The original complaint was filed charging GenesisIntermedia and certain of its officers, directors and a secretly paid financial commentator with violations of the Securities Exchange Act of 1934. The complaint alleges that in December 1999, the beginning of the Class Period, defendants plotted and unleashed their scheme to inflate the price of GenesisIntermedia shares and gave shares worth more than $3 million to a financial commentator who helped send the stock soaring after he agreed to issue allegedly false, positive recommendations for it on CNN, CNBC and Bloomberg Television. However, the complaint alleges defendants concealed the payment of 216,000 shares to the commentator, Courtney Smith, in order to induce the purchase of GenesisIntermedia shares and raise tens of millions of dollars via multiple private securities offerings. As a result of defendants' false statements, GenesisIntermedia's stock price traded at inflated levels during the Class Period, increasing to as high as $25 in June 2001. Then after the close of the market on September 25, 2001, GenesisIntermedia's shares were halted pending the resolution of an investigation. GenesisIntermedia shares remain halted and are in essence, worthless. However, just hours before the announcement of the investigation and "halt," defendant El-Batrawi sold over $1.7 million dollars worth of his own shares.
As summarized by the Co-Lead Counsel’s website, on May 1, 2002, the Honorable Steven V. Wilson issued an order consolidating all related cases into one class action, appointing Lead Plaintiffs to represent the proposed class and appointing Berman DeValerio as one of the Co-Lead counsel to oversee the litigation. Lead Plaintiffs filed a Consolidated Amended Complaint on July 2, 2002. Upon discovery of previously undisclosed information, Lead Plaintiffs moved to transfer this action to the District of Minnesota where related opt-out actions and the bankruptcy proceeding of an interested party were pending. This motion was granted on June 12, 2003 and, on October 8, 2003, Lead Plaintiffs filed a Second Consolidated Amended Complaint (the “Second Amended Complaint”). In essence, this Second Amended Complaint alleged additional claims against new defendants, including Deutsche Bank Securities Limited, Deutsche Bank Securities, Inc. and Deutsche Bank A.G. The crux of the fraud was a scheme engineered by defendants that enabled the secret and illegal “loaning” of stock by Genesis insiders to create the appearance of an efficient market. As a result of the scheme, thousands of investors purchased Genesis stock at its artificially inflated prices. Over the course of the next few years, discovery was completed and motions for summary judgments and class certification were filed. On December 5, 2005 the District of Minnesota denied the motion for class certification. Shortly thereafter, the District Court of Minnesota then transferred the case back to the Central District of California. The motions for summary judgment are still pending.
On July 10, 2006, the plaintiffs filed a renewed motion for class certification before Judge Wilson of the District Court for the Central District of California. This motion was fully briefed and argument heard on August 10, 2006. While that motion was pending, on March 19, 2007, the Court scheduled the matter for trial to commence on July 24, 2007.
On June 15, 2007, defendant Wayne Breedon, a Deutsche Bank representative, filed a notice that he will no longer defend against the claims asserted against him. On June 27, 2007, plaintiffs filed a Fourth Amended Complaint narrowing the issues for trial and asserting claims against Deutsche Bank Securities Limited, Deutsche Bank Securities, Inc. and Deutsche Bank A.G. (“Deutsche Bank defendants”).
On June 28, 2007, the Court denied the motion for class certification. The remaining defendants, Deutsche Bank Securities Limited, Deutsche Bank Securities, Inc. and Deutsche Bank A.G., made an offer of judgment to pay the lead plaintiffs their losses and allow them to appeal the class certification ruling to the Ninth Circuit. This offer of judgment was accepted on July 12, 2007 and approved by the Court on July 31, 2007.
On August 15, 2007, plaintiffs filed a motion to have a default judgment entered against a number of defendants including defendant Breedon. On September 19, 2007, the Court granted plaintiffs’ motion and entered default judgment against Breedon and several other defendants. Final judgment in the case was entered on December 12, 2007.
On January 11, 2008, plaintiffs filed a notice of appeal with the United States Court of Appeals for the Ninth Circuit (“Ninth Circuit”). On appeal, plaintiffs argue that the district court erred when it denied plaintiffs’ motion for class certification. On June 30, 2008, plaintiffs filed their opening appellate brief. On July 30, 2008, the Deutsche Bank defendants filed their brief in opposition. On August 14, 2008, Plaintiffs filed their reply brief in support of their appeal. Oral argument took place on May 7, 2009 before the Honorable John T. Noonan, the Honorable Diarmuid F. O’Scannlain, and the Honorable Susan P. Graber at the Richard H. Chambers US Court of Appeals Building in Pasadena, California. The matter has been submitted, and the decision is pending.
According to an article dated July 29, 2009, a federal appeals court has upheld a decision to deny class certification in a long-standing securities fraud suit alleging Deutsche Bank Securities Ltd. manipulated the stock price of an Internet company. In a decision handed down Wednesday, the U.S. Court of Appeals for the Ninth Circuit ruled that the U.S. District Court for the Central District of California did not err when it denied class certification in the suit because individual questions of reliance predominate over the common claims. … Investors sought to represent a class of people who bought GENI stock between Dec. 21, 1999, and Sept. 25, 2001. But the district court denied class certification in 2006, arguing that the investors would have to prove reliance, which establishes the causal connection between the alleged fraud and the securities transaction, on an individual basis because they could not prove it classwide.