According to the Order entered on March 29, 2006, the plaintiff having failed to effect service on the Defendants in the case commenced on January 5, 2005, within 120 days after filing the complaint, this action is dismissed, without prejudice pursuant to Rule 4(m) of the F.R.C.P.
The original complaint charges China Aviation and certain of its officers and directors with violations of the Securities Exchange Act of 1934. China Aviation trades in petroleum products, including jet fuel, gas oil, fuel oil, crude oil, plastics and oil derivatives.
More specifically, the complaint alleges that during the Class Period, defendants issued false and misleading statements regarding the Company’s business and prospects. As a result of the defendants’ false statements, China Aviation shares traded at inflated levels during the Class Period, whereby the Company’s top officers and directors assisted the Company’s parent company/controlling shareholder in the sale of $120 million worth of its own shares. The true facts, which were known by each of the defendants but concealed from the investing public during the Class Period, were as follows: (a) that contrary to the Company’s prospectus, the Company did not have the necessary risk management controls in place for hedging and trading; (b) that contrary to the private placement offering documents, the funds raised were not to fund an acquisition of the controlling shareholders but rather to meet margin calls for massive derivative losses; and (c) that the Company’s financial statements were grossly overstated or the Company was hiding liabilities totaling in excess of $550 million in derivative trading losses.
On or around November 30, 2004, Bloomberg reported that China Aviation was seeking court protection after losing $550 million from bad bets on oil prices. On this news, trading in the Company’s shares was suspended after the shares dropped to below $.60 per share.