COLUMBUS - Two class action lawsuits have been filed against Stillwater Mining Co. on behalf of shareholders who state that the company issued false and misleading statements regarding its financial performance.
Institutional investors PGM Associates LP and PGM Offshore Partners initiated the first suit saying they "lost multimillions of dollars," said Samuel H. Rudman, an attorney with the New York law firm Milberg Weiss Bershad Hynes & Lerach
The second lawsuit was filed Friday by attorney Brian M. Felgoise of Philadelphia. His suit is similar and claims the mining company's financial statements violated federal securities laws and "had the effect of artificially inflating the market price of the Company's securities."
Stillwater Mining Co. officials declined comment Friday.
"The company has no knowledge regarding a class action lawsuit," said Jim Sabala, Stillwater's chief financial officer.
Last month, mine officials acknowledged that they were in discussions with the federal Securities and Exchange Commission over some of its reports. At the time, company CEO Frank McAllister said the mine's reporting methods have been reviewed since 1994 by an independent consultant. A second consulting company also reviewed the company's reporting methods and found them in compliance with SEC guidelines, he said.
The first lawsuit was filed Thursday in U.S. District Court for the southern district of New York. Stillwater is scheduled to release its next earnings report April 18.
Milberg Weiss Bershad Hynes & Lerach LLP is a 190-lawyer firm with offices in New York City, San Diego, San Francisco, Los Angeles, Boca Raton, Seattle and Philadelphia. The firm has filed many actions on behalf of defrauded investors, consumers, and companies, as well as victims of World War II and other human rights violations. Over the years, the firm has been responsible for more than $30 billion in aggregate recoveries, according to the firm's Web site.
The firm also has a class action suit against Enron executives and directors over the more than $1 billion they gained from selling stock in the company since 1998. The company's stock crashed when it filed for bankruptcy last year, costing thousands of employees their jobs and retirement nest eggs.
The complaint against Stillwater focuses on a period from April 2001 to April 2002 and names as defendants CEO McAllister, CFO Jim Sabala and Harry Smith, a chief operating officer who resigned last December.
Among other allegations, the complaint claims that the company improperly reported "probable reserves" and overstated net income related to the depreciation rate of mine property. That could result in "an impairment charge or a restatement of at least fiscal year 2001 results," the lawsuit contends.
Stillwater knew of the potential problem with the SEC as early as last December, the suit claims. When that was disclosed this month, the company's stock dropped 24 percent.
"The full extent of Stillwater's losses is still unknown to the market" because the ore reserve issue hasn't been settled, the suit states.
The complaint also states that Stillwater moved to reduce shareholder power when it increased the percentage of shareholders needed to call a special meeting from 20 to 50 percent, something the company failed to disclose for seven months.
Rudman said the suit seeks a "lead plaintiff," which might not be the institutional investors that initiated the action. The court determines the lead plaintiff in a class action suit, "which is the plaintiff who lost the most money and has the most interest," he said.
"When we file the complaint, we then issue a press release so plaintiffs have the opportunity to come forward," Rudman said.
Victor Flores, an analyst with HSBC Securities, was only aware of the first lawsuit. It "obviously is not good" for Stillwater, he said. HSBC is listed on Stillwater's Web site as one of a dozen analysts tracking Stillwater stock.
"They're fighting so many battles on so many fronts," he said. "They're being sued for misrepresentation. They have the SEC problem. They have dissident shareholders wanting to throw out the board. They have operational problems, and they have analysts writing negative comments."
Calls made to other Stillwater analysts were not returned.
Flores said the post-Enron environment is contributing to closer SEC scrutiny.
"No question about that," he said. "But, if they (Stillwater) kept on the straight and narrow it wouldn't be drawing attention to themselves."
A copy of the first complaint is at www.milberg.com/stillwater/
Stillwater's stock closed up slightly Friday at $16.51 a share.