Robbins Umeda LLP
today announced that a class action has commenced in the United States District Court for the District of Delaware (the "Court") on behalf of purchasers of China Natural Gas, Inc. ("China Natural Gas" or the "Company") (NASDAQ: CHNG) common stock during the period between March 10, 2010 and August 19, 2010.
China Natural Gas engages in the distribution and sale of natural gas and compressed natural gas for vehicular fuel to commercial, industrial, and residential customers in the People's Republic of China. China Natural Gas was incorporated in 1999 and is headquartered in Xian, the People's Republic of China.
The complaint alleges that China Natural Gas' directors and officers issued materially false and misleading statements and failed to disclose adverse facts known to them regarding the Company's business and financial results. Additionally, the complaint charges China Natural Gas and certain of its officers and directors with violations of the Securities Exchange Act of 1934.
According to the complaint, China Natural Gas did not disclose and did not properly account for a bank loan of $17.6 million with Pudong Development Bank Xi'an Branch ("Bank Loan") in its annual report for the year ending December 31, 2009 on Form 10-K ("2009 Form 10-K") or the Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 ("March 2010 Form 10-Q"). The complaint further alleges that the defendants failed to disclose that the Bank Loan violated an indenture for Senior Notes and Warrants of the Company, placing China Natural Gas in default under the indenture.
Then, on August 13, 2010, after the close of the market, the Company filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2010. In this report, the Company disclosed that management had identified various deficiencies in China Natural Gas' internal controls over financial reporting and disclosure controls. Subsequently, on August 20, 2010, the Company filed various amendments/restatements to both 2009 Form 10-K and March 2010 Form 10-Q. The closing price for China Natural Gas shares declined markedly on elevated volume from a closing price of $6.64 on August 13, 2010, to a closing price on August 24, 2010 of $5.29 per share, representing a 20% decline from the closing price on August 13.