Did Tolls dump stock to avoid housing wreck?

"An investor in Toll Brothers Inc., the largest U.S. luxury homebuilder, can proceed with claims executives misled shareholders about the company's prospects while they sold stock worth $615 million," Bloomberg reporter Jeff Feeley wrote here, citing a ruling by Delaware Chancery Court Judge Travis Laster. Toll declined comment on the litigation.

Story adds: "Toll Brothers officials must face investors' claims they improperly issued bullish forecasts for fiscal years 2006 and 2007 in the face of falling demand for the company's homes... 'Coupled with massive sales of securities,' statements by officials touting Toll Brothers' performance amounted 'to a red flag,' Laster said in his 49-page ruling."

Refusing to dismiss the case, filed by shareholder Milton Pfeiffer as a "derivative" action, Laster cited "public statements by company co-founder Robert Toll in the summer of 2005 that the homebuilder's sales wouldn't slow because it had continued to 'rock and roll' during other periods in which interest rates rose. Toll also described the stock as 'fabulous' and a 'tremendous' buy at the same time he was selling large blocks of his shares...

"'A senior executive can be bullish about his company without sounding like he is auditioning to replace Jim Cramer on 'Mad Money,' Laster said in the ruling. 'Juxtaposed against the allegations about the underlying trends in Toll Brothers' business, these statements are striking'...

"Laster noted that from late 2004 until the fall of 2005, the defendants sold 14 million shares worth a total of more than $615 million. Bruce and Robert Toll, 'who during their long tenures as co-founders of the company had not previously sold significant amounts of stock, respectively sold 37 percent and 29 percent of their shares,' the judge said." Case is
Pfeiffer v. Bruce E. Toll, Delaware Chancery Court (Wilmington), case 4140