1 Consolidated Class Action Complaint 02/23/2007

Case 1-06-cv-01892-WMN Document 54 Filed 02/23/2007 Page 1 of 97

UNITED STATES DISTRICT COURT

DISTRICT OF MARYLAND

ROY T. LEFKOE, On Behalf of Himself and ) No. 1:06-cv-01892-WMNAll Others Similarly Situated, )

CLASS ACTIONPlaintiff,

vs.

JOS. A. BANK CLOTHIERS, INC., ROBERTN. WILDRICK, DAVID E. ULLMAN, and R.NEAL BLACK

Defendants.

CONSOLIDATED CLASS ACTION COMPLAINT


TABLE OF CONTENTS

INTRODUCTION ................................................................................................................................ .......1

NATURE OF THE ACTION ............................................................................................................... .......1

JURISDICTION AND VENUE ........................................................................................................... .......4

PARTIES .............................................................................................................................................. .......5

CLASS ACTION ALLEGATIONS ..................................................................................................... .......8

SUBSTANTIVE ALLEGATIONS ...................................................................................................... .....10

A. Background ................................................................................................................... .....10

B. Jos. A. Bank's Focus on Inventory Management ......................................................... .....11

C. Wildrick's Knowledge of Inventory Issues .................................................................. .....15

D. Jos. A. Bank's Stores Are Flooded with Unprecedented Levels of Fall/Winter2005 Inventory .............................................................................................................. .....16

E. Defendants Take Drastic Action to Move Inventory .................................................... .....23

F. The Company Starts to Recall Remaining Unsold Inventories .................................... .....28

G. Defendants' Price Reduction Strategies Negatively Impacted Sales of theCompany's Core and Spring 2006 Merchandise .......................................................... .....29

H. Jos. A. Bank's Financial Statements Violated GAAP .................................................. .....32

DEFENDANTS' FALSE AND MISLEADING STATEMENTS MADE DURING THE CLASSPERIOD .................................................................................................................................... .....3 9

THE TRUTH IS REVEALED .............................................................................................................. .....66

ADDITIONAL SCIENTER ALLEGATIONS ..................................................................................... .....72

A. Wildrick's Suspicious Insider Trading ......................................................................... .....74

B. The Individual Defendants' Enormous Cash Bonuses ................................................. .....80

i


APPLICABILITY OF PRESUMPTION OF RELIANCE: FRAUD ON THE MARKETDOCTRINE ...................................................................................................................................82

LOSS CAUSATION .................................................................................................................................. 83

NO SAFE HARBOR .................................................................................................................................86

COUNT I - FOR VIOLATIONS OF SECTION 10(b) OF THE EXCHANGE ACT AND RULE10b-5 OF PROMULGATED THEREUNDER AGAINST ALL DEFENDANTS .......................87

COUNT II - FOR VIOLATIONS OF SECTION 20(a) OF THE EXCHANGE ACT AGAINSTDEFENDANTS WILDRICK, ULLMAN AND BLACK .............................................................91

PRAYER FOR RELIEF ............................................................................................................................92

JURY TRIAL DEMANDED .....................................................................................................................92

ii


INTRODUCTION

1. Lead Plaintiff Massachusetts Labor Annuity Fund ("Lead Plaintiff' or "Plaintiff'),

individually and on behalf of a proposed class (the "Class") of all purchasers ofthe publicly traded securities

of Jos. A. Bank Clothiers , Inc. ("Jos . A. Bank" or the "Company") (NASDAQ: JOSB) between December 5,

2005 and June 7, 2006 (the "Class Period"), by and through their undersigned counsel, allege the following

against Jos. A. Bank, Robert N. Wildrick ("Wildrick"), David E. Ullman ("Ullman") and R. Neal Black

("Black") (collectively, "Defendants") seeking remedies under the Securities Exchange Act of 1934 (the

"Exchange Act"). The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the

Exchange Act, 15 U. S.C. §78j (b) and 78t(a), and Rule 1 Ob - 5 promulgated thereunder, 17 C.F.R. §240.1 Ob-5.

NATURE OF THE ACTION

2. Jos. A. Bank describes itself as a designer, retailer and direct marketer of men's tailored and

casual clothing and accessories . Targeting the male career professional , Jos. A. Bank's branding emphasizes

very high levels of quality in its merchandise and in its customer service.

3. The Company sells its products through three primary sales channels: retail store, mail order

catalog, and internet operations. Of these three channels, Jos. A. Bank derives most of its sales through its

more than 350 retail stores located throughout forty states and the District of Columbia. As such, the

Company's ability to forecast and control inventory levels is particularly important to its financial success.

For example, if inventory levels at the retail stores are too low, the Company could lose sales opportunities

because certain products are simply not available to the customers. If, however, those inventory levels are

too high, the Company could be forced to heavily discount existing products to clear out excess inventory in

time for the arrival of the next season's merchandise, a move that could devastate the Company's profit

margins.

1


4. In fact, the Company highlights inventory availability as one ofits "Four Pillars of Success."

Because of the importance of maintaining appropriate inventory levels, Defendants have developed a

comprehensive system of controls that allows them to track inventory at all oftheir retail stores as well as at

the Company's Hampstead, Maryland distribution centers. To be sure, former employees have explained

that the Company uses more than twenty different reports on an almost daily basis in order to forecast,

purchase, allocate, transfer and manage inventory. Many of these reports were disseminated to Wildrick,

Ullman and Black, among others, and the information contained within these reports was a frequent topic of

discussion at various meetings attended by these senior executives . Further, on a monthly basis , Wildrick

would visit various retail stores across the country to gauge their inventory levels, and direct that appropriate

adjustments be made if the circumstances required.

5. Against this backdrop, Defendants issued a series of false and misleading statements

throughout the Class Period concerning Jos. A. Bank's sales , earnings, profit margins and inventories.

Defendants reported "record-breaking earnings" during the Class Period which they attributed to significant

increases in sales and profit margins and the Company's ability to maintain tight control over inventory

levels . Complementing these positive results , Jos. A. Bank had been implementing a strategic initiative to

greatly expand its presence in the men's retail clothing field through a substantial expansion of its retail

stores throughout the country. This strategy required the Company to place an even greater emphasis on

inventory control issues to ensure that new stores were provided with sufficient quantities of the most up-to-

date merchandise and that older stores were not overwhelmed with aging inventory that would not be sold in

new stores.

6. In reality, however, things were not as rosy as Defendants had portrayed. By late 2005, it

became obvious that Jos. A. Bank had overbought its Fall/Winter 2005 merchandise line. Indeed, delayed

2


store openings and tepid customer response to the Fall/Winter 2005 merchandise caused inventory levels to

swell to unprecedented levels. With inventories at the stores and the Company's warehouse piled high, and

no apparent relief in sight, Defendants knew that drastic action needed to be taken to move excess inventory

and meet the sales figures expected by the market.

7. Consequently, Defendants concluded that they would need to substantially discount the

Fall/Winter 2005 merchandise to get it off the shelves, out of the backrooms and out of the warehouse.

Thus, fueled by an intense advertising campaign, Defendants continuously marked down this merchandise

throughout the Class Period until it was selling at prices 70% below the original retail value in most cases.

These tactics had the desired effect ofimproving overall sales figures. But this improvement

came at a significant price. While store sales undoubtedly increased, Defendants failed to disclose the true

picture of the Company's financial condition. Indeed, reckless inventory management and aggressive

pricing strategies resulting from Company-wide clearance programs had been causing severe erosion to Jos.

A. Bank's gross profit margins. Further, sales of the highly discounted Fall/Winter merchandise had, in

effect, cannibalized sales of the higher margin core and Spring 2006 merchandise that had been available at

retail stores for months. Finally, by failing to take an appropriate charge against earnings for knowingly

impaired Fall/Winter 2005 inventories, and instead later washing out the impairment through massive

liquidation efforts, Defendants disseminated financial results that violated Generally Accepted Accounting

Principles ("GAAP"), and were thus false and misleading.

9. The true financial condition of the Company was revealed on June 7, 2006 when Jos. A. Bank

reported its results for the first quarter of fiscal 2006. At that time, Defendants announced that Jos. A.

Bank's "gross profits declined primarily as a result of increased customer demand for fall merchandise,

resulting in less demand for the year-round core merchandise." While Defendants publicly attributed a 140


basis point decrease in gross profit margin to "customer demand" rather than inventory problems or

aggressive promotional pricing, securities analysts following the Company were not so easily fooled. These

analysts openly questioned Defendants' credibility and lack of candor concerning inventory and gross

margin problems that should have been clearly visible early in the Class Period.

10. Accordingly, the market was stunned by the Company' s adverse announcement and punished

the stock price as a result. Following the announcement, the price of Jos. A. Bank shares fell $10.73 a share,

or approximately 29%, to close at $26.40 per share on unusually heavy trading volume, causing tens of

millions of dollars of investor losses.

11. While investors were suffering, Wildrick was laughing all the way to the bank. In fact,

buoyed by Defendants ' misrepresentations , Wildrick unloaded over 74% of his Jos. A. Bank common stock

holdings at artificially inflated prices during the Class Period for proceeds ofnearly $36 million.

JURISDICTION AND VENUE

12. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the

Exchange Act, 15 U.S.C. §§ 78j (b) and 78t (a), and Rule lOb - 5 promulgated thereunder by the Securities

and Exchange Commission (" SEC"), 17 C.F.R. § 240. 1Ob-5.

13. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §

1331, and Section 27 of the Exchange Act, 15 U.S.C. § 78aa.

14. Venue is proper in this District pursuant to Section 27 of the Exchange Act and 28 U.S.C. §

1391(b). Many of the acts charged herein, including the preparation and dissemination of materially false

and misleading information, occurred in substantial part in this District. In addition, Defendants maintain

their chief executive office and principal place of business in this District.

4


15. In connection with the acts alleged in this Complaint, Defendants, directly or indirectly, used

the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate

telephone communications and the facilities of the national securities markets.

PARTIES

16. Lead Plaintiff Massachusetts Labor Annuity Fund was appointed to serve as Lead Plaintiffin

this consolidated action in the Court's November 20, 2006 Order. Lead Plaintiff purchased Jos. A. Bank

securities at artificially inflated prices during the Class Period and suffered an economic loss when the true

facts about the Company's business and financial condition were disclosed and the stock price declined as a

result.

17. Defendant Jos. A. Bank, a Delaware Corporation, maintains its principal executive offices at

500 Hanover Pike, Hampstead, Maryland 21074.

18. Wildrick is, and was at all relevant times, Jos. A. Bank's CEO, President and a member ofthe

Board ofDirectors. Wildrick has served as a member of the Jos. A. Bank Board of Directors since 1994, as

the Company's CEO since November of 1999 and as Jos. A. Bank President since December of 1999. In

this capacity, Wildrick had general authority over all matters relating to the business and affairs of the

Company, including, among other things the dissemination of information regarding the Company's

operations, financial condition, performance and growth. More specifically, Wildrick: (1) reviewed,

controlled and certified the contents of the Company's Form 10-K filed with the SEC during the Class

Period; (2) participated in the Jos. A. Bank earnings conference calls during the Class Period in which false

and misleading statements were disseminated; and (3) participated in the Company's issuance of the false

and misleading press releases during the Class Period. As described below, Wildrick greatly profited from

his position in Jos. A. Bank. In addition to his more than million dollar annual salary, Wildrick received a

5


bonus up to 250% of his annual salary that was directly tied to the performance of Jos. A. Bank stock.

Moreover, during the Class Period, Wildrick, armed with knowledge ofthe non-public adverse material facts

concerning the Company, as alleged herein, sold common stock, garnering for himself almost $36 million in

insider trading profits without disclosing, at the time of his stock sales , these adverse material facts and that

he was making false and misleading statements to the market, as alleged herein.

19. Ullman is , and was at all relevant times, Jos. A . Bank' s Chief Financial Officer ("CFO"),

Principal Financial and Accounting Officer and Executive Vice President ("EVP"). Ullman has served as

the Company's CFO and EVP since 1995 . As Jos. A. Bank's CFO and principal financial and accounting

officer, Ullman's responsibilities included evaluating the effectiveness of disclosure controls and procedures

required for preparing reports to be filed with the SEC. Ullman reviewed, controlled, and certified the

contents of the Company's Form 10-K and financial press releases issued during the Class Period.

Moreover, Ullman led every Jos. A. Bank's earnings conference call during the Class Period in which false

and misleading statements were disseminated.

20. Black is, and was at all relevant times , Jos. A. Bank' s Executive Vice President of

Merchandising and Marketing. Black has served in this role since 2000. In this capacity, Black was

responsible for setting the annual budget for merchandise purchases and overseeing the Company's buying

and planning process. In addition, Black participated in every Jos. A. Bank earnings conference call during

the Class Period in which false and misleading statements were disseminated.

21. Defendants Wildrick, Ullman and Black are collectively referred to herein as the "Individual

Defendants." The Individual Defendants by reason of their senior executive positions at the Company are

familiar with and have been privy to non-public information concerning Jos. A. Bank's business, finances,

sales , and present and future business prospects via access to internal corporate documents, conversations,

6


and connections with other corporate officers and employees, attendance at management and Board

meetings and committees thereof, and via reports and other information provided to them in connection

therewith. Because of their possession of such information, the Individual Defendants knew or recklessly

disregarded that adverse facts specified herein had not been disclosed to, and were being concealed from the

investing public. Except to the extent set forth in this Complaint as provided by confidential witnesses who

are primarily former Jos. A. Bank employees, Plaintiff and other members ofthe Class had no access to such

information, which was, and remains solely under the control of Defendants.

22. Because of their position and access to material information available to them but not the

public, the Individual Defendants knew or recklessly disregarded that the adverse facts specified herein had

not been disclosed to and were being concealed from the public and that the positive representations that

were being made were then false and misleading. As a result, the Individual Defendants are responsible for

the accuracy of Jos. A. Bank's corporate releases detailed herein and are therefore responsible and liable for

the representations contained therein.

23. Each of the Individual Defendants is liable as a primary violator in making false and

misleading statements, and for participating in a fraudulent scheme and course ofbusiness that operated as a

fraud or deceit on purchasers of Jos. A. Bank's securities during the Class Period. Defendants had motives

to pursue a fraudulent scheme in furtherance oftheir common goal, i.e., artificially inflating the trading price

of Jos. A. Bank's securities, which was based in large part on Jos. A. Bank's profit margins and overall

profits being high, by making false and misleading statements and concealing material adverse information.

The fraudulent scheme and course of business was designed to and did: (i) deceive the investing public,

including Plaintiff and other Class members; (ii) artificially inflate the price of Jos. A. Bank's securities

during the Class Period; (iii) cause Plaintiff and other members of the Class to purchase Jos. A. Bank's

7


securities at inflated prices; (iv) allow Jos. A. Bank to conceal and cover up the true financial condition of

Jos. A. Bank to the detriment of its investors, but to the financial benefit of Jos. A. Bank and Defendant

Wildrick who unloaded massive quantities of Jos. A. Bank stock at artificially inflated prices ; and (v)

substantially cause the significant decline in Jos. A . Bank' s stock price as the artificial inflation was

released, resulting in economic damages to Plaintiff and the Class.

24. The Individual Defendants by their status as executive officers of the Company were

"controlling persons" of the Company within the meaning of Section 20 of the Exchange Act and had the

power and influence to cause the Company to engage in the unlawful conduct complained of herein.

CLASS ACTION ALLEGATIONS

25. Plaintiff brings this action as a class action pursuant to Federal Rules of Civil Procedure 23(a)

and (b)(3) on behalf ofthe Class, consisting of all those who purchased the securities of Jos. A. Bank during

the Class Period. Excluded from the Class are Defendants, the officers and directors of the Company,

members of their immediate families and their legal representatives, heirs, successors, or assigns and any

entity in which Defendants have or had a controlling interest.

26. Because Jos. A. Bank has millions of shares of stock outstanding , and because the

Company's shares were actively traded on the NASDAQ, members ofthe Class are so numerous thatjoinder

of all members is impracticable. According to Jos. A. Bank's SEC filings, as of shortly before the close of

the Class Period, Jos. A. Bank had more than 17 million shares outstanding. While the exact number of

Class members can only be determined by appropriate discovery, Plaintiff believes that Class members

number at least in the thousands and that they are geographically dispersed.

8


27. Plaintiff's claims are typical ofthe claims ofthe members of the Class because Plaintiff and

all of the Class members sustained damages arising out of Defendants' wrongful conduct complained of

herein.

28. Plaintiff will fairly and adequately protect the interests ofthe Class members and has retained

counsel experienced and competent in class actions and securities litigation. Plaintiff has no interests that

are contrary to or in conflict with the members of the Class he seeks to represent.

29. A class action is superior to all other available methods for the fair and efficient adjudication

of this controversy, since j oinder of all members is impracticable. Furthermore, as the damages suffered by

individual members of the Class may be relatively small, the expense and burden of individual litigation

make it impossible for the members ofthe Class to individually redress the wrongs done to them. There will

be no difficulty in the management of this action as a class action.

30. Questions of law and fact common to the members of the Class predominate over any

questions that may affect only individual members, in that Defendants have acted on grounds generally

applicable to the entire Class. Among the questions of law and fact common to the Class are:

(a) whether Defendants violated the federal securities laws as alleged herein;

(b) whether Defendants' publicly disseminated press releases and statements during the

Class Period omitted and/or misrepresented material facts;

(c) whether Defendants breached any duty to convey material facts or to correct material

facts previously disseminated;

(d) whether Defendants participated in and pursued the fraudulent scheme or course of

business complained of herein;

9


(e) whether Defendants acted willfully, with knowledge or severe recklessness, in

omitting and/or misrepresenting material facts;

(f) whether the market prices of Jos. A. Bank's securities during the Class Period were

artificially inflated due to the material nondisclosures and/or misrepresentations complained of herein; and

(g) whether the members ofthe Class have sustained damages as a result of the decline

in value of Jos. A. Bank's stock when the truth was revealed and the artificial inflation came out and, if so,

what is the appropriate measure of damages.

SUBSTANTIVE ALLEGATIONS

A. Background

31. Established in 1905, Jos. A. Bank describes itself as "one ofthe nation's leading retailers of

men's classically-styled tailored and casual clothing, sportswear, footwear and accessories." Jos. A. Bank's

products are targeted at the male career professional. The Company prides itself on providing "upscale

classic, professional men's clothing with superior quality at a reasonable price."

32. Jos. A. Bank offers a wide range of clothing and accessories , including formal , business,

business casual, sportswear and golf apparel, under its own label. The Company also sells branded shoes

from other vendors. The Company offers its products at what it calls the "Three Levels of Luxury," which

range from the Jos. A. Bank collection to the more luxurious Signature and Signature Gold collections. The

Company designs and directly sources substantially all of its products through third party suppliers,

manufacturers and/or agents using Jos. A. Bank designs and specifications in an effort to reduce costs.

33. Jos. A. Bank utilizes a multi-channel retailing approach through which it sells merchandise at

retail stores, through a mail order catalog and over the internet. The Company derives the overwhelming

majority of its net sales from its retail store operations. For example, for fiscal 2005, retail store operations

10


accounted for approximately 88% of the Company's net sales. Because of the importance of its retail sales

operations, Jos. A. Bank has indicated that "it has substantial opportunity to increase its store base

throughout the country" and plans to open approximately 500 stores by 2008. It currently has more than 350

stores nationwide.

B. Jos. A. Bank' s Focus on Inventory Management

34. As a clothing retailer, Jos. A. Bank's ability to manage its inventory is vital to its financial

success and is at the forefront of issues discussed and analyzed by the Company 's management . Indeed, the

Company's SEC filings and other public statements tout this philosophy, noting that "inventory availability"

is one of its "Four Pillars of Success" and is a "key focus" for the Company. The Company further

recognizes that its inventory controls and associated gross profit margins are constantly scrutinized by the

market as a benchmark of the Company's financial well being.

35. Achieving proper levels of inventory is a balancing act which requires Jos. A. Bank to keep

enough inventories on hand at the store level to satisfy customer demand without saturating itself in excess

merchandise that cannot be sold in a timely manner. In order to achieve this proper balance, the Company

has established a comprehensive set of controls and procedures which enable it to constantly monitor the

Company's inventory levels at the retail stores and at the Company's Hampstead distribution center.

36. At Jos. A. Bank, efforts to manage and control inventory levels began during the budgeting

and planning stage. According to a former Senior Planner, a former Planner ("Planner 1"), and a former

Associate Planner,' Wildrick, Ullman and Black, whose offices were located in an area called "Executive

Jos. A. Bank's Planning department consisted of Senior Planners, Planners, Assistant Planners andAssociate Planners, all of whom were responsible for analyzing the Company's sales trends to assist in

11


Row," were all proactive in formulating annual and seasonal purchasing budgets and setting sales goals.

Planner 1 specifically noted that Ullman was intimately involved in the planning and merchandising

decisions and strategies of the Company and issued the directives implementing these decisions . Another

former Planner ("Planner 2") stated that it was Black and/or Ullman who established made the preliminary

budget numbers, but that the final decisions on the annual budget were made by Wildrick. This witness

explained that once Wildrick finalized the budget, a hard copy would be submitted by either Black or

Ullman to all of the Company' s Planners.

37. The former Senior Planner revealed that the budgeting and planning process was particularly

important to the Company due to the lengthy lead time within which merchandise orders had to be placed

with vendors . Since Jos. A. Bank placed orders with vendors up to one year in advance of the season for

which the merchandise would be sold at the Company's retail stores, the Company strived to make proper

purchasing decisions because canceling orders that were already be "in the pipeline" was not an option.

Thus, if the Company over-bought merchandise for a particular period, it would be stuck with the excess

merchandise and would be forced to conduct store-to-store transfers , sales, clearances and recalls in order to

eliminate as much of the surplus inventory as possible.

38. A former Buyer2 explained that, after the annual budget was set, and the merchandise orders

were received, the Company's Buyers and Planners would work together using various reports to make sure

implementing the annual/seasonal purchasing budget and to maximize department sales by strategicallyallocating merchandise throughout the Company' s retail stores.

2 Buyers or Merchandising Managers work with the Company's various planners and personnel fromthe Direct Sourcing department to procure sufficient quantities of merchandise/inventory so that forecastedsales could be fulfilled.

12


that the correct amount of inventory was purchased and allocated properly to all Jos. A. Bank stores.

According to a former Assistant Planner, Jos. A. Bank's merchandising department used as many as twenty

different reports on a daily basis to manage and track virtually every facet of the Company's inventory

levels. A former Associate Planner further explained that the Company's computer system used a software

interface, known as the "Eye," that would allow Jos. A. Bank to generate a wide variety of reports used for

forecasting, purchasing, allocating, transferring and managing inventory. Ofthe approximately 20 inventory

reports used by the Company, the most prominent reports included the Open to Buy Report (`OTB Report"),

the Dashboard Report, the Basic Stock Plan Report (the "BSP" Report), the Inventory Analysis Sheet and

FIFO/LIFO Reports.

39. The OTB Report enabled the Company's Planners and Buyers to determine how many items

of a particular class of merchandise or inventory the Company would need to purchase for a given time

period within the upcoming season . The former Assistant Planner elaborated that Jos. A. Bank's Planners

used the information in the OTB Reports to adjust inventory purchases to avoid an excessive surplus of

inventory and to reallocate certain items to stores where sales for a particular product could be maximized.

The former Associate Planner further revealed that at the bottom of every OTB Report was an "OTB line,"

which indicated whether the Company had bought an appropriate level of merchandise for a particular

month and how much, if any, additional funds could be carried over to purchase more merchandise in the

following month. A former Senior Planner explained that each departmental OTB report was "rolled up"

into one comprehensive OTB Report that was provided to Jos. A. Bank's senior executives so that they

could view the total purchasing and budgetary status of Jos. A. Bank.

40. In addition to the OTB Report, the Dashboard Report, according to the former Assistant

Planner, conveys sales and inventory data from each retail store to the Company's headquarters for each

13


day. Moreover, the former Associate Planner explained that the BSP Report shows the movement of

inventory between the distribution center and stores in actual unit amounts on a per style basis for any given

point in time. A former Store Manager who worked in one of the Company's Virginia stores ("Store

Manager 1")3 stated that, on a monthly basis, the Inventory Analysis Sheet provides information on store

inventory for individual product categories using two distinct metrics: the amount of on-hand inventory

expressed in dollar values and the amount of on-hand inventory expressed in quantity. This report also

contained the price and quantity of inventory sold and projections on a month-to-date, quarter-to-date, and

year-to-date basis. The FIFO/LIFO Reports, according to a former Merchandising Manager and Planner 1,

showed Jos. A. Bank's existing inventory and how long such inventory had been at the distribution center.

At bottom, according to the Associate Planner, inventory turnover, which showed how many times the

Company's inventory is sold and replaced over a period of time, was an important metric analyzed by the

Company.

41. Jos. A. Bank's management, including the Individual Defendants, discussed these and other

inventory reports at regularly scheduled meetings in order to keep abreast of various inventory issues that

may arise on a monthly, weekly or even daily basis. For example, Black and other Vice Presidents led

monthly "OTB meetings" at the Company's headquarters at which certain departmental Planners and Buyers

discussed whether the Company was effectively executing its merchandise purchases, staying within its

spending budgets, and achieving its sales forecasts. Planner 2 stated that, during these OTB meetings, Black

would commonly make references to concerns Wildrick had expressed to him about sales and margins, such

The Store Managers oversee a retail store's operations, which includes managing one Assistant StoreManager and several Sales Associates, meeting the annual sales expectations set by the corporate office, andtraining newly hired employees.

14


as "Bob's worried about sales" or "Bob's worried about margins." In addition, numerous former Store

Managers, including a former Store Manager in the Company's New Jersey region ("Store Manager 2"),

stated that the Regional Sales Directors4 and other Store Managers participated in weekly conference calls to

discuss store performance, operations, inventory problems and sales strategies.

C. Wildrick' s Knowledge of Inventory Issues

42. As Jos. A. Bank's CEO, Wildrick was deeply involved in the Company's inventory issues

and was always concerned about whether the Company's retail stores had adequate levels of inventory on

hand. In this regard, a former Regional Sales Director ("Regional Sales Director 1") frequently heard

Wildrick proclaim that "You can't sell it if it's in the warehouse!"

43. In addition to his participation in the budgeting and planning process, his review of key

inventory reports and attendance at various inventory meetings, Wildrick was keenly aware of the inventory

issues faced by the Company through his monthly visits to the Company' s retail stores . The former

Associate Planner and Planner 1 stated that Wildrick would frequently visit Jos. A. Bank retail stores and

speak with Store Managers about their existing inventory levels. According to a former Senior Planner, it

was "par for the course" for Wildrick to personally visit a varying number of stores throughout the country

on a monthly basis. These witnesses further explained that, during these visits, Wildrick would contact

Black and others at headquarters and direct that inventory be reallocated from one store to another or

recalled back to the distribution center. As a result, the former Associate Planner would be forced to attend

"emergency" meetings on almost a weekly basis or would receive e-mails from Black and other Vice

4 The Company employs 24 Regional Sales Directors who were responsible for overseeing theoperations of all the retail stores located within their particular region.

15


Presidents requiring immediate action on one of Wildrick' s directives . Planner 1 explained that, by

following Wildrick's directives, the Company was not really alleviating the problem because they were

effectively transferring inventory from one overburdened store to another.

44. Wildri ck' s conduct duri ng the store visits was corroborated by a former Store Manager at one

of the Company's New York stores ("Store Manager 3"), who described one of Wildrick's visits in

December 2005. During this visit, Store Manager 3 indicated that Wildrick became infuriated with the

store's current level of inventory and began making calls to several executives demanding that inventory

levels be adjusted immediately.

D. Jos. A. Bank's Stores Are Flooded with UnprecedentedLevels of Fall/Winter 2005 Inventory

45. Defendants strongly believed that having inventory in stock was pivotal to achieving desired

sales . A former Regional Sales Director ("Regional Sales Director 2") explained that Jos. A. Bank had a

general policy of supplying its retail stores with large amounts of inventory at all times so that its stores

would be fully stocked throughout a given season. Despite the inventory controls instituted by Defendants,

however, Jos. A. Bank began to run into serious inventory problems in the fall of 2005.

46. One major factor contributing to an inventory surplus was delays and poor planning of the

Company's store expansion initiative. Prior to the Class Period, Jos. A. Bank had embarked on an ambitious

plan to expand its retail store presence. According to the former Associate Planner and Store Manager 3, the

Company had set a goal to open 100 stores every year beginning in 2003, with a total build-out of 500 new

stores to be completed in 2008. These witnesses explained that this store expansion plan negatively

impacted the business ofthe Company's existing stores and led to an overabundance ofinventory in existing

Jos. A. Bank stores.

16


47. As the former Associate Planner recalled, in making its seasonal purchasing decisions, the

Company took into account its projected store openings and purchased sufficient inventory to stock its

"new" stores even though they were not yet open. This became a significant problem during 2005 because

these purchasing decisions were made based on store designs that planned for greater inventory capacities

than the new stores actually possessed once they were built. As a result, once these stores were open and

operational, they ended up having a surplus of inventory. In fact, Planner 1 stated that, while purchasing

decisions were made based on the 4,000 square feet of capacity of the Company's prototype store, the actual

stores were being built with significantly smaller capacities, thereby causing inventory issues when these

new stores were opened for business.

48. Further, for a variety of reasons, the Company experienced considerable delays in getting

stores constructed and operational during 2005. The Senior Planner indicated that it was common for new

store openings to be delayed from the originally scheduled opening dates. In fact, many of the new stores

were not constructed in the timeline that had been expected and set by management, even though inventory

had been purchased in anticipation that those stores would be open by a certain time. The former Associate

Planner and former Senior Planner stated that the merchandise originally intended for these delayed stores

then had to be reallocated to nearby existing stores, even though these stores might already be burdened with

an overabundance of their own inventory. Indeed, according to a former Merchandising Manager, the

Company maintained a strict policy whereby new stores could only feature a current season's merchandise,

and therefore could not carry merchandise from the previous season. Because many new store openings

were delayed, merchandise originally intended for these new stores had to be reallocated to nearby existing

stores.

17


49. Finally, Store Manager 3 stated that through its store expansion plan, Jos. A. Bank was

"cannibalizing" itself by opening new stores within close geographic proximity to existing Jos. A. Bank

stores. Because the new and old stores were so close together, sales figures in both were suffering, and both

were being overwhelmed with unsold inventory. For example, this witness described how Jos. A. Bank

opened two new stores, in New Canaan and Westport CT, that were within 15 minutes driving distance from

the store in Stamford, CT, which was one of the Company's largest and most profitable. By the time this

witness left the Company, the two new stores drove down the profitability of the Stamford store to the point

that management had to reduce its size from a three story "megastore" to one floor.

50. Another significant factor contributing to the drastic increase in inventory levels during late

2005 was that the Company's Fall/Winter 2005 merchandise line was selling very poorly. The former

Associate Planner confirmed that, by September of 2005, only 1 month after its introduction, sales of the

Fall/Winter 2005 line had already fallen dramatically short of forecasted levels, resulting in a surplus of

unexpected inventory. In fact, the witness explained that the Company had so much inventory accumulated

by September 2005, that, "in several classes [i.e., categories of clothing] it would take you a year to turn

existing inventory," instead of the normal six month period required for an inventory turn. The witness

emphasized that, for the Company to have so much inventory this early in the selling season, it was very

clear that the Company had overbought Fall/Winter 2005 merchandise for numerous product classes,

including Nested Suits, Suit Separates (Class 1171 and 1172) and Tuxedos (Class 1160), by upwards of 10%

to 15%.

51. Indeed, Planner 1 confirmed that Jos. A. Bank had forecasted more sales of Fall/Winter

merchandise than actually took place. As this witness explained, the Company had purchased inventory in

anticipation of sales that did not materialize, and because existing orders could not be cancelled, the

18


Company had a growing surplus of inventory. The witness stated that the fact that the Company grossly

overbought the Fall/Winter merchandise line was clearly indicated by the OTB Reports distributed to senior

executives, including the Individual Defendants and discussed at OTB meetings.

52. From participating in monthly OTB meetings, the former Associate Planner learned that the

surplus of inventory was not limited to any specific product classes, but was attributable to the entire

Fall/Winter 2005 merchandise line. From these meetings, it was evident that the Company had amassed an

unprecedented surplus ofinventory and that this one-year turnover ratio for so many classes of merchandise

was a significant problem for the Company.

53. Not only was did the overabundance of inventory cut across all product classes, but it also

adversely impacted retail stores across the country. For instance, a former Assistant Store Manager at one of

the Company's South Carolina stores ("Assistant Store Manager")5 commented that the Fall/Winter 2005

merchandise did not sell well and, consequently, inventory levels at the store greatly increased going into

late 2005. In fact, although the Company always made sure that this South Carolina store kept high levels of

inventory on hand, this witness indicated that, by late 2005/early 2006, the inventory levels had risen

appreciably due to the lack of success of the Fall/Winter 2005 line.

54. Similarly, a former Store Manager at one ofthe Company's Michigan stores ("Store Manager

4") verified that the Company had been experiencing unprecedented levels of inventory prior to and during

the Class Period. This former employee confirmed that, while the Company usually made it a practice to

5 The Assistant Store Manager was responsible for assisting the Store Manager in running a retail storeand generating sales.

19


maintain high levels of inventory at this and other stores in Michigan, the Fall/Winter 2005 merchandise

build-up was disproportionately higher than the stores' inventory levels in prior seasons.

55. A former Store Manager at one ofthe Company's Virginia stores (Store Manager 5") stated

that, beginning by at least September 2005 through March or April of 2006, the store received shipments of

Fall/Winter 2005 merchandise on a weekly and sometimes daily basis. To accommodate the excessive

Fall/Winter merchandise, Store Manager 5 was forced to place extra clothing racks on the sales floor and

plastic containers under the display tables.

56. Similarly, a former Store Manager at one of the Company's Illinois stores ("Store Manager

6") discussed that, beginning in Fall/Winter 2005, and continuing through approximately March or April

2006, this Illinois store received excessive shipments of seasonal Fall/Winter 05 merchandise, which were

significantly greater than the store normally carried. By February 2006, the Illinois store received so much

Fall/Winter 2005 merchandise that this witness had concerns about the ability of his store to successfully

display and sell-through the amounts of inventory the store had received. The witness recalled that the

tables featuring the Fall/Winter 05 items were "stacked 10 to 12 [units] high," and storage containers were

purchased and used to store additional items underneath the tables, which was an out-of-the-ordinary

measure to take even for the typically high levels of merchandise the store carried. Further, the amount of

Fall/Winter 05 shipped to the store was so excessive that space became increasingly difficult to come by in

which to store the merchandise. By March 2006 at the latest, the entire back office storage unit at the

Illinois store was completely filled with excessive Fall/Winter 2005 merchandise. As a result, Store

Manager 6's personal office had to be used as a makeshift secondary storage unit to the point that it became

known as the "cardboard fortress."

20


57. A former Store Manager at one of the Company' s northern Florida stores ("Store Manager

7") corroborated that the store received an excess of Fall/Winter 2005 merchandise during late 2005 and

continuing on several months into 2006. Similarly, a former Sales Associate at a Jos. A. Bank store located

in Western Pennsylvania ("Sales Associate")6 recalled that the store where was "almost like a warehouse" in

that it had a glut of inventory that never seemed to get sold off.

58. Store Manager 1 recalled that by the Winter of 2005, the store had received shipments of

Fall/Winter 2005 merchandise which contained more inventory than what the store normally received. As

this former employee put it, this particular Virginia store was "stacked to the rafters." In addition, Store

Manager 1 learned through weekly conference calls, that neighboring retail stores in the region were also

over-stocked with Fall/Winter 2005 merchandise during this time period.

59. Finally, in addition to the problems faced at the retail store level, the Company's distribution

center in Hampstead, MD was burdened with excessive inventory. The former Associate Planner described

the Hampstead distribution center as "bursting at the seams." This witness and Planner 1 recalled that the

inventory levels became so unmanageable that Jos. A. Bank ordered six or seven additional storage trailers

to house excessive inventory that could not be kept in the actual warehouse. These trailers were located in

the parking lot adjacent to the distribution center.

60. Due to the overabundance of Fall/Winter 2005 inventory at the store level, Regional Sales

Directors and Store Managers constantly complained to Company management about the deleterious impact

that the inventory was having on their financial results. As Planner 1 explained, since Planners served in an

6 Sales Associates were responsible for generating sales by assisting customers with productpurchases.

21


internal customer service capacity in allocating on-hand inventory to the Company's retail stores throughout

the country, they would field calls every week from Regional Sales Directors and Store Managers

concerning the inventory surplus problem. During late 2005 and early 2006, Planner 1, Planner 2, the

former Associate Planner and the former Senior Planner stated that they and other Planners were receiving

multiple calls and e-mails on a weekly basis from Regional Sales Directors and Store Managers expressing

concerns about the inventory surplus. The former Associate Planner described that the largest volume of

calls complaining about the burdensome inventory levels originated from the Company's Virginia Beach,

VA, Atlanta, GA, Annapolis, MD, Wilmington, DE, New York, NY, San Francisco, CA, Pentagon City,

VA, Memphis, TN, and Founders Hall in Charlotte, NC stores.

61. Regional Sales Director 2 noted that it was well known throughout all levels ofthe Company

that there was an excess of Fall/Winter 2005 inventory. In fact, Black and certain other Vice Presidents

were aware ofthese inventory issues as Planner 1 and former Senior Planner relayed these concerns to them

in OTB meetings. According to the former Associate Planner, sometimes the Regional Sales Directors

would "cc" these individuals when sending e-mails on this topic. Moreover, the Senior Planner and

Associate Planner would also forward e-mails they received from Store Managers and Regional Sales

Directors to them requesting input on how they should respond to these emails concerning surplus inventory.

The former Associate Planner and Planner 1 also recalled that Black frequently met with Wildrick and

Ullman to discuss these inventory issues. However, the responses these Planners received from

management were, on the whole, dismissive.

62. The excessive Fall/Winter 2005 inventory levels was also a major topic of discussion at the

Company's "Managers Conference," which was held over a four day period at the end of January 2006 at

the Inner Harbor Hotel in Baltimore, Maryland. Attended by over 1,000 Jos. A. Bank employees, including

22


Store Managers, Division Manager, and the Individual Defendants, the conference served to disseminate

information concerning the Company's strategy and performance, and to introduce managers to a bonus and

incentive program, known as Quantum Leap, that was designed to motivate managers to meet or exceed the

previous years' annual store sales by at least 10%. According to Store Manager 1 and Store Manager 7,

Wildrick, Black and Executive Vice President of Stores and Operations Robert Hensley ("Hensley") made

presentations during the conference.

63. More specifically, according to Store Manager 7, Hensley spoke to the attendees regarding

the Company's high levels of inventory and its plans to sell off this inventory in the coming months. This

witness was particularly troubled by Hensley's comments because they contradicted public statements that

the Company was making about the state ofits inventory levels. This was corroborated by Store Manager 3,

who recalled that Hensley discussed the Company' s plans to deal with " excessive and inadequate

inventories."

E. Defendants Take Drastic Action to Move Inventory

64. With huge surpluses of inventory stockpiled in all of its stores, Defendants realized that

drastic action would need to be taken to get inventory levels back under some semblance of control. To that

end, the Company formed a "special committee" of senior level employees for the purpose ofrevamping the

Company's inventory controls. According to Regional Sales Director 2 revealed that this committee was

spearheaded by Hensley and was comprised of "the usual suspects," which included Black. The witness

understood that Wildrick was likely involved with this special committee to some degree, given its

objectives and the personnel who were involved in it.

65. In addition to this administrative measure, Defendants decided to implement an aggressive

pricing strategy aimed at moving the massive quantities ofFall/Winter 2005 merchandise and increasing its

23


flagging sales. In order to reduce the vastly excessive inventory that its retail stores possessed, Defendants

ordered that such merchandise be heavily discounted. Regional Sales Director 2 stated that the sales

campaign to rid the stores of excess inventory was much more aggressive than in previous years. This

witness explained that, not only were more Fall/Winter 2005 items discounted, and the discounts offered

were even deeper than previous years, but the discounting itselfbegan earlier as well. As the witness stated,

the Company's biggest problem was trying to get [Fall/Winter 2005] merchandise out of the stores."

66. Regional Sales Director 2 further explained that, beginning in late January 2006 and

continuing for the next several months, Black and Senior Vice President of Marketing Jerry Deboer

("Deboer") initiated significant price reductions for the unsold Fall/Winter 2005 inventory on an ongoing

basis. As this witness explained, upon determining what price reductions would be implemented for which

items, Black and Deboer would relay this information to Director of Store Operations Michael Cesar

("Cesar"). Cesar would then fax price reduction forms to all of the Regional Directors and Store Managers.

Upon receiving these fax communications, the Store Managers would make the appropriate price reductions

to the items listed in the forms.

67. Indeed, when initial price reductions proved insufficient to move the inventory, Black and

Deboer would slash prices on the Fall/Winter 2005 merchandise even further. Regional Sales Director 2

described that, through this extensive price reduction strategy, Deboer and Black continually reduced

already marked-down items to even lower and lower prices throughout the first three to four months of

2006. These ongoing reductions were memorialized in "addendums" to the initial Price Reduction forms

that had been sent out by Cesar in January 2006. As Regional Sales Director 2 recalled, Cesar "sent

addendum after addendum" to the Regional Sales Directors and Store Managers across the country with

directives to further lower prices.

24


68. This was confirmed by Store Manager 6. This witness explained that, as a result of the

excessive merchandise, the Illinois store received constant directives from the corporate office to reduce the

inventory levels. The witness recalled receiving numerous fax "addendums," which contained the word

"URGENT" in bolded letters to express the critical nature of these communications, and to ensure that the

directives would be swiftly followed, from the Store Operations department at the corporate office to

individual retail stores providing a multitude of directives.

69. The former Sales Associate further disclosed that Store Managers received weekly, if not

daily, faxes from the corporate office relating to price markdowns during this time. These fax

memorandums contained specific information as to which ofthe Fall/Winter 2005 merchandise items were

to be placed on sale, on clearance, and/or further marked down. The memos were kept in a three-ring binder

on the sales floor and available to all Sales Associates, so that they would have up-to-date information as to

the price reductions for the day or week.

70. According to Store Manager 6, in order to move Fall/Winter 2005 inventory, the Company

ordered that the stores hold continuous sales . In fact, beginning in January 2006, the Illinois store held

significantly more sales than had been the case in prior seasons . According to this witness, it seemed like

"we had sales every five minutes!" Store Manager 4 also stated that the Michigan stores held continuous

sales in order to sell through the excess Fall/Winter 2005 merchandise. Store Manager 7 added that, as a

result of excessive inventories, beginning in January 2006, the northern Florida store held sales to liquidate

as much of the Fall/Winter 2005 merchandise as possible. Store Manager 3 reported that the New York

stores held "sale after sale" in order to liquidate the Fall/Winter 2005 merchandise.

71. As a result of this aggressive pricing, the Company was offering greater discounts than it had

in prior seasons. For example, Regional Sales Director 2 stated that it was not unusual for the price of

25


certain Fall/Winter 2005 merchandise to be reduced by as much as 70%. Store Manager 6 and Store

Manager 7 also confirmed that prices were reduced by as much as 70% from the original retail price in order

to reduce the Fall/Winter 2005 inventory glut.

72. This type of extreme discounting was further corroborated by Store Manager 1 who described

that, in January 2006, a suit from the Fall/Winter 2005 line which usually retailed for $495.00 was marked

down to $247.50, a 50% reduction. Shortly thereafter, the suit was marked down again to $99.00, or 60% off

the already reduced price. This witness further explained that, throughout the months of January and

February 2006, the Virginia store kept four clearance tables on the sales floor, all of which contained

permanently marked-down items from the Fall/Winter 2005 line.

73. Moreover, the Company would offer its customers multiple discounts on one item. Store

Manager 1 revealed that, in order to move its Fall/Winter 2005 inventory, the Company was offering

customers "discounts upon discounts." The witness described this as an active practice at the Company's

Virginia store, among others. Beginning in January 2006, that store held continuous and ongoing sales in

order to liquidate as much of the Fall/Winter 2005 inventory as possible . As Store Manager 1 explained,

such sales represented a deviation from earlier Company sales practices, in that multiple types of sales

would not run simultaneously. As the witness further disclosed, Jos. A. Bank would allow customers to

"group" sale offers together. For instance, the Super Tuesday sales usually meant that all items were marked

down to 50% of their previous prices. However, customers who qualified as "corporate" or "preferred"

clients also received 50% off on any given day. As such, a corporate or preferred client who shopped at a

Jos. A. Bank store on a Super Tuesday, or on another day when the store was implementing a different sale,

would be able to enjoy the discounts from the current sales (i. e., 50% reduced on Super Tuesday) as well as

the discounted prices available to corporate customers.

26


74. This was corroborated by the former Sales Associate, who stated that at two Western

Pennsylvania stores the Company authorized multiple types of sales simultaneously per store. As a result of

such sales practices, Jos. A. Bank customers could take advantage of multiple or "double" bargains for a

particular item, thereby reducing the total sales price for that item to levels significantly lower than the

original retail price. For example, according to this former employee, using these multiple discounts,

customers were able to purchase a certain type of leather jacket from the Fall/Winter 2005 line which

usually retailed for approximately $500.00 for $150.00. This former Sales Associate recalled that, during

this time, it appeared that as if 90% of both stores' respective inventory was on sale at any given time.

75. Things became so desperate at the Company that, by April 2006, the Company had to

implement a "Code Red" in order to boost lagging core item sales and decrease Fall/Winter 2005

inventories . Indeed, according to Store Manager 3 , all store managers within the New York Metro region

received a facsimile on April 8, 2006 from Mike Childers, the Regional Sales Director for the New York

Metro region concerning a message he from Brent Thompson, the Divisional Vice President for the

Northeast. This facsimile stated:

The company, division, and region are in CODE RED. Our current trend dictates thefollowing actions.

Among the action items listed, the facsimile stated that "all Store Managers will be on a 6-day work week

for the rest of the month. As I said, we are in CODE RED mode." Store Manager 3 indicated that working

six days a week during this time ofyear was unprecedented and indicative of serious problems. The witness

also understood that this directive was sent to other Store Managers throughout the country. A former

Regional Sales Director for the Northeast region ("Regional Sales Director 3") confirmed Store Manager 3's

account of the implementation of the "CODE RED."

27


76. Store Manager 6 also recalled that, in April 2006, Store Managers in the Illinois region were

required by the Regional Sales Director to work a 6 day work week because the stores had excessive

inventory that was apparently not selling through at the rates that the Company's management needed. This

witness stated that this directive came from the Regional Sales Director for Illinois on a conference call with

a strong sense of urgency. The witness also confirmed that it was unusual for Store Managers to work a 6

day work week during this time of year when the Company was not in "peak" holiday season.

77. As a result of the aggressive pricing strategy , the Company appeared to accomplish one ofits

goals of increasing sales of Fall/Winter 2005 merchandise. However, these efforts caused the Company's

gross profit margins to take a big hit. The Company's focus on increasing sales using severely marked down

items necessarily resulted in a decrease in the Company's gross profit margins. Yet, despite the increased

sales that were achieved through the Company's pricing strategy, Black and the other Vice Presidents

indicated during the monthly OTB meetings that they were dissatisfied with the decreased gross profit

margins that had resulted and expected that steps would be taken to fix the problem. The former Associate

Planner explained that the demand for higher gross profit margins caused a significant amount of stress in

the monthly OTB meetings because of the "huge disconnect" between the Black and the other participants at

these meetings over these contradictory goals. Planner 1 confirmed that marking down merchandise and

expecting higher gross profit margins were wholly inconsistent strategies emphasized by Black and others

during OTB meetings.

F. The Company Starts to Recall Remaining Unsold Inventories

78. Despite the greatly reduced prices of Fall/Winter 2005 inventory and the large volume of

Fall/Winter 2005 clothing that was sold during the first few months of 2006, the Company was still unable

to sell off its excess inventories. Regional Sales Director 2 recollected that stores within the region still had

28


significant quantities of Fall/Winter 05 inventory on sale as late as April 2006. As a result, beginning in

April 2006, Jos. A. Bank initiated a large-scale recall of this remaining inventory and directed that it be

shipped to the Hampstead distribution center.

79. While Store Manager 4 explained that it was not uncommon for headquarters to implement

recalls on specific items to ensure that the stores had enough floor space to feature the merchandise for the

current season, the Fall/Winter 2005 merchandise recalls were for unit amounts greater than the recalls for

prior seasons. In addition, Regional Sales Director 2 stated that, although recalls usually occurred in March

when seasonal sales normally ran dry, the Company deviated from its usual policy during the Class Period

by keeping unsold merchandise in the stores longer than usual at huge discounts in the hope that the

merchandise would somehow sell. This witness understood that this deviation ofpolicy was a reflection of

the fact that Jos. A. Bank had significantly greater quantities of Fall/Winter inventory remaining in 2006

than it did in prior years.

G. Defendants' Price Reduction Strategies Negatively Impacted Sales of theCompany's Core and Spring 2006 Merchandise

80. While the aggressive discounting practices increased sales ofthe Fall/Winter 2005 inventory,

these sales came at the expense ofthe newer Spring/Summer 2006 inventory and the Company's core basics.

Indeed, despite the fact that Spring 2006 merchandise arrived in stores in February 2006, customers

continued to purchase the extremely low prices of the Fall/Winter 2005 merchandise, and largely ignored the

higher priced, higher margin Spring 2006 merchandise.

81. Several former employees confirmed that the availability of discounted Fall/Winter 2005

merchandise was hurting sales of the other merchandise. The former Sales Associate recalled that, at the

Jos. A. Bank's Western Pennsylvania stores, the majority of customers focused on purchasing the surplus

Fall/Winter 2005 inventory at the reduced prices, even after the Spring 2006 merchandise arrived, which

29


substantially impacted sales of the newer merchandise. Similarly, Store Manager 1, Store Manager 3 and

Store Manager 4 stated that the significant price reductions for the Fall/Winter 2005 merchandise in 2006

were compromising the sales of the core items and Spring/Summer 2006 line at their respective stores. In

fact, Store Manager 4 recalled selling considerably greater amounts of the Fall/Winter 2005 merchandise

than of the Spring/Summer 2006 line. Store Manager 6 stated that customers in the Illinois store were taking

advantage ofthe sales of discounted items and were not purchasing as many of the non-discounted items in

the store such as the new Spring/Summer 2006 line as well as "core" merchandise items.

82. The Company exacerbated this problem by focusing its advertising efforts on the promotion

of sales of the older merchandise. According to Regional Sales Director 2, during early 2006, all or mostly

all of Jos. A. Bank's advertising costs was used to communicate the ongoing sales and clearances for

Fall/Winter 2005 merchandise. The witness learned of this advertising strategy through his conversations

with Senior Vice President of Operations Gary Cejka ("Cejka"), as well as through his interactions with

personnel at various levels of the Company hierarchy. This marketing campaign, which Regional Sales

Director 2 characterized as more aggressive than in prior years, emphasized the discounted Fall/Winter 2005

merchandise at the expense of the new Spring/Summer 2006 line. As this witness put it, "the Spring line

was short circuited" because customers responded to the Company's marketing efforts, which focused on

sales and clearances ofthe Fall/Winter 2005 merchandise. Essentially, the witness and other Regional Sales

Directors recognized that Jos. A. Bank was effectively "trading dollars" by pouring money into

advertisements for deeply discounted merchandise.

83. Similarly, sales of the Spring 2006 and core merchandise suffered because it could not be

displayed properly due to the excessive amounts of Fall/Winter 2005 inventory remaining in the stores.

Ordinarily, the corporate office sent specific directions to the retail stores regarding the displays and

30


arrangement of merchandise, and newer merchandise would receive a more prominent placement than older

merchandise . Throughout early 2006, though, Regional Sales Directors voiced concerns to Cejka during the

weekly conference calls about the fact that the retail stores lacked the physical space to adequately display

both Spring 2006 and Fall/Winter 2005 merchandise without compromising the aesthetics of the

merchandise displays. Specifically, since there was so much excess Fall/Winter 2005 merchandise, the

Regional Sales Directors believed it was difficult, if not impossible, to comply with the corporate

requirements for merchandise arrangements in the stores. Cejka's responses to these concerns were simply

for the Regional Sales Directors to do the best they could under the circumstances, but to continue to display

as much Fall/Winter 2005 merchandise as they could and to "sell through" it.

84. Store Manager 6 further explained that, in March 2006, all Store Managers received a fax,

titled something like "All Store Managers Memo," from SVP of Inventory Management and Planning Jim

Thorne (`Thorne"). This memo indicated that core items were not selling as well as the Company had

anticipated and expressed a "deep concern within the organization" about this issue which required "urgent

attention." According to the witness, Thorne requested (through the memo) that Store Managers provide

observations as to why core merchandise was not selling, and allowed for Store Managers to make

suggestions to Thorne as to how sales of core items could be improved. Store Manager 6 expressed to

Thorne in an e-mail that sales of core items suffered because, among other things, the excessive markdowns

ofFall/Winter 05 merchandise during 1Q06 were causing customers to purchase more ofthese Fall/Winter

05 items, at the expense of the core items. As the witness explained, customers were "stocking up" and

seizing the opportunity to purchase several Fall/Winter 05 items with such heavy discounts.

31

85. At all relevant times during the Class Period, Jos. A. Bank represented that its financial

results were prepared in accordance with GAAP and the accounting and disclosure rules and regulations of

the SEC.' As discussed below, these representations were materially false and misleading because Jos. A.

Bank, in violation of GAAP and its publicly disclosed accounting policies , failed to timely record an

impairment in the value of its bloated Fall/Winter 2005 inventory, which caused a material overstatement of

Jos. A. Bank's reported income during the Class Period. As a result of this GAAP violation, Defendants

disseminated financial statements that were presumptively misleading and/or inaccurate.'

86. As set forth in Chapter 4 of Accounting Research Bulletin ("ARB") No. 43, GAAP requires

that financial statements report a loss to reflect a decline in the value of inventory when its cost exceeds its

market value.9 ARB No. 43 provides:

A major objective of accounting for inventories is the proper determination of incomethrough the process of matching appropriate costs against revenues...

The primary basis for accounting for inventories is cost.... A departure from the cost basisof pricing inventories is required when the utility of goods is no longer as great as its cost.Where there is evidence that the utility of goods, in the ordinary course of business, will beless than cost, whether due to physical deterioration, obsolescence, changes in price levels,or other causes, the difference should be recognized as a loss in the current period. This is

GAAP are those principles recognized by the accounting profession as the conventions, rules andprocedures necessary to define accepted accounting practices at a particular time. Generally AcceptedAuditing Standard §AU 411.02.

6 Pursuant to Regulation S-X (17 C.F.R. §210.4-01(a)(1)), financial statements filed with the SECthat are not prepared in conformity with GAAP are presumed to be misleading and inaccurate.

In November 2004, the Financial Accounting Standards Board ("FASB") amended certain of theprovisions of Chapter 4 of ARB No. 43.

32


generally accomplished by stating such goods at the lower level commonly designated asmarket. [First Emphasis Added]

As used in the phrase lower of cost or market, the term market means the currentreplacement cost except that:

a) Market should not exceed the ... estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of... disposal; and

b) Market should not be less than the ... estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of ... disposal reduced by a ... normal profitmargin. [Emphasis added.]

87. Accordingly , GAAP provides that inventories be valued at the lower of its cost or market,

with market generally defined as net realizable value.10 In addition, GAAP provides that the lower of cost or

market concept be applied generally on an item by item basis (reasonable groupings of like items, however,

is acceptable) since this approach is consistent with the notion of eliminating unrecoverable costs from

inventory.

88. Thus, the issue for financial reporting purposes is not whether inventory is unusable or

obsolete, but rather, whether obsolescence, physical deterioration, changes in price levels, or other factors

cause inventory to be worth less than its stated cost. When the cost ofinventory exceeds its market value, it

is deemed to be impaired and a loss on the value is to be recorded. Indeed, in Accounting Principles Board

Opinion No . 28, paragraph 14, GAAP provides that inventory losses from market declines should not be

deferred beyond the period in which the decline occurs.

10 GAAP defines net realizable value as the estimated selling price in the ordinary course of businessless reasonably predictable costs of completion and disposal, which includes shipping costs, discounts,commissions, other variable selling expenses and may include fixed selling expenses.

33


89. Consistent with these provisions of GAAP, Jos. A. Bank's financial statements filed with the

SEC during the Class Period disclosed the following with respect to its policy of accounting for inventory:

Inventories - The Company records inventory at the lower of cost or market ("LCM"). Costis determined using the first-in, first-out method. The Company capitalizes into inventorycertain warehousing and freight delivery costs associated with shipping its merchandise tothe point of sale. The Companyperiodically reviews quantities ofinventories on hand andcompares these amounts to the expected sales ofeach product. The Company records acharge to cost of goods soldfor the amount required to reduce the carrying value ofinventory to net realizable value . [Emphasis added.]

90. In violation of the above noted provisions of GAAP and its publicly disclosed accounting

policy, Jos. A. Bank improperly delayed the recognition of an impairment of the value of its inventory

during, at least, the quarter ended January 29, 2006. Thereafter, during the ensuing quarter ended April 29,

2006, Defendants attempted to wash out the impairment in the value of Jos. A. Bank's inventory through a

massive clearance sale ofits Fall/Winter 2005 inventory, which adversely affected the Company's earnings.

91. More specifically, as detailed above in paragraphs 64 through 77, numerous former Jos. A.

Bank employees explained that, by late 2005, the Company's inventories ofFall/Winter 2005 merchandise

had swelled to unprecedented levels, both at the stores and at the distribution center due to, inter alia, delays

in new store openings, poor planning, a failure of inventory controls and a lack of customer interest. These

witnesses indicated that, during this time period, incessant complaints about the excessive Fall/Winter 2005

inventories reverberated throughout the Company, from the Store Managers to Regional Sales Directors to

the various Planners and, finally, to the Company's senior executives, including the Individual Defendants.

92. Further, as detailed above in paragraphs 45 through 63, numerous former Jos. A. Bank

employees described that, as a result of the large amount of excess inventory, the Company embarked on an

unusually aggressive promotional and price cutting campaign to pare back its Fall/Winter 2005 inventory.

These witnesses commented that, in order to liquidate the excessive Fall/Winter 2005 inventory, the

34


Company implemented steep price markdowns, continuous clearance sales , and multiple or overlapping

discounts, which were much greater than what was offered in any prior season.

93. The tremendous build-up of inventories and subsequent liquidation efforts informed

Defendants that the value of Jos. A. Bank's Fall/Winter 2005 inventory was impaired pursuant to GAAP

during the Class Period . Once Defendants became aware that its inventory was impaired, GAAP required

them to take an appropriate charge against current earnings. Defendants, however, failed to do so. Rather

than recording an impairment in the value of such inventory in accordance with GAAP, Defendants washed

out the Company's impaired and bloated inventory through a massive price reduction campaign which

materially lowered Jos . A. Bank' s margins and earnings during the quarter ended April 29, 2006.

94. Had Jos. A. Bank's quarterly gross profit margin during the quarter ended April 29, 2006 just

equaled (as opposed to the Company 's experience ofincreasing gross margins) that ofthe comparable April

2005 quarter, Jos. A. Bank's cost of goods sold during the April 2006 quarter would have been

approximately $1.6 million higher than it reported. Conservatively using only this dollar value as the

amount ofthe Company's impaired inventory, Jos. A. Bank's pre-tax income during the quarter ended

January 29, 2006 was overstated by more than 5%.

95. As Defendants have now admitted , the 140 basis point decline in Jos. A . Bank's April 2006

quarter gross margins was the result of being "too price aggressive on somefall goods" that it sold during

February, March and April of 2006. The material and highly unusual decline in Jos . A. Bank' s gross

margins during the April 2006 quarter evidences the fact that its inventory was materially overstated and not

reported at its lower of cost or market during at least the quarter ended January 29, 2006. In fact, the year-

over-year decline in Jos. A. Bank' s gross margin was highly unusual since , as illustrated in the chart below,

35


the Company had previously announced a series of year-over-year gross margin increases prior to April

2006:

Jos. A. BankYear over Year Quarterly Gross Margin iivTsis

62.O(J4

61.0

59.0

a H E~ Z Z x x j- E E

96. Subsequently , during the quarters ended July 29, and October 29, of 2006, the Company

resumed its trend of increasing its year-over-year gross margins.

97. As noted in the SEC's SAB No. 99:

For the reasons noted above, the staff believes that a registrant and the auditors of itsfinancial statements should not assume that even small intentional misstatements in financialstatements, for example those pursuant to actions to "manage" earnings, are immaterial.While the intent of management does not render a misstatement material, it may providesignificant evidence of materiality. The evidence may be particularly compelling wheremanagement has intentionally misstated items in the financial statements to "manage"reported earnings. In that instance, it presumably has done so believing that the resultingamounts and trends would be significant to users of the registrant's financial statements. The

36


staff believes that investors generally would regard as significant a management practice toover- or under-state earnings up to an amount just short of a percentage threshold in order to"manage" earnings. Investors presumably also would regard as significant an accountingpractice that, in essence, rendered all earnings figures subject to a management-directedmargin of misstatement. [Footnotes deleted.]

98. As a result ofthe foregoing GAAP violations, Jos. A. Bank's financial results were materially

inflated during the Class Period. Nonetheless, Defendants have continued their deceptive financial reporting

by failing to restate Jos. A. Bank's Class Period financial statements which improperly accounted for its

impaired inventory."

99. Defendants had the responsibility to select generally accepted accounting principles that were

appropriate to reflect the business activities of the entity. More particularly, Section 13 of the Exchange Act

of 1934 requires that:

Every issuer which has a class of securities registered pursuant to Section 12 of this title andevery issuer which is required to file reports pursuant to Section 15(d) of this title shall:

A. make and keep books, records, and accounts, which, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of theissuer; and

B. devise and maintain a system of internal accounting controls sufficient toprovide reasonable assurances that:

transactions are executed in accordance with management's generalor specific authorization;

ii. transactions are recorded as necessary (a) to permit preparation offinancial statements in conformity with generally accepted accountingprinciples or any other criteria applicable to such statements, and (b) tomaintain accountability for assets;

11 GAAP, in SFAS No. 154, provides that previously issued financial statements that are erroneous dueto an error or a misapplication of accounting principles are to be retroactively restated.

37


iii. access to assets is permitted only in accordance with management'sgeneral or specific authorization; and

iv. the recorded accountability for assets is compared with the existingassets at reasonable intervals and appropriate action is taken with respect toany differences.

100. In addition to the accounting violations noted above, during the Class Period Jos. A. Bank

presented Class Period financial statements in a manner that also violated at least the following provisions of

GAAP:

(a) The principle that interim financial statements are to include disclosures

sufficient so as to make the financial information presented not misleading (SAB Topic 10(a));

(b) The principle that financial statements disclose contingencies when it is at

least reasonably possible that a loss may have been incurred (SFAS No. 5);

(c) The principle that financial statements disclose significant risks and

uncertainties associated an entity ' s business . (SOP No. 94-6);

(d) The concept that financial reporting should provide information about how

management of an enterprise has discharged its stewardship responsibility to owners (stockholders)

for the use of enterprise resources entrusted to it. To the extent that management offers securities of

the enterprise to the public, it voluntarily accepts wider responsibilities for accountability to

prospective investors and to the public in general (FASB Concepts Statement No. 1, ¶50);

(e) The concept that financial reporting should be reliable in that it represents

what it purports to represent. The notion that information should be reliable as well as relevant is

central to accounting (FASB Concepts Statement No. 2, ¶¶58-59);

38


(f) The concept of completeness, which means that nothing is left out of the

information that may be necessary to ensure that it validly represents underlying events and

conditions (FASB Concepts Statement No. 2, ¶80); and

(g) The concept that conservatism be used as a prudent reaction to uncertainty to

try to ensure that uncertainties and risks inherent in business situations are adequately considered.

The best way to avoid injury to investors is to try to ensure that what is reported represents what it

purports to represent (FASB Concepts Statement No. 2, ¶¶95, 97).

101. Similarly, the Company's Class Period SEC filings were also materially false and misleading

in that they failed to disclose known trends, demands, commitments, events, and uncertainties that were

reasonably likely to have a material adverse effect on the Company's liquidity, net sales, revenues and

income from continuing operations, as required by Item 303 of Regulation S-K.

DEFENDANTS' FALSE AND MISLEADING STATEMENTSMADE DURING THE CLASS PERIOD

102. The Class Period begins on December 5, 2005. On that date, the Company issued a filed its

Form 10-Q with the SEC which contained the Company's financial results for the third quarter of fiscal

2005. This Form 10-Q was signed by Ullman and was certified, pursuant to the Sarbanes-Oxley Act of

2002, by Ullman and Wildrick. In this filing, the Company stated that the 45% increase in earnings per

share was attributable to a 27. 8% increase in net sales, a 140 basis point increase in gross profit margins, and

the opening of 56 new stores during the year. In discussing the accounting for inventory, the Company

stated that "[t]he portion of the products that have seasonal or fashion elements are monitored closely to

ensure that aging goals are achieved to limit the need to sell significant amounts of product below cost. In

addition, the Company's strong gross profit margins enable the Company to sell substantially all of its

products at levels above cost." The Company further explained that "[t]he increased gross profit percentage

39


is primarily due to the continued improvement in sourcing of merchandise, thus reducing the cost of items

purchased, and increases in retail prices. Gross profit margins increased in substantially all major product

categories."

103. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Wildrick and Ullman certified

that:

1. I have reviewed this report on Form 10-Q of Jos. A. Bank Clothiers, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a materialfact or omit to state a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading with respect to theperiod covered by this report;

3. Based on my knowledge, the financial statements, and other financial informationincluded in this report, fairly present in all material respects the financial condition, results ofoperations and cash flows ofthe registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)) and internal control over financial reporting (as defined in Exchange ActRules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosurecontrols and procedures to be designed under our supervision, to ensure that materialinformation relating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period in whichthis report is being prepared;

b) Designed such internal control over financial reporting, or caused such internalcontrol over financial reporting to be designed under our supervision, to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and proceduresand presented in this report our conclusions about the effectiveness of the disclosurecontrols and procedures, as of the end of the period covered by this report based onsuch evaluation; and

d) Disclosed in this report any change in the registrant's internal control overfinancial reporting that occurred during the registrant's most recent fiscal quarter (the

40


registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal controlover financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recentevaluation of internal control over financial reporting, to the registrant's auditors and theaudit committee of the registrant's board of directors (or persons performing the equivalentfunctions):

a) All significant deficiencies and material weaknesses in the design or operation ofinternal control over financial reporting which are reasonably likely to adverselyaffect the registrant's ability to record, process, summarize and report financialinformation; and

b) Any fraud, whether or not material, that involves management or other employeeswho have a significant role in the registrant's internal control over financialreporting.

104. Also on December 5, 2005, the Company hosted an earnings conference call with various

securities analysts to discuss Jos. A. Bank's third quarter 2005 financial results and the Company's outlook

for the fourth quarter. Wildrick, Ullman and Black participated in this conference call. During the opening

remarks, Black commented on sales and inventory issues for the upcoming quarters:

In order to maximize the sale opportunity in the fourth quarter '05 and the first quarter '06,we have built our inventories accordingly. Half of the inventory increase is for new storesand the other half is split between two major categories. First, additional year-round basicinventory will continue to support our commitment to being in stock in a wide range of sizesin all stores, which we continue to stress as a strategic competitive differentiator.

Second, additional depth in our fall key items will allow us to maximize our promotionalactivity in the fourth quarter and still have the inventory needed to maximize sales of coldweather goods in the first quarter months ofFebruary and March.... We have the inventoryon hand and we have the marketing in place for a strong holiday selling season.

Ullman added that overall sales were positive for the early part of the fourth quarter, and "our gross profit

margin has increased in the same period in the fourth quarter."

105. During the subsequent question and answer session , Wildrick, Ullman and Black made the

following remarks:

41


Richard Jaffe - Stifel Nicolaus: Just a question for Dave. You mentioned the gross marginrate was up [for the fourth quarter]. Should we assume it'sup at the rate we've seen year-to-date, like you mentionedwith the comp?

David Ullman: Consistent with the past, we're comfortable with at least a100 basis point improvement in the quarter year-over-year -fourth quarter year-over-year. Obviously, not a lot has tooccur between now and the end of the year in terms of salesand margins, but we are confident with 100 basis points atleast.

Margaret Whitfield - Ryan Beck: Although you had a very strong third quarter in terms ofcomps, I thought the inventory build was higher than wassuggested earlier, that you might be up about 30% at the endof both Q3 and Q4. Have your plans changed? Are yougoing to be ending the year with more than a 30% increase?

Neal Black: The plan is to sell it all in the fourth quarter; that is the idea.You book - the way our manufacturing cycle works in orderto drive the kind of gross margins that we do is long-termcommitments directly with factories. And you are planninga flow basically a year in advance. And so how that flowfell, which receipts ended up exactly in the third quarterversus the beginning ofthe fourth quarter, the fact is it is theinventory that we want to have for a very strong fourthquarter selling season.

David Mann - Johnson Rice & Co.: ... I would like to clarify a couple of things. In terms ofanything you did promotionally after Black Friday, I assumethere was no change in terms of the level of discounts or theamount of promotions?

Neal Black: No, I mean all the marketing that has run since Friday was inplace prior to the sales results of that day.

David Mann - Johnson Rice & Co.: Okay -

David Ullman: And David, as I mentioned the gross margins have increasedover that same time frame.

Robert Wildrick: Since the question of inventory has come up a couple of

42


times in this, I would like to point out to you that right nowwe're extremely pleased about our inventory for this reason.Our aging, which is how we look at the inventory, which webelieve is our internal risk factor, is as a percent to totalinventory lower than it has been in any time that I canremember in the Company - our aging percent. So we are inbetter shape than, in my opinion, we've ever been as apercent total inventory, number one.

Number two, as most of you know, we have what is calledan ABL - asset-based loan. And on an asset-based loan, thebank comes in a minimum of one time a year with severalauditors and they audit our inventory in a very seriousmanner. We continue to get an extremely high value gradeon our inventory. And I would anticipate - they just came inagain - when the final result comes out in the next couple ofweeks, it will be higher than last year because of our agingbeing much lower than it ever has been, and the number ofstores we have to liquidate inventory much higher.

So we are very pleased with the way things have gone withthe inventory.... So we feel very good about things goingforward. And with any kind of normalized sales , we oughtto continue to get a better than our 1% margin rate that wefeel certain that we will get - increase.

Neal Black: ... We will do whatever we need to do promotionally tomake sure we get the right amount of sales in the fourthquarter. But there is no huge risk for us because there is stillmany months to come.

106. The market reacted positively to Defendants' statements. For example:

(a) On December 5, 2005, Stifel Nicolaus issued a report reiterating its "Buy" rating for

Jos. A. Bank based, in part, on gross margin improvement. The report further noted that Jos. A. Bank had

"increased its [inventory] depth in key fall items allowing JOSB to maximize its cold weather sales in 4Q05

and I Q06."

43


(b) Ina report issued on December 5, 2005, Ryan Beck & Co. commented the Company's

140 basis point increase in gross margins was greater than expected, and lauded the Company's 27.8% gain

in total sales for the quarter.

(c) Roth Capital Partners reiterated their "Strong Buy" rating based on a 3Q05 was

"Better Than Expected" and a "Strong Start to the Important Month of December."

(d) Morgan Joseph & Company reiterated its "Buy" rating of Jos. A. Bank, reporting that

"[w]e were encouraged by F3Q05 's strong operating results , and we believe that the company is well

positioned for the all-important holiday season."

107. As a result of Defendants' misrepresentations, and resulting analyst affirmation, Jos. A.

Bank's stock rose to an artificially inflated price of $35.46 by the end of trading on December 5, 2005.12

108. The statements contained in paragraphs 102 through 105 were materially false and

misleading because Defendants knew or recklessly disregarded that:

(a) the Company' s inventories of Fall/Winter 2005 merchandise had swelled to

unprecedented levels, both at the store level and at the main distribution center, due to, inter alia, delays in

new store openings, poor planning, a failure of inventory controls and lack of consumer interest (¶¶45-63);

(b) due to the flood of Fall/Winter 2005 inventories, Defendants would have to take

drastic actions to remedy the problem, including, but not limited to, ordering steep price discounts, virtually

continuous sales , and other aggressive pricing strategies, which were substantially different from anything

that had occurred in prior seasons (¶¶64-77);

12 Stock price information has been adjusted to account for the 25% stock dividend declared onDecember 14, 2005 and paid on February 16, 2006.

44


(c) as a result of these drastic actions, any increase in the Company's reported sales

would come at the expense of gross profit margins and earnings, which would suffer dramatic decreases

(¶77); and

(d) the Fall/Winter 2005 inventories were becoming impaired, and Defendants would

have to take an appropriate charge against earnings for the current quarter's financial results as required by

GAAP (¶¶85-101).

109. On January 5, 2006, the Company issued a press release announcing it financial results for

the fiscal months ended December 31, 2005. The press release stated:

JoS. A. Bank Clothiers, Inc. (Nasdaq National Market: "JOSB") today reported that its totalnet sales for the fiscal month ended December 31, 2005 (fiscal December 2005) increased34.0% to $91.1 million, compared with $68.0 million in fiscal December 2004. Comparablestore sales increased 20.7% and combined catalog and Internet sales increased 34.1% infiscal December 2005, when compared with the same prior-year period. The comparablestore sales gain represents the third consecutive year that JoS. A. Bank Clothiers has posteddouble digit comparable stores sales gains in the fiscal month of December.

The Company also noted that it expects earnings per share for the fiscal year ending

January 28, 2006 fiscalyear 2005) to at least meet the consensus analyst estimate of$2.20

per share, representing at least a 28% increase when compared with earnings per share of

$1. 72 infiscalyear 2004. The Company also noted that its financing remains strong as there

are currently no outstanding borrowings under its $100 million credit agreement. In addition,

the Company's cash balance as of January 4, 2006 was approximately $8.5 million more

than its cash balance at the same date last year, despite investing in the opening of over 50

new stores and building its inventory in certain key items during the current fiscal year.

'We are verypleasedwith how well the JoS. A. Bank brand continues toperform anddeliver

record-breaking earningsfor the Company and its shareholders, 'noted Robert N. Wildrick,

Chief Executive Officer of JoS. A. Bank Clothiers , Inc. `We have pursued a number of

initiatives in recent years designed to establish JoS. A. Bank as the premier menswear brand

in America, including a brand-building media advertising campaign that began in November

2004. We believe we have made great progress towards this goal, as evidenced by the sales

strength we have seen during key gift-giving periods . While weather and otherfactors make

it difficult to project sales andgrossprofit margin in January, we expect to at least meet the

consensus analyst estimate of$2.20 per share forfiscal year 2005. '

45


While sales have increased in all merchandise categories during this year's holiday season,particular strength has been noted in blazers, sport coats, sportswear and other key items theCompany invested in this year.

Total net sales for the eleven fiscal months ended December 31, 2005 increased 24.4% to$433.8 million, compared with $348.6 million for the eleven fiscal months ended January 1,2005. Comparable store sales increased 10.0% and combined catalog and Internet salesincreased 24.9% in the eleven fiscal months ended December 31, 2005, when compared withthe same eleven fiscal month prior-year period.13

110. The market reacted positively to the January 5, 2006 earnings announcement. For example:

(a) Ryan Beck & Co. stated in a report issued on January 5, 2006 that it was raising its

projections on earnings per share for 2006 from $2.19 to $2.25 and for 2007 from $2.64 to $2.70. In

addition, the report further raised its rating of the Company to "Outperform" from "Market Perform."

(b) J.P. Morgan also raised estimates for Jos. A. Bank on January 6, 2006, stating that

the Company had "delivered strong December comps driven primarily by growth in transactions. We expect

to see healthy merchandise margins for Q4 ... and we are raising our earnings estimates for 2005 and

2005." J.P. Morgan also raised their 2005 EPS estimate from $2.19 to $2.26 and their 2006 EPS estimate

from $2.61 to $2.78. For 2005, they forecasted an 8% to 10% comp and 12.6% operating margins and, for

2006, they stated they were modeling a 4-6% comp and 13.2% operating margin.

(c) Morgan Joseph & Co., Inc. reiterated their "Buy" rating for Jos. A. Bank stock,

commenting on "strong" December sales and stating that they were "encouraged by the Company's

operating results, in particular during the holiday season."


Bank's stock rose to an artificially inflated price of $39.58 by the end of trading on January 5, 2006.

13 Unless otherwise stated, all emphasized portions of the text were emphasized by Plaintiff.

46


112. The statements contained in paragraph 109 were materially false and misleading because

Defendants knowingly or recklessly disregarded that:

(a) while the Company reported a substantial increase in net sales, Defendants omitted or

otherwise concealed that those sales came at the expense ofthe Company's gross profit margins, which were

dramatically decreasing due to the fact that the Company began to liquidate the excessive levels of

Fall/Winter 2005 merchandise that had accumulated both at the store level and at the main distribution

center (¶¶45-77);

(b) while Defendants promised the market a "record-breaking" earnings increase for

fiscal 2005, Defendants omitted and otherwise concealed that this promise could not be kept and that

earnings were in serious j eopardy due to the fact that Defendants had ordered steep price discounts, virtually

continuous sales , and other aggressive pricing strategies to move excessive Fall/Winter 2005 inventories.

(¶¶64-77);

(c) the Fall/Winter 2005 inventories were impaired, and Defendants needed to take an

appropriate charge against earnings for the current quarter's financial results pursuant to GAAP, rather than

subsequently washing out the impairment through their liquidation efforts (¶¶85-101).

113. On February 2, 2006, the Company issued a press release announcing its financial results for

the fiscal month ended January 28, 2006. The press release stated:

JoS. A. Bank Clothiers, Inc. (Nasdaq National Market: "JOSB ") today reported that its totalnet sales for the fiscal month ended January 28, 2006 (fiscal January 2005) increased 28.9%to $30.8 million, compared with $23.9 million in fiscal January 2004. Comparable store salesincreased 20.4% and combined catalog and internet sales decreased 2.5% in fiscal January2005, when compared with the same prior-year period. While sales increased in all majormerchandise categories during January, continued strength has been noted in blazers,sportcoats, sportswear and other key items in which the Company has invested in recentmonths.

47


The Company also noted that it expects earnings per share for the fiscal year ended January28, 2006 (fiscal year 2005) to be at least $2.39, representing at least a 39% increase whencompared with earnings per share of $1.72 in fiscal year 2004. The Company also noted thatits financing remains strong and there are currently no outstanding borrowings under its $100million credit agreement.

The Company also reported record sales for the fourth quarter and full fiscal year. Total salesfor the fourth quarter of fiscal year 2005 increased 28.1% to $163.8 million, compared withsales of $127.9 million in the prior year period. Total sales for fiscal year 2005 increased24.7% to $464.6 million, compared with sales of $372.5 million in the previous fiscal year.

Comparable store sales rose 15.9% and 10.6% in the fourth quarter and fiscal year 2005,respectively. Combined catalog and internet sales increased 18.9% and 21.7% in the fourthquarter and fiscal year 2005, respectively.

114. The market reacted positively to this announcement. For example:

(a) Roth Capital Partners reported on February 2, 2006 that Jos. A. Bank was a "Strong

Buy" with "continued impressive results." The report raised its EPS estimate to $3.20 and price target to

$70 for the Company, and stated that "[w]e believe that the Company's strategy of increasing inventory in

certain categories in which it was light last winter worked well, in spite of warm weather in many parts of

the country." In addition, the report stated that "[s]ales increased in all major categories during January,

with notable strength in sport coats and sportswear." It further added that "[w]e believe that inventory of

seasonal merchandise is clean and that stores are well positioned for spring," and that the analysts expected

sales momentum and significant gross margin improvement to continue in FY06.

(b) On February 2, 2006, Ryan Beck & Company issued a report maintaining it rating of

Jos. A. Bank as "Outperform" and raising its target price and EPS estimate. Moreover, the report stated that

"[g]iven the strength in November-December sales, we expect ending inventories to fall below the 45% gain

at the end of Q3 and to be close to the original plan of 30%."

48


(c) Morgan Joseph & Co. Inc. issued a report on February 2, 2006 which reiterated its

"Buy" rating and price target. The report indicated that it was "encouraged by the Company's ongoing

strong sales and earnings momentum underpinned by financial strength."

(d) Johnson Rice & Company LLC issued a report on February 3, 2006 stating that Jos.

A. Bank was "above plan," and had impressive sales strength which continued from December and grew

steadily throughout the month. The report further stated that "Es] ales were strong across all categories, with

the strongest performers including sportswear, sport coats and blazers (reflecting categories with increased

inventory investments)." In response, the report noted a raise of EPS estimates.


Bank's stock rose to an artificially inflated price of $43.87 by the end of trading on February 2, 2006.







center (¶¶45-77);

(b) while Defendants promised the market a substantial earnings increase for fiscal 2005,

Defendants omitted and otherwise concealed that this promise could not be kept and that earnings were in

serious jeopardy due to the fact that Defendants they had already ordered steep price discounts, virtually

continuous sales , and other aggressive pricing strategies to move excessive Fall/Winter 2005 inventories.

(¶¶64-77);

49


(c) the drastic actions taken by Defendants to liquidate Fall/Winter inventories did not

have a material effect as such inventories continued to swell to unprecedented levels. In fact, at the

Company's "Managers Conference," which took place just days before this February 2, 2006 press release,

Defendants acknowledged that the Company's inventories were "excessive and inadequate" and discussed

plans to liquidate such inventories in the upcoming months (¶¶62-63); and

(d) the Fall/Winter 2005 inventories were impaired, and Defendants needed to take an

appropriate charge against earnings for the current quarter ' s financial results pursuant to GAAP, rather than


117. On February 22, 2006, Jos. A. Bank presented at the Roth Capital Partners 18th Annual OC

Conference in Dana Point, California. This conference featured presentations from over 250 small-cap

companies across a broad spectrum of sectors, such as technology, healthcare, financial services and

consumer products. Speaking on behalf of the Company, Ullman made the following comments:

Question: And are you still expecting at least a 100 basis points of grossmargin expansion in '06? And would that come just from themerchandise margins or is there other opportunities?

David Ullman: ... But to put in perspective, in the past five, six years we've hadover a 1000 basis point improvement in gross profit margin and wedo see that we have at least another 100 points in the current year,and so that would be continuation of a trend that's, you know, that'sexisted for six years. Where is that going to come from while thereis two sides of the equation, one is cost and one is retail. We seeimprovements on both sides, from a cost side, which typically hasbeen about two thirds of the source of that two thirds of the benefitthe other one third being retail.... And then on the retail side, like Imentioned we will continue to innovate products and I gave yousome examples of that and we expect that to continue to drive themargin rate from the retail side.

Question: And inventory turn is obviously a question that comes up regularly,do you have any plans to increase the inventory turn?

50


David Ullman: Generally speaking our -- you know our inventory turn is about oneto 1.3, 1.4 times a year. So while we are in a growth mode, we don'tsee that changing, you know outside the -- those parameters. Againtrying to give you a perspective, men's wear is an inventoryintensive business.... We think that in stock, one of our corepillars is a critical strategic advantage that we have as a company.... So with the inventory, you know [the department stores] are notoffering them the inventory, they are not offering the locations, andwe think it's a strategic advantage for us to carry the inventory.

Question: Can you discuss the process of winning your customers away fromthe high-low pricing strategy?

David Ullman: Yeah. When this -- the current management team came together, oneof the things that you know, we inherited was a promotionalcompany. I mean, there is promotion there every week, in terms ofattracting the customers. So as -- there is a bit of a disconnect thatwe've always seen in terms of taking the brand upscale, yetpromotional and sometimes in the mind of the consumer, in themind of the Wall Street analyst, who is trying to understand ourbusiness, they sometime have problem relating to that. Well we'vebeen successful with that approach, so we -- it's not something weever envision and abandoning, but we do have a very long-termstrategy of reducing the amount of promotional activity and when Isay long-term, this is something we put in place and we always sawit as an 8 or 10 or 12 year strategy. So we've been together 6 years,what have we done so far? Really two cuts. One is we have a certainportion of our store base that does not get the weekly promotionwithin its store.

As I mentioned, let say -- in a course of a month you have fourweekly promotions in our core stores. Well there is a portion of ourstores that they only get one or two per month and so we are trainingthat customer differently. We are -- we are not getting them used tohaving the frequent promotions or we've also taken some stores thatused to get the four times per month and they are only getting one ortwo now. So right now as we speak, 40% of our store base is in thatlesser promotional cadence activity. And I'd like the way that we arepositioned there, because that can take two pass down the road, asthe -- we referred to it as our A-store versus B-store strategy. As theB-store strategy evolves we can continue to go down that path oreven worst case if they - if we convert some back to A, now you've

51


got a customer who isn't as used to promotions. You start promotingto him and you gain on the sales side as opposed to maybe the grossmargin side. So again we got about 40% of store base in that lessercadence....


Defendants knew or recklessly disregarded that:

(a) while Ullman discussed a continuation of the Company's trend ofgross profit margin

increases, he understood that, by this point in time, that gross profit margins were dramatically decreasing

due to the steep price discounts, virtually continuous sales , and other aggressive pricing strategies

undertaken by the Company to alleviate the excessive Fall/Winter 2005 inventories that had built up both at

the store level and at the main distribution center (¶¶45-77);

(b) while Ullman indicated that the Company did not expect its inventory turn to change,

he understood that, due to the unprecedented level ofFall/Winter 2005 inventories that had accumulated, it

was taking substantially longer for the Company to turn over its existing inventory (¶¶45-63); and

(c) while Ullman discussed the Company's attempts to move away from being a

"promotional company" and that many stores were cutting back on the number of promotions offered, he

was aware that, due to the unprecedented levels of Fall/Winter 2005 inventories, every retail stores had

actually increased its promotional activity by offering steep price discounts, running virtually continuous

and multiple sales , and other aggressive pricing strategies to alleviate the inventory problem (¶¶64-77).

119. On March 2, 2006, the Company issued a press release announcing that "its total sales for the

fiscal month ended February 25, 2006 increased 18.2% to $33.8 million, comparable store sales increased

3.3% when compared with fiscal February 2005, and combined catalog and internet sales increased 37.6%."

120. The market reacted positively to Jos. A. Bank's March 2, 2006 announcement. For example:

52


(a) Ryan Beck & Co. issued a report on March 2, 2006 which maintained its rating of

"Outperform" and stated that "[i]n terms of new merchandise, strong direct sales on low circulation

increases is a key barometer that goods are being well received."

(b) On March 2, 2006, Next Generation Equity Research, LLC issued a report rating Jos.

A. Bank as a "Buy" and stating that "[i]ncreased inventory density beginning in 2H05 should help sustain

positive comp increases into F06."

(c) On March 5, 2006, PriceTarget Research issued a report maintaining an overall

rating of "A" for Jos. A. Bank, raised its power rating , and noted that "[w]ith future returns forecasted to be

above the cost of capital, [Jos. A. Bank] is expected to continue to be a very significant Value Builder."


Bank's stock maintained an artificially inflated price of $42.91 by the end of trading on March 2, 2006.




otherwise concealed that those sales came at the expense of the Company's gross profit margins and

earnings, which were dramatically decreasing due to the fact that the Company began to liquidate the

excessive levels of Fall/Winter 2005 merchandise that had accumulated both at the store level and at the

main distribution center (¶¶45-77); and

(b) while the Company reported a substantial increase in net sales, Defendants omitted or

otherwise concealed that those sales came at the expense of sales of the Company's higher margin core and

Sprin 2006 merchandise, which had been available in retail stores since February 2006 (¶¶80-84).

53


123. On March 31, 2006, the Company issued a press release "reaffirm[ing] its prior earnings

guidance which was provided on February 2, 2006. The Company expected earnings per share for fiscal

2005 to be at least $1.92 (adjusted for stock dividend), representing at least a 39% increase when compared

with earnings per share of $1.38 (adjusted for stock dividend) in fiscal year 2004."



(a) while Defendants reaffirmed their earning guidance for fiscal 2005, Defendants

omitted and otherwise concealed that there was no reasonable basis for them to make this statement due to

the fact that they had been ordering steep price discounts, virtually continuous sales , and other aggressive

pricing strategies to move excessive Fall/Winter 2005 inventories. These drastic action had caused a

dramatic decrease in gross profit margins and earnings (¶¶45-77); and

(b) the Fall/Winter 2005 inventories were impaired, and Defendants needed to take an

appropriate charge against earnings for the current quarter ' s financial results pursuant to GAAP, rather than


125. On April 6, 2006, the Company issued a press release announcing that "its total sales for the

fiscal month ended April 1, 2006 (fiscal March 2006) increased 17.2% to $41.5 million versus $3 5.4 million

in the comparable prior year period. Comparable store sales increased 4.4% when compared with fiscal

March 2005, while combined catalog and Internet sales increased 20.6%. Total sales for the fiscal two

months ended April 1, 2006 increased 17.5% to $75. 2 million compared with $64.0 million in the

comparable prior year period. Comparable stores sales increased 3.9% in the fiscal two months ended April

1, 2006 when compared with the comparable prior year period, while combined catalog and Internet sales

increased 28.1%."

54


126. On April 12, 2006, the Company issued a press release announcing " corrected percentage

increases for combined catalog and Internet sales and comparable store sales for the fiscal month and fiscal

two months ended April 1, 2006." In correcting the April 6, 2006 press release , the Company noted that

"[a]pproximately $300 thousand in sales previously attributed to comparable stores are actually attributable

to catalog and Internet," thus causing a 3.4% increase in comparable store sales and a 30.9% increase in

combined catalog and internet sales , as opposed to the 4.4% and 20.6% respective increases originally

reported.

127. On April 12, 2006, the Company also issued a press release announcing its financial results

for its fiscal year ended January 28, 2006. The press release stated:

The Company's results reflect: a) net income for fiscal 2005 increased 44% to $35.3 million,as compared with net income of $24.5 million for the fiscal year ended January 29, 2005(fiscal 2004); and b) earnings per share for fiscal 2005 increased 41% to $1.95 (adjusted forstock dividend), as compared with fiscal 2004 earnings per share of $1.38 (adjusted for stockdividend), representing another year of record earnings.

The Company previously reported record sales for the fiscal fourth quarter and fiscal 2005.Total sales for the fiscal fourth quarter of 2005 increased 28.1% to $163.8 million, ascompared with sales of $127.9 million in the same prior year period. Total sales for fiscal2005 increased 24.7% to $464.6 million, as compared with sales of $372.5 million in theprior fiscal year. Comparable store sales rose 15.9% in the fiscal fourth quarter and 10.6% infiscal 2005, while combined catalog and internet sales increased 18.9% and 21.7% in thefiscal fourth quarter and fiscal 2005, respectively.

128. Jos. A Bank's financial results for fiscal 2005, the period ended January 28, 2006, were

repeated in the Company's Report on Form 10-K filed with the SEC on or about April 12, 2006. This Form

10-K was signed and certified , pursuant to the Sarbanes-Oxley Act of 2002, by Wildrick and Ullman. The

Company attributed the 44% increase in net income to a 24.7% increase in net sales, a 150 basis point

increase in gross profit margin, and the opening of 56 new stores. In discussing the accounting for

55


inventory, the 10-K stated that "[t]he portions ofproducts that have fashion elements are monitored closely

to ensure that aging goals are achieved to limit the need to sell significant amounts ofproduct below cost. In

addition, the Company's strong gross profit margins enable the Company to sell substantially all of its

products at levels above cost." In discussing the improvement in gross profit margins, the Form 10-K stated

that "[t]he increased gross profit percentage is primarily due to the continued improvement in sourcing of

merchandise, thus reducing the cost of items purchased, and increases in retail prices of certain products.

Gross profit margins increased in substantially all major product categories."

129. In setting forth Jos. A. Bank's Controls and Procedures, the Form 10-K stated:

Disclosure Controls and Procedures and Changes in Internal Control Over FinancialReporting

Limitations on Controls and Procedures. Because of their inherent limitations, disclosurecontrols and procedures and internal control over financial reporting (collectively, "ControlSystems") may not prevent or detect all failures or misstatements of the type sought to beavoided by Control Systems. Also, projections of any evaluation of the effectiveness of theCompany's Control Systems to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate. Management, including the Company's ChiefExecutive Officer (the "CEO") and ChiefFinancial Officer (the "CFO"), does not expect thatthe Company's Control Systems will prevent all error or all fraud. A Control System, nomatter how well conceived and operated, can provide only reasonable, not absolute,assurance that the objectives of the Control System are met. Further, the design of a ControlSystem must reflect the fact that there are resource constraints, and the benefits of controlsmust be considered relative to their costs. Because of the inherent limitations in all ControlSystems, no evaluation can provide absolute assurance that all control issues and instances offraud, if any, within the Company have been detected. These reports by management,including the CEO and CFO, on the effectiveness ofthe Company's Control Systems expressonly reasonable assurance of the conclusions reached.

Disclosure Controls and Procedures -- The Company maintains disclosure controls andprocedures that are designed to ensure that information required to be disclosed in theCompany's reports under the Securities Exchange Act of 1934, as amended (the "ExchangeAct"), is recorded, processed, summarized, and reported within the time periods specified inthe SEC's rules and forms, and that such information is accumulated and communicated tomanagement, including the CEO and CFO, as appropriate, to allow timely decisionsregarding required disclosure.

56


Management, with the participation ofthe CEO and CFO, has evaluated the effectiveness, asof January 28, 2006, of the Company's disclosure controls and procedures (as defined inRule 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, the CEOand CFO have concluded that the Company's disclosure controls and procedures wereeffective as of January 28, 2006.

Management's Annual Report on Internal Control over FinancialReporting -- Managementis responsible for establishing and maintaining adequate internal control over financialreporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act).Management, with the participation ofthe CEO and CFO, has evaluated the effectiveness, asof January 28, 2006, of the Company's internal control over financial reporting. In makingthis evaluation, management used the criteria set forth by the Committee of SponsoringOrganizations of the Treadway Commission in its publication Internal Control -IntegratedFramework. Based on that evaluation, the CEO and CFO have concluded that theCompany's internal control over financial reporting was effective as of January 28, 2006.

Changes in Internal Control over Financial Reporting -- There were no changes in theCompany's internal control over financial reporting identified in connection with theevaluation required by paragraph (d) of Section 240.13a-15 of the Exchange Act thatoccurred during the Company's last fiscal quarter (the Company's fourth quarter in the caseof an annual report) that have materially affected, or are reasonably likely to materiallyaffect, the Company's internal control over financial reporting.

130. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Wildrick and Ullman certified

that:

1. I have reviewed this report on Form 10-K of Jos. A. Bank Clothiers, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a materialfact or omit to state a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading with respect to theperiod covered by this report;

3. Based on my knowledge, the financial statements, and other financial informationincluded in this report, fairly present in all material respects the financial condition, results ofoperations and cash flows ofthe registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)) and internal control over financial reporting (as defined in Exchange ActRules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosurecontrols and procedures to be designed under our supervision, to ensure that material

57


information relating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period in whichthis report is being prepared;

b) Designed such internal control over financial reporting, or caused such internalcontrol over financial reporting to be designed under our supervision, to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and proceduresand presented in this report our conclusions about the effectiveness of the disclosurecontrols and procedures, as of the end of the period covered by this report based onsuch evaluation; and

d) Disclosed in this report any change in the registrant's internal control overfinancial reporting that occurred during the registrant's most recent fiscal quarter (theregistrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal controlsover financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recentevaluation of internal control over financial reporting, to the registrant's auditors and theaudit committee of registrant's board of directors (or persons performing the equivalentfunctions):

a) All significant deficiencies and material weaknesses in the design or operation ofinternal control over financial reporting which are reasonably likely to adverselyaffect the registrant's ability to record, process, summarize and report financialinformation; and

b) Any fraud, whether or not material, that involves management or other employeeswho have a significant role in the registrant's internal control over financialreporting.

131. In response to this announcement regarding Jos. A. Bank's financial results for the fiscal year

ended 2005, Stifel Nicolaus & Co. issued a report on April 12, 2006 proclaiming Jos. A. Bank issued

"impressive results," noting an increase in sales, strong comp store sales and improved gross margin.

Overall, the report concluded that the Company's outlook was favorable.

58


132. On April 13, 2006, the Company conducted a conference call with analysts to discuss the

year-end financial results . Wildrick, Ullman and Black participated in this conference call. In his opening

remarks, Black stated that "[i]n the fourth quarter we had the inventory on hand and we had the correct

marketing in place and we drove a solid sales performance with our respectable margin gain."

133. During the subsequent question and answer session, Wildrick, Ullman and Black made the

following remarks:

Margaret Whitfield -- Ryan Beck & Co And Dave, more color on the inventoriesup more than the sales, do you have theinventory per square foot number andcould you comment what your planningis for inventories at the end of Q2 and goforward?

David Ullman Well, in -

Margaret Whitfield -- Ryan Beck & Co.: Rather in Q1 rather as well as Q2.

David Ullman: -- build in the basics as Neal described,we did that in '05. That will anniversaryitself by - mostly by the second quarter.So the first quarter year-over-year buildwill be comparable to the way we endedthe year. And then we expect the year-over-year increases to decline as we gothroughout the rest of the year.

Christina De Marvel -- Next Generation Just to follow-up Margaret's question on

Equity Research: inventory, I'm wondering, Dave, if you

could talk about aging of the inventory,

particularly the fashion component? I

know the build was mostly in your core

traditional basics, but just wondering if

you could talk about that aspect of the

inventory?

59


David Ullman: Well, I think we talk about our inventoryin two major components. One, which isour basics, which is approximately --represents about two-thirds of our sales,and the other which some has someseasonality or fashion component, whichis obviously the other one-third.

And we have a very good control on theinventory, very good process formonitoring that and we do monitor itvery aggressively. So where we made thebuildwas in basics andwefeel very goodabout how we 're positioned with theinventory.

Christina De Marvel -- Next Generation Okay.Equity Research:

Moving onto [gross] margin, seeing avery dramatic improvement there, say,over the past decade, it's up, I think,about 16 percentage points, somethinglike that. How high do you think the[gross] margin ultimately could reach,say, in the next, you know, say five-yeartime frame and would that primarily befrom sourcing or, you know, is there --are there further changes to mix, youthink, that could contribute there?

And also, at what point do you think wecould expect to see some kind ofoccupancy leverage?

David Ullman: Well, we think we still have

opportunities in our margins, maybe not

as great on a year-over-year basis as

we've seen in the past two years, you

know, we were up 290 points in `04, 150

points in `05. But -- so there's still

opportunities and principally on the

sourcing side.

60

David Ullman: A good part of that depends on thenumber of stores we open. Over half ofour stores that we're operating right noware what we call young stores, you know,they've been open in the last -- within thelast three years.

So that has the opportunity to drive theoperating margins as they mature, andobviously gross margin increases andcomp sales increases would drive theoperating income, too. So it reallydepends on the growth in each of thosethree factors.

Robert Wildrick: Why don't you just indicate what thegross has been for her, Dave, in the newstores?

David Ullman: Well, just to give you an example, the`04 stores that had their first full year ofoperation in `05, they did about 13%, justover 13% four wall contribution. If youstep back and say, well, how did thegroup prior to that do, they had acomparable number in terms of acontribution, and they went up aboutanother 300 basis points in their secondyear of operation.

And so -- and we would expect that tocontinue to grow to get at least to thechain-wide average, which was 23% fourwall contribution for all their stores. So ifthey get to at least that point, that newstore group can add significant operatingleverage to the Company.

61


Robert Wildrick

Paula Kalandiak -- Roth Capital Partners

Yeah, this is Bob Wildrick.

I would say as our margin growth beginsto normalize, we should see leveragecoming because we have over 200 ofthese stores that are maturing, and I thinkyour point is a very good one, becausethe future growth in profits will come asthese stores begin to increase in terms oftheir sales because in most cases the rentis fixed it's not a percentage rent. So it'sa fixed rent. So as we begin to grow thesales on those stores, we do get theleverage.

So that's how I would anticipate movingforward for the next few years. Wewould begin to see some leverage on theexpense line as it relates to the newstores, and I would think that the margingrowth will begin to slow a little andnormalize, and become more normalized.But the Company should continue to be aCompany that grows and profits becauseas these new stores come online andsales grow, we should get the leveragethat you're making reference to.

And with regards to your inventory, I

think your in stock-position at your

catalog or your direct channel has been

somewhere in the 90%. Do you also

track it at the store level and did you see

an increase in in-stock at the store level

in '05?

Neal Black: Yes, we do track it at the store level also,and that was the purpose of - one of thepurposes of our inventory buildup andwe did see an improvement there.

62


Paula Kalandiak -- Roth Capital Partners And then just finally, last year I believeyou guys had commented that youexpected at least 100 basis points ofgross margin improvement for both '05and '06. Now, you got better than that in'05. So does that take away from '06 orcan we still expect 100 basis points in'06?

Dave Ullman: This is Dave.

Like I said, and as you just said, we didget 150 basis points last year. We stillhave opportunity for growth this year bymaybe not at the rate of last year.

134. The market reacted positively to these announcements . For example:

(a) On April 13, 2006, Ryan Beck & Co. maintained its "Outperform" rating, stating

that "[w]hile there was a lot of speculation regarding the delayed earnings release, there does not appear to

be any "smoking gun" in the release. The Company simply did not wish to report results until it filed its 10-

K."

(b) Roth Capital Partners issued a "Buy" rating, noting the improvement in gross margin

percentage.

(c) Next Generation Equity Research, LLC also issued an analyst report on April 13,

2006 stating that "4QF05 EPS Top Expectations" and reiterating its "BUY" rating . The report noted that

4QF05 EPS was ahead of their analysts ' estimate, ahead of the consensus , and higher than a year ago.


Bank's rose to an artificially inflated price of $47.95 by the end oftrading on March 31, 2006 and continued

to trade at artificially inflated levels over the next few weeks.

63


136. The statements contained in paragraphs 125 through 130 and 132 through 133 were

materially false and misleading because Defendants knew or recklessly disregarded that:





center (¶¶45-77);

(b) while the he Company reported a substantial increase in net sales, Defendants omitted

or otherwise concealed that those sales came at the expense of sales of the Company's higher margin core

and Spring 2006 merchandise, which had been available in retail stores since February 2006 (¶¶80-84);

(c) while Defendants reported "another year ofrecord earnings" and "strong gross profit

margins," Defendants omitted and otherwise concealed that there was no reasonable basis for these

statements due to the fact that Defendants had ordered steep price discounts, virtually continuous sales, and

other aggressive pricing strategies to move excessive Fall/Winter 2005 inventories, which had caused

dramatic decreases to gross profit margins and earnings (¶¶64-77);

(d) while Defendants claimed that the Company had sufficient "inventory on hand, "the

correct marketing in place," and "very good control ofinventory," they knew that inventories ofFall/Winter

2005 merchandise had swelled to unprecedented levels necessitating that they take drastic actions to

alleviate the problems (¶¶45-77);

(e) the drastic actions undertaken by Defendants to liquidate Fall/Winter 2005 inventories

did not have a material effect as such inventories continued to swell to unprecedented levels. In fact, at this

time, in order to improve lagging sales of core merchandise and liquidate Fall/Winter 2005 merchandise,

64


Defendants had alerted all stores that "the Company, division, and region are in CODE RED," which

required, among other things, all Store Managers to work 6 day work weeks (¶75); and

(f) the Fall/Winter 2005 inventories were impaired, and Defendants should have taken an

appropriate charge against earnings for the quarterly and yearly financial results pursuant to GAAP, rather

than subsequently washing out the impairment through their liquidation efforts (¶¶85-101).

137. On May 4, 2006, the Company issued a press release announcing that "its total sales for the

fiscal month ended April 29, 2006 increased 17.8% to $38.4 million versus $32.6 million in the comparable

prior year period. The Company also announced that comparable store sales increased 7.3% when compared

with fiscal April 2005, and combined catalog and Internet sales increased 7.7%. In addition, the Company

announced that total sales for the fiscal three months ended April 29, 2006 increased 17.6% to $113.6

million as compared with $96.6 million in the comparable prior year period. Comparable stores sales

increased 4.7% in the fiscal three months ended April 29, 2006 when compared with the comparable prior

year period, while combined catalog and Internet sales increased 25.0%."

138. The market reacted favorably to this announcement. For example, Roth Capital Partners

reiterated their "Buy" rating of Jos. A. Bank on May 4, 2006 and increased its FY06 EPS estimates. In

addition, the report stated that "[w]e believe that promotions during the month were very similar to last

April's promotions. We also believe that inventory is relatively clean and in-line with management's

planned increase."





65




center (¶¶45-77);and

(b) while the Company reported a substantial increase in net sales, Defendants omitted or

otherwise concealed that those sales came at the expense of sales of the Company's higher margin core and

Spring 2006 merchandise, which had been available in retail stores since February 2006 (¶¶80-84).

140. On May 24, 2006, Jos. A. Bank filed its Annual Report for 2005 with the SEC. The Annual

Report contained a copy of the Form 10-K that was filed with the SEC on April 12, 2006, and also included

a gushing "Letter to Stockholders" from Wildrick, which summarized the Company's financial performance

for fiscal 2005. This filing was false and misleading for the reasons set forth in paragraph 136above.


Bank's stock maintained an artificially inflated price of $42.17 by the end of trading on May 4, 2006.

THE TRUTH IS REVEALED

142. On June 7, 2006, Jos. A Bank filed its Form 10-Q through which it reported its financial

results for the first quarter of fiscal 2006. This Form 10-Q was signed by Ullman and certified, pursuant to

the Sarbanes-Oxley Act of 2002, by Ullman and Wildrick.

143. In contrast to the Company's previously positive Class Period filings, Defendants shocked the

market by reporting adverse financial results. To be sure, the Form 10-Q stated that "[for the first quarter of

the Company's fiscal 2006, the Company's net income was $5.9 million compared with net income of $6.7

million for the first quarter of the Company's fiscal 2005. The Company earned $0.32 per diluted share in

the first quarter of fiscal 2006 compared with $0.38 per diluted share in the first quarter of fiscal 2005. As

such, diluted earnings per share decreased 16% as compared with the prior year period."

66


144. The Company attributed this decline to, inter alia, a "140 basis point decrease in gross profit

margins." In discussing this decline, Defendants reported that "[g]ross profit (net sales less cost of goods

sold) totaled $69.8 million or 61.4% of net sales in the first quarter of fiscal 2006, as compared with $60.6

million or 62. 8% of net sales in the first quarter of fiscal 2005. The decreased gross profit percentage is

primarily due to increased sales of promotional fall products during the first quarter of fiscal 2006, with

lower sales of the year-round core products. Sales of the new spring products were consistent with the

comparable prior year quarter."

145. These financial results were repeated in a June 8, 2006 press release. In commenting on these

results, Ullman stated:

While our sales ofnew transitional spring products remained consistent with lastyear, grossprofits declinedprimarily as a result ofincreased customer demandforfall merchandise,resulting in less demandfor the year-round core merchandise. Our new spring productscontinue to show strong sales in May and early June, so we expect our year-over-year profitsto increase at least 10% in the second quarter of fiscal 2006.

146. Upon this announcement, shares of Jos. A Bank fell $10.73 per share, or approximately 29%,

to close at $26.40 per share on June 8, 2006. The trading volume on June 8, 2006 was 11,860,300 shares,

more than 20 times the volume from the previous trading day.

147. During the Company's earning conference call, Wildrick, Ullman and Black attempted to

calm the market by trying to depict the Company's gross margin compression as an aberration that was the

result of a strong consumer response to the Company's promotional offering rather than the direct effect of

the Company's inventory problems and pricing strategies. For example, Black stated:

The first quarter of 2006 featured a good sales performance, but the mix of products soldproduced a temporary drop in the gross margin rate. February and March were particularlystrong months for the sales of winter and cold winter products at promotional prices.Although the gross margin rate for these products is actually higher than a year ago, at thistime of year the margin rate is substantially lower than the rate of the assortment of springand year-round products, mixing out in a total gross margin decline.

67


Part of our strategy in building our inventories up throughout 2005 was to have enough fallremaining into the first quarter. We traditionally have a good cold weather business as longas the weather stays cold, which is through the first quarter, and so we had stronginventories, as we always have in the first quarter. We're not sold out of cold weather rightafter Christmas. It goes really through March and into April.

What we got this year was a much higher-than-expected response to that promotionalactivity. I think manifested in price sensitivity, particularly in tailored clothing, andcustomers just gravitated to those offers more than they did to some ofthe other things in ourassortment. And the promotional offering was very similar to the prior year, as we do everyyear.

So it wasn ' t a matter of inventory levels or promotional prices. It was really a consumerresponse issue and it surprised us.

148. Widrick agreed:

... so we always have some carryover. It's a question of what percentage of that heaviergoods we sell in the spring, and this spring it happened to be, A, we promoted a little bitmore because that's what they seem to want; and B, they bought more. So it goofed up ourmix a little bit and it just happened. We're back on a normalized pace now, but we nevercome out clean on seasonal basics. We buy around them and then redistribute them thefollowing year.

So did Ullman:

And we should emphasize that the inventory levels that we had post Christmas is what wehad planned to have post Christmas. And so it's not as ifwe were in a liquidation mode. It'sjust that the customer responded more to that promotional product in the first quarter.

149. According to Wildrick, the Company's inventory build-up "strategy ... obviously paid off in

the fourth quarter:"

So that was part of our strategy. Our strategy additionally was to bring the inventory downslightly this year and we knew we didn't have to buy as many basics, so we're not. It's thatsimple. There is no hidden agenda here or anything like that. That's What it is. And that'swhat we have said consistently for the last two or three years.

150. Analysts, however, were not convinced. Among others, Richard Jaffe, an analyst with Stifel

Nicolaus, challenged Wildrick's explanations:

68


Richard Jaffe -- Stifel Nicolaus: Obviously a lot to understand here, at

least for me. I'm sort of challenged with

what happened. If you plan to have 20%

more inventory fourth quarter, so you

would have more product available to

sell in the first quarter, what was

surprise? That you did sell it but you just

discounted it more than you anticipated?

Robert Wildrick: Richard, it's a mix. Let's give you an

example. Shoes run about 3% of our

business. They carry about 47 margin.

The rest of the inventories over 60

margin. If suddenly any one month we

sell 5% in shoes, it pulls down our total

margin because of mix. And that in

essence is what happened here. We

don't necessarily have more or less

shoes, it's just that they buy more than

one month and that in essence is what

happened with the fall merchandise. It

wasn't that we -they just bought more

than we normally mix out at. Why they

did I don't have any idea.

Richard Jaffe -- Stifel Nicolaus: I understand that you did mix it out 20%more. There is a real decision you madealmost a year ago to build the third-andfourth-quarter inventories so you woulddistort your in-store assortment to favorfall goods.

Robert Wildrick: We built primarily in annual-I canunderstand where the confusion is here.We built primarily in annual basics. Wedidn't build primarily in seasonal goods.

Richard Jaffe -- Stifel Nicolaus: You've got shoes going from 3 to 5%with the same inventory it's fallmerchandise.

Robert Wildrick: Listen, I just told you what happened.You can keep challenging it, but you'rewasting your time and mine on it. I told

69


you what happened. It mixed outdifferently than we had anticipated.

Richard Jaffe -- Stifel Nicolaus: So you had that more inventory packedaway?

Robert Wildrick: Let me give you an example one day, ifTuesday you think you're going to sell60% fall merchandise and you sell 64%instead of 60, it's going to mix outdifferently. It happened that in Februaryit mixed out a little differently and inMarch than we had anticipated from ourhistory. We did everything the same.We didn't make any tremendous moveone way or another. Itjust happened thatway. Now it could have happened theother way and we could have atremendous result. It just didn't.

Richard Jaffe -- Stifel Nicolaus: Well, if it happened the other way, you'dhave a lot more fall merchandise to bepacked away for next year. Is that whatwould have happened?

Robert Wildrick: No, it' s about the same as it always was.We're not talking about huge amountshere.

Richard Jaffe -- Stifel Nicolaus: I guess the very small quantity had a verybig impact on earnings, so I'm trying toreconcile those two.

151. After the conference call, various analysts noted their shock with the Company's revelations

about on the Company's gross margin compression and questioned the credibility of Jos. A. Bank's

management:

(a) On June 7, 2006, Stifel Nicolaus issued a report stating that "[Jos. A. Bank] reported

Q1 EPS of $0.32, $0.11 below our estimate and $0.14 below consensus . This miss was due primarily to

70


gross margin erosion , which fell 140 bps as markdowns were used to accelerate the sales seasonal goods

and help bring excess inventory in line.

(b) On June 9, 2006, Johnson Rice issued a report commenting on the stock's drop and

the Company's negative performance. These analysts stated that the "Company's first quarter EPS was

significantly below our estimate, led by a breakdown in gross margins and greater than expected demand for

fall products (which were heavily marked down). We believe that thefirst quarter issues were self-inflicted

and Company-specific and do not reflect the health of the men's apparel sector." Overall, the report found

that "gross margin seems to be susceptible to further declines. " In addition, Johnson Rice stated that

"[mJanagement credibility is in question given the operating miscues and the lack of comment (or

guidance) onfourth quarter call (mid-April), when thepressure onfirst quarter gross margin was likely

already visible. "

(c) These sentiments were echoed by Stifel Nicolaus in another report issued on June 9,

2006. In commenting on Jos. A. Bank's earnings miss, the report indicated that "[w]hile we recognize the

high degree of impact that additional clearance sales have upon gross margin we would have thought that

management would have considered this when they decided to build inventory levels in cold weather

products last year." Under the heading "What went wrong?" Stifel Nicolaus analysts explained that "JOSB

increased its inventory levels in two major categories (year round basics and key cold weather products) in

an effort to maximize sales (inventory per square foot was up 22% at year end). We believe that this

strategy backfiredfor JOSB, as customers bought coldweather merchandise (aggressivelypromoted and

at a low margin) instead offull price basic and spring merchandise."

152. Additionally, on June 15 , 2006, Jos. A. Bank presented at the Morgan Stanley Small Cap

Executive Conference. Ullman spoke on behalf ofthe Company. Immediately after Ullman's presentation,

71


analysts questioned him about the Company's inventory and gross margin problems. In response, Ullman

revealed:

One of the things we did in '05 was we built up in certain core Fall products, and that wasone ofthe reasons why we had such a successful third quarter and fourth quarter of '05. Wealso said when we were building those categories, that we - we don't stop selling that stuff atChristmas. That type product sells in January and February and even parts ofMarch. So wedid have a plan to have more of that on hand going into the first quarter. And to sell more.And we did. The offset to that is that there - and that product is sold at a lesser margin ratein the first quarter than it would've been sold during the holiday. It could've been - it's inclearance mode at that time. But we'd had that by design. And the other - if you look at theother product - you know you had - so you had the Fall goods, you had year-round goods,and you had the new Spring goods. The new Spring goods sold very well, margins were upvery nicely. In that year-round category, most categories were working, but there werecertain portions of our opening price point suits that did not work very well, and we actuallyhad a decline in those sales. The margin differential between the Fall goods that we soldearly in the quarter and the year-round and the Spring goods is about ten points. So, sincethe Fall goods became a greater penetration or mix of the sales , than the, you know thehigher margin selling items because of the decline in the opening price point suits, it mixedout to a decline in the gross profit margins of about 140 points. So to us it was about mix.The Fall goods sold even slightly better than planned. They sold at a higher margin rate thanthey did in the prior year, so they - that did what we expected. But it created an imbalancefor us in terms of the overall mix of what we sold.

ADDITIONAL SCIENTER ALLEGATIONS

153. As detailed above, Defendants made numerous materially false and misleading statements

throughout the Class Period despite knowing or recklessly disregarding that these statements were false

when made. These scienter allegations are summarized as follows:

Inventory management and availability are of vital importance to the Company'soperational and financial success - it was one of Jos. A. Bank's "Four Pillars ofSuccess" -- and Defendants, as the most senior level executives at the Companycannot realistically deny that they were aware ofthe severe inventory issues plaguingthe Company during the Class Period. (¶¶34-35)

The Individual Defendants participated in formulating annual and seasonal budgets,

sales goals, and gross profit margins as well as in establishing strategies for planning

and merchandising . (¶¶36-37)

72


• The Individual Defendants monitored the status of the Company's inventory levelsthrough a multitude of reports, including OTB Reports, Dashboard Reports, BSPReports and FIFO or LIFO Reports. (¶¶38-40)

• The Individual Defendants participated in regularly scheduled meetings in whichinventory and other operational issues were discussed. (¶41)

• Wildrick frequently visited Jos. A. Bank's retail stores across the country and

witnessed, inter alia, excessive inventory levels. Wildrick then communicated to

Ullman and Black, among others, specific directives to reallocate or recall the

surplus. (¶¶42-44)

• The Individual Defendants formed a "special committee" to deal with excessive

Fall/Winter 2005 inventory issues. (¶¶64)

• The Individual Defendants discussed the Company's "excessive and inadequate"inventory issues at the January 2006 "Manager's Conference." (¶¶62-63)

• The Individual Defendants knew that there were considerable delays in new storeopenings necessitating the reallocation of Fall/Winter 2005 inventory to existingstores. (¶¶46-49)

• The Individual Defendants knew that customer demand for Fall/Winter 2005merchandise was lagging , which had caused an unprecedented surplus of inventory.(¶¶50-52)

• The Individual Defendants authorized steep discount, continuous and multiple salesand other aggressive pricing strategies to liquidate Fall/Winter 2005 inventory.(¶¶64-69)

• The Individual Defendants implemented a "CODE RED" in April 2006 directedtoward liquidating excessive Fall/Winter 2005 inventory and boosting lagging salesof core and Spring 2006 merchandise . (¶¶75-76)

• Ullman, as the Company's CFO, reviewed and signed off on the Company'sfinancial statements and results. (¶19)

• Pursuant to the Sarbanes-Oxley act of 2002, Wildrick and Ullman reviewed Jos. A.Bank's SEC filings and certified that, inter alia, (1) these filings did not contain anyuntrue statement of material fact or omit to state a material fact; (2) the Company'sfinancial statements and other financial information were fairly presented; (3) theyare responsible for establishing and maintaining disclosure controls and proceduresand internal control over financial reporting; (4) they have disclosed all significantdeficiencies and material weaknesses in the design or operation of internal control

73


over financial reporting; and (5) they have disclosed any fraud that involvesmanagement. (¶¶103, 129-30)

154. In addition to these facts, the Individual Defendants had the motive and opportunity to

misrepresent Jos. A. Bank' s financial and operational condition.

A. Wildrick' s Suspicious Insider Trading

155. While in possession of non-public adverse information regarding the true condition of the

Company's inventories and gross profit margins during the Class Period, Wildrick took full advantage of the

artificial inflation of Jos. A. Bank's common stock caused by Defendants' misrepresentations. In fact,

Wildrick disposed of huge quantities of his stock and reaped massive proceeds during the Class Period as

follows:

Robert N. Wildrick

Summary of Insider Stock Sales14

Shares

Date Sold Price Proceeds

23-Dec-05 16,406 $35.20 $577,500

23-Dec-05 12,375 $35.14 $434,808

23-Dec-05 4,031 $35.13 $141,610

27-Dec-05 6,250 $35.20 $220,000

27-Dec-05 6,250 $35.00 $218,750

27-Dec-05 2,031 $34.80 $70,688

27-Dec-05 1,875 $34.67 $65,010

3-Jan-06 8,281 $34.66 $287,061

3-Jan-06 6,250 $34.62 $216,400

3-Jan-06 1,875 $34.86 $65,370

5-Jan-06 3,125 $38.44 $120,125

5-Jan-06 3,125 $37.66 $117,675

10-Jan-06 7,500 $38.58 $289,320

10-Jan-06 2,500 $39.00 $97,500

10-Jan-06 2,500 $38.88 $97,200

14 Data adjusted for the 25% stock dividend paid on February 16, 2006.

74


10-Jan-06 2,500 $38.95 $97,380

10-Jan-06 1,563 $38.86 $60,725

10-Jan-06 1,375 $39.00 $53,625

10-Jan-06 1,031 $38.96 $40,178

10-Jan-06 938 $38.81 $36,383

10-Jan-06 750 $39.00 $29,250

10-Jan-06 750 $38.96 $29,220

10-Jan-06 625 $39.20 $24,500

10-Jan-06 625 $38.91 $24,320

17-Jan-06 2,000 $37.80 $75,600

17-Jan-06 625 $38.40 $24,000

17-Jan-06 500 $38.20 $19,100

17-Jan-06 375 $37.83 $14,187

18-Jan-06 6,656 $37.60 $250,275

18-Jan-06 5,000 $37.60 $188,000

18-Jan-06 3,750 $37.80 $141,750

18-Jan-06 3,375 $38.00 $128,250

18-Jan-06 375 $38.00 $14,250

24-Jan-06 4,375 $38.40 $168,000

24-Jan-06 3,750 $38.68 $145,050

24-Jan-06 3,750 $38.40 $144,000

24-Jan-06 3,750 $38.48 $144,300

24-Jan-06 3,750 $38.60 $144,750

24-Jan-06 2,293 $38.88 $89,132

24-Jan-06 989 $38.60 $38,166

30-Jan-06 7,500 $41.46 $310,920

30-Jan-06 6,250 $41.45 $259,050

30-Jan-06 5,469 $41.44 $226,625

30-Jan-06 5,000 $41.40 $207,000

30-Jan-06 3,906 $41.46 $161,969

31-Jan-06 12,500 $40.94 $511,700

31-Jan-06 12,500 $41.08 $513,500

31-Jan-06 9,375 $41.21 $386,325

31-Jan-06 6,250 $40.90 $255,650

31-Jan-06 6,250 $41.08 $256,750

31-Jan-06 6,250 $41.12 $257,000

31-Jan-06 6,250 $41.20 $257,500

31-Jan-06 5,000 $40.88 $204,400

31-Jan-06 3,125 $41.22 $128,800

31-Jan-06 1,250 $40.88 $51,100

1-Feb-06 8,750 $41.12 $359,800

1-Feb-06 6,250 $41.28 $258,000

1-Feb-06 3,750 $41.12 $154,200

1-Feb-06 3,125 $41.23 $128,850

75


1-Feb-06 3,125 $41. 00 $128,125

2-Feb-06 12,500 $44. 19 $552,400

2-Feb-06 10,000 $43. 20 $432,000

2-Feb-06 9,375 $43. 24 $405,375

2-Feb-06 9,375 $43. 40 $406,875

2-Feb-06 9,375 $43. 00 $403,125

2-Feb-06 7,125 $43. 28 $308,370

2-Feb-06 6,250 $42. 64 $266,500

2-Feb-06 6,250 $42. 40 $265,000

2-Feb-06 6,250 $43. 20 $270,000

2-Feb-06 5,000 $42. 90 $214,520

2-Feb-06 4,750 $44. 08 $209,380

2-Feb-06 3,125 $42. 32 $132,250

2-Feb-06 3,125 $44. 28 $138,375

2-Feb-06 3,125 $44. 24 $138,250

2-Feb-06 3,125 $44. 11 $137,850

2-Feb-06 3,125 $44. 00 $137,500

2-Feb-06 2,750 $44. 09 $121,242

2-Feb-06 2,625 $42. 88 $112,560

2-Feb-06 2,500 $43. 27 $108,180

2-Feb-06 2,250 $43. 31 $97,452

2-Feb-06 1,875 $43. 08 $80,775

2-Feb-06 1,875 $44. 08 $82,650

2-Feb-06 1,875 $44. 08 $82,650

2-Feb-06 1,750 $43. 20 $75,600

2-Feb-06 1,250 $43. 08 $53,850

2-Feb-06 1,250 $44. 32 $55,400

2-Feb-06 779 $43. 88 $34,172

3-Feb-06 10,000 $43. 92 $439,200

3-Feb-06 9,375 $44. 06 $413,100

3-Feb-06 7,250 $43. 80 $317,550

3-Feb-06 6,250 $43. 80 $273,750

3-Feb-06 6,250 $44. 00 $275,000

3-Feb-06 6,250 $44. 12 $275,750

3-Feb-06 6,250 $44. 20 $276,250

3-Feb-06 6,250 $44. 24 $276,500

3-Feb-06 6,250 $43. 60 $272,500

3-Feb-06 6,125 $43. 60 $267,050

3-Feb-06 4,375 $43. 60 $190,750

3-Feb-06 3,625 $43. 60 $158,050

3-Feb-06 3,375 $44. 20 $149,175

3-Feb-06 3,250 $43. 81 $142,376

3-Feb-06 3,250 $43. 68 $141,960

3-Feb-06 2,750 $43. 60 $119,900

76


3-Feb-06 2,500 $44.26 $110,660

3-Feb-06 2,500 $44.23 $110,580

3-Feb-06 2,500 $44.20 $110,500

3-Feb-06 2,125 $43.80 $93,075

3-Feb-06 1,875 $44.56 $83,550

3-Feb-06 1,875 $43.60 $81,750

3-Feb-06 1,250 $44.34 $55,430

3-Feb-06 1,250 $43.80 $54,750

3-Feb-06 1,000 $44.20 $44,200

3-Feb-06 1,000 $43.80 $43,800

3-Feb-06 625 $43.38 $27,110

8-Feb-06 5,625 $43.00 $241,875

8-Feb-06 3,750 $43.00 $161,250

9-Feb-06 6,250 $42.26 $264,150

10-Feb-06 6,250 $42.20 $263,750

10-Feb-06 5,000 $42.28 $211,400

10-Feb-06 3,125 $42.20 $131,875

10-Feb-06 1,750 $42.20 $73,850

10-Feb-06 1,375 $42.22 $58,058

10-Feb-06 1,250 $42.28 $52,850

13-Feb-06 6,250 $42.40 $265,000

14-Feb-06 1,625 $41.60 $67,600

14-Feb-06 1,000 $41.60 $41,600

14-Feb-06 875 $41.60 $36,400

15-Feb-06 6,250 $41.80 $261,250

15-Feb-06 6,250 $42.00 $262,500

15-Feb-06 12,500 $42.08 $526,000

15-Feb-06 1,250 $42.27 $52,840

15-Feb-06 5,000 $42.34 $211,680

15-Feb-06 6,250 $42.40 $265,000

15-Feb-06 6,250 $42.60 $266,250

15-Feb-06 2,500 $43.28 $108,200

15-Feb-06 2,250 $43.28 $97,380

15-Feb-06 4,625 $43.13 $199,467

15-Feb-06 3,750 $43.04 $161,400

15-Feb-06 3,125 $43.02 $134,425

15-Feb-06 2,500 $43.08 $107,700

15-Feb-06 2,500 $43.28 $108,200

15-Feb-06 3,750 $43.18 $161,940

15-Feb-06 3,125 $43.14 $134,825

15-Feb-06 3,125 $43.14 $134,825

15-Feb-06 3,125 $43.22 $135,075

15-Feb-06 3,125 $43.20 $135,000

15-Feb-06 6,250 $43.29 $270,550

77


15-Feb-06 6,250 $43.66 $272,850

15-Feb-06 6,875 $43.68 $300,300

15-Feb-06 2,500 $43.62 $109,040

15-Feb-06 9,375 $43.22 $405,150

16-Feb-06 5,000 $44.00 $220,000

16-Feb-06 5,000 $44.00 $220,000

16-Feb-06 5,000 $44.00 $220,000

16-Feb-06 4,000 $44.10 $176,400

16-Feb-06 3,300 $44.10 $145,530

16-Feb-06 1,200 $44.10 $52,920

16-Feb-06 1,000 $44.10 $44,100

16-Feb-06 500 $44.10 $22,050

21-Feb-06 5,000 $43.60 $218,000

21-Feb-06 5,000 $43.85 $219,250

21-Feb-06 5,000 $43.50 $217,500

21-Feb-06 4,000 $43.40 $173,600

21-Feb-06 2,500 $44.00 $110,000

21-Feb-06 2,500 $44.00 $110,000

21-Feb-06 2,000 $43.65 $87,300

21-Feb-06 1,900 $43.65 $82,935

21-Feb-06 1,000 $43.40 $43,400

22-Feb-06 7,500 $44.05 $330,375

22-Feb-06 7,500 $44.79 $335,925

22-Feb-06 5,000 $44.29 $221,450

22-Feb-06 5,000 $44.80 $224,000

22-Feb-06 2,500 $44.25 $110,625

22-Feb-06 2,500 $44.86 $112,150

23-Feb-06 5,000 $44.75 $223,750

23-Feb-06 5,000 $44.65 $223,250

23-Feb-06 3,300 $44.75 $147,675

23-Feb-06 3,000 $44.93 $134,790

23-Feb-06 2,500 $44.75 $111,875

23-Feb-06 2,000 $44.90 $89,800

23-Feb-06 1,200 $44.75 $53,700

24-Feb-06 7,500 $44.60 $334,500

24-Feb-06 5,000 $44.75 $223,750

24-Feb-06 1,300 $44.50 $57,850

24-Feb-06 500 $44.80 $22,400

27-Feb-06 7,600 $45.16 $343,216

27-Feb-06 3,000 $45.05 $135,150

27-Feb-06 2,500 $45.25 $113,125

27-Feb-06 2,500 $45.16 $112,900

27-Feb-06 2,400 $45.25 $108,600

27-Feb-06 2,000 $45.04 $90,080

78


27-Feb-06 300 $45.05 $13,515

28-Feb-06 5,000 $45.00 $225,000

28-Feb-06 2,700 $44.75 $120,825

1-Mar-06 5,000 $45.45 $227,250

1-Mar-06 5,000 $45.31 $226,550

1-Mar-06 3,500 $45.00 $157,500

1-Mar-06 3,300 $45.50 $150,150

1-Mar-06 3,000 $45.60 $136,800

1-Mar-06 2,500 $45.24 $113,100

1-Mar-06 2,500 $45.17 $112,925

1-Mar-06 2,200 $45.51 $100,122

1-Mar-06 2,000 $45.64 $91,280

1-Mar-06 2,000 $45.45 $90,900

1-Mar-06 1,500 $45.00 $67,500

1-Mar-06 1,500 $45.50 $68,250

1-Mar-06 1,000 $45.31 $45,310

2-Mar-06 6,000 $42.71 $256,260

2-Mar-06 5,800 $42.54 $246,732

2-Mar-06 4,200 $42.75 $179,550

2-Mar-06 3,550 $42.80 $151,940

853,123 $35,984,122

156. Wildrick's stock sales were unusual and suspicious in that such sales were executed at times

calculated to maximize his personal benefit from the artificial inflation of Jos. A. Bank's stock price.

Wildrick began trading shortly after the Company's disclosure of false and misleading financial results for

the third quarter of fiscal 2005 and continued throughout the Class Period until the Company's false and

misleading financial release on March 2, 2006. During this time, Jos. A. Bank' s stock traded at prices over

$34.00 and, artificially inflated by Defendants ' misrepresentations, exceeded $45.00 on several occasions as

the Class Period wore on. Accordingly, Wildrick's stock sales were conspicuously well-timed.

157. According to his SEC filings, Wildrick sold some or all of his stock pursuant to a Rule lObS-

1 plan which he established on October 3, 2005. Although Plaintiff is unaware ofthe details of this plan, by

the time that Wildrick established this plan and began trading under it, he was already aware of material

adverse non-public information that should have prevented his insider selling. For example, according to the

79


Associate Planner, it was apparent throughout the Company, by at least September 2005, that there were

excessive levels ofFall/Winter merchandise, which was causing major problems. As such, Wildrick knew

or recklessly disregarded that Company's Fall/Winter 2005 inventories had reached unprecedented levels

and that, to resolve this problem, the Company ordered drastic price reductions, which had the effect of

reducing gross profit margins and cannibalizing sales of the Company's Spring 2006 and core merchandise

lines.

158. Further, the stock sales were unusual and suspicious in that Wildrick sold over 74% of his

common stock holdings. Indeed, when his trading was complete, Wildrick had sold 853,153 ofthe common

stock that he actually owned, and reaped proceeds of almost $36 million. These Class Period sales also

represent the only instance in which Wildrick has sold Jos. A. Bank common stock in the past 2 years.

B. The Individual Defendants' Enormous Cash Bonuses

159. The Individual Defendants were strongly motivated to misrepresent Jos. A. Bank' s financial

results because ofthe potential to receive enormous cash bonuses and stock option grants. According to the

May 23, 2006 Proxy, Jos. A. Bank' s compensation philosophy is "to align compensation with business

objectives and performance and to enable the Company to attract, retain and reward senior management who

contribute to the long-term success of the Company." In addition, the Company's executive compensation

program consists of cash-based compensation, which includes base salaries and bonuses and equity-based

compensation in the form of stock option grants.

160. As detailed in the Company's 2006 Proxy, Jos. A. Bank had multiple bonus plans that the

Company's officers and key managers could participate in for 2005, all of which were directly tied to the

Jos. A. Bank stock performance. The first of these was the Company' s Basic Bonus Plan. Under this plan,

maximum potential awards ranged from 10% to 65% of the participants' fiscal year-end base salaries.

80


Under the Basic Bonus Plan, there were two EPS Goals that came into play (a lower and a higher). No

bonus was payable to any Basic Bonus Plan participant unless the Company's EPS were at least equal to the

first EPS Goal, regardless of whether such participant satisfied his/her Performance Goals. However, if

Company's EPS were at least equal to the higher EPS goal and the participant achieved his individual

performance goals, then that participant would receive the maximum potential award.

161. In addition, there was an Incentive Bonus Plan, in which senior management were eligible for

in addition to the Basic Bonus Plan. However, if an eligible participant received a bonus under the Incentive

Bonus Plan, then no bonus was payable to that participant under the Basic Bonus Plan. Maximum potential

awards under the Incentive Bonus Plan ranged from 100% to 130% ofthe participants' fiscal year-end base

salaries . Under the Incentive Bonus Plan, there is a third EPS goal known as the "Incentive EPS Goal."

This goal is higher than the EPS Goals established under the Basic Bonus Plan.

162. Under this plan, unless the Company's EPS is at least equal to the Incentive EPS Goal,

regardless of achievement of individual performance goals, no bonus is payable. On the other hand, if the

Company's EPS is at least equal to the Incentive EPS Goal and the participant satisfied his individual

performance goals, then that participant would receive the maximum potential award.

163. For the fiscal year of 2005, Ullman received a salary of $292,308 and, because Company

achieved an EPS of $1.95 for the 2005 fiscal year, a bonus of $380,000 pursuant to the Incentive Bonus

Plan. According to the 2006 proxy, pursuant to an amended employment agreement, Ullman currently

receives an annual base salary of $375,000, and he is eligible to receive a bonus under the Basic Bonus Plan

of up to $187,500 or a bonus of up to $325,000 under the Incentive Bonus Plan.

164. During 2005, Black received a salary of $369,615 and, because Company achieved an EPS of

$1.95 for the 2005 fiscal year, a bonus of $488,000 pursuant to the Incentive Bonus Plan. Pursuant to an

81


amended employment agreement, Black receives an annual base salary of $500,000, and he is currently

eligible to receive a bonus under the Basic Bonus Plan of up to $250,000 or a bonus of $400,000 under the

Incentive Bonus Plan.

165. Wildrick received a salary of $1,025,876 for the 2005 fiscal year under his employment

agreement and, because the Company achieved an EPS of $1.95 for the 2005 fiscal year, he received the

maximum bonus under his employment agreement of 250% of his base salary, or $2,564,690.

166. As stated above, Jos. A. Bank's executive bonus plans and employment agreements are

directly tied to the performance of Jos. A. Bank stock. Ifthe Company does not achieve certain EPS targets,

the Individual Defendants and other executives do not receive bonuses. If maximum EPS targets are

achieved, the Individual Defendants receive , and, for fiscal 2005, have received, huge cash bonuses.

Accordingly, the Individual Defendants were motivated to make false and misleading statements during the

Class Period in order to keep EPS high with the ultimate goal of receiving bonuses in amounts equal or

greater than their salaries.

APPLICABILITY OF PRESUMPTION OF RELIANCE:FRAUD ON THE MARKET DOCTRINE

167. At all relevant times, the market for Jos. A. Bank's publicly traded securities was well-

developed and efficient for the following reasons, among others:

(a) Jos. A. Bank's securities met the requirements for listing, and were listed and

actively traded on the NASDAQ, a highly efficient and automated market;

(b) as a regulated issuer, Jos. A. Bank filed periodic public reports with the SEC and the

NASDAQ;

(c) Jos. A. Bank regularly communicated with public investors via established market

communication mechanisms, including through regular disseminations of press releases on the national

82


circuits of major newswire services and through other wide-ranging public disclosures, such as

communications with the financial press and other similar reporting services; and

(d) Jos. A. Bank was followed by several securities analysts employed by major

brokerage firms who wrote reports that were distributed to the sales force and certain customers of their

respective brokerage firms. Each ofthese reports was publicly available and entered the public marketplace.

(e) As a result, the market for Jos. A. Bank's publicly traded securities promptly

digested current information regarding Jos. A. Bank from all publicly-available sources and reflected such

information in Jos. A. Bank's securities prices. Under these circumstances, all purchasers of Jos. A. Bank's

publicly traded securities during the Class Period suffered similar injury through their purchase of Jos. A.

Bank's publicly traded securities at artificially inflated prices and a presumption of reliance applies.

LOSS CAUSATION

168. As detailed in this Complaint, Defendants' fraudulent scheme and false statements artificially

inflated Jos. A. Bank's stock price by failing to disclose that Jos. A. Bank had excessive Fall/Winter 2005

inventory on hand which, when liquidated at bargain basement prices, caused the Company's gross profit

margin to nosedive and hurt sales of its other merchandise. These false and misleading statements,

individually and collectively, concealed Jos. A. Bank's true financial circumstances and future business

prospects, resulting in the stock bring artificially inflated until, as indicated herein, the relevant truth about

Jos. A. Bank was revealed. While each ofthese misrepresentations was independently fraudulent, they were

all motivated by Defendants' desire to artificially inflate Jos. A. Bank's stock price and the image of its

future business prospects to give the market the false notion that its inventory levels were in check and its

profit margins were increasing, and not decreasing.

83


169. Defendants' false and misleading statements had the intended effect and causes, or were a

substantial contributing cause of Jos. A. Bank's stock trading at artificially inflated levels throughout the

Class Period.

170. The true picture of Jos. A. Bank's business, operations and finances was disclosed to the

market on June 7, 2006, when Jos. A. Bank revealed that the Company's net income for the first quarter of

2006, the three months ended April 29, 2006, had fallen 13% even as sales revenues increased by 18%.

Defendants attributed this material decline to the fact that its gross profit margins had decreased by

approximately 140 basis points. When Defendants provided the market with this revelation, it was an

indication to the market that Defendants' prior Class Period statements about its financial results and

satisfaction with inventory controls were false and misleading . In fact, securities analysts following Jos. A.

Bank specifically attributed the reported "gross margin erosion" to "markdowns [that] were used to

accelerate the sales of seasonal goods and help bring excess inventory in line," and openly questioned

"management credibility" because "pressure on first quarter gross margin was likely already visible."

171. As a result of the information revealed to the market on June 7, 2006, doubt was cast on the

veracity ofDefendants' prior statements and Jos. A. Bank's true financial circumstances, which were known

to Defendants since the beginning of the Class Period, were revealed causing Jos. A. Bank's stock price to

drop approximately 29% on abnormally high trading volume.

172. Indeed the market reacted negatively to Defendants' shocking disclosure as demonstrated in

the stock chart below:

84


14000000

12000000

10000000

8000000

6000000

4000000

2000000

40

38

36

34

32

30Volume

Price

28

26

24

22

0 El . El El 1:1 20

30- 31- 1-Jun- 2-Jun- 5-Jun- 6-Jun- 7-Jun- 8-Jun- 9-Jun- 12-Jun- 13-Jun- 14-Jun- 15-Jun- 16-Jun-

May-06 May-06 06 06 06 06 06 06 06 06 06 06 06 06

173. The rapid decline in Jos. A. Bank's stock price following the June 7, 2006 revelation was a

direct and foreseeable consequence of the revelation of the falsity of Defendants' Class Period

misrepresentations and omissions to the market. Thus, the revelation of truth at the close of the Class

Period, as well as the resulting clear market reaction, support a reasonable inference that the market

understood that Jos. A. Bank's prior statements were false and misleading.

174. In sum, as the truth about Defendants' prior misrepresentations and concealments was

revealed, the Company's stock price quickly sank, the artificial inflation came out of the stock, and Plaintiffs

were damaged, suffering true economic losses.

175. The decline in Jos. A. Bank stock in June of 2006 was a direct result of the nature and extent

of the revelations to investors and the market of the impact on Jos. A. Bank of excess inventory and

85


decreasing profit margins that had been concealed or misrepresented by Defendants' scheme and

misstatements. The timing and magnitude of Jos. A. Bank's stock price decline negates any inference that

the loss suffered by Plaintiff was caused by changed market conditions, macroeconomic or industry factors

or Company-specific facts unrelated to the Defendants' fraudulent conduct. The economic loss, i.e.,

damages, suffered by Plaintiff was a direct and proximate result of Defendants' scheme and

misrepresentations and omissions which artificially inflated Jos. A. Bank's stock price, and the subsequent

significant decline in the value of Jos. A. Bank's stock when the truth concerning Defendants' prior

misrepresentations and fraudulent conduct, entered the market place.

NO SAFE HARBOR

176. The federal statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any ofthe allegedly false statements pleaded in this complaint. Many ofthe

specific statements pleaded herein were not identified as "forward-looking statements" when made. To the

extent there were any forward-looking statements, there were no meaningful cautionary statements

identifying important factors that could cause actual results to differ materially from those in the purportedly

forward-looking statements. Alternatively, to the extent that the statutory safe harbor does apply to any

forward-looking statements pleaded herein, Defendants are liable for those false forward-looking statements

because at the time each ofthose forward-looking statements was made, the particular speaker knew that the

particular forward-looking statement was false, and/or the forward-looking statement was authorized and/or

approved by an executive officer of Jos. A. Bank who knew that those statements were false when made.

Moreover, to the extent that Defendants issued any disclosures designed to "warn" or "caution" investors of

certain "risks," those disclosures were also false and misleading since they did not disclose that Defendants

86


were actually engaging in the very actions about which they purportedly warned and/or had actual

knowledge of material adverse facts undermining such disclosures.

COUNT I

FOR VIOLATIONS OF SECTION 10(b) OF THE EXCHANGE ACT AND RULE 10b-5 OFPROMULGATED THEREUNDER AGAINST ALL DEFENDANTS

177. Plaintiff repeats and realleges the allegations set forth above as though fully set forth herein.

This claim is asserted against all Defendants.

178. During the Class Period, Jos A. Bank and the Individual Defendants, and each of them,

carried out a plan, scheme and course of conduct which was intended to and, throughout the Class Period,

did: (i) deceive the investing public, Plaintiff and other Class members, as alleged herein; (ii) artificially

inflate and maintain the market price of Jos A. Bank's publicly traded securities; and (iii) cause Plaintiff and

other members ofthe Class to purchase Jos A. Bank's publicly traded securities at artificially inflated prices.

In furtherance of this unlawful scheme, plan and course of conduct, Jos A. Bank and the Individual

Defendants, and each of them, took the actions set forth herein.

179. These Defendants: (i) employed devices, schemes, and artifices to defraud; (ii) made untrue

statements of material fact and/or omitted to state material facts necessary to make the statements not

misleading; and (iii) engaged in acts, practices, and a course of business which operated as a fraud and

deceit upon the purchasers of the Company's securities in an effort to maintain artificially high market

prices for Jos A. Bank's securities in violation of Section 10(b) of the Exchange Act and Rule IOb-5. These

Defendants are sued as primary participants in the wrongful and illegal conduct charged herein. The

Individual Defendants are also sued as controlling persons of Jos A. Bank, as alleged below.

180. In addition to the duties of full disclosure imposed on Defendants as a result of their making

of affirmative statements and reports, or participating in the making of affirmative statements and reports to

87


the investing public, they each had a duty to promptly disseminate truthful information that would be

material to investors in compliance with the integrated disclosure provisions ofthe SEC as embodied in SEC

Regulation S-X (17 C.F.R. § 210 . 01 et seq .) and S-K (17 C.F.R. §229 .10 et seq .) and other SEC regulations,

including accurate and truthful information with respect to the Company's operations, sales , product

marketing and promotion, financial condition and operational performance so that the market prices of the

Company's publicly traded securities would be based on truthful, complete and accurate information.

181. Jos A. Bank and the Individual Defendants, individually and in concert, directly and

indirectly, by the use, means or instrumentalities of interstate commerce and/or of the mails, engaged and

participated in a continuous course of conduct to conceal adverse material information about the business,

business practices, sales performance, product marketing and promotion, operations and future prospects of

Jos A. Bank as specified herein.

182. These Defendants each employed devices, schemes and artifices to defraud, while in

possession of material adverse non-public information and engaged in acts, practices, and a course of

conduct as alleged herein in an effort to assure investors of Jos A. Bank ' s value and performance and

continued substantial sales , financial and operational growth, which included the making of, or the

participation in the making of, untrue statements of material facts and omitting to state material facts

necessary in order to make the statements made about Jos A. Bank and its business operations and future

prospects in the light of the circumstances under which they were made, not misleading, as set forth more

particularly herein, and engaged in transactions, practices and a course ofbusiness which operated as a fraud

and deceit upon the purchasers of Jos A. Bank' s securities during the Class Period.

183. The Individual Defendants' primary liability, and controlling person liability, arises from the

following facts: a) the Individual Defendants were high-level executives at the Company during the Class

88


Period; b) the Individual Defendants, by virtue of their responsibilities and activities as senior executive

officers and/or directors of the Company, were privy to and participated in the creation, development and

reporting of the Company's internal sales and marketing plans, projections and/or reports; c) the Individual

Defendants enjoyed significant personal contact and familiarity with, was advised of, and had access to other

members of the Company's management team, internal reports, and other data and information about the

Company's financial condition and performance at all relevant times; and d) the Individual Defendants were

aware of the Company's dissemination of information to the investing public which he knew or recklessly

disregarded was materially false and misleading.

184. Each of the Defendants had actual knowledge of the misrepresentations and omissions of

material facts set forth herein, or acted with severely reckless disregard for the truth in that each failed to

ascertain and to disclose such facts, even though such facts were available to each of them. Such

Defendants' material misrepresentations and/or omissions were done knowingly or with deliberate

recklessness and for the purpose and effect of concealing Jos. A. Bank' s operating condition , sales , product

marketing and promotional practices and future business prospects from the investing public and supporting

the artificially inflated price of its securities. As demonstrated by the Individual Defendants'

overstatements, misstatements and omissions of the Company's financial condition and performance

throughout the Class Period, the Individual Defendants, if they did not have actual knowledge of the

misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by deliberately

refraining from taking those steps necessary to discover whether those statements were false or misleading.

185. As a result ofthe dissemination ofthe materially false and misleading information and failure

to disclose material facts, as set forth above, the market prices of Jos. A. Bank's securities were artificially

inflated during the Class Period. In ignorance ofthe fact that market prices of Jos. A. Bank's publicly traded

89


securities were artificially inflated, and relying directly or indirectly on the false and misleading statements

made by Defendants, or upon the integrity ofthe market in which the securities trade, and/or on the absence

of material adverse information that was known to or disregarded with deliberate recklessness by

Defendants but not disclosed in public statements by Defendants during the Class Period, Plaintiff and the

other members of the Class acquired Jos. A. Bank's securities during the Class Period at artificially high

prices and were damaged thereby, as evidenced by, among others, the stock price decline on or about June 8,

2006 when the artificial inflation was released from Jos. A. Bank stock.

186. At the time of said misrepresentations and omissions, Plaintiffs and other members of the

Class were ignorant of their falsity, and believed them to be true. Had Plaintiffs and the other members of

the Class and the marketplace known of the true performance, sales , marketing, promotion and other

fraudulent business practices, future prospects and intrinsic value of Jos. A. Bank, which were not disclosed

by Defendants, Plaintiff and other members of the Class would not have purchased or otherwise acquired

their Jos. A. Bank publicly traded securities during the Class Period, or, if they had acquired such securities

during the Class Period, they would not have done so at the artificially inflated prices which they paid.

187. By virtue of the foregoing, Jos. A. Bank and the Individual Defendants have each violated

Section 10(b) of the Exchange Act, and Rule I Ob-5 promulgated thereunder.

188. As a direct and proximate result of Defendants' wrongful conduct, Plaintiff and the other

members of the Class suffered damages in connection with their respective purchases and sales of the

Company's securities during the Class Period, as evidenced by, among others, the stock price decline on or

about June 8, 2006 when the artificial inflation was released from Jos. A. Bank stock.

90


COUNT II

FOR VIOLATIONS OF SECTION 20(a) OF THE EXCHANGE ACT AGAINSTDEFENDANTS WILDRICK, ULLMAN AND BLACK

189. Plaintiff repeats and realleges the allegations set forth above as though fully set forth herein.

This claim is asserted against Defendants Wildrick, Ullman and Black.

190. The Individual Defendants acted as controlling persons ofJos A. Bank within the meaning of

Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions with the

Company, participation in and/or awareness ofthe Company' s operations and/or intimate knowledge of the

Company's fraudulent marketing and promotions and actual performance, the Individual Defendants had the

power to influence and control and did influence and control, directly or indirectly, the decision-making of

the Company, including the content and dissemination of the various statements which Plaintiff contends are

false and misleading. The Individual Defendants were provided with or had unlimited access to copies of

the Company's reports, press releases, public filings and other statements alleged by Plaintiff to be

misleading prior to and/or shortly after these statements were issued and had the ability to prevent the

issuance of the statements or cause the statements to be corrected.

191. In addition, the Individual Defendants' had direct involvement in the day-to-day operations

of the Company and, therefore, are presumed to have had the power to control or influence the particular

transactions giving rise to the securities violations as alleged herein, and exercised the same.

192. As set forth above, Jos. A. Bank and the Individual Defendants each violated Section 10(b)

and Rule lOb-5 by their acts and omissions as alleged in this Complaint. By virtue of their controlling

positions , the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct

and proximate result of the Individual Defendants wrongful conduct, Plaintiff and other members of the

Class suffered damages in connection with their purchases of the Company's securities during the Class

91


Period, as evidenced by, among others, the stock price decline on or about June 7, 2006 when the artificial

inflation was released from Jos. A. Bank stock.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs, on their own behalf and on behalf of the Class, pray for relief and

judgment, as follows:

(a) Declaring that this action is a proper class action, and certifying Plaintiff as class

representatives pursuant to Rule 23 of the Federal Rules of Civil Procedure and Plaintiff's counsel as Lead

Counsel for the proposed Class;

(b) Awarding compensatory damages in favor ofPlaintiff and the other Class members

against all Defendants, jointly and severally, for all damages sustained as a result of Defendant's

wrongdoing, in an amount to be proven at trial, including interest thereon;

(c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred in this

action, including attorneys' fees and expert fees; and

(d) Such other and further relief as the Court deems appropriate.

JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury.

92

s/Douglas WilensPAUL J. GELLERJACK REISEDOUGLAS WILENS120 East Palmetto Park Road, Suite 500Boca Raton, FL 33432Telephone : 561/750-3000561/750-3364 (fax)

Lead Counsel for Plaintiff

BROWN, GOLDSTEIN & LEVY, LLPDANIEL F. GOLDSTEIN120 East Baltimore Street, Suite 1700Baltimore , MD 21202Telephone: 410/962-1030410/385-0869 (fax)

Liaison Counsel

93


CERTIFICATE OF SERVICE

I hereby certify that on today's date, I electronically filed the foregoing document with the Clerk ofthe Court using CM/ECF. I also certify that the foregoing document is being served this day on all counselof record or pro se parties identified below in the manner specified, either via transmission of Notices ofFiling generated by CM/ECF or in some other authorized manner for those counsel or parties who are notauthorized to receive electronically Notices of Electronic Filing.

Michael G. BongiornoOrlando Francisco JuarezDavid W. BowkerWILMER CUTLER PICKERINGHALE and DOOR LLP399 Park Avenue

New York, New York 10022Counsel for DefendantsBy Notice of Electronic Filing

s/Douglas WilensDouglas Wilens

Case 1-06-cv-01892-WMN Document 54-2 Filed 02/23/2007

• AO 440 (Rev. 10/93) [MD Rev. 02/ 2001] Summons in a Civil Action


FOR THE DISTRICT OF MARYLAND

ROY T. LEFKOE, On Behalf of Himself and

All Others Similarly Situated,

Plaintiff,

V.

JOS. A. BANK CLOTHIERS, INC., et al.

Defendants.

TO: (Name and address of Defendant)

R. NEAL BLACK

Jos. A. Bank Clothiers

500 Hanover Pike

Hampstead, MD 21074

Page 1 of 2

SUNMONS IN A CIVIL CASE

CASE 1:06-cv- 01892-WMN

YOU ARE HEREBY SUMMONED and required to serve upon PLAINTIFF'S ATTORNEY (name and address)

LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

PAUL J. GELLER

JACK REISEDOUGLAS WILENS

120 East Palmetto Park Road, Suite 500Boca Raton, FL 33432

Telephone: 561/750-3000561/750-3364 (fax)

an answer to the complaint which is herewith served upon you, within 20 days after service of this

summons upon you, exclusive of the day of service. If you fail to do so, judgment by default will be taken against you for the

relief demanded in the complaint. You must also file your answer with the Clerk of this Court within a reasonable period of time

after service.

Felicia C . CannonCLERK DATE

(By) DEPUTY CLERK

Case 1-06-cv-01892-WMN Document 54-2 Filed 02/23/2007 Page 2 of 2


RETURN OF SERVICE

Service of the Summons and complaint was made by

met')

DATE

NAME OF SERVER (PRINT) TITLE

Check one box below to indicate appropriate method o service

G Served personally upon the defendant . Place where

G Left copies thereof at the defendant's dwelling house or usual place of abode with a person of suitable age and

discretion then residing therein.

Name of person with whom the summons and complaint were

G Returned

G Other (specify):

STATEMENT OF SERVICE FEES

TRAVEL SERVICES TOTAL

DECLARATION OF SERVER

I declare under penalty of perjury under the laws of the United States of America that the foregoing information

contained in the Return of Service and Statement of Service Fees is true and correct.

Executed

Date Signature ofServer

Address ofServer

(1) As to who may serve a summons see Rule 4 of the Federal Rules of Civil Procedure.

Case 1-06-cv-01892-WMN Document 54-3 Filed 02/23/2007



FOR THE DISTRICT OF MARYLAND

ROY T. LEFKOE, On Behalf of Himself and

All Others Similarly Situated,

Plaintiff,

V.

JOS. A. BANK CLOTHIERS, INC., et al.

Defendants.

TO: (Name and address of Defendant)

DAVID E. ULLMAN

Jos. A. Bank Clothiers

500 Hanover Pike

Hampstead, MD 21074

Page 1 of 2

SUNMONS IN A CIVIL CASE

CASE 1:06-cv- 01892-WMN

YOU ARE HEREBY SUMMONED and required to serve upon PLAINTIFF'S ATTORNEY (name and address)

LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

PAUL J. GELLER

JACK REISEDOUGLAS WILENS

120 East Palmetto Park Road, Suite 500Boca Raton, FL 33432

Telephone: 561/750-3000561/750-3364 (fax)

an answer to the complaint which is herewith served upon you, within 20 days after service of this

summons upon you, exclusive of the day of service. If you fail to do so, judgment by default will be taken against you for the

relief demanded in the complaint. You must also file your answer with the Clerk of this Court within a reasonable period of time

after service.

Felicia C . CannonCLERK DATE

(By) DEPUTY CLERK

Case 1-06-cv-01892-WMN Document 54-3 Filed 02/23/2007 Page 2 of 2


RETURN OF SERVICE

Service of the Summons and complaint was made by

met')

DATE

NAME OF SERVER (PRINT) TITLE

Check one box below to indicate appropriate method o service

G Served personally upon the defendant . Place where

G Left copies thereof at the defendant ' s dwelling house or usual place of abode with a person of suitable age and

discretion then residing therein.

Name of person with whom the summons and complaint were

G Returned

G Other (specify):

STATEMENT OF SERVICE FEES

TRAVEL SERVICES TOTAL

DECLARATION OF SERVER

I declare under penalty of perjury under the laws of the United States of America that the foregoing information

contained in the Return of Service and Statement of Service Fees is true and correct.

Executed

Date Signature ofServer

Address ofServer

(1) As to who may serve a summons see Rule 4 of the Federal Rules of Civil Procedure.

Documents

1 Consolidated Class Action Complaint 02/23/2007