Frank Quattrone (1956) is a former investment banker at Credit Suisse First Boston who has been convicted of interfering with a government probe into Credit Suisse First Boston's behavior in allocating hot IPOs. The conviction was later overturned...

The Inevitable Vonage Class Action Suit

screwedcrack.jpgWell, that took longer than expected.


Vonage Holdings Corp., the Internet phone company whose shares have fallen 30 percent since their debut, was accused in a class-action lawsuit of violating securities laws and improperly selling shares to customers.

The suit was filed June 2 in the U.S. District Court in New Jersey by Mount Pleasant, South Carolina-based Motley Rice LLC, according to the law firm's Web site. On May 23, Vonage amended a May 22 filing and strengthened its warning that it may have made technical errors in its IPO.

Those errors, it said, may give customers buying shares the right ``to require us to repurchase their shares at the IPO price.'' Holmdel, New Jersey-based Vonage sold 31.3 million shares and raised $531.3 million on May 23.

About 10,000 of Vonage's 1.6 million customers had agreed to buy shares, which were priced at $17. Some customers have said they won't pay for the shares; the company responded by saying it may sue.

If Milberg Weiss were still on the top of its game we're pretty sure this suit would have been filed sometime last week.

(The above left graphic, in case you're wondering, is "screwed on crack.")


Vonage Accused of Breaking Securities Laws in Class-Action Suit [Bloomberg]

Posted by John Carney on June 5, 2006 10:25 AM |

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To some, this may come as a shock; to others, this may all seem uncanny, since the disastrous Vonage IPO echoes founder Jeff Citron's checkered history. Anyone who's read the Vonage prospectus will recall this telling passage:

The past background of our founder, Jeffrey A. Citron, may adversely affect our ability to enter into business relationships and my have other adverse effects on our business. Prior to joining Vonage, Mr. Citron was associated with Datek Securities Corporation and Datek Online Holdings Corp. During a portion of the time Mr. Citron was associated with Datek Securities, the SEC alleged that Datek Securities, Mr. Citron and other individuals participated in an extensive fraudulent scheme involving improper use of the Nasdaq Stock Market's Small Order Execution System, or SOES. There is a risk that some third parties will not do business with us, that some prospective investors will not purchase our securities or that some customers may be wary of signing up for service with us as a result of allegations against Mr. Citron and his past SEC and NASD settlements. We believe that some financial institutions and accounting firms have declined to enter into business relationships with us in the past, at least in part because of these matters. Other institutions and potential business associates may not be able to do business with us because of internal policies that restrict associations with individuals who have entered into SEC and NASD settlements. While we believe that these matters have not had a material impact on our business, they may have a greater impact on us when we become a public company....
Once a thief, always a thief: the Vonage IPO was an excuse for Citron and his cronies to cash out on what was a deeply flawed company, one that couldn't be sold without the help of unwary investors and rapacious bankers out to capture that coveted 7% underwriting fee. Or as Jeremy Bentham might say, it was a bunch of "nonsense on stilts."

Posted by: Danny | June 5, 2006 02:32 PM

Nonsense on stilts erected on the site of the former home of Robert Brennan.

Posted by: Sterling | June 5, 2006 04:27 PM