Wednesday, October 25, 2006

Wait, I Though the Cart Went After the Horse

We've talked about a fair number of press release permutations over the life of this blog.

Today, Xethanol Corporation (AMEX: XNL) decided to add a new one to the list - the "we don't understand securities litigation, but that won't stop us from commenting on it" press release.

The press release starts off in familiar territory, with the routine headline:
Xethanol Says Class Action Lawsuit Without Merit
But instead of staying on course and setting forth the company's intent to put on a "vigorous defense," the press release takes an unexpected left turn:
"All that we have received thus far is the law firm's press release that ran at 5:19 p.m. yesterday afternoon. Not only are the allegations and insinuations baseless, but also the case apparently has no lead plaintiff," said Louis Bernstein, Xethanol's President and interim CEO.
Well, Mr. Bernstein, that is actually the point. The PSLRA requires that:
Not later than 20 days after the date on which the complaint is filed, the plaintiff or plaintiffs shall cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of the purported plaintiff class--

1. of the pendency of the action, the claims asserted therein, and the purported class period; and

2. that, not later than 60 days after the date on which the notice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class.
If the good folks at Xethanol have any further questions about the securities litigation process, Kaplan Fox & Kilsheimer LLP have prepared this handy flowchart to assist them.

The press release that started the furor was issued by Kahn Gauthier Swick, LLC. That release also contained some interesting language:
SPECIAL NOTICE: While federal law does not prohibit other lawyers from "announcing" this lawsuit, Kahn Gauthier Swick is the law firm that researched, investigated, drafted and filed the securities fraud case against Xethanol. If you are a Xethanol shareholder who decides to contact one of these lawyers, Kahn Gauthier Swick reminds you to fully interview any lawyer to assure that they fully understand the facts surrounding the Xethanol claims our firm has filed in Court.
This is indeed a recurring them, last discussed in June 2005 byThe 10b-5 Daily and Securities Litigation Watch, regarding the PEMSTAR litigation.

It also harkens back to the practice discussed in this November 2002 Fulton County Daily Report article on Bill Lerach's efforts to stop other firms from simply copying and re-filing his firm's securities complaints by copyrighting those complaints.

Not to encourage anyone, but a copy of the Kahn firm's complaint in the Xethanol litigation is available here.

Daily Trivia: One of Xethanol's Advisory Board members is Jed Schutz, a real estate developer and chairman of the board of, Inc., a subsidiary of Dotmenu, Inc., "The #1 source for online food ordering at college campuses."

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