General Physics hid facts to raise stock, suit says

June 24, 1992|By Norris P. West | Norris P. West,Staff Writer

Two investors have filed a federal class-action suit against General Physics Corp. of Columbia, claiming the company concealed information about financial problems to boost its stock price.

A company official denied the charges yesterday.

The suit, filed Monday in U.S. District Court in Baltimore, followed the company's announcement Thursday that second-quarter profits would be lower than forecast. Its stock price fell 36 percent the next day.

In court papers, the investors charge that General Physics misled investors and artificially inflated its stock price with an announcement in March. The company said profits would be in line with projections for 1992, though its performance slumped in the first quarter.

But the suit alleges the company knew its problems would affect earnings beyond the first quarter.

The suit was filed by Lenora Isaacs, of Freehold, N.J., who owns 1,000 shares of General Physics common stock, and Adolph P. (( Raab, who bought 50 shares of company stock after the March announcement. The suit seeks to include other shareholders who traded General Physics stock since the announcement.

The company contracts with federal agencies, including the U.S. Department of Energy, where it trains workers to operate and maintain nuclear power plants.

As in March, company officials last week blamed lower profits on delays in awarding government contracts. John C. McAuliffe, General Physics' chief financial officer, said Thursday that one of those contracts is worth $13.6 million. He said the cost of retaining employees also has cut profits.

The company reported profits of 10 cents a share for the first quarter, less than half the 22 cents analysts had predicted.

After Thursday's announcement, Goldman, Sachs & Co. revised its projections for the company's 1992 earnings from $1.05 to 65 cents per share. General Physics' stock plunged from $9.13 to $5.88 per share Friday.

It closed at $6.25 yesterday.

Kenneth L. Crawford, General Physics' general counsel, said yesterday that the company has been forthright with investors. "We have acted in good faith and made accurate disclosures all along."

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