COURT ORIGINAL Ii OF TEXAS - Class actionsecurities.stanford.edu/filings-documents/1038/CI98_01/1999920_r0… · Class Period: 1 14 - • r t, $10 • $30,o $8 9:1 E " $20 23 (3,

. I4 rn1cT COURT

INon r,,- _ -, sTR3CT OF TEXAS

FILEDORIGINAL iSEP a 0 999

NANCY. D04

UNITED STATES DISTRICT COUR

1

...

ay,1m LE'

NORTHERN DISTL

RICT OF TEXAS DALLAS DIVISION

FREDERICK HOECK, et al., On Behalf of ) Civil Action No. 3:98-CV-0998-GThemselves and All Others Similarly Situated, )

) (Consolidated With No. 3:98-CV-1457-G)Plaintiffs, )

) CLASS ACTION

VS. )

) SECOND AMENDED CONSOLIDATEDCOMPUSA, INC., JAMES F. HALPIN, ) COMPLAINT FOR VIOLATIONS OF THEROBERT S. SEAY, LAWRENCE N. ) SECURITIES EXCHANGE ACT OF 1934MONDRY, LESLIE C. MARSHALL, )HAROLD D. GREENBERG, RICK L. )FOUNTAIN, PAUL F. EWERT, ROBYN )GATCH-PRIEST and JAMES F. SKINNER, )

)Defendants. )

) DEMAND FOR JURY TRIAL

\, ) 0

SUMMARY AND OVERVIEW

1. This is a class action on behalf of all purchasers of the common stock and publicly

traded options of CompUSA, Inc. ("CompUSA" or the "Company") between 12/31/97 and 4/29/98

against CompUSA and certain of its top insiders. In 12/97, CompUSA's stock declined by 32%

(from $38 on 12/1/97 to $25-3/4 on 12/29/97) due to investor concerns that CompUSA and other

computer retailers were encountering slow sales growth and increasing pressure on profit margins

due to increased price competition. This sharp price decline eliminated millions of dollars in value

of the CompUSA stock owned and options to purchase CompUSA stock held by its insiders.

2. In order to halt this decline in CorripU SA stock and to artificially inflate it back up

to higher levels so that they could sell off large amounts of their CompUSA stock, top CompUSA

insiders falsely reported to the market in early 1/98, inter alia, that CompUSA was achieving strong

sales in both its inexpensive PCs (below $1,000) and its higher margin computers despite the

experiences of other similar computer retailers. They further represented that CompUSA's financial

results were not being harmed by expanding sales of inexpensive computers, since the Company was

continuing to sell a substantial number of its higher profit margin PCs to sophisticated computer

users and upscale customers. These insiders went so far as to state that the trend toward low-end

PCs was "healthy" for CompUSA's business. Along with these misrepresentations and others,

CompUSA projected fiscal third quarter earnings to exceed the prior quarter with 1998 earnings per

share ("EPS") of at least $1.35. Based upon these false statements, CompUSA's stock price

recovered with a 36% increase to $35-3/8 on 3/2/98.

3. As the stock price rebounded based upon CompUSA's misrepresentations, the

CompUSA executives named as defendants unloaded 564,790 shares of their CompUSA stock at

prices as high as $33.15, selling off 41% of the CompUSA stock they actually owned and 100% of

the stock they acquired via option exercise during the Class Period, pocketing $17.6 million in illegal

insider-trading proceeds.

4. On 3/4/98, CompUSA traded as high as $33-7/16. On 3/5/98, just eight trading

days after CompUSA's insiders had completed their insider-selling spree, CompUSA stock was

twice halted from trading and ultimately plunged to $26 on volume of over 9 million shares (the

-.1-

largest one-day volume in CompUSA's history as a public company up to that point) as it leaked into

the market that CompUSA was about to make a negative announcement about its 3rdQ F98 results.

After the close, CompUSA revealed that it expected much lower 3rdQ F98 sales than earlier forecast.

Then on 4/1/98, CompUSA revealed that its 3rdQ F98 sales fell from the prior quarter, due in large

part to a decline in sales per superstore, which would result in lower than expected 3rdQ F98 EPS.

CompUSA revealed that gross margins would be approximately 14.1%, lower than in any quarter

in the past year. CompUSA also indicated that these adverse conditions would continue during 4thQ

F98, resulting in lower margins and EPS at least one-third lower than earlier forecast for the 3rdQ

and 4thQ of F98. CompUSA stock plunged from $26-7/16 on 3131198 to $20-1/2 on 411/98 on

volume of 10.1 million shares — the largest one-day volume in CompUSA's history as a public

company.

5. On 4/1/98, contrary to defendants representations, the Company reported that its third

quarter sales fell from the prior quarter and that its fourth quarter estimates would have to be

adjusted downward by at least a third. Further, defendants admitted that CompUSA's gross margins

had fallen to their lowest level of the past year, despite their representations in January that the

margins were protected due to its sales of high-end PCs. Immediately following these disclosures,

the Company's stock plummeted an additional 22% to $20-1/2 — a price at least $10 per share less

than any price obtained by defendants only five weeks earlier. On 4/29/98, the Company officially

announced its third quarter results, confirming its prior announcement on 4/1/98 and indicating that

net income fell 22% from the same period of fiscal 1997. Despite defendants' representations during

the Class Period that the industry's trend toward lower priced PCs was "healthy" for CompUSA's

business, they now revealed that because more of the computers CompUSA sold were models

costing less than $1,000, profits sank to $25.4 million (or $0.27 per share) from $32.7 million (or

$0.35 per share). CompUSA's stock fell to $17-3/16. These events are evidenced by the following

stock chart:

-2-

i,

•..

CornpUSA., Inc.

December 1, 1997 -April 29, 1998

Daily Stock Prices vs. S&P Retail Composite index40

Feb. 2-23, 1998Insiders self 605,322 sharesfor $19,175,559 S&P Retail Composite

35 1—\ilk

Al

\r..,aicr,

a qr-s.2 CompLISA,af 30 —

1, Aill041111P.r \0)a. 02.' TO-9-3 Izi 25 ——6 00 g

13C

20 —

I15

1 1 1 I _L_ 1 I 1 i

12/01197 12/30197 01/29/98 02127/98 03/27198 04127198

12/15/97 01/14/98 02/12198 03/13/98 04/13198

6. Defendants insider trading was unusual in timing and amount, as shown below:

% of SharesShares Actually Owned

Defendants Sold Proceeds Sold

Ewert 20,000 $ 639,397 21%Fountain 21,123 $ 654,790 33%Gatch-Priest 8,484 $ 271,488 55%Greenberg 16,546 $ 529,472 79%Ha/pin 360,000 $11,173,780 56%Marshall 34,166 $ 1,132,603 91%

Mondry 100,000 $ 3,133,200 20%Seay 4,47 $ 141,418 68%

TOTALS: 564,790 $17676,148 41%

•- 3 -

,

r

CompUSA, Inc.Quarterly Stock Sales By Defendants - Dollar Volume

March 1997 - Aeril 1998$20 $40

Class Period:12/31/97 - 4/29/98

$15 $30

Tfc

5—

$1 -0E ()

3

$5 4' $10

Pre ClassPeriod Sales

$0 $0M A M JJ A SO NDJ F M A1997 1990

JURISDICTION AND VENUE

7. Jurisdiction is conferred by §27 ofthe Securities Exchange Act of 1934 ("1934 Act").

The claims asserted herein arise under §§10(b) and 20(a) of the 1934 Act and Rule 10b-5.

8. Venue is proper in this District pursuant to §27 of the 1934 Act. CompUSA is

headquartered in this District. The false and misleading statements were made or issued from this

District.

THE PARTIES

9. (a) PlaintiffFrederick Hoeck, who was appointed as a lead plaintiff in this action

by Order dated June 23, 1998, purchased shares of CompUSA common stock during the Class

Period, as described in the certification filed with plaintiffs initial complaint, and was damaged

thereby.

(b) The following individuals, who were appointed as lead plaintiffs in this action

by Order dated June 23, 1998, purchased shares of CompUSA common stock and/or publicly traded

options on the open market during the Class Period, as described in the certifications attached as

Exhibit 1 to the Declaration of Katherine L. Blanck filed in support of the Hoeck Group's motion to

-4

r

be appointed lead plaintiffs, and were damaged thereby: Jeff Ackerman, Reza Ansari, Robert E.

Appleby, Jr., Boris Blanter, William Blust, Benedict J. Bucalo Trust, Josephine F. Bucalo Trust,

Michael Bucalo, Mary Suk Fun Cheung, John and Honey Jean Christofiles, Ronny and Lourdes

Cohen, Bruce Devlin, Frankie Dinsmore, Michael Dougherty, Joseph Drazdowski, Peter Dugery,

Fran and Paul Gonnelli, Jr., Charles Katsohis, John Kemendo, Ken Klein, Alan Koch, Marc

Lupczynski, John Macuski, Wayman D. Merrill, John T. and Ruth Q. Neary, Philip Ramirez, Larry

Rebich, Jack Rushing, George Schneider, John Special, Wieslawa Tabor, Patricia Waldschmidt,

Irving M. Weiner, Stephen Winarick, and Jedidiah Yueh.

(c) Plaintiff Herbert Silverberg purchased shares of CompUSA common stock

during the Class Period, as described in the certification filed with plaintiffs initial complaint, and was

damaged thereby.

10. Defendant CompUSA, Inc. ("CompUSA") is a large retailer of personal computers

and related products and services. CompUSA operates 150+ Computer Superstores in the United

States. The Company's executive offices are in Dallas, Texas. CompUSA's common stock trades

in an efficient market on the New York Stock Exchange.

11. (a) Defendant James F. Halpin ("Halpin") is President, ChiefExecutive Officer and

a director of the Company. During the Class Period and as part of the fraudulent scheme, Halpin sold

360,000 shares of CompUSA stock at prices as high as $31.31 per share based on inside information,

pocketing over $11.1 million. These sales constituted 56% of the CompUSA stock Halpin actually

owned. Halpin's stock sales during the Class Period were unusual in timing and amount, as set forth

below:

- 5

•

CompUSA, inc.J. Halpin, Pres. CEO - Quarterly Stock Sales - Dollar Volume

March 1997 - April 1998$12 $40Class Period:

1 14 - • r t,

•$10

$30

$8,o

9:1E " $20 23

(3,No Pre Class Period Sales

-3 $4 '

$10

$2 -

$0 $0

MA M J J A S 0 NC:0J F M A1997 1998

(b) Defendant Lawrence N. Mondry ("Mondry") is Executive Vice President-

Merchandising of the Company. During the Class Period and as part of the fraudulent scheme,

Mondry sold 100,000 shares of CompUSA stock at prices as high as $3 1.63 per share based on inside

information, pocketing over $3.1 million. These sales constituted 20% of the CompUSA stock

Mondry actually owned. Mondry's stock sales during the Class Period were unusual in timing and

amount, as set forth below:

•-6-

CompUSA, Inc.L. Mondry, Executive V.P. Merch. - Quarterly Stock Sales - Dollar Volume

March 1997 - April 1998

$3,500 $40Class Period

12131197 - 4129198

$3,000

$30$2,500

o1'7")

8 10en $2,000

4377; No Pre Class Period Sales $20

to

$1,500 -

oo 1st000 .

via

$500

$0 $0MA M JJA SO NDul F M A

1997 1998

(c) Defendant Paul F. Ewell ("Ewert") is Senior Vice President-Merchandising

of the Company. During the Class Period and as part of the fraudulent scheme, Ewert sold 20,000

shares of CompUSA stock at prices as high as $32 per share based on inside information, pocketing

$639,397. These sales constituted 21% ofthe CompUSA stock Ewert actually owned. Ewert's stock

sales during the Class Period were unusual in timing and amount, as set forth below:

•-7-

_r

CompUSA, Inc.P. Ewert, S.V. P. Merchandising - Quarterly Stock Sales - Dollar Volume

March 1997 April 1998

$700 $40Class Period:

12/31/97 - 4/29/98

$600 •••- • - ... . ................ . ..

$30$500

oo 0g. $400

$20 143

$300 •(313'

No Pre Class Period Sales0

$200$10

$100

$0 $0MAM JJ A SO NIDJ F M A

1997 19913

(d) Defendant James E. Skinner ("Skinner") was, during the Class Period,

Executive Vice President, ChiefFinancial Officer, Treasurer and Assistant Secretary ofthe Company.

Because of hi s unique position at CompUSA and his sophisticated financial knowledge, Skinner knew

CompUSA's business was deteriorating during the 2ndQ F98 — he sold off 15,000 shares of

CompUSA stock on 11/21/97 at $35-3/4 per share.

(e) Defendant Harold D. Greenberg ("Greenberg") is Senior Vice President-

Inventory Management of the Company. During the Class Period and as part of the fraudulent

scheme, Greenberg sold 16,546 shares of CompUSA stock at $32 per share based on inside

information, pocketing $592,472. These sales constituted 79% of the CompUSA stock Greenberg

actually owned. Greenberg's stock sales during the Class Period were unusual in timing and amount,

as set forth below:

-8-

,

CompUSA, Inc.H. Greenberg, Sr. V.P. Inv. Mgmt - Quarterly Stock Sales - Dollar Volume

March 1997 - April 1998$800

Class Period:As - •

$600 $30

o P_a

g $400 •........ -o

- $20 s:

=-4 No Pre Class Period Sales

0

$200 ........ $10

$0 $0M A M J J A S 0 NDJ F M A

1997 1998

Defendant Rick L. Fountain ("Fountain") is Vice President-Technical Services

of the Company. During the Class Period and as part of the fraudulent scheme, Fountain sold 21,123

shares of CompUSA stock at prices as high as $31 per share based on inside information, pocketing

$654,790. These sales constituted 33% of the CompUSA stock Fountain actually owned. Fountain's

stock sales during the Class Period were unusual in timing and amount, as set forth below:

-9-

CompUSA, Inc.R. Fountain, V.P. Tech. Services - Quarterly Stock Sales - Dollar Volume


$700 540Class Period12/31/97 - 4/29/98

$600

$500 .. ....... ______ $30

tt $400 ---

$20 2

3 $300 cn

No Pre Class Period Sales0

$200$10

....

$0 $0MA M J J A SO NDJ F M A

1997 1998

(g) Defendant Robyn Gatch-Priest ("Gatch-Priest") is Vice President, Controller

and Assistant Treasurer of the Company. During the Class Period and as part of the fraudulent

scheme, Gatch-Priest sold 8,484 shares of CompUSA stock at $32 per share based on inside

information, pocketing over $271,000. These sales constituted 55% of the CompUSA stock Gatch-

Priest actually owned. Gatch-Priest's stock sales during the Class Period were unusual in timing and

amount, as set forth below:

- 10 -

•

CompUSA, Inc.R. Gatch - Priest, V.P. & Controller - Quarterly Stock Sales - Dollar Volume


$300 $40Class Period:

12/31197- 4/29198

$250

$30

11-; $200

$150 -a-- $20 co

`Co No Pre Class Period Sales

8 $100

$10

$50 ............ _ _

so soM A M J J A SO NCI J F MA

1997 1998

(h) Defendant Leslie C. Marshall ("Marshall") is Vice President-Loss Prevention

of the Company. During the Class Period and as part ofthe fraudulent scheme, Marshall sold 34,166

shares of CompUSA stock at $33.15 per share based on inside information, pocketing over $1.1

million. These sales constituted 91% of the CompUSA stock Marshall actually owned. Marshall's

stock sales during the Class Period were unusual in timing and amount, as set forth below:

- 11 -

CompUSA, Inc.L. Marshall, V.P. Loss Prevention - Quarterly Stock Sales - Dollar Volume


$1200 $40

$1000:

$30

-,-,-) $800 4Class Period:

2.12131197 - 4/29/98

E $600 .z L$20 ID,3No Pre Class Period Sales

8 $400

$10

$200

$0 $0MA M J J A $ 0 N DJ F M A

1997 1998

(i) Defendant Robert S. Seay ("Seay") is Vice President-Technological Training

of the Company. During the Class Period and as part of the fraudulent scheme, Seay sold 4,471

shares of CompUSA stock at $31.63 per share based on inside information, pocketing $141,418.

These sales constituted 68% of the CompUSA stock Seay actually owned. Seay's stock sales during

the Class Period were unusual in timing and amount, as set forth below:

- 12 -

CompUSA, Inc.• R. Seay, V.P. Tech. Training - Quarterly Stock Sales - Dollar Volume


$160 $40Class Period.

12/31/97 - 4/29/98$140

$120 --

S

8 $100 0

No Pre Class Period Sales 9_

$80 r - $20 -43

$6c1

$40 $10

$20

$0 $0M A M J J A SO N DJ F M A

1997 1998

12. The individuals named as defendants in ¶11(a)-(i) are referred to herein as the

"Individual Defendants." The Individual Defendants, because of their positions with the Company,

controlled and/or possessed the power and authority to control the contents of its quarterly and

annual reports, press releases and presentations to securities analysts, which information was

conveyed through the analysts to the investing public.

- 13 -

THE INDIVIDUAL DEFENDANTS'PARTICIPATION IN ISSUING FALSE AND MISLEADING

STATEMENTS DURING THE CLASS PERIODWITH SCIENTER

13. Each of the Individual Defendants is liable for making false statements and for

participating in a fraudulent scheme which permitted defendants to sell or dispose of 564,790 shares

of CompUSA stock at artificially inflated prices, for $17.6 million in insider-trading profits.

Additionally, defendants Halpin, Gatch-Priest, Mondry, Ewert, Greenberg, Seay, Fountain and

Marshall are liable for failing to disclose material adverse facts while selling CompUSA stock.

14. Halpin, Skinner, Gatch-Priest, Mondry, Ewert, Greenberg, Seay, Fountain, and

Marshall were the top executives of CompUSA. They had daily contact while running CoxnpUSA

as "hands-on" managers, dealing with the most important issues facing CompUSA's business, i.e.,

its sales growth, average selling prices of its PC products, its profit margins, its inventory levels and

its financial performance compared to budgeted or forecasted levels. As President, CEO and a

director of the Company, defendant Halpin was responsible for and oversaw all operations of the

Company, including sales, merchandising, inventory planning and control, marketing, and financial

reporting as well as the performance of individual product lines, product demand, inventory levels

and mix, production schedules, sales and earning growth, and actual versus budgeted or forecasted

results. As Executive Vice President, CFO, Treasurer and Assistant Secretary of the Company,

defendant Skinner was responsible for and oversaw all financial matters of the Company, including

the overall financial performance of the Company, the performance of individual product lines,

product demand, inventory levels and mix, production schedules, sales and earnings growth, and

actual versus budgeted or forecasted results. As Vice President, Controller and Assistant Treasurer

of the Company, defendant Gatch-Priest was responsible for and oversaw the preparation of perio dic

financial reports, including, inter alia, the calculations made for reserves for excess and obsolete

inventory. She was also responsible for the preparation of financial analyses which were distributed

to Halpin, Skinner, Mondry, Ewert, Greenberg, Seay, Fountain and Marshall and she supervised all

CompUSA financial personnel. As Executive Vice President-Merchandising, defendant Mondry was

responsible for and oversaw product development. He also controlled purchasing decisions,

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selected, managed and controlled inventory mix, and tracked product demand and monitored sales

of all products. As Senior Vice President-Merchandising, defendant Ewert was responsible for

tracking purchasing decisions, product demand and sales, and determining and monitoring inventory

mix. As Senior Vice President-Inventory Management, defendant Greenberg was responsible for

and oversaw, by product category and region, product demand, inventory levels and mix, production

schedules and sales. As Vice President-Technological Training, defendant Seay was responsible for

developing and overseeing the Company's technical programs and training and working with the

technical specialists and salespeople in CompUSA stores, which required him to obtain up-to-date

information about which CompUSA products were selling to avoid expending company resources

on training for products which had become obsolete. As Vice President-Technical Services,

defendant Fountain was responsible for and oversaw technical support services, which required his

knowledge of which specific categories of products were in high (and low) inventory. As Vice

President, Loss Prevention, defendant Marshall was responsible for tracking inventory levels and

minimizing inventory loss by the Company. Because sharply increased sales of the proper mix of

PC products at strong profit margins were indispensable elements to CompUSA meeting its

internally budgeted and publicly disseminated F98 revenue and EPS forecasts, each of these

Individual Defendants constantly monitored each of these key factors affecting CompUSA's

business.

15. CompUSA has a highly automated "point-of-sale" management information system

which provides instant and detailed information with respect to each store's daily, weekly and

monthly performance to the Individual Defendants who were CompUSA's top executives working

in the Company headquarters in Dallas, Texas. CompUSA's management information system

accumulates data on a per-store basis each time a sale is made of any product, identifying the product

and sales price, thus enabling CompUSA's managers to track sales on a per-store basis, as well as

for the entire corporation, on a daily and weekly basis including the precise products which are sold,

the amount of remaining inventory of each product and the actual sales price of each product sold,

all compared to budgeted and forecasted amounts. Each of the Individual Defendants utilized this

instantaneously available data during the Class Period to constantly and closely monitor the

- 15 -

. _

performance of each CompUSA store and the overall corporate entity. This was done in part by

tracking the sales of each product and the average sales price of the product to determine sales rates,

inventory turnover and gross margin. In addition, this data is used to ascertain "product mix" of sales

and compare individual store performance and overall corporate performance to budgeted or

internally forecasted levels so that during the Class Period each of the Individual Defendants could

determine whether or not individual stores and the corporation are falling behind, meeting or

exceeding budgeted levels of sales and profits and whether average selling prices of key products

are holding to expected levels or falling below expected levels due to weak demand, price

competition or other factors.

16. As a result of this sophisticated management information system, unlike some other

corporations, each of the Individual Defendants had unusually rapid access to information about

CompUSA's business, including changes in trends such as changes in "product mix," slowing sales,

declining average selling prices, increasing inventories and individual store, regional or corporate

performance falling below budgeted or internally forecasted levels. For instance, as a result of this

ultra-sophisticated management information system, even though CompUSA has over 150 retail

stores located throughout the United States selling hundreds if not thousands of separate products,

it is able to announce its corporate-wide sales (including detailed data about sales compared to

budget) and comparative same-store sales (individually and collectively) for a quarter within just

72 hours of the end of the quarter.

17. Because of their top executive positions with CompUSA, their involvement in the

day-to-day management of its business, conversations with other corporate officers and employees

and their attendance at management meetings, each of the Individual Defendants had access to

internal corporate documents concerning the adverse non-public information about the slowing sales

of CompUSA's PC products, its declining profit margins and its accumulation of excessive

inventories. Each of the Individual Defendants closely monitored the performance of CompUSA's

business via reports which CompUSA's Finance Department (under Skinner) and other departments

generated on a weekly, monthly and quarterly basis. Specifically, they circulated product sales

reports (detailed by product category and geographic region), including sales versus year-ago reports,

- 16 -

_

daily, weekly and monthly sales reports showing sales by region and product type, product mix

reports, flash reports and average selling prices reports. They also circulated inventory reports,

including inventory ledgers, inventory aging reports, inventory turnover analysis reports, and excess

and obsolete inventory worksheets. CompUSA's Finance Department also distributed monthly

financial statements and reports which included, among other things, income statements which

tracked overall margins (in the aggregate and by product) and compared CompUSA's actual

financial results to projected results. Thus, each of the Individual Defendants was apprised of the

status of sales of every CompUSA product and store, as well as inventories, so that they knew

where CompUSA stood in terms of the sale of and demand for its products as well as CompUSA's

actual results compared to budget. Thus, each of the Individual Defendants was constantly aware

of the current sales rates for CompUSA products, its product mix and its inventories and knew that

sales were weakening and that CompUSA had accumulated excessive inventories, that CompUSA

was achieving sales and profit margins under internal budget and thus CompUSA's F98 EPS

forecasts could not and would not be achieved.

18. Because of CompUSA's sophisticated management information system, the Individual

Defendants each knew by 12/31/97 that CompUSA's 3rdQ F98 results would be worse than

internally budgeted and forecasted, a below trend-line performance they knew was continuing in

1/98. As a result, by no later than 12/31/97, the Individual Defendants each knew that CompUSA's

sales growth was deteriorating significantly, in large part due to a decline in average selling prices

of personal computers which, in fact, was significantly worse than CompUSA had publicly disclosed

and that, as a result, CompUSA's profit margin, net income and EPS performance during the second

half of F98 would be far worse than CompUSA had been forecasting. This, in turn, they knew

would result in a substantial decline in CompUSA's stock price when these adverse conditions inside

CompUSA's business became publicly known. Thus, shortly after the announcement of CompUSA's

financial results for the 2ndQ F98 on 2/1/98, the Individual Defendants took advantage of

CompUSA's artificially inflated stock price to sell off 564,790 shares of their CompUSA stock at

as high as $33.15 per share, pocketing $17.6 million in insider-trading proceeds.

- 17 -

19. Each of the Individual Defendants also had the motive and the opportunity to make

the false statements and perpetrate the scheme described herein. Each of the defendants is liable for

making false statements and as a participant in a fraudulent scheme and course of business that

operated as a fraud or deceit on purchasers of CompUSA stock, including the making of false and

misleading statements and/or concealing of material adverse facts. The fraudulent scheme and

course of business: (i) deceived the investing public regarding CompUSA's products and business;

(ii) artificially inflated the price of CompUSA's stock and publicly traded options; (iii) caused

plaintiffs and other members of the Class to purchase CompUSA stock and options at inflated prices;

and (iv) permitted the defendants to sell off 564,790 shares of their Comp -USA stock, pocketing

$17.6 million in insider-trading proceeds. Thus, defendants' fraudulent scheme was a success — for

them. The Individual Defendants sold 564,790 shares of their CompUSA stock at artificially inflated

prices, pocketing $17.6 million in illegal insider-trading proceeds.

BACKGROUND TO THE CLASS PERIOD

20. In late 1996, Monorail, a competitor of CompUSA, introduced a "fall-featured"

computer priced at less than $1,000. In early 1997, CompUSA and other manufacturers and retailers

began to follow Monorail's lead — offering stripped down, yet still powerful, PCs at prices less than

$1,000.

21. By mid-1997, lower priced PCs began to gain substantial market share. In 8/97, a

month popular for back-to-school purchases, PCs costing less than $1,000 accounted for 38.7% of

all PCs sold in the industry. During 11/97, the average price of a PC sold at computer retailers and

superstores throughout the industry was $1,329, an all-time low, according to a survey done by

Computer Intelligence.

22. During the holiday shopping season in 12/97, PCs costing less than $1,000

represented over 40% of all PCs sold. Only one year earlier, lower priced PCs accounted for less

than 10% of the PC sales in the industry.

23. In 12/97, CompUSA's stock declined sharply from $38 on 12/1/97 to as low as $25-

3/4 on 12/29/97, due to investor concerns that CompUSA and other computer retailers were

encountering slowing sales growth of their products and suffering profit margin pressure due to price

- 18 -

cutting and increasing sales of lower priced PCs. This sharp price decline eliminated millions of

dollars in value of the CompUSA stock owned and stock options held by its insiders.

24. In order to halt the decline in CompUSA stock and to artificially inflate it back up to

higher levels so that they could sell off large amounts of -their CompUSA stock, CompUSA's top

insiders falsely reassured the securities markets that CompUSA was encountering very strong sales,

that its profit margins were intact, the industry's trend toward lower priced PCs was "healthy" for

CompUSA's business and that it expected to achieve strong revenue and EPS growth during F98.

FALSE AND MISLEADING STATEMENTSISSUED DURING THE CLASS PERIOD

25. On 12/31/97, CompUSA issued a press release reporting "record sales" for its 2ndQ

F98, ended 12/27/97. In fulfilling their responsibilities as CompUSA's top officers, as described in

detail in 714-18 and incorporated into this paragraph by reference, defendants Halpin, Skinner,

Mondry, Seay, Marshall, Greenberg, Fountain, Ewert and Gatch-Priest prepared and reviewed

summaries of CompUSA's quarterly sales results and financial information, knowing and believing

that such info would be analyzed and reported by CompUSA's CEO (Halpin) and CFO (Skinner) in

the form of the Company's quarterly financial statement and press release. Prior to the issuance of

that press release, each of the Individual Defendants discussed what information would be released

to the public regarding the Company's second quarter sales. Each of the Individual Defendants was

provided with a copy of the draft press release prior to or shortly after its issuance and had the ability

and opportunity to prevent its issuance or cause it to be corrected. While the 12/31/97 press release

was the collective product of each defendant, it quoted defendant Halpin. It stated:

"We reached a milestone in this quarter— over $5 billion in sales for calendaryear 1997, in addition to achieving strong second quarter sales, led by a substantialcomparable store sales increase," said James F. Halpin, president and chief executiveofficer. "These accomplishments are a result of our ongoing investment inCompUSA, including opening 14 Computer Superstores (SM), opening five smallmarket stores, and premiering our new Apple® product, 'store within a store'concept."

However, as CompUSA's top executives with responsibility for and knowledge of the Company's

sales performance, defendants Halpin, Skinner, Gatch-Priest, Mondry, Ewen, Greenberg, Seay,

Fountain, Marshall knew the material, adverse, non-public information about CompUSA's financial

- 19 -

_

results and then-existing business conditions discussed in ¶32, which were not disclosed and they

knew or recklessly disregarded that the contents of the 12/31/97 press release were false or

misleading when made. For instance, the Individual Defendants each knew that CompUSA's sales

growth was deteriorating significantly, in large part due to a decline in average selling prices of

personal computers which, in fact, was significantly worse than CompUSA had publicly disclosed

and that as a result, CompUSA's profit margin, net income and EPS performance during the second

half of F98 would be far worse than CompUSA had been forecasting. Despite their duty not to sell

their CompUSA stock under such circumstances, each of the Individual Defendants, except Skinner,

nonetheless did so.

26. In fulfilling their responsibilities as CompUSA's top officers, as described in detail

in r14-18 and incorporated into this paragraph by reference, in early 1/98, subsequent to the release

of CompUSA's 2ndQ F98 sales, each of the Individual Defendants provided CompUSA's CEO

(Halpin) and CFO (Skinner) with information about CompUSA for inclusion in a script to be read

to securities analysts who followed the Company. Each of the Individual Defendants conferred with

the CEO and/or CFO regarding the content of the subject matter that would be discussed with the

analysts. While not all the Individual Defendants spoke words during the conversations and

conferences with analysts, each, through their participation in the preparation of the conference-

statements became speakers. During these discussions, Halpin and Skinner disseminated the

following information to the market by stating:

• CompUSA's business was very strong and it was achieving strong sales not only ofnewer, below $1,000 PCs, but also continuing strong sales of more expensive PCs whichcarried higher margins.

• CompUSA's financial results were not being harmed by the increase in sales ofcheaper PCs largely because it was continuing to sell substantial numbers of more expensivePCs which carried higher profit margins.

• CompUSA was more insulated from adverse impact on profit margins due toincreased sales of $1,000 and under PCs than other PC retailers because CompUSA'sbusiness was unique in attracting a larger number of sophisticated computer users andupscale customers who purchased more expensive PCs and associated equipment thanunsophisticated users and/or first-time buyers.

• CompUSA's inventories were under tight control and within budgeted and forecastedlevels and thus CompUSA would not have to engage in promotional pricing or price cuttingto move excess inventory which would otherwise have a negative impact on its margins.

- 20 -

• CompUSA's superstore format was doing especially well with strong sales of higherend PCs and inventories under tight control.

• While some computer retailers were finding their profit margins hurt by the upsurgein the sale of $1,000 and under PCs, this was not the case with CompUSA, and in fact thistrend was healthy for CornpUSA's business because it was continuing to sell high-end, moreexpensive PCs while the interest in $1,000 and under PCs was bringing many more shoppersinto its stores leading to excitement, revenue increases and purchases of peripheralequipment.

• As a result of the foregoing, CompUSA's business was performing on track and inline with internally forecasted and budgeted levels; CompUSA expected 2ndQ EPS of $.32-$.37, 3rdQ EPS of $.42-$.43, and 4thQ EPS of $ .29-$ .31, leading to F98 EPS ofapproximately $1 .30-$1 .35.


sales performance, defendants Halpin, Skinner, Seay, Mondry, Marshall, Greenberg, Fountain, Ewert

and Gatch-Priest knew the material, adverse, non-public information about CompUSA's financial

results and then-existing business conditions discussed in ¶32, which were not disclosed, and they

knew or recklessly disregarded that the statements about CompUSA which were made to the analysts

were false or misleading when made. For instance, the Individual Defendants each knew that

CompTJSA's sales growth was deteriorating significantly, in large part due to a decline in average

selling prices of personal computers which, in fact, was significantly worse than CompUSA had

publicly disclosed and that as a result, CompUSA's profit margin, net income and EPS performance

during the second half of F98 would be far worse than CompUSA had been forecasting. Despite

their duty not to sell their CompUSA stock under such circumstances, each of the Individual

Defendants, except Skinner, nonetheless did so.

27. On 12/31/97, Gerard Klauer Mattison issued a report on CompUSA, written by

Ciccarelli, which was based on and repeated information provided Ciccarelli in conversations with

Halpin and Skinner. The report forecast F98 and F99 EPS of $1.35 and $1.70, respectively, for

CompUSA and the following quarterly F98 EPS:

Q 1$ .25AQ2 $ .37Q3$ .43Q4 $ .30Year $1.35

The report also stated:

-21 -

Despite investor concerns over the last few weeks regarding CornpUSA's businessin December, the company posted better-than-expected comps of 8.8%. Althoughthe question still remains how much promotional activity was needed to achievethese results, we do not believe the promotional environment was much greater thanoriginally anticipated. Corporate sales were somewhat better than retail, however,which puts some pressure on gross margin. As a result, we are maintaining our 2QEPS estimate of $0.37 vs. $0.25

• CompUSA is less affected by declining ASPs than many of its peers.The precipitous decline in ASPs has hindered the sales growth of most PCmanufacturers and retailers as more units need to be sold just to equal prior yeardollar totals. However, we believe CompUSA is more insulated from the declinein ASPs than its consumer electronic counterparts as it still tends to attractmore sophisticated PC customers than CE retailers (we believe that the CEretailers still have a greater mix of first time or less sophisticated buyers thanComp USA and have, as a result, been more affected by the strong sales in thesub-$1,000 category).

• Excess inventory fears appear unfounded. In our opinion, fears ofexcess inventory were a primary factor in the recent decline in CPU shares.However, we believe CompUSA manages its inventory as well as any company inthe PC distribution industry and CPU would likely only take extra product fromvendors if it were given a compelling enough opportunity, in terms of pricing andextended payment terms.

INVESTMENT CONCLUSION

* * *

Given the company's momentum and our expectation for continued marginexpansion, we remain convinced that CompUSA is a compelling, long term, retailgrowth company. In addition, we believe the company's relatively new BTO business(which got off to a very strong start) could, over time, add substantial incrementalrevenue and profits. We further believe the stock's pullback in December providesinvestors with an excellent buying opportunity, especially given the dissipation offears that the company's fundamentals had softened.

28. On 12/31/97, DLJ Securities issued a report on CompUSA, written by Batter, which

was based on and repeated information provided him in conversations with Halpin and Skinner. The

report forecast F98 and F99 EPS of $1.30 and $1.60, respectively for CompUSA, and the following

quarterly F98 EPS:

Q1 $ .25Q2 $ .35Q3$ .42Q4 $ .29Year $1.30


- 22

We continue to believe that CPU is {sic] taken the steps necessary to maintain itsposition as the leading pure computer retailer and has built a reputable servicebusiness that will continue to be a major factor in driving the company's earnings. ...

Although CompUSA will not break out the sales, sub-$1000 computers salescontinue to be strong and represent by our estimates 35-40% of total PC sales. Whilethis hardware does not carry as high margins as the higher-end computers, it doesinvite more first time buyers into the stores and creates excitement. In addition,sales for the Pentium II picked up as they moved through the quarter which is anexcellent sign heading into 1998. Overall, after what appears now to be anoverstated scare in December, the PC industry at the retail level is relatively healthy.

Margins should be in line, with several items keeping them harnessed. One,the business mix was weighted heavier toward corporate business which has tightermargins than retail. While this keeps margins lower for the quarter, it is essential asthe company continues to make headway in the corporate world so as to build theirservice business down the road. Two, the company did use this quarter to make somesignificant investments including new stores and the infrastructure for the newsmaller format that is going in some rural locations.

29. On 12/31/97, Credit Suisse First Boston issued a report on CompUSA, written by

Yarchover, which was based on and repeated information provided her in conversations with Halpin

and Skinner. The report forecast F98 and F99 EPS of $1.34 and $1.65, respectively, for CompUSA,

and the following quarterly F98 EPS:

Q1 $ .25AQ2 $ .36Q3$ .43Q4 $ .31Year $1.34


We believe sales continue to be strong for high-end machines, the low-end $1,000PC's, software and peripherals. Services, training, and corporate sales also remainstrong, increasing CompUSA's position as a significant competitor in these segments.Going into the next quarter, we think CPU's inventory is in good shape, and wedo not think that the company has a material amount of clearance-typemerchandise....

While competitors continue to scale back their PC efforts, we thinkCompUSA is in an excellent position to continue growing and improving its returnon capital.

30. On 1/2/98, UBS Securities issued a report on CompUSA, written by Erner, which was

based on and repeated information provided her in conversations with Halpin and Skinner. The

report forecast F98 and F99 EPS of $1.35 and $1.75, respectively, for CompUSA, and the following

quarterly F98 EPS:

- 23 -

Q1 $ .25AQ2 $ .37EQ3$ .43EQ4 $ .30EYear $1.35


CompUSA reported almost a 9% same-store sales gain for its second quarter,allaying concerns regarding the impact of sub-$1,000 PCs on total sales dollarvolume. We believe this lower-price point is attracting first-time buyers that wouldnot previously have shopped in its stores. Furthermore, lower price points may alsobe working towards shortening the replacement cycle, and encouraging the purchaseof more than one computer per household. Since CompUSA is still experiencingstrong high-end sales, we do not see sub-$1,000 PCs as detrimental to its business.

* * *

CompUSA continued to report strength at both the high end and at the low end ofPCs. Sales of the sub-$1,000 PC were strong at the start of the quarter. Pentium IIsales picked up later in the period. While declining average selling prices were afactor at the low end, PC prices excluding the sub-$1,000 category seem to beholding up.

31. Based on the extremely positive information defendants disseminated to the market

on and after 12/31/97, the precipitous 12/97 decline in CompUSA's stock was halted, and CompUSA

stock jumped from $25-3/4 on 12/29/97 to $31-1/2 by 1/5/98.

32. The positive statements about CompUSA's business made in late 12/97 and early

1/98, as set forth in 1125-30, were materially false and misleading when issued, and failed to

disclose, inter alia, the following true facts which were then known only to each of the Individual

Defendants who had access to and opportunity to review the internal CompUSA data described in

1115-17:

(a) CompUSA's revenue growth was slowing dramatically due to softening

demand for PC products generally, combined with an increasing percentage of its sales being

composed of much lower priced and therefore much lower margin PC products;

(b) Due to price cutting of higher priced PCs and increasing sales of much lower

priced PC products, including under $1,000 PCs, CompUSA's profit margins were below internally

forecasted or budgeted levels, a negative trend defendants knew was accelerating and would continue

for the foreseeable future;

- 24 -

(c) The increasing popularity and sales of under $1,000 PCs was not a healthy

development for CompUSA's business but in fact a negative development which was adversely

affecting CompUSA's revenue growth, profitability and EPS due to the much lower profit margins

on the sale of these much less expensive products;

(d) CornpUSA's sales of cheap, under $1,000 PC units was accelerating at the

expense of sales of its more expensive and much more profitable PCs which was having an adverse

impact on CompUSA's business, revenue growth, profitability and EPS;

(e) CompUSA's business was performing with revenues, net income and EPS

below internally budgeted or forecasted levels, a negative trend and condition defendants knew was

accelerating and would continue for the next several months;

(f) CompUSA had accumulated excessive levels of slow-moving PC products

and accessory items that it would have to sell at highly promotional, 1. e., discounted, prices which

would hurt its profit margins in the second half of F98;

(g) CompUSA's inventories were more heavily weighted with higher end Pentium

II products, which were not selling nearly as well as the lower end sub-$1000 PCs, leading to an

imbalance between the Company's inventory and market demand, which would lead to margin

reductions in the future as the Company had to engage in price cutting to move its inventory; and

(h) As a result of the foregoing negative factors and conditions impacting

CompUSA's business, the Individual Defendants each actually knew the forecasts being made by and

on behalf of CompUSA for significantly increased revenue, net income and EPS during the second

half of F98 were false and misleading when made as they could not and would not be achieved.

33. On 1/28/98, CompUSA issued a press release reporting its 2ndQ F98 results. In

fulfilling their responsibilities as CornpUSA's top officers, as described in detail in 914-18 and

incorporated into this paragraph by reference, defendants Halpin, Skinner, Mondry, Seay, Marshall,

Greenberg, Fountain, Ewert, and Gateh-Priest prepared and reviewed summaries of CompUSA's

quarterly sales results and financial information, knowing and believing that such information would

be analyzed and reported by CompUSA's CEO (Halpin) and CFO (Skinner) in the form of the

Company's quarterly financial statement and press release. Prior to the issuance of that press release,

- 25 -

„ -

each of the Individual Defendants discussed what information would be released to the public

regarding the Company's second quarter sales. Each of the Individual Defendants were provided

with a copy of the draft press release prior to or shortly after its issuance and had the ability and

opportunity to prevent its issuance or cause it to be corrected. While the 1/28/98 press release was

the collective product of each defendant, it quoted defendant Halpin. It stated:

CompUSA Inc. Reports Record Financial Results for the Second Quarter of Fiscal1998

CornpUSA Inc. America's Largest Computer superstore(R) retailer, todayannounced record financial results for the second quarter of fiscal 1998.

* * *

"This was another outstanding quarter for CompUSA punctuated by excellentresults which we achieved while continuing to make significant investments in all ofour businesses,” said James F. Halpin, CompUSA president and chief executiveofficer.


sales performance, defendants Halpin, Skinner, Seay, Mondry, Marshall, Greenberg, Fountain,

Ewell, and Gatch-Priest knew the material, adverse, non-public information about CompUSA's

financial results and then-existing business conditions discussed in ¶44, which were not disclosed,

and they knew or recklessly disregarded that the public statements about CompUSA in the 1/28/98

press release were false or misleading when made. For instance, the Individual Defendants each

knew that CornpUSA's sales growth was deteriorating significantly, in large part due to a decline in

average selling prices of personal computers which, in fact, was significantly worse that CompUSA

had publicly disclosed and that as a result, CompUSA's profit margin, net income and EPS

performance during the second half of F98 would be far worse than CompUSA had been forecasting.

Despite their duty not to sell their CompUSA stock under such circumstances, each of the Individual

Defendants, except Skinner, nonetheless did so.

34. In fulfilling their responsibilities as CompUSA's top officers, as described in detail

in (11j14-18 and incorporated into this paragraph by reference, on 1/28/98, subsequent to the release

of its 2ndQ F98 results, each of the Individual Defendants provided CompUSA's CEO (Halpin) and

CFO (Skinner) with information about CompUSA for inclusion in a script to be read to securities

- 26 -

analysts who followed the Company. Each of the Individual Defendants conferred with the CEO

and/or CFO regarding the content of the subject matter that would be discussed with the analysts.

While not all the Individual Defendants spoke words during the conversations and conferences with

analysts, each, through their participation in the preparation of the conference statements became

speakers. During an analyst conference call — and during follow-up conversations with participants

(including Ciccarelli of Gerard Klauer Mattison, Yarchover of Credit Suisse First Boston, Balter of

DLJ Securities, Emer of UBS Securities and Lawrence of Morgan Keegan) — Halpin and Skinner

disseminated the following information to the market by stating:

• CompUSA's business was very strong and it was achieving strong sales not only ofnewer, below $1,000 PCs, but also continuing strong sales of more expensive PCs whichcarried higher margins.

• CompUSA's financial results were not being harmed by the increase in sales ofcheaper PCs largely because it was continuing to sell substantial numbers of more expensivePCs which carried higher profit margins.

• CompUSA was more insulated from adverse impact on profit margins due toincreased sales of $1,000 and under PCs than other PC retailers because CompUSA'sbusiness was unique in attracting a larger number of sophisticated computer users andupscale customers who purchased more expensive PCs and associated equipment thanunsophisticated users and/or first-time buyers.

• CompUSA's inventories were under tight control and within budgeted and forecastedlevels and thus CompUSA would not have to engage in promotional pricing or price cuttingto move excess inventory which would otherwise have a negative impact on its margins.

• CompUSA's superstore format was doing especially well with strong sales of higherend PCs and inventories under tight control.

• While some computer retailers were finding their profit margins hurt by the upsurgein sale of $1,000 and under PCs, this was not the case with CompUSA and in fact this trendwas healthy for CompUSA's business because it was continuing to sell high-end, moreexpensive PCs while the interest in $1,000 and under PCs was bringing many more shoppersinto its stores leading to excitement, revenue increases and purchases of peripheralequipment.

• As a result of the foregoing CompUSA's business was performing on track and in linewith internally forecasted and budgeted levels; CompUSA expected 3rdQ EPS of $ .42-$.43and 4thQ EPS of $.29-$.31, leading to F98 EPS of approximately $1.30-$1.35.


sales performance, defendants Halpin, Skinner, Gatch-Priest, Mondry, Ewell, Greenberg, Seay,

Fountain and Marshall knew the material, adverse, non-public information about CompUSA's

financial results and then-existing business conditions discussed in '144, which were not disclosed

-27-

and they knew or recklessly disregarded that the public statements about CompUSA made in the

1/28/98 conference call and in follow-up discussions were false or misleading when made. For

instance, the Individual Defendants each knew that CompUSA's sales growth was deteriorating

significantly, in large part due to a decline in average selling prices of personal computers which,

in fact, was significantly worse that CompUSA had publicly disclosed and that as a result,

CompUSA's profit margin, net income and EPS performance during the second half of F98 would

be far worse than CompUSA had been forecasting. Despite their duty not to sell their CompUSA

stock under such circumstances, each of the Individual Defendants, except Skinner, nonetheless did

so.

35. After the issuance of CompUSA's 1/28/98 release and conference call, the positive

information presented by each of the Individual Defendants was reinforced by a statement made by

Halpin which appeared in the Pittsburgh Post-Gazette on 2/1/98. Halpin described the effect that

the industry trend toward lower priced PCs was having on CompUSA as follows:

"We believe it's healthy for our business.

At the time Halpin made this statement, he knew it was misleading in that it contained

misrepresentations and failed to disclose material facts necessary in order to make it not misleading

for the reasons discussed in detail in 144(a)-(h) which is incorporated into this paragraph by

reference.

36. On 1/28/98, Gerard Klauer Mattison issued a report on CompUSA, written by

Ciccarelli, which was based on and repeated information provided him in the 1/28/98 conference call

and in follow-up conversations with Halpin and Skinner. The report forecast F98 and F99 EPS of

$1.35 and $1.70, respectively, for CompUSA, and the following quarterly F98 EPS:

Q1 $ .25AQ2 $ .36AQ 3$ .43Q4 $ .31Year $1.35


• Sales trends continue to track recent history. Corporate sales continue tooutpace retail sales and services continue to be the fastest growing part of thebusiness. For actual CPUs, the company is still experiencing a barbell pattern for

-28-

_

pricing with the strength coming from both the high-end and the sub-$1,000 category,while sales of mid-level machines are relatively softer.

• Gross margin continues to expand. Gross margin equaled 1Q's level at14.7% and up 80 basis points year-over-year. We expect to see continued grossmargin expansion due to the strength CompUSA's high-margin services as wellas a generally less competitive environment (promotional activity has softeneddramatically, as expected, now that the holiday selling season is over).

* * *

INVESTMENT CONCLUSION

In our opinion, CompUSA is an excellent long term investment and offersinvestors a very favorable risk/reward opportunity at current levels. We believe thecompany continues to gain market share at the retail level and increase its penetrationinto the direct channel, while its growing service businesses continue to drive marginexpansion. We further believe that the company will continue to experienceadditional gross margin expansion from a decreasingly competitive environment.

37. On 1/28/98, Credit Suisse First Boston issued a report on CompUSA, written by

Yarchover, which was based on and repeated information provided her in conversations with Halpin

and Skinner. The report forecast F98 and F99 EPS of $1.34 and $1.65, respectively, for CompUSA,

and the following quarterly F98 EPS:

Q1 $ .25AQ2 $ .36AQ3 $ .43Q4 $ .31Year $1.34


The big question on everyone's mind has been settled — CompUSA managedto grow sales and earnings. This quarter's results are particularly impressive in aselling season that was marked by big promotions at the end of the quarter, strongsales of the lower margin $1000 PC's, and significant reinvestments in the business.We think CPU's strong sales growth of 22% and earnings growth of 44% should giveinvestors comfort that the company has found a way to do what few other computerretailers (and especially mass merchants and consumer electronics chains) have beenable to do — make money selling computers.

While competitors continue to scale back their PC efforts, we thinkCompUSA is in an excellent position to continue growing and improving its returnon capital. ... All-in-all, CompUSA's future looks bright.

* * *

Highlights

* * *

- 29 -

Going into the next quarter, we think CPU's inventory is in good shape, andwe do not think that the company has a material amount of clearance-typemerchandise. ..

For the year, we project sales growth of 23% driven by 6.5% comparablestore sales growth and the opening of 32 large format stores and 5 small formatstores. From a product mix standpoint, we expect the sub-$1000 PC's and the veryhigh-end systems to continue strong ....

* * *

The build-to-order CompUSA branded PC appears to be selling well. Aftersome initial challenges, management believes it has a strong business model and aworkable infrastructure.

38. On 1/29/98, DU Securities issued a report on CompUSA, written by Baiter, which

was based on and repeated information provided him in the 1/28/98 conference call and in follow-up

conversations with Halpin and Skinner. The report forecast F98 and F99 EPS of $1.30 and $1.60,

respectively, for CompUSA, and the following quarterly F98 EPS:

Q1 $ .25Q2 $ .36Q3 $ .42Q4 $ .29Year $1.30


In the face of all the concerns of a difficult Christmas, CompUSA put upstrong earnings for its second quarter. ... We continue to believe that CPU is takingthe steps necessary to maintain its position as the leading computer retailer and hasbuilt a reputable service business that will continue to be a major factor in driving thecompany's earnings.

* * *

The company also made considerable investment in its BTO business. Aftercoming out of the gate perhaps too fast, CPU used this quarter to catch theinfrastructure up to the burgeoning demand. It plans to increase its advertising overthe next year to continue to bolster this business. ...

Sub-$1000 computers sales continue to be strong and represent by ourestimates 35-40% of the total PC sales. While this hardware does not carry as highmargins as the higher-end computers, it does invite more first time buyers into thestores and creates excitement. In addition, sales for the Pentium IT picked up as theymoved through the quarter which is an excellent sign heading into 1998. Overall,after what appears now to be an overrated scare in December, the PC industry at theretail level is relatively healthy.

39. On 1/29/98, UBS Securities issued a report on CompUSA, written by Erner, which

was based on and repeated information provided her in the 1/28/98 conference call and in follow-up

- 30 -

conversations with Halpin and Skinner. The report forecast F98 and F99 EPS of $1.35 and $1.75,

respectively, for CompUSA, and the following quarterly F98 EPS:

Q 1$ .25AQ2 $ .36AQ3$ .42EQ4 $ .32EYear $1.35


Earnings growth outpaced sales growth for the 13th consecutive quarter. ...PC sales were strong at the high and low end and average selling prices declined lessthan last quarter....

... Inventory is current with Pentium IIs making up a large part of the high-endinventory.

* * *

Product outlook is exciting. High-end Pentium II PCs have been selling verywell in the last five weeks. We expect sub-$1000 PCs and bundled systems tocontinue to attract new customers.

40. On 1/29/98, Morgan Keegan issued a report on CornpUSA, written by Lawrence,

which was based on and repeated information provided him in the 1/28/98 conference call and in

follow-up conversations with Halpin and Skinner. The report forecast F98 EPS of $1.32 for

CompUSA, and the following quarterly F98 EPS:

Q 1$ .25AQ2 $ .36AQ3$ .42EQ4 $ .30EYear $1.32


Although average selling prices have been coming down margins should notbe affected. Most sub $1,000 units bring in shoppers who tend to be first timebuyers. These same individuals often purchase several hundred dollars of highmargin accessories. CompUSA's superior selection and value added servicecapabilities keep these customers coming back to purchase new software andaccessories. ...

Nineteen new stores have been opened in the first half bringing total storecount to 148.

41. On 2/12/98, Salomon Smith Barney issued a report on CompUSA, written by

McGrath, which was based on and repeated information provided him during the 1/28/98 conference

- 31 -

-

call and in follow-up discussions with Halpin and Skinner. The report forecast F98 and F99 EPS

of $1.33 and $1.65, respectively, for CompUSA, a 28% five-year EPS growth rate and the following

F98 quarterly results:

EPS/1998

Q 1$ .25AQ2 $ .36AQ3$ .43EQ4 $ .29EYear $1.33E


Built-to-suit business is still in early stages; the company will spend more tomarket private-label products in the second half of fiscal 1998. Otherwise, corporateis still stronger than retail, and services remains the fastest-growing segment.Hardware product pricing is down, but significantly less so than for the industry,overall. Sub-$1,000 PC sales are good, and so is consumer upgrade business.

42. On 2/24/98, Prudential Securities issued a report on CompUSA, written by Katica.

As this was Prudential's first report on CompUSA, this report was written only after Katica had

extensive detailed discussions with Halpin and Skinner and was based on and repeated infoimation

provided him by them during the 1/28198 conference call and in other conversations. The report

forecast F98 and F99 EPS of $1.32 and $1.65, respectively, for CompUSA, a 20%-25% five-year

growth rate and the following F98 quarterly results:

EPS/1998

Q1 $ .25EQ2 $ .36EQ3$ .42EQ4 $ .30EYear $1.32E

The report designated CompUSA as Prudential's "Single Best Idea" and stated:

Multi-Channel Strategy Creates High Productivity And Return OnInvestment. CompUSA has become the largest and most highly profitable dedicatedpersonal computer retailer by expanding its target market beyond the traditional retailstore. Today, retail represents about 60% of total sales while non-retail markets(corporate, government and education), training, technical service, and mail-orderaccount for about 40% of sales. This combination allows CompUSA to generateimpressive sales per foot of $1,400 and an unleveraged return on equity of 27% forthe last twelve months.

Industry Expansion And Higher Non-Retail Sales Driving Earnings Growth.We expect total sales and earnings to grow 20%-25% annually over the next five

-32-

_

. ,

years, fueled by ongoing store expansion and 5%-6% increases in same store sales...

Demand For Personal Computers And Related Products Remains Strong.

43. During 2/98, CompUSA stock moved higher, reaching $35-1/8 on 2/27/98 and its

Class Period high of $35-3/8 on 3/2/98, the next trading day. During 2/2/98-2/23/98 — just 16 trading

days — the Individual Defendants, CompUSA's top executives, sold 564,790 shares of CompUSA

stock at as high as $33.15 per share pocketing $17.6 million in illegal insider-trading proceeds.

44. Each of the positive statements about CompUSA's business during the Class Period

made between 1/28/98-2/24/98, as set forth in T533-42, was materially false and misleading when

issued, and failed to disclose, inter alia, the following adverse information which was then known

only to each of the Individual Defendants who had access to and opportunity to review the internal

CompUSA data described in 11115-17:

(a) CompUSA's revenue growth was slowing dramatically due to softening

demand for PC products generally combined with an increasing percentage of its sales being

composed of much lower priced and therefore much lower margin PC products;

(b) Due to increasing sales of much lower priced PC products, including under

$1,000 PCs, Comp-USA's profit margins were below internally forecasted or budgeted levels, a

negative trend defendants knew was accelerating and would continue for the foreseeable future;

(e) The increasing popularity and sales of under $1,000 PCs was not a healthy

development for CompUSA's business, but in fact a negative development which was adversely

affecting CompUSA's revenue growth, profitability and EPS due to the much lower profit margins

on the sale of these much less expensive products;

(d) CompUSA's sales of cheap, under $1,000 PC units was accelerating at the

expense of sales of its more expensive and much more profitable PCs which was having an adverse

impact on CompUSA's business, revenue growth, profitability and EPS;

(e) CompUSA's business was performing with revenues, net income and EPS

below internally budgeted or forecasted levels, a negative trend and condition defendants knew was

accelerating and would continue for the next several months;

- 33 -

,

(f) CompUSA had accumulated excessive levels of slow-moving PC products

and accessory items that it would have to sell at highly promotional, i.e., discounted, prices which

would hurt its profit margins in the second half of F98;

(g) CompUSA's inventories were more heavily weighted with higher end Pentium

II products, which were not selling nearly as well as the lower end sub-$1000 PCs, leading to an

imbalance between the Company's inventory and market demand, which would lead to margin

reductions in the future as the Company had to engage in price cutting to move its inventory; and

(h) As a result of the foregoing negative factors and conditions impacting

CompUSA's business, the Individual Defendants each knew or recklessly disregarded that the

forecasts being made by and on behalf of CompUSA for significantly increased revenue, net income

and EPS during the second half of F98 were false and misleading when made as they could not and

would not be achieved.

45. On 3/4/98, CompUSA stock traded as high as $33-7/16. On 3/5/98, just eight trading

days after CompUSA's insiders had completed their insider-selling spree, CompUSA stock was twice

halted from trading and ultimately plunged to $26 per share on volume of over 9 million shares (the

largest one-day volume in CompUSA's history as a public company up to that date) as it leaked into

the market that CompUSA was about to make a negative announcement about its 3rdQ F98 results.

After the close, CompUSA revealed that it expected lower 3rdQ F98 sales than earlier forecast.

46. Then on 4/1/98, CompUSA revealed that its 3rdQ F98 sales fell from the prior

quarter, due in part to a 6% decline in sales per superstore, which would lead to a lower than

expected 3rdQ F98 EPS. CompUSA revealed that gross margins would be approximately 14.1%,

lower than in any quarter in the past year. CompUSA also indicated that these adverse conditions

would continue during the 4thQ F98 resulting in lower margins and EPS at least one-third lower than

earlier forecast for the 3rdQ and 4thQ of F98. CompUSA stock plunged from $26-7/16 on 3/31/98

to $20-1/2 on 4/1/98 on volume of 10.1 million shares — the largest one-day volume in CompUSA's

history as a public company.

47. On 4/29/98, the Company officially announced its third quarter results, confirming

its prior announcement on 4/1/98 and indicating that net income fell 22% from the same period of

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fiscal 1997. Despite defendants' representations during the Class Period that the industry's trend

toward lower priced PCs was "healthy" for CompUSA's business, they now revealed that because

more of the computers CompUSA sold were models costing less than $1,000, profits sank to $25.4

million ($0.27 per share) from $32.7 million ($0.35 per share). Furthermore, although the Company

previously represented that comparable same-store sales would be flat, it now stated that the

comparable same-store sales would likely be negative based on continued weak sales. The Company

also revealed that business conditions would remain weak in the 4thQ F98. CompUSA's stock fell

to $17-3/16. Subsequent to the end of the Class Period, CompUSA's business has continued to

deteriorate. On 8/12/98, the Company reported a net loss for the 4thQ F98 of $51.4 million, or $0.57

per share, compared with net income of $22.9 million or $0.24 per share, for the same period of

fiscal 1997. A non-recurring amortization charge related to the Company's plan to implement a new

information technology strategy was included in the net loss for that quarter. Excluding that charge,

the net loss for the fourth quarter was $17.1 million, or $0.19 per share. Once again, in 8/99,

CompUSA posted a net loss for the 4thQ F99 of $64.5 million, or $.70 per share, which reportedly

reflected a restructuring that called for the elimination of direct-sales organizations in each

CompUSA store, and the consequent loss of 2,300 jobs in the Company's commercial sales unit.

INSIDER SELLING

48. While CompUSA's top insiders were issuing favorable statements about CompUSA,

the Individual Defendants sold 564,790 shares of CompUSA stock, for more than $17.6 million

41% of their collective holdings of CompUSA stock— to personally profit from the artificial inflation

in CompU SA's stock price which their fraudulent scheme had created. Notwithstanding their access

to confidential information as a result of their status as directors, officers and/or insiders of the

Company, and their corresponding duty to disclose adverse material facts before trading in

CompUSA stock, the Individual Defendants sold significant amounts of CompUSA shares at

artificially inflated prices in order to profit from the fraud, and did so while in possession of material

non-public information. Defendants' insider selling during the Class Period is detailed below:

% OF

PRICE SHARESDATE SHARES PER PROCEEDS OWNED OPTION

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_

n -

T - •

. .

NAME SOLD SOLD SHARE FROM SALE SOLD SHARES PRICE Ewert 02/06/98 6,700 $31.91 $ 213,797

02/09/98 3,300 832.00 $ 105,600

02/18/98 5,000 832.00 $ 160,000

02/19/98 5 000 $32.00 $ 160,000

20 000 8 639,397 21%

Fountain 01/28/98 11,104 $ 3.19

02/02/98 73 830.68 $ 2,240

02/02/98 21 050 831.00 $ 652,550

21 123 $ 654,790 33% 11,104

Gatch- 02/19/98 8,484 $32.00 $ 271,488Priest 02/26/98 1,723 $ 8.84

02/26/98 4,000 $ 3.19

02/26/98 1,880 $ 6.19

02/26/98 881 $20.50

8 484 $ 271,488 55% 8 484

Greenberg 02/06/98 16 546 $32.00 $ 529,47 79%

Halpin 02/01/98 120,000 $ 3.19

02/04/98 160,000 $ 4.91

02/04/98 280,000 $31.00 8 8,680,000

02/05/98 54,500 $31.25 $ 1,703,125

02/05/98 25,000 831.00 $ 775,000

02/05/98 500 831.31 $ 15,655

360 000 811,173,780 56% 280,000

Marshall 02/17/98 2,668 $ 4.91

02/17/98 28,832 8 3.19

02/17/98 2,666 8 8.84

02/23/98 34,166 $33.15 81,132,603 91%

34 166 $1,132,603 34,166

Mondry 02/04/98 10,000 830.63 $ 306,300

02/09/98 20,000 $31.00 $ 620,000

02/09/98 10,000 $31.63 $ 316,300

02/09/98 10,000 831.56 $ 315,600

02/10/98 15,000 831.50 $ 472,500

02/11/98 35 000 $31.50 81,102,500

100,000 83,133,200 20%

Seay 02/03/98 1,335 84.03

02/03/98 1,803 83.19

02/03/98 1,333 88.82

02/21/98 4 471 $ 141,418

4A2]. 831.63 $ 141,418 68% 4A21

TOTALS: 564.790 817,676,148

49. Each Individual Defendant who exercised options to purchase CompUSA stock

during the Class Period sold a majority of the CompUSA stock acquired by option exercise. During

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_

2/2/98-2123/98 — just 16 trading days — the top CompUSA executives named as defendants sold

564,790 shares of CompUSA stock at as high as $33.15 per share pocketing $17.6 million in illegal

insider-trading proceeds. On 3/4/98, CompUSA traded as high as $33-7/16. On 3/5/98, just eight

trading days after CompUSA's insiders had completed their insider-selling spree, CompUSA

stock was twice halted from trading and ultimately plunged to $26 on volume of over 9 million

shares (the largest one-day volume in CompUSA's history as a public company up to that point) as

it leaked into the market that CompUSA was about to make a negative announcement about its 3rdQ

F98 results. After the close, CompUSA revealed that it expected much lower 3rdQ F98 sales than

earlier forecast.

50. Defendants insider selling during the Class Period is summarized below:

% of Shares

Shares Actually OwnedDefendants Sold Proceeds Sold

Ewert 20,000 $ 639,397 21%Fountain 21,123 $ 654,790 33%Gatch-Priest 8,484 $ 271,488 55%Greenberg 16,546 $ 529,472 79%Halpin 360,000 $11,173,780 56%Marshall 34,166 $ 1,132,603 91%Mondry 100,000 $ 3,133,200 20%Seay 4,471 $ 141,418 68%

TOTALS: 564,790 $17,676,148 41%

51. During 2/98, while CompUSA's top insiders were unloading 564,790 shares of their

CompUSA stock at prices as high as $33.15, they were using millions of dollars of CompUSA's own

funds to repurchase shares of CompUSA stock on the open market to help artificially inflate the

stock while they were unloading their own shares, thus boosting their illegal insider-trading profits.

It was manipulative and deceptive for CompUSA's insiders to do this as they were engaging in

conduct as fiduciaries for CompUSA which was inconsistent with their conduct on their own behalf

and for their own account, i.e. , they were selling their own CompUSA stock knowing the stock was

artificially inflated and would soon collapse in price when they were forced to reveal the

deteriorating condition of CompUSA's business and yet were causing CompUSA to purchase

thousands of shares of its own stock on the open market which they knew would result in CornpUSA

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suffering a substantial loss on those purchases, but which they caused CompUSA to do because those

purchases helped to keep CompUSA stock artificially inflated in the open market while they

unloaded their own shares. Thus, while the CompUSA insiders named as defendants in this action

were unloading 564,790 shares of their CompUSA stock at as high as $33.15 per share, pocketing

over $17.6 million in illegal insider-trading profits, they caused CompUSA to purchase over 150,000

shares of its common stock on the open market, causing CompUSA to suffer millions in losses on

those stock repurchases, but helping themselves pocket millions in insider-trading profits.

FIRST CLAIM FOR RELIEF

For Violation Of Section 10(b) Of The1934 Act And Rule 10b-5 Against All Defendants

52. Plaintiffs incorporate 111111-51 by reference.

53. Each of the defendants: (a) knew or recklessly disregarded the material, adverse, non-

public information about CompUSA's financial results and then-existing business conditions, which

was not disclosed; and (b) participated in drafting, reviewing, and/or approving the misleading

statements, releases, reports, and other public representations of and about CompUSA.

54. During the Class Period, defendants disseminated or approved the false statements

specified above, which they knew or recklessly disregarded were misleading in that they contained

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.

55. Defendants violated §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 plaintiffs and others similarly situated in connection with their purchases of

CompUSA common stock and publicly traded options during the Class Period.

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, .

56. Plaintiffs and the Class have suffered damages in that, in reliance on the integrity of

the market, they paid artificially inflated prices for CompUSA stock. Plaintiffs and the Class would

not have purchased CompUSA stock 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.

SECOND CLAIM FOR RELIEF

For Violation Of Section 20(a) Of The 1934 ActAgainst Defendants Halpin and CompUSA

57. Plaintiffs incorporate Irlfl -56 by reference.

58. Defendant Halpin acted as a controlling person of CompUSA within the meaning of

§20(a) of the 1934 Act. By reason of his positions as President, Chief Executive Officer and a

director of CompUSA and general partner in CompUSA l s largest partner, he had the power and

authority to cause CompUSA to engage in the wrongful conduct complained of herein. CompUSA

controlled each of the Individual Defendants and all of its employees.

59. By reason of such wrongful conduct, Halpin and CompUSA are liable pursuant to

§20(a) of the 1934 Act. As a direct and proximate result of these defendants' wrongful conduct,

plaintiffs and the other members of the Class suffered damages in connection with their purchases

of CompUSA common stock and publicly traded options during the Class Period.

CLASS ACTION ALLEGATIONS

60. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of all persons who purchased CompUSA stock and options (the

"Class") on the open market during the Class Period. Excluded from the Class are defendants herein,

members of their immediate families, any entity in which a defendant has a controlling interest, and

the legal representatives, heirs, successors-in-interest, or assigns of any excluded party.

61. The members of the Class are so numerous that joinder of all members is

impracticable. The disposition of their claims in a class action will provide substantial benefits to

the parties and the Court. During the Class Period, CompUSA had more than 25 million shares of

stock outstanding as well as publicly traded options, owned by hundreds if not thousands of persons.

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62. There is a well-defined community of interest in the questions of law and fact

involved in this case. The questions of law and fact common to the members of the Class which

predominate over questions which may affect individual Class members include the following:

(a) Whether the federal securities laws were violated by defendants;

(b) Whether defendants omitted and/or misrepresented material facts;

(c) Whether defendants statements omitted material facts necessary to make the

statements made, in light of the circumstances under which they were made, not misleading;

(d) Whether defendants knew or had reasonable grounds to believe that their

statements were false and misleading;

(e) Whether the price of CompUSA stock was artificially inflated during the Class

Period; and

(f) The extent of damage sustained by Class members and the appropriate

measure of damages.

63. Plaintiffs' claims are typical of those of the Class because plaintiffs and the Class

sustained damages from defendants' wrongful conduct.

64. Plaintiffs will adequately protect the interests of the Class and have retained counsel

who are experienced in class action securities litigation. Plaintiffs have no interests which conflict

with those of the Class.

65. A class action is superior to other available methods for the fair and efficient

adjudication of this controversy.

66. The prosecution of separate actions by individual Class members would create a risk

of inconsistent and varying adjudications.

STATUTORY SAFE HARBOR

67. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false forward-looking statements pleaded in this

Complaint because the statutory safe harbor does not apply to CompUSA's financial statements and

because none of the particular oral forward-looking statements pleaded herein were specifically

identified as "forward-looking statements" when made. None of the written forward-looking

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_

statements made were specifically identified as forward-looking statements and none o f the false and

misleading statements contained in the press releases or news article are forward-looking projections

or forecasts, but rather statements of past financial data or present-tense business conditions. Nor

was it stated as to either type of forward-looking statement that actual results "could differ materially

from those projected." Nor did "meaningful cautionary statements" identifying important factors that

could cause actual results to differ materially from those in the forward-looking statements

accompany those forward-looking statements. In any event, each of the forward-looking statements

alleged herein was authorized by an executive officer of CompUSA and was actually known by each

of the Individual Defendants to be false when made.

BASIS OF ALLEGATIONS

68. Because the PSLRA, §21D(c) of the 1934 Act [15 U.S.C. §78u-4(c)], requires

complaints to be pleaded in conformance with Federal Rule of Civil Procedure 11, plaintiffs have

alleged the foregoing based upon the investigation of their counsel, which included a review of

CompUSA's SEC filings, securities analysts reports and advisories about the Company, press

releases issued by the Company, media reports about the Company, private investigations and

discussions with consultants, and, pursuant to Rule 11(b)(3), believe that after reasonable

opportunity for discovery, substantial evidentiary support will likely exist for the allegations set forth

at 72, 25-26, 32-35 and 44.

PRAYER FOR RELIEF

WHEREFORE, plaintiffs pray for judgment as follows:

1. Declaring this action to be a proper class action pursuant to Rule 23(a) and (b)(3) of

the Federal Rules of Civil Procedure on behalf of the Class defined herein;

2. Awarding plaintiffs and the members of the Class compensatory damages, including

rescissory damages, where applicable;

3. Awarding plaintiffs and the members of the Class pre-judgment and post-judgment

interest, as well as reasonable attorneys' fees, expert witness fees, and other costs;

4. Awarding extraordinary, equitable, and/or injunctive relief as permitted by law,

equity, and federal statutory provisions sued hereunder, including rescission, the imposition of a•

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constructive trust upon the proceeds of defendants insider trading, pursuant to Rules 64, 65, and any

appropriate state law remedies; and

5. Awarding such other relief as this Court may deem just and proper.

JURY DEMAND

Plaintiffs demand a trial by jury.

DATED this 20th day of September, 1999.

STANLEY, MANDEL & IOLA, L.L.P.MARC R. STANLEYTexas State Bar No. 19046500ROGER L. MANDELTexas State Bar No. 128.91750

4141 albY MARC S. ST :7111111.F

3100 Monticello Avenue, Suite 750Dallas, TX 75205214-443-4300214-443-0358 (Fax)

LIAISON COUNSEL FOR PLAINTIFFS

MILBERG WEISS BERSHADHYNES & LERACH LLP

WILLIAM S. LERACHCalifornia Bar No. 68581KIRK B. HULETTCalifornia Bar No. 110726KATHERINE L. BLANCKCalifornia Bar No. 149110600 West Broadway, Suite 1800San Diego, CA 92101619-231-1058619-231-7423 (Fax)

MILBERG WEISS BERSHADHYNES & LERACH LLP

KAREN T. ROGERSCalifornia Bar No. 185465355 South Grand Avenue, Suite 4170Los Angeles, CA 90071213-617-9007213-617-9185 (Fax)

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SCHIFFRIN & BARROWAY, LLPRICHARD S. SCHIFFRINPennsylvania Bar No. 61872ANDREW L. BARROWAYPennsylvania Bar No. 64477MARC A. TOPAZPennsylvania Bar No. 63782Three Bala Plaza East, Suite 400Bala Cynwyd, PA 19004610-667-7706610-667-7056 (Fax)

CO-LEAD COUNSEL FOR PLAINTIFFS

NADOCSAP1463.11Pleading \Second Amended Petition.vvpd

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r

CERTIFICATE OF SERVICE

The undersigned hereby certifies that true and correct copies of the foregoing were served

on the 20 th day of September, 1999, on the following counsel of record:

El via certified mail, returnMr. Thomas R. McCormickreceipt requested

Mr. William L. Banowskyvia fax # 214-969-1751

THOMPSON & KNIGHT, P.C. 0 via first-class, U.S. mail1700 Pacific Avenue, Ste. 3300 0 via overnight deliveryDallas, TX 75201Z via hand delivery

o via certified mail, returnMr. Larry R. Veselkareceipt requested

Mr. Lee L. Kaplan 0 via fax # 713-221-2320SMYSER, KAPLAN & VE5E -LICA, L.L.P.

via first-dass, U.S. mail700 Louisiana, Ste. 2300 0 via overnight deliveryHouston, TX 77002O via hand delivery

D via certified mail, returnMr. Harvey Greenfield receipt requestedLAW FIRM OF HARVEY GR.EENFIELD 0 via fax # 212-679-982010 East 40th Street, 44th Floor 10 via first-class, U.S mailNew York, NY 10016 0 via overnight delivery

0 via hand delivery

Aid/ kiALL-41/ • „ •

IVIARC R. TANLEY

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Documents

COURT ORIGINAL Ii OF TEXAS - Class actionsecurities.stanford.edu/filings-documents/1038/CI98_01/1999920_r0… · Class Period: 1 14 - • r t, $10 • $30,o $8 9:1 E " $20 23 (3,