ARCHIVED  October 1, 1998

EFTC faces insider trading suit

GREELEY – The severe beating taken by EFTC Corp. common stock this past summer has spawned a class-action lawsuit. A lawsuit alleging insider trading by certain officers and directors of EFTC has been filed on behalf of purchasers of EFTC common stock between April 6, 1998, and Aug. 20, 1998.

The lawsuit was filed in Weld County District Court in Greeley Sept. 17. Craig Anderson, the plaintiff bringing the lawsuit, is charging Denver-based EFTC, its officers, directors and lead underwriter with violations of securities laws in regard to a secondary stock offering conducted in June.

EFTC president and CEO Jack Calderon said no basis exists for such a lawsuit. “The suit has absolutely no merit,” Calderon said. “EFTC will be defending itself aggressively in that suit.”

Anderson bought 150 shares of EFTC stock Aug. 20, when EFTC’s stock price had fallen to $5 a share. While that amount of stock is relatively small, the danger for EFTC is in the lawsuit’s potential class-action status. If granted, such a status could find the company confronting many investors angry over the beating taken by EFTC common stock.

EFTC stock has dropped from a 52-week high of $19 to below $3 this past summer. The stock closed Sept. 30 at $4.19 a share. But Anderson alleges that even at the $5 price at which he purchased the stock, its value was artificially inflated by the company’s representations about its prospects for growth.

EFTC, which has manufacturing facilities in Greeley and corporate offices in Denver, is a provider of small-lot electronics manufacturing and repair services to equipment manufacturers.

Defendants named in the suit are: EFTC Corp.; Calderon; Gerald J. Reid and Lucille A. Reid, company founders; Stuart W. Fuhlendorf, chief financial officer; Brent L. Hofmeister, corporate controller; August P. Bruehlman, chief administrative officer; Robert Monaco, Raymond Marshall, and Lloyd A. McConnell, company directors; and Salomon Smith Barney, lead underwriter for EFTC in the June stock offering.

The suit alleges that the EFTC officers and directors realized in early 1998 that EFTC’s growth from all customers except Allied Signal had turned negative, and that even EFTC’s business with Allied Signal had reached near full volume and would not continue its pattern of strong growth.

EFTC made a secondary stock offering to cash out on stock, the suit alleges, before the true facts concerning the company’s operations and prospects were revealed.

“Had the truth been brought out, that stock would have been trading at near what its trading at now,´ said Randall Steinmeyer, Anderson’s attorney at Reinhardt & Anderson in St. Paul, Minn. “They could never have made that stock offering.”

On June 2, EFTC offered 3 million shares of common stock. for sale. Officers and directors of EFTC were among those selling stocks. According to the complaint, individual defendants sold between 23 percent and 61 percent of their holdings in the company in sales that were “suspicious both in timing and amount.”

According to the lawsuit, stock sales included: Calderon, 80,000 shares at $14 per share, for $1.12 million; Gerald Reid, 250,000 shares for $3.5 million; Stuart Fuhlendorf, 35,000 shares for $490,000; Lloyd McConnell, 155,000 shares for $2.17 million; Lucille Reid, 250,000 shares for $3.5 million; Brent Hofmeister, 15,000 shares for $210,000; August Bruehlman, 20,000 shares for $280,000; Robert Monaco, 260,000 shares for $3.64 million; and Raymond Marshall, 260,000 shares for $3.64 million.

“Each of the defendants is liable for negligently, recklessly or intentionally making false and misleading statements, and/or willfully participating in a scheme or conspiracy and/or aiding and abetting the violation of Colorado law that damaged class members by making false and misleading statements for the purpose of selling their EFTC stock at prices artificially inflated” the lawsuit states.

Fuhlendorf said there were several reasons for the stock offering.

“The purpose of the June offering was to raise funds for the company to continue its rapid growth and to create liquidity for our stockholders,” Fuhlendorf said. “The funds were to be used for paydown of debt and to create working capital for future growth of the business.”

After close of trading on Aug. 20, EFTC announced that it expected third-quarter revenues to be below analysts’ estimates of $60 million to $61 million by approximately 10 percent to 12 percent. Revenues and earnings, a press release stated, were being affected by soft market conditions in the electronic-manufacturing-services industry.

EFTC’s stock dropped to $2 7/8 per share in August, almost 80 percent lower than the $14 per share level where the defendants had sold $42 million of EFTC stock to investors 10 weeks earlier.

Anderson filed a class-action suit, seeking to recover damages on behalf of all purchasers of EFTC common stock from early April to late August. They are represented by several law firms, including Reinhardt & Anderson, Dyer Donnelly in Denver and Milberg Weiss Bershad Hynes & Lerach LLP, a California firm.

GREELEY – The severe beating taken by EFTC Corp. common stock this past summer has spawned a class-action lawsuit. A lawsuit alleging insider trading by certain officers and directors of EFTC has been filed on behalf of purchasers of EFTC common stock between April 6, 1998, and Aug. 20, 1998.

The lawsuit was filed in Weld County District Court in Greeley Sept. 17. Craig Anderson, the plaintiff bringing the lawsuit, is charging Denver-based EFTC, its officers, directors and lead underwriter with violations of securities laws in regard to a secondary stock offering conducted in June.

EFTC president and CEO Jack Calderon said…

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