According to the docket dated August 30, 2001, on June 4, 2001, the Court issued According to the American Access Technologies, Inc.’s FORM 10-QSB for the quarterly period ended June 30, 2001, the federal litigation against the Company, precipitated by the fall of the price of common stock in August, 1999, was dismissed on June 4, 2001, based upon the Plaintiffs' failure to comply with the Court's prior Order to Show Cause. Plaintiffs on July 3, 2001 filed a Motion to Reopen the case, and the Company subsequently filed a Memorandum of Law in Opposition to Plaintiffs' Motion. On August 2, 2001, the judge denied the Plaintiff's motion to reopen, ruling that the case will remain closed.
As reported by the same SEC filing, the suit was filed in United States District Court, Eastern District of New York, originally on September 22, 1999, and amended in February 2000. In March 2001, the judge ruled to move the case to federal district court in Orlando, Florida. Plaintiffs Rachel Bass, Yuri Gurarity, Sol Gingold, Don Nagy, Marilyn Lesser-Gale and John Guida alleged in the Amended Complaint that the defendants, primarily Capital International Security Group and its principals, Grovegate Capital Partners, LLC, and its principals, Bridge Bank and its principals and American Access Technologies, Inc., and its principals participated in a conspiracy to inflate the price of the Company's common stock for the purpose of allowing "insiders" to enrich themselves by selling personal holdings at the inflated price.
The original Complaint charges that American Access and certain of its officers and directors, and Capital International Securities Group ("Capital"), a Florida-based securities brokerage house, and certain of its investment consultants and officers (collectively "the Defendants") conspired together, and agreed to artificially inflate the price of American Access stock so that they could sell their personal holdings at a large profit. Members of the proposed class subsequently suffered substantial losses when the stock's price fell precipitously. During the Class Period, the defendants drove up the price of American Access stock from $7-1/5 to $22-1/5 by, among other things: a) having Capital execute unauthorized trades in which various stocks held in the accounts of certain class members were sold, and blocks of American Access stock were purchased in their place; b) having Capital purchase additional blocks of American Access stock on margin for the accounts of certain class members without their consent; c) having Capital fail to execute orders by certain class members to sell their shares of American Access stock; and d) inducing the purchases of American Access stock by other class members through false or misleading representations concerning the corporation's business prospects, such misrepresentations being communicated by means of the United States mails and interstate wires. While the price of the stock of American Access was artificially inflated, the defendants sold substantially all of their own holdings of American Access stock at a profit of millions of dollars. Subsequently, when the price of the stock began to fall, in August 1999, defendants caused Capital to liquidate the American Access holdings of certain class members in response to margin calls. This accelerated the decline of the stock's price, which plummeted from $16 back to $7-1/2 from August 19, 1999 to August 20, 1999. As a result, the class members suffered substantial losses.