Does anyone know if Berger and Mendoza were named as defendants in any of the class action lawsuits? If the $12MM is not there then it would , on it's face, indicate gross negligence on the part of the auditors. I would guess this regional firm would have a pretty healthy line of liability or error and omissions insurance.
I am not personally of the opinion that the $12MM is gone, but if it is, I would think Berger etc are hanging out quite a bit here and might represent the deepest pockets, after the BOD for recovery.
Just FYI, I spent some of this past week reaching out to all the institutional holders of EGMI stock I could locate. At each firm I was able to speak with the individual handling this investment.
Several would not say much of anything but they all asserted they were not in possesion of any news outside of what is public. Several did say that they either knew the people on the board or had researched them prior to investing and that they believed fraud was unlikely since most had long histories in the financial communities and none of them were thought ill of prior to the current problems. I ran this thesis by the folks who wouldn't comment on anything else and even they confirmed that they felt this way as well. They basically all said that they would not have invested in EGMI if they had not done their homework and that they had originally had faith in the BOD.
A couple commented that they thought there was an internal power struggle over the future direction of EGMI and that this had led to the current debacle.
I do not believe that the institutional guys think there is much of a possibility that there was (is?) no "real" business there.
Not sure what my take-away on this is, as these professionals obviously miscalculated as much, or more, than we individual stockholders, but I have to believe that these organizations do not enter these small companies without knowing the history of the principles involved pretty well.
Take what comfort you will, it's still a crap shoot IMHO. Even without fraud, tiny companies like this often do not survive such a severe blow to their fortunes.
