An investor has filed suit against former directors and auditors of Asche Transportation Services,
saying they illegally inflated the company's results by $6 million.
The class action, Axelson v. Larry L. Asche et al, charges violations of federal securities laws. It was brought on behalf of all investors who purchased Asche common stock between March 30, 1998, and April 7, 2000. The company filed for bankruptcy last year and therefore is not named as a defendant.
Problems first came to light in January 2000, when the Shannon, Ill.-based company dismissed the controller at subsidiary Asche Transfer after the controller apparently misstated financial reports and allegedly stole more than $60,000. A month later, Larry Asche, chairman and CEO, and Diane Asche, vice president and secretary, were fired for allegedly embezzling $1 million. At the same time, the company announced it was implementing cost-cutting measures. In late April, the company announced its annual financial statements would be delayed, which resulted in the company being delisted from the Nasdaq National Market. Just before the end of the year, Asche Transportation filed for Chapter 7 bankruptcy protection.
The complaint accuses the defendants, which include accounting firm Ernst & Young LLP, with filing or certifying false and misleading financial results. According to the plaintiff, improper accounting practices the Asche Transfer subsidiary inflated the company's net worth by $5 million. Defendants Larry Asche and Diane Asche are accused of misappropriating another $1 million from the company. During the two-year period covered in the suit, Asche stock sold for as high as $8-15/32 a share. The suit claims that Asche Transportation Services used the pumped-up stock to raise $15 million in private placements, prepay $2.23 million of debt and acquire another company.