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American Capital Corporation Case 06/29/2007

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Lawsuit Overview

Company
American Capital Corporation
Security
NASDAQ: ACAS

Case Name
American Capital Corporation Case 06/29/2007
Type of Lawsuit
Securities Purchaser Class Action
Class Period Begin
Class Period End
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Summary

<p>According to a press release dated July 18, 2007, a class action lawsuit was filed on June 29, 2007, on behalf of purchasers of the securities issued from the American Capital Corporation (“American Capital”) and Royal Palm Capital Group, Inc. (“Royal Palm”).</p> <p> </p>
<p>The action seeks to pursue remedies under Section 10(b) of the Securities Exchange Act of 1934, Rule 10(b)(5) promulgated thereunder, Section 20(a) of the Securities and Exchange Act of 1934 and for a claim of unsuitability. The complaint alleges that defendants made numerous materially false and misleading statements and fraudulently concealed facts regarding investments in American Capital and Royal Palm. Specifically, the complaint alleges that defendants misrepresented the financial stability of American Capital and Royal Palm and misrepresented the financial stability of investments in American Capital and Royal Palm.</p>
<p> </p>
<p>Further, the complaint alleges that named individuals in control positions of various entities used inter-company transactions including but not limited to “consulting” arrangements, placement agreements, and inter-company loans to artificially inflate the financial conditions of American Capital and Royal Palm, while siphoning off money from these entities through such inter-company dealings. For example, the complaint alleges American Capital loaned $1.3 million to a company called AEI Holding Corporation, entered a placement agreement with Advanced Equities, Inc., an AEI affiliate, and then subsequently repaid the loan directly to the senior manager of American Capital, rather than to American Capital. Likewise, American Capital is alleged to have issued a dividend in the form of stock in a subsidiary, SSI-PM Holdings, Inc., an entity purportedly formed to acquire another entity, Sunshine Industries, Inc. (“Sunshine”). Another entity, owned by certain defendants who were also principals of American Capital, was paid $150,000 to “restructure” Sunshine. However, Sunshine filed for bankruptcy in 2005.</p>
<p> </p>