SOURCE: Sunterra Corporation

April 11, 2006 07:00 ET

Sunterra Issues Statement

LAS VEGAS, NV -- (MARKET WIRE) -- April 11, 2006 -- On April 10, 2006, Sunterra Corporation (NASDAQ: SNRR) filed an SEC Form 8-K/A amending Item 4.01 of its SEC Form 8-K as filed on March 27, 2006. In both its March 27th and April 10th filings, Sunterra indicated that the Audit and Compliance Committee of the company's Board of Directors had dismissed Grant Thornton LLP as the company's independent registered public accounting firm on March 21, 2006.

The April 10th filing also included a letter from Grant Thornton that referred to certain allegations made by a former employee regarding Sunterra's European operations. These allegations principally concerned Sunterra's operations in Spain. Sunterra's decision to terminate Grant Thornton was completely unrelated to these allegations, which were first made in December 2005 by the former Sunterra employee shortly after his termination for cause -- a termination subsequently upheld by a Spanish court.

In December 2005, within one business day of the receipt of the allegations and prior to the issuance of the company's fiscal 2005 financial statements, Sunterra's management informed both Grant Thornton and Sunterra's Audit and Compliance Committee of the nature of the former employee's allegations. Management reported that they had promptly brought the allegations to the attention of the company's internal auditors and in-house legal counsel for investigation. This investigation was subsequently supplemented by a further investigation by external counsel.

As the former employee has recently repeated his original allegations to Grant Thornton following the abovementioned Spanish court hearing, and as the same external counsel had investigated both the issues resulting in the former employee's termination for cause and the employee's subsequent allegations, Sunterra's Audit and Compliance Committee, on April 9, 2006, authorized the retention of independent legal counsel to investigate, review and advise the Committee with respect to the allegations and any other matters that may arise in connection with it.

Sunterra management does not currently expect to comment further on this matter until the investigation is completed, which it hopes and expects can be done in a timely manner.

About Sunterra

Sunterra is one of the world's largest vacation ownership companies with more than 317,000 owner families and nearly 100 branded or affiliated vacation ownership resorts throughout the continental United States and Hawaii, Canada, Europe, the Caribbean and Mexico. Sunterra news releases, as well as additional news and information on the company, can be found at

Forward-Looking Statements

Statements about future results and plans made in this release and the statements attached hereto constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. The company cautions that these statements are not guarantees of future performance, and involve risks and uncertainties and other factors that may cause results to differ materially from those anticipated at the time such statements are made. Future results, performance and achievements may be affected by our ability to successfully implement the cost reduction and marketing plans of our European operations, the outcome of the above investigation, general economic conditions, including a global economic downturn, the impact of war and terrorist activity, business and financing conditions, foreign exchange fluctuations, governmental and regulatory actions, the cyclicality of the vacation ownership industry, relationships with key employees, domestic and international political and geopolitical conditions, competition, downturns in leisure travel patterns, risk associated with the level and structure of our indebtedness, risk associated with potential acquisitions and dispositions, the effects of new accounting pronouncements such as SFAS No. 123(R) and SFAS No. 152 and other circumstances and uncertainties. These risks and uncertainties are presented in detail in our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that results will not materially differ.

We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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