Tuesday, July 18, 2006

GTE: Is This Some Kind of Joke?

Filing a lawsuit seems to have become the American way, hasn’t it? I was recently intrigued over the class action law suit pending against GlobeTel Communications Corp. (AMEX:GTE). We all love to see the underdog (a.k.a. the investor) discover the master plot proposed by the tyrant (a.k.a. the company), rescue the damsel, and ride off into the sunset with his 1.8 billion or so awarded in damages, don’t we? We can watch the movie in a couple of years…. Or so we think. I decided to look into this issue myself because as stated by one of Globetel’s investors in Equitygroups.com’s stock-specific message boards, “we need some answers”. Indeed, we do.

The interesting thing about lawsuits is that there are two parties, both represented by potent legal minds, claiming mutually exclusive arguments. By “mutually exclusive”, I mean that both cannot be true. One side is telling the truth. It logically follows, then, that one side is lying. I am making this assumption, although we like to believe the best we can about our fellow human being and we don’t really want to call anyone a “liar”. We call them “misinformed” or “mistaken”. Let’s face it, everyone: In every court room, in every trial, in every city, town, and state throughout our nation, one side is lying through their teeth, and they know it. Ouch. This obvious truth should increase our interest all the more in what is going on in our court rooms. After all, we could all be a defendant some day.

So what does that have to do with GlobeTel Communications Corp. (AMEX:GTE) and the so-called “Rusian deal”? You be the judge:

The law firm of Schatz and Nobel, P.C. has filed a class action law suit on behalf of those who purchased Globetel stock between December 22, 2005 and April 11, 2006. This was one of several lawsuits filed. The claim is that Globetel made a series of materially false statements regarding plans to provide internet services to Russia during that time. Globetell supposedly boasted of 600 million dollar plans to install wireless networks throughout Russia. Globetell stock traded as high as $3.92 per share during the time in question. On April 11, 2006 an article published by Motley Fool questioned the legitimacy of the deal. Stock prices fell 15%, trading at $1.78 per share.

That sounds cut and dried, right? Maybe not; here’s the other side:

CEO of Globetel, Timothy Huff, responded to the Saffaf Gentile lawsuit in a press release May 4, 2006. Their side is that the evidence for this is simply the Motley Fool articles written by Seth Jayson. He was also quoted as saying that a disclaimer on the Motley Fool website states that not “all” of its writers know about the stock market and they reserve the right to be wrong. He referred to the case as laughable and the product of stock manipulators and tabloid journalists…. Huh?

Could it really be that all of this drama and legal activity is the result of an uneducated opinion meant to entertain and suggest? Our busy and prestigious court systems would not tolerate that, would they? I would like to think not. However, I seem to remember a certain incident about a finger being found in some fast-food cuisine that turned out to be a ploy to get money. What will they think of next? I guess that is why our justice system is built on the tenet that you are innocent until PROVEN guilty. We will get our answers yet.


No comments: