Stockholders v Open Joint Stock Company
Stockholder Sue Vimpel Communications for $1.4B Loss in Stock Value
Specifically, the complaint charges VimpelCom, Alexander V. Izosimov , and Elena A. Shmatova with violations of the Securities Exchange Act of 1934. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known or recklessly disregarded by the defendants:
(1) that VimpelCom was passing fifty percent (50%) of its revenues from its Moscow operations to its wholly-owned subsidiary KB Impuls, thereby improperly deducting fifty percent (50%) of Moscow revenues as expenses to VimpelCom;
(2) as such, VimpelCom was only paying taxes on fifty percent (50%) of the Moscow revenues rather than on all revenues from its Moscow operations, including revenues passed onto KB Impuls;
(3) that this improper deduction caused VimpelCom to artificially inflate its financial results by at least US$534 million for fiscal years 2001-2003;
(4) that as a result of this, the Company's financial results were in violation of generally accepted accounting principles ("GAAP");
(5) that the Company lacked adequate internal controls; and
(6) that as a result of the above, the Company's financial results were materially inflated at all relevant times.
On December 8, 2004, the Company announced that it had received an act with preliminary conclusions of the review of VimpelCom's 2001 tax filing by its tax inspectorate, stating that the Company owed an additional 2.5 billion rubles which is approximately US$90 million in tax (plus 1.9 billion rubles or approximately US$67 million in fines and penalties). A large portion of this amount related to the deductibility of expenses incurred by VimpelCom in connection with the agency relationship between VimpelCom and its wholly owned subsidiary, KB Impuls, which held the GSM license for the city of Moscow and the Moscow region. The announcement caused shares of the Company's stock to fall $8.38 per share, or 21.78 percent, to close at $30.10 per share.
