China MediaExpress purports to own the largest television advertising network on buses throughout 18 of China’s regions, including Beijing. According to the complaint, the Company claims to sell advertisements on more than 27,000 buses. However, the complaint alleges that CCME made false and misleading statements, including misrepresentations about its revenues, the number of buses in its network, and the nature of its business relationships.
On February 3, 2011, analyst firm Muddy Waters released a report alleging that CCME had exaggerated the scope of its operations as part of a “pump and dump” scheme to inflate revenues for management, who would sell the stock. The report claimed that CCME owns fewer than half of the buses it claims to own and that many of the buses' screens do not play advertising content. China MediaExpress shares fell 33 percent on February 3, 2011, closing at $11.09 per share.
On March 14, 2011, CCME announced that its independent auditor, Deloitte Touche Tohmatsu (DTT), and its Chief Financial Officer Jacky Lam had resigned. According to CCME, the auditor stated that it was “no longer able to rely on the representations of management.”
The case seeks to represent a class of investors who purchased CCME stock between May 14, 2010, and March 11, 2011 (the “Class Period”).
CASE TIMELINE
The Court has entered a default judgment in the amount of $535 million and certified a proposed class against China Media Express Holdings, Inc. The case will continue to proceed separately against CCME’s former auditor, Deloitte Touche Tohmatsu.
No other motions to dismiss by Defendant CCME are currently pending. Defendant CCME has failed to answer or file a responsive pleading to the Amended Complaint. CCME’s former counsel has stated under oath that CCME has no inclination to continue its defense in this matter, and has consented to withdrawal of its counsel without retaining substitute counsel. The plaintiffs have filed a default against CCME. Defendant Deloitte Touche Tohmatsu (“DTT”) has answered the Amended and Consolidated Complaint. Discovery is now proceeding as to claims against DTT.
U.S. District Judge Victor Marrero of the Southern District of New York has issued a ruling denying CCME and DTT’s motion to dismiss the case.
Hagens Berman filed a memorandum of law in opposition to CCME’s motion to dismiss the case.
Defendants CCME and DTT have filed motions to dismiss pursuant to Fed. R. Civ. P. 12(b)(6).
Plaintiffs filed an amended and consolidated complaint. This amended complaint names CCME and Deloitte Touche Tohmatsu ("DTT") as defendants. This complaint asserts claims against defendant CCME and DTT for violations of Sections 10(b) of the Securities Exchange Act of 1934.
Hagens Berman has been appointed lead counsel for the plaintiffs by the court.
