First Amended Consolidated Class Action Complaint Master Case No. 01-CV-0205 L (CGA)
James C. Krause, Esq., SBN 66,478
Patrick N. Keegan, Esq., SBN 167,698
Eric J. Benink, Esq., SBN 187434
KRAUSE & KALFAYAN
1010 Second Avenue, Suite 1750
San Diego, CA 92101
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 20007
Tel: (202) 337-8000
Fax: (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, INC.
SECURITIES LITIGATION
______________________________________
This Document Relates To:
ALL ACTIONS
______________________________________
))))))))))
Master Case No. 01-CV-0205 L (CGA)
FIRST AMENDED CONSOLIDATED
CLASS ACTION COMPLAINT FOR
VIOLATIONS OF THE FEDERAL
SECURITIES LAWS
JURY TRIAL DEMANDED
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ii First Amended Consolidated Class Action Complaint Master Case No. 01-CV-0205 L (CGA)
TABLE OF CONTENTS
INTRODUCTION AND OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SUBSTANTIVE ALLEGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
The Hampton-Porter/En Pointe Connection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Defendants Prepare Their Fraudulent Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Laurienti’s First Union Securities, Inc. Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Defendants Begin the Manipulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Post-Class Period Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
CAUSATION ALLEGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ADDITIONAL SCIENTER ALLEGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
FRAUD ON THE MARKET ALLEGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
FIRST CLAIM FOR RELIEF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Violations of Section 10(b) of The Securities Exchange Act of 1934
and Rule 10b-5 Promulgated thereunder
SECOND CLAIM FOR RELIEF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Violations of Section 20(a) of The Securities Exchange Act of 1934
THIRD CLAIM FOR RELIEF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
For Violations of Sections 10(b) and 20A of The Securities Exchange Act of 1934
PRAYER FOR RELIEF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
DEMAND FOR JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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1 First Amended Consolidated Class Action Complaint Master Case No. 01-CV-0205 L (CGA)
Appointed Lead Plaintiffs Robert Flamberg, Wilford Gentry, Robert Mayer, Dennis Pasko,
and Richard Tavano (hereafter collectively referred to as the “Lead Plaintiffs”), by their appointed
Lead Counsel, bring this action on behalf of themselves and all others similarly situated, and allege
the following upon personal knowledge as to themselves and their own activities, and based on
investigation conducted by Lead Counsel for all other matters. That investigation has included the
thorough review and analysis of public documents, Securities and Exchange Commission (“SEC”)
filings, press releases, news articles, the filings in the federal action entitled En Pointe Technologies,
Inc. and Attiazaz Din v. First Union Securities, Inc. and JSL Holdings L.P., Master Case No. 02-CV-
1246 L (RBB) and USA v. Amr I. Elgindy, Case. No. 02-MG-1166, Merrill Lynch Pierce Fenner &
Smith , Inc. v. John Laurienti, 00-CV-00781 L(POR), the filings in the California state court
proceedings entitled First Union Securities, Inc. v. JSL Holdings, L.P., et. al., Case No. GIC748336,
Kenneth L. Fredrick v. Attiazaz Din, et al., Case No. YC039456, and Steven and Jenifer Crosby v.
En Pointe Technologies, Inc., et al., No. GIC759905, and the filings in the arbitration proceeding
entitled Steven and Jenifer Crosby v. Hampton-Porter Investment Banking, LLC, et al., filed with
the National Association of Securities Dealers, and the filings in the arbitration proceeding entitled
First Union Securities, Inc. v. John [W.] Laurienti, et. al., NYSE Docket No. 2000-008703, and the
account statements of defendant John Laurienti, Charles Schwab Account No. 1587-5014, TD
Waterhouse Account No. 499-10030-1-5, TD Waterhouse Account No. 385-01502-1-1, Merrill
Lynch Priority Client Account No. 72B-13851, and First Union Account No. 5413-6986; defendant
JSL Holdings, LP, Merrill Lynch Priority Client Account No. 72B-07387, First Union Account No.
4568-6834, and TD Waterhouse Account No. 821-05908-1-9; and defendant Time Holdings LLC,
TD Waterhouse Account No. 821-03688-1-0, Charles Schwab Account No. 8838-1560, and First
Union Account No. 8403-8625; and interviews with and declarations from Hampton-Porter
Investment Bankers LLC registered representatives Adam Gilman, Jarred Kriz, and Sam Tedesco,
concerning the matters set forth herein.
INTRODUCTION AND OVERVIEW
1. This is a class action on behalf of Lead Plaintiffs and all others who purchased En
Pointe Technologies, Inc. common stock (ENPT) on the NASDAQ NMS between December 7, 1999
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1 Defendants Attiazaz “Bob” Din, Javed Latif, Naureen Din, Zubair Ahmed, Ellis Posner, Mark Briggs,
Verdell Garroutte, Jacob Stetton, Eric Keating and Robert Mercer hereinafter are collectively referred to as the
“Insiders”.
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and April 13, 2000, inclusive (the “Class Period”), and who have suffered damages as the result of
the alleged price manipulation scheme set forth below. Lead Plaintiffs allege violations of the
federal securities laws against En Pointe Technologies, Inc. (hereinafter “En Pointe” or the
“Company”), Attiazaz “Bob” Din (hereinafter “Bob Din”), the co-founder of En Pointe, who has
served as Chairman of the Board of Directors, Chief Executive Officer and President of En Pointe,
and against several other co-conspirators who knowingly participated in manipulating the price of
En Pointe’s common stock.
2. Throughout the Class Period, En Pointe held itself out as a national Business to
Business (“B2B”) e-commerce provider of information technology products and value-added
services, using proprietary and non-proprietary software and systems to drop-ship maintenance,
repair, and operation (“MRO”) products to its customers through an electronically linked network
of allied distributors in the United States.
3. Defendants’ misconduct in connection with this fraudulent scheme and the material
misstatements and omissions regarding En Pointe’s subsidiary, Supply Access, Inc., enabled
Defendant Bob Din to sell 402,000 insider shares of En Pointe for approximately $18 million in
proceeds to the unsuspecting public. Defendants engaged in this illegal scheme and caused material
false and misleading statements to be issued in order to create high demand for En Pointe stock and
artificially inflate the price of En Pointe stock, thereby allowing Defendant Bob Din and other En
Pointe officers and directors1 to sell their En Pointe shares at all-time high prices between $40.59
and $51.15 a share.
4. During the relevant period, Bob Din conspired with a small investment bank,
Hampton-Porter Investment Bankers LLC (hereinafter “Hampton-Porter”), and its brokers,
management, and control persons to orchestrate a price manipulation scheme that allowed Hampton-
Porter’s brokers to receive illegal “kickback” or “concessions” incentives paid by En Pointe, receive
commissions on sales of En Pointe common stock for their customers accounts at artificially inflated
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prices, and sell shares of En Pointe common stock for their accounts at artificially inflated prices.
This scheme included Hampton-Porter’s participation by: 1) parking excessive amounts of investors’
portfolios in En Pointe common stock; 2) refusing to execute sell orders; 3) the use of illegal above
market buy-ins to dissuade potential short sellers from selling En Pointe common stock short; and
4) the dissemination of materially false and misleading statements about En Pointe’s ownership
interest in its subsidiary SupplyAccess, Inc. and its future prospects.
5. Hampton-Porter is a wholly owned sub-entity of H-P Holdings, LLC (hereinafter “HP”).
Gregory Walker holds an ownership interest in H-P and is a control person of both entities.
Time Holdings, LLC, JSL Enterprises, LLC, and JSL Holdings LP, LLC are all entities controlled
by John William Laurienti (hereinafter “Laurienti”). Laurienti and Gregory Walker orchestrated the
pump and dump scheme in conjunction with Bob Din of En Pointe and used these various entities
as conduits for their scheme.
6. Laurienti was an interested owner/member of H-P, which in turn has 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. Laurienti is a
recidivist stock manipulator. For example, in October of 1995, the SEC found that Laurienti failed
to properly discharge his supervisory duties while acting as branch manager for Dickinson & Co.
and in connection with an unregistered stock offering masterminded by Laurienti. As a result,
Laurienti was barred from acting in a proprietary or supervisory capacity with any broker dealer,
municipal securities dealer, investment advisor or investment company. In complete disregard of
that order, Laurienti has attempted to conceal his involvement with Hampton-Porter (a registered
broker-dealer) through his former ownership of H-P, which in turn owns 100% of Hampton-Porter.
Moreover, Laurienti has participated in this price manipulation scheme despite the SEC injunction
barring him from future violations of the securities laws.
JURISDICTION AND VENUE
7. This action arises under Sections 10(b), 20(a) and 20A of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), 15 U.S.C. §§ 78j(b), 78t(a) and 78, and SEC Rule
10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder.
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4 First Amended Consolidated Class Action Complaint Master Case No. 01-CV-0205 L (CGA)
8. This Court has jurisdiction over this subject matter pursuant to 28 U.S.C. §§ 1331
and 1337, and Section 27 of the Exchange Act, 15 U.S.C. § 78aa.
9. Venue is proper in this district pursuant to Section 27 of the Exchange Act and 28
U.S.C. §1391(b). Defendants Hampton-Porter Investment Bankers LLC, H-P Holdings, LLC,
Time Holdings, LLC, JSL Enterprises, LLC, JSL Enterprises, LLC and Laurienti are located in this
Judicial District, and significant sales of En Pointe securities took place in this Judicial District
during the Class Period.
10. In connection with the acts alleged in this complaint, the defendants, directly or
indirectly, used means and instrumentalities of interstate commerce, including but not limited to the
mails, interstate telephone and Internet communications, and the facilities of the NASDAQ NMS.
PARTIES
11. Plaintiff Robert Flamberg purchased a total of 26,000 shares of En Pointe
Technologies, Inc. common stock (ENPT) on the NASDAQ NMS during the Class Period and has
suffered realized and market losses of $265,882.
12. Plaintiff Wilford Gentry, through Astro Corporation, purchased a total of 5,000
shares of En Pointe Technologies, Inc. common stock (ENPT) on the NASDAQ NMS during the
Class Period and has suffered realized and market losses of $160,000.
13. Plaintiff Robert Mayer purchased a total of 27,700 shares of En Pointe Technologies,
Inc. common stock (ENPT) on the NASDAQ NMS during the Class Period and has suffered realized
and market losses of $88,639.
14. Plaintiff Dennis Pasko purchased a total of 6,400 shares of En Pointe Technologies,
Inc. common stock (ENPT) on the NASDAQ NMS during the Class Period and has suffered realized
and market losses of $189,767.
15. Plaintiff Richard Tavano purchased a total of 19,506 shares of En Pointe
Technologies, Inc. common stock (ENPT) on the NASDAQ NMS during the Class Period and has
suffered realized and market losses of $496,518.46.
16. Defendant En Pointe Technologies, Inc. (hereinafter “En Pointe” or the “Company”)
is corporation organized and existing under the laws of the State of Delaware. En Pointe’s principal
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2 Mediha Din is the minor daughter of Bob Din and Naureen Din.
3 Ali Mohyuddin is the son of Bob Din and Naureen Din.
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place of business and headquarters located at 100 N. Sepulveda Blvd., 19th Floor, El Segundo, CA
90245. En Pointe currently has 6.53 million shares outstanding.
17. Defendant Attiazaz “Bob” Din (hereinafter “Bob Din”) , the co-founder of En Pointe,
has served as Chairman of the Board of Directors, Chief Executive Officer and President of En
Pointe. According to En Pointe’s proxy statement dated February 14, 2000, Bob Din was the
beneficial owner of 653,702 shares of En Pointe. Between February 28, 2000 and March 15, 2000,
Bob Din directly and indirectly sold 402,000 shares of En Pointe for approximately $18 million in
proceeds. His sales, during the Class Period, amounted to 61.5% of his ownership position. During
the Class Period, Bob 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:
INSIDER NUMBER OF SHARES PROCEEDS
Bob Din and Naureen Din 202,000 8,958,780
Mediha Din2 100,000 4,339,000
Ali Mohyuddin3 100,000 4,393,711
TOTAL 402,000 $17,691,491
18. Defendant Hampton-Porter Investment Bankers LLC (hereinafter “Hampton-Porter”)
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. Hampton-
Porter is an investment banking and brokerage company, and a member of the National Association
of Securities Dealers. Hampton-Porter was the conduit through which the Defendants pursued their
scheme, by causing it to publish false and misleading statements regarding En Pointe, and by
otherwise manipulating the market for En Pointe stock. Specifically, Hampton-Porter was
controlled by Defendants Laurienti, Gregory Walker and H-P.
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19. Defendant H-P Holdings, LLC (hereinafter “H-P”) 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. H-P, by and for its members, maintains a
100% ownership interest in Hampton-Porter.
20. 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.
21. Defendant JSL Holdings LP (hereinafter “JSL Holdings”) is a limited partnership
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. Laurienti controlled JSL and maintained
an account at Merrill Lynch with at least 65,000 shares of En Pointe in JSL’s name.
22. 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.
23. 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 has
100% ownership interest in Hampton-Porter. Laurienti is the alter ego of Hampton-Porter and
essentially directs its activities. During the Class Period, Laurienti maintained an office at the
principal place of business Hampton-Porter. During the Class Period, Jarred Kriz and Sam Tedesco
also recall Laurienti conducting broker meetings at Hampton-Porter and working in the training
room of Hampton-Porter directing trades, writing out tickets, and performing trading paperwork As
such, Laurienti is a control person with regard to Hampton-Porter.
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24. Defendant Gregory Walker (hereinafter “Walker”) holds an ownership interest in HP,
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.
25. 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 light of
the circumstances under which they were made, not misleading, which operated as a fraud and deceit
upon Lead Plaintiffs and the Class.
CLASS ACTION ALLEGATIONS
26. 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 allege a Third Claim for Relief 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.
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27. 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, and
such shares were publicly traded on the NASDAQ NMS during the Class Period, as reflected in the
Price and Volume History of En Pointe common stock attached hereto as Exhibit 1. The exact
number of members of the Class is not known at this time, but is believed to number in the
thousands.
28. Lead Plaintiffs will fairly and adequately protect the interests of the members of the
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.
29. 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.
30. 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.
31. 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 Class
are:
a) whether the federal securities laws were violated by Defendants’ acts as alleged
herein;
b) whether Defendants’ omitted and/or misrepresented material facts and whether
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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 Bob Din was a control person 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.
SUBSTANTIVE ALLEGATIONS
Background
32. Founded in January 1993 by defendant Bob Din and his wife, 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, defendant Bob
Din, his wife 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%).
33. During 1999, companies in the B2B market started to enjoy unusual attention from
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.”
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34. 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.
35. Simultaneously, defendant Laurienti, a veteran securities manipulator, was casting
about for a likely target for his next pump and dump scheme. Advised by analyst and consultant
Mark Bergman (“Bergman”), Laurienti’s eye fell upon En Pointe. En Pointe’s public float was
relatively small (2.8 million 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.
36. 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-Porter/En Pointe Connection
37. Hampton-Porter’s resident stock tout and Director of Research, 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 public in
the August 1996 IPO, and had been responsible for stirring up investor interest in the offering.
38. 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.
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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, today
announced 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 and
services, 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 Pointe
sales and service consultants bring customized, cost-effective computer hardware,
software and service solutions to a wide range of Fortune 1000 companies, including
IBM Global Services, Northrop Grumman and Motorola, as well as state and local
government
entities.
Dr. Mark Bergman, noted industry analyst and consultant stated: "En Pointe has
grown 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's business model. The En Pointe sales force was introduced to Xybernaut's
products last week, and their response to the product was overwhelmingly
enthusiastic. I believe that the combination of Xybernaut's world-class products and
En Pointe's marketing strength will result in tremendous success for both
companies."
39. Bergman left Xybernaut in September 1998 to try his hand as a freelance stock
promoter. To this end, he founded Access1Financial.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 the 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 Access1Financial.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,
in an article entitled “For a Fee, Analyst Mark Bergman Will Hype Your Company's Stock”.
40. 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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Hampton-Porter is pleased to announce the addition of Mark Bergman as Director
of Research. Mark Bergman is one of the leading experts in the area of technology
enterprises and investment advice. Recently, he was Chief of Global Equities at FAB
Capital, and Senior Analyst at leading Investment Banking firms, such as Volpe,
Hambrecht & Quist, Cruttenden Roth. In addition, he was Director of Research for
the Boston Group. He has founded leading technology growth firms and was recently
Senior Vice-President of Xybernaut Corporation -- the worldwide leader in wearable
computers. Dr. Bergman received a Ph.D. from Northwestern University and
completed post-doctorate work at the University of Illinois.
41. Because he had longstanding contacts with the Insiders and with Defendant Bob Din
in particular, and because he had already been compensated by En Pointe and the Insiders to tout
En Pointe’s stock on the Access1Financial web site, Bergman was in an ideal position to recruit Bob
Din and the Insiders to participate in Laurienti’s pump and dump scheme.
Defendants Prepare Their Fraudulent Scheme
42. On or about September 1, 1999, Defendants began preparing to artificially inflate En
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.
43. Laurienti approached Bob Din about their plan to accumulate shares of En Pointe and
to assume command of the company*s public float. Laurienti convinced Bob Din that his plan would
be a mutually beneficial one. With control over a significant portion of the public float, Laurienti
would essentially act as a price support 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.
44. Laurienti offered to purchase a large stake in En Pointe and promote its stock in
exchange for Bob Din*s assurance that Insiders would not flood the market with stock. In return,
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Bob Din agreed to limit insider sales to 125,000 shares for a period of time during the first quarter
of 2000. Additionally, Bob Din and En Pointe would need to fund payments or “concessions” to
Hampton-Porter registered representatives for pushing En Pointe shares on their clients. Realizing
that Laurienti’s proposal could potentially mean a huge boost to En Pointe stock (of which the Bob
Din alone owned over 1 million shares), Bob Din agreed to participate in the fraudulent conspiracy.
45. Specifically, Bob Din agreed to regulate all Insider sales by En Pointe’s officers and
directors to ensure that the market would not be inundated with a large number of En Pointe shares
at any given time and provide the illicit financial inducements to Hampton-Porter brokers in
exchange for their assistance with the “pump” of the stock. In return, Laurienti agreed to cause
Hampton-Porter to issue falsely positive analyst reports about En Pointe’s business prospects, and
to instruct Hampton-Porter’s brokers to sell En Pointe securities to unsuspecting clients and
members of the Class. In addition, En Pointe would pay illegal “kickbacks” or “concessions” to
Hampton-Porter and its brokers, in which Walker and Laurienti were direct beneficiaries. The
“kickback” or “concessions” paid to Hampton-Porter from En Pointe amounted to illicit payments
of 5% to 20% per share, over and above the broker’s regular commission for their sales of En Pointe
securities.
46. With the fraudulent scheme firmly established and investor interest beginning to
surface as a result of increasing trading volumes, defendants began to aggressively promote En
Pointe shares. Pursuant to their agreement, Sam Tedesco and Jarred Kriz recall Bob Din opening
an En Pointe account at Hampton-Porter and depositing $250,000 to $1 million during the Class
Period. The En Pointe account was used to pay conessions for the sale of En Pointe stock. In
furtherance of the fraudulent scheme, Bob Din, Laurienti and Walker held at least 2 meetings during
the Class Period to instruct Hampton-Porter registered representatives how to sell En Pointe stock
on or about December 8, 1999 and December 15, 1999. During these meetings, Bob Din, Laurienti
and Walker would instruct the brokers on ways to entice clients to invest in the Company and to
convince those clients to hold their shares. Laurienti and James Green informed the brokers that
Hampton-Porter would pay a “concession” of 5% to 20% per share, over and above the broker’s
regular commission, for all sales of En Pointe shares. Adam Gilman, Jarred Kriz, and Sam Tedesco
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were told that a credited concession would be deducted from the brokers paychecks, however, if
their clients sold the stock within a certain period of time. Sam Tedesco and Jarred Kriz also recall
Laurienti and Walker pressuring Hampton-Porter registered representatives to sell En Pointe stock
to their customers without regard to their customers’ suitability.
47. Laurienti’s efforts at Hampton-Porter mirrored his previous attempts at such boiler
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.
48. While all of these elements of the scheme were falling into place, Laurienti began
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 and Walker also
consistently bought and sold the stock in the accounts of Time Holdings, LLC, JSL Enterprises,
LLC, and JSL Holdings, LP, as well as their personal accounts, to create the appearance of active
trading and interest in the stock, some of which were reflected in Schedule 13D/A of Time Holdings,
LLC, dated November 2, 1999. Such purchases were financed, in part, through the utilization of
cash transfers reflected in the Cash Transaction Spreadsheet attached hereto as Exhibit 2. In
addition, Laurienti and Walker bought additional shares of En Pointe through several personal
accounts, including but not limited to, Laurienti’s Charles Schwab Account No. 1587-5014, TD
Waterhouse Account No. 499-10030-1-5, TD Waterhouse Account No. 385-01502-1-1, Merrill
Lynch Priority Client Account No. 72B-13851, and First Union Account No. 5413-6986; JSL
Holdings’s Merrill Lynch Priority Client Account No. 72B-07387, First Union Account No. 4568-
6834, and TD Waterhouse Account No. 821-05908-1-9, and Time Holdings’ TD Waterhouse
Account No. 821-03688-1-0, Charles Schwab Account No. 8838-1560, and First Union Account No.
8403-8625, through the utilization of cash transfers as reflected in the Cash Transaction Spreadsheet
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attached hereto as Exhibit 2. 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.
49. While Hampton-Porter’s brokers aggressively pushed their clients to invest in En
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, Sam Tedesco recalls that Todd Picture began preparing and drafting
promotional “analyst reports” to be published concurrently with “buy” recommendations from
Hampton-Porter.
50. 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. Sam Tedesco recalls that 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. Sam Tedesco recalls that any
efforts by investors to sell their shares during this time were essentially blocked by Hampton-Porter
trading floor, acting at the direction of Laurienti and Walker.
Laurienti’s First Union Securities, Inc. Account
51. 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.
52. In or about January 2000, Laurienti opened an individual account in his name at First
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
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350,000 shares of En Pointe.
53. 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
planning purposes”. Laurienti submitted the Partnership Account opening documents listing JSL
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.
54. Finally, Laurienti represented to First Union that he was now the General Partner of
JSL Holdings and would assume full responsibility for all debit balances arising from the account.
Laurienti, consistent with this charade, signed and executed the opening account documents on
behalf of JSL Holdings as its general partner. In truth and in fact, JSL Enterprises, Inc., a
corporation with no assets, is the sole General Partner of JSL Holdings. Laurienti made these
misrepresentations to dupe First Union into allowing him to transfer his En Pointe shares to an
account that would essentially shield Laurienti from the certain debit balance that would allow En
Pointe’s plunge. On January 31, 2000, an account was opened for JSL Holdings at First Union.
55. Having set up his dummy account, Laurienti directed the transfer of all of his
positions from his Personal Account, including the 350,000 shares of En Pointe, and an existing
debit balances of approximately $6.2 million to the Partnership Account on or about February 10,
2000. An additionally 180,555 shares of En Pointe would be transferred into his account on March
7, 2000 from a non-party brokerage firm. As the value of this stock rose in February and early
March, the equity in Laurienti’s First Union account increased dramatically. In furtherance of his
scheme, Laurienti periodically made withdrawals on the equity essentially borrowed from First
Union and transferred those amounts to various accounts ensuring that he would stand to profit
millions when the bottom fell out of the price of En Pointe shares. In February and March 2000
alone, Laurienti transferred over $2.2 million from his First Union account to other accounts of
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unknown origin.
Defendants Begin the Manipulation
56. On or about December 7, 1999, several En Pointe officers participated in a
conference call with business journalists, analysts and investors. Specifically, three En Pointe
executives (Bob Din, Latif, and Posner) participated in this conference call. During the call, Bob
Din commented on En Pointe’s new “wholly owned” subsidiary SupplyAccess. Bob Din further
stated:
We have recently launched a new subsidiary, SupplyAccess, Inc., which is being
positioned to compete well against entities such as Ariba and Commerce One. We
are in the process of seeking a private placement of securities for no less than
$9.75M and no more than $18.75M.
57. Ariba and Commerce One were and are the two leading companies in the B2B
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.
58. 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.
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/ / /
59. 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.
60. 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
million and no more than 18.75 million.” The maximum offering of $18.75 million would have left
En Pointe with a majority interest in SupplyAccess.
61. This statement was knowingly misleading because Bob Din, in light of his position
and access to internal private placement memoranda for SupplyAccess, En Pointe would complete
on April 4, 2000 a supplemental private placement offering which would reduce the Company’s
ownership in SupplyAccess to a minority position (below 50%) to 45.1%.
62. That same day, December 7, 2000, defendants formally informed the market
concerning the Company’s planned private placement of SupplyAccess stock with the filing of a
Form 8-K with the SEC. This document stated, in relevant part:
The Company is in the process of seeking funding for a private placement of
securities in its recently incorporated, currently wholly owned, direct-procurement
focused subsidiary, SupplyAccess, Inc., for no less than $9.75 million and no more
than $18.75 million.
63. After the early December conference call and 8-K filing, the share price of En Pointe
began to steadily rise as Hampton-Porter created artificial demand for the stock and as the market
digested the news that En Pointe was purportedly a majority owner of SupplyAccess, a company that
was “well positioned” to compete with Wall Street darlings Ariba and Commerce One. In early
December, En Pointe stock traded around $10 per share and an average volume of about 30 to 50
thousand shares a day. In fact, En Pointe stock had never traded above $14 a share during the prior
two years. By December 31, 1999, En Pointe closed at $27.50 per share.
64. During the Class Period Adam Gilman, Jarred Kriz, and Sam Tedesco were employed
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as Account Executive at the defendant brokerage firm of Hampton-Porter. During his employment
at Hampton-Porter, Sam Tedesco also designed and managed Hampton-Porter’s Intranet and Internet
computer systems and connections. As a result, Sam Tedesco had access to and exercised control
over all information maintained on Hampton-Porter’s computer systems. Sam Tedesco also acted
as the interim compliance officer at Hampton-Porter during April, 2000.
65. During the December 8, 1999 and December 15, 1999 broker meetings, Laurienti and
James Green caused Hampton-Porter to offer to pay Sam Tedesco and Jarred Kriz, and every other
Hampton-Porter broker, an incentive award for the sale of En Pointe stock during the Class Period.
Dave Adams, Adam Gilman, Jarred Kriz, Bryan Laurienti, Drew Louis, Sid Merelo, David
Montesano, and Sam Tedesco received incentive payments in the amount of 5% to 20% for the sale
of purchase price of En Pointe stock. These incentive payments were not disclosed to Hampton-
Porter clients or the public and were known to Bob Din. Sam Tedesco and Jarred Kriz were told that
incentives would be taken away if En Pointe stock was sold prior to both Laurienti’s and James
Green’s prior approval, i.e. in order to receive the incentive payments, the En Pointe stock purchased
during the Class Period had to held by Hampton-Porter clients until further approval from both
Laurienti and James Green or the incentives payments would have to be repaid.
66. Thereafter, throughout the Class Period, Laurienti and James Green held daily broker
meetings were they would explain the goals of the day, i.e. which stocks needed to rise or fall, by
how much, and changes to percentage of the sales price sales of En Pointe stock would be paid as
incentive payment.
67. Sam Tedesco and Jarred Kriz recall how Laurienti and James Green caused Hampton-
Porter to organize and prioritize entry of sales orders match quoted prices and lots with
corresponding buy orders for En Pointe stock. Hampton-Porter’s manipulation of purchase and sales
was accomplished through the sophisticated use of the NASDAQ Level II quote system, which
allows traders to see market maker activity in real time. Hampton-Porter’s matching of sales orders
match quoted prices and lots with corresponding buy orders would cause the price of En Pointe
stock to rise. Sam Tedesco also recalls that on one occasion during the Class Period, a Hampton-
Porter client wanted to sell a large block of stock, and Hampton-Porter, using these techniques,
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caused the price of En Pointe stock to move down to discourage the client from selling below his
limit sales price.
68. Sam Tedesco and Jarred Kriz recall that Hampton-Porter was coordinating the
purchase of En Pointe stock with funds from En Pointe’s Hampton-Porter account, in which $1
million was deposited and over 300,000 shares were purchased in order to support the stock price.
Hampton-Porter broker, Troy Peters, and James Green managed the En Pointe account. Sam
Tedesco recalls that Hampton-Porter had a letter authorizing purchases of En Pointe stock at or
about $12 per share. Sam Tedesco was present during a December, 1999 telephone call between
Troy Peters and Bob Din during which Troy Peters asked Bob Din to clarify whether authorization
was for $12 or $12.99 per share.
69. Sam Tedesco and Jarred Kriz recall that Bob Din spoke at Hampton-Porter broker
meeting held at Hampton-Porter on or about December 8, 1999 and December 15, 1999, during
market hours. During these two broker meetings, Sam Tedesco and Jarred Kriz recall that Bob Din
told Hampton-Porter brokers to compare En Pointe with Ariba and Commerce One , not only in
company structure and but also for potential stock price. Specifically, Bob Din told them that
because the En Pointe’s true strategic value was in its Internet-related subsidiaries, Firstsource.com
and SupplyAccess Inc., they should tell their clients that En Pointe was comparable to
CommerceOne, Ariba and PurchasePro, whose stock price was considerably higher. Bob Din also
told them to tell their clients that SupplyAccess Inc. was already generating substantial revenues
from the reselling of computers. Bob Din also instructed them to tell their clients that En Pointe is
in the process of issuing a private placement for SupplyAccess, raising $18 million, and that upon
completion, En Pointe will retain a 51% stake in SupplyAccess. Bob Din explained that the $18
million private placement would bring an additional $35 to $40 in of value to En Pointe’s market
capitalization to En Pointe’s stock based upon trading at 60 times En Pointe’s year 2000 revenues.
Sam Tedesco and Jarred Kriz recall that analyst Todd Picture was in attendance at the December 8,
1999 and December 15, 1999 broker meetings when Bob Din spoke.
70. The Bob Din’s statements at the December 8, 1999 and December 15, 1999 broker
meetings were materially false and misleading at the time that they were published because: a)
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SupplyAccess was not a direct competitor of either CommerceOne, Ariba or PurchasePro and has
never been; b) Defendants concealed and affirmatively misrepresented the fact that En Pointe would
complete on April 4, 2000 a supplemental offering of SupplyAccess preferred stock which would
reduce En Pointe's ownership below that of a majority position (below 50%) to 45.1%; c) the reports
concealed the fact that Defendants were engaged in a scheme to artificially inflate En Pointe's share
price so that Defendants could sell En Pointe stock to the unsuspecting public for massive illegal
profits, and that Hampton-Porter and En Pointe were paying Hampton-Porter's sales representatives
special incentive payments for sales of En Pointe stock; d) the reports concealed the fact that control
persons of Hampton-Porter owned extremely large stakes in En Pointe stock and were causing
Hampton-Porter to advise its customers to buy the stock in order to enrich themselves; and e)
SupplyAccess was a new start up with an unproven technology of questionable value, and there was
no reasonable basis for the statement that SupplyAccess was generating substantial revenues from
the reselling of computers in its first year of operations.
71. Sam Tedesco and Jarred Kriz recall seeing Bob Din in Hampton-Porter offices during
the period of December 28, 1999 through January 4, 2000 meeting with Laurienti, Walker and James
Green. Sam Tedesco also recalls seeing Bob Din and Laurienti meeting separately in Hampton-
Porter offices during the period of December 28, 1999 through January 4, 2000. Sam Tedesco also
recalls attending meetings during the Class Period with Laurienti, Walker and/or James Green when
Bob Din was on the speaker phone during which Hampton-Porter customer’s purchases and sales
of En Pointe stock.
72. Sam Tedesco and Jarred Kriz recall that on or about December 30, 1999, January 31,
2000, February 29, 2000, and March 31, 2000, James Green would call brokers into his office to
discuss commissions and incentive payments. James Green would calculate the amount of incentive
payments for the sale of En Pointe stock and write it on a payroll sheet, which was sent to Regina
Horn in Hampton-Porter’s personnel department. Incentive payments were sometimes paid from
the personal checking account of Walker, as reflected in the Cash Transaction Spreadsheet attached
hereto as Exhibit 2.
73. On January 13, 2000, En Pointe filed its annual report on SEC Form 10-K. This
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document stated, in relevant part:
The Company has recently formed a new subsidiary, SupplyAccess, Inc., to continue
the maintenance and enhancement of these systems, and to offer some of the benefits
of these systems to third parties. A private placement of the capital stock of this
subsidiary is currently in process; there can be no assurance, however, that the
private placement will be successfully completed.
74. The quoted statements in the January 13, 2000 Form 10-K were materially false and
misleading at the time that they were made, in that Defendants concealed the fact that En Pointe
would complete on April 4, 2000 a supplemental private placement offering which would reduce
the Company’s ownership in SupplyAccess to a minority position (below 50%) to 45.1%.
75. Throughout the Class Period, Bob Din, Laurienti, Walker and H-P and caused
Hampton-Porter to consistently advocate the “hidden value” of SupplyAccess to En Pointe’s stock
price. Sam Tedesco recalls that Hampton-Porter published glowing “analyst reports” were drafted
and prepared by Todd Picture, who had received his information from Bob Din at December 8, 1999
and December 15, 1999 broker meetings. These “analyst reports” 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 price
has run more than 280% in the past two weeks and the valuation does appear lofty
on a near term basis, we believe that the current price of the stock reflects a few
critical metrics that should sustain an increase in valuation over the mid to longer
term.
* * * *
[W]e believe the company's true strategic value is in its Internet-related
subsidiaries, Firstsource.com and SupplyAccess Inc., and that the recent run up in
terms of stock price is due to market speculation in terms of these businesses. En
Pointe 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 companies
ramp in terms of revenue and capturing market share, we believe that they represent
a significant value to En Pointe shares. Moreover, an IPO of SupplyAccess could
unleash enormous additional value to En Point shareholders, given a conservative
valuation relative to its peers on the street (see discussion below). At present, we feel
that En Point represents a compelling indirect play in the business-to-business
eCommerce market.
* * * *
SupplyAccess Inc. focuses on large enterprise e-procurement solutions in the
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business-to-business marketplace, including procurement of IT products and
services, operating resources and other vertical products and services. Strategic
partners include SAP AG (NYSE: SAP) and Microsoft Corp. (Nasdaq: MSFT). In
its first two quarters of operation, the company has already processed more than
$100 million in transactions.
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-business
eCommerce solutions for US businesses will explode from $15 billion in 1998 to
about $600 billion in 2002. Moreover, one-fourth of all US business-to-business
purchasing will be done online by 2003, reaching approximately $2.8 trillion in
transaction value, according to the Boston Consulting Group.
We believe that SupplyAccess is poised to take advantage of this exponentially
growing business-to-business eCommerce market, differentiating itself from its
competitors such as CommerceOne, Ariba and PurchasePro on a number of
different levels.
* * * *
[W]e believe that SupplyAccess has a significant opportunity in the huge B2B
market, and therefore makes a compelling value proposition for shareholders of En
Pointe. En Pointe is in the process of issuing a private placement for SupplyAccess,
raising $18 million. Upon completion, En Pointe will retain a 51% stake in
SupplyAccess. Given the street's interest in e-procurement companies and
SupplyAccess' competitive positioning in this space, a SupplyAccess IPO would
bring substantial value to En Pointe. (Emphases added.)
76. Through Hampton-Porter, Bob Din, Laurienti, Walker and H-P continued to feed
similar false and misleading information to the market on February 4, 2000, when Hampton-Porter
published another Todd Picture report containing the following statements:
To reiterate, we believe that SupplyAccess has a significant opportunity in the huge
B2B market, and therefore makes a compelling value proposition for shareholders
of En Pointe. En Pointe is in the process of issuing a private placement for
SupplyAccess, raising $18 million. Upon completion, En Pointe will retain a 51%
stake in SupplyAccess. Given the street’s interest in e-procurement companies and
SupplyAccess’ competitive positioning in this space, a SupplyAccess IPO would
bring substantial value to En Pointe. (Emphases added.)
77. The January 11, 2000 and February 4, 2000 reports compared SupplyAccess to Ariba
and Commerce One on a market capitalization basis. For example, in the February 4, 2000
report,Bob Din, Laurienti, Walker and H-P cause Hampton-Porter to state:
Company Recent Stock Price Market Capitalization:
Ariba- $172 15,629,640
Commerce One- $214 15,470,362
Purchase Pro- $119 3,358,741
En Pointe- $38 227,000
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Assuming that SupplyAccess is valued at a conservative multiple of 60X year ’00
revenues to its peers, (CMRC @ 123x year ’00; and ARBA @ 80x year ’00), with
projected revenue of $7,591,000 in its first year of operations, SupplyAccess should
be valued at approximately $17 per share (28,000,000 basic outstanding). An initial
public offering of SupplyAccess would unleash value to En Pointe in the following
manner: Upon completion of an $18 million private placement, En Pointe would
own 51% of SupplyAccess (which should be valued at approx. $17 per share). This
would in turn, bring an additional $40 to En Pointe’s current $38.25 trading level.
We believe that trading 60x ‘00 revenues, an IPO of SupplyAccess would bring
somewhere between $35 and $40 of value to En Pointe’s market capitalization.
79. The quoted statements in the January 11, 2000 and February 4, 2000 reports were
materially false and misleading at the time that they were published because: a) SupplyAccess was
not a direct competitor of either Commerce One or Ariba and has never been; b) Defendants
concealed and affirmatively misrepresented the fact that En Pointe would complete on April 4, 2000
a supplemental offering of SupplyAccess preferred stock which would reduce En Pointe's ownership
below that of a majority position (below 50%) to 45.1%; c) the reports concealed the fact that
Defendants were engaged in a scheme to artificially inflate En Pointe's share price so that
Defendants could sell En Pointe stock to the unsuspecting public for massive illegal profits, and that
Hampton-Porter and En Pointe were paying Hampton-Porter's sales representatives special incentive
payments for sales of En Pointe stock; d) the reports concealed the fact that control persons of
Hampton-Porter owned extremely large stakes in En Pointe stock and were causing Hampton-Porter
to advise its customers to buy the stock in order to enrich themselves; and e) SupplyAccess was a
new start up with an unproven technology of questionable value, and there was no reasonable basis
for the projection that SupplyAccess would generate $7.5 million in revenues in its first year of
operations.
80. The fact that the SupplyAccess revenue projections contained in the January 11, 2000
and February 2000 reports set forth above were materially false and misleading when made is further
demonstrated in the Company’s subsequent filings. Because En Pointe’s voting interest in
SupplyAccess dropped below 50% to 45.1% effective April 4, 2000 and En Pointe did not otherwise
have control, En Pointe began to account for its investment in SupplyAccess under the equity
method of accounting. Under this method of accounting, En Pointe recognized a loss of $512,000
on its minority stake for the fiscal year ended September 30, 2000. No significant revenues from
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SupplyAccess were reported or evident. In fact, according to En Pointe's annual report on SEC
Form 10-K, filed on January 18, 2001, “SupplyAccess, a start-up internet portal business-to-business
provider, did not record any net sales for the approximate six month period in which the former
subsidiary was consolidated with the Company.”
81. During the period of December 28, 1999 through January 4, 2000, Bob Din endorsed
or approved the January 11, 2000 and February 4, 2000 reports prior to their publication in his
telephone conversations concerning the contents of the reports with Laurienti, Walker and/or James
Green at which Sam Tedesco was present.
82. On February 10, 2000, En Pointe and Bob Din published a press release which stated,
in relevant part:
With the new business systems now operational, En Pointe is at the forefront of
business-to-business e-commerce utilizing its unique tool, SupplyAccess(TM). . . .
* * * *
The Company is in the process of obtaining funding for a private placement of
securities in its subsidiary, SupplyAccess, Inc.
83. En Pointe’s and Bob Din’s statements in the February 10, 2000 press release were
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 would complete on April 4, 2000 a supplemental private
placement offering which would reduce the Company’s ownership in SupplyAccess to a minority
position (below 50%) to 45.1%.
84. On February 25, 2000, En Pointe and Bob Din made another announcement
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 Bob Din concealed the
fact that En Pointe would complete on April 4, 2000 a supplemental private placement offering
which would reduce the Company’s ownership in SupplyAccess to a minority position (below 50%)
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to 45.1%.
/ / /
85. On February 25, 2000, En Pointe’s common stock reached an all-time high of $52
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, Bob Din and the Insiders sold
141,922 shares worth approximately $7.4 million worth of their stock on February 28, 2000 and
February 29, 2000.
86. After En Pointe stock began trading above $50 per share, Laurienti and James Green
reprimanded Sam Tedesco and Jarred Kriz for placing sell orders on En Pointe stock for their clients.
Sam Tedesco and Jarred Kriz recall that their clients would call in, request a sell order, which they
would honor by executing a sell ticket. Upon receipt of such sell orders, Laurienti and James Green
would become openly enraged, rip up the sell tickets and refuse to execute sell orders for Sam
Tedesco’s and Jarred Kriz’s Hampton-Porter clients.
87. 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 of
Series A preferred stock in the gross amount of $18 million. Such funding resulted
in the sale of 12 million shares of preferred stock at $1.50 per share, representing
46.1% of the total 26 million shares of outstanding stock. With the conclusion of this
sale, the Company's ownership in SupplyAccess, Inc. is 53.9%.
88. 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 Bob Din concealed the fact that
En Pointe would complete on April 4, 2000 a supplemental private placement offering which would
reduce the Company’s ownership in SupplyAccess to a minority position (below 50%) to 45.1%.
89. After the release of the En Pointe Form 8K, from March 2, 2000 through March 15,
2000, the Insiders sold an additional 556,095 shares of En Pointe stock worth approximately $27.6
million. Despite this flood of Insider sales, Laurienti had been able to stabilize the price of the stock
by continuing his promotional efforts and encouraging clients of Hampton-Porter to buy En Pointe
shares. Laurienti’s success in this regard was temporary, however.
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90. Known only to En Pointe and Bob Din and unknown to the Class, as reflected in En
Pointe’s Form 10K for fiscal year ending September 30, 2000, “on April 4, 2000, SupplyAccess
completed a supplemental private placement of stock of 5,088,318 shares of convertible preferred
stock at $1.50 a share that reduced the Company’s voting interest to 45.10%.”
91. Also on April 4, 2000, as news of the Insider sales were released, a share price
decline was significant enough to trigger a $1,370,300 margin call on Laurienti’s First Union
Partnership Account. The margin call demanded that additional funds and/or securities be deposited
into the Partnership Account. First Union contacted Laurienti and demanded that he deposit cash
or eligible securities to meet the margin call and was told that if he did not meet the margin call,
securities would be sold in his account. Laurienti met the call by liquidating shares of companies
other than En Pointe. Laurienti specifically instructed First Union never to sell his En Pointe shares
to meet a margin call.
92. Laurienti received an additional margin call from First Union on or about April 11,
2000 due to a further decline in the prices of En Pointe. Laurienti again instructed First Union not
to sell any En Pointe stock in the Partnership Account as he represented he was in the process of
obtaining funds and/or securities to deposit into the Partnership Account to meet the margin call.
Laurienti told First Union that he could get a letter of authorization to transfer $2 million from an
existing account at First Union. The existing account was that of Mediha Din, the eighteen-year-old
daughter of Bob Din. Bob Din suggested to First Union that his daughter would authorize the
transfer of $2 million from her First Union account to JSL Holdings’ First Union account. Laurienti
told First Union that he had, in fact, made the arrangements to receive the $2 million loan and that
the margin calls would be met. Based upon these representations, First Union did not immediately
liquidate the entire Partnership Account. Upon consultation with his in-house lawyer at En Pointe
about this transaction, however, Bob Din rescinded his offer to transfer $2 million from his
daughter’s First Union account because his counsel advised him that the transfer of funds would be
“too obvious”. Bob Din then attempted to arrange for a banker to loan Laurienti $2 million to cover
the debit balance. When the banker, Laurienti and King informed a margin clerk that such a loan
would take a week to arrange, First Union liquidated the remainder of the account to meet the
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margin calls. First Union has since filed a NYSE arbitration claim against En Pointe, Bob Din and
Laurienti for fraud in connection with Laurienti’s margin account, and Bob Din’s and Laurienti’s
promotion of En Pointe common stock.
93. Nine days after the effective date of the sale of majority interest in SupplyAccess, on
April 13, 2000, En Pointe and Bob Din issued a press release announcing the closing of a
supplemental sale of SupplyAccess preferred stock of $7.6 million and that En Pointe was “no
longer a majority stockholder of SupplyAccess, Inc.” In response to this stunning revelation, En
Pointe’s stock price plummeted from its opening price of $27.3125 to close at $12.875 on 2,003,800
shares traded.
94. During and immediately after the April 13, 2000 crash of En Pointe stock, and in
order to relieve some of the selling pressure, Sam Tedesco recalls that Hampton-Porter’s trading
room refused to accept sell orders from clients, at the direction of Walker.
95. The aftermath of the April 13 revelation was reported by Bloomberg News as follows:
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
said it’s no longer the majority owner of SupplyAccess, Inc., an operator of a
business procurement web site.
96. On April 14, 2000, En Pointe further revealed, contrary to prior representations, that
En Pointe’s ownership interest had specifically declined (below 50%) to 45.1%. Specifically, on
April 14, 2000, the Company filed a report on Form 8-K with the SEC, stating in part that,
[En Pointe’s] web procurement subsidiary, SupplyAccess, Inc. completed a $7.6
million supplemental private placement of Series A preferred stock. Total shares
issued were 5.1 million at $1.50 each and represented 16.3% of the total shares
outstanding. At the conclusion of the sale, the Company's percentage ownership in
SupplyAccess was 45.1%.
In response to this more specific announcement, En Pointe’s stock price further declined from its
opening price of $12.875 to close at $10.625 on 878,400 shares traded.
Post-Class Period Events
97. On April 14, 2000, a Hampton-Porter client named Steven Crosby went to Hampton-
Porter’s offices and met with Laurienti, Walker, his broker Brian Laurienti and several other
Hampton-Porter representatives, including Sam Tedesco. By April, Sam Tedesco recalls that
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29 First Amended Consolidated Class Action Complaint Master Case No. 01-CV-0205 L (CGA)
Laurienti had stopped making daily appearances at the offices of Hampton-Porter and Sam Tedesco
had been told that by Brian Laurienti that Laurienti was not showing up to his office at Hampton-
Porter because he was not well, however, Laurienti unexpectedly appeared at the offices of
Hampton-Porter for the April 14, 2000 meeting with Steven Crosby. At the April 14, 2000, Steven
Crosby was informed that Laurienti and Walker and Hampton-Porter were working feverishly to
support En Pointe’s share price, and that Bob Din had agreed to provide $1 million to Hampton-
Porter secretly to allow Defendants to create artificial demand for the stock and prop up the
plummeting share price. Steven Crosby was also informed that Hampton-Porter was purposefully
disguising these purchases to make them appear to be made through different brokerage firms.
98. On April 17, 2000, in a last-ditch effort to boost En Pointe’s share price and continue
with Defendants’ scheme, Sam Tedesco recalls Walker causing Hampton-Porter in-house analyst
Todd Picture to publish another report on behalf of Hampton-Porter 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.”
99. Following the events outlined in the Class Period, various legal actions, including
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,
including the federal action entitled Merrill Lynch Pierce Fenner & Smith , Inc. v. John Laurienti,
00-CV-00781 L(POR), the California actions entitled First Union Securities, Inc. v. JSL Holdings,
L.P., et. al., Case No. GIC748336, Kenneth L. Fredrick v. Attiazaz Din, et al., Case No. YC039456,
and Steven and Jenifer Crosby v. En Pointe Technologies, Inc., et al., No. GIC759905, the National
Association of Securities Dealers arbitration action entitled Steven and Jenifer Crosby v. Hampton-
Porter Investment Banking, LLC, et al., and the New York Stock Exchange arbitration action
entitled First Union Securities, Inc. v. John [W.] Laurienti, et. al., NYSE Docket No. 2000-008703.
Moreover, the legal actions pending and anticipated against Hampton-Porter cause it to close up
shop. As reported 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.”
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30 First Amended Consolidated Class Action Complaint Master Case No. 01-CV-0205 L (CGA)
100. As of July 11, 2002, following 90 days after the end of the Class Period, the
Company’s share price never recovered and averaged only $10.68 per share after the April 13, 2000
En Pointe press release, as reflected in the Price and Volume History of En Pointe common stock
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En Pointe P rice/Volume H istory
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
12/7/99
1/7/00
2/7/00
3/7/00
4/7/00
5/7/00
6/7/00
7/7/00
$0
$10
$20
$30
$40
$50
$60
V olume
Open
High
Low
Close
attached hereto as Exhibit 1 and the chart below:
This price reflects less than a $54 million market capitalization for the Company, after its Insiders
profited at least $35 million dollars alone from their Insider sales from February 28 to March 15,
2000.
CAUSATION ALLEGATIONS
101. En Pointe’s common stock was publicly traded on the NASDAQ NMS at all relevant
times. Defendants’ material misrepresentations, omissions and manipulative contrivances had the
effect of artificially inflating the price of En Pointe’s stock.
102. 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
information 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.
103. 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, as reflected
in the Price and Volume History of En Pointe common stock attached hereto as Exhibit 1. Lead
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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.
104. Until shortly before the filing the original complaint, Lead Plaintiffs and the Class
was unaware of all of the facts, as described herein, and could not have reasonably discovered the
Defendants’ fraudulent scheme by the exercise of reasonable diligence.
ADDITIONAL SCIENTER ALLEGATIONS
105. Each misrepresentation and/or omission of material fact alleged herein was made
with reckless disregard for, or knowledge of its false and misleading nature. At all relevant times,
Bob Din was in a position to know, and did in fact know the material facts regarding the Company
as set forth herein. Specifically, Bob Din was 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, Bob Din was in a
position to know, and must have known or recklessly disregarded the fact that the Company would
complete on April 4, 2000 a supplemental private placement offering which would reduce the
Company’s ownership in SupplyAccess to a minority position (below 50%) to 45.1%. 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.
106. Bob Din had the opportunity to commit and participate in the fraud described herein.
Bob Din was the co-founder of En Pointe, the Chairman of the Board of Directors, the Chief
Executive Officer and the President of En Pointe and shareholder of En Pointe and thus controlled
the Company’s press releases, corporate reports, SEC filings and communications with analysts.
Thus, Bob Din controlled the public dissemination of and could falsify and/or omit, the material
information about En Pointe’s business prospects and operations, that reached the public and
affected the price of En Pointe stock.
107. Laurienti, Walker, 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
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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, Bob Din and broker Troy
Peters also anticipated the crash in En Pointe’s share price, and profited from short selling En Pointe
stock in Canadian accounts established and managed by Amr I. Elgindy.
108. 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, as
reflected in the Price and Volume History of En Pointe common stock attached hereto as Exhibit 1.
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, Bob Din, , while concealing the scheme to artificially inflate
the price of En Pointe securities, and the Insiders sold hundreds of thousands of En Pointe shares
to the unsuspecting public 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:
INSIDER NUMBER OF SHARES PROCEEDS
Bob Din, and his wife,
Naureen Din, Secretary and
Director
202,000 8,958,780
Bob Din, on behalf of
Mediha Din
100,000 4,339,000
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34 First Amended Consolidated Class Action Complaint Master Case No. 01-CV-0205 L (CGA)
Bob Din, on behalf of Ali
Mohyuddin
100,000 4,393,711
Zubair Ahmed, Director 165,000 7,660,537
Mark Briggs, Director 18,000 869,249
Verdell Garroutte, Director 10,000 463,729
Javed Latif, Chief Financial
Officer and the brother-inlaw
of Bob Din
47,185 2,154,802
Ellis Posner, Vice-President
of Sales
33,000 1,506,853
Jacob Stetton, Senior Vice
President and the General
Counsel
10,000 463,730
Robert Mercer, Vice
President
7,322 339,542
Eric Keating, Vice-President
of Services
5,600 262,182
TOTAL 698,017 $35,751,115
109. During the Class Period, Bob Din, together with his wife Naureen Din, (and in
addition to the sales made on behalf of in their minor children), 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 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: 202,000 $8,958,780
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110. 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) Bob Din and Naureen Din sold 61.5% of their ownership position;
(2) Zubair Ahmed sold 20% of his ownership position for $7.66 million
(3) Mark Briggs sold 100% of his ownership position;
(4) Verdell Garroutte sold 100% of his ownership position;
(5) Eric Keating sold 100% of his ownership position;
(6) Javed Latif sold 89.3% of his ownership position;
(7) Robert Mercer sold 100% of his ownership position;
(8) Ellis Posner sold 68.4% of his ownership position; and
(9) Jacob Stetton sold 58% of his ownership position.
111. Moreover, these sales took place shortly after the Defendants primed the market with
their talk of being “well positioned” to compete with Ariba and Commerce One and their
SupplyAccess venture. The Insiders’ sales were also timed to take advantage of the artificial
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%.
112. The combination of attributable knowledge with the evident profit incentives for Bob
Din creates a strong inference of scienter.
FRAUD ON THE MARKET ALLEGATIONS
113. At all relevant times, the market for En Pointe common stock was an efficient market
for the following reasons, among others:
a. At all relevant times during the Class Period, En Pointe’s common stock was
listed and actively traded on the NASDAQ NMS, a highly efficient national
securities market. During the Class Period, the Company had approximately
6.5 million shares of common stock issued and outstanding;
b. As a registered and regulated issuer of securities, En Pointe filed periodic
reports with the SEC and the NASDAQ NMS, in addition to the frequent
voluntary 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.
114. 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
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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 RELIEF
Violations of Section 10(b) of The Securities Exchange Act of 1934
and Rule 10b-5 Promulgated thereunder
(Against All Defendants)
115. Plaintiff incorporates by reference and realleges all preceding paragraphs as though
fully set forth herein.
116. During the Class Period, Defendants En Pointe, Bob Din, Hampton-Porter, H-P, Time
Holdings, JSL Holdings, JSL Enterprises, Laurienti, and Walker engaged in a plan, scheme and
course of business which operated as a fraud upon Plaintiff and the Class, and made various untrue
statements of material fact and omitted to state material facts necessary to make the statements
made, in light of the circumstances under which they were made, not misleading to Plaintiff and the
Class as set forth above. The purpose and effect of this scheme was to induce Plaintiff and the Class
to purchase the Company’s common stock during the Class Period at artificially inflated prices.
117. By reason of the foregoing, Defendants knowingly or recklessly violated
Section10(b) of the Securities Exchange Act of 1934 (hereinafter “Exchange Act”) and Rule 10b-5
promulgated thereunder in that they themselves or a person whom they controlled: (a) employed
devices, schemes and artifices to defraud; (b) made untrue statements of material facts or omitted
to state material facts necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading; or (c) engaged in acts, practices and a course of
business that operated as a fraud or deceit upon Plaintiff and the Class in connection with their
purchases of the Company’s common stock during the Class Period.
118. As a result of the foregoing, the market price of the Company’s common stock was
artificially inflated during the Class Period. In ignorance of the false and misleading nature of the
representations described above, Plaintiff and the Class relied, to their detriment, directly on the
misstatements or the integrity of the market both as to price and as to whether to purchase these
securities. Plaintiff and the Class would not have purchased En Pointe stock at the prices they paid,
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or at all, if they had been aware that the market prices had been artificially and falsely inflated by
Defendants’ false and misleading statements and omissions. At the time of the purchase of En
Pointe stock by Plaintiff and the Class, the fair market value of said common stock was substantially
less than the price paid by Plaintiff. Plaintiff and the Class have suffered substantial damages as a
result.
SECOND CLAIM FOR RELIEF
Violations of Section 20(a) of The Securities Exchange Act of 1934
(Against Defendants Attiazaz “Bob” Din, John William Laurienti, Gregory Walker,
H-P Holdings, LLC, and JSL Enterprises, LLC)
119. Plaintiff incorporates by reference and realleges all preceding paragraphs as though
fully set forth herein.
120. Defendant Bob Din is liable for En Pointe’s material misrepresentations and
omissions complained of herein under §20(a) of the Exchange Act in that he functioned as control
persons of En Pointe by virtue of his executive and directorial positions with the Company, his
knowledge of and involvement in the business of the Company, his daily access to confidential
information regarding the operations and finances of the Company, and his power and ability to
make public statements on behalf of En Pointe to shareholders, potential investors and the media
during the Class Period. As such, they had the power and ability to control the Company’s actions.
121. During the Class Period, defendants Laurienti, Walker and H-P were control persons
of Hampton-Porter, in that H-P owned 100% of Hampton-Porter, Walker and Laurienti own and
controlled H-P, H-P owned Hampton-Porter, Walker was the President of Hampton-Porter, and
Laurienti was empowered by Walker to direct Hampton-Porter’s activities and communications.
In this regard, H-P, through Walker, and Laurienti had direct access to Hampton-Porter’s proprietary
information systems, and had ultimate control of Hampton-Porter’s trading schemes and
communications functions, including the publishing of analyst reports.
122. During the Class Period, defendants Laurienti and JSL Enterprises were control
persons of JSL Holdings, in that JSL Enterprises is the sole general partner of JSL Holdings and
Laurienti has a majority ownership interest in JSL Holdings. In this regard, Laurienti and JSL
Enterprises had knowledge of and involvement in the day to day business of JSL Holdings. As such,
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they had the power and ability to control JSL Holdings’ actions.
123. During the Class Period, Laurienti was a control person of JSL Enterprises, in that
Laurienti has a majority ownership interest in JSL Enterprises. In this regard, Laurienti had
knowledge of and involvement in the day to day business of JSL Holdings. As such, they had the
power and ability to control JSL Enterprises’ actions.
124. During the Class Period, defendants Laurienti and Walker were control persons of
Time Holdings, in that Laurienti and Walker have joint ownership of Time Holdings. In this regard,
Laurienti and Walker had knowledge of and involvement in the day to day business of Time
Holdings. As such, they had the power and ability to control Time Holdings’ actions.
THIRD CLAIM FOR RELIEF
For Violations of Sections 10(b) and 20A of The Securities Exchange Act of 1934
(Against Defendants Attiazaz “Bob” Din)
125. Plaintiff incorporates by reference and realleges all preceding paragraphs as though
fully set forth herein.
126. This claim is asserted against defendant Bob Din pursuant to §§10(b) and 20A of the
Exchange Act and Rule 10b-5 promulgated thereunder, by a Subclass consisting of all purchasers
of En Pointe stock who purchased such stock contemporaneously with the insider sales of the
Insiders, which took place between February 28 and March 15, 2000 as detailed herein.
127. During the Class Period, as detailed above, Bob Din, while in possession of material,
non-public information concerning the supplemental offering of SupplyAccess stock and
SupplyAccess’ uncompetitive position, took advantage of the inflated market for En Pointe’s stock
by dumping his own shares on unwitting investors. In so doing, Bob Din aquired over $18 million
from his stock sales.
128. Bob Din’s stock sales were timed to take advantage of the information gap that
existed between the time of the initial announcements and analyst reports concerning SupplyAccess,
and the revelation that En Pointe had reduced its ownership of SupplyAccess to a minority position,
and during the concealment of the pump and dump scheme. At the time of their insider sales, Bob
Din knew or recklessly disregarded that they possessed materially adverse non-public information
regarding the supplemental offering of SupplyAccess stock, the fact that SupplyAccess was not a
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genuine competitor to Ariba and Commerce One in the B2B marketplace, and the pump and dump
scheme and that this information had not been disclosed to the investing public.
129. As set forth above, defendant Bob Din violated §10(b) and 20A of the Exchange Act
and SEC Rule 10b-5. As a direct and proximate result of Bob Din’s wrongful conduct, and by virtue
of the fact that Lead Plaintiffs and the Subclass purchased shares of En Pointe stock on the
NASDAQ NMS contemporaneously, Lead Plaintiffs and the Subclass suffered damages in
connection with these purchases. Such damages stem from the fact that Lead Plaintiffs and the
Subclass paid artificially inflated prices for En Pointe stock as a result of Bob Din’s violations, and
would not have purchased at such inflated prices, if at all, had Bob Din fulfilled his legal duty to
disclose the materially adverse non-public information or abstain from selling such securities.
130. Lead Plaintiffs Richard Tavano and Dennis Pasko purchased shares of En Pointe
stock contemporaneously with Bob Din’s sales, as reflected in these Lead Plaintiffs’ certifications,
on file with the Court. Specifically, Richard Tavano purchased 1,000 shares on March 8, 2000 and
100 shares on March 15, 2000; and Dennis Pasko purchased 500 shares on February 28, 2000, and
1400 shares on March 8, 2000.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff, on his own and on behalf of the Class, pray for judgment as
follows:
1. Declaring this action to be a class action pursuant to Rules 23(a) and 23 (b)(3) of the
Federal Rules of Civil Procedure on behalf of the Class defined herein;
2. Awarding Lead Plaintiffs and the Class rescissory or compensatory damages in an
amount which may be proven at trial, together with interest thereon;
3. Awarding Lead Plaintiffs and the Class pre-judgment and post-judgment interest, as
well as their reasonable attorneys’ fees and expert witness fees and other costs; and
/ / /
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/ / /
4. Awarding such other and further relief as this Court may deem just and proper
including any extraordinary equitable relief and/or injunctive relief as permitted by law or equity
to attach, impound or otherwise restrict the Defendants’ assets to assure Lead Plaintiffs and the Class
have an effective remedy.
Dated: October 7, 2002 By:__________________________________
James C. Krause, Esq.
Patrick N. Keegan, Esq.
Eric J. Benink, Esq.
KRAUSE & KALFAYAN
Burton H. Finkelstein, Esq.
Donald J. Enright, Esq.
FINKELSTEIN, THOMPSON
& LOUGHRAN
Lead Counsel for Lead Plaintiffs
Other Plaintiffs’ Counsel:
Robert I. Harwood, Esq.
Frederick W. Gerkens, III, Esq.
WECHSLER HARWOOD HALEBIAN & FEFFER LLP
488 Madison Avenue
New York, NY 10022
Michael D. Braun, Esq.
Patrice L. Bishop, Esq.
STULL, STULL & BRODY
10940 Wilshire Boulevard, Suite 2300
Los Angeles, CA 90024
Jules Brody, Esq.
Aaron L. Brody, Esq.
STULL, STULL & BRODY
6 east 45th Street
New York, NY 90024
Marc S. Henzel, Esq.
LAW OFFICES OF MARC S. HENZEL
210 West Washington Square
Third Floor
Philadelphia, PA 19106
Kevin J. Yourman, Esq.
Vahn Alexander, Esq.
WEISS & YOURMAN
10940 Wilshire Boulevard, 24th Floor
Los Angeles, CA 90024
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Ronald A. Marron, Esq.
MARRON & WILSON, LLP
1475 Sixth Avenue, Suite 301
San Diego, CA 92101
Evan Smith, Esq.
BRODSKY & SMITH
11 Bala Avenue, Suite 39
Bala Cynwyd, PA 19004
Corey D Holzer
HOLZER & HOLZER
6135 Barfield Road, Suite 102
Atlanta, GA 30328
Kirk Hulett, Esq.
HULETT HARPER LLP
550 West C Street, Suite 1770
San Diego, CA 92101
Jeffery R. Krinsk, Esq.
FINKELSTEIN & KRINSK
501 West Broadway, Suite1250
San Diego, CA 92101
Alfred G. Yates, Jr., Esq.
LAW OFFICES OF ALFRED G. YATES, JR.
519 Allegheny Building
429 Forbes Avenue
Pittsburgh, PA 15219
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DEMAND FOR JURY TRIAL
Rule 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: October 7, 2002 By:__________________________________
James C. Krause, Esq.
Patrick N. Keegan, Esq.
Eric J. Benink, Esq.
KRAUSE & KALFAYAN
Burton H. Finkelstein, Esq.
Donald J. Enright, Esq.
FINKELSTEIN, THOMPSON
& LOUGHRAN
Lead Counsel for Lead Plaintiffs |
