A class action has been filed in the United States District Court for the Central District of California on behalf of purchasers of Tongxin International Ltd. (NASDAQ: TXIC) common stock during the period between May 15, 2009 and December 14, 2010 (the “Class Period”).
The complaint charges Tongxin and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Tongxin, through its subsidiary, Hunan Tongxin Enterprise Co. Ltd., designs, develops, manufactures, sells, and services engineered vehicle body structures for light, medium, and heavy duty trucks, and light vehicles in the People’s Republic of China.
The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results. Specifically, defendants improperly accounted for Tongxin’s related-party transactions. As a result of defendants’ false statements, Tongxin’s stock traded at artificially inflated prices during the Class Period, reaching a high of $11.39 per share on October 14, 2009.
On June 30, 2010, Tongxin announced that it would delay filing its Form 20-F for the fiscal year ending December 31, 2009. On October 12, 2010, Tongxin announced that NASDAQ would delist the Company’s stock due to its failure to timely file its Form 20-F and acknowledged that a report issued by KPMG, the forensic accountants hired by the Company’s Audit Committee, concluded that the documentary support for certain of its related-party transactions was contradictory, insufficient and lacking in substantive detail and/or accuracy, thus calling into question the validity of the transactions. On November 20, 2010, Tongxin announced that the Company’s CEO and CFO were being removed from their positions with the Company and lowered its revenue guidance for fiscal year 2010 from its prior outlook of $150-$160 million to a range of $100-$110 million. Then, on December 13, 2010, Tongxin announced that it had filed a civil suit against its former CFO, Jackie Chang, due to the wrongful transfer of Company funds by Chang into an account for the benefit of her and the Company’s former CEO, Rudy Wilson. On this news, Tongxin’s stock declined $0.05 per share to close at $1.35 per share on December 14, 2010.
According to the complaint, the true facts, which were known by the defendants but concealed from the investing public during the Class Period, were as follows: (a) Tongxin improperly accounted for its related-party transactions such that its financial statements were presented in violation of Generally Accepted Accounting Principles; and (b) defendants failed to maintain proper internal controls related to Tongxin’s engaging in and accounting for its related-party transactions and over the safeguard of the Company’s assets.
If you are a current shareholder and purchased during the period ay 15, 2009 and December 14, 2010 and would like to discuss your options of exercising your rights as a shareholder, please contact us.
Please submit the following information so we can determine if you qualify for the suit. If you don't know all the specific details, partial information is also acceptable.