On October 14, the law firm of Coughlin Stoia Geller Rudman & Robbins LLP announced that a class action had been commenced on behalf of “an institutional investor” in the United States District Court for the Eastern District of Pennsylvania on behalf of purchasers of Advanta Corp. Class A and/or Class B common stock during the period between October 31, 2006 and November 27, 2007.
Within a 24-hour period, three Pennsylvania-based law firms (Advanta is headquartered in Spring House, Pennsylvania) – Pittsburgh-based Stember Feinstein Doyle & Payne, LLC, the Bensalem-based law offices of Howard G. Smith, and the Bala Cynwyd-based law office of Brodsky & Smith, LLC – all had announced investigations “on behalf of participants in the Advanta Corp. Employee Savings Plan or the Advanta Employee Stock Ownership Plan” relating to “whether certain fiduciaries of the Plans knew or should have known that Advanta may not have been timely disclosing losses related to its credit card receivables” and ultimately breached their ERISA fiduciary duties by continuing to offer and/or not divest the company stock holdings of those plans.
Setting things off was the announcement by Coughlin Stoia that a lawsuit had been filed, charging that Advanta – formerly one of the nation’s largest issuers of MasterCard and some Visa credit cards to small businesses and professionals in the United States, through subsidiary Advanta Bank Corp. – and certain of its officers and directors violated the Securities Exchange Act of 1934 by issuing “materially false and misleading statements” regarding the company’s business and financial results. The complaint alleged that defendants engaged in improper behavior (basically an aggressive program of granting credit cards) that harmed Advanta’s investors by “failing to disclose the impact of the economic environment and the deteriorating credit trends on its business” – and, “as a result of defendants’ false statements, Advanta’s stock traded at artificially inflated prices.”
The complaint also claims that following the eventual disclosures Advanta stock dropped precipitously (“a decline of 72% from Advanta’s Class Period high of $34.07 per share in June 2007”).
The stock-drop investigations launched by the other firms basically adopted boilerplate language that is surely now familiar to any employer that offers company stock in its defined contribution plan; that the plan fiduciaries may have breached their obligations under ERISA by continuing to offer the stock as an investment option for participant contributions when it was imprudent to do so; and by failing to take action to sell the stock or “otherwise protect the Plans’ assets in light of the company’s business strategies and financial condition.”
All three law firms included an invitation for employee/participants in those plans to reach out to the firms to “discuss this matter or have any questions concerning your rights with regard to this matter.”
More information on the Coughlin Stoia litigation is at http://www.csgrr.com/cases/advanta/
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