NEW YORK: NY: The Company which publishes a local ethnic Indian weekly India Abroad has been sued by one of its investors for misrepresentation of facts with the intention to defraud while soliciting offers for the sale of common Stock of the newspaper.
The class action civil suit was filed on September 9 at the U.S. District Court for the Eastern District of Pennsylvania by Anand Mittal who had purchased 8,000 common stock shares of India Abroad for $10,000 in 1988. It was filed’ under Section 27 of the Securities Exchange Act of 1934 the Securities Act of 1933 and the Racketeer influenced Corrupt Organization Act of 1961.
The suit charged that as a part of soliciation the defendants India Abroad Publications Inc “engaged in a scheme to misrepresent the financial condition of India Abroad, the transaction between insiders and affiliates, the liquidity of securities offered in private placement and personnel of India Abroad.”
Named along with Rajiv as defendants are Emerging Growth Securities Inc (EGS) which was the placement agent for the stock, Prakash Shah the chairman of EGs, and Sperduto Spector and Company the accountants for India Abroad since 1974.
The complainant charges that in an effort to induce the defendant EGS’s customers to purchase shares of the stock the customers were given untrue statements of material facts and certain other facts were omitted ‘intentionally, knowingly and recklessly.”
The suit also charges that the defendants provided false net income profits that were based on historical relationships between subscriber, revenues and profits for the period 19841993. It said the comparison, stated in the soliciations between India Abroad and the New York Times was misleading. News India, a local newspaper Reported. It also said that existence of life subscriptions of the paper was concealed.
The suit also charges that Gopal Raju used a part of public investment to purchase at par value, the current outstanding stock of the Canadian subsidiary which is currently owned by Gopal Raju himself, without disclosure of the terms of such a sale and certain loans to the officers of the company.
In his complaint Mittal said, ‘In reliance upon the integrity of the statements made (by) India Abroad and EGS through their agents, plaintiff and members of the class purchased India Abroad common stock at value that did not fairly represent the earning potential of India Abroad and which did not take into account the risks associated with the investment and were thereby damaged.
He adds that if “the plantiff and the members of the class had known the falsity of the misstatement and omissions of facts made by defendants India Abroad and EGS they would not have purchased the shares of India Abroad common stock.
Ina press statement Gopal Raju said, “I deny that either India Abroad or I have made any false statements or violated any securities law.
Mital seeks the court to grant him recovery of the consideration paid for the security with interest, along with the awarding to plaintiff of the costs and dismemberments of the action, including reasonable allowances for attorney’s fees and reimbursement of plaintiff’s expenses.
The suit also seeks an injunction against the defendants repeating the same or similar conduct.
Article extracted from this publication >> October 13, 1989
