KO&L SUCCESSFULLY RESOLVES CLAIMS OF COMPUDYNE CORPORATION AND WILLIAM BLAIR MEZZANINE CAPITAL FUND II, L.P. AGAINST FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. FOR $4.5 MILLION AND AGAINST THE FNY ENTITIES FOR $0.3 MILLION, AND AGAINST HILARY L. SHANE
On November 21, 2006, it was announced that CompuDyne Corporation (“CDCY”) and William Blair Mezzanine Capital Fund II, L.P. (“Blair”) had reached a settlement to resolve their claims against Friedman, Billings, Ramsey Group, Inc. (“FBR”) arising out of an offering of a private investment in public equity ("PIPE") on behalf of CDCY and Blair in October 2001. Pursuant to the settlement, FBR, which acted as the placement agent for the PIPE offering, has agreed to pay CDCY and Blair $4.5 million. K&O represented CDCY and Blair in achieving this significant result.
KO&L has also been prosecuting the claims of CDCY and Blair against Hilary L. Shane (“Shane”), First New York Securities, L.L.C. (“FNY Securities”), FNY Millennium Partners, L.P. (“FNY Millennium”), and FNY Capital Corp. (“FNY Capital”) arising out of the same PIPE offering in October 2001in the United States District Court for the Southern District of New York. In June 2007, Plaintiffs agreed to settle their claims against the FNY entities for $300,000 subject to the entry of a bar order by the Court, which was entered on July 19, 2007. Plaintiffs' claims against Shane has also been resolved. In the litigation CDCY and Blair alleged that the FNY entities and Shane engaged in unlawful insider trading by selling CDCY common stock short while in possession of material, non-public information – CDCY’s and Blair’s plan to sell shares by means of a PIPE transaction. In addition, it was alleged that Shane made false representations in order to obtain the right to acquire 475,000 shares of CDCY common stock that were being offered through the PIPE. CDCY and Blair contend that these unlawful actions enabled the FNY entities and Shane to artificially and fraudulently increase the volatility of and/or depress the market price of CDCY common stock prior to the pricing of the PIPE offering, thereby injuring CDCY and Blair. Discovery is ongoing in the action.
