A class action has been filed in the Southern District Court of New York against Royal Group Technologies, Ltd, (NYSE: RYG) a global manufacturer of polymer-based home improvement, consumer and construction products, and certain of its officers and directors by stockholders who purchased the company's common stock between February 11, 2004 and October 13, 2004. The action claims that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.

Specifically, the complaint alleges that during the Class Period, defendants caused Royal Group's shares to trade at artificially inflated levels through the issuance of false and misleading financial statements. The statements were materially false and misleading because defendants knew, but failed to disclose that:

• defendants were enjoined in a scheme to packet ill-gotten monies in violation of applicable law, including laws governing "fraud" and "conspiracy";

• defendants used a resort partially owned by them as a vehicle to steal money from the Company;

• the Company's inventory was overstated as defendants delayed the write down of these assets to prevent further earnings erosion;

• the Company's U.S. window business was not poised for growth but faltering, contrary to defendants' portrayal;

• the defendants' margins were being eroded by the increase of higher raw material costs; and

• As a result of (i)-(vi) above, defendants' projections for FY 2003-2004 were grossly overstated.

On October 15, 2004, Royal Group disclosed the first Royal Canadian Mounted Police production order for three Royal Group current or former executives who faced allegations of defrauding shareholders and creditors. The court documents named company founder, controlling shareholder and non-executive chairman Vic De Zen, former CFO Gary Brown and then current President and CEO Douglas Dunsmuir.
The investigation relates to allegations that De Zen, Brown and Dunsmuir violated sections of the Criminal Code for fraud and conspiracy by circulating or publishing a prospectus or statement or account which they knew was false, for a period between January 1996 and July 2004. Upon this news, shares of Royal Group fell $1.12 per share, or almost 15%, to close at $7.85 per share.
On October 28, 2004, these allegations widened to include current CFO Ronald Goegan and large shareholders Domenic D'Amico and Fortunato Bordin, and expanded the time period from January 1996 to the present.