Stanford University Law School - Securities Class Action Clearinghouse

 

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

------------------------------------------------------
MAYER BUREKHOVICH, on behalf of
himself and all others similarly
situated,

                      Plaintiff,

           vs.

ABLE TELECOM HOLDING CORP.,
GIDEON D. TAYLOR, GERRY W.
HALL, and FRAZIER L. GAINES,

                      Defendants.

------------------------------------------------------


:
:
:
:
:
:
:
:
:
:
:
:
:
:
x


CIVIL ACTION NUMBER

CLASS ACTION COMPLAINT

JURY TRIAL DEMANDED

Plaintiff, by his attorneys, as and for his Class Action Complaint, alleges the following upon personal knowledge as to himself and his acts and as to all other matters upon information and belief based upon, inter alia, the investigation made by and through his attorneys, including a review of the public filings of Able Telecom Holdings, Inc. ("Able Telecom" or the "Company") with the Securities and Exchange Commission ("SEC"), published reports, and news articles. Plaintiff believes that further substantial evidentiary support will exist for the allegations set forth below after a reasonable opportunity for discovery.

NATURE OF THE CASE

1. This is a class action on behalf of a class of persons and entities who purchased Able Telecom common stock (the "Class") between December 7, 1997 and September 14, 1998, inclusive (the "Class Period"), brought under Section 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act").

2. Throughout the Class Period, the defendants repeatedly failed to timely and fully disclose the financial condition on one of its acquisitions; misrepresented that following Able Telecom's acquisition of MFS Network Technologies, Inc. ("NT") certain key senior executives of NT would stay on to work for Able Telecom when the defendants knew that they would resign; failed to timely and fully disclose the dilution of shareholder value due to the Company's issuance of "bottomless" convertible bonds to finance the NT acquisition; and failed to disclose that the Company's financing of the NT acquisition violated Able Telecom's prior debt arrangements, causing the Company to become liable immediately for the repayment of its long term debt.

3. Each of the defendants either knew or recklessly disregarded that these material misrepresentations and omissions artificially inflated the prices of Able Telecom's securities on the open market and adversely affected the integrity of the market for Able Telecom securities, and that investors would be deceived into purchasing Able Telecom securities at artificially inflated prices.

JURISDICTION AND VENUE

4. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the Exchange Act [15 U.S.C. 78j(b) and 78t(a)] and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission ("SEC") [17 C.F.R. 240.10b-5].

5. This Court has jurisdiction of this action pursuant to Section 27 of the Exchange Act, as amended [15 U.S.C. 78aa] and 28 U.S.C. 1331 and 1337.

6. Venue is properly laid in this District pursuant to Section 27 of the Exchange Act and 28 U.S.C. 1391(b) and (c). The acts, conduct, combination, and conspiracy complained of, including the preparation, issuance, and dissemination of materially false and misleading information to the investing public, occurred in substantial part in this District, and Able Telecom maintains its principal executive offices in this District as does the Individual Defendant (as defined below).

7. In connection with the acts, conduct, combination, and conspiracy alleged in this Complaint, the defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including the mails and telephonic communications and the facilities of the NASDAQ National Market System, a national securities exchange.

THE PARTIES

8. During the Class Period, plaintiff Mayer Burekhovich and each member of the Class purchased shares of Able Telecom common stock in the open market without knowledge of the misrepresentations and omissions of the defendants and without knowledge that the stock price was inflated during the Class Period, and have suffered damages as a result. During the Class Period, plaintiff and each member of the Class directly or indirectly relied upon the defendants' public reports, press releases, filings with the SEC, and other public statements, as more fully described below. Plaintiff and each member of the Class also relied on the fact that Able Telecom stock was fairly priced and/or upon the integrity of the market for Able Telecom securities. As a result, plaintiff and each member of the Class have been damaged by the defendants' wrongful conduct.

9. Plaintiff Mayer Burekhovich purchased shares of Able Telecom common stock as set forth in the attached certification and was damaged thereby.

10. Able Telecom is a company organized and existing under and by virtue of the laws of the State of Florida, with its principal executive offices located at 1601 Forum Place, Suite 1110, West Palm Beach, Florida 33401. As of June 10, 1998, Able Telecom had 9,973,863 shares of common stock outstanding. At all relevant times, Able Telecom common stock was actively traded on the NASDAQ National Market System under the symbol "ABTE."

11. At all relevant times, defendant Gideon D. Taylor ("Taylor") has served as Chairman of the Board, and a director of the Company.

12. Defendant Gerry W. Hall ("Hall") served as President and Chief Executive Officer and a director of the Company until March 1998.

13. Defendant Frazier L. Gaines ("Gaines") has served as President and Chief Executive Officer of the Company since March 1998 and he has served as a director of the Company throughout the Class Period.

14. Defendants Taylor, Hall, and Gaines are collectively referred to herein as the "Individual Defendants."

15. As officers, directors, and/or controlling persons of a publicly-held company whose common stock is registered with the SEC under the Exchange Act, traded on the NASDAQ National Market System, and governed by the provisions of the Exchange Act, the defendants had a duty to promptly disseminate accurate and truthful information with respect to the Company's operations, business, and management, and to correct any previously issued statements from any source that were untrue at the time they were made or had become untrue after they were made, and to disclose all information required by applicable regulations, so that the market price of the Company's publicly traded securities would be based upon truthful and accurate information.

16. During the Class Period, each of the Individual Defendants were senior executives and/or directors of Able Telecom and were privy to and had actual knowledge of material information regarding Able Telecom's management, operations, and businesses. As a result of their possession of this information, each of these defendants knew or recklessly disregarded material facts which were required to be disclosed, yet had not been disclosed to and were being concealed from the public.

17. The Individual Defendants, because of their positions of control and authority as officers and/or directors of the Company, were able to and did control the contents of the various quarterly and annual financial reports, SEC filings, press releases, and presentations to securities analysts pertaining to the Company. Accordingly, by reason of their status as officers and/or directors of Able Telecom, the Individual Defendants were "controlling persons" within the meaning of Section 20 of the Exchange Act, and had the power and influence to cause Able Telecom to engage in the unlawful conduct complained of herein, and exercised such power during the Class Period. Each officer/director defendant was provided with copies of Able Telecom's management reports, press releases, and SEC filings alleged herein to be misleading prior to, or shortly after, their issuance, and had the ability and opportunity to prevent their issuance or cause them to be corrected. As a result, each of the Individual Defendants is responsible for the accuracy of the public reports and releases detailed herein as "group published" information, and is therefore responsible and liable for the representations contained therein.

18. During the Class Period, the defendants, individually and in concert, directly and indirectly, engaged and participated in a continuous course of conduct to misrepresent the financial condition of Able Telecom and to conceal adverse material information regarding Able Telecom. The defendants employed devices, schemes, and artifices to defraud, and engaged in acts, practices, and a course of conduct as herein alleged in an effort to increase and maintain an artificially high market price for the common stock of Able Telecom. These actions included the formulation, making, and/or participation in the making of untrue statements of material facts, as well as omitting state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, which operated as a fraud and deceit upon plaintiffs and the other members of the Class.

CLASS ACTION ALLEGATIONS

19. Plaintiff brings this case as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure, on behalf of himself and all other persons who purchased or otherwise acquired Able Telecom common stock between December 4, 1997 and September 14, 1998, inclusive. Excluded from the Class are the defendants herein, members of the immediate family of each of the Individual Defendants, any person, firm, trust, corporation, officer, director, or other individual or entity in which any defendant has a controlling interest or which is related to or affiliated with any of the defendants, and the legal representatives, agents, affiliates, heirs, successors-in-interest, or assigns of any such excluded party.

20. The members of the Class are so numerous that joinder of all members is impracticable. During the Class Period, nearly 10 million shares of Able Telecom common stock were outstanding. Throughout the Class Period, the common stock of Able Telecom was actively traded on the NASDAQ National Market System, an efficient market. Class members are believed to number in the thousands, based on the number of shares outstanding and the average daily trading volume, although the precise number of class members can only be determined through appropriate discovery,. In addition, the names and addresses of the class members can be ascertained from the books and records of Able Telecom or its agents.

21. Plaintiff will fairly and adequately represent and protect the interests of the members of the Class. Plaintiff has retained competent counsel experienced in class action litigation under the federal securities laws to further ensure such protection, and intends to prosecute this action vigorously.

22. Plaintiff's claims are typical of the claims of the other members of the Class because plaintiff's and all the class members' damages arise from and were caused by the same false and misleading representations and omissions made by or chargeable to the defendants. Plaintiff does not have interests antagonistic to, or in conflict with, the Class.

23. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. As the damages suffered by individual class members may be relatively small, the expense and burden of individual litigation make it virtually impossible for the class members to seek redress for the wrongful conduct alleged. Plaintiff knows of no difficulty which will be encountered in the management of this litigation which would preclude its maintenance as a class action.

24. Common questions of law and fact exist as to all members of the Class and predominate over any questions affecting solely individual members of the Class. Among the questions of law and fact common to the Class are:

25. The names and addresses of the record owners of the shares of Able Telecom's common stock purchased during the Class Period are available from the Company's transfer agent. Notice can be provided to such record owners by a combination of published notice and first-class mail using techniques and a form of notice similar to those customarily used in class actions arising under the federal securities laws.

FRAUD-ON-THE-MARKET DOCTRINE

26. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-the-market doctrine in that, among other things:

27. Based upon the foregoing, plaintiff and the other members of the Class are entitled to a presumption of reliance upon the integrity of the market for the purpose of class certification as well as for ultimate proof of the claims on their merits. Plaintiff will also rely, in part, upon the presumption of reliance upon material misrepresentations and omissions and upon the actual reliance of the class members.

NO SAFE HARBOR

28. The statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the allegedly false statements pleaded in this complaint. The statements pleaded herein were not specifically identified as "forward-looking statements" when made. To the extent there were any forward-looking statements, there were no meaningful cautionary statements identifying the important then-present factors that undermined the forward-looking statements, deprived them of any reasonable basis, and which could and did cause actual results to materially differ from those in the purportedly forward-looking statements. Alternatively, to the extent that the statutory safe harbor does apply to any forward-looking statements pleaded herein, the defendants are liable for those false forward-looking statements. This liability is premised on the fact that at the time each of those forward-looking statements was made, the particular speaker made the statement in bad faith knowing that the particular forward-looking statement had no reasonable basis and was false and misleading, and/or the forward-looking statement was authorized and/or approved by an executive officer of Able Telecom who knew that the statements were false when made.

SUBSTANTIVE ALLEGATIONS

29. Able Telecom, through its subsidiaries, is a service company involved in planning, developing, building, and maintaining the communications infrastructure for an array of applications, including telecommunications, traffic management, and cable television systems. Able Telecom conducts its operations throughout the United States and internationally, primarily in Latin America.

30. On or about December 4, 1997, the Company issued a press release over the PR Newswire announcing that it had entered into an agreement with COMSAT Corporation and a wholly-owned subsidiary of COMSAT to acquire certain assets and assume certain liabilities of the subsidiary's intelligent traffic systems and wireless infrastructure and services businesses in Texas and Alabama. According to the press release, the agreement provides for the assumption by Able Telecom of various construction and other contracts which management estimated would result in revenue of approximately $29 million to Able Telecom over the next 18 to 24 months, which would raise the Company's current backlog to an estimated $130 million. Defendant Hall stated in the press release: "Able Telecom is pleased with the opportunity afforded the company by this acquisition. It expands our base of business within the Southern United States, specifically Texas and Alabama, and opens up new marketing opportunities in the Wireless construction and service area, as well as substantially increasing our backlog in the Traffic Management Division."

31. The statements in the December 4, 1997 press release were materially false and misleading and omitted to state facts that would make them not false and misleading when made because the statements suggested that the agreement would be profitable for Able Telecom and was beneficial for the Company when the defendants knew that COMSAT lost $1.4 million in 1995, $4.4 million in 1996, and substantial amounts in 1997 up to the time the deal was announced.

32. On or about December 12, 1997, the defendants issued a press release over the PR Newswire responding to a press release issued the day earlier by Applied Cellular Technology, Inc. which had announced the termination of negotiations related to Applied Cellular's unsolicited takeover offer for Able Telecom. Defendant Hall, after denying that there had been any substantive negotiations with Applied Cellular concerning its offer, then stated: "We continue to be optimistic that the strategies we are pursuing at Able Telecom Holding Corp. will result in significant enhancement of shareholder value and that these strategies are best pursued at the present time on an independent basis. We continue to be comfortable with the market's revenue and earnings estimates for our company for our 1998 fiscal year." Those estimates were reported by Dow Jones Online News on December 12, 1997 to be 51 cents per share on 1998 fiscal year revenue of $107 million.

33. The statements made as well as those omitted in the December 12, 1997 press release were materially false and misleading. The press release failed to state facts that would make the statements within not false and misleading when made because such statements were issued without any reasonable basis in fact. In particular, the defendants knew that their recently announced agreement with COMSAT would saddle the Company with substantial new money losing operations.

34. On or about December 15, 1997, the Company issued a press release over the PR Newswire clarifying a correction released by the Dow Jones News Service. In its press release, the Company reiterated "we are comfortable with the market's revenue and earnings estimates for our company for our 1998 fiscal year of $107 million in revenue and EPS of $.51.

35. The statements in the December 15, 1997 press release were materially false and misleading and omitted to state facts that would make them not false and misleading when made because the statements were issued without any reasonable basis in fact, particularly since the defendants knew that their recently announced agreement with COMSAT would saddle the Company with substantial new money losing operations.

36. On or about February 17, 1998, the Company issued a press release over the PR Newswire announcing its results for fiscal 1997 and its comments on the 1998 outlook. Defendant Hall stated: "We believe our current group of managers will be capable of sustaining our present level of growth and performance well into the 1998 fiscal year."

37. The statements in the February 17, 1998 press release were materially false and misleading and omitted to state facts that would make them not false and misleading when made because the statements were issued without any reasonable basis in fact, particularly since the defendants knew that their recently announced agreement with COMSAT would saddle the Company with substantial new money losing operations.

38. On or about March 10, 1998, the Company issued a press release announcing the appointment of defendant Frazier Gaines as interim President and Chief Executive Officer. Gaines was to replace defendant Hall who continued as President of the Georgia Electric Company unit and assumed traffic management responsibilities.

39. On or about March 13, 1998, the Company issued a press release over the PR Newswire announcing that its first quarter results would be impacted negatively by the unusual weather conditions experienced in its operating areas during December and January. The Company stated that it "expects sales to be lower than expected and as a result they expect to report an operating loss for the quarter." Defendant Gaines stated that "[l]ike several of our competitors, Able Telecom has experienced a difficult quarter in terms of production. The wet ground conditions have hampered our efforts in several locations and within different subsidiaries. We estimate that this production will be made up over the next three quarters."

40. The statements in the March 13, 1998 press release were materially false and misleading and omitted to state facts that would make them not false and misleading when made because the statements were issued without any reasonable basis in fact since the defendants knew that their recently announced agreement with COMSAT would saddle the Company with substantial new money losing operations which would lead to losses. Instead defendants tried to blame their expected operating loss for the first quarter solely on unusual weather-related problems.

41. On or about March 17, 1998, the Company announced over the PR NewsWire its results for the first quarter of fiscal 1998, reporting revenues for the quarter of $22.4 million and a net operating loss before a reduction for the non-cash charge attributable to the discounted conversion of the Company's convertible preferred stock (the accretive dividend) for the quarter ended January 31, 1998 of ($719,437) or ($.08) per share, compared with a net income of $490,239 or $.06 per share for the same period in 1997. Defendant Gaines blamed the drop in sales and increase in costs during Able's first quarter of 1998 on the weather conditions experienced throughout the southeastern United States. The increase in their estimated cost to complete several of their unfinished contracts was attributed to the change in the working condition. According to Gaines the Company expected "that these conditions will improve in the second and third quarter and that we will be able to recapture these sales in future periods. Our recently announced acquisition candidates will give us the opportunity to spread our operations over a wider geographic area which should reduce our exposure to adverse weather conditions...We look forward to better performance over the remaining quarters of the current fiscal year."

42. The statements in the March 17, 1998 press release were materially false and misleading and omitted to state facts that would make them not false and misleading when made because the statements were issued without any reasonable basis in fact since the defendants knew that their recently announced agreement with COMSAT would saddle the Company with substantial new money losing operations which would lead to losses. Instead, defendants tried to blame their expected operating loss for the first quarter solely on unusual weather-related problems.

43. On or about April 2, 1998, the Company announced that it had completed the acquisition of Patton Management Company whose operating subsidiaries, Wright & Lopez and Black Industries, provide services to the telecommunications industry throughout the southeastern United States. The purchase price was $1,855,000, payable by cash and a promissory note, and the cancellation of a seller's note receivable.

44. On or about April 27, 1998, the Company issued a press release over the PR Newswire announcing an agreement to acquire MFS Network Technologies, Inc. ("NT"), a subsidiary of WorldCom, Inc. ("WorldCom"). NT is an established provider of telecommunications infrastructure construction services with a particular expertise in intelligent traffic management systems. Conditioned upon clearance under the federal antitrust laws, the closing of the transaction was said to be expected to occur on or about May 31, 1998. The acquisition transaction included a six-month option to WorldCom to acquire up to two million shares of Able Telecom common stock at $7 per share. The combined revenues for Able Telecom/NT for calendar year 1998 were projected to be more than $450 million. According to defendant Taylor: "The acquisition of NT positions Able Telecom as one of the largest telecommunications construction and integration companies in the nation. An existing $1 billion aggregate backlog of projects at Able Telecom and NT, helps assure Able Telecom of a robust platform for the continued expansion of our business in future years." "We are enthusiastic about our ability to develop and expand our international business in the foreseeable future. We see this transaction as an [sic] significant opportunity for both companies and are delighted to be able to develop a meaningful strategic relationship with WorldCom. This agreement represents a very significant step for Able Telecom," Taylor said. According to the press release, "Substantially all of the current management team of MFS Network Technologies is expected to continue to serve as the management and operations team of NT on a going-forward basis. 'We welcome the employees of NT to the Able Telecom family,' Taylor concluded."

45. Upon the Company's announcement of its acquisition of NT, shares of Able Telecom rose $1.125 or 14% to $9.0625. On April 29, 1998, the brokerage firm Sterne, Agee & Leach raised its recommendation on Able Telecom to a "Buy" from "Accumulate." Over the next few trading days the stock price continued to surge. On or about May 4, 1998, research analyst Lori Alexander of Preferred Capital Markets, initiated coverage on Able Telecom with a "Strong Buy" rating and a price target of $32 per share. Kaufman Bros. analyst Vik Grover said that the acquisition pushed the Company into the spotlight, and the stock price catapulted on May 4, 1998 to a 52-week high, reaching as high as $17 11/16 per share on enormous volume of two million shares, compared with a daily average volume of 203,100. The stock price reached as high as $20.94 per share in June 1998.

46. On or about June 8, 1998, the Company issued a press release over the PR Newswire reporting on the status of its pending acquisition of NT. Although antitrust clearance had been received, the Company chose to extend the May 31, 1998 closing date as permitted under the agreement in order to complete due diligence review. "We have until July 31 to close but we are working diligently and we hope to complete the acquisition much earlier," stated defendant Taylor.

47. On or about June 11, 1998, the Company issued a press release over the PR Newswire announcing record revenues and sharply increased results for its second quarter ended April 30, 1998. In announcing these results, defendant Taylor stated "Our two new acquisitions have been absorbed. We are profitable and will continue our growth into becoming a very different company."

48. The statements in the June 11, 1998 press release were materially false and misleading and omitted to state facts that would make them not false and misleading when made because the statements were issued without any reasonable basis in fact since the defendants knew that their recent acquisitions of COMSAT and Patton would saddle the Company with substantial new money losing operations which would lead to losses not growth.

49. On or about July 6, 1998, the Company issued a press release over the PR Newswire announcing that it had completed the acquisition of NT, effective July 2, 1998. According to the press release, "[t]his acquisition positions Able Telecom Holding Corp. as a full spectrum telecommunications construction and systems integration company, serving clients in the U.S. and abroad. Revenues of Able's newly combined companies for fiscal 1998 are projected to be more than $350 million." "The addition of MFSNT to our corporate family creates an aggregate $1.2 billion backlog of projects and opens opportunities for continued growth an expansion," said defendant Taylor. "In keeping with our other recent acquisitions, the addition of MFSNT to our group of companies expands our presence in international and domestic markets." The press release stated that "[t]he purchase price is equal to the net book value of MFSNT as of March 31, 1998, plus $10 million, subject to certain adjustments. Able has paid $15 million and given the seller a note for the balance of the purchase price, due August 31, 1998. As previously announced, in April Able also granted a WorldCom subsidiary a six-month option to purchase up to 1,817,941 shares of Able common stock at $7 per share. The Company financed the purchase in part by privately placing $20 million of non-voting five-year convertible preferred stock, which will pay a 4% dividend. The investors were advised by the Palladin Group L.P. and Rose Glen Capital Management L. P. The preferred stock is convertible into common stock based upon the market price at the time of conversion. In connection with the preferred stock, Able issued five year warrants to purchase 1 million shares of common stock at $19.80 per share."

50. The defendants' statements in paragraphs 44, 45, 46, and 49 of the Complaint were materially false and misleading and omitted to state facts that would make them not false and misleading when made because the statements were issued without any reasonable basis in fact since the defendants knew that their recently announced acquisition agreement of NT would saddle the Company with substantial new money losing operations which would lead to losses. These losses stem from NT's ownership of unprofitable operations in a capital intensive, low margin, highly competitive construction contract business as well as NT's lack of possession of any valuable proprietary product or technology. Potential losses faced by the company resulted from the fact that many key senior executives of NT would quit after the acquisition, that the Company's issuance of "bottomless" convertible bonds to finance the NT acquisition would have the potential to dramatically dilute existing shareholder value, and that the Company's financing of the NT acquisition violated Able Telecom's prior debt arrangements, causing the Company to become immediately liable for the repayment of its long term debt.

51. On July 14, 1998, the Dow Jones News Service reported that Able Telecom's stock price had plummeted nearly 38% over the past week as word spread on Wall Street about the Company's controversial financing of the NT acquisition which could have sharply diluted existing shareholder value. There was no floor provided in the structure of the proposed $20 million in preferred stock and the preferred shares were to be convertible into common stock based on the market price at conversion. Ultimately, existing shareholders were subject to heavy dilution since the preferred stock was not convertible at a fixed price, thus there was no fixed number of shares to be created upon conversion. In other words, as the stock price moves lower, more shares would be created upon conversion, leading to heavy dilution for existing shareholders. As a consequence of this poorly constructed financing arrangement, which the defendants had failed to disclose to investors, the Company was forced to try to rework the convertible portion of the deal.

52. On or about July 15, 1998, the Company issued a press release over the PR Newswire announcing that it was making progress on restructuring its financing package for the NT acquisition and that one of the two underwriters of the transaction, Palladin Group, L.P., had agreed upon a buyout, and that the Company was attempting to negotiate with Rose Glen Capital Management L.P., the other underwriter. Defendant Taylor stated that there are "absolutely no fundamental reasons" for any decline in Able's stock. "Things couldn't be better with this company," he said. "Any way you took it [sic], Able is performing well. We expect strong earnings per share next year. Revenues are expected to exceed $500 million that's a stream of revenues of more than $1.3 million a day." "We expect $50 million in EBITDA," he added. "By any evaluation, we should be selling at a much higher current price." Taylor attributed the drop in the stock price to "notorious short-sellers."

53. The Company's July 15, 1998 press release was materially false and misleading and omitted to state facts that would make it not false and misleading when made because the statements were issued without any reasonable basis in fact since the defendants knew that their recently announced acquisitions would saddle the Company with substantial new money losing operations which would lead to losses, that many key senior executives of NT would quit after the NT acquisition, that the Company's issuance of "bottomless" convertible bonds to finance the NT acquisition would have the potential to dramatically dilute existing shareholder value, and that the Company's financing of the NT acquisition violated Able Telecom's prior debt arrangements, causing the Company to become immediately liable for the repayment of its long term debt.

54. On or about July 21, 1998, the Company issued a press release announcing that it had retained the financial advisory firm of Dabney Flanigan, LLC, to assist in arranging financing to complete the NT transaction and to renegotiate the terms of the $20 million private convertible preferred offering. The press release noted that the purchase price of NT is at or below $101.4 million, subject to a comprehensive independent audit currently being conducted. The Company added "We anticipate financing for the acquisition is on target as per the schedule in the purchase agreement." Taylor further stated: "We're totally focused on long term shareholder value; right now that means completing and integrating the MFSNT acquisition so we can continue building the new Able."

55. On or about August 4, 1998, the Company issued a press release over the Business Wire announcing that it had signed a contract to provide its NeuroLAMA call record and data collections service to a recently privatized Brazilian telephone company. In that announcement, defendant Gaines added that Able Telecom's integration of NT is on schedule according to the purchase agreement and that the Company hopes to announce results of the final audit shortly.

56. The Company's August 4, 1998 press release was materially false and misleading and omitted to state facts that would make it not false and misleading when made because the statements were issued without any reasonable basis in fact since the defendants knew that the integration was not proceeding well because many key senior executives of NT were or would be quitting after the NT acquisition, including Kevin P. Moersh, President and Chief Executive Officer, Robert Thurman, Senior Vice President of Estimating and Engineering, Rick Bonds, Vice President of Legal and Regulatory Affairs, bill Thompson, President and Chief Operating Officer of MFS Transportation Systems, and Bob Eide, Senior Vice President of Network Sales.

57. On or about August 14, 1998, the Company issued a press release over the PR Newswire stating that it had paid $38.6 million towards to NT acquisition and was discussing the final purchase price with the seller. Defendant Gaines also stated that the Company was not in default under its bank loan, its 12% senior subordinated notes, or other material obligations.

58. On or about August 18, 1998, the Company issued a press release over the Business Wire announcing that the remaining balance due on its note to WorldCom for the acquisition of NT was approximately $49 million, with additional potential downward adjustments based on the Company's continuing review of operating results prior to July 2, 1998.

59. On or about August 20, 1998, the Company issued a press release over the Business Wire announcing that it had hired Robert E. Dupuis as President, Chief Executive Officer, and director, John Marino as Executive Vice-President - Finance, Accounting and Public Relations, and Curtis A. Dale as Chief Operating Officer.

60. On or about August 31, 1998, the Company issued a press release over the Business Wire announcing that it has engaged Preferred Capital Markets, Inc. as the Company's financial advisor to advise Able Telecom on matters having to do with its capital structure, financing, mergers, and acquisitions. In a second press release that day, issued over the Business Wire, the Company announced that it had agreed with WorldCom to extend the final payment date relating to the acquisition of NT to September 17, 1998. Defendant Taylor stated: "We believe that a resolution to the conclusion of the transaction can be achieved that is fair and equitable to the entities involved. While Able is confident that a mutual resolution regarding the contract terms and conditions can be achieved, Able has begun to pursue financing alternatives that will enable us to meet any cash requirement upon completion of the review by the independent third party, if such review is needed. Preferred Capital Markets, Inc. has been retained by Able as financial advisors in obtaining this funding."

61. The Company's August 31, 1998 press release was materially false and misleading and omitted to state facts that would make it not false and misleading when made because the defendants failed to disclose the terms of its reprieve on making the required August 31, 1998 payment to WorldCom which otherwise constituted an event of default under the Note and NT Stock Pledge Agreement, the defendants failed to disclose that the Company had still not obtained any funding for the NT acquisition other than the bottomless preferred stock, and the defendants failed to disclose whether the Company had repaid its $10 million 12% senior subordinated notes, plus interest and a prepayment penalty, on August 31, 1998, or whether the Company had defaulted on this obligation.

62. On or about September 1, 1998, the Company issued a press release over the Business Wire announcing that it had entered into a standstill agreement with WorldCom until September 17, 1998 to resolve the issue surrounding the substantial differences between the two entities regarding the purchase price calculation of NT. Able Telecom claimed that the note extended by WorldCom has been paid in full based on information provided to Able Telecom from the audit, Able Telecom's analysis of the calculations, WorldCom's previous agreement to a minimum reduction of $14 million, and the payment by Able Telecom to WorldCom of more than $38 million to date.

63. On or about September 1, 1998, the Company issued a press release over the Business Wire announcing that it had accepted the resignations of Chief Executive Officer and President, Robert E. Dupuis, and Executive Vice President, John Marino without any explanation. These men had only been with the Company since August 20, 1998.

64. On September 1, 1998, the price of Able Telecom stock dropped to its lowest point after 52 weeks at $1 3/4 per share, a drastic difference from the $20.94 high in June 1998.

65. On or about September 11, 1998, the Company issued a press release over the Business Wire announcing that it had concluded the financing terms for the acquisition of NT from WorldCom. Under the terms of the agreement, Able Telecom will issue a replacement note to WorldCom in the amount of $30 million. The note will accrue interest at 11.5% and matures on December 15, 2000.

66. On or about September 15, 1998, the Company confirmed that its auditor, Ernst & Young, had resigned, effective September 7, 1998, and said that it will delay the release of its quarterly report for the period ended July 31, 1998. No listing of new auditors accompanied the announcement, in the Company's SEC filing, of Ernst & Young's resignation. The filing merely said that "the final selection of an accounting firm is anticipated to be finalized by the Company in the fourth quarter of fiscal 1998," and failed to cite any reason for the resignation.

67. The Company failed to notify its shareholders of its auditor's resignation for seven days. Ernst & Young was Able Telecom's sixth auditor in the last ten years. Failure to disclose the resignation of the Company's auditor, Ernst & Young in its September 11, 1998 press release made such release materially false and misleading. The Company's September 15, 1998 press release was materially false and misleading and omitted to state facts that would make it not false and misleading when made because the defendants failed to disclose the terms of the Company's new $30 million loan with WorldCom, the amount of receivables it had collected and paid to WorldCom, and the amount of NT's losses used to reduce the purchase price to WorldCom. Moreover, the defendants failed to disclose that the new $30 million loan with WorldCom violated the covenants of the $10 million, 12% senior subordinated notes, leading to the Company's obligation to repay those notes in full on August 31, 1998, nor have the defendants disclosed whether the note payment was made or whether the Company has defaulted.

COUNT I

VIOLATION OF SECTION 10(b) OF THE SECURITIES EXCHANGE ACT
AND RULE 10b-5 THEREUNDER

68. Plaintiff repeats and realleges each and every allegation above as if set forth in full herein.

69. Throughout the Class Period, the defendants, singly and in concert, directly or indirectly, engaged in a common plan, scheme, and course of conduct described herein, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices, and a course of business which operated as a fraud upon plaintiff and the other members of the Class; made various false statements of material facts and omitted to state material facts to make the statements made not misleading to plaintiff and the other members of the Class; and employed manipulative or deceptive devices and contrivances in connection with the purchase and sale of Able Telecom common stock.

70. The purpose and effect of the defendants' plan, scheme, and course of conduct was to artificially inflate the price of Able Telecom common stock and to artificially maintain the market price of Able Telecom common stock.

71. The Individual Defendants, as the senior officers and directors of the Company, had actual knowledge, throughout the Class Period, of the material omissions and/or the falsity of the material statements set forth above, and intended to deceive plaintiff and the other members of the Class, or, in the alternative, acted with reckless disregard for the truth when they failed to ascertain and disclose the true facts in the statements made by them or other Able Telecom personnel to the SEC, the plaintiff, and other members of the Class.

72. As a result of the foregoing, the market price of Able Telecom common stock was artificially inflated during the Class Period. In ignorance of the falsity of the reports and statements, and the deceptive and manipulative devices and contrivances employed by the defendants, plaintiff and the other members of the Class relied, to their detriment, on the reports and statements described above and/or the integrity of the market price of Able Telecom common stock during the Class Period in purchasing Able Telecom common stock at prices which were artificially inflated as a result of the defendants' false and misleading statements.

73. Had plaintiff and the other members of the Class known of the material adverse information which the defendants did not disclose, they would not have purchased Able Telecom common stock at the artificially inflated prices that they did.

74. Plaintiff and the other members of the Class who purchased Able Telecom common stock in ignorance of the financial risk to them as a result of such nondisclosure were harmed as a result of defendant's concealment of this material information.

75. As a result of the wrongful conduct alleged herein, plaintiff and the other members of the Class have suffered damages in an amount to be established at trial.

76. By reason of the foregoing, the defendants have violated Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder and are liable to the plaintiff and the other members of the Class for the substantial damages which they suffered in connection with their purchases of Able Telecom common stock during the Class Period.

COUNT II

VIOLATION OF SECTION 20(A)
OF THE SECURITIES EXCHANGE ACT

77. Plaintiff repeats and realleges each and every allegation above as if set forth in full herein.

78. During the Class Period, each of the Individual Defendants was a controlling person of Able Telecom within the meaning of Section 20(a) of the Securities Exchange Act by virtue of his executive positions and/or directorship at Able Telecom and his specific acts.

79. Able Telecom concealed from plaintiff and the other members of the Class during the Class Period material facts which each of the Individual Defendants was privy to and had actual knowledge of.

80. Each of the Individual Defendants had the power and influence, and exercised the same, to cause Able Telecom to engage in the unlawful conduct and practices complained of herein by causing Able Telecom to disseminate the false and misleading information referred to above.

81. By virtue of the foregoing, the Individual Defendants have violated Section 20(a) of the Securities Exchange Act.

82. By virtue of the conduct alleged above, the defendants are liable to the plaintiff and the other members of the Class for the substantial damages which they suffered in connection with their purchases of Able Telecom common stock during the Class Period.

WHEREFORE, plaintiff, on his own behalf and on behalf of the other members of the Class, demands judgment against the defendants as follows:

JURY DEMAND

Plaintiff demands a trial by jury.

Dated: September 17, 1998

GOODKIND LABATON RUDOFF
  & SUCHAROW LLP

By:______________________________
    Emily C. Komlossy, Esq.
    Florida Bar No. 007714
    Peter H. Rachman, Esq.
    Florida Bar No. 977756
International Building, Suite 813
2455 East Sunrise Boulevard
Fort Lauderdale, Florida 33304
Tel: (954) 630-1000
Fax: (954) 565-1312

OF COUNSEL:

BEATIE & OSBORN LLP
Eduard Korsinsky, Esq.
599 Lexington Avenue, Suite 42
New York, New York 10022
(212) 888-9000



Source: Diskette file from Beatie and Osborn LLP