ICI hit by class action lawsuit
11 Apr 2003
The law firm of Cauley Geller Bowman Coates & Rudman has filed a class action lawsuit in a New York District Court on behalf of purchasers of American Depositary Shares of Imperial Chemical Industries (ICI).
The lawsuit alleges that ICI violated Sections 10(b) and 20(a) of the US Securities Exchange Act of 1934, and Rule 10b-5, by issuing a series of material misrepresentations to the market between August 1, 2002 and March 24, 2003, thereby artificially inflating the price of ICI securities.
Throughout the period, it alleges that ICI issued numerous press releases in which it stated that it had resolved ICI's distribution and software problems that the company had experienced at its Quest division's Fragrance & Food businesses.
ICI further stated that the company was on track to report strong financial results, that it had cleared its backlog of customer orders and that it had not lost any customers as a result of its production problems.
The lawsuit alleges that these statements were materially false and misleading because they failed to disclose and/or misrepresented several facts.
First off, it alleges that ICI's software, distribution and production problems at its Quest division were not 'temporary' problems or 'unique' to the Naarden, The Netherlands location, but impacted company-wide operations and profitability. Secondly, it claims that ICI's software, distribution and production problems at its Quest division had not been 'essentially' or 'largely' 'resolved' or 'rectified'. Finally it says that, contrary to ICI's representations that it had cleared its backlog of orders and not lost any customers as a result of the software, distribution and production problems at Quest, ICI's customers were, in fact, obtaining new sources of supply and discontinuing their relationships with ICI.
On March 25, 2003, before the opening of trading, ICI issued a profit warning with respect to its fiscal 2003 first quarter. ICI announced that its first quarter profit would drop approximately 24%, as a result of, among other things, 'business lost following the customer service problems in 2002.'
Following this announcement, shares of ICI fell from a close of $9.60 per share on March 24, 2003 to a close of $5.60 per share on March 25, 2003, or a single-day decline of more than 36%, on nearly twenty times normal trading volume, according to a statement issued by the law firm.
