Charles E. G. Leech Sr., et al. v. Brooks Automation, Inc ...securities.stanford.edu/filings-documents/1036/BRKS_01/2006619_f01... · 2 traded securities of Brooks during the Class

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

CHARLES E. G. LEECH SR., on behalf of himself and all others similarly situated, Plaintiff, v. BROOKS AUTOMATION, INC., ROBERT J. THERRIEN, ELLEN B. RICHSTONE, ROGER D. EMERICK, AMIN J. KHOURY, ROBERT W. WOODBURY, JR., and EDWARD C. GRADY, Defendants.

CASE NO. _______________ JURY TRIAL DEMANDED

CLASS ACTION COMPLAINT

Plaintiff, Charles E.G. Leech Sr., by his attorneys, on behalf of himself and all others similarly situated,

alleges the following based upon the investigation of Plaintiff’s counsel, except as to allegations specifically

pertaining to Plaintiff, which are based on personal knowledge. The investigation of counsel included, among other

things, a review of Brooks Automation, Inc.’s (“Brooks” or the “Company”) public filings with the United States

Securities and Exchange Commission (“SEC”), press releases issued by the Company, public conference calls,

media and news reports about the Company, and publicly available trading data relating to the price and volume of

Brooks’s securities.

I. INTRODUCTION

1. This is a federal class action brought on behalf of a class consisting of all persons who purchased or

otherwise acquired the publicly traded securities of Brooks between July 25, 2001 and May 22, 2006, inclusive (the

“Class Period”).

2. This securities class action is brought under Sections 11, 12 and 15 of the Securities Act of 1933 (the

“Securities Act”), 15 U.S.C. §§77k, 77l and 77o, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934

(“Exchange Act”), 15 U.S.C. §§78j(b), and 78t(a), and the rules and regulations promulgated thereunder by the SEC,

including Rule 10b-5, 17 C.F.R. §240.10b-5 on behalf of all those who purchased or otherwise acquired the publicly

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traded securities of Brooks during the Class Period to recover damages caused to the Class by defendants’ violations of

the securities laws.

3. Brooks describes itself as a leading supplier of automation products and solutions primarily serving the

worldwide semiconductor market and a supplier hardware, software and services to both chip manufacturers and original

equipment manufacturers, or OEMs, who make semiconductor device manufacturing equipment.

4. A series of recent reports made in The Wall Street Journal has revealed that stock option grants to

Brooks’s CEO and other Brooks directors were dated just prior to substantial run-ups in share price, often after steep

declines. The low prices on the day of the grants meant these insiders received options with unusually low exercise

prices, providing more profit for the insiders if the option is cashed out.

5. An analysis by The Wall Street Journal found that the odds of such patterns occurring by chance is

extraordinarily remote and suggest that the grants may have been backdated to take advantage of the low prices.

6. On March 18, 2006, The Wall Street Journal published a story titled “The Perfect Payday - Some

CEOs reap millions by landing stock options when they are most valuable; Luck - or something else?” that identified

Brooks as one of several companies “with wildly improbable option-grant patterns.”

7. The Wall Street Journal reported that “Year after year, some companies' top executives received

options on unusually propitious dates . . . The analysis bolsters recent academic work suggesting that backdating was

widespread, particularly from the start of the tech-stock boom in the 1990s through the Sarbanes-Oxley corporate reform

act of 2002. If so, it was another way some executives enriched themselves during the boom at shareholders' expense.

And because options grants are long-lived, some executives holding backdated grants from the late 1990s could still

profit from them today.”

8. The Wall Street Journal's analysis noted the following:

Brooks Automation Inc., a semiconductor-equipment maker in Chelmsford, Mass., gave 233,000 options to its CEO, Robert Therrien, in 2000. The stated grant date was May 31. That was a great day to have options priced. Brooks's stock plunged over 20% that day, to $39.75. And the very next day it surged more than 30%. A June 7 Brooks report to the SEC covering Mr. Therrien's May options activity made no mention of his having gotten a grant on May 31, even though the report - which Mr. Therrien signed - did cite other options-related actions he took on May 31. Not until August was the May 31 grant reported to the SEC. It wasn't the only well-timed option grant he got. One in October 2001 came at Brooks stock's lowest closing price that year, once again at the nadir of a sharp

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plunge. The Journal analysis puts the odds of such a consistent pattern occurring by chance at about 1 in nine million. Mr. Therrien, who stepped down as CEO in 2004 and retired as chairman this month, didn't return messages seeking comment. Chief Financial Officer Robert Woodbury said Brooks is "in the process of revamping" practices so grants come at about the same time each year. Mr. Woodbury, who joined in 2003, said no one at Brooks would be able to explain the timing of Mr. Therrien's grants. The highly favorable 2000 grant also benefited two others at Brooks-the compensation-committee members who oversaw the CEO's grants. Although Brooks directors typically got options only in July, that year a special grant was awarded just to these two directors, Roger Emerick and Amin J. Khoury. Each got 20,000 options at the low $39.75 price. By the time of their regular July option-grant date, the stock was way up to $61.75, a price far less favorable to options recipients.

9. On April 26, 2006, Brooks issued a press release titled “Brooks Automation Announces Review of

Past Stock Option Grants and Announces Q2 Earnings Conference Call” that stated, in part, the following:

CHELMSFORD, Mass., April 26, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Brooks Automation, Inc. (Nasdaq: BRKS) today announced that its Board of Directors has created a special committee comprised of independent directors to conduct an internal review of matters related to past stock option grants, including the timing of such grants and associated documentation.

10. On May 11, 2006, Brooks issued a press release titled “Brooks Automation to Restate Past Periods

Related to Certain Stock Option Grants,” that stated, in part, the following:

CHELMSFORD, Mass., May 11 /PRNewswire-FirstCall/ -- Brooks Automation, Inc. (Nasdaq: BRKS) today announced an update concerning the review into past stock option grants being conducted by a special committee of its board of directors. The review is not complete.

Based on a report on May 10, 2006 from the special committee concerning the work done to date, the Company will be required to correct certain SEC filings, including particularly its financial statements contained in filings for some or all of the periods commencing in fiscal 1999 and ending in fiscal 2005. In light of the pending restatement, these financial statements, reported in SEC filings and elsewhere, and all earnings press releases and similar communications issued by the Company relating to fiscal years 1999 through 2005, should not be relied upon.

The Company believes that it accounted for certain matters concerning stock options incorrectly, and as a result recognized less compensation expense than it should have in periods prior to fiscal 2006 . . . .

The Company also announced that it filed with the SEC a Form 12b-25 that states that it did not timely file its Form 10-Q for the period ending March 31, 2006. The Company expects to file the Form 10-Q for the period ending March 31, 2006 as soon as is practical after the special committee's review is complete. (Emphasis added).

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11. On May 12, 2006, Brooks issued a press release titled “Brooks Automation Announces Informal

Inquiry by SEC into Stock Option Practices and Receipt of Staff Determination from Nasdaq Stock Exchange,” that

stated, in part, the following:

CHELMSFORD, Mass., May 12 /PRNewswire-FirstCall/ -- Brooks Automation, Inc. (Nasdaq: BRKS) today announced that it has received notice that the Securities and Exchange Commission is conducting an informal inquiry concerning stock option grant practices to determine whether violations of the federal securities laws have occurred. The Company is cooperating fully with the SEC in this matter. The Company also announced that it received today a staff determination letter from the Nasdaq Stock Market stating that the Company fails to comply with Marketplace Rule 4310(c)(14) as a result of the fact that the Company did not make a timely filing of its quarterly report on Form 10-Q for its March 31, 2006 fiscal quarter and did not indicate in its Form 12b-25 Notification of Late Filing that it would file the Form 10-Q on or before the fifth calendar day following the prescribed due date. The letter stated that the Company's securities will be delisted from the Nasdaq Stock Market at the opening of business on May 23, 2006 unless the Company requests a hearing in accordance with Nasdaq Marketplace Rules . . . .

12. On May 18, 2006, Brooks issued a press release that disclosed the resignation of Amin J. Khoury and

Roger D. Emerick from the Company’s Board of Directors.

13. On May 22, 2006, after the close of trading, Brooks disclosed that, on Friday, May 19, 2006, it

received a grand jury document subpoena from the U.S. Attorney for the Eastern District of New York requesting

records pertaining to the granting of stock options.

14. On May 23, 2006, shares of Brooks declined from $12.37 per share to close at $12 per share, a decline

of approximately 3%. Overall, since March 20, 2006, the first trading day after The Wall Street Journal first revealed on

Saturday March 18, 2006 that Brooks engaged in backdating stock options, shares of Brooks have declined from $13.88

per share at the opening of trading on March 20, 2006, to close at $12 per share at the close of trading on May 23, 2006,

a decline of $1.88 per share, or approximately 14%.

II. JURISDICTION AND VENUE

15. This Court has jurisdiction over the subject matter of this action pursuant to Section 22(a) of the

Securities Act (15 U.S.C. §77v(a)) and Section 27 of the Exchange Act (15 U.S.C. §78aa) as well as 28 U.S.C. §§1331,

1337 and 1367.

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16. Venue is proper in this District pursuant to Section 22(a) of the Securities Act (15 U.S.C. §77v), 27 of

the Exchange Act (15 U.S.C. §78aa) and 28 U.S.C. §1391(b) and (c) as defendant Brooks and/or the Individual

Defendants conduct business in and the wrongful conduct took place in this District.

III. THE PARTIES

17. Plaintiff Charles E. G. Leech Sr. acquired Brooks’s publicly traded securities as detailed in the

attached Certification and was damaged thereby.

18. Defendant Brooks, formerly known as Brooks-PRI Automation, Inc., is a Delaware Corporation with

its principal executive offices at 15 Elizabeth Drive, Chelmsford, Massachusetts.

19. Defendant Robert J. Therrien (“Therrien”) was a CEO and Chairman of the Company during the Class

Period. Therrien retired as CEO on September 30, 2004, but remained Chairman of the Board. It has been reported that

he retired as Chairman of the Board in March 2006. During the Class Period, Therrien sold 304,687 Brooks shares at

artificially inflated prices for proceeds of $5,919,479.

20. Defendant Ellen B. Richstone (“Richstone”) was Senior Vice President of Finance and Administration

and Chief Financial Officer until her resignation on October 31, 2002.

21. Defendant Roger D. Emerick (“Emerick”) was a director of the Company during the Class Period.

During the Class Period, Emerick sold 11,000 Brooks shares at artificially inflated prices for proceeds of $146,420.

22. Defendant Amin J. Khoury (“Khoury”) was a director of the Company during the Class Period.

During the Class Period, Khoury sold 5,000 Brooks shares at artificially inflated prices for proceeds of $300,949.

23. Defendant Robert W. Woodbury, Jr. (“Woodbury”) has been Senior Vice President and Chief

Financial Officer of Brooks since February 2003.

24. Defendant Edward C. Grady (“Grady”) has been President and Chief Operating Officer of Brooks

since February 2003 and CEO since October 2004.

25. The individuals named as defendants in ¶¶ 19-24 are referred to herein as the “Individual Defendants.”

The Individual Defendants, because of their positions with the Company, possessed the power and authority to control

the contents of Brooks’s quarterly reports, press releases and presentations to securities analysts, money and portfolio

managers and institutional investors, i.e., the market. Each defendant was provided with copies of the Company’s reports

and press releases alleged herein to be misleading prior to or shortly after their issuance and had the ability and

opportunity to prevent their issuance or cause them to be corrected. Because of their positions and access to material

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non-public information available to them but not to the public, each of these defendants knew that the adverse facts

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

which were being made were then materially false and misleading. The Individual Defendants are liable for the false

statements pleaded herein.

IV. CLASS ACTION ALLEGATIONS

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

23(b)(3) on behalf of a class of all persons who purchased the publicly traded securities of Brooks during the period from

July 25, 2001 through May 22, 2006, inclusive (the “Class”).

27. The members of the Class are so numerous that joinder of all members is impracticable. While the

exact number of Class members is unknown to plaintiff at the present time and can only be ascertained through

appropriate discovery, plaintiff believes that there are hundreds of members of the Class located throughout the United

States. As of February 9, 2006, there were approximately 75 million shares of Brooks common stock which were

actively traded on the NASDAQ in an efficient market.

28. Plaintiff’s claims are typical of the claims of the members of the Class. Plaintiff and all members of

the Class have sustained damages because of defendants’ unlawful activities alleged herein. Plaintiff has retained

counsel competent and experienced in class and securities litigation and intends to pursue this action vigorously. The

interests of the Class will be fairly and adequately protected by plaintiff. Plaintiff has no interests which are contrary to

or in conflict with those of the Class that plaintiff seeks to represent.

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

controversy. Plaintiff knows of no difficulty to be encountered in the management of this action that would preclude its

maintenance as a class action.

30. Common questions of law and fact exist as to all members of the Class and predominate over any

questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class

are:

(a) whether the federal securities laws were violated by defendants’ acts and omissions as

alleged herein;

(b) whether defendants misstated and/or omitted to state material facts in their public

statements and filings with the SEC;

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(c) whether defendants acted negligently or with the requisite state of mind;

(d) whether defendants participated directly or indirectly in the course of conduct

complained of herein; and

(e) whether the members of the Class have sustained damages and the proper measure of

such damages.

V. FALSE AND MISLEADING STATEMENTS

31. The Class Period begins on July 25, 2001 when the Company issued a press release titled “Brooks

Automation Announces Fiscal 2001 Third Quarter Results”, that stated, among other things, that for the quarter ended

June 30, 2001 Brooks reported net income of $304,000, or $0.02 per share.

32. On August 14, 2001 Brooks filed its quarterly report with the SEC on Form 10-Q for the quarter ended

June 30, 2001. The Form 10-Q, signed by defendants Richstone and Therrien, included the Company’s previously

reported financial results for the quarter ended June 30, 2001.

33. On November 14, 2001, Brooks issued a press release titled “Brooks Automation Reports Fiscal 2001

Fourth Quarter Results; Results Better Than Guidance; Acquisition of PRI Automation, Inc. On Track to Close Q2

FY2002”, that stated, among other things, that for the quarter ended September 30, 2001, Brooks reported a net loss of

$33.3 million or $1.76 per share and for the year ended September 30, 2001, Brooks reported a net loss of $26.6 million,

or $1.65 per share.

34. On December 14, 2001, Brooks filed its annual report with the SEC on Form 10-K for the year ended

September 30, 2001. The Form 10-K, signed by defendants Richstone, Therrien, Emerick and Khoury, included the

Company’s previously reported financial results for the quarter and year-ended September 30, 2001. The annual report

represented that the financial statements were prepared in accordance with generally accepted accounting principles.

35. Also, the annual report stated the following “The Company's employee stock compensation plans are

accounted for in accordance with Accounting Principles Board Opinion No. 25, ‘Accounting for Stock Issued to

Employees,’ ("APB 25") and related interpretations. Under this method, no compensation expense is recognized as long

as the exercise price equals or exceeds the market price of the underlying stock on the date of the grant.”

36. On January 23, 2002, Brooks issued a press release titled “Brooks Automation Reports Fiscal 2002

First Quarter Results”, that stated, among other things, that for the quarter ended December 31, 2001, Brooks reported a

net loss of $7.7 million or $0.39 per share.

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37. On February 14, 2002 Brooks filed its quarterly report with the SEC on Form 10-Q for the quarter

ended December 31, 2001. The Form 10-Q, signed by defendants Richstone and Therrien, included the Company’s

previously reported financial results for the quarter ended December 31, 2001.

38. On April 24, 2002, Brooks issued a press release titled “Brooks Automation Reports Fiscal 2002

Second Quarter Results” that stated, among other things, that for the quarter ended March 31, 2002, Brooks reported a

net loss of $11.7 million or $0.58 per share.

39. On May 15, 2002, Brooks filed its quarterly report with the SEC on Form 10-Q for the quarter ended

March 31, 2001. The Form 10-Q, signed by defendants Richstone and Therrien, included the Company’s previously

reported financial results for the quarter ended March 31, 2002.

40. On July 26, 2002, Brooks issued a press release titled “Brooks Automation Reports Fiscal 2002 Third

Quarter Results” that stated, among other things, that for the quarter ended June 30, 2002, Brooks reported a net loss of

$24.2 million or $0.89 per share.

41. On August 14, 2002, Brooks filed its quarterly report with the SEC on Form 10-Q for the quarter

ended June 30, 2002. The Form 10-Q, signed by defendants Richstone and Therrien, included the Company’s previously

reported financial results for the quarter ended June 30, 2002.

42. On November 30, 2002, Brooks issued a press release titled “Brooks-Pri Automation Reports Fiscal

2002 Fourth-Quarter And Full-Year Results”, that stated, in part that Brooks reported a net loss for the quarter ended

September 30, 2002 of $673.3 million, or $18.76 per share, and a net loss for fiscal year ended September 30, 2002 of

$720.0 million, or $27.90 per share.


September 30, 2002. The Form 10-K, signed by defendants Therrien, Emerick and Khoury, included the Company’s

previously reported financial results for the quarter and year-ended September 30, 2002. The annual report represented

that the financial statements were prepared in accordance with generally accepted accounting principles.

44. Also, the annual report stated that “The Company's employee stock compensation plans are accounted

for in accordance with Accounting Principles Board Opinion No. 25, ‘Accounting for Stock Issued to Employees,’

("APB 25") and related interpretations. Under this method, no compensation expense is recognized as long as the

exercise price equals or exceeds the market price of the underlying stock on the date of the grant.”

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45. On January 22, 2003, Brooks issued a press release titled “Brooks-Pri Automation Reports Fiscal 2003

First -Quarter Results”, that stated, in part, that Brooks reported a net loss for the quarter ended December 31, 2002 of


46. On February 4, 2003, Brooks issued a press release that updated the earnings report provided on

January 22, 2003. The press release stated, in part, that the Quarterly Report on Form 10-Q that will be filed by Brooks-

PRI in February 2003 for the quarter ended December 31, 2002 for a net loss for the fourth quarter of $71.0 million, or a

loss of $1.95 per share.

47. On February 14, 2003, Brooks filed its quarterly report with the SEC on Form 10-Q for the quarter

ended December 31, 2002. The Form 10-Q, signed by defendant Therrien included the Company’s previously reported

financial results for the quarter ended December 31, 2002. The quarterly report also contained a certification pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002 signed by Defendant Therrien that stated, in part, that “The information

contained in the First Quarter Form 10-Q fairly presents, in all materials respects, the financial condition and results of

operations of the Company.”

48. On April 22, 2003, Brooks issued a press release titled “Brooks Automation Reports Fiscal 2003

Second Quarter Results”, that stated, in part, that Brooks reported a net loss for the quarter ended March 31, 2003 of



March 31, 2003. The Form 10-Q, signed by defendants Therrien and Woodbury, included the Company’s previously

reported financial results for the quarter ended March 31, 2003. The quarterly report also contained a certification

pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 signed by Defendants Therrien and Woodbury that stated, in

part, that “The information contained in the First Quarter Form 10-Q fairly presents, in all materials respects, the

financial condition and results of operations of the Company.”

50. On July 23, 2003, Brooks issued a press release titled “Brooks Automation Reports Results for Fiscal

3rd Quarter Ended June 30, 2003”, that stated, in part, that Brooks reported a net loss for the quarter ended June 30, 2003

of $36.4 million or $0.99 per share.

51. On August 11, 2003, Brooks filed its quarterly report with the SEC on Form 10-Q for the quarter

ended June 30, 2003. The Form 10-Q, signed by defendants Therrien and Woodbury, included the Company’s

previously reported financial results for the quarter ended June 30, 2003. The quarterly report also contained a

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certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 signed by Defendants Therrien and Woodbury

that stated, in part, that “The information contained in the First Quarter Form 10-Q fairly presents, in all materials

respects, the financial condition and results of operations of the Company.”

52. On October 30, 2003, Brooks issued a press release titled “Brooks Automation Reports Fiscal 2003

Fourth-Quarter and Full-Year Results” that stated, in part, that the net loss for the fourth quarter was $49.5 million, or

$1.33 per share and the net loss for fiscal 2003 was $185.8 million or $5.05 per share.

53. On December 27, 2003 Brooks filed its annual report with the SEC on Form 10-K for the year ended

September 30, 2003. The Form 10-K, signed by defendants Therrien, Woodbury, Emerick and Khoury, included the

Company’s previously reported financial results for the quarter and year-ended September 30, 2003. The annual report

represented that the financial statements were prepared in accordance with generally accepted accounting principles.

54. The annual report also contained a certification pursuant to Section 302 of the Sarbanes-Oxley Act of

2002 signed by Defendants Therrien and Woodbury that stated, in part, that “Based on my knowledge, this report does

not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,

in light of the circumstances under which such statements were made, not misleading with respect to the period covered

by this report.”

55. In addition, the annual report stated that “The Company’s employee stock compensation plans are

accounted for in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to

Employees” (“APB 25”) and related interpretations. Under this method, no compensation expense is recognized as long

as the exercise price equals or exceeds the market price of the underlying stock on the date of the grant.”

56. On January 27, 2004, Brooks issued a press release titled “Brooks Automation Reports Results for

Fiscal 1st Quarter Ended December 31, 2003” that stated, in part, that the net loss for the first quarter was $8.9 million,

or $0.23 per share.


ended December 31, 2003. The Form 10-Q, signed by defendants Therrien and Woodbury, included the Company’s

previously reported financial results for the quarter ended December 31, 2003. The quarterly report also contained a


that stated, in part, that “Based on my knowledge, this report does not contain any untrue statement of a material fact or

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omit to state a material fact necessary to make the statements made, in light of the circumstances under which such

statements were made, not misleading with respect to the period covered by this report.”

58. On April 22, 2004, Brooks issued a press release titled “Brooks Automation Reports Results for Fiscal

2004 Second Quarter Ended March 31, 2004” that stated, in part, that net income for the second quarter 2004 was $6.9

million, or $0.15 per diluted share. Brooks’s CEO Therrien stated, in part, that “Brooks had a record-breaking fiscal

second quarter” and “Our ability to execute our disciplined growth strategy along with the pace of the industry recovery

in semiconductor capital equipment spending resulted in bookings, revenues and profitability that exceeded our guidance

for the quarter.”


March 31, 2004. The Form 10-Q, signed by defendants Therrien and Woodbury, reported net income for the period

ended March 31, 2004 of $6.2 million or $0.14 per share. The quarterly report also contained a certification pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002 signed by Defendants Therrien and Woodbury that stated, in part, that

“Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material

fact necessary to make the statements made, in light of the circumstances under which such statements were made, not

misleading with respect to the period covered by this report.”

60. On July 29, 2004, Brooks issued a press release titled “Brooks Automation Reports Results for Fiscal

2004 Third Quarter Ended June 30, 2004” that stated, in part, that net income for the third quarter 2004 was $12.3

million, or $0.27 per diluted share. Defendant Therrien stated "I am extremely proud of the Company's performance

both financially and operationally during this growth cycle of our industry. GAAP earnings of $0.27 per share exceeded

our guidance for the quarter. Our ongoing earnings for the quarter were better than the Thomson FirstCall consensus

estimates which exclude the restructuring charges and amortization of acquired intangibles.”

61. Also on July 29, 2004, Brooks filed its quarterly report with the SEC on Form 10-Q for the quarter

ended June 30, 2004. The Form 10-Q, signed by defendants Therrien and Woodbury, included the Company’s



that stated, in part, that “Based on my knowledge, this report does not contain any untrue statement of a material fact or

omit to state a material fact necessary to make the statements made, in light of the circumstances under which such

statements were made, not misleading with respect to the period covered by this report.”

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62. On November 4, 2004, Brooks issued a press release titled “Brooks Automation Reports Results for

Fiscal 2004 Fourth Quarter and Fiscal Year Ended September 30, 2004” that stated, in part, that net income for the fourth

quarter 2004 was $8.0 million. Defendant Grady stated "Fiscal year 2004 was a record-setting year for Brooks as we

delivered revenues, bookings and net income that exceeded previous peak levels. Revenues for fiscal year 2004 were

$539.8 million, which is a year- over-year growth of 57.1 percent, and exceeds the previous peak revenues achieved in

fiscal year 2001. Net income for fiscal year 2004 was $17.7 million, or $0.41 per diluted share on a GAAP basis.”


September 30, 2004. The Form 10-K, signed by defendants Grady, Therrien, Woodbury, Emerick and Khoury, included

the Company’s previously reported financial results for the quarter and year-ended September 30, 2004. The annual

report represented that the financial statements were prepared in accordance with generally accepted accounting

principles.


2002 signed by Defendants Grady and Woodbury that stated, in part, that “Based on my knowledge, this report does not

contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in

light of the circumstances under which such statements were made, not misleading with respect to the period covered by

this report.”

65. Also, the annual report stated that “The Company’s employee stock compensation plans are accounted

for in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”

(“APB 25”) and related interpretations. Under this method, no compensation expense is recognized as long as the


66. On February 1, 2005, Brooks issued a press release titled “Brooks Automation Reports Results for

Fiscal 2005 First Quarter Ended December 31, 2004” that stated, in part, that net income for the first quarter of fiscal

2005 was a loss of $0.9 million, or $0.02 per share.


ended December 31, 2004. The Form 10-Q, signed by defendants Grady and Woodbury, included the Company’s


certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed by Defendants Grady and Woodbury that

stated, in part, that “Based on my knowledge, this report does not contain any untrue statement of a material fact or omit

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to state a material fact necessary to make the statements made, in light of the circumstances under which such statements

were made, not misleading with respect to the period covered by this report.”

68. On May 3, 2005, Brooks issued a press release titled “Brooks Automation Reports Results for Fiscal

2005 Second Quarter Ended March 31, 2005” that stated, in part, that net income for the second quarter of fiscal 2005

was a loss of $2.5 million, or $0.06 per share.


March 31, 2005. The Form 10-Q, signed by defendants Grady and Woodbury, included the Company’s previously

reported financial results for the quarter ended March 31, 2005. The quarterly report also contained a certification

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed by Defendants Grady and Woodbury that stated, in

part, that “Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a

material fact necessary to make the statements made, in light of the circumstances under which such statements were

made, not misleading with respect to the period covered by this report.” The quarterly report represented that “[t]he

unaudited consolidated financial statements of Brooks . . . . included herein have been prepared in accordance with

generally accepted accounting principles.”

70. On August 1, 2005, Brooks issued a press release titled “Brooks Automation Reports Results for Fiscal

2005 Third Quarter Ended June 30, 2005” that stated, in part, that net income for the third quarter of fiscal 2005 was $0.9

million, or $0.02 earnings per share.

71. On August 3, 2005, Brooks filed its quarterly report with the SEC on Form 10-Q for the quarter ended

June 30, 2005. The Form 10-Q, signed by defendants Grady and Woodbury, included the Company’s previously

reported financial results for the quarter ended June 30, 2005. The quarterly report also contained a certification

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed by Defendants Grady and Woodbury that stated, in

part, that “Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a

material fact necessary to make the statements made, in light of the circumstances under which such statements were

made, not misleading with respect to the period covered by this report.” The quarterly report represented that “[t]he

unaudited consolidated financial statements of Brooks . . . . included herein have been prepared in accordance with

generally accepted accounting principles.”

72. On September 26, 2006, Brooks filed a Joint Proxy/Prospectus with the SEC pursuant to Rule

424(b)(3) in connection with the merger of Brooks and Helix Technology Corporation (“Helix”) in which each share of

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Helix common stock was to be converted into the right to receive 1.11 shares of Brooks common stock.1 The Joint

Proxy/Prospectus, which is part of a registration statement on Form S-4 that Brooks filed with the SEC on August 30,

2005, included Brooks’s net income and earnings per share, derived from Brooks’s audited consolidated financial

statements as of and for the years ended September 30, 2004, September 30, 2003, September 30, 2002, September 30,

2001, and September 30, 2000, and Brooks’s unaudited consolidated financial statements as of and for the nine months

ended June 30, 2005 and June 30, 2004.

73. On November 9, 2005, Brooks issued a press release titled “Brooks Automation Reports Results for

Fourth Quarter and Full Year Fiscal 2005 Ended September 30, 2005” that stated, in part, that net loss for the fourth

quarter of fiscal 2005 was $7.6 million or $0.17 per share and full year net loss was $6.5 million or $0.15 per share.


September 30, 2005. The Form 10-K, signed by defendants Grady, Therrien, Woodbury, Emerick and Khoury, included

the Company’s previously reported financial results for the quarter and year-ended September 30, 2005. The annual

report represented that the financial statements were prepared in accordance with generally accepted accounting

principles.


2002 signed by Defendants Grady and Woodbury that stated, in part, that “Based on my knowledge, this report does not

contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in

light of the circumstances under which such statements were made, not misleading with respect to the period covered by

this report.”

76. The annual report also stated that “The Company’s employee stock compensation plans are accounted

for in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”

(“APB 25”) and related interpretations. Under this method, no compensation expense is recognized as long as the


77. The statements referenced above in ¶¶ 31-76, were each materially false and misleading when made as

they misrepresented and/or omitted the following adverse facts which then existed and disclosure of which was

necessary to make the statements made not false and/or misleading, including:

1 In the Joint Proxy/Prospectus, Brooks estimated it would issue approximately 29,796,123 shares of Brooks common stock in the merger. On October 27, 2005, Brooks disclosed that it completed its merger with Helix on October 26, 2005.

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(a) That Brooks failed to disclose that stock option grants were not given the fair market value of the

stock on the grant date, but rather, were improperly backdated;

(b) That Brooks improperly accounted for stock options by recognizing less compensation expense

than the Company should have recognized, thereby improperly inflated the Company’s reported

earnings;

(c) That contrary to the representation contained certifications pursuant to the Sarbanes-Oxley Act of

2002, the information contained in the Brooks’s 10-Qs and 10-Ks did not fairly presents, in all

materials respects, the financial condition and results of operations of the Company and did, in

fact, contain materially untrue statements;

(d) That Brooks’s financial statements were not prepared in accordance with GAAP, including APB

25.

VI. THE TRUTH BEGINS TO EMERGE

78. On March 18, 2006, The Wall Street Journal published a story titled “The Perfect Payday - Some

CEOs reap millions by landing stock options when they are most valuable; Luck - or something else?” that identified

Brooks as one of several companies “with wildly improbable option-grant patterns.”

79. On April 26, 2006, Brooks issued a press release titled “Brooks Automation Announces Review of

Past Stock Option Grants and Announces Q2 Earnings Conference Call” that stated that Brooks created a special

committee comprised of independent directors to conduct an internal review of matters related to past stock option

grants, including the timing of such grants and associated documentation.

80. On May 11, 2006, Brooks issued a press release titled “Brooks Automation to Restate Past Periods

Related to Certain Stock Option Grants.”

81. On May 12, 2006, Brooks issued a press release titled “Brooks Automation Announces Informal

Inquiry by SEC into Stock Option Practices and Receipt of Staff Determination from Nasdaq Stock Exchange.”

82. On May 18, 2006, Brooks issued a press release that disclosed the resignation of Amin J. Khoury and

Roger D. Emerick from the Company’s Board of Directors.

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83. On May 22, 2006, after the close of trading, Brooks disclosed that, on Friday, May 19, 2006, the

Company received a grand jury document subpoena from the U.S. Attorney for the Eastern District of New York

requesting records pertaining to the granting of stock options.

84. On May 23, 2006, shares of Brooks declined from $12.37 per share to close at $12 per share, a decline

of approximately 3%. Overall, since March 20, 2006, the first trading day after the Wall Street Journal first revealed on

Saturday March 18, 2006 that Brooks engaged in backdating stock options, shares of Brooks have declined from $13.88

per share at the opening of trading on March 20, 2006, to close at $12 per share at the close of trading on May 23, 2006,

a decline of $1.88 per share, or approximately 14%.

VII. LOSS CAUSATION/ECONOMIC LOSS

85. During the Class Period, as detailed herein, defendants engaged in a scheme to deceive the market and

a course of conduct that artificially inflated Brooks’s stock price and operated as a fraud or deceit on Class Period

purchasers of Brooks publicly traded securities by misrepresenting the Company’s operating condition and future

business prospects. Defendants achieved this by making positive statements about Brooks’s business while they knew

that the Company was suffering from a variety of adverse factors which were then negatively impacting its financial

results, as detailed herein. Later, however, when defendants’ prior misrepresentations were disclosed and became

apparent to the market, the price of Brooks stock fell precipitously as the prior artificial inflation came out of Brooks’s

stock price. As a result of their purchases of Brooks publicly traded securities during the Class Period, plaintiff and other

members of the Class suffered economic loss, i.e., damages under the federal securities laws.

86. The decline in Brooks’s stock price at the end of the Class Period was a direct result of the nature and

extent of defendants’ fraud finally being revealed to investors and the market. The timing and magnitude of Brooks’s

stock price declines negate any inference that the loss suffered by plaintiff and other Class members was caused by

changed market conditions, macroeconomic or industry factors, or Company-specific facts unrelated to the defendants’

fraudulent conduct.

VIII. FRAUD-ON-THE-MARKET DOCTRINE

87. At all relevant times, the market for Brooks publicly traded securities was an efficient market for the

following reasons, among others:

(a) The Company’s Common Stock met the requirements for public listing and was listed

and actively traded on the Nasdaq, a highly efficient market;

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(b) As a regulated issuer, the Company filed periodic public reports with the SEC; and

(c) The Company regularly issued press releases which were carried by national news wires.

Each of these releases was publicly available and entered the public marketplace.

88. As a result, the market for the Company’s publicly traded securities promptly digested current

information with respect to Brooks from all publicly available sources and reflected such information in the price of the

Company’s securities. Under these circumstances, all purchasers of the Company’s publicly traded securities during the

Class Period suffered similar injury through their purchase of the publicly traded securities of Brooks at artificially

inflated prices and a presumption of reliance applies.

IX. ADDITIONAL SCIENTER ALLEGATIONS

89. As alleged herein, defendants acted with scienter in that defendants knew that the public documents

and statements issued or disseminated in the name of the Company were materially false and misleading; knew that such

statements or documents would be issued or disseminated to the investing public; and knowingly and substantially

participated or acquiesced in the issuance or dissemination of such statements or documents as primary violations of the

federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their receipt of information

reflecting the true facts regarding Brooks, their control over, and/or receipt and/or modification of Brooks’s allegedly

materially misleading misstatements and/or their associations with the Company which made them privy to confidential

proprietary information concerning Brooks, participated in the fraudulent scheme alleged herein.

90. Defendants knew and/or recklessly disregarded the falsity and misleading nature of the information

which they caused to be disseminated to the investing public. The ongoing fraudulent scheme described in this

complaint could not have been perpetrated over a substantial period of time, as has occurred, without the knowledge and

complicity of the personnel at the highest level of the Company, including the Individual Defendants.

91. Defendants had the motive and opportunity to perpetrate the fraudulent scheme and course of business

described herein because the Individual Defendants were the most senior officers of Brooks, issued statements and press

releases on behalf of Brooks and had the opportunity to commit the fraud alleged herein.

X. NO SAFE HARBOR

92. The statutory safe harbor provided for forward-looking statements under certain circumstances does

not apply to any of the allegedly false statements pleaded in this complaint. Many of the specific statements pleaded

herein were not identified as “forward-looking statements” when made. To the extent there were any forward-looking

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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 of those 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 Brooks who knew that those statements were false when made.

FIRST CLAIM FOR RELIEF For Violation of Section 10(b) of the Exchange Act

and Rule 10b-5 Against All Defendants

93. Plaintiff incorporates ¶¶1-92 by reference.

94. During the Class Period, defendants disseminated or approved the false statements specified above,

which they knew or recklessly disregarded were materially false and misleading in that they contained material

misrepresentations and failed to disclose material facts necessary in order to make the statements made, in light of the

circumstances under which they were made, not misleading.

95. Defendants violated Section 10(b) of the 1934 Act and Rule 10b-5 in that they:

(a) Employed devices, schemes and artifices to defraud;

(b) Made untrue statements of material facts or omitted to state material facts necessary in

order to make statements made, in light of the circumstances under which they were made not misleading; or

(c) Engaged in acts, practices, and a course of business that operated as a fraud or deceit

upon plaintiff and others similarly situated in connection with their purchases of Brooks publicly traded securities

during the Class Period.

96. Plaintiff and the Class have suffered damages in that, in reliance on the integrity of the market, they

paid artificially inflated prices for Brooks’s publicly traded securities. Plaintiff and the Class would not have purchased

Brooks publicly traded securities at the prices they paid, or at all, if they had been aware that the market prices had been

artificially and falsely inflated by defendants’ misleading statements.

97. As a direct and proximate result of these defendants’ wrongful conduct, plaintiff and the other

members of the Class suffered damages in connection with their purchases of Brooks publicly traded securities during

the Class Period.

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SECOND CLAIM FOR RELIEF For Violation of Section 20(a) of the Exchange Act

Against the Individual Defendants

98. Plaintiff incorporates ¶¶1-92 by reference.

99. The Individual Defendants acted as a controlling person of Brooks within the meaning of Section 20(a)

of the Exchange Act as alleged herein. By virtue of their high-level positions, and their ownership and contractual rights,

participation in and/or awareness of the Company’s operations and/or intimate knowledge of the statements filed by the

Company with the SEC and disseminated to the investing public, 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.

100. In particular, the Individual Defendants had direct and supervisory 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.

101. As set forth above, Brooks and the Individual Defendants each violated Section 10(b) and Rule 10b-5

by their acts and omissions as alleged in this Complaint. By virtue of their positions each as a controlling person, the

Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of

Brooks’s and 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 Period.

THIRD CLAIM FOR RELIEF For Violation of Section 11 of the Securities Act

(Against Defendants Brooks, Grady, Woodbury, Emerick, Khoury and Therrien)

102. Plaintiff incorporates ¶¶1-92 by reference except that, for purposes of this claim, Plaintiff expressly

excludes and disclaims any allegation that could be construed as alleging or sounding in fraud or intentional or

reckless misconduct.

103. Plaintiff acquired Brooks common stock in the merger between Brooks and Helix. As a result of

Defendants’ false statements in Joint Proxy/Prospectus, which is part of a registration statement that was filed with

the SEC on Form S-4 on August 30, 2005 (the “Joint Proxy/Prospectus”), Plaintiff acquired Brooks common stock at

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artificially inflated prices. The price of Brooks’s stock declined significantly when the truth began to be publicly

revealed about the Company’s improper stock option grants and financial condition that had been negligently

overstated by Defendants, and accordingly Plaintiff was damaged as a proximate result.

104. The Joint Proxy/Prospectus was inaccurate and misleading because it contained untrue statements

of material facts, including Brooks’s financial statements contained in filings for some or all of the periods

commencing in fiscal 1999 and ending in fiscal 2005, which the Company will restate, and omitted to state other

facts necessary to make the statements made not misleading, and concealed and failed adequately to disclose material

facts as described above.

105. As issuer of the shares, Brooks is strictly liable to Plaintiff and the Class for the misstatements and

omissions.

106. The Joint Proxy/Prospectus was signed by Defendants Grady, Woodbury, Emerick, Khoury and

Therrien either personally or through an Attorney-in-Fact and/or caused its issuance. These Defendants each had a

duty to make a reasonable and diligent investigation of the truthfulness and accuracy of the statements contained in

the Registration Statement. They had a duty to ensure that such statements were true and accurate and that there were

no omissions of material facts that would make the statements made misleading. These Defendants failed to do so.

None of these Defendants made a reasonable investigation or possessed reasonable grounds for the belief that the

statements contained in the Joint Proxy Statement/Prospectus were true and without omissions of any material facts

and were not misleading.

107. Defendants issued, caused to be issued and participated in the issuance of materially false and

misleading written statements to the investing public that were contained in the Joint Proxy Statement/Prospectus,

which misrepresented or failed to disclose, inter alia, the facts set forth above.

108. Plaintiff acquired Brooks common stock traceable to and in reliance on, the Joint Proxy

Statement/Prospectus.

109. Plaintiff and the Class have sustained damages. The price of Brooks common stock has declined

substantially subsequent to and due to Defendants’ violations as described herein.

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110. At the times they acquired common stock, Plaintiff and other members of the Class were without

knowledge of the facts concerning the wrongful conduct alleged herein and could not have reasonably discovered

those facts. Less than one year elapsed from the time that Plaintiff discovered or reasonably could have discovered

the facts upon which this Complaint is based to the time that Plaintiff filed this Complaint.

111. By reason of the foregoing, Defendants Brooks, Grady, Woodbury, Emerick, Khoury and Therrien

have violated §11 of the Securities Act.

FOURTH CLAIM FOR RELIEF For Violation of Section 12 of the Securities Act

(Against Defendants Brooks, Grady, Woodbury, Emerick, Khoury and Therrien)

112. Plaintiff incorporates ¶¶1-92 by reference except that, for purposes of this claim, plaintiff expressly



113. This Count is brought by Plaintiff pursuant to §12(a)(2) of the Securities Act, 15 U.S.C. §77l, on

behalf of all who acquired Brooks shares in connection with, and traceable to, the merger between Brooks and Helix.

This Count does not contain any allegations sounding in fraud. Moreover, for purposes of this Count, Plaintiff

affirmatively states he does not claim that Defendants committed intentional or reckless misconduct or that

Defendants acted with scienter or fraudulent intent.

114. Defendants were sellers and offerors and/or solicitors of purchasers of the common stock offered

pursuant to the Prospectus. Defendants issued, caused to be issued, and/or signed the Registration Statement and

Joint Proxy Statement/Prospects in connection with the merger between Brooks and Helix. The Joint Proxy

Statement/Prospectus was used to induce investors, such as the Plaintiff and the other members of the Class, to

acquire Brooks common stock.

115. The Joint Proxy Statement/Prospectus contained untrue statements of material facts, omitted to

state other facts necessary to make the statements made not misleading, and concealed and failed to disclose material

facts. The Individual Defendants’ actions of solicitation included participating in the preparation of the false and

misleading Joint Proxy Statement/Prospectus. Brooks, acting through its employees, agents and others, solicited

such acquisition for their personal financial gain through the preparation and dissemination of the Joint Proxy

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Statement/Prospectus.

116. Brooks and Defendants Grady, Woodbury, Emerick, Khoury and Therrien owed Plaintiff and the

other members of the Class the duty to make a reasonable and diligent investigation of the statements contained in

the Joint Proxy Statement/Prospectus to ensure that such statements were true and that there was no omission of

material facts required to be stated in order to make the statements contained therein not misleading.

117. Plaintiff and other members of the Class acquired Brooks common stock pursuant to and/or

traceable to the defective Joint Proxy Statement/Prospectus. Plaintiff did not know, or in the exercise of reasonable

diligence could not have known, of the untruths and omissions contained in the Joint Proxy Statement/Prospectus.

118. By reason of the conduct alleged herein, these Defendants violated, and/or controlled a person who

violated, §12(a)(2) of the Securities Act. Accordingly, Plaintiff and members of the Class who hold Brooks common

stock acquired in the merger between Brooks and Helix have the right to rescind and recover the consideration for

their Brooks common stock and hereby elect to rescind and tender their Brooks common stock to the Defendants

sued herein in return for the consideration for those securities together with interest thereon. Class members who

have sold their Brooks common stock are entitled to rescissory damages.

119. By virtue of the foregoing, the defendants violated §12 of the 1933 Act.

FIFTH CLAIM FOR RELIEF For Violation of Section 15 of the Securities Act

(Against Defendants Grady, Woodbury, Emerick, Khoury and Therrien)

120. Plaintiff incorporates ¶¶1-92 by reference except that, for purposes of this claim, plaintiff expressly



121. The Individual Defendants, at all relevant times, participated in the operation and management of

the Company, and conducted and participated, directly and indirectly, in the conduct of Brooks’s business affairs.

122. As officers and directors of a publicly owned company, these defendants had a duty to disseminate

accurate and truthful information with respect to Brooks’s financial condition and results of operations.

123. Because of their positions of control and authority as senior officers and directors of Brooks, these

defendants were able to, and did, control the contents of the Joint Proxy/Prospectus which contained materially false

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financial information. These defendants therefore were “controlling persons” of Brooks within the meaning of

Section 15 of the Securities Act.

PRAYER FOR RELIEF

WHEREFORE, plaintiff prays for judgment as follows: declaring this action to be a proper class action;

awarding damages, including interest; awarding reasonable costs, including attorneys’ fees; and such

equitable/injunctive relief as the Court may deem proper.

JURY DEMAND

Plaintiff demands a trial by jury.

Dated: June 19, 2006 ____________________________________ Peter A. Pease, BBO#392880 Bryan A. Wood, BBO#648414 BERMAN DEVALERIO PEASE TABACCO BURT & PUCILLO One Liberty Square Boston, Ma. 02109 Tel: (617) 542-8300 Fax: (617) 542-1194 Liaison Counsel for Plaintiff

KAPLAN FOX & KILSHEIMER LLP Frederic S. Fox Joel B. Strauss Donald R. Hall Jeffrey P. Campisi 805 Third Avenue, 22nd Floor New York, New York 10022 Tel: (212) 687-1980 Fax: (212) 687-7714 Counsel for Plaintiff

Documents

Charles E. G. Leech Sr., et al. v. Brooks Automation, Inc ...securities.stanford.edu/filings-documents/1036/BRKS_01/2006619_f01... · 2 traded securities of Brooks during the Class