On October 7, 2013 the Honorable Katherine B. Forrest of the United States District Court for the Southern District of New York appointed Cohen Milstein lead counsel in the pending proposed securities class action litigation against Magnum Hunter Resources Corporation ("Magnum Hunter"). Cohen Milstein's client was selected as lead plaintiff.
The complaint charges Magnum Hunter and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Magnum Hunter engages in the acquisition, exploration, exploitation, development and production of crude oil and natural gas onshore in the U.S. and Canada.
The complaint alleges that during the Class Period, Magnum Hunter issued materially false and misleading statements regarding the reliability of its publicly reported financial reports. It is alleged that investors were misled concerning the reliability of Magnum Hunter’s financial statements and internal controls in order to, among other things, facilitate the sale by Magnum Hunter of hundreds of millions of dollars’ worth of its common stock, preferred shares and publicly traded debt in multiple offerings conducted during the Class Period.
The complaint further alleges that on April 16, 2013, Magnum Hunter disclosed that it had dismissed its “independent” outside auditor, PricewaterhouseCoopers LLP (“PwC”), after PwC advised it of material weaknesses in Magnum Hunter’s internal accounting controls, and that PwC has demanded further investigation into: (1) the valuation of Magnum Hunter’s oil and gas properties; (2) calculation of its oil and gas reserves; (3) its position with respect to certain tax matters; (4) its accounting for its acquisition of NGAS Resources, Inc.; and (5) its compliance with certain debt covenants. Then on April 22, 2013, Magnum Hunter was forced to disclose that PwC disagreed with its account of their parting, disclosing a letter from PwC stating that PwC had “advised the Company that information [had come] to [its] attention that [PwC had] concluded materially impact[ed] the fairness or reliability of the Company’s consolidated financial statements and [that] this issue was not resolved to [PwC’s] satisfaction prior to [its] dismissal.”
The complaint alleges that following the April 16, 2013 disclosure of PwC’s potential disagreement with Magnum Hunter’s accounting practices, which required additional investigation; Magnum Hunter’s resulting termination of PwC; Magnum Hunter’s resulting inability to provide timely audited financial results for fiscal 2012 and its subsequent admission of significant defects in its internal controls; and the April 22, 2013 confirmation that PwC had concluded the Company’s previously reported financial reports did not fairly or reliably reflect its actual financial results, the price of Magnum Hunter’s publicly traded securities plummeted, erasing billions of dollars in market capitalization.
The lawsuit is entitled In re Magnum Hunter Resources Corporation Securities Litigation.
Order - October 7, 2013 [PDF]