IN THE UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF NUCHIGAN

c 17Case No . 99-761 4IN RE LASON, INC. ) Case -76 2SECURITIES LITIGATION ) Case No . 99--161'T4----

THIS DOCUMENT RELATES TO:ALL ACTIONS

Case No. 00-705127;

Judge Arthur J. TarnoLw

JURY TRIAL DEMANDED

CONSOLIDATED AND AMENDED CLASS ACTION COMPLAIN T

Plaintiffs, by their undersigned attorneys, on behalf of themselves and the Class they see k

to represent, for their Consolidated and Amended Class Action Complaint make the followin g

allegations , based upon the investigation conducted by, and under the supervision of, their counsel ,

which investigation included the review and analysis of information related to the relevant time

period, including, inter alla, United States Securities and Exchange Commission ("SEC") filings by

Lason, Inc. ("Lason" or the "Company"), press releases, news articles, and other media report s

(including those disseminated in print and by electronic media), reports of securities analysts an d

investor advisory services, and interviews with numerous former employees of Lason . Except a s

alleged herein, the underlying information concerning Defendants' misconduct, and the particular s

thereof, are not available to Plaintiffs and the public and lie within the possession and control o f

Defendants and other Lason insiders . Accordingly, Plaintiffs believe that additional substantia l

evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for

discovery .

NATURE OF THE ACTION

1, This is a federal securities class action on behalf of all purchasers of the common

stock of Lason, Inc . ("Lason" or the "Company") between February 17, 1998, and December 17 ,

1999, inclusive (the "Class Period"), including but not limited to all persons or entities tha t

purchased Lason common stock pursuant or traceable to a registration statement (the "Registratio n

Statement") and prospectus (the "Prospectus") issued in connection with the secondary offering o f

Lason common stock on or about August 17, 1998 .

2. This case arises from the Defendants' combined efforts to transform Lason, a regiona l

image and data capture, data management and output processing services company, which ha d

revenues of approximately $120 .3 million in fiscal year 1997 into, by December of 1999, a $479 . 6

million international concern by way of a roll-up consolidation strategy. During the Class Period,

through the efforts of all the Defendants, Lason embarked on an aggressive "growth by acquisition

plan," acquiring 39 companies in the 30 months ended December 31, 1999 .

3 . During the Class Period, Defendants knowingly: (1) filed false financial statement s

violative of Generally Accepted Accounting Principles ("GAAP") that overstated the Company' s

revenues from operations ; (2) issued false and misleading statements in press releases and other

publicly disseminated documents ; and (3) in connection with the secondary public offering of

Lason's common shares on August 19, 1998 (the "Offering"), issued a materially false an d

misleading Registration Statement and Prospectus which created the false impression that Lason wa s

carefully choosing companies to acquire, smoothly integrating the companies it purchased, an d

realizing benefits from cross -selling the products of its various subsidiaries . This was far from the

truth. In fact, during the Class Period, hoping to quickly add revenues to the Company's bottom line ,

-2-

and contrary to what Lason informed and represented to its investors and the market, Lason acquired

businesses without adequately screening them, failed to adequately manage or fund the operations

of its newly acquired subsidiaries, and failed to implement an integration plan which would enabl e

the Company to benefit from synergies and to cross-sell products from its various subsidiaries .

JURISDICTION AND

4. The claims asserted herein arise under and pursuant to Sections 11, 12(a)(2) and 1 5

of the Securities Act of 1933 ( the"Securities Act") [15 U.S .C . §§77k, 771(a)(2) and 77o] and Section s

10(b) and 20( a) of the Securities Exchange Act of 1934 ( the "Exchange Act") ([15 U.S .C . §§ 78j(b)

and 78t(a)] and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission

("SEC") [17 C.F.R. § 240 .10b-5] .

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

§§ 1331 and 1337, Section 22 of the Securities Act [15 U.S .C. §77v], and Section 27 of the

Exchange Act [15 U . S.C. § 78aa] .

6. Venue is proper in this District pursuant to Section 22 of the Securities Act, Section

27 of the Exchange Act, and 28 U.S .C. § 1391(b). Lason maintains its chief executive and principal

place of business within this District and the acts charged herein, including the preparation an d

dissemination of materially false and misleading information, occurred in substantial part in thi s

District .

7 . In connection with the acts alleged in this complaint, Defendants, directly o r

indirectly, used the means and instrumentalities of interstate commerce, including, but not limited

to, the mails , interstate telephone communications and the facilities of the NASDAQ National

Market System, a national securities exchange .

-3-

PARTIES

8. By Order of the Court dated March 21, 2000, Lead Plaintiffs John Choi, George

Franks, Albert Sapiano, David Saul, James Sullivan, DJR International Group, Inc . Defined Benefi t

Plan & Trust, Richard Wolfson Charitable Remainder Trust, John Michael Druncik, and Gregor y

Nelson were appointed Lead Plaintiffs . Each of the Lead Plaintiffs purchased Lason securities durin g

the Class Period and sustained significant losses as a direct result of Defendants' fraudulent conduc t

alleged herein. Each of the Plaintiffs has previously executed certifications authorizing thei r

participation in this action as mandated by Section 21D(a)(2)(A) of the Exchange Act. Plaintiff

Aaron Brody purchased shares on the August 1998 offering .

9. (a) Defendant Lason, Inc . is a Delaware corporation with its principal executiv e

offices located at 1305 Stephenson Highway, Troy, Michigan 48083 . The Company claims to

provide products and services to over 4,000 customers, primarily in the commercial, healthcare ,

financial services and professional services industries, varying in size from small business an d

professional groups to Fortune 100 companies .

(b) At all times relevant to this action,,Lason common stock was actively trade d

on the NASDAQ exchange, a national securities exchange, under the ticker symbol "LSON" and wa s

registered pursuant to § 12 of the Exchange Act (15 U.S .C. § 781 ) . The market for Lason common

stock was therefore open, well-developed and efficient at all relevant times . Lason files annual ,

quarterly, and other reports with the SEC in accordance with the Exchange Act .

10. On or about August 19, 1998, Lason completed a secondary offering in which i t

offered 3,500,000 shares of common stock through the Underwriter Defendants (defined below), a t

a price of $47 per share, thereby raising in excess of $134 million .

-4-

11 . The following Defendants collectively referred to as the "Individual Defendants" at

all times relevant to this action, served in the capacities listed below and received substantia l

compensation related thereto :

(a) Defendant Gary L. Monroe ("Monroe") has served as Lason's Chief Executive

Officer since February 1996, and Chairman of its Board of Directors since April of 1998 . Monroe

was President of the Company from April 1997 until January of 1999 and has served as a directo r

since joining Lason in September 1995 . Monroe signed the registration statement filed with the SEC

on or about July 29, 1998 in connection with the Offering and the Company's 1999 Annual Report

on Form 10-K (the "1999 10-K") . During the Class Period, Monroe was quoted frequently in the

news media and in press releases and other publicly disseminated materials .

(b) Defendant William J . Rauwerdink1("Rauwerdink") served as Lason's Chief

Financial Officer, Executive Vice President , Treasurer and Secretary from May, 1996 until hi s

resignation in May 2000°. Rauwerdink served as a director of the Company since May 1999 .

Rauwerdink is a certified public accountant . Rauwerdink signed the registration statement file d

with the SEC on or about July 29, 1998 in connection with the Offering, the Company's 1998 an d

1999 10-Ks, and Quarterly Reports on Form 10-Q for the quarters ended: March 31, 1998, March

31, 1999 filed on May 17, 1999 ; June 30, 1999, filed on August 16, 1999 ; and September 30, 199 9

filed on November 15, 1999 .

On December 11, 1995, Defendant Rauwerdink consented to the entry of an order enjoininghim from violating certain antifraud and tender offer provisions of the federal securities laws .

2 According to a Lason press release, Rauwerdink resigned his executive positions on May 15,2000 purportedly to pursue personal interests but was to remain with the Company for anundisclosed transition period .

-5-

(c) Defendant John R . Messinger ("Messinger") has served as an officer of th e

Company since he joined L ason in July, 1997. Messinger was promoted from Executive Vic e

President and President of Imaging Services to President and Chief Operating Officer of the

Company in February, 1999 .

12 . It is appropriate to treat the Individual Defendants as a group for pleading purposes

and to presume that the false, misleading and incomplete information conveyed in the Company' s

financial statements public filings , press releases and other publications as alleged herein are th e

collective actions of the narrowly defined group of Defendants identified above . Each of the above-

referenced officers of Lason, by virtue of his high-level position with the Company, was directl y

involved in the daily operations of the Company at the highest levels and was privy to confidentia l

proprietary information concerning the Company and its business, operations, products, growth an d

financial condition as alleged herein . Said Defendants were involved in drafting, producing ,

reviewing and/or disseminating the false and misleading statements and information alleged herein ,

were aware or recklessly disregarded that the false and misleading statements were being issue d

regarding the Company and approved or ratified these statements in violation of the federal securities

laws.

13. As officers, directors and controlling persons of a publicly held company whos e

common stock was, and is , registered with the SEC pursuant to the Exchange Act, traded on the

NASDAQ National Market and governed by the provisions of the federal securities laws, th e

Individual Defendants each had a duty to promptly disseminate accurate and truthful informatio n

with respect to the Company's financial condition, performance, growth, operations, financial

statements, business, markets, management, earnings and present and future business prospects, an d

-6-

to correct any previously- issued statements that had become materially misleading or untrue, so that

the market price of the Company's publicly-traded securities would be based upon truthful and

accurate information . The Individual Defendants' misrepresentations and omissions during the Clas s

Period violated these specific requirements and obligations .

14 . The Individual Defendants participated in the drafting , preparation, and/or approval

of the various financial statements, press releases and other communications complained of herei n

and were aware of, or recklessly disregarded, the misstatements contained therein and omission s

therefrom. Because of their Board membership and/or executive and managerial positions wit h

Lason, each of the Individual Defendants had access to the adverse undisclosed information about

Lason's business, finances, markets, and present and future business prospects, as particularize d

herein, through access to internal corporate documents, conversations, or connections with corporate

officers or employees, attendance at management and/or Board of directors' meetings an d

committees thereof, and/or through reports and other information provided to them in connectio n

therewith, and knew (or recklessly disregarded) that these adverse facts rendered the positiv e

representations made by or about Lason and its business, issued or adopted by the Company,

materially false and misleading .

15 . The Individual Defendants, because of their positions with Lason, controlled the

contents of quarterly and annual repo rts, press releases and presentations to securities analysts . Each

Individual Defendant was provided with copies of the reports and press releases alleged herein to

be misleading prior to or shortly after their issuance and had the ability and opportunity to preven t

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

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

-7-

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

public and that the positive representations which were being made were then false and misleading .

As a result, each of the Individual Defendants is responsible for the accuracy of Lason's corporat e

releases detailed herein as "group-published" information and is therefore responsible and liable fo r

the representations contained therein .

16. Each of the Individual Defendants is liable as a primary violator in making false an d

misleading statements, and for participating in a fraudulent scheme and course of business tha t

operated as a fraud or deceit on purchasers of Lason securities during the Class Pe riod . All of the

Defendants had motives to pursue a fraudulent scheme in furtherance of their common goal, i .e . ,

inflating the reported earnings of Lason and the trading price of Lason securities by making false an d

misleading statements and concealing mate rial adverse information. The fraudulent scheme and

course of business was designed to and did : (i) deceive the investing public, including Plaintiffs an d

other Class members ; (ii) artificially inflate the price of Lason securities during the Class Period ; (iii )

cause Plaintiffs and other members of the Class to purchase Lason securities at inflated prices ; (iv )

conceal the Individual Defendants' fraudulent conduct ; and (v) increase the value of the Individual

Defendants' Lason shareholdings .

17. Lason and the Individual Defendants are hereinafter collectively referred to as th e

"Lason Defendants ."

18. Defendants Prudential Securities, Inc .; BancAmerica Robertson Stephens ; William

Blair & Co, . LLC ; Jeffries & Co . ; PaineWebber Inc; the Robinson -Humphrey Co. LLC; BT Alex .

Brown Inc .; McDonald & Company Securities, Inc .; Roney Capital Markets ; SunTrust Equitabl e

Securities Corporations ; and Wheat First Securities, Inc . (collectively the "Underwriter Defendants")

-8-

substantially participated in the commission of the wrongs alleged herein through their involvemen t

in the August 1998 Secondary Offering . The Underwriter Defendants were at all times entities

engaged in the business of investment banking, underwriting and selling securities to the investin g

public . The Underwriter Defendants were the underwriters of the Offering for which they receive d

substantial fees . Prior to the August 1998 Secondary Offering, the Underwriter Defendants were

required to and purportedly did, conduct an investigation into the business , operations , prospects ,

financial condition, and accounting and management control systems of Lason, known as a "due

diligence investigation . °" In the course of such investigation, the Underwriter Defendants would hav e

obtained knowledge of acts alleged herein if they had acted with reasonable care .

19. Defendant Prudential Securities, Inc . was the lead underwriter of the August 199 8

Offering of Lason shares (the "Offering") . Pursuant to an underwriting agreement, Prudentia l

Securities, Inc . agreed to purchase 945,000 shares of Lason common stock .

20. Defendant BancAmerica Robertson Stephens was an underwriter of the Offering .

Pursuant to an underwriting agreement, BancAmerica Robertson Stephens agreed to purchas e

351,000 shares of Lason common stock.

21 . Defendant William Blair & Co, LLC was an underwriter of the Offering. Pursuan t

to an underwriting agreement , William Blair & Co, LLC agreed to purchase 351,000 shares of

Lason common stock .

22. Defendant Jeffries & Company , Inc. was an underwriter of the Offering. Pursuant

to an underwriting agreement , Jeffries & Company, Inc . agreed to purchase 351,000 shares of

Lason common stock .

-9-

23. Defendant PaineWebber Inc. was an underwriter of the Offering . Pursuant to an

underwriting agreement, PaineWebber Inc . agreed to purchase 351,000 shares of Lason common

stock.

24. Defendant Robinson -Humphrey Co. LLC was an underwriter of the Offering .

Pursuant to an underwriting agreement , Robinson -Humphrey Co. LLC agreed to purchase 351,000

shares of Lason common stock.

25. Defendant BT Alex. Brown Inc . was an underwriter of the Offering . Pursuant to an

underwriting agreement , BT Alex . Brown Inc . agreed to purchase 60,000 shares of Lason common

stock.

26. Defendant McDonald &. Company Securities, Inc . was an underwriter of the Offering .

Pursuant to an underwriting agreement, McDonald & Company Securities, Inc . agreed to purchase

60,000 shares of Lason common stock .

27. Defendant Roney Capital Markets was an underwriter of the Offering. Pursuant to

an underwriting agreement, Roney Capital Markets agreed to purchase 60,000 shares of Laso n

common stock.

28 . Defendant SunTrust Equitable Securities Corporation was an underwriter of the

Offering . Pursuant to an underwriting agreement, SunTrust Equitable Securities Corporation agree d

to purchase 60,000 shares of Lason common stock .

29 . Defendant Wheat First Securities, Inc . was an underwriter of the Offering . Pursuant

to an underwriting agreement, Wheat First Securities, Inc . agreed to purchase 60,000 shares of Lason

common stock .

_10_

30. Each of the Defendants sued in the Section 10(b) claim is liable as a participant in a

fraudulent scheme and course of business which operated as a fraud or deceit on purchasers of Lason

common stock, by disseminating materially false and misleading statements and/or concealin g

material adverse facts . The scheme: (i) deceived the investing public regarding Lason's business

operations and the intrinsic value of Lason common stock ; and (ii) caused Plaintiffs and other

members of the Class to purchase Lason common stock at artificially inflated prices .

PLAINTIFFS' CLASS ACTION ALLEGATION S

31 . Plaintiffs bring this action as a class action pursuant to Federal Rule of Civi l

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all persons who purchased Lason

common stock between February 17, 1998 and December 17, 1999, inclusive, (the "Class Period" )

including without limitation all persons or entities that purchased Lason common stock pursuant or

traceable to the Registration Statement and Prospectus issued in connection with the Offering on o r

about August 17, 1998, and were damaged thereby . Excluded from the Class are Defendants ,

members of the immediate family of each of the Individual Defendants , any subsidiary or affiliate

of Jason and the officers, directors of Lason or its subsidiaries or affiliates, or any entity in whic h

Defendants have or had a controlling interest, and the legal representatives, heirs, successors or

assigns of any excluded person .

32. The members of the Class are so numerous that joinder of all members i s

impracticable . While the exact number of Class members is unknown to Plaintiffs at this time and

can only be ascertained through appropriate discovery, Plaintiffs believe that there are thousands of

members of the Class located throughout the United States . As of August 12, 1999, there were

approximately 18.774 million shares of Lason common stock issued and outstanding. Throughout

- 11 -

the Class Period, Lason common stock was actively traded on the NASDAQ National Marke t

System. Record owners and other members of the Class may be identified from records maintaine d

by Lason and/or its transfer agents and may be notified of the pendency of this action by mail, usin g

a form of notice similar to that customarily used in securities actions .

33 . Plaintiffs' claims are typical of the claims of the other members of the Class as all.

members of the Class were similarly affected by Defendants' wrongful conduct in violation of federal

law that is complained of herein .

34. Plaintiffs will fairly and adequately protect the interests of the members of the Clas s

and have retained counsel competent and experienced in class action and securities litigation .

35 . Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class . Among the

questions of law and fact common to the Class are :

(a) whether the federal securities laws were violated by Defendants' acts an d

omissions as alleged herein ;

(b) whether statements made by Defendants to the investing public during th e

Class Period contained material misrepresentations about the business, operations , financial

statements of Lason ; and

(c) to what extent the members of the Class have sustained damages and th e

proper measure of damages .

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

adjudication of this controversy since joinder of all members is impracticable . Furthermore, as the

damages suffered by individual Class members may be relatively small, the expense and burden of

-12-

individual litigation make it impossible for members of the Class to individually redress the wrong s

done to them . There will be no difficulty in the management of this action as a class action .

NO SAFE HARBO R

37. The statutory safe harbor relating to forward-looking statements under certai n

circumstances does not apply to any of the allegedly false statements pleaded in this complaint.

Many of the specific statements pleaded herein were not identified as "forward-looking statements "

when made . To the extent there were any forward-looking statements, there were no meaningfu l

cautionary statements identifying important factors that could cause actual results to differ materiall y

from those in the purportedly forward -looking statements . Alternatively, to the extent that the

statutory safe harbor does apply to any forward-looking statements pleaded herein , Defendants are

liable for those false forward-looking statements because at the time each of those forward-lookin g

statements was made, the particular speaker knew, or was reckless in not knowing, that the particula r

forward-looking statement was false , and/or the forward-looking statement was authorized and/o r

approved by an executive officer of Lason who knew, or was reckless in not knowing, that thos e

statements were false when made .

SUBSTANTIVE ALLEGATIONS

Applicability Of Presumption Of Reliance :Fraud-On-The-Market Doctrine

38. At all relevant times , the market for Lason' s stock was an efficient market for the

following reasons, among others :

(a) Lason's common stock met the requirements for listing, and was listed an d

actively traded, on the NASDAQ Stock Exchange, a highly efficient and automated market ;

-13-

(b) As a regulated issuer, Lason filed periodic public reports with the SEC an d

the NASDAQ ;

(c) Lason regularly communicated with public investors via established market

communication mechanisms, including through regular disseminations of press releases on th e

national circuits of major newswire services and through other wide-ranging public disclosures, such

as communications with the financial press and other similar reporting services ; and

(d) Lason was followed by several securities analysts employed by major brokerage

firms who wrote reports which were distributed to the sales force and certain customers of thei r

respective brokerage firms. Each of these reports was publicly available and entered the publi c

marketplace .

39 . As a result of the foregoing, the market for Lason's stock promptly digested curren t

information regarding Lason from all publicly available sources and reflected such information in

Lason's stock price . Under these circumstances, all purchasers of Lason's common stock during the

Class Period suffered similar injury through their purchase of Lason's common stock at artificiall y

inflated prices and a presumption of reliance applies .

Background FactsLason 's Business and Operations

Company Back rgound

40. Lason was incorporated in January of 1995. That same month, Golder, Thoma ,

Cressey, Rauner Fund W ("GTCR Fund N"), a fund controlled by Golder, Thoma, Cressey, Rauner ,

invested $10 million in the Company becoming its majority shareholder .

-14-

41 . Lason completed its initial public offering in October, 1996 and a secondary public

offering in August 1997 . Coincident with Defendant Messinger's arrival at the Company in July o f

1997, Lason embarked on a growth by acquisition strategy . During 1997, the Company acquired

14 companies with operating units in eight states , at a total cost of $71 million .

42. Following these acquisitions, during the Class Period, Lason represented to the publi c

that the Company was a provider of integrated information outsourcing services in three particula r

areas : (1) image and data capture, (2) data management and (3) output processing . During the Class

Period, Lason purported to employ more than 13,000 persons , with operations in 30 U . S . states, the

United Kingdom, Canada, Mexico, India, Mauritius and the Caribbean. The Company also

purported to operate over 85 multi-functional imaging centers and 100 facility management site s

located on customers' premises . During the relevant times, the Company claimed to have an many

as 4,000 customers primarily in the commercial, healthcare, financial services and professiona l

services industries . The Company purported to offer information management services across a wide

variety of media types and formats which are designed to provide integrated solutions to it s

customers' complex information management needs .

Beginning in 1998 Lason embarks on a Risk yAc uq isition Strategy in Order to Expand Revenues

43 . In 1998, Defendants embarked on a plan to fu rther ramp up Lason's growth through

acquisition. In January 1998, just prior to the beginning of the Class Period, an article in Crain's

Detroit Business quoted Defendant Rauwerdink as stating that Lasori planned 12-15 acquisitions to

take place in 1998 . The article stated that Lason's goal was to grow through acquisition to eventually

dominate the document-management industry in the United States . According to the article ,

-15-

Rauwerdink stated that Lason was on the lookout for small document management companies that

find themselves at a point where they need to make large investments in technology or to be

acquired. Rauwerdink characterized 1997 as "a great year" with revenues projected to be $120

million compared to $69 .9 million in 1996.

44. However, at the time that Rauwerdink was touting the success of the Company' s

acquisition strategy, Lason was already not the successful enterprise he portrayed it to be . By the

beginning of 1998, Lason was not realizing the revenues which the Company had counted on from

newly acquired subsidiaries, as those businesses' revenues, at best, remained static at their pre-

acquisition levels, and in many instances were declining .

45 . By mid-January, 1998, Lason's senior management was aware that the revenues from

the recently acquired companies were being purposefully overstated in the Company's filed financial

statements in contravention of GAAP in order to make it appear that such units were achieving

revenue targets . The Lason Defendants knew that Lason's revenue growth was almost completely

attributable to the accretion of additional revenue captured through the acquisition process and not

from Lason's success in increasing revenues at the newly acquired companies or from Lason's ability

to "cross-sell" (i .e ., sell products from one unit to customers of another unit) its products and

services . Furthermore, the Lason Defendants knew that Lason had not integrated the companies it

had acquired to date such that these units could even offer integrated solutions to customers .

46. In the midst of this precarious situation, on August 19, 1998, Mason completed the

Offering of 3,500,000 shares underwritten by the Underwriter Defendants who should have

determined through appropriate due diligence that Lason was not the successful company it portrayed

itself to be.

-16-

47. Throughout the Class Period, Defendants issued a series of materially false and

misleading statements concerning the Company's operations, performance and financial results .

Among other things, Lason misrepresented that the Company had a selective acquisition progra m

and misrepresented the success it was having with respect to its integration of its newly acquire d

businesses .

48. Specifically, although Lason assured the market that it had a selective acquisitio n

program, in reality, the Company failed to take any meaningful measures to ascertain whether th e

companies which Lason acquired had the potential to see their revenues increase or that the acquired

companies could even maintain revenues at pre-acquisition levels . During the Class Period, Lason

acquired companies which could not be easily integrated into Lason, companies whose high revenue s

were not capable of replication in coming years and companies in serious jeopardy of failure . They

did so all for the purposes of amassing an increasing revenue base which would artificially make

Lason appear to be a company enjoying rapid growth . Specifically, before Lason acquired the M-R

Group, the largest acquisition that the Company made during the Class Period, Lason failed t o

complete appropriate due diligence on the Company. Lason executives did not visit the vast majority

of M-R Group's offices or meet with the M-R Group executives . As a result, Lason failed to

investigate potential problems with the M-R Group, specifically those relating to its Memex unit .

49. In addition, during the Class Period, the Lason Defendants assured the market and

the Class that the Company was pursuing an aggressive integration strategy which would enable the

Company to cross-sell the products of various newly acquired units . However, these assurances were

false in that Lason did not integrate the newly acquired businesses into a cohesive structure such tha t

these units shared accounting and computer systems, or were even provided basic information abou t

-17-

what other units did. As a result, during the Class Period, salespeople at the various Laso n

subsidiaries could not cross-sell the Company's products because they were not even aware of wha t

products other divisions sold, and were unable to secure such information from Lason headquarters .

Lason misrepresented and omitted from its investors the material facts related to its failure to eve n

attempt to integrate the acquired companies, as is evident from the Lason Defendants' apatheti c

conduct in the wake of the Company's largest acquisition, the M-R Group . Other than issuing an

employee survey via e-mail to M-R Group employees, Lason management had virtually no contac t

with the M-R Group for nearly three months following the acquisition and the Lason Defendants did

not visit the M-R Group during this time . Furthermore, while the Company focused on completin g

an endless stream of acquisitions, Lason failed to provide its newly acquired subsidiaries wit h

enough resources to even maintain their level of competitiveness . As a result, all aspects of Lason' s

existing businesses began to suffer .

50 . During the Class Period, Defendants were able to mask the truth about the problem s

with Lason's business and "growth by acquisition" strategy by a twofold strategy of (1) filing fals e

financial statements which inflated the revenues of the Company's operations and understated it s

expenses ; and (2) completing a continuing stream of progressively larger acquisitions capped off b y

the $145 million merger with the M-R Group which ostensibly added significant new revenues t o

the bottom line .

51 . In order to condition the market to believe that the Company was performin g

according to Company-guided market expectations , during the Class Period, the Lason Defendants

issued public statements in press releases and to analysts, which statements fraudulently created the

materially false and misleading impression that the Company's revenues and earnings were on target

_18_

with market forecasts, when in fact, at the time that these statements were made, Defendants kne w

or were reckless in not knowing that Lason' s actual revenues were materially overstated in the

Company's financial statements. The Lason Defendants made these statements for the purposes of

convincing market analysts who covered Lason that Lason was meeting such analysts' estimates an d

that the Company's integration plan associated with its growth by acquisition plan was proceedin g

according to plan . Furthermore, the Lason Defendants knew, or were reckless in not knowing, tha t

rather than experiencing growth in its internal operations, Lason's pre-existing businesses wer e

failing and that growing, foreseeable and inevitable problems within Lason would make it impossibl e

to meet analysts' forecasts for fiscal year 1999 .

52. As evidence of the foregoing , within days of the Lason Defendants' revealing just a

small indication of the true nature of Lason's financial problems, on December 9, 1999, in reactio n

to the sudden and unexpected volatility in the Company's stock price, Lason's Chairman and CEO ,

Gary Monroe, reassured investors stating , "[w]e are not aware of any reason for Lason's shar e

price decline . "

53 . According to an article appearing in the December 13, 1999 issue of QLaia:a Detroi t

Business, Defendant Rauwerdink also sought to deflect the market's attention from the true

fundamental problems besetting the Company by, instead, attributing its stock price "dropoff t o

unfounded chat-room rumors on the Internet, Wall Street's general uneasiness for companies growin g

through acquisition, and a newsletter issued earlier that fall, with an inaccurate analysis of th e

company's balance sheet ." This deficient, if not completely inaccurate, explanation on the part o f

Defendant Rauwerdink was a subterfuge designed to keep the investing public in the dark about the

Company's true financial deterioration .

-19-

54. However, as investors ultimately discovered, both Monroe and Rauwerdink' s

statements were blatantly false and misleading , statements regarding the Company' s true financial

condition, since, less than one week later, after the market closed on Friday, December 17, 1999, the

Company finally announced that fourth-quarter earnings would be about one-third lower than

analysts and investors expected .

55. The reaction by the market to the Company's belated and shocking disclosure wa s

punitive and immediate . Analysts from SunTrust Equitable, Prudential, Robinson-Humphrey ,

Jeffries & Co. and Merrill Lynch all subsequently slashed their ratings on the stock . Then, on

Monday, December 20, 1999, the next trading day, the market reacted to the news regarding the true

financial condition of the Company, and Lason common stock fell from 23 5/16 to 117116 -- a total

of 117/8, constituting over a 50% drop in one day . and a greater than 56 point drop from the Clas s

Period high of $68.25. As a result of the foregoing market decline, Plaintiffs and the Class hav e

sustained significant damages as a direct result of the Lason Defendants' misconduct .

56. Focusing on Defendant Monroe's December 9, 1999 statement professing ignorance

of any reason for the drop in the Company's stock price and Defendant Rauwerdink's December 10 ,

1999 cover-up statement, the January 3, 2000 issue of Crain's Detroit Business singled Lason out as

a prime example of a publicly traded company "being punished . . . for not giving the public enough

information." The article, entitled "Let Lason be a Lesson in Dealing with Bad News," portrayed

Lason as an object " lesson ," then emphasized that "Wall Street . . . hates feeling misled" and referred

to Lason's "damaged credibility on Wall Street . "

57 . A follow-up article appearing in the January 17, 2000 issue of Crain's Detroi t

Business featured the negative feedback by Prudential Securities vice president and senior analys t

-20-

Kevin Dyches to the Company's dramatic "flip-flopping" about its year-end financial results .

Dismissing the Company's incredible claim that it did not learn about its earnings shortfall until lat e

in the quarter, the article quotes Dyches as retorting :

'There's always two sides to the story,' he said . 'And their claim isthey really didn't know until Dec. 15. The other side of that case is'well, you lied to us . How did things change so much in a week? '

The article also quoted Dyches as stating that "many analysts question the truth" of the Company' s

self-professed late discovery of its disappointing earnings results .

58. In its March 23, 2000 Business Wire press release, the Company finally revealed th e

extent of its dismal financial results for the fourth quarter of 1999 . Specifically, the Compan y

announced a $50 .3 million loss in net income for that quarter arriving at a $2 .78 net loss per share.

The $50.3 million loss consisted of an approximately $2 6 million net loss from continuing

operations, $3 .2 million net loss from discontinued operations and a $21 .1 million net loss on

disposal of discontinued operations . By so delaying its announcement of these results, the Compan y

and the Individual Defendants, knowingly or recklessly, misled the investing public with respect t o

the true fundamental problems besetting the Company and its various acquired companies, a s

described in great detail elsewhere in this Complaint . The Company also announced in that releas e

its decision to abandon its plans to spin-off its e-commerce units .

59. An article appearing in the April 3, 2000 issue of Crain's Detroit Business pinpointed

Memex, a subsidiary of the M-R Group plc company that Lason had just acquired in 1999, as on e

of the business units which Lason was eliminating .

-21-

60. Significantly, as pleaded elsewhere in this Complaint, the Company, prior to it s

acquisition of the M-R Group, had "turned a blind eye" to the substantial difficulties that Memex an d

its U . S . subsidiary, AMT, were expe riencing in the marketplace .

61 . In addition , the April 3, 2000 article refers to Defendant Monroe's improperly shifting

blame for the fourth quarter 1999 shortfall on Year 2000 fears supposedly held by Lason's customers

which, he indicated, would be resolved by rebounding sales in the first quarter of 2000. In fact ,

however, he knew or was reckless in not knowing that the Company's financial troubles, as describe d

in detail elsewhere in this complaint, were far more deep-seated than the actual or hypothetical Yea r

2000 problem and that these problems, by their very nature, would not readily lend themselves t o

the quick resolution that he had indicated.

62. In its April 18, 2000 Business Wire press release, Lason announced that it would no t

release its first quarter 2000 financial results until the first week of May, 2000 .

63. A May 1, 2000 article appearing in Crain's Detroit Business , during this developing

turmoil, reported that Lason had lost its newest director, the "very, very well-respected" Michael

Willis who resigned a mere four months after joining the board. Moreover, the article quoted

Defendant Monroe, with regard to the Company's then forthcoming earnings announcement, as

cryptically stating that "I think we have a lot of good things to tell . "

64. In its May 5, 2000 Business Wire press release , Lason announced yet a furthe r

postponement in the reporting of its first quarter 2000 financial results to May 15, 2000 .

65. Lason finally announced further "disappointing" results for the first quarter 2000 i n

its May 15, 2000 Business Wire press releases , specifically the Company reported a $5.8 million los s

from continuing operations . This loss included:

-22-

a net expense of approximately $1 .0 million, from a unit expected tobe sold, and an increase of approximately $1 .1 million in non-cashgoodwill amortization expense related to the change to purchaseaccounting for M-R Group plc . Also included in first quarter cost ofrevenues and other operating expenses are non-recurring expenseslargely related to the Company's businesses, which are expected to becombined, integrated or exited .

66. Consistent with Defendant Monroe's modus ran ' of stringing the Company' s

investors all along, these "disappointing" results put the swift lie to Defendant Monroe's precedin g

statements that the Company would rebound after the supposed Year 2000 problem disappeared an d

that there were "a lot of good things to tell . "

67. In addition, the May 15 press release disclosed that the Company, as of March 31 ,

2000, was in violation of certain covenants contained in its credit agreement but had been able to

obtain a waiver from its lenders until May 31, 2000 .

68. Not surprisingly, in view of these distressing announcements, the Compan y

announced, in a separate Business Wire press release dated May 15, 2000, that Defendan t

Rauwerdink had resigned as Lason's Executive Vice-President, Chief Financial Officer, Secretary

and Treasurer .

69. As signs of further dramatic fall-out from Lason's emerging financial problems, an

article in the May 29, 2000 issue of Crain's Detroit Business reported that Defendant Monroe had

stated that Lason had already shut down eighteen of its offices within the previous six months an d

that Lason would shut down an additional twenty offices in the year 2000 .

70. These developments further impacted the price of Lason shares . By June 19, Lason

shares were trading at a price of $2 17/32, an approximately 95% drop off from its 52 week high of

-23-

$50 1/2, recorded on September 8, 1999 . By June 30, 2000, the day of the filing of this Complaint ,

Lason's shares were trading at $2 1/2 .

THE CLASS PERIOD

The Class Period Begins as the LasonDefendants Announce Results for the FourthQuarter of 1997 and Year Ended 1997 whichMisstate The Company's Revenues in Violation of GAA P

71 . On February 17, 1998, Lason issued a press release on the Business Wire which

announced purportedly "record revenues" from operations and net income for the fourth quarter an d

year ended December 31, 1997 . According to the release, consolidated revenues increased 72% to

$120.3 million for 1997, up from $69 .9 million in 1996 . Income from operations rose to $15 . 6

million from $7 .7 million in the prior year .

72 . The results announced in the February 17, 1998 press release were reported in the

Company's filed 10-Q for the Fourth Quarter of 1997 and Annual Report on Form 10K for the yea r

1997 (the "1997 10-K") which were filed with the SEC on March 31, 1998 . In the notes

accompanying Lason's financial statements in the 199710-K, the Lason Defendants represented tha t

Lason was in compliance with GAAP's requirements for revenue recognition by stating: Revenues

are recorded when the services are provided .

Revenues are recorded when the services are provided . Revenues arepresented in the consolidated statements of income net of postagebecause the cost of such postage is passed through to the customer .

This representation misleadingly served to create the impression that the Company recognize d

revenues after services had been completed and after products had been mailed.

-24

73. The results announced in the February 1998 press release and repo rted in the

Company's 1997 Fourth Quarter 10-Q and 10K for 1997 were materially false and misleading, an d

were known by the Lason Defendants to be materially false and misleading at the time they were

issued or were recklessly disregarded as such because by the middle of January of 1998, Lason' s

reported revenues were at least in part derived from accrual of work-in-progress pursuant to use of

the percentage-of-completion method of accounting and not completed services, in contraventio n

of the Company's described GAAP, as represented in the 1997 10-K.

74. More specifically, by at least on or about January 15 , 1998 , Lason management,

including Defendant Messinger and Lason executives Brian Jablonksi and Bruce Duff were awar e

that a portion of the revenues reported by Lason's litigation support services businesses were false .

75. According to a former employee employed by the litigation copy division during the

Class Period, sometime during the first or second week of January 1998, Bruce Duff, the Vic e

President of Lason's Litigation division, contacted a general manager of Lason's Richmond litigatio n

copy business (the recently acquired Corporate Copies) to direct that the general manager move

$128,000 revenue for a job completed in early January of 1998, to December of 1997 so that th e

revenues associated with that large job could be recognized in Fiscal Year 1997 .

76. Shortly thereafter, at a cocktail reception on or about January 15, 1998, at Lason' s

national sales meeting on Marco Island, Florida, this general manager discussed the movement o f

the revenue from January of 1998 to December of 1997 in a conversation with Defendant Messinger ,

Jablonski and Bob Bassman , Lason's controller. Thereafter, Duff pulled the general manager aside

and instructed him not to discuss the movement of the $128,000 revenue in front of Bassman ,

because Bassman had to sign off on Lason's financials averring that the numbers were correct "to the

-25-

best of his knowledge ." The discussion was then held without Bassman present, at which time th e

Lason management present (Duff, Messinger and Jablonski) directed the general manager t o

recognize the $128,000 revenue in the fourth quarter of 1997 .

77. GAAP (Accounting P rinciples Board Opinion No . 10,1 12) states that : "Revenue

should ordinarily be accounted for at the time a transaction is completed ." GAAP (statement o f

Financial Accounting Concepts No . 5,183) further states that :

Revenues and gains generally are not recognized until realized orrealizable, and revenues are considered to have been earned when theentity has substantially accomplished what it must do to be entitledto the benefits represented by the revenues . Based upon this GAAPthere is a presumption that, unless otherwise disclosed, service typebusinesses will recognize revenue when services have beencompleted .

78 . Irrespective of the general presumption noted above, because "the usefulness of

financial statements for purposes of making economic decisions about the reporting entity depend s

significantly upon the user's understanding of the accounting principles followed by the entity, "

GAAP (Accounting P rinciples Board Opinion No . 22, Disclosure of Accounting Policies ; ("APB

Opinion No. 22")) requires disclosure of a company 's accounting policies. In this regard, APB

Opinion No. 22 states :

. . . .information about the accounting policies adopted by a reportingentity is essential for financial statement users . When financialstatements are issued purporting to present fairly financial position,changes in financial position, and results of operations in accordancewith generally accepted accounting principles, a description of allsignificant accounting policies of the reporting entity should beincluded as an integral part of the financial statements .

Disclosure of accounting policies should identify and describe theaccounting principles followed by the reporting entity and th e

-26-

methods of applying those principles that materially affect thedetermination of financial position, changes in financial position, orresults of operations. In general, the disclosure should encompassimportant judgments as to appropriateness of principles relating torecognition of revenue . . .

APB Opinion No . 22 .

79. Thus, Lason's recognition of revenue for jobs that were not yet completed (i .e .

constituting work- in-progress ) as of the date of the Company's financial statements violated APB

Opinion No. 22 because Lason did not disclose that the Company was recognizing revenue fro m

projects not yet complete .

80 . The $128,000 in revenue falsely attributed to 1997 in the Richmond litigation cop y

office was not an isolated aberration . During the Class Period, according to individuals employe d

in the litigation copy division, it was routine practice for Bruce Duff, the Vice President of Lason' s

litigation copy business, to direct general managers of the several litigation copy businesses tha t

reported to him to provide Lason headquarters with inflated quarterly revenue figures based o n

"work- in-progress" numbers . Specifically, after the general managers would provide the accurate

revenue numbers for the quarter, Duff would call them and tell them to add a certain amount o f

revenues to the quarterly reported financials . He termed the additional revenue amount he was

looking for "work-in-progress" or "WIP" numbers. However, there was no correlation between the

WIP number he wanted reported as work in progress with actual work actually being performed a t

the litigation copy units . Specifically, Duff requested that certain material amounts, approximatel y

$25,000 a quarter in the Richmond office (which represented approximately 10% of the quarterly

revenue there), be added to the previously reported quarterly revenues regardless of whether ther e

was $25,000 of work being performed at the facility . The pressure to "W P up the revenue numbers "

-27-

occurred throughout the litigation copy division and, in addition to the aforementioned discussions

about this policy with Lason Executives at the January 1998 cocktail reception, was openly discussed

by general managers at a Company outing in Dewey Beach, Delaware in July, 1998 .

81 . The intense pressure that Bruce Duff exerted on the litigation copy division to WIP

up the numbers to hit revenue targets, so that the Company could meet analysts' estimates by any

means necessary, was applied in other Lason units as well . According to an individual employed

by Lason during the Class Period, eventually, because of the increasing and/or persistent number of

work-in-progress revenues being reported which did not relate to any actual jobs and/or customers,

Bob Bassman, Lason's Controller, changed Lason's requirements for reporting work-in-progress

numbers, and began requiring that every reported work-in-progress job be accompanied by a job

number and a client number .

False Statements_ about the API Acquisitio n

82 . On March 9, 1998, Lason issued a press release over the Business Wire entitled

"Lason to acquire API Systems ; Acquisition Adds $25 million in annual revenues and expands New

York operation ." The release quoted Monroe as stating,

The Lason strategy is built on providing integrated informationmanagement services in three core areas : image and data capture,data management, and output processing . . . . This is anotherimportant step in establishing integrated, large-scale operations in keylocations throughout the U.S. API Systems has over 15 years ofindustry experience in the presort, data management and digitalprinting businesses .

83. The release also informed that the API acquisition brought more than 250 employees

to Lason and brought a strong experienced management team to Lason with long term relationship s

-28-

with Fortune 500 customers, and a total customer base of approximately 200 primarily large

commercial banks, investment banks and insurance companies .

84. The statements contained in the March 9, 1998 press release were materially false and

misleading, and were known by the Lason Defendants to be materially false and misleading at the

time of their publication or were recklessly disregarded as such because Lason's acquisition of API

did not bring strong experienced management to Lason but , as Lason Defendants knew but failed

to disclose, saddled Lason with a subsidiary whose value was impaired and reduced because at th e

time of the acquisition, API's executives and most senior employees were under crimina l

investigation for mail fraud . According to an individual employed by Lason's mail sorting division s

during the Class Period, to succeed in the mail processing business, it is imperative that a company

have a completely untarnished reputation for integrity and the problems at API were commo n

knowledge in the mail processing business at the time of the acquisition. Consequently, the

existence of the criminal investigation had an adverse impact on the value of API because th e

"experienced management" team touted by Lason, including the owners, chief executive officers ,

general manager and day shift manager, among others, were under investigation for mail fraud and

were subject to indictment on RICO charges which would likely negatively impact API' s

relationships with its customers and future value . The Lason Defendants were aware of the ongoin g

criminal investigation of widespread criminal conduct at API at the time that they made the

acquisition as evidenced by the fact that they required API to pay into a postage-related escrow fund

as a prerequisite of the acquisition . 3

3 In fact, on April 16, 1999, Lason's share price dramatically declined as a result of theannouncement that 10 "employees" of API had been indicted on charges that they defrauded thePostal Service of more than $25 million between 1994 and 1997 . (The April 1999 announcement

-29-

85. Just as the Lason Defendants intended, and as occurred throughout the Class Perio d

following disclosure of acquisitions by Lason, the announcement of the API acquisition caused

analysts following Lason to raise estimates for Lason's earnings . For example, on March 10, 1998 ,

the very next day after the API announcement, BancAmerica Robertson Stephens issued a report on

Lason announcing that they were "Raising Estimates ." The report noted that ,

"In 1997, API revenues grew approximately 20% with internal growthsimilar to Lason . We believe API systems is nicely profitable andcould add $0. 10 to annualized [earnings per share] . . . In recent monthswe indicated we believed Lason could earn $1 .30-$1 .35 withacquisitions by the end of 1998 . Lason has blown away our forecastsfor acquisitions, completing $60M in 3 months while maintaining astrong internal growth rate of 15% . We believe there continues to beupside to our current EPS forecasts . Rated a Buy. Price Target $50 . "

86. On May 13, 1998, Prudential Securities issued a report on Lason entitled "[w}e Ar e

Raising Our 12-Month Price Target on Lason to $50 Per Share From $45 on Expected Consisten t

30% EPS Growth ." The report noted "The company's cross-selling opportunities are enticing, with

the large scale Racom and ASI (sic) acquisitions and further opportunities expected through futur e

acquisitions. We believe that these opportunities should be able to maintain Lason's internal growt h

at approximately 15%-20% . . . . We believe that the management gained through the acquisition s

of ICS, A[P]I and Racom should help manage the business to be a $500 million entity within th e

next three years . "

87 . On May 14, 1998, Larson filed its quarterly report on Form 10-Q for the first quarter

of 1998 ended March 31, 1998 (the "First Quarter 1998 10-Q") . The First Quarter 1998 10- Q

was itself materially false and misleading because the indicted individuals were not simply somemiscellaneous "employees" but constituted the entirety of the executive and management structureof API,)

-30-

reported that the Company had paid $55 .4 million for a number of acquisitions during the first

quarter of 1998 . The two largest acquisitions were the aforementioned API acquisition and the

February, 1998 acquisition of Racom Corporation for approximately $20 .9 million in cash an d

188,372 shares of Lason common stock (valued at $5.2 million) . The First Quarter 1998 10-Q

reported that consolidated net revenue increased 77% from the first quarter of 1997 . In the

Management's discussion and analysis of the results of operations, the Lason Defendants stated ,

Approximately $17 .9 million of the increase was due to acquisitionsand approximately $2 .5 million was due to growth in the Company'sexisting business . The internal growth was primarily the result of a$2.7 million increase in image and data capture revenue and a$550,000 increase in print on demand revenue, partially offset by theeffects of certain discontinued services .

88. Lason's First Quarter 199810-Q falsely portrayed the company's revenue recognitio n

policy as recognizing revenue after services have been provided referring readers to the revenu e

recognition note which was contained in the Company's Form 10-K by the statement contained i n

each report :

The accompanying unaudited condensed consolidated financialstatements of Lason, Inc . (together with its subsidiaries, the"Company" ) have been prepared in conformity with generallyaccepted accounting principles for interim financial information andwith the instructions for Form 10-Q and Rule 10-01 of Regulation S-X . . . . In the opinion of management, all necessary adjustments(consisting of normal recurring adjustments) considered necessary fora fair presentation have been included . For further information, referto the consolidated financial statements and notes thereto included inthe Company's annual report on Form 10-K . . . .

89 . The representations in the First Quarter 1998 10-Q referenced in 1 87, which th e

Lason Defendants caused the Company to disseminate to the investing public, were materially false

-31-

and misleading, and were known by the Lason Defendants to be materially false and misleading a t

the time that they were filed, or were recklessly disregarded as such because unbeknownst an d

undisclosed to the investing public, the Company had been recognizing revenue (based upon fals e

estimates) pursuant to the percentage-of-completion method of accounting and not solely based upo n

the completion of services .

90. The First Quarter 1998 10-Q was also false and misleading because the "interna l

growth" which the Company attributed to increases in image and data capture revenue was based o n

revenues from phantom work-in-progress as discussed in 73-81 above, which never in fact

existed.

91. The Company's illusory growth by acquisition strategy and filing of quarterl y

financial statements which falsely and misleading inflated revenues had their desired effect on th e

market and the many analysts who were tracking the stock . On June 16, 1998, Jeffries & Co. issued

a report initiating coverage on Lason with a "Buy" rating and a price target of $55, 21% above

current levels . The report lauded Lason's customer retention, "first class sales and marketing

organization" and "successful acquisition program."

92 . On June 17, 1998, Sheryl Skolnick, a BancAmerica Robertson Stephens analyst ,

issued a report on Lason entitled, "Raising 1999 Earnings per Share Estimates by $0 .08 a Share

Following Closing of Four Acquisitions ." Skolnick attributed three cents of the increase in earning s

estimate directly to the acquisition of two litigation copy businesses, one based in Houston and on e

based in New Orleans the previous day . The report indicated that the New Orleans business woul d

be folded into Racom, which the analyst termed a "relatively sophisticated" company in the area o f

data management.

-32-

93 . On June 24, 1998, Prudential Securities issued a report on Lason reiterating its "Buy"

rating and announcing that "we are raising our 12-month price target on Lason to $55 per share fro m

$50 as a result of expected 30% -plus future earnings growth ." The Report stated that the chang e

in price target was based on the Company' s recent acquisitions and solid earnings growth. That

same day, Jeffries & Co. issued a report also reiterating a Buyrating and likewise announcing a price

target of $55 per share . The Jeffries analyst, Susan V. Lacerra counseled that Lason "should be a

core holding for growth stock investors and investors fleeing to quality small caps . "

94. On July 9,1998 , Jeffries & Co. issued another report on Lason, reiterating their "Buy "

rating on the Company and announcing an increase in their earnings estimate on Lason by two cents

to $1.80 a share . The July 9, 1998 Jeffries report noted that Lason's recent acquisition of Input

Services International would have a neutral impact on earnings in 1998 due to "the usual three-to-si x

months integration period." According to the report,

During its comprehensive integration process Lason increasesexpenses at the acquired companies, temporarily compressingoperating margin contribution which is offset by additional acquiredsales. This integration includes: 1) converting the acquired companyto the Lason brand ; 2) implementing common technology includingnetworks, hardware and software; 3) training the sales force

extensively on cross-selling ; and 4) achieving strong workingrelationships with local management .

95 . This statement was materially false and misleading when made because Lason di d

not have a comprehensive three to six month integration process . According to numerous

individuals employed by Lason during the Class Period, many months after companies were acquired

by Lason, these units continued to function as independent units . Common technology was not

uniformly implemented; sales training was cursory rather than extensive consisting of only inviting

-33-

sales representatives to a single sales meeting at which Lason provided an overview of the products

and services offered by the various units of the Company . According to those former employee

sources, as a result of the lack of integration, Lason's highly self-touted "cross-selling" hardly if ever

occurred.(as described elsewhere herein) and local management did not establish strong relationships

with Lason headquarters . As a result, turnover in these management positions was high, as

evidenced by the high turnover in the litigation copy division .

The Second QuarterResults

96. On July 22, 1998, Lason issued a press release to report "record revenues" for the

Second Quarter of 1998, The release reported that second quarter revenue rose 128% to $62 .6

million up from $27 .4 million in the second quarter of 1997. Operating income increased 118% to

$8.0 million compared with $3 .7 million in the prior year's second quarter . Net income for the

quarter increased 93% to $3 .8 million compared with $2 .0 million for the second quarter of 1997 .

In that release, Gary Monroe was quoted as stating "Lason's record second quarter was due to our

strong internal growth and the solid performance of each of our business units . . . . Our acquisition

program continues to focus on attracting high quality, market leading organizations within our highly

fragmented industry . Internal growth is again due in part to the success of our cross-selling efforts . "

97 . The statements in July 22,1998 press release referenced in 1 96 were materially false

and misleading, and were known by the Lason Defendants to be materially false and misleading at

the time they were issued, or were recklessly disregarded as such because, j rnte alia s

(a) The Company's record reported revenues were in part based on misstated and

fictitious recorded numbers. By January of 1998, Monroe knew that Lason's recorded revenues were

based on falsely reported revenues as discussed above in 9 73-81 .

-34-

(b) Rather than performing solidly, by July 22, 1998, Lason 's businesses , including its

litigation support businesses were losing revenues .

(c) The Lason Defendants were not having success with their "cross-selling" efforts .

Lason's salespeople were unable to sell the products offered by other Lason divisions . According

to individuals employed by Lason during the Class Period, the sales training provided by Lason t o

employees of the former Racom, Pinnacle & Corporate Copies among others consisted of nothin g

more than the opportunity to attend a single cross-training seminar at which short introductions o f

Lason's divisions were made and brief overviews of Lason's products were provided. Lason

salespeople were not provided with detailed information about the specific products available fro m

other divisions or whom to contact to secure such information . Lason had provided no meaningful

cross-selling training or other integration training to employees of Racom, acquired in the first

quarter of 1998, which continued to function as an independent business following Lason' s

acquisition.

(d) Lason was not acquiring high quality, market leading organizations . It was acquirin g

low quality, poor performing organizations . For example, in the recent past, the Company had

acquired API, a mail sorting operation under a cloud related to a federal criminal investigation, a s

described in 184 above, and litigation copy businesses, such as Corporate Copies and Pinnacl e

Copies, which, according to individuals employed by those Lason divisions at or near the time of the

acquisitions, were losing business at the time they were purchased and had declining revenues, suc h

that the Company was paying substantial sums for leases on copy equipment one-half of which were

laying idle .

-35-

98. On August 14, 1998, the Lason Defendants filed their quarterly report for the second

quarter of 1998 ended June 30, 1998 with the SEC which reported the revenues announced on Jul y

22, 1998 ("the Second Quarter 1998 10-Q" ) . The recorded results in the Second Quarter 10-Q wer e

false and. misleading when made, for the reasons stated in IN 73-81 above .

99. The Lason Defendants false and misleading statements to the market about Lason' s

revenues had their desired effect . All the analysts which followed Lason were now rating th e

Company a "buy" or better . In that regard, on August 21, 1998, Kevin Dyches, an analyst fro m

Prudential Securities announced that Prudential Securities was "changing our designated single best

idea to Lason." In that report Dyches said,

"We believe that Lason's growth rate will be around 40% or higher over the next fewyears, significantly superior to the market . In addition, Lason has a proven record ofsolid growth, through both recession and expansion phases of the economy, thuseliminating any worrisome cyclical factors . With 1999, earnings estimates at $1 .90

per share, Lason's stock is currently selling at only 60% of its expected growth rate-thus providing a strong buying opportunity . "

The Third Quarter Roults

100. On October 21, 1998, Lason issued a press release announcing "record results" for

the Third Quarter of 1998 . According to the release, third quarter revenues rose 155% to $77 .9

million, up from $30.6 million in the third quarter of 1997 . Operating income increased 148% to

$9.7 million compared with $3 .9 million in the prior year's third quarter . The Company filed its

financial statement for the third quarter of 1998, on Form 10-Q with the SEC on November 13, 1998

which reported the results announced in the October 21, 1998 press release (the "Third Quarter 199 8

-36-

101 . Each of the press releases describing Lason's quarterly results for the second and third

quarters of 1998 ended June 30,1998 and September 30,1998, respectively, and the Company's file d

quarterly financial statements issued on Form 10-Q for the second and third quarters of 1998, filed

on August 14, 1998 and November 13, 1998, respectively, falsely and materially portrayed th e

Company's revenue recognition policy as recognizing revenue after services had been provided a s

shown, referring readers to the revenue recognition note which was contained in the Company's

Form 10-K by the statement contained in each report that :

The accompanying unaudited condensed consolidated financialstatements of Lason, Inc . (together with its subsidiaries, the"Company" ) have been prepared in conformity with generallyaccepted accounting principles for interim financial information andwith the instructions for Form 10-Q and Rule 10-01 of Regulation S-X . . . . In the opinion of management, all necessary adjustments(consisting of normal recurring adjustments) considered necessary fora fair presentation have been included.

102. The representations in Lason's July 22,1998 and October 21, 1998 press releases and

Second Quarter 1998 10-Q and Third Quarter 1998 10-Q referenced above in 11 73-81 which th e

Lason Defendants caused the Company to disseminate to the investing public, were materially false

and misleading because unbeknownst and undisclosed to the investing public, the Company had been

recognizing revenue (based upon estimates) pursuant to the percentage-of-completion method of

accounting and not solely based upon the completion of services method which the Company

claimed to use in its public filings .

103. Throughout the fall of 1998, Lason continued to announce acquisitions, and as had

become common practice, thereafter analysts following Lason continued their pattern of raisin g

earnings estimates and price targets based on the faulty information that Lason had been supplyin g

-37-

to them. For example, on October 30, 1998, BancBoston Robertson Stephens issued a report o n

Lason, entitled "Lason, Inc. Acquires Key Canadian Player, Adding $0 .03 to 1999 EPS Estimate . "

According to that report, the BancBoston expected the Datacom acquisition to add $14 million i n

annualized revenues to Lason's results, and expected Lason to add to Datacom's 20% annual growt h

through cross-selling .

104. In addition, on November 6, 1998, Jeffries & Co . issued a report on Lason raisin g

price target and EPS estimates "because the Company has built strong earnings momentum goin g

into next year with the acquisition over the past two months of three companies totaling $28 million

in revenues . These acquisitions could be more accretive than our estimate increase has indicated du e

to synergies with Lason's existing businesses . "

105. In addition, on November 16,1998 and November 25,1998 , BancBoston Robertson

Stephens again revised upwards its estimate Lason's earnings, by $0.01 and $0.03 a share

respectively based upon Lason's announcement of two acquisitions . On November 13, 1998 ,

Prudential also raised their earnings estimates for Lason based upon Lason's announcement of its

acquisition of Texas based Lone Star Southwest Mailing Services .

False and Misleadin Statements Related t Lason's Existing Businesses

106. On February 16, 1999, Lason issued a press release, published on Business Wire ,

announcing purported record revenues, income from operations and net income for the fourth quarte r

and year end 1998. The release stated that consolidated revenues had increased 132% to $279 . 8

million for 1998, from $120.3 million in 1997 . Gary Monroe was quoted as stating,

Our 1998 results highlight Lason's continued strong internal growth,driven by a solid operating platform, and our ability to execute adisciplined approach to acquisitions . In addition, we had strong

-38-

improvement in our days sales outstanding which strengthened ourcash flow position . . . . . Our aggressive approach to the integration ofacquired companies and our commitment to cross-selling will havepositive long-term affects on the quality of our business and itsfinancial returns .

107. Defendant Monroe's statements as set forth in Lason's February 16, 1999 press re lease

were materially false and misleading , and were known by the Lason Defendants to be materially false

and misleading at the time of their publication or were recklessly disregarded as such because Lason

did not have a "disciplined approach" to acquisitions as described in 1 97 above, and because Lason

did not have a "solid operating platform" since, at the time this statement was issued, Lason' s

existing businesses were in serious decline .

108. Specifically, according to individuals employed in senior positions by Lason's service

center division during the Class Period, as of early 1999, Lason's Service Center business, which ha d

historically been one of the Company's main profit centers , was losing customers because Lason did

not offer the type of integrated solutions its customers were looking for. For example, according to

a former manager in Lason's Service Center during the Class Period, customers such as Johnso n

Controls, Mexican Industries and Lear Seating , were seeking to deal with one salesperson for both

their reproduction and digital services . Despite their representations to the contrary, Lason could no t

offer these integrated services . In addition, a number of the Service Center business's customers

were looking to transfer hard copy documents to a digital data format. Lason failed to expend

resources such that the division could offer such services . Lason failed to even provide networked

computers to service centers . As a result of the Company's inability to meet the needs of it s

customers, Lason's Service Centers lost business to competitors which could provide integrate d

digital services, g-y, the Johnson Controls account which went to MSX. Furthermore, according to

-39-

individuals employed by that division during the Class Period and a Class Period customer of tha t

division, the Service Center business was not a solid operating platform because Lason refused t o

adequately compensate employees in the division, who went years without raises, while Lason' s

senior executives continued to reward themselves with additional compensation .

109 . Also, for example, according to a manager at Lason's Business Communications

Division in Livonia, Michigan, which had secured GM's database business , Lason had lost the

confidence and virtually all of the business of GM which had previously been the Company's larges t

client .

110. The GM business was vital for Lason because the Company had historically derive d

a major portion of its business from the major domestic automobile manufacturers . In the first hal f

of 1998, for example, General Motors Corporation("GM") and Ford Motor Company accounted fo r

16.8% and 13 .9% respectively , of the Company's consolidated net revenues . The GM account

represented approximately a $4 to $5 million annual revenue stream to Lason . Lason had no other

customer whose revenue accounted for more than 10% of the Company's net revenues . Lason was

a tier one service provider to the automotive industry . In this capacity, among other services, Lason

provided on-site copy services, mail distribution and database services . In particular, during the

relevant time, Lason had secured on-site copy services business at the GM Tech Center, and the

Business Communications Division also had a number of substantial database accounts for GM ,

including the Five Card System database, the Hanover Credit Bureau, Assets and Recoverie s

database, the Illinois Collection and Credit database, and the Chevrolet Dealer Collection database .

111 . The importance of Lason's GM database business was recognized by analysts wh o

followed Lason. For example, in a August 20, 1998 report, Kevin Dyches, a Prudential Securities

-40-

analyst stated that "Lason has a long history with its main customers . . .A good example of growing

customer loyalty comes from General Motors, which now keeps its largest worldwide database with

Lason, and has Lason provide recall data and invoices to its customers ."

112. However, Lason hid from its investors the fact that this important relationship with

the Company's single largest customer, GM, was severely harmed because of Lason's failure to live

up to commitments that the Company had made to GM . Specifically, according to two individuals

who worked at Lason on GM's database business, although Lason assured GM that Lason had

redundancies in its database services such that there was a backup for GM's databases, and that

Lason employees devoted to the account were skilled in the operation of databases, in July of 1998,

a Lason employee crashed the Drive which ran GM's customer communications database and GM's

vehicle recall program database at which time GM discovered that there was no backup . GM then

discovered that the backup did not exist because Lason had not spent the approximately $200,000

required to build one . As a result of the crash, the customer communication and vehicle recall

program databases was completely out of service for more than three weeks .

113. Thereafter, GM sought to be compensated for the weeks of interruption of service .

After protracted negotiations, Lason finally agreed to provide GM with a $400,000 credit as a

settlement of GM's claims which the Company communicated to GM in a letter from Terry

Neumann, President of Lason's Communications division . However, Lason's resistance to us e

capital for existing operations doomed the agreement : by February of 1999, Lason backed out of the

agreement and refused to offer any credit to GM . The database incident and Lason's failure to take

adequate steps to remediate its business failures poisoned the Company's relationship with GM, and

by September of 1998, GM began the process of withdrawing its database business from Lason .

-41

114. Lason similarly hid from its investors other material facts regarding its various self-

inflicted problems with its customers . For example, another aspect of GM's business that Lason had

was the GM Design Center reproduction business . According to an individual employed by GM's

design center during the relevant time who worked with Lason, Lason lost several very large GM

accounts because the quality of Lason's work was poor and the Company routinely missed deadlines .

For example, GM requested that Lason print 1000 copies of .a two-sided phone directory within a

week. Lason agreed to the time constraint, but then delivered only part of the job by the deadline .

The missing of deadlines was a constant and frustrating problem for Lason's clients . GM was not

alone. Numerous other Lason customers who failed to receive their completed product on time

included Fanuc Robotics .

115 . Further, by early 1999, Lason was no longer paying its creditors in a timely manner ,

and as a result, Lason's divisions, including the Business Communications Division, could not get

print and mail vendors to deliver products other than on a cash basis . In addition, a number of

Lason's subcontractors, such as data entry companies, cut off Lason's credit . For example, according

to an individual employed in a management position at Lason's Phoenix office during the Class

Period, by 1999, Lason's Phoenix subsidiary (formerly IPRO), which was one of Lason's Internet-

based businesses, was unable to purchase the products and/or parts it needed to operate from

vendors, including, for example, Insight (a software company), because they were not paying their

bills .

116 . Lason also hid from investors the material fact that it had not integrated its operations,

thereby making it unable to achieve economies of scale . For example, the Company had no t

established a common accounting system, so that the entire company's accounting could be done by

-42-

one unit . Rather, each unit continued to keep its own books which were separately reported to

headquarters, using outdated software which was also inappropriate for a company of Lason's size .

Furthermore, the Company failed to implement appropriate systems and controls to ensure that th e

suppliers were paid and financial results were accurate . For example, according to a manager of a

$40 million division of Lason, Lason' s management had no idea of the volume of business for tha t

division and no idea what the company's billings were . If a divisional head tried to obtain accurat e

numbers on sales for the purposes of planning staffing levels or purchasing of equipment, they wer e

unable to get such numbers from Lason's accounting department . When the manager did get such

numbers, they were unreliable . He could get three different figures if he asked three different people

in the accounting department which further calls into question the accuracy of the financial figures

that the Company publicly reported.

117 . Lason's materially false and misleading statements regarding the success of th e

Company's integration plan and materially false and misleading financial state ments which inflated

the Company's revenues had the Lason Defendants' desired effect of overcoming the market' s

concerns about the Company's growth-by-acquisition strategy . For example, on February 17, 1999 ,

Prudential Securities issued a report on Lason, by analyst Kevin Dyches entitled, " Las[o]n : Driven

by Strong Internal Growth & Acquisition Success, Record 4Q." The report stated, in part,

Lason's 1999 outlook is one of explosive growth potential . From aconservative standpoint, we believe Lason will be able to sustainrevenue and earnings growth in the 25%-30% range, includingacquisitions. Our high-end aggressive growth expectations suggestachievable growth of 45%-50%, should the company continue its1998 acquisition pace . We believe Lason remains positioned for thisextensive growth through acquisitions . Management continues toreaffirm the company's aggressive acquisition plans, as supported byan "exceptionally full" acquisition pipeline both domestically and

-43-

internationally. With the pipeline full of high-quality, technologyfocused candidates, we believe Lason will not only receive thebenefits of geographical enhancement, but will reap the benefits fromthe integration of acquired technologies and products that could provesuperior to Lason's current products . Management noted that thestrength of the current pipeline allows for more discretion in choosingacquisitions that "fit the grid" . As for internal growth, we feelcomfortable with internal revenue growth expectations of 15%-18%and internal earnings growth expectations in the range of 20%-25% .The company's "focused cross-selling initiative" will continue tobolster success with obtaining large, new national contracts . Thesenew national contracts, combined with the company's enhancedgeographical presence, help position the company for sustained,strong internal growth .

Lason's strong financial position and asset management initiativeswill support Lason's focus on growth . Lason's successful completionof their August equity offering, coupled with abundant access tocredit facilities and little debt, provides the company with amplefinancial resources to continue their aggressive acquisition plans . We

were encouraged by Lason's operating cash flow for the fourthquarter, which according to management, was approximately $15million. We were also encouraged by the companies announcementthat the DSO had been reduced by 6-7 days in the fourth quarter . Anarea of recent focus, the receivables management of a growthcompany, particularly one with significant acquisitions, can be adifficult task. In our view, Lason's management displayed the meansnecessary to successfully operate a large, explosive-growthcompany . "

118. Also, in a February 26, 1999 article in the Detroit Free Press . Kevin Dyches, an

analyst covering Lason for Prudential Bache was quoted, in reference to Lason, as stating :

[T]he biggest risks to such an aggressive expansion strategy isabsorbing new companies fast enough to keep from slowing downoverall growth . Being too ambitious is always a risk . The downsideis there's a reason why people sell companies . . . You have to makesure the business you're buying is as strong as the seller says it is .

You can't afford to lose customers.

-44-

Dyches then discounted these concerns with regard to Lason, stating that there was a lot Lason wa s

doing right . Specifically, Dyches focused on Lason's reported revenue growth of 10% a year in its

acquired companies and 20% a year internally, and the fact that some 85% of Lason's business wa s

allegedly_ from repeat customers as reasons for Lason's success . However, as discussed herein ,

Jason's "success" was built on smoke and mirrors, as the Company's reported revenues were fals e

and inflated and the Company's existing businesses were troubled as they missed deadlines and lost

long-term customers .

119. On March 31, 1999, the Company filed its Annual Report for Fiscal Year 1998 o n

Form 10K (the "1998 10-K") . The notes to the financial statements contained in the Company's

1998 Form 10-K reiterated that " revenues are recorded when the services are provided." This

statement was materially false and misleading, and was known by the Lason Defendants to b e

materially false and misleading at the time of its filing, or was recklessly disregarded as such becaus e

the Company's reported revenues contained revenues derived from work-in-progress or which wer e

completely fictitious as described above in 173- 8 1 .

120. By causing the Company's financial statements to misleadingly fail to disclose tha t

the Company recognized estimated revenue pursuant to the percentage -of-completion method of

accounting while concomitantly leading the investment community to believe that the Compan y

recognized revenues after services had been completed, the Lason Defendants caused the Company' s

financial statements to fail to comply with GAAP (APB Opinion No . 22 as noted above in 178),

including APB Opinion No. 28 which states that "the Board encourages management to provide

commentary relating to the effects of significant events upon the interim financial results . "

-45

121 . By causing the recording of fictitious revenue as noted in In 73-81, 88-90 , 97-98 ,

101-102 above, the Lason Defendants caused each of the Company°s financial statements which wer e

disseminated to the investing public during the Class Period (and the earnings releases which the y

were based upon) to be materially false misleading and in violation of the provisions of GAAP a s

particularized in ¶ 77-78 above .

Las on Announces Its Largest Ac uisiti n : The M-R Group

122. On March 25, 1999, Lason issued a press release, published on Business Wire, in

which the Company announced that it had reached agreement on terms of a merger with the M-R

Group plc . According to the release, the merger would make Lason the world's leading provider of

integrated information management services for image and data capture, data management and

output processing. Under the Agreement, M-R shareholders would receive 4.877 shares of newly

issued Lason common stock for every 100 shares of M-R that they held. The transaction valued the

entire share capital of M-R at approximately $145 million . The Press Release quoted Defendan t

Monroe as stating :

The Proposed merger with London-based M-R Group meets ourstrategic objective of delivering information management services toour multi-national clients . . . M-R Group is our largest acquisition todate and provides Lason with a strong platform for growth in Europe,and provides an excellent management team to assist with further

expansion. Colin Haylock, Executive Chairman of M-R Group, willcontinue to lead its operations and will report to me . We are excitedabout the potential of cross-selling our service offerings through anexpanded international network .

The release also stated that "the proposed transaction is expected to be accounted for as a pooling-of-

interests for United States accounting purposes . . . "

-46-

123. The statements contained in Lason°s March 25, 1999 announcement of the M- R

Group acquisition, as referenced in 1122 were materially false and misleading, and were known by

the Lason Defendants to be materially false and misleading at the time of their publication or were

recklessly disregarded as such because Lason did not disclose that the Company had failed to

complete reasonable due diligence before deciding to complete the MAR Group acquisition.

Specifically, according to individuals employed by the M-R Group at the time of the merger by th e

time Lason agreed to the deal, Lason executives had not even visited, let alone inspected the vast

majority of the M-R Group's approximately 15 offices in the U .K . and spent no time reviewing th e

M-R Group's physical operations, and/or products or management before agreeing to the merger .

Lason's purported "due diligence" prior to the acquisition was focused primarily on how much

revenue Lason could add to their bottom line through a merger with the M-R Group, and consiste d

only of review of the M-R Group' s reported financial statements , meetings with the M-R Group

board and reliance on their investment banker, Merrill Lynch . In essence, like so many of their

previous acquisitions, the Lason Defendants were unaware of what they were actually acquiring b y

way of the M-R Group acquisition .

124. Lason's failure to perform appropriate due diligence before acquiring the M-R Group

was not a problem peculiar to that acquisition . Lason routinely failed to investigate the companies

which the Company acquired . For example, according to an individual employed as a manager in

Lason's Phoenix office during the Class Period, a Lason executive did not actually visit the Phoeni x

IPRO facility until several months after the acquisition of IPRO was already complete .

-47-

Old Problems Threaten M R Dea l

125 . On April 15, 1999, Lason issued a press release over the Business Wire to respond

to the announcement of federal indictments against ten API employees, which had led to a 10 %

decline in Lason's share price . In the press release, Defendant Monroe was quoted as stating that ,

The federal indictment is unrelated to Lason's current operations andwe believe will have no impact on our business . . . Lason's businessremains very sound . We believe that we have the management,systems and controls in place within our New York operations, aswell as our other mail-related operations, to detect any potentialproblems related to postal payments . In addition, we have a strongmanagement team in this area that is in full control of the New Yorkoperations. We believe this was an isolated incident unrelated toLason's operations, and we are placing these employees named in theindictment on administrative leave pending the resolution of thesematters .

126. Defendant Monroe' s statements in the April 15, 1999 press release were materiall y

false and misleading, and were known by the Lason Defendants to be materially false and misleadin g

at the time of their publication or were recklessly disregarded as such because the indicte d

individuals consisted of the entire management team at API -- not mere employees . Lason had

touted these very individuals as a "strong management team " in its March 9, 1998 Lason pres s

release announcing the API deal . Thus, contrary to Monroe' s statement, these indicted individuals '

actions were inextricably related to the operations of the API facility and the placement of all th e

indicted employees on administrative leave would likely have a significant effect on Lason's API

unit's operations .

127 . On April 29, 1999, Lason announced "record first quarter results" for the quarter

ended March 31, 1999 . According to the press release, first quarter revenue rose 128 percent to

$106.2 million up from $46.6 million in the first quarter 1998 . Operating income increased 126%

-48-

to $13.4 million compared with $5 .9 million in the prior year first quarter. Net income for the

quarter increased 96% to $6.8 million compared with $3 .5 million for the first quarter of 1998 . For

the 1999 first quarter, the Company reported diluted net income per share of $0 .43 compared with

$0 .29 per share in the comparable quarter of the prior year, an increase of 48 percent . Defendan t

Monroe was quoted in the press release as stating, "[w]hile we continue to aggressively integrate our

acquisitions, the Company achieved robust internal growth during the first quarter of 20% ." Lason

filed its financial statement for the first quarter of 1999 on Form 10-Q with the SEC on May 17 ,

1999 which reported the results announced in the April 29, 1999 press release (the "First Quarter

1999 10-Q")

128 . Just like all previous quarterly reports filed during the Class Period, the First Quarte r

199910-Q materially falsely and misleadingly portrayed the Company's revenue recognition polic y

as recognizing revenue after services had been provided as shown by the reference to readers to the

revenue recognition note which was contained in the Company 's Form 10-K by the statement

contained in each report that :

The accompanying unaudited condensed consolidated financialstatements of Lason, Inc. (together with its subsidiaries, the"Company" ) have been prepared in conformity with generallyaccepted accounting principles for interim financial information andwith the instructions for Form 10-Q and Rule 10-01 of Regulation S-X . . . . In the opinion of management, all necessary adjustments(consisting of normal recurring adjustments) considered necessary fora fair presentation have been included .

129 . Also , the statements contained in Lason 's April 29, 1999 press release were materiall y

false and misleading, and were known by the L,ason Defendants to be materially false and misleadin g

at the time of their publication or were recklessly disregarded as such because, as set forth above in

-49-

¶173-81, 88-90, 97-98, 100-101, and 120 Lason's ability to continue to report "record results" was

derived from the fact that these results were based on falsely reported and overstated revenues, an d

because the Company was not aggressively integrating its acquisitions, as described previously i n

71 95, 97, 116 .

130. On May 4, 1999, Lason issued a press release on Business Wire which announced

completion of yet another acquisition, this time of Crest Information Technologies, which accordin g

to the release, was a leading Midwest regional provider of imaging services, including scanning and

conversion data storage and retrieval . In that release, Defendant Monroe was quoted as stating ,

"[w]ith this acquisition, all our regions have leadership in place which will help drive our targete d

cross-selling activities and our continuing integration of acquired businesses . "

131 . The statements in Lason's May 4, 1999 press release referenced in 1 130 were

materially false and misleading, and were known by the Lason Defendants to be materially false and

misleading at the time of their publication or were recklessly disregarded as such for the reasons se t

forth in 1173-81, 95, 97, 108, 116, 123, 124, and126 above and because :

(a) According to individuals employed during the Class Period at numerou s

offices including Lason's : litigation copy division, Phoenix IPRO office, Business Communication

division, San Diego office, and according to Class Period customers of Lason, Lason did not hav e

leadership in its cross-selling activities and had not integrated its businesses, but instead had

provided virtually no cross-selling training to its sales staff and had not provided training sufficien t

to even inform the Lason sales staff of the various products produced by Lason's subsidiaries, le t

alone how to sell such products to current customers . Furthermore, the Lason Defendants had faile d

to provide Lason's subsidiaries with the resources necessary to establish, let alone drive, cross-selling

-50-

efforts . For example, according to an individual employed there during the Class Period, Laso n

refused to commit resources necessary to provide the minimum required equipment to the Phoeni x

IPRG office which providedcoding and database services over the Internet . Although this operatio n

was ostensibly a high tech business of the type that Lason touted in its public releases, Lason refused

to purchase software for the Phoenix office, even though the software was necessary for the offic e

to be able to conduct business . Furthermore, Lason failed to properly staff this high tech unit, but

instead placed a 19 year-old without a college education, or any significant computer experience a s

the manager of the office.

Lason Keens M-R Group Acquisition From Fa lling Through

132. On May 13,1999, Lason issued a press release published on the Business Wire which

announced that the Company had revised the terms of the merger agreement with M-R Group to tak e

into account the change in Lason's share price since the announcement of the Merger . Under the

revised terms of the agreement, M-R shareholders would receive 5 .376 shares of Lason common

stock for every 100 shares of M-R group shares held, revised upward from the previously announce d

4.877 shares they would have received in the original terms of the deal .

133 . Lason management agreed to provide additional value to M-R Group shareholder s

because the Company needed to complete the deal at any cost . Lason was depending on the

accretive effect of the revenues from M-R Group to add to the Company's bo ttom line . In that

regard, according to individuals employed by the M-R Group during the acquisition, the Laso n

Defendants disregarded and ignored existing problems at the M-R Group which were made know n

to them by the M-R Group Board, specifically, the facts that : (a) the M-R Group's revenues had

slipped more than 10% off the Company's own revenue projections for 1999 a development whic h

-51-

the M-R Group would be required to disclose under British law to near certain disastrous effect i f

the merger did not go forward ; (b) the M-R Group's troubled Memex unit which sold a low margin

search and retrieval software product to police forces was experiencing high costs and low sales t o

its very limited market ; and (c) Memex's U .S. subsidiary, AMT's search and retrieval softwar e

product was not Y2K compliant and (d) that subsidiary had promised to deliver by November 199 9

to its customers, who had already purchased the non-compliant product, a Y2K complian t

replacement product which had not yet been developed, and; as a result of the Y2K problems with

the AMT product, several of AMT's customers had brought suit against the Company .

134. On May 17, 1999, Lason filed its quarterly report for the first quarter of 1999 ende d

March 31, 1999 with the SEC which reported the revenues announced on April 29, 1999 (the "First

Quarter 199910-Q") . The recorded results in the First Quarter 1999 10-Q were false and misleading

when made, for the reasons stated in 173-81 above.

135. Just like all previous quarterly reports filed during the Class Period, the First Quarte r

1999 10-Q materially falsely and misleadingly portrayed the Company's revenue recognition policy

as recognizing revenue after services had been provided as shown, referring readers to the revenu e

recognition note which was contained in the Company's Form 1998 10-K by the statement contained

in the report that :

The accompanying unaudited condensed consolidated financialstatements of Lason, Inc . (together with its subsidiaries, or the"Company" ) have been prepared in conformity with generallyaccepted accounting principles for interim financial information andwith the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. . . . In the opinion of management, all necessary adjustments(consisting of normal recurring adjustments) considered necessary fora fair presentation have been included.

-52-

136, On May 27, 1999, the day of the Company's annual meeting of shareholders, Lason

issued a press release announcing that the Company expected "record" financial results for 1999 .

In that release, Monroe stated that "Lason's strong internal growth highlights our focus on cross-

selling programs, the successful integration of acquired companies and our new branded service

initiatives . We are committed to the transition of acquired companies to the Lason name to enhanc e

market recognition and increase cross-selling oppo rtunities . "

137, Defendant Monroe's statements as quoted in the May 27, 1999 Lason Press Release

were materially false and misleading , and were known by the Lason Defendants to be materially false

and misleading at the time of their publication or were recklessly disregarded as such for the reason s

stated in 9[9[ 95, 97,108, 116, 123, 124 and131 above .

138 . On June 9, 1999, according to a report in the Detroit Free Press , Lason announced

that the Company's merger with the M-R Group had been approved by the M-R Group' s

shareholders . The Company announced that it expected the deal to close by June 30, 1999 and o n

June 28, 1999, Lason announced that the M-R group merger had been completed following th e

approval of the High Court of England and Wales .

139. On July 27, 1999, Lason issued a press release, published on Business Wire, in which

it announced purported "Record" results for the second quarter of 1999, ended Tune 30, 1999 .

According to the press release, in second quarter 1999 the Company had purported net income o f

$9.6 million, or $0 .51 per share, compared with $6 .8 million, or $0.44 per share reported in the same

period the prior year . Total purported revenues for the second quarter increased 64 percent to $142 . 1

million, compared with $86 . 5 million reported in the same period the prior year. In addition to

announcing these purported "Record" results, the Lason Defendants also announced that in

-53-

furtherance of the Company's consolidation strategy, Lason would begin to "streamline" it s

operations by taking substantial charges and making employee reductions . In order to convince the

market that these charges and reductions were part of Lason's growth strategy, the Lason Defendant s

used this press release to condition the market to believe that the Company was operating accordin g

to expectations . As evidence of this, the press release stated, in part, the following :

'Lason 's results for the second quarter include the strong growthof our core business and the contribution from the recentlyacquired companies , including M-R Group ,' stated [defendant]Monroe . 'Our internal owth rate, excluding -R Grow of 20.6%for the quarter demonstrates our success at cross-selling our coreservices in image and data capture, data management and outputprocessing„ and an increased focus on web-based services.' 'With theacquisition of M-R Group, we now have a strong worldwideplatform to meet the needs of our multinational customers . Weintend to streamline and focus that platform to support rapidlygrowing markets like e-commerce . Today, services to this sectorrepresent approximately $50 .0 million in annualized revenue and arethe fastest growing part of our business .' 'To accelerate this growth,we will align core operating centers in all major regions . Thesecenters will be supported by a dedicated sales and marketingeffort. As a result of these changes, we will be consolidating 24facilities, including 12 M-R facilities, out of our approximately150 current locations . In addition, 300-400 employees will bephased out . Our organization has s agnificant experience withstreamlining operations . These moves will Rosition Lason as a `TrulyIntegrated Worldwide Company' with an improved cost structure,able to better capitalize on the tremendous opportunities in front ofus .' [Emphasis added. ]

140. The statements contained in the July 27, 1999 press release, reproduced herein in

y[ 139, were materially false and misleading, and were known by the Lason Defendants to b e

materially false and misleading at the time of their publication, or were recklessly disregarded a s

such for reasons set forth in IJ 73-81, 84, 95, 97,108, 121,123, 124,126, and131 above and because :

-54-

(a) the M-R Group acquisition did not provide a strong worldwide platform for Lason

but rather consisted of a Company that itself was close to collapse . At the time of the acquisition,

as noted above, according to individuals employed by the M-R Group at the time of the acquisition,

the M-R Group was perilously close to having to issue a "profit warning" (as required under British

Law) disclosing that the company profits would be 10% lower than the 6 million pounds sterling

(approximately $9,480,000 valued as of the date of the press release) which the Company ha d

previously forecast, which disclosure would likely have a devastating result on the M-R Group' s

share price . In addition, the M-R Group was beset with problems resulting from the facts that (1 )

the Company was being sued by a major customer, the British Government for 3 million pound s

Sterling (approximately $4 .74 million valued as of the date of the press release) for claims relate d

to a government contract dispute; and (2) the Company's Memex division, which required

significant capital resources 3 million pounds sterling, was failing, as that company was unable to

secure contracts among its limited customer base ;

(b) at the time such statements were made by the Mason Defendants , the Company

was experiencing severe and substantial problems integrating recent acquisitions and these problem s

were materially increasing the Company' s costs and expenses ;

(c) as a result of these integration problems, the Company was unable to realize

substantial synergies from the acquisitions as expected and, in fact, was being negatively impacted ;

(d) the Company was experiencing a mate rial decline in sales as management

failed to devote resources necessary to maintain the revenue stream of their existing businesses and

these businesses lost important accounts including , according to individuals employed by Laso n

-55-

during the Class Pe riod , GM's Service Direct Mail Account, and the Chevrolet Owner s

Communications Program Database, in July 1999 ; and

(e) the Company's financial results were artificially inflated by the Company' s

recognition of revenue based upon fictitious "work-in-progress" numbers and the Company's failure

to timely recognize material charges for restructuring costs and obsolete or impaired assets and/o r

inventory.

141 . The materially false and misleading statements issued by the Company in publicl y

disseminated statements had their intended effect of falsely inflating the stock price . As evidenc e

of this, immediately following the Company' s announcement of "record" second quarter results and

its "streamlining" plans, on July 28, 1999, PaineWebber, Inc . ("PaineWebber") issued an analyst

report on Lason in which it rated Lason common stock a "Buy," and encouraged its customers t o

purchase Lason stock. In making its recommendations, the analysts relied in part, on the following :

* Strong Internal Growth Rate - - The company reported 20%internal revenue growth rate for the second consecutive quarter, upfrom 18% one year ago . These strong rates show the success ofLason 's growth initiatives. Given the strength of new businesswins year-to-date , we expect Lason will continue to operate at thehigh end of its 15-20% target range.

* * * * *

* We Continue To Believe The Stock Is Undervalued - - We areraising our 1999 estimate to $2 .05 and maintaining our 2000 EPSestimate at $2.50, as we believe Lason will continue to achieveinternal growth of at least 20 % . Our $75 target price (30x our 2000estimate of $2 .50) is probably aggressive given the recent sell-off ;however, it is unrealistic for a high recurring revenue informationservices company with a substantial EPS growth rate of 30% to tradefor any great length of time at such a steep discount to its long-termgrowth rate. We reiterate our Buy rating .

-56-

More Acquisitions Likely to Create Upside . While our estimatesassume no additional transactions, Lason's track record to at adsus to believe that the likelihood of seeing .,,., additional accretiveacquisitions is quite high . We look for progress on the acquisitionfront to drive upward revisions to our earnings estimates and ourtarget price . [Emphasis added.]

Based on a review of the information provided in part by the Company, and its analysis of th e

Company's reported "record" results and its stated growth prospects, PaineWebber estimated th e

following quarterly and year-end earnings per share :

~2 Q3 4-Q Total

1998Actual 0.29 0.31 0.35 0.39 1 .35

1999Estimate 0.43 0.51A 0.53 0.58 2.05

142. On August 4 ,1999, the Company issued a press release , published on Business Wire ,

in which it announced another acquisition this time of Addressing Services Company, Inc .

("ASCO"), a Connecticut-based provider of business communications and output processing

services , with approximately $15 million in annualized revenues . According to the press release,

the sellers were paid an undisclosed amount of cash and stock . In addition to making this

announcement, the Lason Defendants used this press release to condition the market to believe that

Lason's acquisition strategy was proceeding according to Company-driven expectations . As

evidence of this, the press release stated, in part, the following:

The Lason strategy is built on providing, on a regional basis,integrated information management services in three core areas :image and data capture, data management, and output processing,'stated [defendant] Monroe . 'ASCO . combined with our existing

-57-

strong businesses in the Northeast and New York Metro olitanregion. provides Lason with unmatched service and delivecggabilities in this important market area .' [Emphasis added . ]

143. The Company' s statements contained in the August 4, 1999 press release reproduce d

herein in 9[ 142, were materially false and misleading, and were known by the Lason Defendants t o

be materially false and misleading at the time of their publication, or were recklessly disregarded a s

such, for the reasons stated herein in 184 above, among others .

144. Based on a review of the information provided in part by the Company, and it s

analysis of the Company's reported record results and its stated growth prospects, Robertso n

Stephens estimated the following quarterly and year-end earnings per share :

-Q-1 -Q2 -Q3 4-Q D911

1998Actual 0.29 0.31 0.35 0.39 1.35

1999Estimate 0.43 0.51A 0.56 0.63 2.1 2

145. On August 16, 1999, the Lason Defendants filed the Company's quarterly report fo r

the second quarter ended June 30, 1999 with the SEC which reported the revenues announced in th e

July 27, 1999 Lason press release (the "Second Quarter 1999 10-Q") . The recorded results in the

Second Quarter 1999 10-Q were materially false and misleading when made .

146. Just like all previous quarterly reports filed during the Class Period, the Second

Quarter 199910-Q materially falsely and misleadingly portrayed the Company's revenue recognition

policy as recognizing revenue after services had been provided as shown, referring readers to th e

revenue recognition note which was contained in the Company's 1998 Form 10-K by the statemen t

contained the report that:

-58-

The accompanying unaudited condensed consolidated financialstatements of Lason, Inc. (together with its subsidiaries, the"Company" ) have been prepared in conformity with generallyaccepted accounting principles for interim financial information andwith the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. . . . In the opinion of management, all necessary adjustments(consisting of normal recurring adjustments) considered necessary fora fair presentation have been included.

147. The materially false and misleading statements issued by the Company had the effect

of misleading analysts and the investing public . As evidence of this, immediately following the

Company's announcement of purported record second quarter results and plan to "streamline "

operations, among other things, on October 13, 1999, Robertson Stephens issued an analyst report

on Lason in which it rated Lason common stock a "Buy," and encouraged its customers to purchas e

Mason stock . In making its recommendations, the analysts relied in part, on the following :

* We continue to believe that there are 2-4 more acquisitions thatmay be completed before the end of October . Due to Y2K duediligence, we continue to foresee a pause in Lason's acquisitionactivities form late October through January 2000 . We believe thecompany will focus on integration and emerge with a layer ofadditional acquisitions in CYOO.

* In our view, the overall business remains robust and theCompany's third quarter should be in-line with our estimates of$0.56. In addition, we believe that the M-R Group integrationactivities continue to pro rgoess ahead of schedule.

* In our opinion, the Company shares remain undervalued . Thestock currently trades at 14x our CYOO EPS estimate of $2 .75 . Webelieve that a demonstrated 20% internal growth model with creditbeing given for acquisitions, yields a goal of 25x PIE multiple on our2000 Q2 EPS run-rate of $2 .64, thus our 12-month price target is$66.

* We are maintaining our Buy rating on Lason shares. [Emphasisadded.]

-59-

148. On October 18, 1999, the Company issued a press release, published on Business

Wire , in which it announced the acquisition of Atlantic Document Centers, Inc . ("ADS"), a North

Carolina based provider of electronic information storage, digital print-on-demand and statemen t

processing services, with approximately $ 8 million in annualized revenues . According to the press

release, the sellers were paid an undisclosed amount of cash and stock. In addition to making thi s

announcement, the Lason Defendants used this press release again to condition the market to believ e

that the Company's acquisition strategy was proceeding according to Company-driven expectations .

As evidence of this, the press release stated, in part, the following :

'Our acquisition of ADC brings to Lason a strong East Coast provider,to complement our Midwest and West Coast operations, of ourdistributed digital print-on-demand strategy built around LasonDocument Express,' stated [defendant] Monroe . These capabilitiesform a major component in our service offerings to the e-commerceindustry . '

149. Defendant Monroe's statement quoted in Lason's October 18, 1999 Press Release, se t

forth in 1 148 above, was materially false and misleading, and were known by the Lason Defendant s

to be materially false and misleading at the time of its publication or was recklessly disregarded as

such because Lason was experiencing problems with its "digital" business as discussed in 1 115 an d

1 131 and because the Company did not have integrated operations as discussed above in' 95, 97,

116 .

150. On October 27, 1999, Lason issued a press release, published on Business Wire, in

which it announced purported "Record" results for the third quarter of 1999, the period ende d

September 30, 1999 . According to the press release , for the third quarter 1999 the Compan y

announced purported net income of $10 .6 million, or $0 .56 per share, compared with $4 .8 million ,

-60-

or $0.29 per share, reported in the same period the prior year . Total purported revenues for the third

quarter increased 58 percent to $152 .7 million, compared with $96.9 million reported in the same

period the prior year . In addition to announcing these purported "Record" results, the Laso n

Defendants used this press release to condition investors to believe that the Company's toute d

acquisition and integration strategy was operating according to expectations and the Company was

well positioned to capitalize on market opportunities . As evidence of the foregoing, the press release

contained, in part, the following :

'Lason continues to post strong financial results, including this recordthird quarter,' stated [defendant] Monroe . 'Our internal growth rate,excluding M-R Group, of 19% for this quarter again demonstrates thestren h our service model in the high owth digital markets we_gfhave targeted . Integration of our worldwide operations,acceleration by the M-R Group Merger, is on track. We expect itto be largely complete by year-end. Our team continues to deliversuperior results in serving markets such as e-commerce, whilecontinuing to focus on growing our worldwide business .' [Emphasisadded . ]

151 . The Company's statements contained in the October 27, 1999 press release,

reproduced herein in 1150, were materially false and misleading, and were known by the Laso n

Defendants to be materially false and misleading at the time of their publication, or were recklessl y

disregarded as such for the reasons stated herein in IN 73-81, 95, 97, 108, 116, 123, 124, 131 and 140

among others .

152. Furthermore , the above -referenced statements in the October 27, 1999 press rele ase

were materially false and misleading, and were known by the Lason Defendants to be materially fals e

and misleading at the time of their publication or were recklessly disregarded as such because th e

integration of the Company's worldwide operations was not on track to be completed at year end .

-61-

In fact, as of October 27, 1999, according to individuals employed by M-R Group at the time of th e

acquisition, Lason had taken virtually no steps to integrate the M-R Group's U .K. operations . By

December 31, 1999, the M-R Group's U .K. operations, which represented 80% of the M-R Group's

total operations continued to operate as they had prior to the Lason acquisition. By the end of

October 1999, Lason had dismissed most of the board level executives at the M-R Group, includin g

Colin Haylock, whom Defendant Monroe had promised would stay on to lead the U .K. business .

153 . In addition, contrary to Defendant Monroe 's assertions in the October 27, 199 9

release, according to the above-referenced M-R Group sources , Lason management had taken

virtually no steps to integrate the M-R Group into the Company . Specifically, from the time of th e

acquisition in June, 1999, until October 1999, Lason had nearly no contact with the M-R Group i n

the U.K. While Lason did take steps to integrate the M-R Group's U . S . operations (includin g

attempting to resolve the serious Y2K problems at the U .S . Memex subsidiary, AMT) and the M-R

Group's Mauritius data capture subsidiary, Lason failed to take steps to integrate the vast majority

of M-R Group businesses located in the U.K. Lason's entire integration program consisted of

holding (a) in September of 1999 a single meeting in the U.K. with 20 to 30 M-R Group

management level employees at which Defendants Monroe and Rauwerdink and other Laso n

executives and managers made brief presentations about Lason's philosophy and business and (b)

a single three day sales conference in the U.S . on cross- selling for M-R Group sales manager s

brought to the U . S. for that purpose .

154. Moreover, the August and September meetings referenced in the preceding paragraph

were merely introductory presentations and did not impact the way the M-R Group U.K. businesses

operated. The sales meeting simply provided an overview of Lason's products but did not provid e

-62

enough information such that an M-R Group salesperson would be familiar enough with suc h

products so that they could sell them . Following the M-R Group acquisition, the M-R Group's

financial officer reported his results to Lason's U .S. headquarters, but this flow of information wa s

a one-way street . Lason did not provide information to the M-R Group through any manageria l

reporting structure . Lason provided no direction on operating procedure to the M-R Group U .K. and

did not implement common technology, including networks, hardware and software, or achiev e

working relationship with local managers . By October of 1999, Lason executives had still not even

visited the majority of the 15 M-R offices in the U.I .

155. According to the M-R Group sources, prior to the September London meeting ,

Lason's only other contact with the M-R Group employees and at least the majority of its

management was Lason's emailing a survey to M-R Group managers seeking their opinions about

the positive and negative aspects of the M-R Group's business and structure .

156. At that two-day London meeting , Lason executives Monroe, Rauwerdink and Randy

Baker discussed the results of that survey and provided a brief overview of Lason's structure . With

no knowledge of the M-R Group's operations except for their incomplete due diligence and th e

results of a single questionnaire, on the eve of their arrival for the London meeting, Lason senior

management appointed Patrick O'Connor, previously of MAR Group, Managing Director of th e

former M-R Group's U.K. business and told him to cut $2.5 million pounds from the M-R Group' s

budget, an amount so large as to cripple the Company's operations, and to require that nearly al l

high-level management be let go .

157. To meet the directive, O'Connor dismissed : The National Sales Director (who

conveniently for Lason was due 100,000 pounds in sales commissions which could be avoided b y

-63-

his dismissal), the M-R Group's Operations Director, its Technical Director, the managing director

of the M-R Group's most profitable division microfilm, COM, and CD production ; the managing

director of the Systems Integration Group ; the managing director of the Memex division, the

managing director of the Output Services division ; and, the managing director of the Product and

Maintenance division .

158 . Furthermore, Lason senior executives resisted the M-R Group's management' s

attempt to introduce Lason management to M-R Group customers . For example, Her Majesty's Land

Registry ("ILi'll R'') was perhaps the M-R Group's most important customer for which the M-R

Group provided digital and electronic imaging and scanning services . Pursuant to a 15 million

pound contract, the M-R Group was scanning and converting the land registry's paper files to

computer-based color files. These files were then intended to be used by solicitors to accomplish

property searches and transfers . The Land Registry also had significant other business with the M-R

Group and was negotiating to secure another contract valued at 10 million pounds sterling .

However, when executives from the M-R Group tried to set up a meeting, at H vH.R's management's

request, beginning on or about June of 1999, between Lason senior management (including

Defendant Monroe) and HMLR's management, Lason senior management refused the HM.R's

request and never met with the M-R Group's most important customer .

159. The Lason Defendants' deliberate or reckless avoidance of conducting even the mos t

cursory steps necessary to integrate its approximately $145 million M-R Group acquisition coupled

with their abrupt dismissal of the M-R Group's core management team and the pending litigation

demonstrate the falsity of the statement in the October 27, 1999 press release that integration of the

M-R Group was "on track ."

-64-

160. In addition, domestically, by the end of the third quarter, the Lason Defendants kne w

that the planned disposition of the non-litigation copy businesses, the offset print business, the digita l

graphics business and the software development business would result in a loss in excess of $3 0

million. In contravention of GAAP (APB Opinion No. 17 and FASB Statement No . 121), the

recognition of this material loss was improperly deferred to year end .

161 . Furthermore, the October 27, 1999 press release and the Company's quarterly repor t

for the third quarter of 1999, ended June 30 , 1999 (the "Third Quarter 1999 10-Q") which repo rted

the revenues announced in the October 27, 1999 press release , in addition to being mate rially false

and misleading for the reasons stated in IN 73-81 , 95, 97, 108, 116, 123, 124, 131 and 140 among

others , also materially overstated revenues by $3,860,000 .

162. The materially false and misleading statements issued by the Company had the effec t

of continuing to mislead analysts . As evidence of this, following the Company's announcement o f

record third quarter results , among other things, on November 15, 1999, Bear , Stearns & Co., Inc .

("Bear Stearns") issued an analyst report on Lason in which it rated Lason common stock a "Buy, "

and encouraged its customers to purchase Lason stock . In making its recommendations, the analysts

relied in part, on the following :

We initiated coverage of Lason Inc . with a Buy rating onNovember 10, at the previous day's closing price of $387/8 . . .

Lason is entering a new, accelerated stage of growth, with e-commerce leading the expansion .

We believe that Lason's broad, integrated service offering sets itapart from the more narrowly focused pack . Leveraging a broad,integrated array of services has been elemental to the company' s

-65-

business strategy since 1996 . our inion Lason is uniquely ableto address customers' desire for outsourcing and vendorconsolidations by providing more than 500 rvices across thecontinuum of document capture . management and output. Theinformation management industry is highly fragrnented consisting ofa large number of small companies that have limited servigeofferings. Thus, nearly all of Larson's competitors ,are at adisadvantage, as thews on one or two. but not all three of thesecomplementary areas .

We think that as investors begin to understand Lason's improvedinternal growth prospects, as well as its shift to an operatingcompany, the stock's valuation should rise .

We attribute the recent weakness to the general malaise affectingsmall caps. In addition , Lason has been tarnished somewhat bynegative sentiment toward acquisitive companies . Our $55 priceobjective is based on a multiple of 20x our 2000 EPS estimate of$2.74, which is stil l a wise discount to Lason 's historical average,but nonetheless implies about 50% appreciation from currentlevels . [Emphasis added . ]

163. In spite of the Lason Defendants' efforts to conceal the problems which they knew ,

or recklessly disregarded, existed at the Company, around this time, the market price of Lason shares

began to decline . Between November 8, 1999, and December 8, 1999, the price of the Company's

shares fell from $39 .50 per share to $20.75 per share . To strengthen investor confidence, the Lason

Defendants immediately stepped up their campaign to maintain Lason's stock price by again issuing

a materially false and misleading press release . Thus, on December 9, 1999, the Company issued

a press release, published on Business Wire, in which Defendant Monroe, the Company's Chief

Executive Officer, stated "we are concerned about our stockprice drop and its volatility, and we

are not aware of any reason for Lason 's share price decline ." Two days later, on December 13,

1999, r 'n's further reported that Defendant Rauwerdink attributed Lason 's stock decline to

-66-

"unfounded chat-room rumors on the Internet, Wall Street's general uneasinessfor companie s

growing through acquisition , and a newsletter issued earlier thisfall with an inaccurate analysis

of the company's balance sheet." (Emphasis added . )

164. The Company's statements contained in the December 9, 1999 press release an d

December 13, 1999 Crain's report, reproduced herein in 11 163, were materially false and

misleading, and were known by the Lason Defendants to be materially false and misleading at the

time of their publication, or were recklessly disregarded as such for the reasons stated herein in Ifl

73-81, 95, 97, 108, 116, 123, 124, 131, 140 and 160, and because, the Lason Defendants knew o f

reasons for Lason's share price decline . Specifically, the Lason Defendants then knew that Lason

had lost the GM database business which had been a significant revenue source for the Company .

According to former employees of Lason who worked on the GM database account during the Clas s

Period, this occurred because, (in addition to the facts set forth in 1109-114), on or about Novembe r

1999, in order to ensure that their business was getting proper attention from Lason, GM requeste d

from Lason a list of all Lason employees who were exclusively devoted to GM's database project.

In response, Lason provided GM with a false and misleading list, which included dozens of name s

of individuals who not only did not work on the account but also included some names pf people

who did not even work at Lason and/or were decea5g . By the beginning of December 1999, Lason

had finally lost the GM database accounts to MSX .

165 . The materially false and misleading statements issued by the Lason Defendants had

the effect intended by their publication, and, as intended, the price of Lason stock increased almos t

$4.00 per share in the two trading days following Lason's December 9, 1999 press release . As

-67-

evidence of this, on December 8, 1999, the price of Lason shares closed at $20 .75 per share, and on

December 13, 1999, the price of Lason common stock closed at $24.06 per share .

166. On December 17, 1999, Lason issued a press release which stated :

Lason recently completed an intense review of its e-commerce, digitaland more traditional businesses as a result of the Company's growthopportunities in the dynamic digital market-place. To increase ourfocus on these new, fast growing markets, Lason will reposition itsbusinesses to strengthen its role as a worldwide leader in digitalinformation management . . . .To accomplish the repositioning, theCompany will discontinue, by sale or exit from the market itsactivities providing traditional (rather than Internet enabled) litigationsupport, software development and other analog services . . . Theseactions are expected to result in a change in the previouslyannounced accounting for the M-R Group, plc acquisition frompooling-of- interests to purchase accounting. ..

Fourth Quarter revenues, net of the discontinued activities, areexpected to be $7 to $9 million less that the consensus estimates .(Emphasis added.)

The above-quoted statement is hereinafter referred to as the "December 17, 1999 Announcement" .

167. GAAP, (Accounting Principles Board Opinion No . 20 Accounting Changes ; "APB

Opinion No. 20") states (in 117) :

The nature of and justification for a change in accounting principleand its effect on income should be disclosed in the financialstatements of the period in which the change is made . Thejustification for the change should explain clearly why the newlyadopted accounting principle is preferable .

168. After having reported the Lason/M-R business combination as a pooling-of- interests

for two consecutive quarters, the Lason Defendants decision to make the December 17, 199 9

Announcement that the Company had taken "certain actions which require a change in accounting "

but failed to disclose the specifics of such action, the justification for the change in accountin g

-68-

principle or provide an explanation why the newly adopted accounting principle is preferable . In thi s

regard, the financial statements within the Amended 10-Qs failed to comply with GAAP .

169 . The Lason Defendants ' attribution of the need for a restatement as required by the

change in accounting method was in fact, a subterfuge to conceal the real reason for the restatemen t

which was, to finally disclose the $30 million dollar impairment and correct the $3 .8 million dollar

overstatement of revenue in the Company's Third Quarter 1999 10-Q .

170. Specifically, the Amended 10-Q for the third quarter of 1999 disclosed the following :

TIDE MONTHS ENDEDSEPTEMBER 30, 1999($ IN THOUSANDS )

Original Restated Chan FeRevenues :Midwest 3,898 3,898Central 41,003 40,759 ( 244)Northeast 22,333 21,557 ( 776)Southeast 19,276 20,051 775Southwest 17,545 17,525 1West 25,497 25,496 ( 1 )International 23,389 23,180 ( 209)Other (175) (3,581) 3(,406)

Total 152,745 148,885 3(•860)

171. Specifically, during the Class Period, the Lason Defendants knew that the Company' s

assets were mate rially impaired and failed to disclose this fact in contravention of GAAP. (FASB

Statement No. 5 and APB Opinion No . 28) .

172. In their 10-Q for the third quarter of 1999, the Lason Defendants stated that th e

growth experienced by the existing businesses was $11 .3 million . However, this statement was

false, as confirmed by their restatement, the Company's revenues were really $3 .8 million less than

reported .

-69-

173 . Under both the pooling of interests method of accounting and the purchase metho d

of accounting, the revenues of the combining companies are aggregated (and, thus, should b e

identical) .

174. Because of this fact, the Company's January 19, 2000 Form 8-K stated that : "The

change to purchase accounting will not affect Lason's consolidated operating revenues or cash flow s

subsequent to June 30, 1999 . "

175, As described above, Lason recognized wholly fictitious revenue and revenue whic h

had been recognized before it was earned beginning at least in January of 1998, causing revenue s

to be overstated throughout the Class Period. It was only a matter of time before the Company' s

financial statements would have to be restated to reflect revenue catch-up adjustments . In this

regard, it was only a matter of time before the Lason Defendants were forced to cause the compan y

to disclose that revenue "growth", which was in fact based on a fictitious and improperly recognized

revenue baseline , and revenues recognized from new acquisitions , could not continue . Thus, after

the pace of acquisitions slowed down, the Lason Defendants were forced to announce, in th e

December 17, 1999 press release that the Company 's revenues would miss consensus estimates by

$7 to $9 million dollars .

Lason's True Financial Condition AndRestructuring Plans Are Belatedly Disclosed

176. On December 17, 1999, within four days of the Lason Defendants' reassurin g

investors that Lason's restructuring was proceeding according to plan, Lason surprised the marke t

by issuing a press release, published on Business Wire, in which it announced that fourth quarte r

results would fall materially short of analysts' expectations, by as much as $0 .80 per share and tha t

-70-

the Company now planned to sell what the Lason Defendants had previously referred to as its core

assets . In this regard, the press release stated, in part, the following :

Lason, Inc. today announced that its Board of Directors authorized theengagement of investment bankers to explore a spin-off, or othermeans, to capitalize and launch a portion of its existing e-commercebusiness into a separate unit . . .

(Defendant] Monroe commented, 'Lason recently completed anintense review of its e-commerce, digital and more traditionalbusinesses as a result of the Company's growth opportunities in thedynamic digital marketplace . To increase our focus on these new, fastgrowing markets, Lason will reposition its businesses to strengthenits role as a worldwide leader in digital information management . Webelieve these actions should significantly enhance shareholder value . '

To accomplish the repositioning, the Company will discontinue, bysale or exit from the market, its activities providing traditional (ratherthan Internet enabled) litigation support, software development andother analog services. These services are no longer consistent withLason's long-term growth strategy . The expected effect on 2000revenue and. gros~t gin ted to these discontinued businessesranges from approximately $75 to $90 million and approx mately $23to $27 million, respectively. Earnings share from continuingoperations, after adjustment for these discontinued units, are expectedto be reduced by between approximately $0.60 and $0.80 comparedwith the consensus 2000 estimate . These actions are expected toresult in a change in the previously announced accounting for theM-R Group, plc acquisition from pooling-of-interests to purchaseaccounting, with a resulting increase of approximately $126 millionin goodwill and approximately $4.2 million in related increasedannual non-cash amortization expense . '

Monroe continued, These changes, except for the change inamortization expense, will be included in Lason's fourth quarterresults as discontinued operations and repositioning charges . Weexpect fourth quarter revenue will be reduced for the results ofdiscontinued operations by approximately $19 million and operatingincome will be down approximately $800,000 . Fourth quarter chargeswill also include the effects of an expected non-cash loss resultingfrom the sale or elimination of discontinued operation s

-71-

(approximately$47 million, net of tax), the change to purchaseaccounting for the M-R Group acquisition (approximately $1 .1million increase in quarterly non-cash amortization expense) and therestructuring reserve resulting from the cost reduction opportunitycreated by the repositioning (approximately $23 to $27 million) . '

'The Company further announced that , due primarily to thefourth quarter revenue results to date , it expects fourth quarterearnings per share before discontinued operations and othercharges (listed above ) to be approximately 31% to 38% lowerthan the consensus estimate of $0.61. Fourth quarter revenues,net of the discontinued activities , are expected to be $7 to $9million less than the consensus estimates . This is a preliminaryestimate because December remains a key month for final fourthquarter results . Lason's estimates for fourth quarter revenue andearnings per share are based on results for October, preliminaryresults for November, the outlook for December and the increasedamortization expense related to the change to purchase accounting forthe M-R Group amortization . '

[Defendant] Monroe concluded, 'Lason's fourth quarter revenues arebeing adversely affected by a slow down in sales because ofY2K-related purchasing delays by some of our customers . We aredisappointed with the fourth quarter revenue shortfall, but remainconfident about the Company's prospects . Further, as a part of ourrepositioning, the Company expects to shift its focus away fromacquisitions to an accelerated integration of its businesses to enhanceour future profitability .' [Emphasis added.]

177 . The market's reaction to Lason 's shocking disclosure was punitive and immediate, an d

evidenced the fact that Defendant Monroe had lost all credibility in the market, and that his

explanation of sudden Y2K-related issues was not credible to investors . Immediately after hearin g

the Company' s purported explanation for its sudden revenue and earn ing sho rtfall , on December 20,

1999, Bloomberg news service reported that Lason shares fell as much as 51 % or $1 :1 .88 per share ,

to close at $11 .50 per share, a new 52-week low. Lason stock traded 19 .2 million shares on the day,

and was the largest reported decline of any stock trading in the U .S. markets . In addition to th e

-72-

foregoing, Bloomberg also reported that at least five analysts cut their rating on the stock following

this belated disclosure .

Undisclosed vers Information

178 . The market for Lason's common stock was open, well-developed and efficient at all

relevant times . As a result of these materially false and misleading statements and failures to

disclose materially adverse events, Lason's common stock traded at artificially inflated prices during

the Class Period. The artificial inflation continued until the time Lason admitted that it would b e

forced to sell the core operations of the Company which Lason could not integrate into its existing

operations, and this admission was communicated to, and/or digested by, the securities markets .

Plaintiffs and other members of the Class purchased or otherwise acquired Lason common stock

relying upon the integrity of the market price of Lason's common stock and market information

relating to Lason, and have been damaged thereby .

179. During the Class Period, the Lason Defendants materially misled the investing public ,

thereby inflating the price of Lason's common stock, by publicly issuing false and misleading

statements and omitting to disclose material facts necessary to make the Lason Defendants'

statements, as set forth herein, not false and misleading . Said statements and omissions were

materially false and misleading in that they failed to disclose material adverse information and

misrepresented the truth about the Company, its business and operations, including, i, &a, that:

(a) at the time such statements were made by the Lason Defendants, the Company

was experiencing severe and substantial problems integrating recent acquisitions and that these

problems were materially increasing the Company's costs and expenses ;

-73-

(b) as a result of these integration problems, the Company was unable to realiz e

substantial synergies from the acquisitions as expected and, in fact, was being negatively impacted ;

(c) the Company was experiencing a material decline in sales as management was

distracted by the integration problems and unable to implement the Company's business plan; and

(d) the Company's financial results were artificially inflated by the Company' s

failure to timely recognize material charges for restructuring costs and obsolete or impaired asset s

and/or inventory .

180. At all relevant times , the material misrepresentations and omissions particularized

in this Complaint directly or proximately caused or were a substantial contributing cause of th e

damages sustained by Plaintiffs and other members of the Class . As described herein, during the

Class Period, the Lason Defendants made or caused to be made a series of materially false o r

misleading statements about Lason's business, prospects and operations . These material

misstatements and omissions had the cause and effect of creating in the market an unrealisticall y

positive assessment of Lason and its business, prospects and operations, thus causing the Company' s

common stock to be overvalued and artificially inflated at all relevant times . The Lason Defendants '

materially false and misleading statements during the Class Period resulted in Plaintiffs and othe r

members of the Class purchasing the Company's common stock at artificially inflated prices, thu s

causing the damages complained of herein .

Other Relevant GAAP Violations

181 . The Lason Defendants were required to cause the Company to disclose, in its

financial statements, the existence of the material facts described herein and to appropriatel y

recognize and report revenues and expenses in conformity with GAAP. The Company failed to

-74-

make such disclosures and to account for and to report revenue and expenses fairly and in conformity

with GAAP .

182. As discussed above, each of the quarterly and annual reports filed with the SEC

during the Class Period were materially false and misleading because they misstated the Company' s

revenue and earnings .

183 . The Lason Defendants knew and ignored, or were reckless in not knowing, the fact s

which indicated that the financial statements and the various press releases and public statements

which were particularized above, were materially false and misleading for the reasons set forth

herein above .

184. SEC Regulations require that financial statements filed with the SEC conform wit h

GAAP. Financial statements filed with the SEC which are not prepared in conformity with GAAP

are presumed to be misleading or inaccurate. [17 C.F.R. § 210.401 (a)(1)] . The Company' s financia l

statements referred to above were false and misleading for the reasons alleged herein and becaus e

they constituted an extreme departure from GAAP by violating the following concepts and principles

of generally accepted accounting and fair financial reporting, among others particularized herein

above :

(a) The concept that financial reporting should provide information that is useful topresent and potential investors and creditors and other users in making rationalinvestment, credit and similar decisions (FASB Statement of Financial AccountingConcepts No. 1) .

(b) The concept that financial reporting should provide information about an enterprise'sfinancial performance during a period (FASB Statement of Financial AccountingConcepts No. 1) .

(c) The concept that financial reporting should be reliable in that it represents what itpurports to represent (FASB Statement of Financial Accounting Concepts No . 2) .

-75-

(d) The concept of completeness, which means that nothing material is left out of theinformation that may be necessary to ensure that it validly represents underlyingevents and conditions (FASB Statement of Financial Accounting Concepts No . 2) .

(e) The concept that conservatism be used as a prudent reaction to uncertainty to try toensure that uncertainties and risks inherent in business situations are adequatelyconsidered (FASB Statement of Financial Accounting Concepts No . 2) .

(f) The concept that the accounting method applied should be appropriate in thecircumstance (AU 411) .

(g) The concept that the financial statements , including the related notes , should beinformative of matters that affect their use, understanding , and interpretation (AU411) .

(h) The concept that the financial statements should reflect the underlying events andtransactions in a manner that presents the financial position and the results ofoperations within a range of acceptable limits that were reasonable and practicableto attain accuracy in financial statements (AU 411) .

(i) The principle that disclosure of accounting policies should identify and describe theaccounting principles followed by the reporting entity and the methods of applyingthose principles that materially affect the financial statements (APB Opinion No . 22) .

() The principle that losses be accrued for when a loss contingency exists (Statementof Financial Accounting Standards No . 5) .

(k) The principle that if no accrual is made for a loss contingency, then disclosure of thecontingency shall be made when there is at least a reasonable possibility that a lossor an additional loss may have been incurred (Statement of Financial AccountingStandards No . 5) .

(1) The principle that contingencies and other uncertainties that affect the fairness ofpresentation of financial data at an interim date shall be disclosed in interim reportsin the same manner required for annual reports (APB Opinion No . 28) .

(m) The principle that disclosures of contingencies shall be repeated in interim andannual reports until the contingencies have been removed, resolved, or have becomeimmaterial (APB Opinion No . 28) .

(n) The principle that management should provide commentary relating to the effects ofsignificant events upon the interim financial results (APB Opinion No . 28) .

-76-

(o) The concept that an expense or loss is required to be recognized if it becomes evidentthat previously recognized future economic benefits of an asset have been reducedor eliminated, or that a liability has been incurred or increased, without associatedeconomic benefits (FASB Statement of Financial Accounting Concepts No . 5) .

(p) The principle that revenues should ordinarily be accounted for at the time atransaction is completed, with appropriate provision for uncollectible accounts(Accounting Principles Board Opinion No. 10) .

(q) The principle that long-lived as sets and certain identifiable intangibles to be held andused by an entity be reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not be recoverable,and that an impairment loss is to be recognized when the sum of the expected futurecash flows is less than the carrying amount of the asset (FASB Statement of FinancialAccounting Standards No . 121) .

(r) The principle that long-lived assets and certain identifiable intangibles to be disposedof be reported at the lower of carrying amount or fair value less cost to sell (FASBStatement of Financial Accounting Standards No . 121) .

(s) The principle that the method or methods of measuring extent of progress towardcompletion should be disclosed in the notes to the financial statements (Statement ofPosition 81-1) .

(t) The principle that the specific criteria used to determine when a contract issubstantially completed should be followed consistently and should be disclosed inthe note to the financial statements on accounting policies (Statement of Position g 1-1) .

SCIENTER ALLEGATIONS

185 . As alleged herein, the Lason Defendants acted with scienter in that the Laso n

Defendants knew that the public documents and statements issued or disseminated in the name o f

the Company were materially false and misleading ; knew that such statements or documents woul d

be issued or disseminated to the investing public ; and knowingly and substantially participated o r

acquiesced in the issuance or dissemination of such statements or documents as primary violation s

of the federal securities laws. As set fo rth elsewhere herein in detail, the Lason Defendants , by virtue

-77-

of their receipt of information reflecting the true facts regarding Lason, their control over, and/or

receipt and/or modification of Lason's allegedly materially misleading misstatements and/or their

associations with the Company which made them privy to confidential proprietary informatio n

concerning Lason, participated in the fraudulent scheme alleged herein . The Lason Defendants were

motivated to conceal the Company's true financial condition so that they would be able to complet e

the Offering and to use Lason stock to purchase other companies and maintain its acquisitio n

strategy, which was the driving force behind the Company's revenue growth .

186. By mid-January of 1998, at the beginning of the Class Period, the Lason Defendants

had actual knowledge that the Company's reported revenues were being falsely reported . As

discussed elsewhere herein, at a Lason sales meeting, Defendant Messinger and other senio r

management directed that revenue be recognized on work-in-progress so that the Company coul d

meet quarterly estimates . As signatories to Lason's quarterly and annual financial statements, an d

senior management of the Company, the Lason Defendants knew that Lason's financial statements

represented that the Company recognized revenue when services were provided . Furthermore ,

because they knew that their action in recognizing revenue on work-in-progress violated GAAP an d

made the Company's financial statements false and misleading, Defendants Messinger and othe r

Lason senior management acted affirmatively to conceal their actions from Lason's controller .

187 . The Lason Defendants were motivated to misrepresent the truth concerning Lason' s

business and the success of its acquisition strategy in order to meet analysts' earnings estimates an d

artificially inflate the price of Lason shares so that the Company could finance more acquisitions .

188 . During the Class Period, the Lason Defendants financed material portions of thei r

acquisitions with shares of Lason' s common stock. For example , in July of 1998 , the Company

-78-

acquired Consolidated Reprographics for $34 .9 million in cash and 112,044 shares of Lason

Common stock valued at approximately $6 .1 million .

189 . Furthermore, Lason 's largest acquisition , the $145 million acquisition of the M-R

Group, plc was financed with shares of Lason common stock .

190 . The Lason Defendants were motivated to conceal the truth about the Company' s

business and prospects because a decline in the value of the Company's shares would undermine : (1 )

the Company's ability to complete the Offering ; (2) the Company's ability to finance acquisition s

through the use of common stock and because ; (3) the Company lacked sufficient capital to complet e

acquisitions without use of stock to fund at least a portion of the sales . A high stock price wa s

crucial to completing the deals . The importance of maintaining Lason's share price during the Class

Period was evidenced by the fact that a decline in Lason's shares almost jeopardized the M-R Grou p

merger because there the merger agreement enabled M-R Group to walk away from the transactio n

if Lason's shares fell below a certain level for four straight days . Further, the higher Lason's share

price, the less Lason shares would have to be exchanged to acquire target companies . This is als o

evidenced by the fact that when there was a dip in share price, prior to the M-R Group acquisition ,

Lason was forced to exchange more shares than originally anticipated .

191 . In addition, Lason's disclosed acquisition strategy was to keep the prior managemen t

of the acquired companies on as managers of their businesses by structuring the acquisition so tha t

the selling owners could sell their Lason shares only after a lockup period expired . Therefore, in th e

event that the Lason share price declined, the Lason Defendants risked the likelihood that the sellin g

owners able to do so would immediately sell their shares and leave their prior businesses, thu s

-79-

jeopardizing the continuity of management and business relationships, which comprised the goo d

will that was in essence what Lason had purchased.

192. The Lason Defendants were also motivated to conceal the true state of Lason' s

business to enable Lason insiders to sell their personal holdings of Lason shares for a profit .

193. According to First Call Insider Research , during the Class Period :

(a) Defendant Monroe sold or otherwise disposed of 50,000 Lason common

shares that he held directly, receiving thereby proceeds of approximately $1 .97 million;

(b) Defendant Rauwerdink sold 29,000 Lason common shares that he held

directly, receiving thereby proceeds of approximately $1 .5 million ;

(c) Directors Joseph P. Nolan and Bruce V. Rauner on behalf of GTCR Fund IV ,

sold 311, 959 Lason common shares that they held indirectly receiving thereby proceeds of

approximately $13.65 million. Director Nolan also sold 3,000 Lason common shares that he hel d

directly, receiving thereby $160,890 in proceeds ;

(d) Director Robert A. Yanover sold 56,000 Lason common shares that he held

indirectly, receiving thereby proceeds of approximately $3 .1 million ;

(e) Director Allen J. Nesbitt sold 14,000 Lason common shares that he held

indirectly, receiving thereby proceeds of approximately $896,000 and otherwise disposed of 100,00 0

Lason common shares that he held indirectly in a transaction valued at approximately $3 .74 million ;

(f) Director Brian E. Jablonski sold 3,200 Lason common shares that he hel d

directly receiving thereby $121,600 in proceeds .

194. Thus, du ring the Class Period , the aforementioned individuals disposed of an

aggregate of 567,159 Lason common shares that they held directly or indirectly, receiving thereby

-80-

aggregated proceeds of approximately $25 .14 million. Moreover, in the specific context of the

August 1998 secondary offering, the GTCR Fund IV, the Yanover Associates Limited Partnershi p

and the Joseph Jonathan Yanover and Jennifer D . Yanover Irrevocable Trust offered, respectively,

450,000, _124,500 and 70,500 Lason common shares .

Materially False Statements in theAugust 1998 Prospectus and Registration Statement

195 . On or about August 19, 1998, Lason made an Offering of 3,500,000 shares o f

Common Stock at a price of $47 per share . The Company eventually sold 2,925,000 shares realizing

net proceeds of $130.8 million from the Offering after underwriting discounts and commissions .

The balance of the shares offered in the Offering were sold by various shareholders of the Company ,

including but not limited to: GTCR Fund IV which offered 450,000 of its shares (approximately 1/3

of their then total holdings) ; Defendant Monroe who offered 25,000 of his Lason shares (which

represented almost 1/4 of his then total available holdings) ; and Brian Jablonski who offered 20,000

of his Lason shares (which represented more than half of his then total available holdings) . Under

the agreement, Lason and GTCR Fund IV granted the underwriters, in the event of an over-allotment ,

a 30-day option to purchase up to an additional 109,450 shares of common stock . According to their

Prospectus, Lason intended to use the net proceeds to repay indebtedness that had been mostly use d

to finance acquisitions .

196. The Offering was underwritten by a group led by Prudential Securities, Inc., which

included BancAmerica Robertson Stephens ; William Blair & Co, . LLC ; Jeffries & Co ., PaineWebbe r

Inc ; Robinson -Humphrey Co. LLC; BT Alex . Brown Inc ., McDonald & Company securities, Inc .

Roney Capital Markets, SunTrust Equitable Securities Corporations and Wheat First Securities, Inc .

-81-

197 . The completion of the Offering was of vital importance to the Defendants . Defendan t

Monroe was quoted in an article in Crain's Detroit Businesa on September 14, 1998 as describin g

the importance of the offering : "We acquire a lot of companies, and we do need equity . If we had

not gotten the offering done when we did, it would be difficult to raise equity . "

198 . In connection with the offering, Lason filed the Registration Statement with the SEC ,

which incorporated the Prospectus . The Prospectus was materially false and misleading as set fort h

herein .

The Prospectus Misrepresented Lason'sAcquisition and Integration Strategies an dFalsely Described the Company's Accounting Methods

199. The Prospectus made specific misrepresentations and failed to disclose mate rial facts

concerning Lason's acquisition strategy, its ability and commitment to integrate acquired companie s

and Lason's accounting methods .

200. The Prospectus contained the following representations, among others, concernin g

the Company's business, operations , services and products :

Since its secondary public offering, the Company has :

-achieved significant internal revenue growth, generating net revenuesin the six months ended June 30, 1998 that were approximately 18%higher than those achieved in the six months ended June 30, 1997,excluding the results of companies acquired after June 30, 1997 .

201 . Under a heading entitled "Acquisition Strategy" the Prospectus stated that,

The Company's acquisition strategy is to selectively makeacquisitions of companies that : (i) have proven operating track recordsand strong customer franchises that could benefit from Lason'stechnology and broad product and service offerings ; (ii) have solidmanagement teams that will join and remain with Lason'smanagement team after the acquisition ; (iii) have an existing presenc e

-82-

in the Company's core competencies to build economies of scalethrough volume purchasing and facility utilization; (iv) expand theCompany's customer base and thereby increase its cross-sellingopportunities ; and (v) broaden the Company's geographic reach .

Prospectus at 27 .

202. The statements in 1200 and 1201 were false and misleading because :

(a) The management of many acquired companies did not join and remain with

the Lason after the mergers as is evidenced by the departure of the selling owners of Pinnacle ,

Corporate Copies, and Premier Copies, shortly after these companies became divisions of Lason;

(b) The companies acquired by Lason often did not have proven operating trac k

records and strong customer franchises . For example: (1) as discussed above at 1 84, API was a

weak franchise when purchased because of the postal investigation and (2) Corporate Copies an d

Pinnacle Copies' customer bases were significantly eroding when they was acquired as discussed i n

197.

203 . Under a heading entitled "Business Strategy", the Prospectus stated that :

The Company's goal is to become a national, single source providerof image and data capture, data management and output processingservices for customers in its targeted industries . To achieve this goal,the Company will continue to implement a focused business strategybased on the following elements :

Provide a broad range of services that will allow both existing andnew customers to secure all of their information management servicesfrom one source. The Company's broad range of services and itssignificant investment in technology and capacity enable it tocompete successfully for large, complex projects on a national basis .

Facilitate the cross-selling of additional services to customers throughits comprehensive marketing program and develop national brandrecognition for the quality and scope of Lason's services . The

-83-

Company has leveraged its existing customer relationships to sell itscustomers the full range of its information management services . . . . . .

Make selective acquisitions to further broaden its geographic reach,customer base, management expertise and technological capabilitiesand to attain economies of scale in purchasing and facility utilization .

Prospectus at 28 .

204. The statements referenced in 1[203 were each materially false and misleading whe n

made and omitted material facts for the following reasons:

(a) Lason had no "comprehensive marketing program ." According to numerous

former employees employed by a number of Lason divisions during the Class Period, the Compan y

did not provide the training, support or information to its sales force to enable it to cross-sell Laso n

products or services offered by other divisions other than the products within which the particular

Lason office specialized. Lason salespeople were knowledgeable about the particular business the y

were involved in, but were not provided with information necessary for them to sell other Laso n

products and services offered by other divisions or subsidiaries of the Company . Instead of a

national recognition of the quality and scope of Lason's services, Lason's own sales force wa s

unaware of the quality and scope of Lason's services and were not provided with resources to answe r

potential customer's questions .

(b) Lason had not leveraged existing customer relationships to sell a broad arra y

of products . Lason provided virtually no training to its existing sales force in cross -selling products

and services . The rudimentary training provided consisted generally of the opportunity to attend a

single sales meeting at which representatives from the various Lason offices made brief presentations

about their businesses . Thereafter, salespeople were not provided with useful manuals o r

-84-

background information describing the various products which Lason was capable of providing . As

a result, Lason salespeople were unable to inform or assist customers about which services the othe r

divisions of the Company could allegedly provide. Lason's sales representatives were not provided

with proper marketing materi als and/or brochures to facilitate cross-selling .

(c) Lason had no recognizable cross-selling management structure, There wa s

no chain of communication . Salespeople attempting to cross-sell a product such as imaging and

software were often unable to find anyone at Lason's headquarters who could answer questions or

requests about the array of services provided by the various units of Lason . Salespeople would learn,

only after a customer had purchased a solution from another business, that in fact, their ow n

company had a subsidiary which could have provided the service . Lason did not routinely distribute

even a minimal list of the company's services and capabilities to its salespeople . Neither did the

company provide training or training materials to enable the Company salespeople to cross-sell t o

its customers . The failure to have a proper chain of communication to provide Lason's sales staff

with information necessary to sell Lason's entire range of products and services caused frustratio n

among Lason's sales staff, and led to, among other things, significant attrition in their ranks, and le d

to significant harm to the Company's goodwill .

(d) Though the Company claimed to encourage cross-selling, in reality Lason

made such sales virtually impossible . For example, according to an individual employed in Lason' s

Wilmington litigation copy office during the Class Period, sales representatives from Lason' s

Wilmington litigation copy office repeatedly attempted to cross-sell other Lason projects such as

"facilities management" services, imaging services and imaging and software services to clients, bu t

were unable to receive information or services necessary to even bid for such jobs. In one such case ,

-85-

a sales representative attempted to sell a software package to a customer who needed to translate a

couple of hundreds of pages of documents from Portuguese, a job which would have produced

significant revenue . Despite the fact that Lason apparently had a suitable product, and the fact that

the customer requested a product demonstration, Lason failed to secure the account because, th e

Company kept switching the sales team on the account, the Company missed deadlines and

otherwise failed to respond to the requests of the customer . In another example, according to a

former employee of Lason's business communications division during the Class Period, aLason sale s

representative in the Business Communications division who had a good relationship with his the n

customer, GM, was approached by GM about the potential for a graphics communications project .

However, despite numerous calls to various Lason offices, this sale representative could not find

anyone at Lason who could tell him whether Lason could do the job . Three weeks later, after the

opportunity had passed, the sales representative found out that Lason did have a subsidiary whic h

could have provided the service for which GM was looking .

(e) According to several individuals employed by Lason during the Class Period ,

when Lason sales personnel attempted to cross-sell on their own initiative, their efforts to learn abou t

pricing and availability of other Lason family of products were not responded to in a timely manne r

by Lason headquarters . As a result, such sales opportunities were discouraged and lost . Lason' s

sales structure further discouraged cross-selling by offering lower compensation to salespeople wh o

tried to cross-sell outside their area of expertise . Sales commissions for cross-selling were greatl y

discounted and on occasions when salespeople brought cross-selling opportunities to the attentio n

of Lason management, the opportunity was taken from the salesperson who had developed the

prospect . Efforts at cross-selling were abandoned by Lason salespeople after the Company regularl y

-86-

failed to make a reasonable bid for such jobs, either failing to follow up at all, failing to submit a bi d

on time, or submitting a bid which was unreasonable and these inadequate bids threatened th e

salespeople 's relationships with their customer base.

(f) Lason provided antiquated equipment to its subsidiaries , and in large measure

utilized technology which was several years out of date . For example, according to a competitor o f

Lason who had pursued acquiring the Company, in its collection letter division, Lason utilized main

frame computers and a technology called "easy letter" which was several years out of date, and no t

compatible with standardized PC based computers, while its competitors used a programabl e

Microsoft Word based software program which ran on PCs and which offered much greate r

flexibility to customers .

(g) Lason did not selectively acquire companies with complementary custome r

bases or technologies. Rather, the companies acquired were far-flung stand-alone operation s

incapable of being effectively integrated . For example, according to an individual employed b y

Lason's litigation copy division during the Class Period, law firms, which were the primary

customers of Lason's litigation copy business , were not suitable candidates for the hard sell sale s

techniques used in the corporate division, In addition, the Lason Defendants did not understand th e

selling relationships and product needs of the law firms in this market and failed to develop a n

effective strategy for cross-selling other products and services to these clients . For example, Lason

tried to sell imaging services to law firms which could not be done locally and would require tha t

sensitive litigation documents be sent to other states for processing while Lason's competitors coul d

complete the job locally .

-87-

(h) Lason's acquisitions did not evidence a selective acquisition strategy . Ina deal

that was pending at the time of the Prospectus, according to a former employee of that division an d

other Lason employees, Lason purchased a litigation copy business in Richmond, Virginia whic h

was experiencing high revenues due to the one-time extraordinary copying business associated with

the various tobacco litigations . Sep, ¶9[ 97, 202. According to individuals employed by Lason i n

that office and elsewhere during the Class Period, Lason purchased the company at an inflated pric e

based on the high revenues associated with the tobacco litigation, and failed to recognize that th e

shop had peaked the year before . Thus, Lason failed to adequately complete due diligence on th e

businesses that the Company acquired.

(i) Lason did not have expertise in customer base management. Following the

acquisitions, after Lason management took over the new businesses, Lason's management failed to

understand the businesses it acquired, and undermined the sales relationships with the customers ,

such that the customer base it had acquired was eroded . Once Lason took over, Lason managemen t

missed deadlines, and customers became dissatisfied because of, inter aia, new sales and

management practices which undermined existing sales relationships and employee morale. In the

Output Processing segment of Lason's business, specifically the collection letter business, fo r

example, according to a competitor of that business during the relevant time, which is a time-

sensitive business, Lason's turnaround time on documents might take several days while it s

competitors could turn documents around in one day .

205 . The Prospectus describes Lason's acquisition of API :

On March 5, 1998, the Company acquired substantially all of theassets of API Systems, Inc . ("API") for a purchase price of $25.3million and the assumption of certain liabilities , plus additional earn -

-88-

out payments which are contingent upon achieving certain operatingincome targets (the "API Acquisition") . API, headquartered in NewYork City, provides business communications services primarily tothe financial and commercial industries in Connecticut, New Jersey,New York, and Pennsylvania . For the twelve months endedDecember 31, 1997, API had net revenue of $30 .1 million . The APIAcquisition, combined with the Company's existing New York basedChurchill Communications operation, provides the Company with asignificant output processing presence in the New York metropolitanmarket .

206. This statement was false and misleading because the statement failed to disclose that ,

at the time that the acquisition of API, one of the three largest made by the Company in the six

months preceding the Offering, all of API's owners and senior management were under Federal

criminal investigation for criminal RICO postal fraud . Defendants were aware of the investigation

at the time the acquisition was made as evidenced by the fact that Lason required that the deal be

structured as an asset purchase and required that indemnification clauses be added to cover Lason's

liability with regard to the criminal investigation . Lason required that $4 million of the sale proceeds

be escrowed for settling postal fines and debts and required that a portion of the payment price for

API, specifically, 117,702 shares of Lason common stock (valued at approximately $3 .8 million) be

put into escrow as collateral to indemnify the Company for risk associated with the investigation .

Also, according to separate analyst reports issued on April 16, 1999, by Prudential Securities and

Jeffries & Co., Lason was aware of the existence of the investigation prior to the Company's

acquisition of API because API management volunteered that an investigation was underway at the

time of the proposed sale . Nonetheless, Defendants failed to disclose in the Prospectus the existence

of the criminal investigation into allegations of longstanding postal fraud by the entire executive and

management structure of API, which eventually resulted in the arrest of the former owners and then

-89-

current executives and managers at API on charges of mail fraud, racketeering and bribery whic h

allegedly reaped proceeds of more than $25 million .

207. Under the heading "SALES AND MARKETING", the Prospectus described the

Company' s sales strategy :

The Company's sales efforts are handled primarily through its in-house direct sales staff of approximately 160 employees located in 25states. In addition to its direct sales force, the Company continues tobuild a team of executive-level account managers who focus on large,national organizations requiring a coordinated sales presence formultiple service offerings . The Company's executive office includesmarketing staff personnel who develop brand awareness, providecollateral sales materials and assist in implementing strategicmarketing initiatives . . . . . Historically, the Company's salesrepresentatives have focused their efforts on specific serviceofferings. The Company has maintained this product-focusedexpertise, which it continues to augment through cross-sell trainingand professional development programs .

Prospectus pp. 32-33 .

208. This description was false because :

(a) Lason's field sales representatives did not receive sales materials, marketing

assistance or brand awareness direction from Lason's executive offices ;

(b) Lason's field sales representatives were not provided with cross-sell trainin g

or professional development programs .

209. Lason also did not disclose that despite the fact that the Company touted itself as a

technology business , in numerous areas of its businesses , including the litigation copy service

centers, and technology based businesses Lason relied on outdated, slow technology and failed t o

commit resources to upgrade technology, according to an individual employed in that division durin g

the Class Period, as evidenced by the Company's refusal, in its Lason Systems subsidiary, one of th e

_90-

Company's "high tech" businesses , to replace antiquated PCs with the standard industry technology ,

and refusal to even purchase basic required software for those antiquated PCs . Also, according to

a former manager at the service centers division during the Class Period, when the Company di d

provide PCs, for example to its Service Centers division, the Company failed to network the

computers to each other or Lason headquarters . Thus, the machines were unable to effectivel y

communicate with one another.

The So-Called "Risk Factors" Set Forth In The ProspectusWere Materially False And Misleading In and Of Themselve s

210. The purported "Risk Factors" set forth in the Prospectus commencing at page 7, were

themselves false and misleading in the following respects :

(A) The risk styled " Risks of Acquisitions and Failure to Integrate Acquired Businesses "

contained the following false and misleading statements :

There can be no assurance that the Company will be able to identifyand acquire attractive acquisition candidates , profitably manage suchacquired companies or successfully integrate such acquiredcompanies into the Company without substantial costs , delays orother problems .

In addition, there can be no assurance that companies acquired in thefuture will be profitable at the time of acquisition, that the companiesrecently acquired or acquired in the future will achieve sales andprofitability justifying the Company's investment therein or that theCompany will recognize the synergies expected from suchacquisitions. The failure to generate profitability or to obtain anyanticipated synergies from such acquired businesses could have amaterial adverse effect on the Company's businesses, financialcondition or results of operation s

211 . These statements were materially false and misleading because they presented thes e

"so-called" risks as hypothetical future possibilities when in fact, at the time of the Offering, Laso n

-91-

had been and was continuing to have material difficulty integrating the recently acquired companies .

As a result, Lason was not experiencing any synergies from the new businesses, and was, because

of the attention being directed towards the new businesses at the expense of existing operations ,

actually losing customers in its existing businesses and would sustain materially reduced financia l

results .

FIRST CLAIM

Violation Of Section 10(b) OfThe Exchange Act Against And Rule 10b-5

Promulgated Thereunder Against Lason and the Individual Defendants

212. Plaintiffs repeat and reallege each and every allegation contained above as if fully se t

forth herein .

2 1 3. During the Class Period, Lason and the Individual Defendants, and each of them ,

carried out a plan, scheme and course of conduct which was intended to and, throughout the Clas s

Period, did: (i) deceive the investing public, including Plaintiffs and other Class members, as allege d

herein ; (ii) artificially inflate and maintain the market price of Lason's common stock ; and (iii) caus e

Plaintiffs and other members of the Class to purchase Lason's common stock at artificially inflated

prices. In furtherance of this unlawful scheme, plan and course of conduct, the Lason Defendants ,

and each of them, took the actions set forth herein .

214. The Lason 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) engaged in acts, practices and a course of business whic h

operated as a fraud and deceit upon the purchasers of the Company 's securities in an effort to

maintain artificially high market prices for Lason's securities in violation of Section 10(b) of th e

-92-

Exchange Act and Rule 10b-5. The Lason Defendants are sued either as primary participants in th e

wrongful and illegal conduct charged herein or as controlling persons as alleged below .

215. In addition to the duties of full disclosure imposed on the Lason Defendants as a

result of -their making of affirmative statements and reports, or participation in the making of

affirmative statements and reports to the investing public, the Lason Defendants had a duty t o

promptly disseminate truthful information that would be material to investors in compliance wit h

the integrated disclosure provisions of the SEC as embodied in SEC Regulation S-X (17 C.F.R .

Sections 210.01 et seq.) and Regulation S-K (17 C . F.R. Sections 229 .10 et seq .) and other SEC

regulations, including accurate and truthful information with respect to the Company's operations ,

financial condition and earnings so that the market price of the Company's securities would be base d

on truthful, complete and accurate information .

216 . Lason and the Individual Defendants, individually and in concert, directly an d

indirectly, by the use, means or instrumentalities of interstate commerce and/or ofthe mails , engaged

and participated in a continuous course of conduct to conceal adverse material information about th e

business, operations and future prospects of Lason as specified herein .

217 . 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 Lason' s value and performance an d

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 th e

statements made about Lason and its business operations and future prospects in the light of th e

circumstances under which they were made, not misleading, as set forth more particularly herein ,

-93-

and engaged in transactions, practices and a course of business which operated as a fraud and decei t

upon the purchasers of Lason's common stock during the Class Period .

218. Each of the Individual Defendants' primary liability, and controlling person liability ,

arises from the following facts : (i) the Individual Defendants were high-level executives and/or

directors at the Company during the Class Period and members of the Company' s management team

or had control thereof; (ii) each of these Defendants, by virtue of his or her responsibilities an d

activities as a senior officer and/or director of the Company was privy to and participated in th e

creation, development and reporting of the Company's internal budgets, plans, projections and/or

reports ; (iii) each of these Defendants enjoyed significant personal contact and familiarity with th e

other Defendants and was advised of and had access to other members of the Company' s

management team, internal reports and other data and information about the Company's finances ,

operations, and sales at all relevant times ; and (iv) each of these Defendants was aware of th e

Company's dissemination of information to the investing public which they knew or recklessl y

disregarded was materially false and misleading .

219. The Lason Defendants had actual knowledge of the misrepresentations and omission s

of material facts set forth herein, or acted with reckless disregard for the truth in that they failed t o

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 an d

for the purpose and effect of concealing Lason's operating condition and future business prospect s

from the investing public and supporting the artificially inflated price of its securities . As

demonstrated by the Lason Defendants' overstatements and misstatements of the Company' s

business, operations and earnings throughout the Class Period, the Lason Defendants, if they did no t

-94-

have actual knowledge of the misrepresentations and omissions alleged, were reckless in failing t o

obtain such knowledge by deliberately refraining from taking those steps necessary to discove r

whether those statements were false or misleading .

220. As a result of the dissemination of the materially false and misleading information

and failure to disclose material facts, as set forth above, the market price of Lason's common stock

was artificially inflated during the Class Period. In ignorance of the fact that market prices of

Lason's publicly-traded securities were artificially inflated, and relying directly or indirectly on the

false and misleading statements made by the Lason Defendants, or upon the integrity of the marke t

in which the securities trade, and/or on the absence of material adverse information that was know n

to or recklessly disregarded by the Lason Defendants but not disclosed in public statements by

Defendants during the Class Period, Plaintiffs and the other members of the Class acquired Laso n

common stock during the Class Period at artificially high prices and were damaged thereby.

221. 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 othe r

members of the Class and the marketplace known of the true financial condition and busines s

prospects of Lason, which were not disclosed by the Lason Defendants, Plaintiffs and other member s

of the Class would not have purchased or otherwise acquired their Lason common stock, or, if the y

had acquired such common stock during the Class Period, they would not have done so at th e

artificially inflated prices which they paid .

222. By virtue of the foregoing, the Lason Defendants have violated Section 10(b) of th e

Exchange Act, and Rule 10b-5 promulgated thereunder .

-95-

223. As a direct and proximate result of the Lason Defendants ` wrongful conduct , Plaintiffs

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

and sales of the Company 's common stock du ring the Class Period.

SECOND CLAIM

Violation Of Section 20(a) OfThe Exchange Act Against The Individual Defendants

224. Plaintiffs repeat and reallege each and every allegation contained above as if fully

set forth herein .

225. The Individual Defendants acted as controlling persons of Lason 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 its inability to integrate its acquisitions according to Company-inspired

market expectations, the Individual Defendants had the power to influence and control and did

influence and control, directly or indirectly, the decision-making of the Company, including the

content and dissemination of the various statements which Plaintiffs contend were false and mis-

leading. The Individual Defendants were provided with or had unlimited access to copies of the

Company's reports, press releases, public filings and other statements alleged by 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 .

226. In particular, each of these Defendants had direct and supervisory involvement in the

day-to-day operations of the Company and, therefore, is presumed to have had the power to contro l

-96-

or influence the particular transactions giving rise to the securities violations as alleged herein, and

exercised the same .

227 . As set forth above, Lason and the Individual Defendants each violated Section 10(b )

and Rule I Ob-5 by their acts and omissions as alleged in this Complaint . By virtue of their positions

as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of the

Exchange Act . As a direct and proximate result of Defendants' wrongful conduct, Plaintiffs and

other members of the Class suffered damages in connection with their purchases of the Company' s

common stock during the Class Period .

THIRD CLAIM

Against all Defendants for Violations of Section 11 of the Securities Ac t

228. Plaintiffs repeat and reallege each and every allegation contained above as if fully set

forth herein .

229 . This Claim is brought pursuant to Section 11 of the Securities Act, 15 U.S .C. §77k ,

on behalf of Plaintiffs, against all Defendants . This claim is cumulative and/or alternative to th e

other claims set forth in this complaint.

230. The Prospectus was materially inaccurate and misleading, contained untrue statement s

of material facts, omitted to state other facts necessary to make the statements made not misleading ,

and concealed and failed adequately to disclose material facts as described above.

231 . The Company is the registrant for the issuance of Lason common stock . The

Defendants named herein were responsible for the contents and dissemination of the Registratio n

Statement and the Prospectus .

-97-

232. As issuer of the shares, Lason is strictly liable to Plaintiffs for the misstatements and

omissions alleged herein .

233. None of the Defendants named herein made a reasonable investigation or possesse d

reasonable grounds for the belief that the statements contained in the Registrations Statement an d

the Prospectus were true and without omissions of any material facts and were not misleading .

234. Defendants issued, caused to be issued and participated in the issuance of materiall y

false and misleading written statements to the Plaintiffs which were contained in the Prospectus ,

which misrepresented or failed to disclose, inter a ia, the material adverse facts set forth above . By

reason of the conduct herein alleged, each Defendants violated, and/or controlled a person who

violated Section 11 of the Securities Act.

235. Plaintiffs acquired Lason shares issued pursuant to, or traceable to, and in relianc e

on, the Regis tration Statement .

236. Plaintiffs have sustained damages . The value of Lason shares has declined

substantially subsequent to and due to Defendants' violations .

237 . At the times they purchased or acquired Lason shares , Plaintiffs were without

knowledge of the facts concerning the wrongful conduct alleged herein and could not hav e

reasonably discovered these facts prior to December 1999 . Less than one year has elapsed from the

time Plaintiffs discovered or reasonably could have discovered the facts upon which this complain t

is based to the time that Plaintiffs filed their complaint. Less than three years have elapsed from the

time that the securities upon which this claim is brought were e na fide offered to the public to th e

time Plaintiffs filed their complaint herein .

-98-

FOURTH CLAIM

A ainst all Defendants for Violations of Secti 12(a)(2) of the Securities Act

238. Plaintiffs repeat and reallege each and every allegation contained above as if fully se t

forth herein .

239. This claim is brought by Plaintiffs pursuant to Section 12(a)(2) of the Securities Ac t

as purchasers of Lason shares in connection with the issuance of Lason shares pursuant to th e

Registration Statement and Prospectus . This claim is cumulative and/or alternative to the othe r

claims set forth herein .

240. Defendants were sellers , offertory and/or solicitors of sales of Lason shares offere d

pursuant to the August 1998 Prospectus .

241 . The Prospectus contained untrue statements of material facts, omitted to state other

facts necessary to make the statements not misleading, and concealed and failed to disclose materia l

facts . Defendants' actions of solicitation included participating in the preparation of the false and

misleading prospectus .

242. The Defendants other than Lason owed to the purchasers of Lason shares , including

Plaintiffs and other class members the duty to make a reasonable and diligent investigation of th e

statements contained in the Registration Statement, including the Prospectus, materials containe d

therein, to ensure that such statements were true and that there was no omission to state a materia l

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

Defendant Lason is strictly liable for the misrepresentations in the Prospectus .

243 . Plaintiff Brody and other members of the subclass purchased or otherwise acquire d

Lason shares pursuant to and traceable to the defective Prospectus . Plaintiffs did not know, or in the

-99-

exercise of reasonable diligence could not have known, of the untruths and omissions contained i n

the Prospectus .

244. Plaintiffs, individually and representatively hereby offer to tender to Defendants those

securities which Plaintiffs and other class members continue to own, on behalf of all members of th e

Class who continue to own such securities, in return for the consideration paid for those securities

together with interest thereon .

245. By reason of the conduct alleged herein, these Defendants violated and/or controlle d

a person who violated, § 12(a)(2) of the Securities Act . Accordingly, Plaintiffs and other member s

of the Class who hold Lason shares purchased in the Offering have the right to rescind and recover

the consideration paid for their Lason shares and, hereby elect to rescind and tender their Laso n

shares to the Defendants sued herein . Plaintiffs and other Class members who have sold their Laso n

shares are entitled to rescissory damages .

246. Less than three years have elapsed from the time that the securities upon which thi s

count is brought were sold to the public to the time of the filing of this action . Less than one year

has elapsed from the time when Plaintiffs discovered or reasonably could have discovered the fact s

upon which this Count is based to the time of the filing of the action .

FIFTH CLAIM

Against the Individual Defendants forViolations of Section 15 of the Securities Act

247. Plaintiffs repeat and rea llege each and eve ry allegation contained above as if fully set

forth herein . This Count is brought pursuant to Section 15 of the Securities Act against th e

Individual Defendants .

- 100 -

248. Each of the Defendants named in this Count was a control person of Lason by virtue

of his position as a director, senior officer and/or controlling shareholder of Lason . The Individual

Defendants also served on Lason's Board of Directors . Finally, Defendants each had a series o f

direct and/or indirect business and/or personal relationships with other directors and/or majo r

shareholders of Lason .

249. Each of the Individual Defendants also was a culpable participant in the violation s

of Section 11 and 12(a)(2) of the Securities Act alleged in Counts III and TV above, based on thei r

having signed the Registration Statement and having otherwise participated in the process whic h

allowed the Offering to be successfully completed .

WHEREFORE, Plaintiffs prays for relief and judgment, as follows :

(i) Declaring this action to be a proper class action, pursuant to Rule 23 o f

the Federal Rules of Civil Procedure on behalf of the Class denied herein and Plaintiffs to be th e

Class representatives ;

(ii) Awarding compensatory damages in favor of Plaintiffs and the other Clas s

members against all Defendants, jointly and severally, for all damages sustained as a result of

Defendants' wrongdoing, in an amount to be proven at trial, including interest thereon ;

(iii) Awarding Plaintiffs and the Class their reasonable costs and expense s

incurred in this action, including counsel fees and expert fees ; and

(iv) Such other and further relief as the Court may deem just and proper .

-101-

JURY TRIAL DEMANDE D

Plaintiffs hereby demand a trial by jury .

Respectfully submitted,

By .

MANTESE MILLER MANTESE ANDSHEA, P .L.L.C.

E. Powell Miller (P39487)Gerard Mantese (P34424)Marc L. Newman (P51393)1301 W. Long Lake Road , Suite 135Troy , Michigan 48098Tel : (248 ) 267-1.200

MILBERG WEISS BERSHADHYNES & LERACH LLP

Barry A. WeprinElaine S. KuselOne Pennsylvania Plaza , 49th FloorNew York, New York 10119-0165(212) 594-5300

LAW OFFICES OF LIONEL Z. GLANCYLionel Z . GlancyPeter BinkowNeal A. Dublinsky1801 Avenue of the Stars #3 11Los Angeles, CA 9006 7Tel : (310) 201-9150

WASINGER KICKHA M AND KOHLSStephen Wasinge r100 Beacon Centre26862 Woodward AvenueRoyal Oak, MI 48067-0958Tel: (248) 414-9900

Plaintiffs' Co-Lead Counse l

- 102 -

BERGER & MONTAGUESherrie Savet tArthur Stock1622 Locust StreetPhiladelphia, PA 19103Tel . : (215) 875-3000

FINK ZAUSMER & KAUFMAN, P .C.David H . FinkMark J . ZausmerTed Peters31700 Middlebelt Road, Ste . 150Farmington Hills, MI 48334Tel . : (248) 851-411 1

FRUCHTER & TWERSKYJack G. Fruchter60 East 42nd Street , Ste . 4700New York, NY 10165Tel . : (212) 687-6655

LAW OFFICES OF MARC S . HENZELMarc S . Henzel210 West Washington SquarePhiladelphia, PA 19106Tel . : (215) 625-999 9

KIRBY MCINERNEY & SQUIRE, LLPIra Press830 Third AvenueNew York, NY 10022Tel . : (212) 371-660 0

MILLER FAUCHER CAFFERTY ANDWEXLER, LLP

Patrick CaffertyAndrew J . Morganti101 N. Main St ., Ste. 885Ann Arbor , MI 48104Tel . : (734) 769-2144

-103-

SHEPERD & GELLERPaul Geller7200 W. Camino Real, Suite 203Boca Raton, FL 3343 3Tel . : (561) 750-3000

SCHIFFRIN & BARROWAY, LLPAndrew BarrowayThree Bala Plaza East, Ste. 400Bala Cynwyd, PA 19004Tel . : (610) 667-7706

SPECTOR & ROSEMAN, PCEugene A . SpectorRobert M . Roseman1818 Market Street, Ste . 2500Philadelphia , PA 1.9103Tel . : (215) 496-0300

WEISS & YOURMANJoseph Weiss551 Fifth Avenue , Ste . 1600New York, NY 10176Tel . : (212) 682-302 5

LAW OFFICES OF ALFRED YATES, JR .Alfred Yates519 Allegheny Building429 Forbes AvenuePittsburgh, PA 15219Tel . : (412) 391-5164

Attorneys for Plaintiffs

- 104 -

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF MICHIGA N

IN RE LASON, INC. Case No . 99-76079SECURITIES LITIGATION Case No . 99-76123

Case No . 99-76134THIS DOCUMENT RELATES TO: Case No. 00-70512ALL ACTIONS

PROOF OF SERVICF,

STATE OF MICHIGAN )

COUNTY OF OAKLAND )

Hon . Arthur Tarnow

prime ,'J

Kristina Del Serrone states that on June 30, 2000, she served a copy of the Consolidated an d

Amended Class Action Complaint and this Proof of Service upon : Carl H. von Endo, Esq . and

Steven A . Roach, Esq ., Miller, Canfield, Paddock & Stone, 150 West Jefferson, Suite 2500, Detroit ,

MI 48226, via hand delivery ; and by first class U .S . mail, postage prepaid to : James J . Restivo, Esq .

and Roy W. Arnold, Esq . ; Reed Smith Shaer & McClay, LLP ; 435 Sixth Ave .; Pittsburgh, P A

15219; and to :

Lionel Z . Glancy, Esq .Peter A. Binkow, Esq .Law Offices of Lionel Glancy1801 Ave. of the Stars, Ste. 311Los Angeles, CA 90067

Paul Geller, Esq .Shepherd & Geller, LL C7200 W. Camino Real , Suite 20 3

Boca Raton, FL 3343 3

Steven G. Schulman, Esq .Michael A . Swick, Esq .Milberg Weiss Bershad Hynes & Lerach, LLPOne Pennsylvania Plaza, 49 1 Floor

New York, NY 10119

Stephen Wasinger, Esq .Timothy 0 . McMahon, Esq .Wasinger Kickham and Kohls100 Beacon Centre26862 Woodward Ave.Royal Oak, MI 48067

Marc S . Henzel, Esq. Ira Press, Esq.Law Offices of Marc S. Henzel Kirby McInerney & Squire, LLP210 West Washington Square 830 Third Ave .Philadelphia, PA 19106 New York, NY 10022

Andrew Barroway, Esq .Patrick Cafferty, Esq . Schiffrin & Barroway, LLPAndrew J . Morganti, Esq . Three Bala Plaza East, Ste. 400Miller Faucher Catferty and Wexler, LLP Bala Cynwyd, PA 1900 4101 N. Main St., Ste . 885Ann Arbor, MI 48104 Jack G. Fruchter, Esq .

Fruchter & TwerskySherrie Savett, Esq . 60 East 42nd Street, Ste . 470 0Arthur Stock, Esq . New York, NY 10165Berger & Montagu e1622 Locust Street David H. Fink, Esq .Philadelphia, PA 19103 Mark J . Zausmer, Esq .

Ted Peters, Esq.Joesph Weiss, Esq . Fink Zausmer & Kaufman, PCWeiss & Yourman 31700 Middlebelt Rd ., Ste, 150551 Fifth Ave ., Ste . 1600 Farmington Hills, MI 4833 4New York, NY 101.76

Alfred Yates, Esq .Eugene A . Spector, Esq . Law Offices of Alfred Yates, Jr .Robert M. Roseman, Esq . 519 Allegheny BuildingSpector & Roseman, PC 429 Forbes Ave.1818 Market Street, Ste . 2500 Pittsburgh, PA 1521 9Philadelphia, PA 19103

I declare that the above statements are true to the best of my information, knowledge an d

belief.

Kristina Del Serrone

Subscribed to and sworn before me onthis 30'x' day of June, 2000 .

`Notary Public

BRENDA SPublic, -On lb Cy' Cosa ,ssir;

'EX ma~neap', AI

-2-