In Re Cinar Corporation Securities Litigation 1:00-CV-1086 …securities.stanford.edu/.../2000721_r01c_100CV1086.pdf · 2007-09-24 · IN RE CINAR CORPORATION Master File No. CV 00

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

IN RE CINAR CORPORATION Master File No. CV 00 1086

SECURITIES LITIGATION

This Document Relates To:

ALL ACTIONS

CONSOLIDATED AND AMENDED

CLASS ACTION COMPLAINT==

Plaintiffs, individually and on behalf of all other persons

similarly situated, by their undersigned attorneys, for their

consolidated and amended class action complaint, allege upon

personal knowledge as to themselves and their own acts, and upon

information and belief as to all other matters, based upon, inter

alia , the investigation made by and through their attorneys as

detailed in Paragraph 13.

NATURE OF THE ACTION

1. Plaintiffs bring this lawsuit as a class action on

behalf of themselves and all purchasers of limited voting shares

("Class B shares")"' of CINAR Corporation ("CINAR" or the

"Company") through the NASDAQ National Market ("NASDAQ") during

i/ CINAR's share capital consists of Variable Multiple

Voting Shares and Limited Voting Shares. Only Limited Voting

Shares were traded on the NASDAQ. The 1997 Offering (as defined

below) was for Subordinate Voting Shares which were redesignated as

Limited Voting Shares in 1998. The 1999 Offering (as de

below) also only offered Limited Voting Shares.

1553 / CMP / 00043823.WPD v 1 tr

the period April 8, 1997 through and including March 10, 2000

(the "Class Period"), and on behalf of sub-classes consisting of:

a) all purchasers of CINAR stock issued in connection with the

secondary public offering pursuant to the Registration Statement

dated March 3, 1999 (The "1999 Registration Statement") and

through the U.S./International Underwriters as defined therein

(the "1999 Offering"); and b) all purchasers of CINAR stock

issued in connection with the secondary public offering pursuant

to the Registration Statement dated September 23, 1997 (The "1997

Registration Statement") and through the U.S./International

Underwriters as defined therein (the "1997 Offering"); to recover

damages caused by defendants' violations of the federal

securities laws.

2. During the Class Period, CINAR and the Executive

Defendants, as defined below, caused CINAR to disseminate to the

investing public materially false and misleading financial

statements, press releases, and public filings concerning CINAR's

publicly reported revenues, earnings, and assets. Moreover, the

defendants issued materially false and misleading registration

statements in connection with the 1999 Offering of 7 million

Class B shares and the 1997 Offering of 3.1 million Class B

shares to the public, resulting in proceeds for CINAR totaling

1553 / CMP / 00043523 WPD v 1 2

proximately $241 million.=

3. During the Class Period, with respect to claims brought

under the Securities and Exchange Act of 1934, CINAR and the

Executive Defendants engaged in a common course of conduct that

operated as a fraud on the integrity of the market for shares of

CINAR stock by intentionally and/or recklessly: i) overstating

CINAR's revenues and earnings which had been, in large part,

fraudulently obtained through tax credits; ii) failing to

disclose the improper and unauthorized investment of $122 million

of Company assets ; and iii) :ailing to record related party

transactions properly in accordance with U.S. and Canadian

Generally Accepted Accountinc Principles ("GAAP"). As a result,

all of the Company's 1997, 1:98 and 1999 financial reports and

public filings contained numorous material misstatements and

omissions. Indeed, the Company has announced that it will be

restating its fiscal year 197 and 1998 financial statements and

has yet to file its financial results for fiscal year 1999.

4. As a direct result of the defendants' continuing series

of false representations and material omissions, the market price

of CINAR Class B stock surged during the Class Period to a high

of $30.25 per share.

5. The false and misleading nature of defendants'

?/ All dollar amounts in the complaint are in U.S. Dollarsunless otherwise indicated.

1553 / CMP / 00043823 . WPD vl 3

statements was concealed from the investing public until October

15, 1999, when the truth slowly began to emerge. On that day,

press reports began to circulate in the market that CINAR was

being investigated by Montreal police in connection with tax

credit fraud. A report published on Bloomberg on October 15,

1999, stated, in pertinent part, as follows:

The CBC [Canadian Broadcasting Corp.] reported that

Canadians were asked to sign screenplays that were

actually written by U.S. authors to secure tax breaks

that were intended for television productions that were

written by Canadians.

Indeed, it was later di.;closed that one of the Canadians used as

a "front" for scripts w_is Helen Charest, sister to Defendant

Charest, who had signed several scripts using a pseudonym and had

collected nearly $1 million (Cdn.) in royalties. In response to

these reports, CINAR an:iounced that its Audit Committee would be

conducting an internal -_nvestigation into the charges.

6. Immediately f,.)llowing the October 15, 1999 report, the

price of the Company's Class B stock plunged from more than

$28.00 per share on October 14, 1999 to $22.125 per share on

October 15, 1999 and continued to decline over the next few days.

7. Seeking to minimize the damage, CINAR and the Executive

Defendants made public statements in which they falsely stated

that any tax liability would be limited and immaterial. In

response to defendants' materially false and misleading

reassurances, the price of CINAR stock rebounded, climbing from

1553 / CMP / 00043823 . WPD vi 4

$15.9375 per share on October 21, 1999 to $27.3875 per share on

February 8, 2000.

8. However, in a February 18, 2000 press release issued

over Business Wire , CINAR made another partial disclosure that

the financial and accounting impacts of the reviews of the

Company's records related to the tax practices allegations were

"expected to be greater than initially anticipated." Market

reaction to this announcement was immediate. The price of CINAR

Class B stock declined to $17.9375 per share from $24.625, a one-

day decrease of 27% and a decrease of over 40% from the Class

Period high of $30.25 per share reached on September 30, 1999.

Once again, however, this announcement only disclosed part of the

truth-

9. After the close of trading on March 6, 2000, the

Company issued a press release over Business Wire further

disclosing that:

[t]he Company has determined that approximately US $122million of its funds have been invested without theapproval of its Board of Directors. About US$86million of these investments have been pledged tosecure other investments. The Company's efforts todate have not permitted it to determine with claritythe nature of those other investments or their value.The Company is endeavoring to complete with the utmosturgency a special review of this matter to determineits legal position, and to obtain possession of suchfunds.

Hasanain Panju has been terminated as an officer

and employee of the Company. He was formerly the

Senior Executive Vice-President.

1553 / CMP / 00043823 .WPD 0 5

The reviews by the Audit Committee and the Company,which have been broadened in scope, now suggest thatwhile the Company will make every effort to do so, theCompany may not be able to release its financialstatements for the 1999 financial year within theprescribed statuary delays.

10. In the wake of this shocking disclosure, husband and

wife team Ronald Weinberg and Micheline Charest, founders of the

Company, resigned as Co-Chief Executive officers.

11. The response to these stunning disclosures was swift

and devastating. CINAR's stock price plummeted $12.62 to --,lose

at $5.75 per share on March 7, 2000, an amaz_.ng plunge of -learly

70% in one day, and 80% f==-om the Class Period high. Tradieg in

CINAR ClaEs B stock has boon halted on the Ce:.nadian and American

stock excranges since March 8, 2000.

12. On March 10, 20(;0, CINAR announced it would be

restating its financial results for fiscal yE:ars 1997 and 1998

and the first three quarters of fiscal year -999 due to is:eues

related tc improperly obtee.ined tax incentive., nondisclosure of

related party transactions and unauthorized investment

transactions. To date, C1NAR had not filed its annual financial

statement for the year ended November 30, 1999.

13. Class members who purchased shares of CINAR Class B

stock throughout the Class Period have suffered and continue to

suffer substantial injury from the fraud perpetrated by the

Company's most senior executive officers.

1553 / CMP / 00043823.WPD % 1 6

BASIS OF ALLEGATIONS

14. Plaintiffs' allegations set forth herein are based upon

their thorough investigation, conducted by and through their

attorneys, of all reasonably available sources of information,

including, but not limited to, the review of filings by CINAR

with the United States Securities and Exchange Commission

("SEC"), the Canadian securities regulatory authorities (on

"SEDAR")3I, as well as regulatory filings and reports, securities

analyst reports about the Company, press releases and other

public statements issued by the Company during the Class Period,

and media reports about the Company, including articles in

Canadian newspapers, and consultation with experts, including

forensic accountants. Plaintiffs believe that substantial

additional evidentiary support will exist for the allegations set

forth herein after a reasonable opportunity for discovery.

JURISDICTION AND VENUE

15. The claims alleged herein arise under Sections 10(b)

and 20 of the Securities Exchange Act of 1934 (the "Exchange

Act"), 15 U.S.C. §§ 78j(b) and 78t, and Rule 10b-5, 17 C.F.R.

3` Filings with Canadian securities regulatory authorities areelectronically filed on the System for Electronic Document Analysisand Retrieval (SEDAR). All references to Canadian filings by CINARwill hereinafter be referred to as SEDAR filings.

1553 / CMP / 00043823 .WPD vi 7

§ 240.10b-5 promulgated thereunder; and Sections 11 and 15 of the

Securities Act of 1933 (the "Securities Act"), 15 U.S.C. §§ 77k

and 77o.

16. The jurisdiction of this Court is based on Section 27

of the Exchange Act, 15 U.S.C. § 78aa; Section 22 of the

Securities Act, 15 U.S.C. § 77v; and 28 U.S.C. § 1331 (federal

question jurisdiction).

17. Venue is proper in this District pursuant to Section 27

of the Exchange Act, Section 22 of the Securities Act, and 28

U.S.C. 1391(b) and (c). Although CINAR is a Canadian company,

its Class B stock tradES on the NASDAQ National Market, which the

Company represented to be its "principal trading market." CINAR

also reported that almost half of the Company's fiscal year 1998

revenues were generates. in the United States.

18. In addition, a substantial majority of the shares sold

in the 1997 and 1999 Offerings (90% and 77% respectively) were

sold, by agreement, to U.S. and other non-Canadian citizens.

Under the terms of the Underwriting Agreement in the 1997

Offering, the U.S./International Underwriters agreed to sell 2.7

million of the total 3 million shares being offered and were

prohibited from selling those shares in the Provinces of Montreal

or Quebec or to Canadian persons. Similarly, according to the

terms of the Underwriting Agreement in the 1999 Offering, the

U.S./International Underwriters agreed to sell more than 5.4

1553 / CMP / 00043823.WPD v1 8

million of the total 7 million shares being offered and were

prohibited from selling those shares in Canada or to Canadian

persons.

19. In connection with the acts alleged in this complaint,

defendants, directly or indirectly, used the means and

instrumentalities of interstate commerce, including, but not

limited to, the mails, interstate telephone communications and

the facilities of the national securities exchanges and markets.

PARTIES

20. Lead Plaintiff The Kaufmann Fund purchased CINAR Class

B stock during the Class Period and pursuant to the 1997 and 1999

Registrat:i.on Statements as set forth in the schedule attached

hereto as Exhibit 1 and was damaged thereby. The Kaufmann Fund

was duly appointed to serve as Lead Plaintiff pursuant to Order

of this Court dated May 30, 2000.="

21. Plaintiff Richard A. Melanson purchased 200 shares of

CINAR stock on the open market through NASDAQ on July 7, 1999, at

$25 per share , a price which was artificially inflated by

defendants' misrepresentations.

22. Plaintiffs Chai Ha Tsung and Li Min Xia purchased 200

-" The Certification of The Kauffman Fund was previouslyfiled with the Court in connection with its motion for appointmentas lead plaintiff. The certifications of the other plaintiffs areon file with their originally filed complaints.

1553 / CMP / 00043823.WPD v1 9

shares of CINAR stock on the open market through NASDAQ on March

7, 2000 at $5.6875 per share, a price which was artificially

inflated by defendants' misrepresentations.

23. Plaintiff James Mobashery purchased 1000 shares of

CINAR stock on the open market through NASDAQ on March 8, 2000 at

$7.375 per share, a price which was artificially inflated by


24. Plaintiff Muhammed J. Kahn purchased 500 shares of

CINAR stock on the open market through NASDAQ on March 6, 2000 at

$7.00 per share, a price which was artificially inflated by


25. Defendant CINAR is a company organized under the laws

of the province of Quebec, Canada, and maintains its principal

executive offices at 1055 Rene-Levesque Blvd. East, Montreal,

Quebec. CINAR purports to be an integrated entertainment and

education company that develops, produces, markets and

distributes non-violent programming and supplemental education

products for children, families and educators worldwide. CINAR's

Entertainment Division is a supplier of live action and animated

children's and family programming, including the Emmy Award

winning ARTHURTM, that it markets and distributes to broadcast,

cable and other media outlets. As of June 22, 2000, CINAR had

over 33.1 million shares of Class B stock outstanding. During

the Class Period, the Company's Class B stock traded on the

1553 / CMP / 00043823_WPD vl 10

NASDAQ market, which is an open, efficient and well-developed

market, until trading was halted indefinitely on March 8, 2000.

CINAR's stock also traded on the Toronto Stock Exchange until

March 8, 2000 and on the Montreal Exchange until that exchange's

restructuring on December 3, 1999.

26. Defendant Ronald A. Weinberg ("Weinberg") was, at all

relevant times hereto, CINAR's Director, President and Co-Chief

Executive officer and served on the Company's Management

Committee. Defendant Weinberg resigned his executive positions

on or about March 6, 2000, but continues to serve on CINAR's

Board of Directors.

27. Defendant Micheline Charest ("Charest") was, at all

relevant times hereto, CINAR's Chairman of the Board of Directors

and Co-Chief Executive Officer and served on the Company's

Management Committee. Defendant Charest resigned from her

executive positions on or about March 6, 2000, but continues to

serve on CINAR's Board of Directors.

28. Defendant Hasanain Panju ("Panju"), at all relevant

times hereto, was the Company's Senior Executive Vice-President,

Director, and Chief Financial officer and served on the Company's

Management Committee. Panju was also listed on CINAR's press

releases as referenced herein as the Company's contact person.

Defendant Panju's employment with CINAR was terminated on March

6, 2000.

1553 / CMP / 00043823.WPD v]

29. Defendants Weinberg, Charest and Panju are collectively

referred to herein as the "Executive Defendants."

30. Defendant Marie-Josee Corbeil ("Corbeil") is, and was

at all relevant times hereto, the Company's Vice-President and

General Counsel and a Director and served on the Company's

Management Committee.

31. Defendant Ernst & Young ("E&Y") is a firm of chartered

accountants located at 1 Place Ville Marie, Bureau 2400,

Montreal Quebec,H3B 3M9 Canada. E&Y is also a member of Ernst &

Young International, Ltd., headquartered in New York, which is a

worldwide organization that provides integrated assurance &

advisory, corporate finance and tax services. E&Y has acted as

CINAR's outside auditors since 1992, audited CINAR's financial

statements for the fiscal years ended November 30, 1997 and

November 30, 1998 and rendered unqualified opinions on the 1997

and 1998 year end financial statements. E&Y's unqualified audit

opinions on CINAR's 1997 and 1999 financial statements appeared

in the 1999 Registration Statement.

32. Each Executive Defendant is liable as a participant in

a fraudulent scheme and course of business that operated as a

fraud or deceit on purchasers of CINAR Class B stock, by

disseminating materially false and misleading statements and/or

concealing materially adverse facts. The scheme: (i) deceived

the investing public regarding CINAR's business, growth,

operations, and the intrinsic value of CINAR Class B stock; and

1553 / CMP / 00043823.WPD v1 12

(ii) caused plaintiffs and other members of the Class to purchase

CINAR Class B stock at artificially inflated prices.

CLASS ACTION ALLEGATIONS

33. Plaintiffs bring this lawsuit pursuant to Rule 23(a)

and (b)(3) of the Federal Rules of Civil Procedure, on behalf of

themselves and a class (the "Class") of all persons who purchased

or otherwise acquired shares of CINAR Class B stock on the open

market through NASDAQ from April 8, 1997 through March 10, 2000,

inclusive (the "Class Period") and on behalf of Sub-Classes

consisting of:

a. All persons who purchased CCNAR stock i:sued in

the 1997 Offering pursuant :o the 1997

Registration Statement and through the

U.S./International Underwri:ers as defiled therein

(the "1997 Offering Sub-Cla3s"); and

b. All persons who purchased CCNAR stock issued in

the 1999 Offering pursuant =o the 1999

Registration Statement and through the

U.S./International Underwriters as defined therein

(the "1999 Offering Sub-Class") .

Excluded from the Class and Sub-Classes are the defendants named

herein, members of the immediate family of each of the

defendants, any partner, person, firm, trust, corporation,

officer, director or other individual or entity in which any

defendant has a controlling interest or which is related to or

1553 / CMP l 00043823.WPD v1 13

affiliated with any of the defendants, and the legal

representatives, agents, affiliates, heirs, successors-in-

interest or assigns of any such excluded party.

34. The members of the Class and Sub-Classes for whose

benefit this action is brought are so numerous that joinder of

all membersis impracticable. As of June 22, 2000, CINAR had

nearly 34 million shares of Class B stock outstanding.

Furthermore, more than 3 million CINAR Class B shares were issued

pursuant to the 1997 Registration Statement and more than 7

millio_1 CINAR Class B shares were issued pursuant to the 1999

Registration Statement. In addition, approximately 122 million

shares of CINAR Class B stock traded on the NASDAQ during the

Class Period. While the precise number of members of the Class

is not yet known and can only be ascertained through appropriate

discovery, plaintiffs believe there are, at a minimum, thousands

of geo_praphically dispersed members of the Class and Sub-Classes

who purchased CINAR stock during the Class Period.

35. The claims of plaintiffs are typical of the claims of

other members of the Class and Sub-Classes as plaintiffs and

members of the Class and Sub-Classes sustained damages arising

out of defendants' wrongful conduct in violation of federal law

as complained of herein.

36. There are questions of law and fact that are common to

members of the Class and Sub-Classes and predominate over any

questions affecting solely individual members of the Class and

Sub-Classes. Among the questions fo law and fact common to the

i ti53 / CMP / 00043823.WPD vl 14

Class and Sub-Classes are:

a. Whether defendants' acts as alleged herein

violated the federal securities laws;

b. Whether defendants participated in and pursued the

common course of conduct complained of herein;

c. Whether documents, press releases, reports and/or

statements disseminated to the investing public and CINAR's

shareholders during the Class Period omitted or misrepresented

material facts about the business, management, transactions,

markets, financial condition of CINAR, or became materially false

or misleading during the Class Period;

d. Whether the 1997 Registration Statement containEd

untrue statements of fact and/or omitted from disclosure material

facts which were necessary to make the representations made

therein not misleading.

e. Whether the 1999 Registration Statement contained

untrue statements of fact and/or omitted from disclosure material

facts which were necessary to make the representations made

therein not misleading.

f. Whether, with respect to the 1934 Act claims, the

defendants acted knowingly or recklessly in omitting to state

and/or misrepresenting material facts

g. Whether, with respect to the 1934 Act claims, the

market price of CINAR's Class B stock during the Class Period was

artificially inflated or maintained because of the defendants'

conduct complained of herein; and

1553 / CMP / 00043823. WPD v I 15

h. Whether the members of the Class and Sub-Classes

have sustained damages and, if so, the appropriate measure

thereof.

37. Plaintiffs will fairly and adequately protect the

interests of the members of the Class and Sub-Classes.

Plaintiffs are committed to the vigorous prosecution of this

action and have retained competent counsel experienced in

litigation of this nature. Plaintiffs have no interests

antagonistic to or in conflict with those the Class and Sub-

Classes.

3E.. For the reasons stated herein, a class action is

superior to other available methods for the fair and efficient

adjudication of this action and the claims asserted herein.

Furthermore, because of the damages suffered by the individual

Class rlembers may be relatively small, the expense and burden of

individual litigation makes it impr6cticable for the Class and

Sub-Class members to seek legal redress individually for the

wrongs complained of herein. Plaintiffs anticipate that there

will not be any difficulty in the management of this litigation

as a class action.

39. Plaintiffs will rely, in part, upon the presumption of

reliance established by the fraud-on-the-market doctrine in that:

a. Defendants made public misrepresentations or

failed to disclose material facts during the Class Period;

b. The omissions and misrepresentations were

material;

1553 / CMP / 00043823.WPD vI 16

c. At all relevant times, the market for the

securities of the Company was an efficient market for, among

others, the following reasons:

i) CINAR Class B stock met the requirements for

listing and was listed and actively traded on NASDAQ, a highly

efficient and automated market;

ii) As a regulated issuer, CINAR filed periodic

public reports with the SEC and the Canadian regulatory

authorities; and

iii) CINAR regularly communicated with the

investing public through the dissemination of various reports,

participated in meetings and conferences with investors and

securities analysts and through other customary means of

communicating such as the use of major newswire services for the

dissemination of press releases and providing information and

interviews about the Company to the business media.

d. The misrepresentations and omissions alleged would

tend to induce a reasonable investor to misjudge the value of the

Company's securities; and

e. Plaintiffs and members of the Class and Sub-

Classes purchased their CINAR stock between the time the

defendants failed to disclose or misrepresented material facts

and the time the true facts were disclosed, without knowledge of

the omitted or misrepresented facts.

40. As a result, the market for CINAR securities promptly

digested current information regarding the Company from all

1553/CMP/00043823.WPDvl 17

publicly available sources and reflected such information in

CINAR's stock price. Under these circumstances, all purchasers

of CINAR shares during the Class Period suffered similar injury

through their purchase of shares at artificially maintained

prices and a presumption of reliance applies.

41. It is appropriate to treat CINAR and the Executive

Defendants as a group for pleading purposes and to presume that

the false and misleading information conveyed in CINAR's public

filings as alleged herein is the collective action of the

narrowly defined group of defendants identified above.

1553 / CMP / 00043823 .WPD v 1 18

SUBSTANTIVE ALLEGATIONS

Background

42. CINAR purports to be an integrated entertainment and

education company. The Company develops, produces, post-produces

and distributes non-violent programming and educational products

for children, families and educators on an international basis.

The Company operates through two divisions: CINAR Entertainment

and CINAR Education. The Company has publicly described its

objective "to be a leading international provider of children's

and family programming and supplemental education products."

43. CINAR was incorporated _n 1976 by defendants Charest

and Weinberg, the wife and husband team that operated and

controlled the Company throughout the Class Period. After

initially focusing on program distribution for third parties and

sourcing content in Eastern Europe, the Company began to produce

and distribute its own content and build its proprietary library.

44. CINAR went public in Canada on September 15, 1993, on

the Montreal and Toronto exchanges, with an initial public

offering of 2.0 million shares. It became listed on the NASDAQ

in June 1994. Since then, the Company has completed four

secondary offerings, one in April 1995 for 2.6 million shares, a

second in July 1996 for 2.3 million shares, a third during the

Class Period in September 1997 for 3.1 million shares, and a

fourth during the Class Period in March 1999 for 7 million

shares. On April 28, 1998, CINAR declared a 2-for-1 stock split.

1553 / CMP / 00043823.WPD vi 19

The Tax Credit Scheme

45. In connection with an investigation by Canadian

regulatory authorities into charges of copyright violations, it

was discovered that CINAR had substituted the names of Canadian

citizens on scripts written by Americans in order to obtain tax

credits under certain incentive programs established by the

Canadian government. (The programs are detailed in ¶$ 62-63 and

76 below.)

46. One such Canadian "front" was Helene Charest, sister of

defendant Charest, who appeared on the scripts for several CINAR

productions under the pseudonym "Erica Alexandre," a name derived

from the names of defendants Charest ar.d Weinberg's two children.

Helene Charest received nearly $1 million (Cdn.) in royalties for

scripts written bT Americans but attributed to Erica Alexandre.

Helene Charest is not a writer and did not participate in the

writing of any sc:--ipts. The royalties were allegedly repaid in

December 1999.

47. Another Canadian, Thomas LaPierre, has also admitted to

signing his name to scripts written by American authors on behalf

of CINAR and claims that defendants Charest, Weinberg and Corbeil

asked him to draw up sub-contracts to pay the American authors.

Mr. LaPierre is the son of Laurier LaPierre, Chairman of Telefilm

Canada, a Canadian agency which provides funding to qualified

Canadian production companies for certified Canadian productions.

In fiscal 1998 and 1997, CINAR received $3.2 million (Cdn.) and

$6 million (Cdn.), respectively, in funding from Telefilm Canada

1553 / CMP / 00043823-WPD vi 20

for program production.

48. In response to the these allegations, the Royal

Canadian Mounted Police (the "RCMP") began investigating the

accusations of tax credit fraud against CINAR. In the course of

this investigation, the RCMP raided the offices of SODEC, an

agency which certifies productions for the Quebec provincial tax

credit and seized files relating to CINAR. In April, 2000, the

RCMP filed court documents relating to its tax credit fraud

investigation in which they allege that CINAR fraudulently

obtained $7.8 million (Cdn.) in tax credits for productions

falsely represented to have used Canadian scriptwriters. The

RCMP investigation is ongoing.

49. These facts were concealed from the investing public

until the partial cisclosure on October 15, 1999 as detailed in

¶93. It was not until the conclusion of the Class PDriod, on

March 10, 2000, thct the investing public was advised of the

depths of defendants' deceit.

` 'he Unauthorized Investment

50. In the course of its investigation into the allegations

of tax credit fraud, CINAR's auditing committee also discovered

that $122 million had been improperly invested without board

approval and which had not been properly reflected on the

Company's publicly issued financial statements. CINAR quickly

announced that it had recovered $36 million of the funds which

had been invested in Canadian government bonds or other

1553 / CMP / 00043823 _WPD v1 21

investment-grade securities, but it was initially unclear where

the remaining $86 million had been invested.

51. Then, on March 20, 2000, CINAR filed a lawsuit in the

Supreme Court of the Commonwealth of the Bahamas against three

affiliated financial firms - Norshield International Ltd.

("Norshield"), Globe-X Management Ltd. ("Globe Mgt.") and Globe-X

Canadiana Ltd. ("Globe Cdn."). In its suit, CINAR claimed that

$122 million had been invested with these companies without the

approval of CINAR's Board of Directors and sought to recover $76

million still outstanding. Norshield had forwarded $10 million

to CINAR shortly before CINAR's Bahamian litigation was

commenced.

52. CINAR has since disclosed that $86 million was used as

margin for the purchase of non-investment grade commercial paper

of Globe Cdn.

53. The $122 million had been invested through Norshield,

Globe Mgt., and Globe Cdn., all of whom are affiliated with

Norshield Financial Group ("NFG").

54. NFG has several ties with CINAR. For example, Mr.

Xanthoudakis, founder and President of NFG, is a known

acquaintance of defendants Weinberg, Charest and Panju. In its

Bahamian complaint, CINAR has alleged that each of these

defendants knew of and signed off on the $122 million investment.

And, in response to an inquiry by CINAR, NFG had confirmed that

it held certain securities on CINAR's behalf. In addition, NFG's

Vice-President of Finance, Mario Ricci, was previously employed

1553 / CMP / 00043823 .WPD vl 22

as CINAR's Corporate Controller. According to CINAR's Bahamian

complaint, Mr. Ricci also signed off on the investments prior to

his departure from CINAR. Another former CINAR director, Hubert

Marleau, is President of Palos Capital Corp., a merchant banker

that is part of the NFG group of companies. Throughout the Class

Period, none of these facts were disclosed to the investing

public.

55. As of July 6, 2000, CINAR had reported the recovery of

$60 million of the amount invested without board approval. The

Bahamian litigation has been suspended while CINAF. is in

negotiations with the Bahamian companies to recover the remaining

$62 million in investments.

Defendants ' Material Misstatements and Omissions

56. On April 8, 1997, CINAR issued a press release

announcing its financial results for the first qu^_rter ended

February 28, 1997 (the "April 8 Press Release"). The Company

reported that revenues for the first quarter ended February 28,

1997 increased 46% to $17.7 million (Cdn.) compared to $12.2

million (Cdn.) in the first quarter 1996. The Company has

admitted that these statements were materially false and

misleading by virtue of its announced intention to restate its

financial statements for fiscal year ending November 30, 1997.

57. On May 5, 1997, the Company filed an Interim Report for

the First Quarter Ended February 28, 1997 ("1Q97 Interim Report")

with SEDAR. The 1Q97 Interim Report also contained financial

1553 / CMP / 00043823.WPD vl 23

statements for the Company for the first quarter of 1997, among

other periods and reported assets of $41.9 million (Cdn.) in

marketable securities and $15.6 million (Cdn.) in tax credits

refundable. The Company has admitted that these statements were

materially false and misleading by virtue of its announced

intention to restate its financial statements for fiscal year

ending November 30, 1997.

58. On July 19, 1997, CINAR issued a press release

purporting to announce "record" results for both the second

quarter and six months ended May 31, 1997 (the "July 19 Press

Release"). The Company reported that revenues for the second

quarter of 1997 increased 36% to $19.7 million (Cdn.) from $14.5

million (Cdn.) for the comparable period in 1996. The Company

also reported that revenues for the first six months of fiscal

1997 increased 40% to $37.4 million (Cdn.) from $26.6 million

(Cdn.) for the same period in 1996. The Company has admitted

that these statements were materially false and misleading by

virtue of its announced intention to restate its financial

statements for fiscal year ending November 30, 1997.

59. On July 25, 1997, the Company filed an Interim Report

for the Second Quarter Ended May 31, 1997 ("2Q97 Interim Report")

with SEDAR. The 2Q97 Interim Report also contained financial

statements for the Company for the first quarter of 1997, among

other periods and reported assets of $40.9 million (Cdn.) in


refundable as of May 31, 1997. The Company has admitted that

1553 / CMP / 00043823.W11D vl 24.

and funds from Telefilm Canada represented 1.5% of the

Company's revenues.

63. The 1997 Registration Statement contained the following

description of tax credits received by CINAR under one of the

Canadian government programs:

Since 1995, a refundable tax credit is available under

the Income Tax Act (Canada) for eligible film and

television productions undertaken by qualified Canadian

corporations. The credit is calculated on the basis of

each individual production and is available only to

taxable Canadian corporations whose activities are

primarily those of a Canadian film or video production

business carried on in Canada and which are Canadian-

controlled as determined for the purposes of the

Investment Canada Act. A corporation is controlled by

Canadians for purposes of the Investment Canada Act

where, inter alia, Canadians own a majority of the

voting interests. CINAR qualifies for the tax credit.

believes it will continue to so qualify and will use

its best efforts to ascertain that all its production

projects will continue to be eligible for the tax

credit. Tax credits refundable to CINAR pursuant to

this program amounted to $3.7 million in fiscal 1996.

These statements were materially false and misleading in that

they failed to disclose that in 1997 CINAR's efforts to obtain

those tax credits through the fraudulent substitution of Canadian

authors on scripts written by American writers.

64. Each of the Executive Defendants signed the 1997

Registration Statement and the Prospectus.

65. On or about October 15, 1997, CINAR issued a press

release once again purporting to announce "record" results for

the third quarter and nine months ended August 31, 1997 (the

"October 15 Press Release"). The Company reported that revenues

for the third quarter of fiscal 1997 increased 74% to $17.8

1553 / CMP / 00043823 .WPD vl 26

these statements were materially false and misleading by virtue

of its announced intention to restate its financial statements

for fiscal year ending November 30, 1997.

60. On September 29, 1997, CINAR completed a public

offering of 3,450,000 Subordinate Voting Shares, at a price of

$33.75 per share (including its over-allotment option of 450,000

shares) pursuant to the 1997 Registration Statement. The Company

received proceeds of $97,789,100 before subtracting expenses of

the offering.

61. The 1997 Registration Statement and Prospectus

contained misstatements of material fact and omitted from

disclosure facts necessary to make the statements made therein

not misleading. For example, the 1997 Registration statement

included the Company's financial results for the six months ended

May 31, 1997, as previously reported in the July 19, 1997 release

and in the 2Q97 Interim Report. The Company has admitted that



for fiscal year ending November 30, 1997.

62. Further, with respect to the issue of tax credits, the

Registration Statement and Prospectus states that the Company

defrays part of its production costs through:

the benefits of government incentives, includingrefundable tax credits from the Canadian government andthe Quebec government and funds from The Canadian FilmDevelopment Corporation ("Telefilm Canada"). ... Forfiscal year 1996, refundable tax credits from theCanadian and Quebec government incentives represented6.4% and 14.7%, respectively, of the Company's revenues

1553 / CMP / 00043823.WPD vl 25

million (Cdn.) from $10.2 million (Cdn.) for the comparable

period in 1996. The Company also reported that revenues for the

first nine months of fiscal 1997 increased 50% to 55.2 million

(Cdn.) from $36.9 million (Cdn.) for the same period in 1996.

The Company has admitted that these statements were materially

false and misleading by virtue of its announced intention to

restate its financial statements for fiscal year ending November

30, 1997.

66. On October 30, 1997, the Company filed an Interim

Report for the Third Quarter Ended August 31, 1997 ("3Q97 Interim

Report") with SEDAR. The 3Q97 Interim Report also contained

financial statements for the Company for the third quarter of

1997, among other periods, and reported assets of $34.9 million

(Cdn.) in marketable securities and $18.7 million (Cdn.) in tax

credits refundable as of August 31, 1997. The Company has




67. On February 29, 1998, CINAR issued a press release

purporting to announce "record" financial. results for the fourth

quarter and year ended November 30, 1997 (the "February 29 Press

Release"). For the year ended November 30, 1997, the Company

reported that revenues increased 62% to $93.7 million (Cdn.) from

$57.9 million (Cdn.) in the previous year. The Company also

reported that revenues for the fourth quarter 1997 increased 83%

to $38.5 million (Cdn.) from $21.1 million (Cdn.) during the same

1553 / CMP / 0004332 3.WPD v 1 27

period in 1996. The Company has admitted that these statements

were materially false and misleading by virtue of its announced



68. On April 23, 1998, the Company filed an Annual Report

with SEDAR for the fourth quarter and year ended November 30,

1997 (the `1997 Annual Report"). The 1997 Annual Report also

contained financial statements for the Company for the fourth

quarter and year ended November 30, 1997, among other periods,

and reported $169.3 million (Cda.) in marketable securities and

$23.8 million (Cdn.) in tax credits refundable as of November 31,

1997. the Company has admitted that these statements were


intentihn to restate its financial statements for fiscal year


69. On April 23, 1998, CI'\TAR issued a press release

announcing its financial results for the first quarter 1998, the

period ending February 28, 1998 (the "April 28 Press Release").

The Company reported that revenues for the first quarter

increased 61% to $28.6 million (Cdn.) compared to $17.7 million

(Cdn.) in the first quarter of 1997. The Company has admitted



statements for fiscal year ending November 30, 1998.

70. On April 29, 1998, the Company filed an Interim Report

with SEDAR for the first quarter ended February 28, 1998 (the

1553 / C'MP / 00043823.WPD vl 28

"1Q98 Interim Report"). The 1Q98 Interim Report also contained

financial statements for the Company for the first quarter ended

February 28, 1998, among other periods, and reported $129.4

million (Cdn.) in marketable securities and $25.2 million (Cdn.)

in tax credits refundable as of February 28. 1998. The Company

has admitted that these statements were materially false and



71. On July 8, 1998, CINAR issued a press release

announcing its financial results for the second quarter and six

months ended May 31, 1998 (the "July 8 Press Release"). The

Company reported that revenues for the second quarter of 1998

increased 83% to $36.1 million (Cdn.) from $19.7 million (Cdn.)

for the comparable period in 1997 and that revenues for the first

six months of fiscal 1998 increased 73% to $64.6 million (Cdn.)

frorr $37.4 million (Cdn.) for the same period the prior year.


false, and misleading by virtue of its announced intention to


30, L998.

72. The Company filed an Interim Report with SEDAR for the

second quarter and six months ended May 31, 1998 (the "2Q98

Interim Report") on or about April 29, 1998. The 2Q98 Interim

Report also contained financial statements for the Company for

the second quarter ended May 31, 1998, among other periods and

reported assets of $127.9 million (Cdn.) in marketable securities

1553 / CMP / 00043823 .WPD vl 29

and $29 million (Cdn.) in tax credits refundable as of May 31,

1998; $169.3 million (Cdn.) in marketable securities and $23.8

million (Cdn.) in tax credits refundable as of November 30, 1997;

and $41 million (Cdn.) in marketable securities and $20.4 million

(Cdn.) in tax credits refundable as of May 31, 1997. The Company

has admitted that these statements were materially false and



73. On or about October 21, 1998, CINAR issued a press

release purporting to announce its financial results for the

third quarter and nine months ended August 31, 1998 the "October

21, Press Release"). For the third quarter ended August 31,

1998, the Company reported that revenues increased 7I% to $30.5

million (Cdn.) ,. compared to $17.8 mill ion (Cdn.) in the third

quarter of 1997. The Company also repo::ted that, for the nine

months ended August 31, 1998, revenues increased 72% to $95.2

million (Cdn.), compared to $55.2 mill---on (Cdn.) in the 1997 nine

month period. The Company has admitted that these statements

were materially false and misleading by virtue of itE announced



74. On October 30, 1998, the Company filed an Interim

Report with SEDAR for the third quarter and nine months ended

August 31, 1998 (the "3Q98 Interim Report"). The 3Q98 Interim


the third quarter ended August 31, 1998, among other periods, and

1553/CMP/00043823.WPDv1 30

reported assets of $87.5 million (Cdn.) in marketable securities

and $29 million (Cdn.) in tax credits refundable as of August 31,

1998. The Company has admitted that these statements were





purporting to announce its financial results for the fourth

quarter of 1998, the period ending November 30, 1998, as well as

fiscal year 1998. The Company reported that revenues for the

1998 fiscal year increased 61.1% to $151 million (Cdn.) from

$93.7 million (Cdn.) for 1997. Defendant Weinberg commented on

the results in pertinent part as follows:

1998 was a tremendous year for CINAR . With Carson-Dellosa and HighReach Learning, as well as with thepending acquisition of Edisoft Ltd., an interactiveeducational software company , CINAR Education has thetools to increase expansiDn into the fast growingsupplemental education market..

The Company has admitted that :here statements were materially



30, 1998.

76. On or about February 8, 1999 CINAR filed its Form 40-F

(Annual Report of A Foreign Issuer) with the SEC which confirmed

the previously announced financial results ("1998 40-F"). On

that same date, CINAR filed its Annual Report with SEDAR (the

"1998 Annual Report"). Both the 1998 Annual Report and the Form

1553 / CMP / 00043823 .WPD vl 31

40-F contained audited consolidated financial statements. The

1998 40-F and the 1998 Annual Report, in a section entitled

"Industry Incentives," stated in pertinent part as follows:

Since 1995, a refundable tax credit is available under

the Income Tax Act (Canada) for eligible film and

television productions undertaken by qualified Canadian

corporations. The credit is calculated on the basis of

each individual production and is available only to

taxable Canadian corporations whose activities are

primarily those of a Canadian film or video production

business carried on in Canada and which are Canadian-

controlled as determined for the purposes of the

Investment Canada Act. A corporation is controlled by

Canadians for purposes of the Investment Canada Act

where, inter alia, Canadians own a majority of the

voting interests. CINAR qualifies for the tax credit.

CINAR believes that so long as, among other things, it

continues to be Canadian controlled as determined for

the purposes of the Investment Canada Act, it will

continue to so qualify and it will use its best efforts

to ascertain that all its production projects will

continue to be eligible for the tax credit. Tax

credits refundable to CINAR pursuant to this program

amounted to $6.8 million in fiscal 1998.

The Canadian government, through Telefilm Canada,

has implemented and sustained funding programs over the

last 15 years whereby Telefilm Canada may be assigned

an ownership interest in a production in exchange for

financial assistance. Such assistance may be in the

form of recoupable advances in script development,

investment in production, bridge financing, recouping

advances of the cost of dubbing into English or French

and grants of up to 75% of certain advertising and

promotion costs. Over the years, CINAR has

significantly reduced its reliance on funding from

Telefilm Canada. The Company received approximately

$3.2 million in fiscal 1998 compared to approximately

$6.0 in fiscal 1997, a decline from 6.5% to 2.1% of

total revenue.

Under terms of the current provincial tax creditsystem under the Taxation Act (Quebec), Quebec offers arefundable tax credit for Quebec film production equalto 33 1/3% of eligible manpower costs, which in turncannot exceed 45% of the total production cost of agiven project. The credit is calculated on the basis

1 553 / CMP / 00043823 .WPD vl 32

of each individual production and is available only to

a qualified corporation having an establishment in

Quebec and carrying on an eligible film or television

production business at a fixed place of business inQuebec, as long as the corporation is not controlled,directly or indirectly, by persons domiciled outsideQuebec. The Company will continue to be controlled bypersons domiciled in Quebec so long as more than 50% ofthe members of its Board of Directors are personsdomiciled in Quebec and shares having more than 50% of

the combined voting power of its outstanding shares are

beneficially owned by persons domiciled in Quebec. Taxcredits refundable to CINAR pursuant to the existingprogram amounted to $11.5 million in fiscal 1998.

These statements were materially false and misleading at the time

they were made as defendants had knowingly and/or recklessly

obtained the tax credit.:, by fraudulently claiming Canadian

authorsdip of scripts w--_itten by American citizens which would

have disqualified such CINAR programs from eligibility under the

government tax credit p_--ograms.

77. On,March 4, 1799, CINAR issued a press release

announcing that it had executed an underwriting agreement for the

sale to the public in the U.S. and Canada of 7,000,000 Limited

Voting Shares at a price of $20.00 (U.S.) per share. The press

release stated that 6,500,000 shares were to be sold by CINAR and

500,000 shares were to be sold by corporations controlled by

principal shareholders of the Company. In connection with the

Offering, on March 4, 1999, the Company filed the 1999

Registration Statement, which incorporated a prospectus (the

"1999 Prospectus"). In the aggregate, the 1999 Offering

generated proceeds of more than $150 million.

78. On March 23, 1999, CINAR issued a press release

1553 / CMP / 00043823. WPD vl 3 j

announcing that the underwriters for the offering had exercised

"in full their over-allotment option for an additional 1,050,000

Limited Voting Shares for $20.00 (U.S.) per share."


contained misstatements of material fact and omitted from


not misleading. For example, the 1999 Registration Statement

repeated the Company's financial results for, among other years,

fiscal year 1998, and contained the Company's 1998 financial

statements. The Company has admitted that these statements were

materially fal;e and misleading by virtue of its announced

intention to r state its financial' statements for fiscal year

ending November 30,I 1998.

80. Furt-ier, with respec-, to!the issue of tax credits, the

1999 Registration and Prospectus repeated verbatim the Company's

statements con_:erning the so-called "Industry Incentives"

contained in the 1998 Annual Report and reported that in fiscal,

1998 and 1997, CINAR received $6.8 million (Cdn.) and $5.9

million (Cdn.), respectively, to tax credits under the Investment

Canada Act and $11.5 million (Cdn.) and $10.7 million,

respectively (Cdn.), in tax credits under the Taxation Act

(Quebec). These statements were materially false and misleading

because they failed to disclose that a substantial portion of

these tax credits had been fraudulently obtained through CINAR's

practice of falsely representing scripts written by U.S. writers

as the work of Canadian citizens.

1553 / CMP / 00043823-WPD v1 34

81. The 1999 Registration Statement also contained a

material misstatement of fact regarding CINAR's investments.

CINAR's Balance Sheet listed assets of $70.4 million (Cdn.) in

Marketable Securities as of November 30, 1998 and $169.3 million

(Cdn.) in Marketable Securities as of November 30, 1997. Note 4

of the Notes to Consolidated Financial Statements states:

"Marketable Securities [17% (1997-18%) of which are denominated

in Canadian dollars and 83% (1997-82%)] consist of consist of

high investment grade securities and are carriec at cost which

approximated market value." This statement was materially false

and misleading in that it failed to disclose thc.t $122 million

had been invested and used as margin for the purchase of non-

investment grade commercial paper. As would later be disclosed,

the investments were made without authorization fromICINAR's

board of directors but with knowledge and/or reckless disregard

by the Executive Defendants.

82. Each of the Executive Defendants and Corbeil signed the

1999 Registration Statement.

83. On April 21, 1999, CINAR issued a press release

announcing its financial results for the first quarter of 1999,

the period ending February 28, 1999 ("April 21 Press Release").

The Company reported revenues for the first quarter increased

27.8% to $36.5 million (Cdn.), as compared to $28.6 million

(Cdn.) for the same period the prior year. The Company has



1553 / CMP / 00043823 .WPD v1 35

financial statements for fiscal year ending November 30, 1998

84. The April 21 Press Release was attached to a Form 6-K,

which was filed with the SEC the same day as its release to the

public.

85. On April 27, 1999 CINAR filed a Form 6-K with the SEC

which attached the Company's First Quarter Interim Report for 3

months ended February 28, 1999 (the "1Q99 Interim Report"). The

1Q99 Interim Report contained a letter which was signed by

defendants Charest and Weinberg and was virtually identical to

the April 21 Press Release. The 1Q99 Interim Report also

contained financial statements for the Company for the first

quarter of 1999, among other periods. The report disclosed

assets of $113.8 million (Cdn.) in marketable securities and

$37.6 million (Cdn.) in tax credits refundable as of February 28,

1999; $70.4 million (Cdn.) in marketable securities and $33

million (Cdn.) in tax credits refundable as of November 30, 1998;

and $129.4 million (Cdn.) in marketable securities End $25.3

million (Cdn.) in tax credits refundable as of Febriary 28, 1998.



restate its financial statements for fir fiscal year 1998 and the

first three quarters of fiscal year 1999.

86. On July 7, 1999 CINAR issued a press release announcing

its financial results for the second quarter of 1999, the period

ending May 31, 1999 ("July 7 Press Release"). The Company

reported revenues for the second quarter increased 41.2% to $51.0

1553 / CMP / 00043823-WPD v 1 36

million (Cdn.), as compared to $36.1 million (Cdn.) for the same

period the prior year. The July 7 Press Release also contained a

"Consolidated Statement of Earnings." The Company has admitted



-statements for fiscal year 1998 and the first three-quarters of

fiscal year 1999.

87. The July 7 Press Release was attached to a Form 6-K,

which was filed with the SEC the same day as i'=s release to the

public, and attached the Company's Second Quarter Interim Report

for 3 months ended May 31, 1999 (the "2Q99 Intarim Report"). The

'2Q99 Interim Report contained a letter which was signed by

defendants Charest and Weinberg and was virtually identical to

the July 7 Press Release. The 2Q99 Interim Reaort also contained

!financial statements for the Company for the s?cond quarter of

1998, among other periods. The report disclos.?d assets of $261

!million (Cdn.) in marketable securities and $4.3 million (Cdn.) in

tax credits refundable as of May 31, 1999; $70.4 million (Cdn.)

in marketable securities and $33 million (Cdn.) in tax credits

refundable as of November 30, 1998; and $127.9 million (Cdn.) in

marketable securities and $29 million (Cdn.) in tax credits

refundable as of May 31, 1998. The Company has admitted that



for fiscal year 1998 and the first three quarters of fiscal year

1999.

1553 / CMP / 00043823.WPD v1 37

88. On November 2, 1999, the Company filed an Interim

Report with SEDAR for the third quarter and nine months ended

August 31, 1999 (the "3Q99 Interim Report"). The 3Q99 Interim


the third quarter ended August 31, 1999, among other periods.

The report disclosed assets of $237.6 million (Cdn.) in


refundable as of August 31, 1999; $70.4 million (Cdn.) in

marketable securities and $33 million (Cdn.) in tax credits

refundable as of November 30, 1998; and $87.6 million (Cdn.) -n


refundable as of August 31, 1998. The Company has admitted tat

these statements were materially false and misleading by virt_ie


for fiscal year 1998 and for the first three quarters of fiscal

year 1999.

89. The statements referenced above in $$ 56 -59, 61, 63,

65-81, and 83-88; and in $11 94, 96, 99, and 101 below, were

materially false and misleading whaz^n made because defendants

misrepresented and failed to disclose the following facts:

(a) that the Company was falsely representing that it

was earning strong results and had continuing growth when in

fact, such results and growth were due to the fact that

defendants were fraudulently claiming that scripts written by

United States citizens were written by Canadian citizens in order

to obtain tax credits from the Canadian and Quebec governments;

1553 / CMP; 00043823.WPD v1 38

(b) that the Company's financial results were

artificially inflated by millions of dollars as a result of its

fraudulent tax practices which at all material times violated

both U.S. and Canadian GAAP;

(c) that, because Canadian broadcasters are required to

spend a specific amount on Canadian programming, they generally

pay a premium for Canadian productions. Thus, CINAR's Canadian

customers had arguably overpaid for foreign programming falsely

represented by CINAR to be Canadian programming and could seek

reimbursement of such overpayments;

(d) that, as a result of the forEgoing , defendants'

estimates, projections and opinions as to the Company's expected

revenues, earnings, income and value of itE stock were lacking in

reasonable basis at all relevant times; anc.

(e) that $122 million had been invested overseas

without authorisation from CINAR's board of directors, some of

which had been used as margin for the purchase of non-investment

grade commercial paper.

90. Under GAAP, restatement is a serious step reserved only

for situations in which no lesser remedy is available. According

to the Accounting Recommendations of the Auditing Standards Board

of the Canadian Institute of Chartered Accountants ("CICA

Handbook") § 1506, restatements are only permitted - and are

required - for material accounting errors or irregularities that

existed at the time the financial statements were prepared.

91. As a consequence of the misrepresentations and

1553 / CMP i 00043823-WPD vl 39

investigating alleged irregularities involving CINAR, a report

published on Bloomberg on October 15, 1999, stated, in pertinent

part, as follows:

The CBC [Canadian Broadcasting Corp.] reported that

Canadians were asked to sign screenplays that were

actually written by U.S. authors to secure tax breaks

that were intended for television productions that were

written by Canadians.

94. Following the public reports of potential tax issues at

CINAR, the price of the Company's Class B stock dropped from more

than $28.00 to X15.9375 per share. CINAR and the Executive

Defendants, however, immediately sought to counteract this

negative news ar_d resultant stock price drop by falsely

portraying any potential liability in connection with any tax

problems as lim._ted and not material. In this regard, on October

18, 1999, CINAR issued a press release announcing that "the

company has moved to deal with allegations contained in certain

media reports cc,ncerning practices with respect to Canadian

content rules related to television and film productions." The

press release stated:

The allegations in the media appear to pertain to

episodes produced several years ago and have no

relation to the current operations and activities of

the company. Based upon its review to date, CINAR

believes that such allegations will not have any

material adverse impact on the financial position or

results of the compan

Nonetheless, the Board of Directors has given a special

mandate to members of the Audit Committee of the Board,

composed only of outside directors, to review the

various issues associated with the allegations. The

Committee has been instructed to report its findings

and recommendations to the Board of Directors at the

earliest possible date. The Board reaffirms its intent

1553 / CMP / 00043823.WPD vl 41

concealment regarding the intentional use of unearned tax

credits, the massive amounts of unauthorized and undisclosed

investments and the failure to disclose or properly account for

related party transactions, every quarterly and annual financial

press release issued on behalf of CINAR during the Class Period,

and every quarterly and annual report distributed-to shareholders

and filed with the SEC or the Canadian regulatory authorities,

was materially inaccurate, as they contained or referenced

financial statements which overstated earnings and assets in

material amounts.

92. W--iile plaintiffs are not privy to ,he exact amoL-nt of

the restateaentsj for each period, by virtue _)f CINAR's st6-ted

intention t_) restate their financial results for the fiscal years

ended 1997 ±nd 1998, as well as all reported quarters for 1999,

defendants _ire implicitly acknowledging the -ateriality of the

misstatements and omissions contained in the restated

financials.-7

The Truth Begins to Emerg e

93. On October 15, 1999, press reports began to circulate

in the market that CINAR was being investigated by Montreal

police in connection with tax credit fraud. Following reports by

certain Canadian media that the Montreal police were

Such amounts will be pleaded with greater specificityonce CINAR has filed the restatement with the appropriate

regulatory agencies.

1553 / CMP / 00043823_WPD vl 40

to cooperate with all competent authorities. [Emphasis

added.]

95. The statements referenced above in ^j 94 were false and

misleading when made because CINAR and the Executive Defendants

lacked any reasonable basis for their stated belief that the

allegations would not have "any material adverse impact on the

financial position or results of the company." These statements

were also false and misleading because they misrepresented and

failed to disclose the adverse facts as set forth in ¶ 90.

96. Then, on October 19, 1999, CINAR issued a press release

announcing its financial results for the third quarter of 1999,

the period ending August 31, 1999 ("October 19 Press Release").

The Company reported revenues for the third quarter increased

52.3% to $46.5 million (Cdn.), as compared to $30.5 million

(Cdn.) for the same period the prior year. The Company has



financial statements for the first three quarters of fiscal year

1999.

97. As further proof that the market was still being misled

by CINAR, in conjunction with the Company's attempts at

stabilizing its stock price, Jeffries & Co, Inc. ("Jeffries &

Co.") reported on October 20, 1999 as follows:

The company reported an upside surprise for 3099,driven primarily by better-than-expected gross marginimprovement in both its entertainment and educationdivisions. In relation to recent reports of potentialtax fraud allegations, we remain confident that thereis no systematic attempt by Cinar management to defraud

1553 / CMP / 00043823.WPD vl 42

the Canadian tax credit program.

98. Following these announcements, the price of CINAR stock

gradually rebounded, climbing from $15.9375 per share on October

21, 1999 to $27.3875 per share on February 8, 2000.


which reported:

The Company and its Audit Committee and theirrespective advisors have been reviewing the Company'srecord relating to its productions, including thosewith respect to scriptwriting. These reviews arecontinuing as part of the preparation of financialstatements for the 1999 fiscal year. Management andthe auditors of the Company are working closelytogether with a view to finalize the Company'sfinancial statements for the 1999 fiscal year: they areexpected to be available in a few weeks time, withinthe regulatory time frame.

The financial and accounting impacts of the outcome ofthose reviews, although not yet determined, areexpected to be greater than initially anticipated.However, the Company expects that the outcome of suchreviews will not undermine its financial strength orliquidity. Management is positive about its ongoingbusiness activities.

100. Market reaction to the uncertainty described by this

announcement was immediate and punitive for CINAR shareholders.

The price of CINAR Class B stock declined to $17.9375 per share

from $24.625, a one-day decrease of 27% and a decrease of over

40% from a Class Period high of $30.25 per share reached on

September 9, 1999.

101. On March 6, 2000, after the close of trading, the

Company issued a press release over the Canadian Corporate News

wire services in which additional partial disclosures were made:

1553 / CMP / 00043823.WPD v] 4 -)

party transactions. Furthermore, it alsoappears likely that the financial informationreported for the first, second and thirdquarters of fiscal 1999 will need to berestated for issues related to taxincentives, disclosure of related partytransactions and unauthorised [sic]transactions. Accordingly, the Company'spreviously issued financial statements forthe financial years ended November 30, 1997and 1998 as well as for the first, second andthird quarters of the 1999 financial yearand, where applicable, the auditors' reportthereon, should not be relied upon.

105. Because CINAR has failed to file its financial

statements for the year ending November 30, 1999 with the SEC and

Canadian regulatory authorities, it faces delisting from the

NASDAQ and the Toronto Stock Exchange. CINAR representatives met

with NASDAQ officials on July 13, 2000, in an effort to convince

the exchange nct to delist CINAR's shares and to update NASDAQ on

ElY's ongoing audit.

106. In the interim, Telefilm Caiada and Canadian Televison

Fund, two organizations which provide funding to Canadian

productions, have halted all dealings with CINAR until it can

provide more information about its financial situation and the

tax credit fraud.

107. As of the date of this complaint, CINAR has not

announced the completion of E&Y's audit of CINAR's fiscal year

1999 financials, which is said to be delayed due to the discovery

of additional scripts which were falsely credited as authored by

Canadians for purposes of improperly receiving tax credits. In a

National Post article dated June 21, 2000, CINAR's newly

1553/CMP/00043823.WPDv1 45

appointed Chief Executive Officer, Barrie Usher, is quoted as

saying, "We did find some more items that had to be investigated

and that has really slowed up the issue of finalizing the tax

credit situation."

SCIENTER ALLEGATIONS

108. As alleged herein, CINAR and the Executive Defendants

acted with scienter in that they knew or recklessly disregarded

that the public documents and statements issued or disseminated

in the name of CINAR were materially false or misleading; knew or

recklessly disregarded that such statements or documents would be

issued or disseminated to the investing public; and knowingly or

recklessly substantially participated or acquie"ced in the

issuance or dissemination of such statements or documents as

primary violators of the federal securities lawrr. As set forth

elsewhere herein in detail, CINAR and the Executive Defendants,

by virtue of their receipt of information reflecting the true

facts regarding CINAR, their control over, and/&r receipt and/or

modification of CINAR's allegedly materially misleading

misstatements and/or their associations with CINAR which made

them privy to confidential proprietary information concerning

CINAR, participated in the fraudulent scheme alleged herein.

Indeed, with respect to defendants Weinberg and Charest, a family

member, using the collective names of the defendants' children,

took credit for scripts written by American citizens. As a

result, at least with respect to these defendants, actual

1553 / CMP / 00043823.WPD vl 46

knowledge of the fraudulent tax credit scheme can be inferred.

109. The misstatements and omissions of CINAR and the

Executive Defendants regarding the Company's fraudulent tax

practices and the wholly improper and undisclosed investment of

$122 million of the Company's funds artificially inflated and

served to maintain the price of CINAR's Class B stock at an

artificially high price.

110. CINAR and the Executive Defendants were motivated to

conceal the true nature of CINAR's revenues which were

artificially inflated by the Company's fraudulent tax practices

in order to artificially inflate the Company's Class B stock

price which was being used as currency in negotiating and s

consummating numerous stock-for-stock acquisitions during the

Class Period. CINAR's artificially inflated stock price allowed

these defendants to exchange less CINAR stock for acquisitions,

while simultaneously allowing the Executive Defendants and

Corbeil to expand CINAR without suffering a corresponding amount

of dilution of their personal stock holdings that normally

accompanies stock-for-stock acquisitions.

ill. Specifically, on July 2, 1997, CINAR announced that it

had agreed to purchase Carson-Dellosa Publishing Company Inc. and

two of its subsidiaries ("Carson-Dellosa") for $24.5 million in

cash and $16 million in CINAR Class B subordinate-voting shares.

CINAR's artificially inflated stock price allowed defendants to

exchange less CINAR Class B stock in its deal with Carson-

Dellosa, while simultaneously allowing the Executive Defendants

1553 / CMP / 00043823.WPD vl 47

[t]he Company has determined that approximately US $122million of its funds have been invested without theapproval of its Board of Directors. About US$86million of these investments have been pledged tosecure other investments. The Company's efforts todate have not permitted it to determine with claritythe nature of those other investments or their value.The Company is endeavoring to complete with the utmosturgency a special review of this matter to determineits legal position, and to obtain possession of suchfunds. Hasanain Panju has been terminated as anofficer and employee of the Company. He was formerlythe Senior Executive Vice-President. Although thereviews by the Audit Committee and the Company, whichhave been broadened in scope, now suggest that whilethe Company will make every effort to do so, theCompany may not be able to release its financialstatements for the 1999 fiscal year within theprescribed statuary delays.

102. In the wake of this shocking disclosure, husband and

wife team Ronald Weinberg and Micheline Charest resigned as co-

chiEf executives.

103. The response of investors to these stunning disclosures

was swift and devastating. On the NASDAQ exchange, CINAR's stock

price plummeted $12.62 to close at $5.75 per share on March 7,

200C - an amazing plunge of nearly 70% in one day, and 80% from

the Class Period high. Trading in CINAR stock has been halted on

the Canadian and American stock exchanges since March 8, 2000.

104. On March 10, 2000, CINAR issued a press release stating

that:

[A]s a result of the reviews undertaken bythe Company and its Audit Committee anddiscussions with its auditors, it appearslikely its audited financial statements forthe financial years ended November 30, 1997and 1998 will need to be restated. Thereasons for such restatements relate to taxincentives and the disclosure of related

1553 / ('MP / 00043823.WPD v] 44

and Corbeil to expand CINAR without suffering a corresponding

amount of dilution of their personal holdings.

112. Later, on May 26, 1998, CINAR announced that is had

agreed to acquire High Reach Learning for approximately $26

million, including 422,000 Limited Voting Shares of CINAR. Once

again, CINAR's artificially inflated stock price allowed

defendants to exchange less CINAR Class B stock in its deal with

Carson-Dellosa, while simultaneously allowing the Executive

Defendants and Corbeil to expand CINAR without suffering a

corresponding amount of dilution of their personal holdings.

113. In addition, CINAR and the Executive Defendants were

motivated to artificially inflate the price of CINAR shares in

order to complete the 1997 and 1999 Secondary Offerings of CINAR

stock during the Class Period.

114. The undisclosed adverse information concealed by

defendants during the Class Period is the type of inforrration

which, because of SEC regulations, rules of the national stock

exchanges and customary business practice, is expected by

investors and securities analysts to be disclosed to the

investing public. This information is known by corporate

officials and their legal and financial advisors to be the type

of information which is expected to be and must be disclosed.

Under Item 303 of Regulation S-K, promulgated by the SEC under

the Exchange Act, there is a duty to disclose in periodic reports

filed with the SEC "known trends or any known demands,

commitments, events or uncertainties" that are reasonably likely

1553 / CMP / 00043823.WPD v 1 48

to have a material impact on a company's sales revenues, income

or liquidity, or cause previously reported financial information

not to be indicative of future operating results. 17 C.F.R.

§ 229.303(a)(l)-3(3) and Instruction 3. In addition to the

periodic reports required under the Exchange Act, management of a

public company has a duty promptly "to make full and prompt

announcements of material facts regarding the company's financial

condition." SEC Release No. 34-8995, 3 Fed. Sec. L. Rep. (CCH)

23,120A, at 17,095, 17 C.F.R. § 241.8995 (October 15, 1970).

The SEC regulates companies "that can reasonably be expected to

reach investors and the trading markets, whoever the intended

primary audience." SEC Release No. 33-6504, 3 Fed. Sec. L. Rep.

(CCH) ¶ 23,120, at 17,095-3, 17 C.F.I.z§ 241.20560 (January 13,

1984). The SEC has emphasized that '[i]nvestors have legitimate

expectations that public companies a:--e making, and will continue

to make, prompt disclosure of signif:_cant corporate

developments." SEC Release No. 1827=., [1981-1982 Transfer

Binder] Fed. Sec. L. Rep. (CCH) ¶ 83,049, at 84,618 (November 19,

1981). Defendants' violation of Item 303 of Regulation S-K,

serve as further indicia of their scienter because the

undisclosed information was known to defendants and such

information suggested that their public statements regarding

CINAR's revenues and assets were not accurate.

115. The market for CINAR Class B stock was open, well-

developed and efficient at all relevant times. As a result of

the materially false and misleading statements and failures to

1553 I CMP I00043823.WPD vt 49

disclose the full truth about CINAR, its business and its

improper activities, CINAR Class B stock traded at artificially

maintained prices throughout the Class Period. Plaintiffs and

other members of the Class purchased or otherwise acquired CINAR

Class B stock relying upon the integrity of the market price of

CINAR Class B stock and market information relating to the

Company or, in the alternative, upon defendants' materially false

and misleading statements, and in ignorance of the adverse,

material undisclosed information and false financial statements

known to defendants and have been damaged thereby.

Violations of GAAP and Auditing Standards

116. The SEC requires that publicly-traded companies present

their financial. statements in accordance with GAAP. 17 C.F.R. §

210.4-01(a)(1). CINAR's 1997 and 1998 annual financial

statements and the interim financial statements on Form 6-K

issued throughout the Class Period were materially misstated and

were presented in a manner which violated GAAP because, among

other reasons:

a. They were not prepared on a consistent basis;

b. Amounts due from governments were overstated;

c. They failed to report marketable securities at

their net realizable value, and all of the

interest income that was derived therefrom; and

the assets, equity and income, of the enterprise

were overstated.

1553 / CMP / 00043823-WPD vl 50

117. CINAR's financial statements also violated the

following GAAP principles, among others:

a. The principle of fair presentation ("presents

fairly"). ( See APB No. 4, ¶(¶ 109, 138, 189, and

Canadian Institute of Chartered Accountants

("CICA") Handbook, Sections 1000 and 1500)

b. The principle of adequacy and fairness of

disclosure. ( See APB No. 4, $11 81, 106, 189, 199

and CICA Handbook, Accounting, pp 9-10.)

c. The principle of materiality concerning

information that is significant enough to affect

evaluations or decisions. ( See APB No. 4, $$ 25,

128 and CICA Handbook, Section 1000.)

d. The principle that the substance of transactions

rather than form should be reflected. ( See APB

No. 4, 11$ 25, 35, 127 and CICA Handbook, Section

1000.)

f. The principle that the financial statements

contain and disclose relevant, understandable, and

timely information for the economic decisions of

the user. ( See APB No. 4, ¶$ 23, 88, 89, 92 and

CICA Handbook, Section 1000.)

g. The principle that the financial statements

provide reliable financial information about the

enterprise for the economic decisions of the user.

( See APB No. 4, ¶ ¶ 77, 78, 107, 108 and CICA

1553 / CMP / 00043823 . WPD v1 51

Handbook, Section 1000.)

118. Defendant E&Y did not plan, staff, execute and finalize

the audits of CINAR in accordance with Canadian Professional

Standards. In particular:

a. E&Y did not design the audits in a manner that

would provide reasonable assurance of detecting

errors and irregularities (intentional

misstatements) that are material to the financial

statements;

b. E&Y did not obtain sufficient knowledge of matters

relating to the nature of CINAR's business and its

organizational and operating characteristics;

c. E&Y did not adhere to the principle that items

included in the financial statements be reliably

corroborated by outside evidence ("verifiability")

d. E&Y did not confirm the existence of CINAR's

reported investments and did not verify ownership

of such investments;

e. E&Y failed to audit the value of the reported

marketable securities and did not trace the income

received from investments;

f. E&Y did not ascertain whether the income received

from CINAR's investments was commensurate with the

risks;

g. E&Y did not confirm or verify whether securities

had been pledged;

1 553 CMP 00043923 WPD vl 52

h. E&Y did not investigate properly all related party

transactions;

i. E&Y did not confirm or verify CINAR's eligibility

for government grants and tax credits; and

j. E&Y did not evaluate properly the collectibility

of CINAR's receivables, including grant money from

government programs.

( See CICA Handbook, Sections 5000, 5025, 5090, 5100, 5130, 5135,

5136, 5140, 5145, 5150, 5200, 5205, 5300, 5301, 5303, 5400, 5405,

and 5510.)

COUNT I

ON BEHALF OF THE CLASS AGAINST CINAR

AND THE EXECUTIVE DEFENDANTS FOR

VIOLATIONS OF SECTION 10(b) OF THE

EXCHANGE ACT !iND RULE 10b-5 OF THE

SECURITIES ANT) EXCHANGE COMMISSION

119. Plaintiffs repeat and reallege each and every preceding

allegation as if fully set forth herein.

120. This count is brought by plaintiffs pursuant to Section

10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder

by the SEC against CINAR and the Executive Defendants.

121. During the Class Period, CINAR and the Executive

Defendants, and each of them, carried out a plan, scheme and

course of conduct which was intended to and, throughout the Class

Period, did: (i) deceive the investing public, including

plaintiffs, as alleged herein; (ii) artificially inflate and

1553 ! CMP / 00043823. WPD v1 53

maintain the market price of CINAR's securities; and (iii) cause

plaintiffs to purchase CINAR's securities at artificially

inflated prices. In furtherance of this unlawful scheme, plan

and course of conduct, CINAR and the Executive Defendants, and

each of them took the actions set forth herein.

122._CINAR and each of the Executive Defendants (a) employed

devices, schemes, and artifices to defraud; (b) made untrue

statements of material fact and/or omitted to state material

facts necessary to make the statements not misleading; and (c)

engagqed in acts, practices, and a course of business which

oper,ited as a fraud and deceit upon the purchasers of CINAR stcck

in a:i effort to maintain artificially high market prices for

CINA-I's securities in violation of Section 10(b) of the Exchance

Act and Rule 10b--5.

123. In addition to the duties of full disclosure imposed on

the xecutive Defendants, by their status as controlling persons

of C:`:NAR, as a result of their affirmative statements and

repots, or participation in the making of affirmative statements

and reports to the investing public, these defendants had a duty

to promptly disseminate truthful information that would be

material to investors in compliance with the integrated

disclosure provisions of the SEC as embodied in SEC Regulation

S-X (17 C.F.R. Sections 210.01 et seq.) and S-K (17 C.F.R.

Sections 229.10 et seq.) and other SEC regulations, including

accurate and truthful information with respect to CINAR's

operations and financial condition so that the market price of

1553 / CMP / 00043823 -WPD vJ 54

CINAR's Class B stock would be based on truthful, complete and

accurate information.

124. CINAR and the Executive Defendants, individually and in

concert, directly and indirectly, by the use of means or

instrumentalities of interstate commerce and/or of the mails,

engaged and participated in a continuous course of conduct to

conceal adverse material information about the business and

operations of CINAR as specified herein. These defendants

employed devices, schemes and artifices to defraud, while in

possession of material adverse non-public information and engaged

in acts, practices, and a course of conduct as alleged herein in

an effort to assure investors of CINAR's value and performance

and continued substantial growth, which included the making of,

or the participation in. the making of, untrue statements of

material facts and omitting to state material facts necessary in

order to make the statements made about CINAR and its business

operations in light of the circumstances under which they were

made, not misleading, as set forth more particularly herein, and

engaged in transactions, practices and a course of business which

operated as a fraud and deceit upon the purchasers of CINAR

securities during the Class Period.

125. Each of the Executive Defendants' primary liability

arises from the following facts: (i) the Executive Defendants

were high-level executives and/or directors at CINAR during the

Class Period and members of the Company's management team or had

control thereof; (ii) each Executive Defendant enjoyed

1553 / CMP l 0004382 I.WPD vl 55

significant personal contact and familiarity with the other

defendants and was advised of and had access to the other

defendants' internal reports and other data and information about

CINAR's policies and practices at all relevant times; (iii) each

of these defendants, by virtue of his or her responsibilities and

activities as a senior officer and/or director of the Company was

privy to and participated in the creation, development and

reporting of the Company's internal budgets, plans, projections

and/or reports; and (iv) each Executive Defendant was aware of

CINAR's dissemination of information to the investing public

which they knew or recklessly disregarded was materially false

and misleading.

126. The Executive Defenc.ants had actual knowledge of the

misrepresentations and omissic.ns of material facts set forth

herein, or acted with recklesE disregard for the truth in that

they failed to ascertain and to disclose such facts, even though

such facts were available to them. Such defendants' material

misrepresentations and/or omissions were done knowingly or

recklessly and for the purpose and effect of concealing the true

nature of CINAR's operating condition and future business

prospects from the investing public and supporting the

artificially inflated price of its securities. As demonstrated

by said defendants' overstatements and misstatements of CINAR's

business, operations and earnings throughout the Class Period,

said defendants, if they did not have actual knowledge of the

misrepresentations and omissions alleged, were reckless in

1553 / CMP / 00043823.WPD vl 56

failing to obtain such knowledge by deliberately refraining from

taking those steps necessary to discover whether those statements

were false or misleading.

127. As a result of the dissemination of the materially

false and misleading information and failure to disclose material

facts by CINAR and the Executive Defendants, as set forth above,

the market price of CINAR Class B stock was artificially inflated

and maintained throughout the Class Period. In ignorance of the

fact that the market price of CINAR's Class B stock was

artificially inflated and maintained, and relying directly or

indirectly on the false and misleading statements made by

defendants, or upon the integrity of the market in which CINAR's

Class B stock trades, and the truth of any representations made

to appropriate agencies as to the investing public, at the times

at which any statements were wade, and/or on the absence of

material adverse information that was known to or recklessly

disregarded by CINAR and the Executive Defendants but not

disclosed in public statements by CINAR and the Executive

Defendants during the Class Period, plaintiffs and the other

members of the Class acquired CINAR Class B stock during the

Class Period at an artificially high price and were damaged

thereby.

128. At the time of said misrepresentations and omissions,

plaintiffs and other members of the Class were ignorant of their

falsity, and believed them to be true. Had plaintiffs and the

other members of the Class and the marketplace known of the true

1553 /CMP / 00043823_WPD v1 57

financial condition and business prospects of CINAR, which were

not disclosed, plaintiffs and other members of the Class would

not have purchased or otherwise acquired CINAR Class B stock

during the Class Period, or, if they had acquired CINAR Class B

stock during the Class Period, they would not have done so at the

artificially inflated prices which they paid.

129. By virtue of the foregoing, CINAR and the Executive

Defendants have violated Section 10(b) of the Exchange Act, and

Rule lOb-5 promulgated thereunder.

130. As a direct and proximate result of the wrongful

conduct of the CINAR and the Executive Defendants, plaintif-s and

the other members of the Class suffered damages in connection

^)ith their purchases of CINAR's Clasp B stock during the Class

Period.

131. The undisclosed adverse information concealed by C'INAR

nod the Executive Defendants during the Class Period is the type

of information which, because of SEC regulations, rules of the

rational stock exchanges and customary business practice, is

expected by investors and securities analysts to be disclosed to

the investing public. This information is known by corporate

officials and their legal and financial advisors to be the type

of information which is expected to be and must be disclosed.

1 553 / CMP / 00043823 .WPD vl 58

COUNT II

ON BEHALF OF THE CLASS AGAINST THEEXECUTIVE DEFENDANTS FOR VIOLATIONS

OF SECTION 20(a) OF THE EXCHANGE ACT



133. The Executive Defendants acted as controlling persons

of CINAR 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 Company's internal financial condition, business practice

and acquisitions, these defendants had the power to influence and

control and did influence and control, directly or indirectly,

the decision-making of CINAR, including the content and

dissemination of the various statements which plaintiffs contend

are false and misleading. The Executive Defendants were each

provided with or had unlimited access to copies of CINAR's

internal reports, press releases, public filings and other

statements alleged by plaintiffs 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.

134. In particular, each of these defendants had direct

involvement in or intimate knowledge of the day-to-day operations

of CINAR and therefore, is presumed to have had the power to

1553/ CMP / 00043823. WPD v 1 59

control or influence the particular transactions giving rise to

the securities violations as alleged herein, and exercised the

same.

135. Furthermore, as of March 18, 1999, defendants Weinberg

and Charest each own approximately 2.5 million (total 5 million)

of CINAR's Class A shares. Thus, Weinberg and Charest, who are

husband and wife, collectively own a controlling 62.40 of CINAR's

total voting rights. Defendant Corbeil owns 1500 Class A shares

and defendant Panju owns 3300 Class A shares and 3300 Class B

shares.

136. As set forth above, the Executive Defendants each

violate. Section 10(b) and Rule 10b-5 by their acts and omissions

as a_llele.d in this Complaint. By virtue of their positions as

controlling persons, these defendants are liable pursuant to

Section 20(a) of the Exchange Act. As a direct and proximate

result if the wrongful conduct of these defendants, plaintiffs

and oth--r members of the Class suffered damages in connection

with their purchases of the Company's securities during the Class

Period.

COUNT III

ON BEHALF OF THE 1997 OFFERING SUB-CLASS

AGAINST CINAR AND THE EXECUTIVE DEFENDANTS

FOR VIOLATIONS OF SECTION 11 OF THE

SECURITIES ACT IN THE 1997 OFFERING



1553 / CMP / 00043823.WPD vl 60

138. Count III is brought pursuant to Section 11 of the

Securities Act, 15 U.S.C. § 77k, on behalf of the 1997 Offering

Sub-class against CINAR and the Executive Defendants, in

connection with the 1997 Offering.

139. To the extent that it reported financial results for

the first six-months of fiscal year 1997, the 1997 Registration

Statement contained untrue statements of material fact and

omitted to state other facts necessary to make the statements

made the:_ein not misleading, and failed to disclose material

facts ad,-quately as described above when it was declared

effectiv-_ by the SEC.

140. CINAR was the registrant for the sharES sold to

plaintif=s and other members of the Class in the 1997 Offering.

The Execjtive Defendants were directors and officers of CINAR at

the time the 1997 Registration Statement was declared effective

by the S:iC and each Executive Defendant signed the 1997

Registra=ion Statement. CINAR issued, caused tc be issued and

participited in the issuance of the materially false and

misleading statements to the investing public which were

contained in the 1997 Registration Statement, which

misrepresented or failed to disclose, inter alia , the facts set

forth above. CINAR is strictly liable to plaintiff The Kaufmann

Fund and the 1997 Offering Sub-Class as an issuer of the shares.

141. Lead Plaintiff The Kaufmann Fund acquired CINAR stock

issued pursuant to the 1997 Registration Statement.

1553 l CMP 00043223.WPI) vl 61

142. Lead Plaintiff and other members of the 1997 Offeringt

Sub-Class have sustained damages as a result of the wrongdoing

alleged herein. The value of CINAR's Class B stock has declined

substantially since the 1997 Registration Statement became

effective due to defendants' wrongful conduct described herein-

143. At the time they purchased CINAR Class B stock, Lead

Plaintiff and other members of the 1997 Offering Sub-Class were

without knowledge of the facts concerning the wrongful conduct

alleged herein and could not have reasonably discovered those

fact=s .

144. Less than one year has elapsed since plaintiffs

dis-overed or reasonably could have discovered the facts upon

which this Complaint is based. Less than three years have

ela.)sed since the securities upon wh_ch this Count is brought

wer,^ bona fide offered to the public.

, -I T TT TTT

ON BEHALF OF THE 1997 OFFERING SUB - CLASS AGAINST

CINAR FOR VIOLATIONS OF SECTION 12(A)(2) OF

THE SECURITIES ACT IN THE 1997 OFFERING



146. Count IV is brought pursuant to Section 12(a)(2) of the

Securities Act against CINAR in connection with the 1997

Offering.

147. CINAR was a seller, offeror and/or solicitor of sales

of the shares offered pursuant to the 1997 Registration

1553 / CMP / 00043823.WPD vI 62

Statement.

148. CINAR solicited and/or was a substantial factor in the

purchase by plaintiff The Kaufmann Fund and the 1997 Offering

Sub-Class of Class B stock in the 1997 Offering. In support of

soliciting sales of the Class B stock issued by CINAR, the

Company did the following acts in furtherance of the 1997

Offering:

a. CINAR actively drafted, revised, and filed the

1997 Registration Statement with the SEC and caused the SEC to

declare the 1997 Registration Statement to be declared effective.

The 1997 Registration Statement and Prospectus were "selling

documents" calculated by CINAR to create an interest in CINAR's

Class B stock and was widely distributed by defendants for that

purpose;

b. CINAR finalized the 1997 Registration Statement

and Prospectus and caused them to become effective as of

September 29, 1997. But for CINAR having drafted, filed, and/or

signed the 1997 Registration Statement and Prospectus, the 1997

Offering could not have been effected; and

c. CINAR conceived and planned the 1997 Offering and

orchestrated all activities necessary to effect the offering of

these securities to the investing public, including plaintiffs

and the 1997 Offering Sub-Class, by issuing the securities,

promoting the securities, and supervising their distribution and

ultimate sale to the investing public.


1553 / CMP / 00043823_WPD v1 63

contained untrue statements of material fact and omitted from


not misleading.

150. According to the 1997 Registration Statement and

Prospectus, "of the 3,000,000 Subordinate Voting Shares being

offered hereby ...., 2,750,000 are being offered by CINAR

CINAR, therefore, was a seller, offeror and/or solicitor of sales


Statement.

151. Lead Plaintiff The Kaufmann Fund and other members of

the 1997 Offering Sub-Class acquired the Company's Class B stock

pursuant to the 1997 Registration Statement. Plainti_-fs did not

know, and in the exercise of reasonable diligence could not have

known, of the untruths and omissions contained in or made in

connection with the 1997 Registration Statement.

152. Plaintiff The Kaufmann Fund and other membe_.-s of the

1997 Offering Sub-Class have sustained injury and suffered`

damages.

153. By reason of the conduct alleged herein, plaintiff The

Kaufmann Fund and members of the 1997 Offering Sub-Class who hold

the Company's shares have the right to rescind and recover the

consideration paid for the Company's shares and hereby elect to

rescind and tender their shares of the Company to the defendants

sued herein. 1997 Offering Sub-Class members who have sold their

shares of CINAR are entitled to rescissory damages.

154. Less than three years has elapsed since the securities

1 553 / CMP / 00043823.WPD vl 64

upon which this Count is brought were sold to the public. Less

than one year has elapsed since plaintiffs discovered or

reasonably could have discovered the facts upon which this Count

is based.

COUNT V


AGAINST THE EXECUTIVE DEFENDANTS




allegation as if set forth fully herein

156. Count V is brought by plaintiffs pursuant to Section 15

of the Securities Act, 15 U.S.C. § 770, on behalf of the 1997

Offering Sub-Class against the Executiv,:^ Defendants.

157. CINAR is liable as an issuer ender Section 11 of the

Securities Act and as a seller under Seeetion 12(a)(2) of the

Securities Act as set forth in Counts I-I and IV herein.

158. The Executive Defendants, b•T virtue of their power to

sign the 1997 Registration Statement, h__gh-ranking positions at

CINAR, stock ownership and/or other specific acts identified

above, were, at the time of the wrongs alleged herein,

controlling persons within the meaning of Section 15 of the

Securities Act.

159. By reason of the conduct alleged in Count III of the

Complaint, the Executive Defendants are liable for the aforesaid

wrongful conduct, and are liable to plaintiff The Kaufmann Fund

and to the other members of the 1997 Offering Sub-Class for

1 553 / CMP / 00043823.WPD v1 65

substantial damages which they suffered in connection with their

acquisition of CINAR stock during the Class Period_

160. Less than one year has elapsed since the securities


than three years have elapsed since plaintiffs discovered or

reasonably could have discovered the facts upon which this Count

is based.

COUNT VI


AGAINST ALL DEFENDANTS FOR VIOLATIONS OF

SECTION 11 OF THE SECURITIES ACT IN THE 1999 O]PFERING



162. Count VI is brought pursuant to Section 11 of the

Securities Act, 15 U.S.C_ § 77k on behalf of the 199) Offering

Sub-Class against all defendants in connection with the 1999

Offering.

163. The 1999 Registration Statement contained untrue

statements of material fact and omitted to state other facts

necessary to make the statements made therein not misleading, and

failed to disclose material facts adequately as described above

when it was declared effective by the SEC.

164. CINAR was the registrant for the shares sold to

plaintiff The Kaufmann Fund and other members of the 1999

Offering Sub-Class in the 1999 Offering. The Executive

Defendants and Corbeil were directors and officers of CINAR at

15,53 / CMP / 00043823. WPD k-1 66

the time the 1999 Registration Statement was declared effective

by the SEC and each Executive Defendant and defendant Corbeil

signed the 1999 Registration Statement. CINAR issued, caused to

be issued and participated in the issuance of the materially

false and misleading statements to the investing public which

were contained in the 1999 Registration Statement, which

misrepresented or failed to disclose, inter alia , the facts set

forth above. CINAR is strictly liable to plaintiff The Kaufmann

Fund arid the 1999 Offering Sub-Class as an issuer of the shares.

1S5. E&Y consented to the inclusion of its auditor's

opinions in the 1999 Registration Statement. E&Y's audit

opinions with respect to CINAR's 1997 and 1998 financier!

statem€nts were materially false and misleading on Marca 9, 1999

when the 1999 Registration Statement was declared effec_.ive for

the following reasons:

(a) the Company' s financial statements included tens of

millions of dollars in revenue from tax credits which h,id been

fraudu]ently obtained for scripts written for CINAR programs by

U.S. citizens which were being falsely accredited to Canadian

citizens;

(b) the Company's financial results were artificially

inflated as a result of its fraudulent tax practices which at all

material times violated both U.S. and Canadian GAAP;

(c) CINAR's fraudulent practice of substituting the

names of Canadian scriptwriters on its programs had resulted in

CINAR's Canadian customers overpaying for programming and the

1553 / CMP / 00043523 WPD vl 67

subsequent disclosure of this practice subjects CINAR to

liability for the repayment of those overcharges;

(d) the estimates, projections and opinions as to the

Company's expected revenues, earnings, income and value of its

stock were lacking in reasonable basis at all relevant times due

to its fraudulent tax practices; and

(e) the Company was falsely representing its assets to

be invested in marketable securities when, in fact, $122 million

had been invested overseas without authorization from CINAR's

Board of Directors, and some of which had been used as margin for

the purchase of non-investment grade commercial paper.

166. Lead Plaintiff The Kaufmann Fund acquired CINAR stock

issued pursuant to the 1999 Registration Statement.

167. Lead Plaintiff and other members of the 1999 Offering

Sub-Class have sustained damages as a result of the wrongdoing

alleged herein. The value of CINAR's Class B stock has declined

substantially since the 1999 Registration Statement became

effective due to defendants` wrongful conduct described herein.

168. At the time they purchased CINAR Class B stock, Lead

Plaintiff and other members of the 1999 Offering Sub-Class were

without knowledge of the facts concerning the wrongful conduct

alleged herein and could not have reasonably discovered those

facts.

169. Less than one year has elapsed since plaintiffs

discovered or reasonably could have discovered the facts upon

which this Complaint is based. Less than three years have

1553 / CMP / 00043823 WPD vl 68

elapsed since the securities upon which this Count is brought

were bona fide offered to the public.

COUNT VII

ON BEHALF OF THE 1999 OFFERING SUB-CLASS AGAINST

CINAR FOR VIOLATIONS OF SECTION 12(A)(2) OF

THE SECURITIES ACT IN THE 1999 OFFERING



171. Count IV is brought pursuant to Section 12(a)(2) of the

Securities Act against CINAR in connection with the 1999

Offering.

172. CINAR was a seller, offeror and/or solicitor of sales


Statement.

173. CINAR solicited and/or was a substantial factor in the

purchase by plaintiffs and the 1999 Offering Sub-Class of Class B

stock in the 1999 Offering. In support of soliciting sales of

the Class B stock issued by CINAR, the Company did the following

acts in furtherance of the 1999 Offering:

a. CINAR actively drafted, revised, and filed the

1999 Registration Statement with the SEC and caused the SEC to

declare the 1999 Registration Statement to be declared effective.

The 1999 Registration Statement and Prospectus were "selling

documents" calculated by CINAR to create an interest in CINAR's

Class B stock and was widely distributed by defendants for that

purpose;

1553 / CMP / 00043823.WPD v1 69

b. CINAR finalized the 1999 Registration Statement

and Prospectus and caused them to become effective as of March 9,

1999. But for CINAR having drafted, filed, and/or signed the

1999 Registration Statement and Prospectus, the 1999 offering

could not have been effected; and

c. CINAR conceived and planned the 1999 Offering and

orchestrated all activities necessary to effect the offering of

these securities to the investing public, including plaintiff The

Kaufmann Fund and the 1999 Offering Sub-Class, by issuing the

securities, promoting the securities, and supervising their

distribution and ultimate sale to the investing public.


contained untrue statements of material fact and omitted from


not misleading.

175. According to the 1999 Registration Statement and

Prospectus, "Of the 7,000,000 Limited Voting Shares being offered

hereby, 6,500,000 are being offered by CINAR ... ." CINAR,

therefore, was a seller, offeror and/or solicitor of sales of the

shares offered pursuant to the 1999 Registration Statement.

176. Lead Plaintiff The Kaufmann Fund and other members of

the 1999 Offering Sub-Class acquired the Company's Class B stock

pursuant to the 1999 Registration Statement. Plaintiffs did not

know, and in the exercise of reasonable diligence could not have

known, of the untruths and omissions contained in or made in

connection with the 1999 Registration Statement.

1553 / CMP / 00043823.WPD vl 70

177. Plaintiffs and other members of the 1999 Offering Sub-

Class have sustained injury and suffered damages.

178. By reason of the conduct alleged herein, plaintiff The

Kaufmann Fund and members of the 1999 Offering Sub-Class who hold

the Company's shares have the right to rescind and recover the

consideration paid for the Company's shares and hereby elect to

rescind and tender their shares of the Company to the defendants

sued herein. 1999 Offering Sub-Class members who have sold their

shares of CINAR are entitled to rescissory damages.

179. Less than three years has elapsed since the securities


than one year has elapsed since plaintiffs discovered or

reasonably could have discovered the facts apon which this Count

is based.

COUNT VIII


AGAINST THE EXECUTIVE DEFENDANTS ..ND CORBEIL




allegation as if set forth fully herein.

181. Count VIII is brought by plaintiffs pursuant to Section

15 of the Securities Act, 15 U.S.C. § 77o, on behalf of the 1999

Offering Sub-Class against the Executive Defendants and Corbeil.

182. CINAR is liable as an issuer under Section 11 of the

Securities Act and as a seller under Section 12(a)(2) of the

1 553 / CMP / 00043823.WPD v 1 71

Securities Act as set forth in Counts VI and VII herein.

183. The Executive Defendants and Corbeil, by virtue of

their power to sign the 1999 Registration Statement, high-ranking

positions at CINAR, stock ownership and/or other specific acts

identified above, were, at the time of the wrongs alleged herein,

controlling persons within the meaning of Section 15 of the

Securities Act.

134. By reason of the conduct alleged in Count VI of the

Complaint, the Executive Defendants and Corbeil are liable for

the aforesaid wrongful conduct, and are liable to plaintiff 'Ihe

Kaufmann Fund and to the other members of the 1999 Sub-Class for

substantial damrges which they suffered in connection with tleir

acquisition of CINAR stock during the Class Period.

185. Less than one year has elapsed since the securitieE

upon which this Count is brought were sold to the public, LEss

than three years have elapsed since plaintiffs discovered or

reasonably could have discovered the facts upon which this Ccunt

is based.

15 53 / CMP / 00043823.WPD vI 72

PRAYER FOR RELIEF AND JURY DEMAND

WHEREFORE, plaintiffs, on their own behalf and on behalf of

the Class and Sub-Classes, pray for judgment as follows:

A. Declaring this action to be a proper class action and

certifying plaintiffs as class representatives under Rule 23 of

the Federal Rules of Civil Procedure;

B. Awarding compensatory damages in favor of plaintiffs

and the other members of the Class and Sub-Classes against all

doofendants, jointly and severally, for the damages sustained as a

rE>sult of the wrongdoing of defendants, together with interest

thereon;

C. Awarding plaintiffs the fees and expenses incurred in

this action, including reasonable allowance of fees for

p:;aintiffs' attorneys and experts; and

D. Granting such other and further relief as the Court may

dE.em just and proper.

PLAINTIFFS DEMAND A TRIAL BY JURY.

Doted : July 21, 2000

LOWEY DANNENBERG BEMPORAD

& SELINGER, P.C.

By:

Neil L. Selinger aS"9389)

Jeanne F. D'Esposlto (JD 5843)

The Gateway, 11th Floor

One North Lexington Avenue

White Plains, NY 10601

Telephone : ( 914) 997-0500

LEAD COUNSEL FOR PLAINTIFFS

1553 % CMP / 00043821WPD vl 73

Andrew Barroway, Esq.David Kessler, Esq.Patricia Weiser, Esq.SCHIFFRIN & BARROWAY, LLP

3 Bala Plaza East, Suite 400Bala Cynwyd, PATelephone: (610) 667-7706

Joseph J. Tabacco, Jr., Esq.Nicole Lavallee, Esq.BERMAN, DeVALERIO, PEASE

& TABACCO, P.C.425 California Street, Suite 2025

San Francisco, CA 94104Telephone: (415) 433-3200

Steven G. Schulman, Esq.MILBERG WEISS BERSHAD HYNES &

LERACH, LLPOne Pennsylvania PlazaNew York, NY 10119

Telephone: (212) 594-5300

Mel E. Lifshitz, Esq.BERNSTEIN, LIEBHARD & LIFSHITZ, LLP10 East 40`h Street, 22"a FloorNew York, NY 10016Telephone: (212) 779-1414

Stanley M. Grossman, Esq.POMERANTZ HAUDEK BLOCK & GRCSSMANN100 Park AvenueNew York, NY 10017-5516

Telephone: (212) 661-1100

Tzivia Brody, Esq.

STULL, STULL & BRODY

6 East 45th StreetNew York, NY 10017Telephone: (212) 687-7230

Jonathan M. Stein, Esq.

SHEPHERD & GELLER, LLC7200 West Camino Real, Suite 203Boca Raton, FL 33433

Telephone: (561) 750-3000

Jeffrey H. Squire, Esq.KIRBY McINERNEY & SQUIRE LLP830 Third Avenue, 10th FloorNew York, NY 10022

1553 / CMP l 00043823.WPD vl 74

Telephone: (212) 317-2300

Joseph Weiss, Esq.

WEISS & YOURMAN

The French Building, Suite 1600

551 Fifth Avenue

New York, NY 10176

Telephone: (212) 682-3025

LAW OFFICES OF JEFFREY S. ABRAHAM

The Lincoln Building

60 East 42nd Street, 47th Floor

New York, NY 10165

Telephone: (212) 692-0555

Lionel Z. Glancy, Esq.

LAW OFFICES OF L. Z. GLANCY

1801 Avenue of the Stars

Los Angeles, CA 90067

Telephone: (310) 201-9160

Gary S. Graifman, Esq.

KANTROWITZ, GOLDHAMMER

& GRAIFMAN, P.C.

210 Summit Avenue

Montvale, NJ 07645

Telephone: (201) 391-7000

Brian Murphy, Esq.

RABIN & PECKEL LLP

275 Madison Avenue

New York, New York 10016

Telephone: 212) 682-1818

Leo W. Desmond, Esq.

2161 Palm Beach lake Blvd.

Suite 204

West Palm Beach, FL 33409

Telephone: (561) 721-8000

1553 / CMP / 00043823 .WPD vl 75

EXHIBIT A KAUFMANN FUND CINAR TRANSACTIONS

!•-an'. U'pe description traded: sell date shareslocal net b net

unit price l cost localamount it

As of 4/8/97: held 590,000 shares

BUY CINAR CORP -1:9/97 4 / 1 4/97 5M00 000 1.228.125.00 1_'28 . 125.00 24 . 562500

BUY CINAR CORP 4:15 97 4/18:97 10.000 000 243 . 750.00 243.750 00 24.375000

BUY CINAR CORP 4/ 16/97 42 1/97 20.000000 490,000 . 00 490.000.00 24.500000

BUY CINAR CORP 421'97 4,2-197 20.000 000 478 ,000.00 4 78,000.00 23.900000

BUY CINAR CORP 42997 5.2.97 10,000000 230.625.00 230.62500 23 . 062_500

BUY CINAR CORP -1 , 30 97 5 1 5,97 2.500 000 57,187 50 57.187.0 22.875000

BUY CINAR CORP 5 2 97 5,7/97 3.000 000 68.625.00 68 . 625.00 22 . 875000

BUY CINAR CORP 5 97 8 97 2.500 000-

57.187-50 57.1 S7 . 50--- ------- -22.8. 000

BUY CINAR CORP 5 8.9 7 5 1 9; 5.000 000 114,375 . 00 11.4.375.00 22 . 875000

BUY CINAR CORP 5, 8 .' 97 5 13, 97 37.000 000 851.000 . 00 851,000.00 23.000000

BUY CINAR CORP 9,23:97 9 1:2 9,97 2.000 000 67,500 00 67 ,5 00.00 33 . 750000

BUY CI\AR CORP 9 ; 2397 929'97 I ;5.000 000 :.906 . 2.0.00 5.906.2 50 , 00 33 350000

BUY CINAR CORP 9 1124 97 9:2997 73,000 000 2.669.996 .90 2.669.996.90 36.575300

BUY CINAR CORP 3/-1 , 99 3.9 99 250.000 000 5.000 . 000.00 5.000 . 000.00 20.000000

BUY CINAR CORP 101 S 99 10.'21;99 123.000 000 2.210.000 . 00 2.210.000 . 00 17.680000

BUY--------

CINAR CORP--- -

10 18 99- -----

10/21;99------

25.000 .000 433 , 312.50 -133 3 12.50 17.312500

BUY CINAR CORP 101599 10.'21,99 _0.000000 873.250M 873 ?-0.00 17.46-000

BUY C [NAR CORP 10 2 -,,,99 11,11'99 5.000 000 75 .312.50 74;.312.50 15.062500

BUY CI `AR CORP 11 1 99 11 ,4 99 ,15.000 000 794,376.00 794 . 376.00 17.652800

BUY CINAR CORP 1 1,16,99 1 1,119 1, 99 37.500 000 4-16.092 - 50 -446.092 . 50 11.895800

BUY CINAR CORP 11,16 99 11:19:99 12.500 000 148.437.50 148.437.50 11.875000

BUY CINAR CORP 12 1,99 126 .99 50.000 000 742,030-00 742 . 030.00 14.840600

SELL C1\AR CORP 10 1-1 97 10'17/97 25,000.000 1.021,840.93 1.021.840.90 40-875000 914382.50

local net base nettrans type description trade date sell date shares unit price id cost local

amount a mount

SELL C'INARC'ORP 1011( 10.21,97 7000000 282.335.57 2i 5.50 40.375000 256.02' 10

SELL CINAR CORP 102 11'3.97 3.500.000 134.542.86 1.3 _4280 38 482100 12_8.013 53

SELL CINAR C ORP 103097 11 -1 97 7.000.000 _72.46!00 272.-161.00 39 964300 256.0_'' Iu

SELL CINAR CORP I 1 3 97 1 L6 97 1.400 000 54.804 67 54.801.60 39 187500 51._205 4'

SELL C11N:\R (ORP 1 I 21 97 11 16 97 (J.100 000 2-:5.516.81 245.516.80 40 250000 10) 33

SELL CIN:AR ('ORf' 1 1 97 12 1 9? 5.000 00) 204-36S 1S '_04.368 10 -10 875000 1 52.8-(I 50

SELL CINAR C ORP f 2 ') 97 13 12 9- 35.000 000 1.329.955-66 1.329.955 60 3S 000000 1.207.532 -10

SELL CINAR CORP I. _8.98 2 2 98 5.000 000 Is-4.901s- 1 S4.99 " 80 . 7 000000 165.750 00

SELL C'INAR CORP 1.30,98 2--i.98 2.000000 71-.t)67 57 72.667 50 363'• 5000 6-.500 00

SELL CINAR C-ORP 22.98 215 98 4.000 000 146.375.1 1 146.37510 36.625000 135.000 00

SELL. CINAR UORP 22598 22.'109S 5.300 000 195.956-72 195.956 70 3? 014200 178 5'3 01)

SELL CINAR CORP _.'6/98 2 1 1 /98 4.000 000 148.995.03 148.995.00 37.250000 13 5.000 00

SELL CINAR CORP 2;9'98 2..'12'98 6.500 000 238.429.60 238,429.60 36-682700 219.375.00

SELL CINAR CORP 2'10.98 2/13198 6.200.000 227.067.43 227,067.40 36.625000 209._25000

SELL CINAR C ORP 2/10/98 2/13/98 1.000.000 36.855.00 36.855.00 36.875000 33.750 00

SELL CINAR CORP 2/ 111198 2/17/98 7.000.000 251.991.60 251.991.60 36.000000 236.250 00

SELL CINARCORP 120.%98 2251/98 37.500000 1.434.327.18 1,434.327.10 38250000 1.265.625.00

SELL CINAR CORP -_'23!98 2/26-98 2.000000 --o ^7..792.z_3 ^79,792.30 39.937500 6'.00 00

SELL CINAR CORP _ 5 98 3110'98 1 9.500000 715.661 93 745.662.90 39.240400 65S.125 00

SELL CINAR CORP 5. 111,98 5/14/98 22.500-000 428,736.70 428.736.70 19.055600 379.687.50

SELL CINAR CORP 5 2'98 5i15i98 26.500 000 502.423.21 502.423.20 19.000000 447,187, -0

SELL CINAR CORP 5'13'98 5/18198 3,000.000 56.002_0 56.002.50 18.687500 50.625.00

SELL CINAR C ORP 5: 15.98 5i20/98 28.000.000 535.389 75 535,389.70 19.121700 472.500.00

SELL CINAR CORP 5;: 81 98 5,'21/98 20.000 000 38-2,487.25 382.487 20 19.125000 337.500 00

SELL CINAR CORP 10"4.'98 10/19/98 8.000.000 131.550.80 13.550.80 16.484400 105,500.00

SELL CINAR CORP 10 5 98 10/20/98 32.500.000 537.16&09 537.168.00 16.528800 4_8,593.75

SELL CINAR CORP 10 16,98 l0%21/98 49.000.000 819-095 89 519.095.80 16.716242 640.688.00

SELL ! CINAR CORP 10, 9,98 10/22/98 10.500 000 183.056 31-11 185.0-5630 17.625000 135.8-43.75

SELL CINARCORP 11.'_198 11/5/98 25.000.000 5-13731.87 5-13,731.80 21.750000 321.5617_50

SELL CINAR CORP 11 3 98 11/6/98 25.000.000 540.606.97 540.60690 21.625000 310,750.00

SELL CINARCORP II 198 11 /6/98 5.000.000 107.921 39 107.92130 21.625000 6-1.062.50

SELL CINAR CORP 11 9:98 11/13/98 45,000 000 978.717.37 978,717.30 21.750000 552.656.25

SELL CAR CORP I I1 98 11/16/98 25,000.000 540.60697 540,606.90 21.625000 307,031.25

SELL CINAR CORP 111, 2'98 11/17/98 25,000.000 538 562.50 538,562-50 21.562500 306.625.00

SELL CINAR CORP 11% 3,98 11/18/99 25.000.000 538.562.50 538-=62-50 21.562500 306,250.00

SELL CINAR CORP I I: -11,98 11/20/98 25.000.000 524.982-50 524.982 50 21.000000 304.8 12.50

SELL CINAR CORP 11, IS 98 11,23/98 25.000.000 531 2_2.29 5343220 21 250000 302.437.50

SELL CINAR CORP 1 1.19 98 11/24,198 35,000.000 7S6.S-47 27 786,8 7.20 22.48'.100 419,937.50

SELL CINAR CORP 11/2) 98 11/251198 15.000.000 33, 1,.188 75 337.488.70 22.500000 179,250.00

SELL CINAR CORP 1 I 2 ' 98 11,127/98 25.000.000 581 230 62 5814060 23.250000 287,968.75

SELL CINAR CORP 11.2.:98 11/27/98 10.000000 232_.925.00 2_32.92500 23-312500 117,406.25

SELL C1NAR CORP 11.2- 98 11/30.'98 12.500000 '-87 490.41 287,490 -10 23.000000 143,750 00

SELL CINAR CORP 1 J."224 98 1 l i'301,'98 1 1.000.0001 252 51.56 2_52.151-50 23.000000 126,500.00

SELL CINAR CORP 1 1,27,98 112,98 6.000.000 136.505.64 136.505.60 22.791700 69.000.00

SELL CINAR CORP 12'898 12/11;98 20.500.000 -152_._266.17 45_.26610 22.062500 235,750.00

SELL CINAR CORP 12%10-98 12%16'98 6,700.000 14 777.19 143,T77- 10 21.500000 77,050.00

SELL CINAR CORP 12/11,98 12/16/98 12,000.000 263.511 20 263.511.20 22.000000 137,706.25

SELL CINARC'ORP 12/'21%98 12/24;98 7.300.000 163.789.74 163.789.70 22.477700 83,493.75

SELL CINAR CORP 12/23/98 12/29/98 14.000.000 31 1.054-21 31 1.054.20 22.258900 160.125-00

SELL CINARCORP 225100 3:1;00 97,000000 1.856.508.31 1,856,508.30 19.169900 1.940,000.00

SELL CINAR CORP 2'25,00 3/1 00 3,000.000 56.371, 5.61 56.375 60 18.812500 60,000.00

SELL CINAR CORP 3:'1%00 3/6;00 1,600.000 31,334.95 31,334-90 19.625000 32,000.00

SELL CINAR CORP 3%3,00 3%8t00 2-500.000 44.586.01 44,586.00 17.875000 50,000.00

SELL CINAR CORP 3/7.00 3110/00 250,000.000 1,415.577.81 1,415,577 80 5.662500 4,758,488.00

SELL CINAR CORP 3%8,'00 3/13%00 140,000.000 988.717.04 988,717.00 7.125000 1,987,178.50

SELL CINAR CORP 3/8,00 3113/00 35,000 000 249.678.17 249,678.10 7.133900 61 1,275.00

SELL CINAR CORP 3/8,00 3 13/00 75,000.000 537.199.51 537,199.50 7.192900 1,322,819.50

SPDIV CINAR CORP 4/30/98 5/5/98 800,000.000 0.00 0.00 0-000000 0.00

NO.004 ©02e2/23/01D 10:38 SHEPHERD a GELLER' LAC 4 M ILBERG NY 1JUZ

.1 t .a,a ^v .. vvv'R V V-e

0222/08 A V 15:19 SHE'" +lD 8. GELLER , LLC 4 202 G54o54 N0.'392 D03

Gana, LLC73X} Car1ui Re4 SW%u 203

B= R=L PL 33433

(561 ) 750-3000(361) 730-3364 Pa miI

C TIFICAflON ON NAMED PLAINTIFFE _U TO "-DERAL RF, QUM .A $

RICHARD SON ("Plaintiff'), declares as to the claims asserted under the federal " ' ssec

taw& that:

1. Plaintifhas reviewed or will review the CThTAR CORPORATION curltiescomplaint or will review it prior to filing.

2. Plaintiff did not purchase the seeurity that is the subject of this action at thedirection ofPlaintif€°s counsel or in order to participate in this private action or any other lti ion.under the federal securities laws

3. F'aintif is willing to serve as a represenzative party on behalf of the class,including providing testimony at deposition and trial, if necessary,

4. P.ainti.f has made no transaction(s) dieing the Class Period in the debt orequity securities that are the subject of thic action except those set forth below-

PriceatiOtt Amount P92 P(E Share

CINAR Pau t $5000 7/7/99 $25.00

5. D ring the years prior to the date of this Certifloate, Plaintiff has sought toseine or served as a reprisentative party for a class In the following actions filed under the federalsacurilies laws:

6. The PWntiffw ll not accept any payment for serving as a representative pattyan behaN of the class beyond the Plaintiffs pro rate share of any recovery, except such reasonablecosts and expenses (inetudb 'g lost wages) directly relating to the representation of the class asordered or approved by the court.

I ddaeiare under penalty of perjury that the foregoing is true and correct. Executed this 22' day ofFebruary, 2400_

a" 'Wm4tlQI AIi^TYL?A9321^s^APch^rv^ 22.3000

Documents

In Re Cinar Corporation Securities Litigation 1:00-CV-1086 …securities.stanford.edu/.../2000721_r01c_100CV1086.pdf · 2007-09-24 · IN RE CINAR CORPORATION Master File No. CV 00