U.S.-based legal firm Robbins Geller Rudman & Dowd LLP announced that a class action has been commenced in the United States District Court for the Central District of California on behalf of purchasers of China-based Rino International Corporation common stock during the period between February 17, 2009, and November 12, 2010, inclusive.
The plaintiff seeks to recover an undisclosed amount of damages on behalf of all purchasers of Rino common stock during the period.
The complaint charges Rino and certain of its officers and directors with violations of the U.S. Securities Exchange Act of 1934. Rino, through its subsidiaries, is engaged in the business of designing, manufacturing, installing and servicing wastewater treatment and flue gas desulphurization equipment for use in China's iron and steel industry and anti-oxidation products and equipment designed for use in the manufacture of hot rolled steel plate products.
The complaint alleges that during the class period, defendants issued materially false and misleading statements regarding the company's business practices and financial results. Specifically, the defendants allegedly failed to disclose that the company's financial results were inflated and were reportedly inconsistent with results reported by Rino to tax authorities in China. As a result of defendants' false statements, Rino stock traded at artificially inflated prices during the Class Period, reaching a high of USD34.25 per share on November 30, 2009. As a result of this inflation, Rino was able to consummate a registered direct offering of nearly 3.3 million shares of its common stock at USD30.75 per share in December 2009.
On November 10, 2010, the research firm Muddy Waters LLC posted an unfavorable report about Rino's business practices, alleging that the company had been engaged in activities ranging from vastly inflating revenue to fabricating customer relationships and allowing its management to use company money to buy a luxury home in Orange County, California. Additionally, Muddy Waters reported a discrepancy between the company's revenue of USD192.6 million reported in its fiscal 2009 Form 10-K filed with SEC and its revenue of USD11 million reported in its annual report for fiscal 2009 filed with the China State Administration of Industry and Commerce. After this news, Rino's stock reportedly fell USD2.34 per share to close at USD13.18 per share on November 11, 2010, a one-day decline of 15% on high volume.
