By a News Reporter-Staff News Editor at Telecommunications Weekly -- Schiff Hardin LLP and Oppenheimer Wolff & Donnelly LLP filed the class action lawsuit in the United States District Court for the District of Minnesota, on behalf of William Dean, and all similarly-situated persons and entities who purchased Telecommunications Revenue Bonds Series 2008 (the "Bonds") issued by the Defendant City of Monticello (the "City") between June 19, 2008 and May 31, 2012, inclusive (the "Class Period") (Civ. Act. No. 14-cv-00376, filed on Feb. 12, 2014). The action alleges that the City committed violations of the Securities Exchange Act of 1934 and the Minnesota Securities Act of 2002.
The City is a political subdivision of the State of Minnesota. The Bonds were issued by the City to provide funds to finance the development, acquisition, construction and installation of a "fiber to the premises" broadband communications network (the "FTTP Project"), which provides cable television services, internet access and telephone services. The FTTP Project is owned, developed and constructed by the City.
The complaint alleges that, during the Class Period, the City made fraudulent material misrepresentations and omissions regarding the economic feasibility of the FTTP Project. The sole source of revenue to pay debt service on the Bonds is net operating revenues from the FTTP Project. The net revenues generated by the FTTP Project for the first several years of operations were highly dependent upon the time frame in which the network was completed, as the underlying technology and direct competition in the retail telecommunications market is constantly evolving. Among other things, the complaint alleges that the City failed to disclose the following material facts: (i) on May 21, 2008, less than one month before the issuance of the Bonds, a Summons and Complaint (the "Litigation") was served upon the City by Bridgewater Telephone Company, Inc.; (ii) the City was aware that, as a result of this ongoing Litigation, construction for the FTTP Project would be significantly delayed; (iii) the delay in construction for the FTTP Project would negatively impact projected net revenues, the sole source of cash flow to pay debt service on the Bonds; (iv) the projected net revenues set forth in the offering documents were no longer accurate; (v) bondholders could not rely on the forecasted financial statement set forth in the offering documents to determine when the FTTP Project would begin to generate net revenues.
Due to delays in construction as a result of the Litigation, as well as competition in the market, the FTTP Project has struggled to gain subscribers. In fact, the City has lost money providing the services contemplated by the FTTP Project. Furthermore, until July of 2011, debt service on the Bonds was paid solely from Bond proceeds and not from net revenues of the FTTP Project. The City also used a loan from another department to pay debt service on the Bonds from June 2011 until June 2012. On May 31, 2012, the City publicly announced that it would no longer pay debt service due on the Bonds.
Plaintiff seeks to recover damages on behalf of all purchasers of the Bonds during the Class Period (the "Class"). The plaintiff is represented by Schiff Hardin LLP and Oppenheimer Wolff & Donnelly LLP, which have expertise in prosecuting investor class actions and extensive experience in actions involving financial fraud.
A proposed settlement has been reached with the City in relation to this matter. The proposed Settlement agreement provides for a total recovery of $7,750,000. The Settlement fund includes two parts: (1) a cash payment of $5,750,000 from the City, and (2) a distribution of $2,000,000 in trust funds currently held under an indenture. The Settlement will resolve all claims related to the offering and sale of the Bonds issued by the City. If approved, the Settlement will conclude the class action.
If you purchased or acquired the Bonds during the Class Period, and you wish to serve as lead plaintiff, you may move the Court no later than 60 days from today (no later than April 13, 2014). Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain a member of the proposed class.
If you desire to be represented by your own lawyer, you may hire one at your own expense and you may enter an appearance with the Court.
Keywords for this news article include: Legal Issues, Telecommunications, Oppenheimer Wolff & Donnelly LLP.
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