Coal is also used for making steel. It is baked in hot furnaces to make coke, which is used to smelt iron ore in the steelmaking process. The carbon in coal gives steel the strength and versatility for products such as bridges, buildings, and automobiles. Some coal is exported to Western Europe, Canada, and
Japan.
9 25. There are four major types of coal. Coal is classified by hardness. The harder the
coal, the less moisture it contains and the more efficient it is as fuel. Lignite (softest coal)
contains a significant amount of moisture; it's brownish black and crumbles easily with it
principal use being the generation of electricity. Sub-bituminous (medium soft coal) has
significantly less moisture than lignite and is used to produce steam for electrical generation.
Bituminous (medium hard coal) contains very little moisture and is high heat value. It is also
used to generate electricity and to make coke for use in the steel industry. Anthracite (hardest
coal) has a very high heat value, burns slowly, and is primarily used as a home heating fuel
alternative to oil.
THE COMPANY
26. Defendant ICG is currently a leading producer of coal in Northern and Central
Appalachia with over 660 million "short tons" of coal reserves in approximately 25 coal mines
and mining operations in West Virginia, Kentucky, Maryland and Illinois. / ICG markets a broad
range of sulfur steam and bituminous coal to customers consisting largely of electric utilities, as well as domestic and international industrial customers. While the Company purportedly has large reserves of high quality metallurgical coal — primarily used in steel production — its ability to extract and sell coal from these deposits is seemingly very limited with only approximately
100,000 and 200,000 tons of metallurgical coal produced in 2005 and 2006, respectively.
27. In 2006, ICG's Central Appalachia mines purportedly produced 11.2 million tons of coal, while its mines in Northern Appalachia purportedly produced 3.2 million tons of coal.
Approximately 95% of the coal shipped by these mines in 2006 was destined for electric utilities,
1 A "short" ton is equal to 2,000 pounds. A "long" or British ton is equal to 2,240 pounds; a metric ton is approximately 2,205 pounds. The short ton was the unit of measure consistently used by ICG in its SEC filings and thus is the measuring unit adopted for this Complaint unless otherwise noted. 10 mostly in the eastern half of the United States, including Georgia Power Company, Duke Power
and Carolina Power & Light Company.
ROSS, WL ROSS AND THE FORMATION OF ICG
28. The creation of ICG resulted from defendant Ross' investment through WL Ross.
Ross is credited with the restructuring of more than $200 billion of bankrupt company assets
worldwide, and in 1998, Fortune Magazine dubbed him the "King of Bankruptcy."
29. Having no prior (or practical) experience in the coal industry, but with a history of
purchasing and consolidating distressed companies in industries other than coal, Ross
commenced his activities by buying an interest in the Anker Coal Group, Inc. and 18 of its
consolidated subsidiaries ("Anker") in September 1999. At the time, Anker owned rights to
hefty, untapped coal deposits. Ross gained sufficient control over Anker by April 2001 that he
installed himself as a director.
30. By late 2002, defendant Ross had accumulated a more substantial interest in
Anker, controlling $37.3 million in secured Anker debt and approximately 47 percent of its preferred stock. 2 Ross was the largest shareholder and one of only four people to hold a seat on the company's board of directors, using his position of control to oust Anker's management and install his own which management team promptly placed Anker into bankruptcy to allow Ross to rid Anker of its previously guaranteed health benefits to retired miners. Upon exiting bankruptcy in October 2003, Ross installed defendant Teramoto as chairman of Anker's board and CEO of
CoalQuest Development, an Anker subsidiary.
31. Upon Anker emerging from bankruptcy in 2003, it projected increased production from its West Virginia mines, including Sago. At that time, Anker purportedly owned and
2 Following the completion of ICG's Reorganization and IPO, only a small portion of this debt remained unpaid. 11 controlled nearly 707 million tons of bituminous coal and held long term output contract with several major Eastern utilities. Anker, however, continued to lose money even as coal production at Sago and other mines expanded throughout 2004. This was principally due to the lack of diversity of the company's coal grade (almost exclusively bituminous), and the lack of economies of scale allowing enhanced productivity. The WL Ross investment was accordingly at risk and bolster Anker's limited operations Ross needed to increase its operating mine base and coal reserves while accessing in order to acquire additional coal reserves and fund ongoing (but unprofitable) operations. To do that, defendant Ross needed to tap the capital markets by using a corporation that could be taken public to restructure the operations of Anker/CoalQuest into a larger publicly traded entity.
32. To facilitate that goal, in May 2004, Ross (through his WL Ross investment vehicle) and with a few other investors, formed ICG, Inc. for the purpose of acquiring the existing coal reserves and mining operations of (bankrupt) Horizon Natural Resources Company, f/k/a AEI Resources Holdings, Inc. ("Horizon"), but only after shedding the company's employee health care benefits and environmental reclamation liabilities. Following ICG's inception, defendant Ross and WL Ross' strategy has been to target and acquire coal producing properties and going concerns located in the Appalachia and Illinois Basin with that are union free, have limited reclamation liabilities and are substantially free of legacy liabilities. ICG's initial Form
S-1 filed April 1, 2005 and subsequent SEC filings made in connection with the Company's corporate reorganization and initial IPO consistently touted this philosophy and often proclaimed
12 that ICG had the lowest level of exposure to these types of liabilities than any other publicly traded U.S. coal producer.3
33. To implement the intended acquisition of Horizon, on or about August 17, 2004,
ICG tendered a combined $290.0 million cash bid with A.T. Massey Coal Co. ("A.T. Massey") to acquire Horizon's coal producing and transportation assets at a bankruptcy court auction, and its bid was accepted and confirmed by the bankruptcy court on September 17, 2004. Pursuant to its agreement with A.T. Massey, ICG agreed to fund $285.0 million of the cash bid and assume up to $5.0 million of Horizon liabilities to cure the pre-sale defaults. The underlying Horizon coal leases and contracts were thus assumed and then assigned to ICG. ICG also agreed to contribute a credit bid of second lien Horizon bonds. ICG's credit bid included the cancellation of $482.0 million of Horizon bonds in return for which the Horizon bondholders received the right to participate in the rights offering to purchase ICG securities.
34. Following the acquisition of Horizon, and consistent with the rights provided to
Horizon bond holders, defendant Ross initiated the merger of the assets and mining operations of
ICG with Anker and its subsidiary, CoalQuest, which purportedly owned 377 million tons of coal reserves as stated by ICG's subsequent SEC filing. Accordingly, on March 31, 2005, ICG entered into business combination agreements with Anker and CoalQuest for a stock-for-stock transaction by which Anker and CoalQuest shareholders would, collectively, receive stock in
ICG, Inc., the "new" holding company of its wholly-owned subsidiary, International Coal Group,
Inc. ("old ICG") that, in turn, would own Anker and CoalQuest as wholly-owned subsidiaries.
At the time, ICG's initial Form S-1 was filed, defendant Ross owned a majority of Anker's stock,
See, e.g., ICG's Form S-1 (initial reorganization registration statement) filed April 28, 2005 at pp. 1 and 3; Foim 424B3 (reorganization prospectus) filed November 21, 2005 at p. 1; and Form 424B4 (initial public offering) filed December 8, 2005 at pp. 1 and 3. 13 controlled its board, and had used the controlling interest in Anker to have defendant Teramoto
installed as the manager and CEO of CoalQuest (Anker's wholly-owned subsidiary).
35. On April 28, 2005, ICG filed its Form S-1 with the SEC. Six (6) amendments
were thereafter filed to the initial Form S-1 prior to the actual Reorganization. While the initial
Form S-1 contemplated that an immediate initial public offering to fund the "new ICG" would
occur immediately following the Company's reorganization and stock exchange, in the
transactions were later bifurcated, and two separate prospectuses prepared and used. The first
was issued on November 18, 2005 to effect the corporate reorganization and securities exchange
that took place on Monday, November 21, 2005 (the "Reorganization"). The second prospectus
was for a 21,000,000 share initial public offering dated December 7, 2005 that was sold by "new
ICG" on December 8, 2005 (the "IPO").
36. In the initial Form S-1 it was also contemplated that shares of "old ICG" would be
swapped for shares of "new ICG" in a one-for-one-tax-free exchange and Anker and CoalQuest
shareholders receive, collectively, "up to 22.5% of the common stock of "new ICG." Also
contemplated was that the directors and officers of "old ICG" would continue to serve in the
same capacities for "new ICG", with the stock of this new entity traded on the NYSE under the
ticker symbol "ICO."
37. According to the prospectus for the Reorganization, the Company had previously
obtained sufficient irrevocable proxies from a majority of "old ICG" shareholders to consummate
the transaction. Thus, the only option for the shareholders opposing the Reorganization or the
IPO (which would dilute the percentage of their ownership interest in ICG) was to exercise their rights of appraisal. Pursuant to the terms of the Reorganization, Anker shareholders collectively received 14,840,909 shares of ICG common stock and CoalQuest shareholders received
14 9,250,000 shares of ICG common stock, most of which was owned and/or controlled by
defendant Ross through WL Ross and their affiliates.
MATERIALLY FALSE AND MISLEADING STATEMENTS ISSUED DURING THE CLASS PERIOD
38. The Class Period commences on April 28, 2005, the date of the Company's filing
of a Form S-1 for the corporate reorganization of ICG and the initial public offering. The
Reorganization and Offering Documents filed by ICG, as well as its subsequent SEC filings, press releases and other statements disseminated to the public contained untrue material
statements and omitted to state other facts necessary to make the statements of said document not misleading and further failed to be prepared in accordance with controlling rules and regulations.
39. Generally, these documents and statements failed to disclose that ICG was at all times relevant hereto subject to numerous, material safety violations as a result of chronic and consistent failure to maintain mining operation in a safe manner as prescribed by law.
Defendants' nondisclosures materially impacted the Company's coal production, financial results, and coal processing operations in a negative and adverse manner. As alleged hereinbelow, a number of the Company's mines were cited for material and repeated safety violations well beyond the general or ordinary safety issues typically arising as a result of coal mining operations. These extensive and persistent violations exposed the Company to increased risk of substantial liability and concomitant adverse financial consequences as a result of its deficient safety record. Equally material, the repeated mine accidents and MSHA citations (which required
ICG to expend substantial resources on remediation) caused a foreseeable, substantial decline in coal production and a number of the Company's mines, including those identified below, that was not accurately or properly reported in the Company results of operations as filed with the
15 SEC and caused ICG's financial reports to the public to materially overstate coal production and understate operating expenses during the Class Period.
40. For example, the April 28, 2005 Form S-1 and subsequent amendments and SEC filings, including the November 2005 Reorganization and December IPO prospectuses, highlighted the Company's safety record, representing that the Company has "recognized leadership in safety and environmental stewardship" and noting that the Company's "focus on safety and environmental performance" reduced the "likelihood of disruption or production at our mines .... Specifically, the April 28, 2005 Form S-1 and subsequent SEC fillings stated in pertinent part as follows:
Recognized leadership in safety and environmental stewardship.
The injury incident rates at our mines throughout 2004, according to the Mine Safety and Health Administration, or MSHA, were below industry averages. . . . Our focus on safety and environmental performance results in the reduced likelihood of disruption of production at our mines, which leads to higher productivity and improved financial performance.
See, e.g., ICG Form S-1, filed April 28, 2005, at p. 74.
41. Continuing on with its purported focus on workplace safety, the April 28,2005
Form S-1 and subsequent SEC filings also stated in pertinent part as follows:
Continue to focus on improving workplace safety and environmental compliance.
We have maintained and plan to continue to maintain an excellent safety and environmental performance record. We continue to implement safety measures and environmental initiatives that are designed to promote safe operating practices and improved environmental stewardship among our employees. Our ability to maintain a good safety and environmental record improves our productivity and lowers our overall cost structure as well as bolsters employee morale.
Id., at p. 4 (emphasis added).
16 42. Similarly, with respect to the safety of its business operations, the April 28, 2005
Form S-1 and subsequent SEC filings asserted that the Company employs preventive
maintenance and rebuild programs to ensure that our equipment is modern and well maintained,
stating in pertinent part as follows:
The mobile equipment utilized at our mining operation is scheduled to be replaced on an on-going basis with new, more efficient units during the next five years. Each year we endeavor to replace the oldest units, thereby maintaining productivity while minimizing capital expenditures.
Id., at p. 82.
43. This was untrue as minimizing capital expenditures was creating a productivity time bomb resulting in safety-induced downtime and/or chronically down timed equipment. The
April 28, 2005 Form S-1 and subsequent SEC registration filings also contained a section entitled Industry Data, which stated in pertinent part as follows:
Statements relating to our leadership in safety and environmental performance are based on our receipt of numerous awards from state and federal agencies, including awards from the Mine Safety and Health Administration, or MSHA, the principal federal agency regulating health and safety in the coal mining industry, and the Office of Surface Mining, the principal federal agency regulating environmental performance in the coal mining industry.
Id., at p. 34.
44. With respect to the Company's overall business strategy, the April 28, 2005 Form
S-1 expressly stated in relevant part:
Maximize profitability through highly efficient and productive mining operations.
We are continuing to evaluate and assess our current operations in order to maximize operating efficiency and returns on invested capital. We are focused on maintaining low-cost, highly productive operations by continuing to invest substantial capital in state-of-the-art equipment and advanced technologies. We expect to internally fund approximately $264 million of capital expenditures in the next two years. As we take advantage of planned expansion opportunities
17 from 2007 through 2009, we expect to spend approximately $572 million on capital expenditures, which may require external financing.
Id., at p. 3.
45. In fact, ICG was then operating inefficiently, was not maintaining "low cost,
highly productive operations" and was not adequately investing in equipment and advanced
technology. This business strategy substantially mirrors that contained in ICG's Fifth (5th)
Amendment to its Form S-1 filed November 9, 2005 (the last substantive registration statement
filing before the Reorganization), stated the following:
OUR BUSINESS STRATEGY
Maximize profitability through highly efficient and productive mining operations.
We are continuing to evaluate and assess our current operations in order to maximize operating efficiency and returns on invested capital. We are focused on maintaining low-cost, highly productive operations by continuing to invest substantial capital in state-of-the-art equipment and advanced technologies. We expect to internally fund approximately $304 million of capital expenditures in the next two years. As we take advantage of planned expansion opportunities from 2007 through 2009 principally as a result of the Anker and CoalQuest acquisitions, we expect to spend approximately $627 million on capital expenditures, which may require external financing.
ICG's 5th Amendment to Form S-1, dated November 9, 2005, at p. 4.
46. With respect to the Anker and CoalQuest acquisitions and purported positive effect on ICG's overall business strategy, the April 28, 2005 Form S-1 and subsequent SEC filings stated in relevant part:
Through the acquisition of certain key assets from the bankruptcy estate of Horizon the WLR investor group was able to acquire high quality reserves strategically located in Appalachia and the Illinois Basin that are union free, have limited reclamation liabilities and are substantially free of other legacy liabilities. Due to our initial capitalization, we were able to complete the acquisition without incurring a significant level of indebtedness. Following this offering, we expect to retire substantially all
18 of our long term debt and will be strategically well-positioned. Consistent with the WLR investor group's strategy to consolidate profitable coal assets, the Anker acquisition further diversifies our reserves.
Form S-1 at p. 71.
47. In fact, the above representations failed to disclose and omitted necessary
information revealing the defendants' purported "recapitalization" did not eliminate ICG's precarious financial position and that certain coal assets were not available (or would have de minimis effect) to ICG's mining operations. The outlook for the Company's mine production provided for in the April 28, 2005 Form S-1 and related SEC filings (including the
Reorganization prospectus) was positive, stating in pertinent part:
Spruce Fork Division — Anker West Virginia Mining Company
• • •
The Spruce Fork Division currently consists of two active underground mines: Spruce No. 1 and Sago located in Upshur County, West Virginia, near the town of Buckhannon. The Spruce No. 1 Mine is extracting coal from the Upper Freeport seam and the Sago mine is extracting coal from the Middle Kittanning seam. Nearly all of the reserves in the Spruce Fork Division are owned by ICG. The Spruce No. 1 Mine opened in 1997 and we anticipate that its reserves will be depleted sometime during the third quarter of 2005. The Sago mine, which was originally opened in 1999 as a contract mine, closed in 2002, and then reopened as a captive operation in the first quarter of 2004. Sago is expected to reach full production by the fourth quarter of 2005.
We have projected that the Spruce Fork Division will produce approximately 1.3 million tons of coal in. 2005. The Sago 3 mine, scheduled for production in 2007, is a replacement for the Spruce No. 1 Mine. The reserves at Spruce Fork have characteristics that make it marketable to both steam and metallurgical coal customers.
• • •
Sycamore Group
Sycamore Group consists of The Sycamore Group LLC and the Harrison Division. The Sycamore Group LLC is a joint venture between ICG and Emily Gibson Coal Company. The joint venture operates one underground mine, the 19 Sycamore No. 1 Mine (a.k.a. the Fairfax No. 3 Mine), in Harrison County, West Virginia, . . . .We expect that ICG's 50% share of the 2005 production to be approximately 210,000 tons, all of which is sold on a raw basis and shipped to Allegheny Power Service Corporation's Harrison Power Station by truck.
The Harrison Division consists of the Sycamore No. 2 Mine, which is located in Harrison County, West Virginia, . . . . The planned annual production is expected to increase from approximately 430,000 tons in 2005 to over 1.2 million tons in 2006. The coal produced from the Sycamore No. 2 Mine will be sold on a raw basis and shipped to Allegheny Power Service Corporation's Harrison Power Station by truck under a new life of mine, total production coal supply agreement.
Id., at pp. 94-95; see also, IPO prospectus, dated December 7, 2005, at pp. 99-100.
48. In fact, the estimated production for the Spruce Fork Division and Sycamore No.
2 Mine lacked rational basis and was specious as the attributed production capacity inconsistent with the facts known to the defendants at that time and, thus, rendered these statements false and misleading when made. Defendants also failed to disclose or otherwise omitted acknowledging that ICG's mines were not operated in a safe manner, were repeatedly cited for numerous safety violations by both federal and state agencies, resulting in substantial disruption to ICG's mining operations and exposed the Company to substantial liability and adverse financial consequences.
Defendants, therefore, had no reasonable basis to state that ICG had (i) mining operations that were "highly efficient and productive;" (ii) an "excellent safety and environmental performance record;" (iii) a "focus on safety and environmental performance;" and (iv) mining operations that were run "highly efficient and productive" when the opposite was true.
THE TRUTH REGARDING ICG's WOEFUL SAFETY RECORD COMES TO LIGHT
49. ICG was not operating its mines in a safe manner and was subject to numerous material and repeated safety violations. Indeed, the safety violations, so egregious at certain of
20 the Company's mines, exposed the Company to the heightened risk that it would and did incur
substantial liability and/or adverse financial results as a result of its deficient and inadequate
safety and maintenance record.
The MSHA
50. Section 103(a) of the Mine Act states that authorized representatives of the
Secretary shall make inspections of each underground mine in its entirety at least four times a year (regular inspections) for the purposes of determining whether an imminent danger exists
and where there is compliance with the mandatory health or safety standards or with any citation, order or decision issued under the Mine Act.
51. The U.S. Mine Safety and Health Administration ("MSHA") is a federal agency that administers the provisions of the Federal Mine Safety and Health Act of 1977 (Mine Act). It enforces compliance with safety and health standards in order to eliminate fatal accidents, reduce the frequency and severity of nonfatal accidents, minimize health hazards, and maintain standards of safety and health conditions in U.S. coal mines.
52. Section 103(a) of the Mine Act authorized MSHA to make frequent inspections and investigations for the purpose of (1) obtaining, utilizing and dissemination information relating to health and safety conditions, the causes of accidents, and the causes of diseases and physical impairments originating in mines, (2) gathering information with respect to mandatory health or safety standards, (3) determining whether an imminent danger exists, and (4) determining whether there is compliance with the mandatory health or safety standards or with any citation, order or decision issued under this title or other requirements of this Act.
21 The Sago Mine Tragedy
53. On January 2, 2006, only weeks after ICG's Reorganization and IPO, 12 miners
were killed and another seriously injured as a result of an underground explosion at the Sago
mine owned by ICG. The Sago mine is an underground facility in Upshur County, West
Virginia, located near the town of Buckhannon. The Sago mine began operating in 1999; was
closed in 2002; and, then reopened in early 2004 amid growing global demand for coal-based
energy.
54. While ICG considered Sago a "new" mine (developed in 1999), it was actually part of a field once owned by Pittston Coal that included many worked-out areas. Cave-ins and roof collapses were a chronic concern. Sago was a "gassy" mine and harbored large quantities of potentially explosive methane. Further, miners at Sago were not only several hundred feet below the surface, but had to travel horizontally several thousand feet to reach the "coal face" — the point at which raw coal is harvested.
55. The aftermath of the Sago tragedy caused numerous facts to surface indicating that the Company had a woeful safety record at numerous mines, and that safety violations, mine accidents, and government investigations were chronic and routinely caused costly disruptions in
ICG mining operations that had been concealed by ICG in its SEC filings, press releases and shareholder reports.
56. For example, on January 4, 2006 a USA Today article that analyzed Sago's safety record found the ICG mine had far more violations and far more accidents than other comparable mines. In fact, Sago had 40 accidents in 2005 alone, compared to a maximum of 12 accidents at the mines used in USA Today's analysis.
22 57. ICG attempted to calm the market's fears about its safety record and support the price of ICG stock, releasing several positive press releases. On January 26, 2006, ICG filed a
Form 8-K in which release a copy of the prepared statement entitled "International Coal Joins
Senate Effort to Improve Mine Safety" that defendant Hatfield presented to the U.S. Senate
Committee on Appropriations on January 23, 2006 in connection with its hearing on the Sago mine disaster. In the statement, Hatfield provided assurances that ICG had been making safety improvements at Sago since June 1, 2005 and "our Company has worked closely with federal and state regulators in an effort to make this Mine as safe as possible. Hatfield also stated that the Sago mine disaster "will lead to improvement throughout the industry" and assured the
Senate that "[w]hile the tragic events of January 2 confirm that we must be vigilant on mine safety, the safety record at the Sago Mine demonstrates that our management team aggressively focused on mine safety and protecting our people." In addition, the Company took steps in the
Form 8-K (filed January 26, 2006, at p. 2) to reassure the market that the Sago mine disaster and its resultant closure would have little, if any, "material negative effect on ICG's financial condition or operations."
58. In the midst of a proliferation of news reports disclosing ICG's hundreds of safety violations, ICG, repeatedly disavowed that these citations were likely to lead to serious accidents, work stoppages or disruptions to the Company's financial condition or operations.
Instead, ICG took the offensive, proclaiming that its safety record was "excellent." For example, on February 1, 2006, ICG "reaffirmed" to the investment community that each of its mines and shipping facilities would "begin each shift with a special in-depth safety review." ICG also announced:
This procedure will include not only West Virginia operations, but also those in Kentucky, Illinois and Maryland.
23 Mine managers will discuss safety issues presented in each of the fatal accidents that have occurred in West Virginia, which will include risks associated with roof and rib control, belt fires, operating equipment in close proximity to gas wells - and will specifically reinforce mine evacuation plans.
The Woeful Conditions at the Sago Mine was a Known Disaster Waiting to Happen
59. At the time of the explosion, the Sago Mine was under the jurisdiction of MSHA's
Coal Mine Safety and Health (CMS&H) District 3 office, located in Morgantown, West Virginia.
MSHA's practice is to conduct one complete safety and health inspection (regular inspection) each quarter at each underground mine. A regular safety and health inspection was started on
October 3, 2005, and was ongoing at the time of the explosion. The last underground MSHA presence at the Sago Mine prior to the explosion was on December 7, 2005.
60. In 2005 alone, Sago was cited for over 200 violations of MSHA regulations, including 21 times for build-up of toxic glass. The MSHA employs a negligence scale to assess an operator's culpability for allowing violations to occur. Sago mine violations were classified as involving a "High" degree of negligence 8% of the time in 2005, almost three times higher than the national average.
61. Additionally, a large number of the violations at Sago were documented as
"significant and substantial" ("S&S") by the MSHA. In determining whether a violation could
"significantly and substantially contribute to the cause and effect of a mine safety or health hazard," the inspector must first find that an injury or illness would be reasonably likely to occur if the violation was not rectified and, if the injury or illness were to occur, such injury would be reasonably serious. In 2005 - the same year ICG's Reorganization and stock exchange occurred-
.
24 .a staggering 48% of citations and orders were deemed "S&S" violations at the Sago mine.
Furthermore, the mine had 12 roof collapses in 2005.
62. Operations at Sago were so deficient, that in just one day (September 12, 2005), the mine received in excess of $25,000.00 in fines. The fines issued from the MSHA investigation were largely pursuant to federal regulations for allowing the accumulation of combustible materials and deficiencies in its pre-shift examinations. During an inspection period running from early October to late December 2005 - contemporaneous in time to the
Reorganization and its immediate aftermath - MSHA investigators issued 46 citations and three orders for several safety violations at Sago. 18 of these violations were listed as "S&S," that is, investigators believed the cited hazards were likely to cause an accident that would seriously injure a miner. Not surprisingly, Sago's accident rate tripled the national average and more than a dozen serious roof falls — in which huge slabs of the mine roof simply collapsed — were recorded in 2005.
63. The MSHA also cited Sago for violating its approved roof control and mine ventilation plans that exist specifically to prevent explosions like that which doomed Sago's victims, in addition to violations concerning emergency escapeways and required pre-shift safety examinations- again all within the same time frame leading up to before and during the
Reorganization.
64. During 2005, the MSHA increased enforcement activity at Sago in response to the severity and pervasiveness of safety violations and the compliance problems arising from the abnormal number of roof falls that were occurring, the increased injury rate, and ICG's disregard of compliance with safety regulations. MSHA personnel met with Anker Energy officers throughout 2005 at their Bridgeport field office and District 3 Office in Morgantown to
25 emphasize the need for deficient compliance at the mine. According to Ray McKinney, administrator of the coal division of the MSHA, federal inspectors spent 744 hours at the Sago
Mine in 2005 last year, compared with 405 hours in 2004 - a 84% increase in on-site hours.
65. The number of Section 104(d)(1) citations, also known as "unwarrantable failure citations" increased in 2005 as a result of the need for enhanced enforcement by the MSHA.
Under MSHA regulations, a Section 104(d)(1) Citation is only issued if (1) there is a violation of a mandatory health or safety standard; (2) the violation significantly and substantially contributes to the concern of a mines' safety or health hazard; and (3) there is an "unwarrantable failure" of the mine operator or contractor to comply with the required standard. Mere negligence or reckless disregard on the part of the operator is insufficient to warrant a Section 104(d)(1) violation or order. Hence, a violation is deemed an "unwarrantable failure" if it is determined that the mine operator entails aggravated misconduct constituting more than ordinary negligence.
The MSHA cited Sago over a dozen times for serious Section 104(d)(1) "unwarrantable failures" from May 2005 through December 2005 - the critical period immediately preceding the
Reorganization.
66. On July 12, 2005, a single month after ICG began providing management services at Sago, the MSHA cited the mine for exposing miners to significant hazards. The Section
104(d)(1) unwarrantable failure citation, stated as follows:
[t]he failure of management to provide reasonable sight lines for the miners to follow demonstrates higher than normal neglect as sight lines are fundamental to the systematic development of a section. This section is a set of mains that will be utilized for years. The small block sizes can not be completely replaced. The miners will be exposed to the danger done for several years to come. (Emphasis added).
67. By December 14, 2005, less than a month after the Reorganization and exchange of common stock, ICG's Sago MSHA investigators issued 46 citations and three
orders citing safety violations at the Sago mine. Sago also received a Section 104(d)(1) Citation
fine for the dangerous accumulation of coal accumulated from previous mining shifts. The
MSHA safety inspector noted in the citation that operator ICG "has showed a high degree of
negligence for the health and safety of the miners that work in this coal mine by allowing the
conditions to exist. This is an unwarrantable failure to comply with a mandatory standard."
(Emphasis added).
68. A breakdown of MSHA's citation record for Sago for 2005 shows the following:
2 —103 (k) orders (issued by MSHA when accidents occur).
181 — 104(a) citations (a citation is issued with a reasonable abatement time).
96 of these citations were "significant and substantial" (i.e. likely to cause injury or death).
104(b) citations (issued for a previous citation/safety violation that had not been corrected).
1 - 104(d)(1) unwarrantable failure citation (issued when there is an unwarrantable failure to comply with a mandatory safety or health standard).
2 — 104(d)(1) orders (issued to withdraw miners from a section of the mine where dangerous conditions exist).
13 — 104(d)(2) orders (issued for violations similar to those that resulted in the issuance of the withdrawal order under 104(d)(1). These are extremely serious and violated leading to a "special investigation" and charges against mine supervisors, foremen, and the mine operator, including criminal proceedings.
69. The Federal Mine Safety and Health Review Commission (Commission)4
recognizes that past discussion with MSHA about recurring problems serves to place operators
on notice that increased efforts are required to comply with the standard. The Commission 5 has
similarly determined that past violations will put an operator on notice that is has a recurring
4 Consolidation Coal Co., 23 FMSHRC 588 (2001). Peabody Coal Co., 14 FMSHRC 1258 (1992). 27 safety problem needing correction and the violation history can be relevant in determining the
operator's negligence. The Commission 6 has stated that citations further serve to place an
operator on notice of the need to increase its efforts for compliance.
70. In numerous instances, inspection notes and citations supported the determination
of heightened negligence at Sago. For example, Citation No. 7098544, issued on November 8,
2005 cited to a violation of 30 CFR 75.202(a), indicating the mine roof in miner areas were not
properly supported or controlled to protect miners from hazards.
71. Similarly, Citation No. 714929, issued October 5, 2005, asserted violations of 30
CFR 75.380(d)(2), indicating that the primary mine escapeway was not properly marked and presented a danger.
72. Section 104(a) of the Mine Act directs the inspector to specify a reasonable time for the operator to abate a violation. The MSHA Program Policy Manual states that the time for abatement should be determined, whenever practical, after a discussion with the mine operator or the operator's agent. The degree of danger to the miners is the first consideration in determining a reasonable time for abatement. At least eight citations were outstanding when the Sago mine explosion occurred.
73. The Sago mine failed to comply with the standards of the West Virginia Office of
Miners' Health, Safety and Training, the state agency responsible for administering West
Virginia's mine safety laws and regulations. During 2005 alone, this agency cited Sago for 143 violations of state mine safety laws and regulations, many involving "high" negligence and/or repeat occurrences.
74. As discussed ICG was providing management services to numerous Anker mines, including the Sago mine, by June 2005. ICG, therefore, was aware of the significant and
6 Youghiogheny & Ohio Coal Co., 9 FMSHRC 2007 (1987). 28 repeated safety issues at numerous mines by the time the Reorganization Documents were issued
and the financial investment in equipment needed to address the problems. The safety problems
at the Sago mine were so pervasive that the MSHA ordered parts closed 18 times during 2005.
75. Tony Oppegard, a former official with the MSHA, capsulated that state of
Defendant's operations during the class period in stating: "I would say these (violations) are
indicative of an operator who wasn't going to let safety get in the way of production." The
former director of the MSHA agreed when he represented "This mine [Sago] should have been
closed. . . the record is very clear."
76. The reality was that The Company's safety issues plagued the operations of most,
if not all of its underground mine assets, and would necessarily negatively impact ICG's financial
condition because of the inevitability of disruption from disaster (as occurred) or because at the need, apparent at the time of issuance of Faun S-1 in April 2005 that capital was needed to purchase new equipment and modernize safety facilities at the mines.
Spruce Fork Division Mines
77. The above is reinforced to the Company's April 28, 2005 Form S-1, and its projection that the Spruce Fork Division, (consisting of the Sago and Spruce No. 1 mines), "will produce approximately 1.3 million tons of coal in 2005." (April 28, 2005 Form S-1, at p. 86)
This same pronouncement was reiterated by ICG no less than eight (8) times in the Company's
SEC filings between June 27,and December 7, 2005.7 In fact, work stoppages caused by safety
'See, ICG's First Amendment to Form S-1 issued June 15, 2005 at p. 95; Form S-4 issued June 26, 2005 at p. 95; Third Amendment to Form S-1 issued September 28, 2006 at p. 97; Second Amendment to Form S-4 issued October 24, 2005 at p. 94; Fourth Amendment to Form S-1 issued October 24, 2005 at p. 100; Fifth Amendment to Form S-1 issued November 9, 2005 at p. 99; Reorganization prospectus issued November 18, 2005 at p. 94; and IPO prospectus issued December 7, 2005 at p. 99. 29 hazards, MSHA citations and deteriorating equipment caused the actual coal production from
Spruce Fork Division Mines to be less than 760,000 tons — a $20 million+ in lost revenues, and a
negative variance of 41.5% from the production that ICG repeatedly represented would be
achieved (including as late as December 7, 2005).
Sycamore Group Mines
78. Similar to the Spruce Fork Division Mines, the Company's April 28, 2005 Form
S-1 projected that the mining operations of its Sycamore Group Mines, consisting of Sycamore
No. 1 and No. 2 mines of Harrison County, West Virginia, would realize a combined production
"increase from approximately 430,000 tons in 2005 to over 1.6 million tons in 2006." The 2006 production figures were made without reasonable basis and when known to be unrealistic when made in April 2005. The Company's assertion continued nonetheless while representing this same coal production output figure on at least six (6) occasions in SEC filings issued between
June 15, 2005 and November 9, 2005.8 At that point Defendants first "clarified" in the
Reorganization and IPO prospectuses that the 2006 output projected of these mines was reduced to 1.2 million tons9, a decrease of 400,000 tons.
79. The revision of the above projection followed the Company determination during the third quarter 2005 that its Sycamore No. 1 mine was depleting the mine's current coal seam and that tapping additional reserves was time consuming and not cost ineffective given the state of the mines equipment and the availability of capital. Additionally, from the fourth quarter of
2005 the Sycamore No. 2 mine began experiencing instances of what ICG termed "adverse
See, ICG's First Amendment to Form S-1 issued June 15, 2005 at pp. 95-96; Form S-4 issued June 26, 2005 at pp. 95-96; Third Amendment to Form S-1 issued September 28, 2006 at p. 98; Second Amendment to Form S-4 issued October 24, 2005 at p. 95; Fourth Amendment to Form S-1 issued October 24, 2005 at p. 101; and Fifth Amendment to Form S-1 issued November 9, 2005 at p. 100. See,; Reorganization prospectus issued November 18, 2005 at p. 95; and IPO prospectus issued December 7, 2005 at p. 100. 30 geological conditions," i.e., roof collapses, floodings, methane gas build ups, etc., leaving the
mine completely unsafe and subject to multiple MSHA citations and work stoppages. Indeed,
when mining operations recommenced at Sycamore No. 2 at the end of the second quarter of
2006, reduced production levels (less than 20%) than forecasted were inevitable - the mine was
closed before the end of 2006.
80. At all relevant times the Company failed to publicly disclose the Sycamore
Group's sharp curtailment of mining operations, the reduced coal yields at Sycamore No. 1, the
numerous accidents and MSHA citations, and the production decreases encountered at Sycamore
No. 2. Defendants' public statements and SEC filings for ICG's fourth quarter 2005, first quarter
2006 results of operations and the Company's 2005 Form 10-K, filed March 30, 2006 failed to
suitably or accurately disclose the decreasing production and the need for additional capital.
Indeed, it was not until the conclusion of the Class Period on June 6, 2006 that ICG disclosed the
emergence of serious production problems at its mines, having combined output for 2006 of less
than 350,000 tons — a fraction of the production projected by the Company's numerous SEC
filings during 2005.
The Sentinel Mine Outage
81. As like the problems with the Sycamore Group mines, at the beginning of the
fourth quarter 2005, ICG began experiencing production difficulties, accidents, MSHA citations,
and operational set backs at its Sentinel mine located in Barbour County, West Virginia, near the town of Philippi. Much like the Company's Sago operations, in 2005 MSHA inspectors fined the
Sentinel mine for over 110 safety and maintenance violations, 44 of which were deemed "serious
and substantial." Moreover the mine recorded injury rates of 6.5 and 4.4 times the national
average.
31 82. Sentinel was an Anker legacy mine with coal production at the Lower Kittanning seam when production commenced in 1990. This seam had been depleted by early 2004. ICG's
SEC filings in 2005 represented that Anker had been able to seamlessly convert the mine's coal harvesting operations to the Upper Kittanning alternative seam during the fourth quarter 2004, and that operations using a "new low-seam continuous miner" had been deployed for continuous mining activity through 2005 that was producing high quality (high priced) steam and metallurgical coal. This piece of ICG's production was projected to annually produce 317,000 tons I° of coal.
83. In actuality, coal production at the Sentinel mine sharply declined after ICG's assumption of control of the mine in June 2005, in large part due to stoppages and remedial safety measure necessary to correct numerous MHSA citations at the Sentinel mine. Increased production costs followed as harvesting coal from the Upper Kittanning seam was problematic and like other ICG operations, required investment in equipment and mine safety. Less than
123,000 tons of coal was produced at the Sentinel mine for 2005 — a negative variance of nearly
62% projected to the public as late as December 7, 2005 and contained in ICG's prospectus for its IPO. This situation caused a revenue loss for 2005 that exceeded $10 million.
84. The decline in coal production and increased difficulties and costs of mining coal from the Upper Kittanning seam and elsewhere as a result of accidents and MSHA violations was known or recklessly disregarded by Defendants and not revealed to the public. In fact, in the third quarter 2005 ICG decided to abandon coal extraction efforts from the Kittanning seams.
Toward the end of 2005 ICG entered negotiations to secure the right to mine lower quality coal from the Clarion seam at the Sentinel mine, a prospect secured in early 2006 resulting in a 20%
1° See, e.g., ICG' s Form S-1 filed April 28, 2005 at p. 87; Fourth Amendment to Form S-1 filed October 24, 2005 at p. 101; Reorganization prospectus dated November 18, 2005 at p. 95; and IPO prospectus dated December 7, 2005 at p. 100. 32 per ton price reduction. The Company's statement in its 2005 Form 10-K filed March 31, 2006
(p. 13) that "mining is currently conducted in the Upper Kittanning seam by room-and-pillar
mining method" was false and misleading at the time made for such operations were non-existent
at that time. Indeed, although this decision to halt mining of the Upper Kittanning seam was
made by ICG during the third quarter 2005, it was first disclosed publicly on June 6, 2005 (close
of the Class Period), and the Sentinel mine's production operations for the Clarion seam did not
begin until the fourth quarter of 2006 (as later disclosed in the Company's 2006 Form 10-K).
Indeed, according to ICG's 2006 Form 10-K (p. 8), the total coal production of the Sentinel mine
in 2006 was but 58,400 tons.
The Viper Mine Fire
85. The mine safety and maintenance troubles caused by deferred maintenance and need for new equipment for ICG was not exclusive to the Sago operations. The Company's
Viper Mine, an underground coal mine in central Illinois for instance, was also fined by the
MSHA for numerous serious safety infractions throughout 2005. During the time of completion of the Reorganization, the Viper mine received numerous citations and fines for safety and maintenance violations. The MSHA listed a number of these violations as "serious and substantial," including violations for failing to protect miners from roof collapses.
The Birch River Mine
86. In October 2004, ICG took control of the Birch River Mine, a strip mine in
Webster County, West Virginia, in connection with its acquisition of Horizon's assets following its successful bankruptcy auction bid. The Birch River Mine's accident rate worsened throughout 2005 under ICG's ownership, increasing from 2.17 injuries per 200,000 hours worked to 3.25 injuries per 200,000 hours worked. This was twice the national average in 2005. MSHA
33 inspectors identified 37 safety violations at the Birch River Mine during this time, 12 of which
were deemed "serious and substantial."
87. MSHA inspectors cited the Birch River Mine an additional 13 times, and assessed
over $120,588.00 in penalties, for serious violations relating to ICG's failure to use proper
electrical connections, correct equipment defects, allow accumulations of combustible materials,
and failure to maintain proper safety. The thirteen citations spanned February 7, 2006 through
April 3, 2006, contemporaneous to the Sago disaster.
Other Problem Mines
88. During 2005, the Company's Stony River Mine in Grant County, West Virginia
recorded a nonfatal injury rate of approximately 28 injuries per 200,000 hours worked, four
times higher than the national average. In February an operational disaster occurred when the
Stony River mine had a major roof collapse. It did, however, render the mine permanently
inoperable — a fact concealed until June 6, 2005 (close of the Class Period)
89. The Knott County, Kentucky's Cavalry Mine of ICG received over 100 MSHA
citations in 2005. The Blackberry Creek Mine, located in Pike County, Kentucky, was cited
over 65 times in 2005. And ICG's Flint Ridge Mine in Breathitt County, Kentucky, received 27
MSHA citations in December 2005 alone.
Defendants' Knowledge of Mine Safety Violations and Outages
90. The foregoing allegations establish defendants conscientious and carefully
conceived plan to avoid needed expenditures on plant equipment and safety and fail to disclose
or minimize, the consequence to safe operations and coal production volumes. Rather than
devote needed resources to ensuring that its mines were operated in a safe and productive manner, defendants concentrated on temporarily increasing coal production to show increased
34 profits. Defendants postponed disclosure of the truth regarding ICG's deteriorating mine conditions and hazardous status and need to invest in equipment.
91. Throughout the Class Period ICG and the Individual Defendants received nearly continuous operational reports routinely disclosing mine accidents, MSHA citations, acute safety problems and declining actual coal production from the Companies' mining operations. As such, defendants knew, or recklessly chose to ignore, the declining levels of production in its operational units and the increasing frequency of work stoppages caused by safety hazards and
MSHA citations requiring corrective action and emergency mine closures. Indeed, defendant
Ross admitted during an ABC news interview broadcast on or about January 5, 2006 that he was personally aware and regularly kept abreast of the various mine collapses, accidents and MSHA citations routinely issued in connection with ICG's mining operations.
92. After close of trading on June 6, 2007, ICG issued a one page press release to investors which sough to correct earlier material misstatements/omissions by announcing that,
"due to a variety of operating issues experienced during the first half of 2006, [ICG] has lowered its outlook for the Company's 2006 financial performance." The operating issues described included:
• A conveyor fire at the Company's Viper mine on April 8, 2006 that resulted in a 30-day loss of production and significant repair costs;
• A major roof collapse at the Company's newly acquired Stony River mine located in Garrett County, Maryland, occurring in February 2006 (but not previously reported) had lead the Company to permanently close the mine;
• Adverse geologic conditions at the Company's Sycamore No. 2 mine in Harrison County, West Virginia had some how caused "difficult mining conditions resulted in high production costs and reduced tonnage" in the Sycamore No. 1 mine's operations and also "forced a 4-month delay in startup of the Number 2 mining section"; and
35 • That the Company's Sentinel mine's production units would be "moved from the high-cost Upper Kittanning mine to the underlying Clarion reserve" thus causing an 8-month construction outage during 2006 while mine shafts and slopes were extended "to access recently acquired Clarion seam reserves."
93. The market immediately appreciated the significance of the disclosures and reacted negatively in response by eroding ICG stock price from $8.50 on June 6, 2006 to $7.10 per share (approximately a loss of 16.5%) on June 7, 2006 on extremely heavy trading volume.
The stock continued to decline as further disclosures regarding the impact of work stoppages caused by ICG mining safety violations, accidents, and equipment deficiencies became public over the ensuing weeks.
Violation of SEC Rules and Regulations
94. In addition to the duties of full disclosure imposed on the defendants by their status as controlling persons of ICG, as a result of their affirmative statements and reports, or participation in the making of affirmative statements and reports to the investing public contained in the Company's SEC filings, press releases and other public statements, defendants had a duty to promptly disseminate truthful information that would be material to investors in compliance with the integrated disclosure provisions of the SEC as embodied in SEC regulations
S-X (17 C.F.R. §210.01, et seq.) and S-K (17 C.F.R. §229.10, et seq.) and other SEC regulations.
The Company was required to disclose in the appropriate SEC filings the safety and maintenance problems at ICG mines, the causes as known, and the potential and actual adverse impact that those problems would, and did, have on the Company's financial condition and operations as detailed herein. Defendants SEC filings failed to contain any such disclosure. Specifically, inter alia:
(a) Pursuant to Item 11(h) of Form S-1, a Registration Statement is required to furnish the information required by Item 303 of Regulation S-K. Under item 303(a) of Regulation S-K an issuer is required to, among other things, "describe
36 any known trends or uncertainties that have had or that the registrant reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations." The prevalent safety and maintenance problems resulting from the need for equipment and capital investment at ICG mines was having, and would continue to have, a damaging impact on the Company's revenues and income from continuing operations through decreasing coal production and, therefore, Defendants were required to disclose this fact in the Reorganization Registration Statement but did not; and
(b) Pursuant to Item 3 of Form S- 1, a registration statement is required to furnish the information required by Item 503 of Regulation 503. Under Item 503(c) of Regulation S-K, an issuer is required to, among other things, provide a "discussion of the most significant factors that make the offering risky or speculative." The prevalent safety and maintenance problems resulting from a lack of investment in needed equipment at ICG mines negatively impacting coal production, cause shutdowns of several mines, and decrease of coal production and revenues loss necessarily followed as described herein. Accordingly, the production problems and mine status (both safety and equipment) were "significant factors" that made the Reorganization and Offering "risky or speculative", thus required to be disclosed, but not, in the Company's SEC filings.
95. The Reorganization and stock exchange was effectuated on Monday, November
21, 2005 - approximately 131 million shares of old ICO stock were exchanged for a like number of new ICO shares in a firm commitment public offering, in which the lead underwriters were
UBS Investment Bank and Lehman Brothers.
96. ICG's compliance with safety facility, equipment and maintenance standards, as represented in the Reorganization and Offering Documents, 2005 Form 10-K and Form 10-Q's filed during the Class Period were false and misleading and not prepared in accordance with SEC regulations.
DEFENDANTS ACTED WITH SCIENTER
97. As alleged herein, defendants acted with scienter in that defendants knew that the
Reorganization and Offering Documents, 2005 Form 10-K and Form 10-Qs, press releases and other public statements filed, issued or disseminated in the name or at the instance of the
Company during the Class Period were materially false and misleading. Defendants similarly ;
37 knew that such filings and documents would be issued and/or disseminated to the investing
public and, as such, knowingly and substantially participated, acquiesced and authorized the
issuance and dissemination of such filings and documents that were primary violations of the
federal securities laws.
98. As set forth elsewhere herein, defendants, by virtue of their receipt of information
reflecting the true facts regarding ICG and their control over, and/or receipt and/or modification
of materially misleading misstatements and/or their associations with the Company which made
them privy to such confidential propriety information concerning ICG, participated in the
fraudulent scheme alleged herein.
99. Defendants received information entailing the true facts regarding ICG and had
control over, and/or receipt of and/or modification and/or direct participation of the group
published information. Defendants association with the Company made them privy to all
confidential and proprietary information concerning ICG and each Defendant thereby
participated in the fraudulent scheme alleged herein.
100. Defendants knew and/or recklessly disregarded the falsity and misleading nature
of the information which was disseminated to the investing public. The ongoing fraudulent
scheme described in the complaint could not have been perpetuated over a substantial period of time, as occurred, without the knowledge and complicity of personnel at the highest level of the
Company, including the Individual Defendants.
101. Defendants were motivated to engage in this course of conduct in order to complete the corporate Reorganization and Offering and enable defendant Ross to merge ICG and his interests in Anker, gain access to a publicly traded market for ICG common stock, and raise additional capital to fund the future operations and equipment and infrastructure
38 requirements of ICG/Anker, where the Individual Defendants and the Company realized millions in additional net proceeds.
102. Defendant Ross was particularly motivated to commit the scheme and misconduct alleged herein. As Chairman of the Board of the Company, Ross both earned performance based compensation from the Company and owned substantial holdings of Company securities.
Therefore, he would disproportionately benefit by engaging in the practices herein described that inflated the Company's stock price.
103. During the Class Period, and with the Company's stock trading at artificially inflated prices, ICG completed the Reorganization, on or about November 21, 2005, and completed its IPO transaction but days later on December 8, 2005.
APPLICABILITY OF THE PRESUMPTION OF RELIANCE: FRAUD-ON-THE-MARKET DOCTRINE
104. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-the market doctrine in that:
(a) Defendants named under these causes brought pursuant to the Exchange Act made public representations or failed to disclose material facts during the Class Period regarding ICG as alleged herein;
(b) The omissions and misrepresentations were material;
(c) Both prior to the Reorganization and continuing throughout the Class Period, ICG's stock was traded on a well developed national stock exchange, initially the Pink Sheets Electronic Quotation Service and, following the Reorganization, the NYSE. Both of these markets are open and efficient;
(d) ICG filed periodic reports during the Class Period with the SEC;
(e) The market rapidly assimilated information about ICG which was publicly available and communicated by the foregoing means; that information was promptly reflected in the price of the Issuer's common stock;
39 (0 The misrepresentations and omissions and the manipulative conduct alleged herein would tend to induce a reasonable investor to misjudge the true value of the of the Issuer's common stock; and
(g) Plaintiff and the class members purchased their stock between the time defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the misrepresented facts.
LOSS CAUSATION/ECONOMIC LOSS
105. Defendants' false and misleading statements had the intended effect and caused the Company's securities to trade at artificially inflated levels.
106. The decline in the value of the Company's securities was a direct result of the nature and extent of defendants' fraud finally being revealed to investors and the market. The timing and magnitude of the decline in the value of the Company's securities negates any inference that the loss suffered by plaintiff and other members of the Class was caused by changed market conditions, macroeconomic or industry factors, or Company-specific facts, unrelated to defendants' fraudulent conduct. The economic loss, i.e., damages, suffered by the plaintiff and other Class members was a direct result of defendants' fraudulent scheme to artificially inflate the value of the Company's securities, and the subsequent significant decline in that value when defendants' prior misrepresentations and other fraudulent conduct was revealed to the investing public.
STATUTORY SAFE HARBOR
107. The statutory safe harbor providing for forward-looking statements under certain circumstances does not apply to any of the false "forward-looking statements" pleaded in this
Complaint. None of the "forward-looking statements", if any, pleaded herein were sufficiently identified as a "forward-looking statement" when made. No meaningful cautionary statements identifying important factors that could cause actual results to differ materially from that in the
40 "forward-looking statements" accompany any relevant statements. To the extent that the statutory safe harbor does apply to any "forward-looking statements" pleaded, the defendants are liable for those false-"forward-looking statements" because at the time each of those statement was made, the speaker actually knew the "forward-looking statement" was false and the
"forward-looking statement" was authorized and/or approved by an executive officer or director of ICG who actually knew that those statements were false when made.
CLASS ALLEGATIONS
108. Plaintiff brings this action as a class action pursuant to Rule 23(a) and (b)(3) of the Federal Rules of Civil Procedure on behalf of a Class consisting of all persons and entities who during the Class Period April 18, 2005 through June 6, 2006 either: (1) purchased "old ICG" securities; (2) held "old ICG" securities and received shares in "new ICG" pursuant to the
Company's November 21, 2005 Reorganization; or (3) purchased shares of new ICG stock following the Company's Reorganization. Excluded from the Class are defendants, any officers or directors of the Company, members of their immediate families, and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest (including, but not limited to WL Ross, WLR I and WLR II).
109. The members of the Class are so numerous that joinder of all members is impracticable. While the exact number of Class members is unknown to plaintiff at the present time and can only be ascertained through appropriate discovery, plaintiff believes that there are thousands of members of the Class located throughout the Unites States. ICG issued and/or exchanged millions of shares in connection with the Company's Reorganization and Offering.
Record owners, beneficial owners, and other members of the Class may be identified from records maintained by ICG and/or its transfer agent(s) and may be notified by the pendency of
41 this action by mail, using a form of notice similar to that customarily used in securities class
actions.
110. Plaintiffs claim is typical of the claims of the members of the Class as all
members of the Class are similarly affected by defendants' wrongful conduct in violation of
federal law that is complained of herein.
111. Plaintiff will fairly and adequately protect the interests of the members of the
Class and has retained counsel competent and experienced in Class and securities litigation.
Plaintiff has no interests that are adverse or antagonistic to those of the Class.
112. A class action is superior to other available methods for the fair and efficient
adjudication of this controversy. Because the damages suffered by many individual class
members may be relatively small, the expense and burden of individual litigation make it
virtually impossible for the class members to individually seek redress for the wrongful conduct
alleged herein. Plaintiff knows of no difficulty to be encountered in the management of this action that would preclude its maintenance as a class action.
113. Common questions of law and fact exist as to all members of the Class and predominate over any questions affecting solely individual members of the Class. The prosecution of separate actions by individual Class members would create a risk of inconsistent and varying adjudications, which could establish incompatible standards of conduct for defendants. Among the questions of law and fact common to the Class are:
(a) Whether the Securities and Exchange Act of 1934 and/or Rule 10b-5 promulgated thereunder were violated by defendants' acts as alleged herein;
(b) Whether defendants participated in and pursued the common course of conduct complained of herein;
42 (c) Whether the Reorganization and Offering Documents, 2005 Form 10-K, and Form 10-Qs issued and filed with the SEC during the Class Period, and/or disseminated by Defendants to the investing public and the Company's shareholders during such period, contained untrue statements of material fact, omitted to state facts necessary to make the statements made therein not misleading, and were prepared in accordance with the rules and regulations governing their preparation;
(d) Whether the market price of ICG securities during the Class Period was artificially inflated due to the misrepresentations and/or non-disclosures complained of herein;
(e) Whether defendants acted with scienter and willfully or with conscious or deliberate recklessness with respect to the claims brought under the Exchange Act and/or Rule 10b-5 promulgated thereunder; and
(f) The extent of damage sustained by Class members and the appropriate measure of damages.
COUNT I
FOR VIOLATIONS OF SECTION(b) AND RULE 10b-5 THEREUNDER AGAINST DEFENDANTS BASED UPON MATERIALLY FALSE AND MISLEADING STATEMENTS AND OMISSION OF MATERIAL FACTS
114. Plaintiff repeats and realleges the allegations set forth above as though fully set
forth herein.
115. ICG common stock is currently traded on the NYSE (under the symbol "ICO")
and governed by the provisions of the federal securities laws. Defendants each had a duty to
disseminate truthful information promptly and accurately with respect to the Company's
operations, products, markets, management, earnings and business prospects, to correct any previously issued statements that had become materially misleading or untrue, and to disclose
any trends that would materially affect earnings and the financial results of ICG, so that the market price of the Company's publicly traded securities would be based upon truthful and accurate information.
43 116. Under rules and regulations promulgated by the SEC under the Exchange Act, the defendants also had a duty to report all trends, demands or uncertainties that were likely to influence ICG's net sales, revenues and/or income and financial performance and the Individual
Defendants' representations violated these specific requirements and obligations.
117. The Reorganization and Offering Documents and other SEC filings made by ICG during the Class Period contained untrue statements of material facts, omitted to state other facts necessary to make the statements not misleading, and concealed and failed to disclose material facts.
118. Plaintiff and other members of the Class purchased or otherwise acquired either
"old ICG" or "new ICG" common stock during the class period (or had the existing shares or
"old ICG" stock exchanged for "new ICG" stock pursuant to the Reorganization). Plaintiff and the class members did not know, or in the exercise of reasonable diligence could not have known, of the false statements and omissions contained in the Reorganization and Offering
Documents and the other SEC filings, press releases and public statements issued by the
Company and/or the Individual Defendants on behalf of ICG.
119. Defendants violated §10(b) of the Exchange Act and Rule 10b-5 in that they:
(a) employed devices, schemes and artifices to defraud;
(b) made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or
(c) engaged in acts, practices and a course of business that operated as a fraud or deceit upon plaintiff and others similarly situated in connection with their purchase, exchange or acquisition of ICG stock during the relevant period in an effort to maintain an artificially high market price for ICG stock in violation of § 10(b) of the Securities Act and Rule 10b-5.
44 120. In addition to the duties of full disclosure imposed on the defendants by their
status as controlling persons of ICG, as a result of their affirmative statements and reports, or
participation in the making of affirmative statements and reports to the investing public,
defendants had a duty to promptly disseminate truthful information that would be material to
investors in compliance with the integrated disclosure provisions of the SEC as embodied in SEC
regulations S-X (17 C.F.R. §210.01, et seq.) and S-K (17 C.F.R. §229.10, et seq.) and other SEC
regulations, including accurate and truthful information with respect to ICG's stock, operations,
financial condition and earnings so that the market price of ICG stock would be based on
truthful, complete and accurate information.
121. Defendants, individually and in concert, directly and indirectly, by using the
means and instrumentalities of interstate commerce and/or of the mails, engaged and participated
in a continuous course of conduct to conceal adverse material information about the business,
operations and future prospects of ICG as specified herein.
122. The defendants employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information and engaged in acts, practices, and a
course of conduct as alleged herein in an effort to assure investors of ICG's value and performance and continued substantial growth, which included the making of, or the participation in the making of, untrue statements of material facts and omitting to state material facts necessary in order to make the statements made about ICG's workplace safety, equipment needs, capital requirements and environmental compliance, business operations and future prospects, in light of the circumstances under which they were made, not misleading, as set forth more particularly herein, and engaged in transactions, practices and a course of business which operated as a fraud and deceit upon the purchasers of ICG stock during the Class Period.
45 123. Each of the Individual Defendant's primary liability, and controlling person liability, arises from the following facts:
(a) the Individual Defendants were high-level executives and/or directors at the Company at all times relevant hereto and members of the Company's management team or had control thereof;
(b) each of these defendants, by virtue of his responsibilities and activities as a senior officer and/or director of the Company was privy to and participated in the creation, development and reporting of the Company's internal budgets, plans, projections, operations, the Reorganization and/or Offering Documents, SEC filings, press releases and/or other public statements and reports;
(c) each of these defendants enjoyed significant personal contact and familiarity with the other defendants and was advised of and had access to other members of the Company's management team, internal reports and other data and information about the Company's workplace safety, compliance, finances, operations, capital needs, and the sales of coal and related trending at all relevant times; and
(d) each of the defendants was aware of the Company's dissemination of information to the investing public which they knew or recklessly disregarded was materially false and misleading.
124. The defendants had actual knowledge of the misrepresentations and omissions of material facts set forth herein in the above mentioned filings, documents and public statements.
Defendants' material misrepresentations or omissions with respect to the Company's workplace safety, equipment requirements and capital needs were done knowingly and for the purpose and effect of concealing ICG's true operating condition and safety record and the adverse effects on the Company's financial condition and operations from the investing public while supporting the artificially inflated price of ICG stock, as demonstrated by said defendants' overstatements and misstatements of ICG's workplace safety, financial condition, operations, equipment, capital needs and future earnings prospects and/or financial statements throughout the relevant time period. Defendants, if they did not have actual knowledge of the misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by deliberately refraining
46 from taking those steps necessary and reasonably prudent to discover whether those statements were false or misleading.
125. As a result of the dissemination of the materially false and misleading information
and failure to disclose material facts by all defendants, as set forth above, the market price of
ICG stock was artificially inflated during the class period.
126. In ignorance of the fact that market prices of ICG's publicly-traded securities were
artificially inflated, and relying directly or indirectly on the false and misleading statements made by defendants, or upon the integrity of the market in which securities trade, and/or the
absence of material adverse information that was known to or recklessly disregarded by defendants but not disclosed in public statements by defendants during the relevant period, plaintiff and the other members of the Class purchased, exchanged or otherwise acquired ICG common stock during the Class Period as alleged herein, and were damaged thereby.
127. At the time of said misrepresentations and omissions, plaintiff and other members of the Class were ignorant of their falsity and believed them to be true. Had plaintiff and the other members of the Class and the marketplace known the truth as to ICG's workplace conditions, safety violations, operations and financial needs which were not disclosed by defendants, plaintiff and other members of the Class would not have purchased, exchanged or otherwise acquired ICG common stock during the Class Period as alleged herein, or, if they had purchased, exchanged or otherwise acquired such stock, would not have done so at the artificially inflated prices which they did.
128. By virtue of the foregoing, defendants have violated § 10(b) of the 1934 Act and
Rule 10b-5 promulgated thereunder.
47 129. As a direct and proximate result of the wrongful conduct of the defendants,
plaintiff and the other members of the Class suffered damages in connection with their purchases
of stock during the Class Period.
COUNT II
FOR VIOLATIONS OF SECTION 20(a) AGAINST THE DEFENDANTS BASED UPON MATERIALLY FALSE AND MISLEADING STATEMENTS AND OMISSIONS OF MATERIAL FACTS
130. Plaintiff repeats and re-alleges each and every allegation set forth in the
paragraphs above, as if set forth fully herein.
131. Each of the Individual Defendants, by virtue of their offices, directorships, and
specific acts was, at the time of the wrongs alleged herein, a controlling person of ICG within the
meaning of §20(a) of the Exchange Act. By virtue of their high-level position, and their
ownership and contractual rights, participation in and/or awareness of the Company's operations
and/or intimate knowledge of the false financial and operational statements filed by the
Company with the SEC and disseminated to the investing public, the Individual Defendants had the power and the influence to control and did influence and control, directly or indirectly, the decision-making of the Company, including the content and dissemination of the various statements which plaintiff contends are false and misleading. The Individual Defendants were provided with or had unlimited access to copies of ICG's Reorganization and Offering
Documents, 2005 Form 10-K, Form 10-Qs, press releases and other public statements attributable to defendants alleged by plaintiff to be false or misleading prior to and/or shortly after they were filed, issued or disseminated, and Individual Defendants had the ability to prevent the filing, issuance or dissemination of the filings, documents and statements or cause them to be corrected.
48 132. Defendants were obligated to make a reasonable and diligent investigation of the
accuracy and completeness of the Reorganization and Offering Documents and other SEC
filings, press releases and public statements made, approved or attributable to the defendants
during the Class Period. Plaintiff did not know and, in the exercise of reasonable diligence,
could not have known, of the false representations and omissions contained in these materials
and statements.
133. In addition, each of these defendants had direct and supervisory involvement in
the day-to-day operations of the Company, including but not limited to direct and supervisory
involvement with respect to the written and oral communications made in connection with ICG's
corporate Reorganization and Offering and SEC filings and press releases and public statements
made, issued or disseminated during the Class Period and, therefore, had the power to control or
influence the particular activities giving rise to the securities violations as alleged herein, and
exercised the same.
134. As set forth above, defendants each violated Section 10(b) and Rulel Ob-5 by their
acts and omissions as alleged in this Complaint. By virtue of their positions as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act. As
a direct and proximate result of defendants' wrongful conduct, plaintiff and other members of the
Class suffered damages in connection with their purchases of the Company's securities during the Class Period.
PRAYER FOR RELIEF
WHEREFORE, plaintiff, on behalf of itself and other members of the Class, prays for judgment as follows:
49 A. Declaring the action to be a proper class action pursuant to Rule 23(a) and (b) of the Federal Rules of Civil Procedure on behalf of the Class defined herein and appointing plaintiff as Lead Plaintiff and their counsel as Lead Counsel for the Class and certifying plaintiff as Class Representative.
B. Awarding compensatory damages in favor of plaintiff and the Class against all defendants, jointly and severally;
C. Awarding plaintiff and the other members of the Class pre-judgment and post- judgment interest, as well as their costs and expenses of this litigation, including reasonable attorneys' fees and experts' fees and other costs and disbursements;
D. Awarding extraordinary, equitable and/or injunctive relief as permitted by law or equity and the federal statutory provisions sued hereunder, pursuant to Rules 64 and 65 and any appropriate state law remedies to assure that the Class has an effective remedy; and
E. Awarding plaintiffs and other members of the Class such other and further relief as this Court may deem just and proper under the circumstances.
JURY DEMAND
Plaintiff demands a jury trial.
Dated: January 7, 2008 Respectfully submitted,
THE GIATRAS LAW FIRM PLLC
/V_...... 4,- f- 7 ,. .10...... _._ ,._ .... -41P Troy . Giatras, Esquire
118 Capitol St., Suite 400 Charleston, WV 25301 Telephone: (304) 343-2900
50 Facsimile: (304) 343-2942 WV State Bar ID No: 5602
FINKELSTEIN & KRINSK LLP Jeffrey R. Krinsk Mark L. Knutson Kati C. Kazemi 501 West Broadway, Suite 1250 San Diego, California 9210-3579 Telephone: (619) 238-1333 Facsimile: (619) 238-5425
Attorneys for Plaintiff Saratoga Advantage Trust
51 Jan-04-08 05:51pm From- 1-776 P.002/002 F-066 FtliKtLwiEiN i<1ut4SX La) SARATOGA ADVANTAGE TRUST
CERTIFICATION OF REPRESENTATIVE PLAINTIFF PURSUANT TO 15 U.S.C. §78u-4(a)(2)
L Bruce Ventimiglia, as President and Authorized Representative of Saratoga Advantage Trust, Mid Capitalization Portfolio ("Plaintiff'), declare as to the claims asserted under the federal securities laws, .that I have reviewed the Complaint and authorized the filing of this Motion For Appointment Of Lead Plaintiff And Approval Of Lead Counsel.
1. Plaintiff did not purchase the security that is the subject of this action at the direction of plaintiff's counsel or in order to participate in this private action.
2. Plaintiff is willing to serve as a representative party on behalf of the class, including providing testimony at deposition and trial, if necessary. •
3. Plaintiff's transactions in the securities that are the subject of this action during the Class Period are as follows:
Security Amount Purchased/So14 Date Price Per Share
ICO 39,000 Purchase 10/20/2005 14.15 ICO 19;800" Sale' 12/15/2005 10.80. ICO 19,200 Sale 04/20/2006 10.1043 •
4. Plaintiff has shught to ierve'or served as a representative party for a class in the following actions filed under the Securinek Exchange Act of 1934 or Securities Act of 1933 within the last three years: • In Re Apple computer Inc. Derivative Lineation, 5:06-cv-04128-JF
Citv of Ann Arbor v: ice, Inc., a/k/a/ International Coal Group, Inc., et al. 207.cv-0226
Countrywide Fin. Coro. et consolidated with PaPPIIS et al. v. Couritrvwide Fin. Corp. et al., 07-cv-05295-MRP
5. Plaintiff will not accept any payment for serving as a representative party on behalf of the class beyond the Plaintiffs pro rata share of any recovery, except such reasonable costs and expenses (including lost wages) directly relating to the representation of the class as ordered or approved by the court. - -
I declare under penalty or perjury of the laws of the United States that the foregoing is true and correct. Executed this El day of January, 2008 at Garden City, New York.
Bruce Ventimiglia President and Authorized Representative of Saratoga Advantage Trust, Mid Capitalization Portfolio
Ria.lS 44 (Rev. 12/07) CIVIL COVER SHEET The JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiating the civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.) L (a) PLAINTIFFS DEFENDANTS SARATOGA ADVANTAGE TRUST, on Behalf of Themselves and ICG, INC. a/k/a/ INTERNATIONAL COAL GROUP, INC., All Others Similarly Situated WILBUR L. ROSS, BENNETT K. HATFIELD, WENDY L. N (b) County of Residence of First Listed Plaintiff Nassau County County of Residence of First Listed Defendant Kanawha (EXCEPT IN U.S. PLAINTIFF CASES) New York (IN U.S. PLAINTIFF CASES ONLY) NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE LAND INVOLVED.
(C) Attorney's (Firm Name, Address, and Telephone Number) Attorneys (If Known) Troy N. Giatras, Esquire, The Giatras Law Firm, PLLC, 118 Capitol St., Suite 400, Charleston, WV 25301. (304) 343-2900 II. BASIS OF JURISDICTION (Place an "X" in One Box Only) III. CITIZENSHIP OF PRINCIPAL PARTIES(Place an "X" in One Box for Plaintiff (For Diversity Cases Only) and One Box for Defendant) O 1 U.S. Government 1!I 3 Federal Question PTF DEF PTF DEF Plaintiff (U.S. Government Not a Party) Citizen of This State 0 1 0 I Incorporated or Principal Place 0 4 0 4 of Business In This State
0 2 U.S. Government 0 4 Diversity Citizen of Another State 0 2 0 2 Incorporated and Principal Place 0 5 0 5 Defendant of Business In Another State (Indicate Citizenship of Parties in Item III) Citizen or Subject of a o 3 0 3 Foreign Nation 0 6 0 6 Foreign Country IV. NATURE OF SUIT (Place an "X" in One Box Only) I CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTES I O 110 Insurance PERSONAL INJURY PERSONAL INJURY 0 610 Agriculture 0 422 Appeal 28 USC 158 0 400 State Reapportionment O 120 Marine 0 310 Airplane 0 362 Personal Injury . 0 620 Other Food & Drug 0 423 Withdrawal 0 410 Antitrust O 130 Miller Act 0 315 Airplane Product Med. Malpractice 0 625 Drug Related Seizure 28 USC 157 0 430 Banks and Banking O 140 Negotiable Instrument Liability 0 365 Personal Injury - of Property 21 USC 881 0 450 Commerce O 150 Recovery of Overpayment 0 320 Assault, Libel & Product Liability 0 630 Liquor Laws 1 PROPERTY RIGHTS 0 460 Deportation &Enforcement ofJudgment Slander 0 368 Asbestos Personal 0 640 R.R. & Truck 0 820 Copyrights 0 470 Racketeer Influenced and O 151 Medicare Act 0 330 Federal Employers' Injury Product 0 650 Airline Regs. 0 830 Patent Corrupt Organizations O 152 Recovery of Defaulted Liability Liability 0 660 Occupational 0 840 Trademark 0 480 Consumer Credit Student Loans 0 340 Marine PERSONAL PROPERTY Safety/Health 0 490 Cable/Sat TV (Excl. Veterans) 0 345 Marine Product 0 370 Other Fraud 0 690 Other 0 810 Selective Service O 153 Recovely of Overpayment Liability 0 371 Truth in Lending LABOR SOCIAL SECURITY ;31 850 Securities/Commodities/ of Veteran's Benefits 0 350 Motor Vehicle 0 380 Other Personal 0 710 Fair Labor Standards 0 861 HIA (1395ff) Exchange O 160 Stockholders' Suits 0 355 Motor Vehicle Property Damage Act 0 862 Black Lung (923) 0 875 Customer Challenge O 190 Other Contract Product Liability 0 385 Property Damage 0 720 Labor/Mgmt. Relations 0 863 DIWC/DIWW (405(g)) 12 USC 3410 O 195 Contract Product Liability 0 360 Other Personal Product Liability 0 730 Labor/MgmtReporting 0 864 SSID Title XVI 0 890 Other Statutory Actions O 196 Franchise Injury & Disclosure Act 0 865 RSI (405(g)) 0 891 Agricultural Acts 1 REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS 0 740 Railway Labor Act FEDERAL TAX SUITS 0 892 Economic Stabilization Act 0 210 Land Condemnation 0 441 Voting 0 510 Motions to Vacate 0 790 Other Labor Litigation 0 870 Taxes (U.S. Plaintiff 0 893 Environmental Matters 0 220 Foreclosure 0 442 Employment Sentence 0 791 Empl. Ret. Inc. or Defendant) 0 894 Energy Allocation Act 0 230 Rent Lease & Ejectment 0 443 Housing/ Habeas Corpus: Security Act 0 871 IRS—Third Party 0 895 Freedom of Information 0 240 Torts to Land Accommodations 0 530 General 26 USC 7609 Act 0 245 Tort Product Liability 0 444 Welfare 0 535 Death Penalty IMMIGRATION 0 900Appeal of Fee Determination 0 290 All Other Real Property 0 445 Amer. w/Disabilities - 0 540 Mandamus & Other 0 462 Naturalization Application Under Equal Access Employment 0 550 Civil Rights 0 463 Habeas Corpus - to Justice O 446 Amer. w/Disabilities - 0 555 Prison Condition Alien Detainee 0 950 Constitutionality of Other 0 465 Other Immigration State Statutes O 440 Other Civil Rights Actions
V. ORIGIN (Place an "X" in One Box Only) Appeal to District 0 5 Transferred from Judge from 64 1 Original CM 2 Removed from CI 3 Remanded from CI 4 Reinstated or CI 6 Multidistrict 0 7 Reopened another district Litigation Magistrate (speProceeding State Court Appellate Court cify) Judgment Cjite.the U.S Ciuil Statute under which vou ate Bina (Do not cite jurisdictional statutes unless diversity): b- u..C. ectionsiri80)(P) anaTio(ay. a VI. CAUSE OF ACTION Brief description ofsause: lass Action 'Complaint tor Violation ot federal Securities Law n VII. REQUESTED IN 0 CHECK IF THIS IS A CLASS ACTION DEMAND $ CHECK YES only if demanded in complaint: COMPLAINT: UNDER F.R.C.P. 23 JURY DEMAND iiti Yes 0 No VIII. RELATED CASE(S) (See instructions): Copenhaver IF ANY JUDGE DOCKET NUMBER 2:07-0226 DATE SIGNATURE OF ATTORNEY OF RECORD 0/0 7'2008 '-7.22---7# -,'!X,,,-----. ----- FOR OFFICE USE ONLY
RECEIPT 6 AMOUNT APPLYING IFP JUDGE MAO. JUDGE