Saratoga Advantage Trust, Et Al. V. International Coal Group, Inc., Et Al
Total Page:16
File Type:pdf, Size:1020Kb
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.