Newspaper article St Louis Post-Dispatch (MO)

Investors Say They Were Misled by Nationsmart

Newspaper article St Louis Post-Dispatch (MO)

Investors Say They Were Misled by Nationsmart

Article excerpt

Several disenchanted shareholders of NationsMart Corp. allege in separate lawsuits that they were defrauded by the company and two investment firms that touted its stock.

In unrelated lawsuits filed this week in federal courts in St. Louis and Chicago, the NationsMart investors accuse company officials of breaking federal securities laws by reporting misleading information during and after its initial public offering last December.

Both lawsuits seek class-action status in an effort to represent the hundreds of investors in St. Louis and around the nation who have bought NationsMart stock.

In a statement released Wednesday, NationsMart said its executives believe the suits to be "without merit," and said the company will "contest them vigorously."

NationsMart was founded by marketer S. Leslie Flegel and dry cleaner Mel A. Friedman in 1992. It operates dry-cleaning and shoe-repair centers inside Wal-Mart stores.

The lawsuits mark the latest development for a company that has already experienced its share of disappointment and disaster despite a brief history.

Since its public offering, NationsMart has burned through millions, fired one chief executive, been rocked by the death of another in an auto accident and been forced to close about one-third of its centers.

The company in recent months has embarked on a last-ditch effort to sell franchises and borrow money from its own directors to stay afloat.

Meanwhile, NationsMart investors have watched the value of their stock decline since last year's stock offering. The stock, which traded at a high of $6.50 a share last December, closed Wednesday at $1.50.

The investors are suing NationsMart, Pauli & Co. of Clayton, RAS Securities Corp. of New York as well as current and former NationsMart directors and executives.

Those sued include Flegel, who is chief executive of Display Information Systems Corp.; Friedman, owner of Edith Walden Cleaners; Michael E. Thaman, former chief executive at NationsMart; Alice E. …

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