As expected, and as predicted, the putative class action plaintiffs have amended their federal securities law complaint — in accordance with Judge Gettleman’s opinion of earlier this month. The omission of only parts of Mr. Allin’s business experience (the less than flattering parts, of course) appears prominently, as the central allegation of scienter in the new pleading.
The entire 25 page affair is here, as a PDF — but I’ll just quote this portion:
“…In its letter of resignation, Grant Thornton concluded based on background information related to the investor it had independently obtained and later had been brought to its attention by management through subsequent discussions, that this background information had not been brought to Grant Thornton’s attention on a timely basis. In its resignation letter, Grant Thornton indicated that it believed a representation made by the Company that Hogan & Hartson LLP (“Hogan”) had agreed to be re-engaged as the Company’s legal counsel upon payment of outstanding fees was not factual based upon its on inquires made to Hogan. In addition, Grant Thornton also indicated that the Company had not been forthcoming with contact information requested from the Company for an official reference regarding the background of the investor. These factors, coupled with newly found information concerning the investor’s background, and the fact that the funding had never occurred as promised by the investor, led Grant Thornton to conclude that it could no longer rely on Patron’s representations and, as a result, Grant Thornton is unwilling to be associated with the financial statements prepared by Patron, and accordingly, advised us that Grant Thornton was withdrawing its audit reports and those audit reports could no longer be relied upon….
Grant Thornton’s findings are highly material and demonstrate that Defendant Allin misled Grant Thornton, given that Defendant Allin was CEO and Acting CFO of Patron when Grant Thornton resigned and made these findings. Effectively, at the time of Grant Thornton’s resignation Defendant Allin was Patron. Indeed, in Patron’s Form 10QSB filed with the SEC three weeks earlier on December 29, 2003, Defendant Allin’s home address is listed as the corporate headquarters of Patron — except that a “Suite 150” is added to the address….
The materiality of the Grant Thornton’s findings is heightened by the fact that Defendant Allin’s Textura biography touted that he has previously served as “audit partner” at “Pricewaterhouse” accounting firm. This is important for two reasons. First, it shows that it is unlikely that Defendant Allin’s misstatements to Grant Thornton were the result of mistake, but more likely fraud or reckless conduct given his background as an “audit partner.” Second, Textura should have disclosed Defendant Allin’s background at Patron [to investors] so that they could assess this [the(?)] material[ity of this] information for themselves….”
Now we wait to see the company’s answer. Onward.