1 2 3 4 5 6 1 7 8 9 1 0 12 13 14 1 5 16 17 18 19 20 2 1 22 2 3 24 25 26 27 28 James C . Krause, Esq ., SBN 66,478 Patrick N . Keegan, Esq ., SBN 167,698 KRAUSE & KALFAYA N 1010 Second Avenue, Suite 1750 San Diego, CA 9210 1 Tel : (619) 232-0331 Fax : (619) 232-4019 Burton H . Finkelstein, Esq . Donald J . Enright, Esq . FINKELSTEIN, THOMPSON & LOUGHRAN 1055 Thomas Jefferson Street, NW, Suite 601 Washington, DC 2000 7 Tel : (202) 337-8000 Fax : (202) 337-809 0 Lead Counsel for Lead Plaintiffs (Additional Counsel on Signature Page) 03 ~` .' :! 1 ~3 ['M W : 2 3 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNI A In re EN POINTE TECHNOLOGIES, INC . SECURITIES LITIGATION This Document Relates To : ALL ACTIONS Master Case No . O1-CV-0205 L (CGA) CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAW S JURY TRIAL DEMANDE D Consolidated Amended Class Action Complaint 1 Master Case No. 01-CV-0205 I, (CGA)
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James C. Krause, Esq ., SBN 66,478Patrick N. Keegan, Esq ., SBN 167,698KRAUSE & KALFAYAN1010 Second Avenue, Suite 1750San Diego, CA 9210 1Tel: (619) 232-0331Fax : (619) 232-4019
Burton H. Finkelstein, Esq .Donald J . Enright, Esq .FINKELSTEIN, THOMPSON & LOUGHRAN1055 Thomas Jefferson Street, NW, Suite 601Washington, DC 20007Tel : (202) 337-8000Fax : (202) 337-8090
Lead Counsel for Lead Plaintiffs(Additional Counsel on Signature Page)
03 ~` .' :! 1 ~3 ['M W : 2 3
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
In re EN POINTE TECHNOLOGIES, INC .SECURITIES LITIGATION
This Document Relates To :
ALL ACTIONS
Master Case No. O1-CV-0205 L (CGA)
CONSOLIDATED AMENDED CLASSACTION COMPLAINT FORVIOLATIONS OF THE FEDERALSECURITIES LAW S
JURY TRIAL DEMANDED
Consolidated Amended Class Action Complaint 1 Master Case No. 01-CV-0205 I, (CGA)
18 is a limited liability company organized and existing under the laws of the State of California with
19 its principal place of business 600 West Broadway, 14" Floor, San Diego, California . Hampton-
20 Porter is an investment banking and brokerage company, and a member of the National Association
21 of Securities Dealers . Hampton-Porter was the conduit through which the Defendants pursued their
22 scheme, by causing it to publish false and misleading statements regarding En Pointe, and by
23 otherwise manipulating the market for En Pointe stock . Specifically, Hampton-Porter was controlled
24 by Defendants Laurienti, Gregory Walker and H-P .
25 28. Defendant H-P Holdings, LLC (hereinafter "H-P") is a limited liability company
26 organized and existing under the laws of the State of California with its principal place of business
27 600 West Broadway, 14" Floor, San Diego, California . H-P, by and for its members, maintains a
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Consolidated Amended Class Action Complaint 6 Master Case No . 01-CV-0205 L (CGA)
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100% ownership interest in Hampton -Porter .
29. Defendant Time Holdings , LLC (hereinafter "Time Holdings ") is a limited liability
company organized and existing under the laws of the State of California with its principal place of
business 600 West Broadway , 14th Floor , San Diego , California. Time Holdings is a holding
company used as an alter ego for its sole members, Laurienti and Walker . Time Holdings, at the
time of the allegations contained herein , held approximately 522,700 shares of En Pointe (ENPT) .
Time Holdings also received hundreds of thousands of dollars from Hampton -Porter labeled as
"consulting fees ." Time Holdings principle place of business is located at 600 W . Broadway, 14th
Floor , San Diego , CA 92101 .
30. Defendant JSL Holdings LP (hereinafter "JSL Holdings") is a limited partnership
organized and existing under the laws of the State of Califo rn ia with its principal place of business
12626 High Bluff Drive , Suite 350, San Diego, California. Laurienti controlled JSL and maintained
an account at Merrill Lynch with at least 65,000 shares of En Pointe in JSL's name .
31 . Defendant JSL Enterprises, LLC (hereinafter "JSL Enterprises") is a limited liability
company organized and existing under the laws of the State of California with its principal place of
business 12626 High Bluff Drive, Suite 350, San Diego, California . JSL Enterprises, LLC is the sole
general partner of JSL Holdings, LP, and is controlled by Laurienti .
32. Defendant John William Laurienti (hereinafter "Laurienti") resides in California
within this Judicial District . Laurienti was an interested owner/member of H-P, which in turn ha s
100% ownership interest in Hampton-Porter . Laurienti is the alter ego of Hampton-Porter and
essentially directs its activities . As such, Laurienti is a control person with regard to Hampton-
Porter.
33. Defendant Gregory Walker (hereinafter "Walker") holds an ownership interest in H-P,
which in turn has 100% ownership interest in Hampton-Porter . Walker was also the President of
Hampton-Porter at all relevant times . As such, Walker is a control person with regard to Hampton-
Porter and H-P .
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Consolidated Amended Class Action Complaint 7 Master Case No . 01-CV-0205 I. (CGA)
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34 . Defendant Mark Bergman ("Bergman") was hired as Hampton-Porter's Director o f
Research on or about June 23, 1999, and served as such at all relevant times . In this capacity,
Bergman authored certain false and misleading analyst reports concerning En Pointe . (See ¶¶ 76-77,
infra) . Furthermore, Bergman served as a primary liaison between En Pointe and Hampton-Porter,
as he had had a long standing relationship with En Pointe's senior management, including Defendant
Bob Din. Bergman had been employed with the Boston Group when that company managed En
Pointe's 1996 Initial Public Offering, and had been part of the selling group responsible for attracting
investor interest . Bergman continued his relationship with En Pointe's senior management
thereafter . While he was a Vice President at Xybernaut Corp ., that company published a press
release on May 21, 1998 announcing a so-called marketing and distribution agreement with En
Pointe. This release quoted Bergman as stating, inter alia, that "En Pointe has been growing rapidly
by providing its customers with quality products, expertise and service ." Finally, in Bergman's
capacity as founder and President of Access 1 Financial .eom, Bergman was compensated by En Pointe
to initiate and maintain positive coverage of En Pointe throughout the Class Period .
35. During the Class Period, the defendants, individually and in concert, directly and
indirectly, engaged and willfully participated in a continuous course of conduct to misrepresent and
conceal material information regarding En Pointe's subsidiary SupplyAccess, Inc . and the scheme
to artificially inflate En Pointe's stock price as specified herein in order to sell at least $35 million
worth of En Pointe shares on the open market . Defendants employed devices, schemes, and artifices
to defraud, and engaged in acts, practices, and a course of conduct as herein alleged in an effort to
increase and maintain an artificially high market price for En Pointe shares . This included the
formulation of, making, and/or participation in the making of untrue statements of material facts, and
the omission to state material facts necessary in order to make the statements made, in Iight of the
circumstances under which they were made, not misleading, which operated as a fraud and deceit
upon Lead Plaintiffs and the Class . In addition, each of the Insiders, due to their attendance at
management and/or Board of Director meetings, were informed by defendant Bob Din about the
scheme to artificially inflate En Pointe's stock price, and each of the Insiders knew that the schem e
Consolidated Amended Class Action Complaint 8 Master Case No . 0l-CV-0205 L (CGA)
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had not been disclosed to, and was being concealed from, the public . Despite the Insiders' duty no t
to sell their En Pointe stock under such circumstances, they nonetheless did so in violation of th e
federal securities laws .
CLASS ACTION ALLEGATION S
36. Lead Plaintiffs bring this class action under Rules 23(a) and 23(b)(3) of the Federal
Rules of Civil Procedure, on behalf of a class of persons who bought or otherwise acquired En
Pointe common stock during the Class Period (or their successors in interest) and who suffered
damages thereby ("the Class") . Lead Plaintiffs also assert Count III on behalf of a subsclass
consisting of all purchasers of En Pointe stock who purchased such stock contemporaneously with
the Insider sales on February 28 and March 13, 2000 (the "Subclass") . Excluded from the Class and
Subclass are the Defendants named herein, members of the immediate families of the Defendants,
any firm, trust, partnership, corporation, officer, director or other individual or entity in which a
Defendant has a controlling interest or which is related to or affiliated with any of the Defendants,
and the legal representatives, heirs, successors in interest or assigns of any such excluded party .
37. The Class and Subclass are so numerous that joinder of all members is impracticable .
As of May 11, 2000, En Pointe had 6 . 5 million shares of common stock issued and outstanding, an d
such shares were publicly traded on the NASDAQ NMS during the Class Period . The exact numbe r
of members of the Class is not known at this time, but is believed to number in the thousands .
38. Lead Plaintiffs will fairly and adequately protect the interests of the members of th e
Class and Subclass, and Lead Plaintiffs have no interests which are contrary or in conflict with the
interests of the Class members that they seek to represent. Plaintiffs have retained competent
counsel, who has been appointed by the Court as Lead Counsel for the Class, experienced in class
action litigation under the federal securities laws to ensure such protection, and intends to prosecute
this action vigorously .
39. Lead Plaintiffs ' claims are typical of the members of the Class and the Subclass ,
because Lead Plaintiffs and all of the Class members sustained damages arising from the same
wrongful conduct complained of herein .
Consolidated Amended Class Action Complaint 9 Master Case No . 01-CV-0205 L (CGA)
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40 . 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 members of the Class may be relatively small, the expense and
burden of individual litigation make it impossible for the members of the Class to individually seek
redress for the wrongs done to them . There will be no difficulty in the management of this action
as a class action.
41 . Questions of law and fact common to the members of the Class predominate over any
questions that may affect only individual members in that Defendants have acted on grounds
generally applicable to the entire Class . Among the questions of law and fact common to the Clas s
i are :
a) whether the federal securities laws were violated by Defendants' acts as allege d
herein ;
b) whether Defendants' omitted and/or misrepresented material facts and whether
Defendants breached any duty to convey material facts or to correct material facts previously
disseminated ;
c) whether Defendants participated in and pursued the common course of conduct
complained of herein ;
d) whether Defendants acted with scienter in omitting and/or misrepresenting material
facts, and otherwise manipulating the market for ENPT stock ;
e) whether the price of En Pointe common stock was artificially inflated during the
Class Period as a result of the material misrepresentations and omissions complained of herein ;
f) whether the Insiders were control persons of En Pointe as alleged herein ; and
g) whether members of the Class have sustained damages and, if so, the proper measure
of such damages .
25 III
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Consolidated Amended Class Action Complaint 10 Master Case No . 01-CV-0205 L (CGA)
SUBSTANTIVE ALLEGATION S
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Background
42. Founded in January 1993 by Bob Din and Naureen Din, En Pointe is a California-
based reseller of information technology products including desktop and laptop computers , monitors
and application software . In August 1996, En Pointe Technologies was taken public by the Boston
Group, a broker/dealer formerly registered with the State of California . For the three years following
its initial public offering ("IPO") at $8 .00/share , En Pointe stock typically fluctuated in price between
$4 and $10 on the NASDAQ. At the time of the IPO, defendants Bob and Naureen Din and their
son and daughter , Ali Mahyuddin and Mediha Din, controlled over 33 % of the outstanding shares
of En Pointe . By 1999 , En Pointe had over 5 . 9 million shares outstanding , with Insiders controlling
3 .1 million shares (approximately 52%) and the public float accounting for approximately 2 .8
million shares (approximately 48%) .
43 . During 1999, companies in the B2B market started to enjoy unusual attention fro m
investors because many market research companies estimated the profit potential in this sector to
be enormous. For example, International Data Corporation estimated that "Internet-based
procurement applications will grow from $187 million in 1998 to $8 .5 billion in 2003, well on the
way in automating the estimated $1 .3 trillion that U .S. corporations spend on indirect purchases . "
44. Beginning in early 1999, however, En Pointe's business had begun to deteriorate . For
example, while En Pointe reported net income of $0 .19, $0.04 and $0.16 per share for the first,
second and third quarters of Fiscal 1998, En Pointe reported a net loss of ($0.01), ($0 .76) and ($0 .16)
per share, for the first, second and third quarter of Fiscal 1999, respectively . By December 31, 1999,
sales of En Pointe had fallen by over 20%, compared to the same fiscal quarter of the prior year.
Thus, without price manipulation, the prospects for a rise in share price of En Pointe were bleak at
best.
45. Simultaneously, Defendant Laurienti, a veteran securities manipulator, was castin g
!+ about for a likely target for his next pump and dump scheme . Advised by Defendant Bergman ,
Laurienti's eye fell upon En Pointe . En Pointe's public float was relatively small (2 .8 million
Consolidated Amended Cl ass Action Complaint 1 1 Master Case No . 0l-CV-0205 L (CGA)
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shares), with approximately half of the Company's shares held by insiders and members of the Din
family . With this small float and the attendant small trading volume in the stock, and with
management that had already demonstrated a strong interest in boosting its share price through
questionable means, En Pointe was a nearly ideal pump and dump stock .
46. With shares of En Pointe trading at around $6 in early 1999 and a public float of 2 . 8
million shares, Laurienti recognized that he had the financial capacity to purchase enough shares to
manipulate the price of the stock . Laurienti also realized, however, that with Insiders controlling
almost half of the outstanding shares of En Pointe, the market could be inundated with shares at any
given time - depressing the price of En Pointe shares and increasing the public float . Laurienti
decided to minimize this risk by enlisting the support and cooperation of En Pointe's management.
The Hampton-PorterlEn Pointe Connectio n
47. Hampton-Porter's resident stock tout and Director of Research, Defendant Bergman ,
had a long standing relationship with En Pointe's senior management, and with Defendant Bob Din
in particular . Bergman had been employed with the Boston Group when it took En Pointe publi c
in the August 1996 IPO, and had been responsible for stirring up investor interest in the offering .
48. Thereafter, from late 1997 until September 1998, Bergman worked as a consultant ,
Director of Investor Relations, and/or Vice President with Xybernaut Corp ., a Fairfax, VA company.
While Bergman working with Xybernaut, he introduced the two companies and encouraged them
to enter into a "strategic partnership" that was long on hype but short on substance . For the purposes
of generating investor interest in the two companies, Xybernaut published a press release on May
21, 1998 which stated in part :
Xybernaut Corporation (Nasdaq: XYBR), a leader in wearable computers, todayannounced that an agreement had been completed with En Pointe Technologies, Inc .(Nasdaq: ENPT), under which En Pointe will market, sell and service Xybernaut(R)products in the U .S . and Canada on a non-exclusive basis .
En Pointe is one of the nation's fastest-growing resellers of computer products andservices, directing a team of more than 475 employees from its Los Angeles,California corporate headquarters and currently generating revenues in excess of$500 million annually . With coverage in 19 cities throughout the U .S ., En Pointesales and service consultants bring customized, cost-effective computer hardware,software and service solutions to a wide range of Fortune 1000 companies, includingIBM Global Services, Northrop Grumman and Motorola, as well as state and local
Consolidated Amended Class Action Complaint 12 Master Case No . 01-CV-0205 L (CGA)
1 governmententities .
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Dr. Mark Bergman, noted industry analyst and consultant stated : "En Pointe hasgrown rapidly by providing its customers with quality products, expertise and service .I feel that Xybernaut's hardware and software products fit perfectly into En Pointe'sbusiness model . The En Pointe sales force was introduced to Xybernaut's productslast week, and their response to the product was overwhelmingly enthusiastic . Ibelieve that the combination of Xybernaut's world-class products and En Pointe'smarketing strength will result in tremendous success for both companies . "
49 . Bergman left Xybernaut in September 1998 to try his hand as a freelance stock
promoter . To this end, he founded Access IFinancial .com, "advertising" investment e-mail
newsletter service and "tout sheet" web site, and named himself the President of the company . On
the Access1 web site, Bergman hyped to stocks of companies that paid him to provide positive
coverage for them, often using the companies' own stock as consideration . En Pointe was one such
company . In fact, the financial news website www.briefing.com published an article on August 8,
2000, stating that Access 1 Financial .com had disclosed that it was paid by subject companies for their
positive coverage, and that one such company was En Pointe. Similarly, Bloomberg News published
an article on April 28, 2000, further documenting Bergman's "analyst for hire"operation, stating in
part :
For a Fee, Analyst Mark Bergman Will Hype Your Company's Stock Santa Monica,California, April 28 (Bloomberg)
Environmental Solutions spurted to 7 3/8 from 4 718, with 1 .5 million shareschanging hands a day, after it issued a press release Feb. 25 saying Bergman's firm,Access 1 Financial of Santa Monica, California, had begun "coverage" of thecompany with a "buy" recommendation . Internet bulletin boards soon begancirculating the optimistic report .
Then, on March 13, Teodosio Pangia -- the man Bergman says paid him $25,000 and30,000 shares to write the report -- filed with the Securities and ExchangeCommission his intention to sell 3,170,975 shares of Environmental Solutions, hisentire holding .
The sequence of events -- shares of the Richmond Hill, Ontario, company now tradeat around 2 -- makes it seem like a "classic pump-and-dump" operation to AlanBromberg, professor of law at Southern Methodist University in Dallas .
Buyers were influenced by a seemingly independent analyst ' s report to bid up astock, Bromberg said, while insiders sold at the inflated prices . This may be morethan just unethical . "If a company ' s press release about a research report fails to
Consolidated Amended Class Action Complaint 13 Master Case No . 01-CV-0205 L (CGA)
disclose the report was bought and paid for," says Valerie Caproni, director of theSEC"s Pacific regional office, "it's probably securities fraud . "
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Disclosure
Environmental Solutions isn't alone in not providing full disclosure. SinceDecember, Access I has issued reports on a score of small companies; typically, thecompanies and their investor relations representatives then draw attention to thereports via electronic press-release services as if they'd been the work of anindependent analyst, not a paid consultant .
In style and content, Bergman's reports mimic those of traditional stock analysts --"We recommend the accumulation of Environmental Solutions Worldwide Inc .'sshares for appropriate investors" -- though he's hardly an impartial evaluator of acompany's prospects .
As Bergman's brochure to potential clients puts it, his analyst reports are designedto have a "potentially substantial impact on your company's valuation . "
Manipulation ?
In the case of Environmental Solutions -- a three-year-old start-up with no revenueor manufacturing operations -- shares began rising even before Bergman's report waspublished : for days, word had spread over the Internet of an imminent analyst's reportthat would highlight the company's excellent prospects .
As a case study, Environmental Solutions seems "consistent with a short-termmanipulation of the market for the benefit of a selling insider," said John Coffee, aColumbia University law professor .
Bergman says he worked as an analyst at D .H. Blair Investment Banking, atHambrecht & Quist, and Hampton Porter of San Diego, among others, before startingAccess 1 as a financial public relations service .
Bergman concedes ordinary investors can get "confused" over his company'sservices. "I think that could easily be remedied with a rule that companies have todisclose that they've paid for the research report," he says .
In any event, companies might be re-thinking Bergman's role in their businessstrategy. Shares of all 23 companies for whom his firm issued "buy"recommendations are now trading for less than on the day his reports came out .
50. On June 23, 1999, Hampton-Porter published a press release announcing that it had
hired Bergman as its Director of research, stating :
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Consolidated Amended Class Action Complaint 14 Master Case No . 01-CV-0205 L (CGA)
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Hampton-Porter is pleased to announce the addition of Mark Bergman as Directorof Research. Mark Bergman is one of the leading experts in the area of technologyenterprises and investment advice . Recently, he was Chief of Global Equities at FABCapital, and Senior Analyst at leading Investment Banking firms, such as Volpe,Hambrecht & Quist, Cruttenden Roth . In addition, he was Director of Research forthe Boston Group . He has founded leading technology growth firms and was recentlySenior Vice-President of Xybernaut Corporation -- the worldwide leader in wearablecomputers . Dr. Bergman received a Ph.D . from Northwestern University andcompleted post-doctorate work at the University of Illinois .
51 . Because he had longstanding contacts with the Insiders and with Defendant Bob Di n
in particular, and because he had already been compensated by En Pointe and the Insiders to tout E n
Pointe's stock on the AccesslFinancial web site, Defendant Bergman was in an ideal position t o
recruit Bob Din and the Insiders to participate in Laurienti's pump and dump scheme .
Defendants Prepare Their Fraudulent Schem e
52. On or about September 1, 1999, Defendants began preparing to artificially inflate E n
Pointe's stock price to enable Defendants to pocket millions in unlawful insider trading proceeds .
To this end, Laurienti assembled a team of his associates to join him at Hampton-Porter, a penny
stock brokerage firm in which he had a 40% ownership interest . Although Laurienti had been barred
by the SEC in 1993 from acting in a supervisory capacity with any broker dealer or investment
company, Laurienti was able to operate this boiler room outfit through Walker, the President of
Hampton-Porter . Laurienti also ensured his control of Hampton-Porter by installing his trusted
friend, James Green, as the branch manager and hiring his brother, Bryan Laurienti, to join as a
broker .
53 . Laurienti and Bergman approached Bob Din about their plan to accumulate share s
of En Pointe and to assume command of the company ' s public float . Laurienti convinced Bob Din
that his plan would be a mutually bene ficial one . With control over a significant port ion of the
public float , Laurienti would essentially act as a price suppo rt for the stock while Bob Din could act
in a similar capacity by controlling the sale of shares by Insiders . Under this arrangement,
defendants would profit handsomely from the rise in price and could coordinate their selling of
shares to optimize their returns .
11 1
Consolidated Amended Class Action Complaint 15 Master Case No . 01-CV-0205 L (CGA)
1 54, Laurienti offered to purchase a large stake in En Pointe and promote its stock in
2 exchange for Bob Din's assurance that Insiders would not flood the market with stock . In return,
3 Bob Din agreed to limit insider sales to 125,000 shares for a period of time during the first quarter
4 of 2000. Additionally, Bob Din and En Pointe would need to fund payments or "concessions" to
5 Hampton-Porter registered representatives for pushing En Pointe shares on their clients . Realizing
6 that Laurienti's proposal could potentially mean a huge boost to En Pointe stock (of which the Bob
7 Din alone owned over 1 million shares), the Insiders agreed to participate in the fraudulent
8 conspiracy .
9 55. Specifically, Bob Din agreed to regulate all Insider sales by En Pointe's officers and
10 directors to ensure that the market would not be inundated with a large number of En Pointe shares
11 at any given time and provide the illicit financial inducements to Hampton-Porter brokers in
12 exchange for their assistance with the "pump" of the stock . In return, Laurienti agreed to cause
13 Hampton-Porter to issue falsely positive analyst reports about En Pointe's business prospects, and
14 to instruct Hampton-Porter's brokers to sell En Pointe securities to unsuspecting clients and
15 members of the Class. In addition, En Pointe would pay illegal "kickbacks" or "concessions" to
16 Hampton-Porter and its brokers, in which Walker and Laurienti were direct beneficiaries . The
17 "kickback" or "concessions" paid to Hampton-Porter from En Pointe amounted to illicit payments
18 of $0 .50 per share, over and above the broker's regular commission for their sales of En Pointe
19 securities .
20 56. With the fraudulent scheme firmly established and investor interest beginning to
21 surface as a result of increasing trading volumes, defendants began to aggressively promote En
22 Pointe shares . Pursuant to their agreement, Bob Din and En Pointe paid Hampton-Porter at least
23 $1 .5 million to push En Pointe stock . Holding up their side of the bargain, Laurienti and Walker
24 held several meetings to instruct the Hampton-Porter registered representatives to sell En Pointe
25 stock. During these meetings, Laurienti would insruct the brokers on ways to entice clients to invest
26 in the Company and to convince those clients to hold their shares . Laurienti informed the brokers
27 that Hampton-Porter would pay a "concession" of 50 cents per share, over and above the broker's
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Consolidated Amended Class Action Complaint 16 Master Case No . 01-CV-0205 L (CGA)
regular commission, for all sales of En Pointe shares. A credited concession would be deducte d
from the brokers paychecks, however, if their clients sold the stock within a certain period of time .
(See Exhibit 1 : Declaration of Adam Gilman , a Hampton-Porter registered representative) .
57. Laurienti's efforts at Hampton-Porter mirrored his previous attempts at such boile r
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room tactics while employed at Dickinson & Co . In 1993, in fact, Laurienti had been barred by the
SEC from acting in a supervisory capacity with any brokerage firm for permitting kick-backs of cash
and securities to his brokers for selling a stock called Fairmont Resources, Inc ., a Canadian penny
stock .
58 . While all of these elements of the scheme were falling into place, Laurienti bega n
quietly acquiring shares of En Pointe for his own account and through his various alter egos, Time
Holdings, LLC, JSL Enterprises, LLC, and JSL Holdings, LP, in order to gain control of the public
float of En Pointe . Time Holdings alone acquired 522,700 shares of En Pointe from August to
December of 1999 . This holding alone amounted to an 8 .8% stake in En Pointe, just below the 10%
insider threshold . Not only did Laurienti ultimately acquire these shares but he also consistently
bought and sold the stock to create the appearance of active trading and interest in the stock . (See
Exhibit 2 : Schedule 13D/A of Time Holdings, LLC) . In addition, Laurienti bought additional shares
of En Pointe through several personal accounts, including but not limited to, TD Waterhouse and
Ameritrade, Laurienti bought additional shares of En Pointe . By early December 1999, Laurienti
had purchased 520,000 shares of En Pointe for his personal accounts . In the aggregate, through his
personal account, the accounts of affiliated entities, and Hampton-Porter's clientele, Laurienti
controlled as much as 2 million shares of En Pointe stock .
59. While Hampton-Porter's brokers aggressively pushed their clients to invest in E n
Pointe securities, and with no other investment analysts reporting on En Pointe securities, En Pointe
and Hampton-Porter seized the opportunity to "pump" the stock by issuing false and misleading
public statements . To this end, Bergman began preparing and drafting promotional "analyst reports"
to be published concurrently with "buy" recommendations from Hampton-Porter .
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60. With this boiler room operation ready to commence, Hampton-Porter brokers began
a vigorous campaign to induce their clients to invest in En Pointe. If clients did not buckle under
the weight of the high-pressure sales pitch, the brokers would simply engage in unauthorized trading
of En Pointe in their client's accounts . Any complaints by the clients would be met with a cancel and
rebill of the transaction to another unsuspecting client's account effectively creating the perception
of even greater trade activity in En Pointe . Any efforts by investors to sell their shares during this
time were essentially blocked by their brokers who were unwilling to forfeit their concessions .
Laurienti's First Union Securities , Inc. Account
61 . Having amassed an enormous position in En Pointe at a number of discount brokerage
firms, Laurienti contacted William A . King ("King"), Senior Vice President and Director of
Corporate Executive Services of First Union Securities, Inc. ("First Union") in its Newport Beach
Office to inquire about First Union's margin requirements in late 1999 . King informed Laurienti that
First Union would allow him to borrow against 50% of his total portfolio .
62. In or about January 2000, Laurienti opened an individual account in his name at Firs t
Union ("the Personal Account") with King acting as the registered representative for the account .
Laurienti executed the requisite margin documents to allow him to take advantage of First Union's
margin requirements . Upon the opening of the Personal Account, Laurienti initially transferred in
350,000 shares of En Pointe .
63 . Recognizing his potential for liability for the inevitable debit balance that would
occur when En Pointe shares returned to their true market value, Laurienti asked King to open a
separate account at First Union on behalf of JSL Holding ("the Partnership Account") . King knew
that such a request would be met with resistance and suspicion by First Union . To coax First Union
into allowing such an account, Laurienti represented the JSL Holdings was being formed for "estate
Enterprises, L .L .C . as the general partner of JSL Holding . This application was rejected by First
Union . Laurienti then resubmitted the opening documents with JSL Holdings, L .P . as the general
partner . This too was rejected by First Union .
Consolidated Amended Class Action Complaint 18 Master Case No . 01-CV-0205 L (CGA)
1 64, Finally, Laurienti represented to First Union that he was now the General Partner of
2 JSL Holdings and would assume full responsibility for all debit balances arising from the account .
3 Laurienti, consistent with this charade, signed and executed the opening account documents on
4 behalf of JSL Holdings as its general partner. In truth and in fact, JSL Enterprises, Inc ., a
5 corporation with no assets, is the sole General Partner of JSL Holdings . Laurienti made these
6 misrepresentations to dupe First Union into allowing him to transfer his En Pointe shares to an
7 account that would essentially shield Laurienti from the certain debit balance that would allow En
8 Pointe's plunge . On January 31, 2000, an account was opened for JSL Holdings at First Union .
9 65. Having set up his dummy account, Laurienti directed the transfer of all of his
10 positions from his Personal Account, including the 350,000 shares of En Pointe, and an existing
11 debit balances of approximately $6 .2 million to the Partnership Account on or about February 10,
12 2000. An additionally 180,555 shares of En Pointe would be transferred into his account on March
13 7, 2000 from a non-party brokerage firm . As the value of this stock rose in February and early
14 March, the equity in Laurienti's First Union account increased dramatically . In furtherance of his
15 scheme, Laurienti periodically made withdrawals on the equity essentially borrowed from First
16 Union and transferred those amounts to various accounts ensuring that he would stand to profit
17 millions when the bottom fell out of the price of En Pointe shares . In February and March 2000
18 alone, Laurienti transferred over $2.2 million from his First Union account to other accounts of
19 unknown origin .
20 Defendants Begin the Manipulation
21 66. On or about December 7, 1999, several En Pointe officers participated in a conference
22 call with business journalists , analysts and investors . Specifically, three En Pointe executives (Bob
23 Din, Latif, and Posner) participated in this conference call . During the call, Bob Din commented on
24 En Pointe's new "wholly owned" subsidiary SupplyAccess . Bob Din further stated :
25 We have recently launched a new subsidiary, SupplyAccess, Inc ., which is beingpositioned to compete well against entities such as Ariba and Commerce One . We
26 are in the process of seeking a private placement of securities for no less than $ 9 .75Mand no more than $18 .75M .
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67 . Ariba and Commerce One were and are the two leading companies in the B2 B
exchange market and experienced strong demand for their stock in 1999 . Bob Din, in the December
7, 1999 conference call, characterized En Pointe's subsidiary SupplyAccess as "being positioned to
compete well against" both Ariba and Commerce One, the dominant companies in the B2B
marketplace . This statement was patently false . In fact, neither En Pointe nor SupplyAccess have
ever been significant players in the B2B market in which Ariba and Commerce One operate, and they
were not positioned to offer any significant competition to those companies .
68 . B2B industry reports confirm that SupplyAccess and En Pointe were not even
remotely involved as players in the B2B marketplace . Specifically, in January 2000, Broadview
International, LLC released a research report entitled "Market Maps of B2B Digital Marketplaces
and Web-Enabled Supply Demand Management Companies ." Broadview's report sought to account
for every known public and private company operating in the B2B market . Additionally, Broadview
categorized each company into market segments identifying the focus of the B2B companies . Ariba
and Commerce One were characterized as "Super Verticals" as opposed to just horizontal or vertical
market B2B companies . This characterization of Ariba and Commerce One reflected their
domination of the B2B space . Most importantly, neither En Pointe nor SupplyAccess were
mentioned as operating in any B2B market whatsoever -- in fact they were not even mentioned in
the report .
69. A March 13, 2000 press release published by Commerce One, Inc . further
demonstrates the fact that En Pointe and SupplyAccess were not and never have been competitors
of Commerce One . This press release lists En Pointe as one of over 30 "vendors and suppliers" who
had "endorsed Commerce One's Round Trip capability ." This statement makes it clear that En
Pointe was a purchaser of Commerce One's technology, rather than a competitor in the B2B market .
70 . During the December 7,1999 conference call, defendant Bob Din also announced that
the private placement offering of SupplyAccess would garner a total of "no less than $9 .75 millio n
and no more than 18 .75 million." The maximum offering of $18 .75 million would have left E n
Pointe with a majority interest in SupplyAccess .
Consolidated Amended Class Action Complaint 20 Master Case No . 01-C V-0205 L (CGA)
1 71, This statement was knowingly misleading because Bob Din, in light of his position
2 and access to internal private placement memoranda for SupplyAccess, knew at that time that a
3 supplemental offering was being prepared for another $7 .6 million, which in turn would leave En
4 Pointe with a minority ownership interest in SupplyAccess .
5 72. That same day, December 7, 2000, defendants formally informed the market
6 concerning the Company's planned private placement of SupplyAccess stock with the filing of a
7 Form 8-K with the SEC . This document stated, in relevant part .
8 The Company is in the process of seeking funding for a private placement ofsecurities in its recently incorporated, currently wholly owned, direct-procurement
9 focused subsidiary, SupplyAccess, Inc ., for no less than $9 .75 million and no morethan $18 .75 million .
1073. After the early December conference call and 8-K filing, the share price of En Pointe
11began to steadily rise as Hampton-Porter created artificial demand for the stock and as the market
12digested the news that En Pointe was purportedly a majority owner of SupplyAccess, a company that
13was "well positioned" to compete with Wall Street darlings Ariba and Commerce One . In early
14December, En Pointe stock traded around $10 per share and an average volume of about 30 to 50
15thousand shares a day . In fact, En Pointe stock had never traded above $14 a share during the prior
16two years . By December 31, 1999, En Pointe closed at $27 .50 per share .
1774 . On January 13, 2000, En Pointe filed its annual report on SEC Form 10-K . This
18document stated, in relevant part :
19The Company has recently formed a new subsidiary, SupplyAccess, Inc ., to continue
20 the maintenance and enhancement of these systems, and to offer some of the benefitsof these systems to third parties . A private placement of the capital stock of thi s
21 subsidiary is currently in process ; there can be no assurance, however, that the privateplacement will be successfully completed .
2275 . The quoted statements in the January 13, 2000 Form 10-K were materially false and
23misleading at the time that they were made, in that Defendants concealed the fact that En Pointe was
24poised to proceed with a supplemental private placement offering which would reduce the
25Company's ownership in SupplyAccess to a minority position .
2676. Throughout the Class Period, Laurienti, Walker and H-P and caused Hampton-Porter
27to consistently advocate the "hidden value" of SupplyAccess to En Pointe's stock price . Hampton-
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Porter published glowing "analyst reports" drafted and prepared by Bergman which were designed
to artificially inflate the share price of En Pointe stock and work in tandem with the artificial demand
for the stock that Hampton-Porter's boiler room operation was creating . For example, in a research
report published January 11, 2000, Hampton-Porter stated :
We rate ENPT Accumulate, Speculative . While En Pointe Technologies' stock pricehas run more than 280% in the past two weeks and the valuation does appear loftyon a near term basis, we believe that the current price of the stock reflects a fewcritical metrics that should sustain an increase in valuation over the mid to longerterm .
[W]e believe the company 's true strategic value is in its Internet-relatedsubsidiaries, Firstsource.com and SupplyAccess Inc., and that the recent run up interms of stock price is due to market speculation in terms of these businesses . EnPointe currently holds a 71 % stake in Firstsource and a 51 % stake in SupplyAccess(upon completion of an $18 million private placement) . As each of these companiesramp in terms of revenue and capturing market share, we believe that they representa significant value to En Pointe shares . Moreover, an IPO of SupplyAccess couldunleash enormous additional value to En Point shareholders, given a conservativevaluation relative to its peers on the street (see discussion below) . At present, we feelthat En Point represents a compelling indirect play in the business-to-businesseCommerce market.
SupplyAccess Inc. focuses on large enterprise e-procurement solutions in thebusiness-to-business marketplace, including procurement of IT products and services,operating resources and other vertical products and services . Strategic partnersinclude SAP AG (NYSE : SAP) and Microsoft Corp . (Nasdaq: MSFT) . In its first twoquarters of operation, the company has already processed more than $100 million intransactions .
Growth in the business-to-business Internet commerce market continues to explode,and is affecting the way small businesses to large corporations are doing business .Business-to-business eCommerce enables companies to drastically reduce costs,increase and sustain ROI and gain competitive advantages over their peers .According to Giga Information Group, savings due to the use of business-to-businesseCommerce solutions for US businesses will explode from $15 billion in 1998 toabout $600 billion in 2002. Moreover, one-fourth of all US business-to-businesspurchasing will be done online by 2003, reaching approximately $2 .8 trillion intransaction value, according to the Boston Consulting Group .We believe that SupplyAccess is poised to take advantage of this exponentiallygrowing business-to-business eCommerce market, differentiating itself from itscompetitors such as CommerceOne, Ariba and PurchasePro on a number ofdifferent levels .
*** *
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Consolidated Amended Class Action Complaint 22 Master Case No . 01-CV-0205 L (CGA)
1 [W]e believe that SupplyAccess has a significant opportunity in the huge B2Bmarket, and therefore makes a compelling value proposition for shareholders of E n
2 Pointe. En Pointe is in the process of issuing a privateplacementfor SupplyAccess,raising $18 million. Upon completion , En Pointe will retain a 51% stake in
3 SupplyAccess. Given the street's interest in e-procurement companies andSupplyAccess' competitive positioning in this space, a SupplyAccess IPO would
4 bring substantial value to En Pointe. (Emphases added.)
5 77. Through Hampton-Porter, Laurienti, Walker and H-P continued to feed similar false
6 and misleading information to the market on February 4, 2000, when Hampton-Porter published
7 another Bergman report containing the following statements :
8 To reiterate , we believe that SupplyAccess has a significantopportunity in the hugeB2B market, and therefore makes a compelling value proposition for shareholders
9 of En Pointe . En Pointe is in the process of issuing a private placement fo rSupplyAccess, raising $18 million. Upon completion, En Pointe will retain a 51 %
10 stake in SupplyAccess . Given the street's interest in e-procurement companies andSupplyAccess' competitive positioning in this space, a SupplyAccess IPO would
11 bring substantial value to En Pointe . (Emphases added . )
12 78. The January 11 and February 4, 2000 compared SupplyAccess to Ariba and
13 Commerce One on a market capitalization basis . For example, in the February 4, 2000 report, H-P,
14 and Jaurienti cause Hampton-Porter to state :
15 Company Recent Stock Price Market Capitalization:Ariba- $172 15,629,640
18 Assuming that SupplyAccess is valued at a conservative multiple of 60X year '00revenues to its peers, (CMRC @ 123x year '00 ; and ARBA @ 80x year '00), with
19 projected revenue of $7,591,000 in its first year of operations, SupplyAccess shouldbe valued at approximately $17 per share (28,000,000 basic outstanding) . An initial
20 public offering of SupplyAccess would unleash value to En Pointe in the followingmanner: Upon completion of an $18 million private placement, En Pointe woul d
21 own 51 % of SupplyAccess (which should be valued at approx. $17 per share) . Thiswould in turn, bring an additional $40 to En Pointe's current $38 .25 trading level .
22 We believe that trading 60x `00 revenues, an IPO of SupplyAccess would brin gsomewhere between $35 and $40 of value to En Pointe's market capitalization .
2379. The quoted statements in the January 11, 2000 and February 2000 reports were
24materially false and misleading at the time that they were published because : a) SupplyAccess was
25not a direct competitor of either Commerce One or Ariba and has never been ; b) Defendants
26concealed and affirmatively misrepresented the fact that En Pointe and the Insiders were planning
27a $7.6 million supplemental offering of SupplyAccess preferred stock which would reduce En
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Consolidated Amended Class Action Complaint 23 Master Case No 01-CV-0205 1. (CGA)
1 Pointe's ownership below that of a majority position; c) the reports concealed the fact that
2 Defendants were engaged in a scheme to artificially inflate En Pointe's share price so that Defendants
3 could sell En Pointe stock to the unsuspecting public for massive illegal profits, and that Hampton-
4 Porter and En Pointe were paying Hampton-Porter's sales representatives special incentive payments
5 for sales of En Pointe stock ; d) the reports concealed the fact that control persons of Hampton-Porter
6 owned extremely large stakes in En Pointe stock and were causing Hampton-Porter to advise readers
7 to buy the stock in order to enrich themselves ; and e) SupplyAccess was a new start up with an
8 unproven technology of questionable value, and there was no reasonable basis for the projection that
9 SupplyAccess would generate $7 .5 million in revenues in its first year of operations .
10 80. The fact that the SupplyAccess revenue projections contained in the January 11, 2000
11 and February 2000 reports set forth above were materially false and misleading when made is further
12 demonstrated in the Company's subsequent filings . Because En Pointe's voting interest in
13 SupplyAccess dropped below 50% effective April 4, 2000 and En Pointe did not otherwise have
14 control, En Pointe began to account for its investment in Supply Access under the equity method of
15 accounting . Under this method of accounting, En Pointe recognized a loss of $512,000 on its
16 minority stake for the fiscal year ended September 30, 2000 . No significant revenues from
17 SupplyAccess were reported or evident . In fact, according to En Pointe's annual report on SEC Form
18 10-K, filed on January 18, 2001, "SupplyAccess, a start-up internet portal business-to-business
19 provider, did not record any net sales for the approximate six month period in which the former
20 subsidiary was consolidated with the Company ."
21 81 . On February 10, 2000, En Pointe and the Insiders published a press release which
22 stated, in relevant part :
23 With the new business systems now operational, En Pointe is at the forefront ofbusiness-to-business e-commerce utilizing its unique tool, SupplyAccess(TM) . . .
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25The Company is in the process of obtaining funding for a private placement of
26 securities in its subsidiary, SupplyAccess, Inc .
27 111
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Consolidated Amended Class Action Complaint 24 Master Case No. 01-CV-0205 L (CGA)
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82. En Pointe's and the Insiders ' statements in the February 10, 2000 press release wer e
materially false and misleading at the time that they were published, in that they concealed the facts
that: a) neither the Company nor SupplyAccess was an active competitor in the business-to-business
e-commerce marketplace, and in fact neither was considered to be a player in this market ; and b)
contrary to prior statements, En Pointe was poised to proceed with a supplemental private placement
offering which would reduce the Company's ownership in SupplyAccess to a minority position .
83 . On February 25, 2000, En Pointe and the Insiders' made another announcemen t
concerning their planned private placement of SupplyAccess equity, stating that "its subsidiary,
SupplyAccess, Inc ., has completed a first closing of a $26 .5 million investment in
SupplyAccess(TM) Series A Preferred Stock ." This statement was materially false and misleading
at the time that it was made, because it failed to disclose, and En Pointe and the Insiders concealed
the fact that En Pointe was poised to proceed with a supplemental private placement offering which
would reduce the Company's ownership in SupplyAccess to a minority position .
84. On February 25, 2000, En Pointe's common stock reached an all-time high of $5 2
per share . In an effort to capitalize on the stock's all-time and the undisclosed knowledge of the
impending sale of En Pointe's controlling interest in SupplyAccess, the Insiders sold 141,922 shares
worth approximately $7 .4 million worth of their stock on February 28, 2000 and February 29, 2000 .
(See ¶~ 105-113, infra) .
85 . On March 2, 2000, En Pointe filed a report on Form 8-K with the SEC, stating in part :
The Company announces that its web procurement business-to-business subsidiary,SupplyAccess, Inc ., recently completed an initial funding of a private placement ofSeries A preferred stock in the gross amount of $18 million . Such funding resultedin the sale of 12 million shares of preferred stock at $1 .50 per share, representing46.1 % of the total 26 million shares of outstanding stock . With the conclusion of thissale, the Company's ownership in SupplyAccess, Inc . is 53 .9%.
86. The quoted statements in the March 2, 2000 Form 8-K were materially false and
misleading at the time that they were made , in that En Pointe and the Insiders concealed the fact that
En Pointe was poised to proceed with a supplemental private placement offering which would reduce
the Company ' s ownership in SupplyAccess to a minority position .
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Consolidated Amended Class Action Complaint 25 Master Case No . 01-CV-0205 L (CGA)
1 87, After the release of March 2 Form 8K, from March 2, 2000 through March 15, 2000,
2 the Insiders sold an additional 556,095 shares of En Pointe stock worth approximately $27 .6 million .
3 (See IT 105-113, infra) . Despite this flood of Insider sales, Laurienti had been able to stabilize the
4 price of the stock by continuing his promotional efforts and encouraging clients of Hampton-Porter
5 to buy En Pointe shares . Laurienti's success in this regard was temporary, however . Finally, on
6 April 4, 2000, news of the Insider sales caused a share price decline significant enough to trigger a
7 $1,370,300 margin call on Laurienti's First Union Partnership Account . The margin call demanded
8 that additional funds and/or securities be deposited into the Partnership Account. First Union
9 contacted Laurienti and demanded that he deposit cash or eligible securities to meet the margin call
10 and was told that if he did not meet the margin call, securities would be sold in his account.
I 1 Laurienti met the call by liquidating shares of companies other than En Pointe . Laurienti specifically
12 instructed First Union never to sell his En Pointe shares to meet a margin call .
13 88. Laurienti received an additional margin call from First Union on or about April 11,
14 2000 due to a further decline in the prices of En Pointe . Laurienti again instructed First Union not
15 to sell any En Pointe stock in the Partnership Account as he represented he was in the process of
16 obtaining funds and/or securities to deposit into the Partnership Account to meet the margin call .
17 Laurienti told First Union that he could get a letter of authorization to transfer $2 million from an
18 existing account at First Union . The existing account was that of Mediha Din, the eighteen-year-old
19 daughter of Bob Din. Bob Din suggested to First Union that his daughter would authorize the
20 transfer of $2 million from her First Union account to JSL Holdings' First Union account . Laurienti
21 told First Union that he had, in fact, made the arrangements to receive the $2 million loan and that
22 the margin calls would be met . Based upon these representations, First Union did not immediately
23 liquidate the entire Partnership Account . Upon consultation with his in-house lawyer at En Pointe
24 about this transaction, however, Bob Din rescinded the offer as his counsel advised him that the
25 transfer of funds would be "too obvious" . Bob Din then attempted to arrange for a banker to loan
26 Laurienti the requisite amount to cover the debit balance . When the banker, Laurienti and King
27 informed a margin clerk that such a loan would take a week to arrange, First Union liquidated the
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Consolidated Amended Class Action Complaint 26 Master Case No . 0 I-CV-0205 L (CGA)
1 remainder of the account to meet the margin calls . First Union has since filed a NYSE arbitration
2 claim against En Pointe, Bob Din and Laurienti for fraud in connection with Laurienti's margin
3 account and Laurienti's promotion of En Pointe common stock .
4 89. On April 13, 2000, En Pointe and the Insiders issued a press release announcing the
5 closing of a supplemental sale of SupplyAccess preferred stock of $7 .6 million and that En Pointe
6 was "no longer a majority stockholder of SupplyAccess, Inc ." In fact, it was later revealed that En
7 Pointe's ownership interest had declined to 45 .1%. In response to this stunning revelation, En
8 Pointe's stock price plummeted from an intra-day high of $28 .50 to close at $12 .87 on over 2 million
9 shares traded .
10 90. En Pointe shares have not traded over $13 per share since and traded at $9 per share
11 90 days after the April 13, 2000 En Pointe press release . This price reflects less than a $54 million
12 market capitalization for the entire company . Insiders profited at least $35 million dollars alone from
13 their insider sales from February 28 to March 15, 2000.
14 91 . During and immediately after the April 13, 2000 crash of En Pointe stock, and in
15 order to relieve some of the selling pressure, Hampton-Porter's trading room, at the direction of
16 defendants Laurienti, Walker and H-P refused to accept sell orders from clients . Defendants
17 Laurienti, Walker and H-P also caused Hampton-Porter to pressure its registered representatives to
18 sell En Pointe stock to their customers without regard to its suitability .
19 92. The aftermath ofthe April 13 revelation was reported by Bloomberg News as follows :
20 En Pointe Technologies Inc . (ENPT) shares fell $14 .63, or 53 percent, to $12 .88 .The provider of business-to-business information technology products and services
21 said it's no longer the majority owner of SupplyAccess, Inc., an operator of abusiness procurement web site .
22Post-Class Period Events
2393 . On April 14, 2000, a Hampton-Porter client named Steven Crosby went to Hampton-
24Porter's offices and confronted his broker and several other Hampton-Porter representatives . He was
25informed that Defendants were working feverishly to support En Pointe's share price, and that Bob
26Din had agreed to provide $1 .5 million to Hampton-Porter secretly to allow Defendants to create
27artificial demand for the stock and prop up the plummeting share price . He was also informed that
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Consolidated Amended Class Action Complaint 27 Master Case No. 01-CV-0205 L (CGA)
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Hampton-Porter was purposefully disguising these purchases to make them appear to be made
through different brokerage firms . These facts are alleged in an arbitration complaint styled Crosby
v. Hampton-Porter Investment Banking, LLC, filed with the National Association of Securities
Dealers in June of 2000 .
94. On April 17, 2000, in a last-ditch effort to boost En Pointe ' s share price and continue
with Defendants ' scheme , Laurienti , Walker and H-P caused Hampton-Po rter to publish another
report touting En Pointe and SupplyAccess . This report contained a "strong buy" recommendation
for En Pointe's stock and stated that En Pointe's stock had been "oversold due to market conditions . "
95 . Following the events outlined in the Class Period, various legal actions, includin g
those filed by Lead Plaintiffs and by First Union and the Crosbys, have been instituted against
Defendants in connection with their scheme to manipulate the price of En Pointe securities .
Apparently, these legal actions have spurred Hampton-Porter to essentially go into hiding . In fact,
on May 17, 2001, The San Diego Union-Tribune published an article stating, in relevant part
"Hampton-Porter, a brokerage house with a history of disciplinary actions and lawsuits against it,
has abruptly departed its office in downtown San Diego . "
96 . As of June 2001, the Company's share price still has not recovered, hovering aroun d
$2 per share .
CAUSATION ALLEGATION S
97. En Pointe's common stock was publicly traded on the NASDAQ NMS at all relevan t
times. Defendants' material misrepresentations, and omissions manipulative contrivances had th e
effect of artificially inflating the price of En Pointe's stock .
98. Defendants had a duty to promptly disseminate accurate and truthful information with
respect to En Pointe's financial and operational condition or to cause and direct that such informatio n
` be disseminated and to promptly correct any previously disseminated information that was
misleading to the market . As a result of their failure to do so, the price of En Pointe's stock price
was artificially inflated during the Class Period, damaging Lead Plaintiffs and the Class .
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99. Defendants' false and misleading statements and omissions in their public statements
directly caused losses to the Class . On the strength of these false statements, misrepresentations and
material omissions, the Company's stock was artificially inflated to a Class Period high of $52 on
February 25, 2000 and remained artificially inflated until the end of the Class Period . Lead Plaintiffs
and all class members who bought shares during the Class Period were harmed thereby, when the
share prices plummeted on April 13, 2000 upon the revelation of the true nature of the Company's
ownership of SupplyAccess .
100. Until shortly before the filing the original complaint, Lead Plaintiffs and the Clas s
~ was unaware of all of the facts, as described herein, and could not have reasonably discovered th e
Defendants' fraudulent scheme by the exercise of reasonable diligence .
ADDITIONAL SCIENTER ALLEGATION S
101 . Each misrepresentation and/or omission ofmaterial fact alleged herein was made wit h
reckless disregard for, or knowledge of its false and misleading nature . At all relevant times, each
Defendant was in a position to know, and did in fact know the material facts regarding the Company
as set forth herein. Specifically, the Insiders were in a position to know, and indeed must have
known that the Company was not actively operating as a competitor to Ariba and Commerce One .
Indeed, as described above, En Pointe was listed in a Commerce One press release as a purchaser
of Commerce One's services and products, rather than a competitor . Similarly, the Insiders were in
a position to know, and must have known or recklessly disregarded the fact that the Company was
planning an expanded private placement offering of SupplyAccess securities which would reduce
the Company's ownership of SupplyAccess below 50% . Indeed, by February 25, 2000, Defendants
had done a primary closing on the supplemental offering, and thus had to know the full terms of the
deal by the date, and almost certainly months before .
102. The Insiders had the opportunity to commit and participate in the fraud describe d
I herein . The Insiders were each top officers, directors and/or shareholders of En Pointe and thu s
controlled the Company 's press releases, corporate reports, SEC filings and communications with
analysts . Thus, they controlled the public dissemination of and could falsify and/or omit, th e
Consolidated Amended Class Action Complaint 29 Master Case No . Ol-CV-0205 L (CGA)
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and affected the price of En Pointe stock .
103 . Laurienti, Walker, Bergman, Hampton-Porter, and the other Hampton-Porter related
defendants were engaged in a purposeful, intentional manipulation of the market for En Pointe's
stock at all times during the Class Period . As such, they intentionally paid incentive kickbacks to
brokers for selling En Pointe stock to unwitting customers, intentionally parked stock in clients'
accounts without their consent, intentionally avoided selling En Pointe stock for clients and seized
back incentive payments made to brokers whose clients sold their shares . These intentional acts
were all a part of a scheme the express purpose of which was to artificially inflate the share price of
En Pointe stock. Laurienti profited at least $2 .2 million by siphoning off cash from his margin
account when the En Pointe's share price was high, and then refusing to pay back such cash when
margin calls were precipitated by the crash in En Pointe's share price . Lauritenti also planned on
selling his En Pointe shares at an even more considerable profit, but was undercut when the Insiders
broke ranks and engaged in their insider sales .
104 . By mid-March, the price of En Pointe shares had been driven to astronomical levels .
What had previously been a $9 stock as late as December 1999 had increased five-fold to $52 .
Enticed by the prospect of immediate and sizeable returns at the stock's all-time high and the
undisclosed knowledge of the impending sale of En Pointe's controlling interest in SupplyAccess,
the Insiders began a wholesale sell-off of their shares . Despite the fact that it is unlawful for any
person who is an officer, director or controlling person of an issuer to sell stock in the issuer at a time
when he/she knows material information about the issuer which would significantly affect the market
price of the issuer's security, the Insiders sold hundreds of thousands of En Pointe shares to the
unsuspecting public, while concealing the scheme to artificially inflate the price of En Pointe
securities, between February 28, 2000 and March 15, 2000, Insiders sold nearly 700,000 shares of
En Pointe netting over $35 million . The Insiders' selling during the Class Period is summarized as
follows :
Consolidated Amended Class Action Complaint 30 Master Case No . 01-CV-0205 L (CGA)
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INSIDER NUMBER OF SHARES PROCEED S
Naureen and Bob Din 202,000 8,958,780
Mediha Din2 100,000 4,339,000
Ali Mohyuddin3 100,000 4,393,71 1
Ahmed 165,000 7,660,537
Briggs 18,000 869,249
Garrourte 10,000 463,729
Latif 47,185 2,154,802
Posner 33,000 1,506,85 3
Stetton 10,000 463,73 0
Mercer 7,322 339,542
Keating 5,600 262,182
TOTAL 698,017 $35,751,11 5
105. During the Class Period, Bob Din and Naureen Din made the following sales of En
Pointe common stock while in possession of material adverse information concerning the
Company's business and finances as described herein :
DATE SHARES PRICE PROCEED S
02-28-00 20,000 $44 .05 $881,000
02-29-00 30,000 $42.73 $1,281,900
03-01-00 15 ,000 $45 .46 $681,900
03-06-00 30,000 $40.83 $1,224,900
03-08-00 53,000 $43 .78 $2,320,340
03-10-00 24,000 $50.36 $1,208,640
03-14-00 20,000 $45 .66 $913,200
03-15-00 10,000 $44.69 $446,900
TOTAL : 202,0001 1 $8,958,780
Ill/
2 Mediha Din is the minor daughter of Bob and Naureen Din .
3 Ali Mohyuddin is the son of Bob and Naureen Din .
C Consolidated Amended Class Action Complaint 31 Master Case No . 01-CV-0205 L (CGA)
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106 . During the Class Period, Ahmed made the following sales of En Pointe common
stock while in possession of material adverse information concerning the Company's business and
finances as described herein :
DATE SHARES PRICE PROCEEDS
03-01-00 15,000 $45 .20 $678,000
03-02-00 10,000 $43 .25 $432,500
03-03-00 10,000 $43 .54 $435,400
03-07-00 15,000 $42.66 $639,900
03-09-00 63,300 $48 .51 $3,070,683
03-10-00 1,700 $49.62 $84,3S4
03-13-00 30,000 $48.05 $1,441,500
03-15-00 20,000 $43 .91 $878,200
TOTAL: 165,000 $7,660,537
107 . During the Class Period, Briggs made the following sales of En Pointe common stock
while in possession of material adverse information concerning the Company's business and
finances as described herein :
DATE SHARES PRICE PROCEEDS
02-28-00 8 ,000 $51 .15 $409,200
02-28-00 5,000 $47.55 $237,750
02-28-00 1,191 $44.46 $52,95 1
02-29-00 3,809 $44.46 $169,348
ITOTAL : 18,000 S869,24 9
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108. During the Class Period, Garroutre made the following sales of En Pointe common
stock while in possession of material adverse information concerning the Company's business and
finances as described herein :
DATE SHARES PRICE PROCEED S
02-28-00 5,000 $47 .55 $237,750
02-28-00 1,191 $47 .55 $56,632
02-29-00 2,142 $44.46 $95,233
02-29-00 1 ,667 $44 .46 $74,11 9
TOTAL : 10,000 $463,729
109 . During the Class Period, Latif made the following sales of En Pointe common stock
while in possession of material adverse information concerning the Company's business and
finances as described herein :
DATE SHARES PRICE PROCEED S
02-28-00 15,477 $47.55 $735,93 1
02-29-00 9,523 $44 .36 $422,440
03-01-00 5,000 $44 .96 $223,800
03-03-00 9,100 $45 .11 $410,50 1
03-10-00 1,100 $50 .00 $55,000
03-15-00 6,985 $43 .97 $307,130
TOTAL : 47,185 $2,154,802
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110 . During the Class Period, Posner made the following sales of En Pointe common stock
while in possession of material adverse information concerning the Company's business and
finances as described herein :
DATE SHARES PRICE PROCEEDS
02-28-00 10,000 $47.55 $475,500
02-28-00 5,000 $47.55 $237,75 0
02-28-00 477 $47.55 $22,68 1
02-29-00 9,523 $44.46 $423,392
03-06-00 5,000 $41 .21 $206,050
03-14-00 3,000 $47 . 1 6
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$141,480
TOTAL: 33,000 -1i - $ 1,506,853
111 . During the Relevant Period, Stetton made the following sales of En Pointe common
stock while in possession of material adverse information concerning the Company's business and
finances as described herein :
DATE SHARES PRICE PROCEED S
02-28-00 6,191 $47 .55 $294,382
02-29-00 3,809 $44 .46 $169,34 8
TOTAL: 10,000 $ 463,730
112 . During the Class Period, Mercer made the following sales of En Pointe common stock
while in possession ofmaterial adverse information concerning the Company's business and finances
as described herein :
DATE SHARES PRICE PROCEED S
02-28-00 4,533 $47.55 $215,544
02-29-00 467 $44 .46 $20,762
02-29-00 2,322 $44.46 $103,23 6
TOTAL : 7,322 $339,542
Consolidated Amended Class Action Complaint 34 Master Case No. 01-C V-0205 L (CGA)
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113 . During the Class Period, Keating made the following sales of En Pointe common
stock while in possession of material adverse information concerning the Company's business and
finances as described herein :
DATE SHARES PRICE PROCEED S
02-28-00 1,000 $48 .87 $48,870
02-28-00 1,600 $47,55 $76,08 0
02-28-00 1,247 $47.55 $59,294
02-29-00 1,753 $44.46 $77,93 8
TOTAL : 5,600 $262,182
114 . These sales are unusual and suspicious in their timing and amount since Insiders had
never before sold shares in February and March (and therefore such sales were not part of an adopted
annual practice) and Insiders sold a majority of their ownership positions as demonstrated below :
(1) Briggs sold 100% of his ownership position ;(2) Garroutte sold 100% of his ownership position;(3) Keating sold 100% of his ownership position ;(4) Mercer sold 100% of his ownership position;(5) Latif sold 89 .3% of his ownership position;(6) Posner sold 68 .4% of his ownership position ;(7) Bob Din and Naureen Din sold 61 .5% of their ownership position ;(8) Stetton sold 58% of his ownership position ; and(9) Ahmed sold 20% of his ownership position for $7 .66 million .
115 . Moreover, these sales took place shortly after the Defendants primed the market with
their talk of being "we ll positioned" to compete with Ariba and Commerce One and their
SupplyAccess venture . The Insiders ' sales were also timed to take advantage of the arti ficial demand
for En Pointe stock that was fostered by Hampton -Porter's boiler room operation , and to precede the
announcement that En Pointe 's ownership of SupplyAccess had fallen below 50% .
116. The combination of attributable knowledge with the evident profit incentives for th e
various Defendants creates a strong inference of scienter .
FRAUD ON THE MARKET ALLEGATION S
117. At all relevant times , the market for En Pointe common stock was an efficient market
for the following reasons, among others :
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` Consolidated Amended Class Action Complaint 35 Master C as e No . DI-CV-0205 L (CGA)
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a. At all relevant times during the Class Period, En Pointe's common stock waslisted and actively traded on the NASDAQ NMS, a highly efficient nationalsecurities market. During the Class Period, the Company had approximately6.5 million shares of common stock issued and outstanding ;
b. As a registered and regulated issuer of securities , En Pointe filed periodicreports with the SEC and the NASDAQ NMS, in addition to the frequentvoluntary dissemination of information described in this Complaint ; and
c . Several financial analysts covered and reported on En Pointe's developments,and disseminated such reports to the investing public .
118 . As a result of the above, the market for En Pointe securities promptly digested current
information with respect to En Pointe from all publicly available sources and reflected such
information in En Pointe's stock prices. Under these circumstances, all purchasers of En Pointe
stock during the Class Period suffered similar injury through their purchase of securities at prices
which were artificially inflated by the Defendants' manipulative activities . Thus, a presumption of
reliance applies .
FIRST CLAIM FOR RELIE FViolations of Section 10(b) of The Securities Exchange Act of 1934
and Rule IOb-5 Promulgated thereunder(Against All Defendants)
119 . Plaintiff incorporates by reference and realleges all preceding paragraphs as thoug h
fully set forth herein.
120 . During the Class Period, Defendants En Pointe, Bob Din, Latif, Naureen Din, Ahmed ,
11 1475 Sixth Avenue, Suite 301San Diego, CA 9210 1
12Evan Smith, Esq .
13 BRODSKY & SMITH11 Bala Avenue, Suite 39
14 Bala Cynwyd, PA 19004
15 Corey D HolzerHOLZER & HOLZER
16 6135 Barfield Road, Suite 102Atlanta, GA 3032 8
17Kirk Hulett, Esq .
18 HULETT HARPER LLP550 West C Street, Suite 1770
19 San Diego, CA 9210 1
20 Jeffery R. Krinsk, Esq.FINKELSTEIN & KRINSK
21 501 West Broadway, Suite 1250San Diego, CA 9210 1
22Alfred G . Yates, Jr ., Esq .
23 LAW OFFICES OF ALFRED G . YATES, JR .519 Allegheny Building
24 429 Forbes AvenuePittsburgh, PA 15219
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Consolidated Amended Class Action Complaint 41 Master Case No. 01-CV-0205 L (CGA)
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DEMAND FOR JURY TRIA LRule 38(b) of the Federal Rules of Civil Procedure
Lead Plaintiffs, on behalf of themselves and all others similarly situated, hereby demand a
trial by jury of this action .
Dated: June 18, 2001 By :Jam C' Krause ,'Esq.' NPa ick N. Keegan, Esq . L
USE & KALFAYAN
Burton H. Finkelstein, Esq .Donald J. Enright, Esq .FINKELSTEIN, THOMPSON& LOUGHRAN
Lead Counsel for Lead Plaintiffs
Consolidated Amended Class Action Complaint 42 Master Case No . 01-CV-0205 I . (CGA)
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James C. Krause, Esq., SBN 66,478Patrick N. Keegan, Esq ., SBN 167,698KRAUSE & KALFAYAN1010 Second Avenue, Suite 1750San Diego, CA 9210 1Tel : (619) 232-0331Fax: (619) 232-4019
Burton H. Finkelstein, Esq .Donald J . Enright, Esq .FINKELSTEIN, THOMPSON & LOUGHRAN1055 Thomas Jefferson Street, NW, Suite 601Washington, DC 20007Tel: (202) 337-8000Fax : (202) 337-8090
Lead Counsel for Lead Plaintiffs(Additional Counsel on Signature Page)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
In re EN POINTE TECHNOLOGIES, INCSECURITIES LITIGATION
This Document Relates To :
ALL ACTIONS
Master Case No. 01-CV-0205 L (CGA)
PROOF OF SERVICE
I am employed with the LAW OFFICES OF KRAUSE & KALFAYAN , whose address is
1010 Second Avenue, Suite 1750 , San Diego , California, 92101 ; 1 am not a party to this cause . I
am over the age of eighteen years .
I further declare that on the date hereof I served a copy of the following documents :
CONSOL IDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF
THE FEDERAL SECURITIES LAWS on the interested parties listed below :
SEE ATTACHED SERVICE LIS T
IX] BY FIRST CLASS MAIL. I am familiar with the business practice of this office for
collection and processing of correspondence with the United States Postal Service on the sam e
I Proof of Service 1 Master Case No. 01-CV-0205 L (CGA)
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date that it is placed for collection . I deposited in the ordinary course of business at San Diego,
California on June 18, 2001 .
[ ] BY UPS EXPRESS MAIL. I am familiar with the business practice of this office for
collection and processing of correspondence with the United Parcel Service on the same date that
it is placed for collection on .
[ J BY PERSONAL DELIVERY. I then sealed the envelope and caused it to be hand
delivered to the offices of the addressee .
BY FAX. Counsel whose name appears above, was faxed a copy of said document(s)
by facsimile transmission .
I declare under penalty of perjury that the foregoing is true and correct .
Executed on June 18, 2001 .
Stacy Boite l
f Proof of Service 2 Master Case No. 01-CV-0205 L (CGA)
GREGG A. RUFFALO v . EN POINTE TECHNOLOGIES, INC, et al.SERVICE LIST
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Todd E . Gordinier, Esq .John F . Cannon, Esq .Jason H . Anderson, Esq .STRADLING, YOCCA, CARLSON & RAUTH660 Newport Center Drive , Suite 160 0Newport Beach , CA 92660-6422Tel: (949) 725-4000Fax : (949) 725-4100
OF COUNSEL :Burton H . Finkelstein, Esq .Donald J . Enright, Esq .FINKELSTEIN, THOMPSON & LOUGHRAN1055 Thomas Jefferson Street , NW, Suite 601Washington , DC 20007
Attorneys for DefendantsEn Pointe Technologies, Inc ., Attiazaz"Bob" Din, Javed Latif, Naureen Din ,
Zubair Ahmed, Ellis Posner, MarkBriggs, Verdell Garroutte, Jacob Stetton,
Eric Keating, and Robert Mercer
Robert I . Harwood, Esq .Frederick W . Gerkens, III, Esq .Thomas J. Harrison, Esq .WECHSLER HARWOOD HALEBIAN & FEFFER LLP488 Madison AvenueNew York, NY 10022
Michael D . Braun, Esq .Patrice L . Bishop, Esq .STULL, STULL & BROD Y10940 Wilshire Boulevard, Suite 2300Los Angeles, CA 9002 4
Jules Brody, Esq.Aaron L . Brody, Esq .STULL, STULL & BRODY6 east 45th Stree tNew York, NY 90024
Kevin J . Yourman, Esq .Vahn Alexander, Esq .WEISS & YOURMAN10940 Wilshire Boulevard, 24th FloorLos Angeles, CA 90024
Ronald A . Marron, Esq .MARRON & WILSON, LLP1475 Sixth Avenue, Suite 301San Diego , CA 9210 1
Evan Smith, Esq .BRODSKY & SMITH11 Bala Avenue, Suite 39Bala Cynwyd, PA 19004
Proof of Service Master Case No. OI-CV-0205 L (CGA)
I Corey D HolzerHOLZER & HOLZER
2 6135 Barfield Road, Suite 102Atlanta, GA 3032 8
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Proof of Service 4 Master Case No. 41 -CV-0205 L (CGA)