THE DEFENDANTS' MANIPULATION OF THE MARKET FOR IBUY SECURITIES
40. Waldron, its customers, and the accounts controlled by
Waldron beneficially own the great majority of the public float of
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IBUY stock, which is approximately 1.3 million shares. As of mid-
February 1998, Waldron itself maintained an inventory of more than
400,000 shares of IBUY in proprietary accounts. Waldron also sold
the stock to many of its customers, who continue to hold large
positions in the stock in their accounts with Waldron.
41. Commencing at the time of the IPO, Waldron, at the
direction of defendant Perle, began to manipulate the price of IBUY
stock via artificial market activity including parking
arrangements, guarantees against losses, and fraudulent purchasing.
Waldron and Perle also worked closely with defendant McNulty on a
weekly basis whereby defendant McNulty would pass the supposedly
confidential information of those who had "hit" or contacted IBUY's
website to defendants Perle and Waldron. Defendants Waldron and
Perle used this information to solicit persons who had visited
IBUY's website regarding the purchase of IBUY shares. None of
those arrangements were disclosed to plaintiff or the marketplace.
42. As a result of the manipulative devices employed by
defendants, the price of IBUY stock rose far beyond any rational
value. Notwithstanding the historical losses of the Company, the
stock sold at $9 per share in the IPO. Moreover, as a result of
defendants' manipulative conduct and their issuance of the false
and misleading statements, the price of IBUY rose to over $30 per
share in mid-March 1998 for a total market capitalization of
approximately $200 million.
43. In or about January 1998, despite the defendants' best
efforts, the price of IBUY began to fall. In order to prop up its
stock price, the defendants began to issue false information in
conjunction with Waldron. In addition, in order to relieve some of
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the selling pressure, Waldron's trading room, at the direction of
defendant Perle, adopted a policy of refusing to accept sell orders
from customers. Waldron also pressured its registered
representatives to sell IBUY stock to their customers without
regard to its suitability, which resulted in sales of the stock to
many unsuitable customers.
44. Due to the size of Waldron's positions, it was apparent
to each of the defendants that if IBUY's price was allowed to fall
to true value, Waldron would sustain a huge loss and be forced out
of business. Defendants Perle, Hay and McNulty would also suffer
serious losses (along with other IBUY insiders who received stock
prior to the IPO) from such a price collapse.
45. On March 25, 1998, IBUY was forced to disclose that
trading in IBUY shares was suspended for 10 days by the SEC because
of suspicions of manipulative conduct. In addition, it was
reported that defendant Waldron was facing charges that it had
rigged the market to pump up the stock of the Company. In response
to the suspension of trading, and in denial of any wrongdoing by
the Company, defendant McNulty stated the following:
"What is going on with Wall Street isn't happening
on Main Street which is where our company does its
business. Our company continues to execute its plan and
despite the controversy, we continue to service our
customers, and develop relationships with suppliers and
vendors to build our franchise in the explosive
electronic retail marketplace."
"IBUY remains focused on its mission statement to be
the dominant low price leader on the Internet selling
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brand-name consumer products everyday. The Company has
continued to position itself as a worldwide retailer as
evidenced by the opening of our European offices to
secure products and distribution for that marketplace."
46. Another bomb shell was dropped when on March 26, 1998,
Kristine Webster, the Company's Chief Financial Officer, disclosed
that 23% of the Company's revenues since the inception of its
business have come via the purchases of computers and other office
equipment valued at more than $250,000 by defendant Waldron. This
was never disclosed to the investing public in any filing including
the prospectus for the IPO. Thus, at the time of the offering,
Waldron, the principal underwriter, was itself the principal source
of IBUY's revenues! Clearly, these transactions were consummated
for the purpose of generating revenue growth as Waldron prepared to
take the Company public. As this adverse information was disclosed
the reported price of IBUY fell to approximately $20 per share.
Furthermore, the current price of IBUY shares is illusory given
that no NASDAQ marketmaker is willing and able to post a bid or ask
price for IBUY. Consequently, the true value of the millions of
IBUY shares traded during the Class Period is substantiallyimpaired.
FIRST CLAIM FOR RELIEF
For Violation Of §10(b) Of The 1934 Act
And Rule 10b-5 Against All Defendants
47. Plaintiff incorporates ¶¶1-46 by reference.
48. Defendants violated §10(b) of the 1934 Act and Rule 10b-5in that they:
(a) Employed devices, schemes, and artifices to defraud;
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(b) Made untrue statements of material facts or omitted
to state material facts necessary in order to make statements made,
in light of the circumstances under which they were made, notmisleading; or
(c) Engaged in acts, practices, and a course of business
that operated as a fraud or deceit upon plaintiff and others
similarly situated in connection with their purchases of IBUY
common stock during the Class Period.
49. Each of the defendants: (a) knew the material, adverse,
non-public information about IBUY's financial results and then-
existing business conditions, which was not disclosed; and
(b) participated in drafting, reviewing, and/or approving the
misleading statements, releases, reports, and other public
representations of and about IBUY.
50. During the Class Period, defendants disseminated or
approved the false statements specified above, which they knew were
misleading in that they contained misrepresentations and failed to
disclose material facts necessary in order to make the statements
made, in light of the circumstances under which they were made, notmisleading.
51. Plaintiff and the Class have suffered damages in that, in
reliance on the integrity of the market, they paid artificially
inflated prices for IBUY stock. Plaintiff and the Class would not
have purchased IBUY stock at the prices they paid, or at all, if
they had been aware that the market prices had been artificially
and falsely inflated by defendants' misleading statements.
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SECOND CLAIM FOR RELIEF
For Violation Of §20(a) Of The 1934 Act
Against Defendants McNulty, Perle and IBUY
52. Plaintiff incorporates ¶¶1-51 by reference.
53. Defendants McNulty and Perle acted as controlling persons
of IBUY within the meaning of §20(a) of the 1934 Act. By reason of
their positions as senior executives of Waldron and/or IBUY, they
had the power and authority to cause IBUY to engage in the wrongful
conduct complained of herein. IBUY controlled McNulty and all ofits employees.
54. By reason of such wrongful conduct, McNulty, Perle and
IBUY are liable pursuant to §20(a) of the 1934 Act. As a direct
and proximate result of these defendants' wrongful conduct,
plaintiff and the other members of the Class suffered damages in
connection with their purchases of IBUY common stock during theClass Period.
CLASS ACTION ALLEGATIONS
55. Plaintiff brings this action as a class action pursuant
to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of
all persons who purchased IBUY stock (the "Class") during the Class
Period. Excluded from the Class are defendants herein, members of
their immediate families, any entity in which a defendant has a
controlling interest, and the legal representatives, heirs,
successors-in-interest, or assigns of any excluded party.
56. The members of the Class are so numerous that joinder of
all members is impracticable. The disposition of their claims in
a class action will provide substantial benefits to the parties and
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the Court. During the Class Period, IBUY had more than 4 million
shares of stock outstanding, owned by hundreds of persons.
57. There is a well-defined commonality of interest in the
questions of law and fact involved in this case. The questions of
law and fact common to the members of the Class which predominate
over questions which may affect individual Class members includethe following:
(a) Whether defendants effected the scheme and unlawful
course of business complained;
(b) Whether the federal securities laws were violated bydefendants;
(c) Whether defendants omitted and/or misrepresentedmaterial facts;
(d) Whether defendants' statements omitted material
facts necessary to make the statements made, in light of the
circumstances under which they were made, not misleading;
(e) Whether defendants knew that their statements were
false and misleading;
(f) Whether the price of IBUY stock was artificially
inflated during the Class Period; and
(g) The extent of damage sustained by Class members and
the appropriate measure of damages.
58. Plaintiff's claims are typical of those of the Class
because plaintiff and the Class sustained damages from defendants'
wrongful conduct.
59. Plaintiff will adequately protect the interests of the
Class and has retained counsel who are experienced in class action
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securities litigation. Plaintiff has no interests which conflict
with those of the Class.
60. A class action is superior to other available methods for
the fair and efficient adjudication of this controversy.
61. The prosecution of separate actions by individual Class
members would create a risk of inconsistent and varyingadjudications.
STATUTORY SAFE HARBOR
62. The statutory safe harbor provided for forward-looking
statements under certain circumstances does not apply to any of the
allegedly false forward-looking statements pleaded herein because
each of the statements pleaded herein was made during the lock-up
period and "in connection with" IBUY's IPO. Moreover, none of the
statements allegedly made herein were identified as forward-looking
statements and accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to
differ materially from those in the forward-looking statements. In
any event, each of the forward-looking statements alleged herein
was authorized by an executive officer of IBUY and was actually
known by each of the Individual Defendants to be false when made.
BASIS OF ALLEGATIONS
63. Because the PSLRA, §21D(c) of the 1934 Act [15 U.S.C.
§78u-4(c)], requires complaints to be pleaded in conformance with
Federal Rule of Civil Procedure 11, plaintiff has alleged the
foregoing based upon the investigation of his counsel, which
included a review of IBUY's SEC filings, securities analysts'
reports and advisories about the Company, press releases issued by
the Company, media reports about the Company and private investi-
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gations and, pursuant to Rule 11(b)(3), believes that after
reasonable opportunity for discovery, substantial additional
evidentiary support will likely exist for the allegations set forth
at ¶¶1-5, 7-8, 13-19, 29, 31 and 40-44. PRAYER FOR RELIEF
WHEREFORE, plaintiff prays for judgment as follows:
1. Declaring this action to be a proper class action
pursuant to Rule 23(a) and (b)(3) of the Federal Rules of Civil
Procedure on behalf of the Class defined herein;
2. Awarding plaintiff and the members of the Class compen-satory damages;
3. Awarding plaintiff and the members of the Class
pre-judgment and post-judgment interest, as well as reasonable
attorneys' fees, expert witness fees, and other costs;
4. Awarding extraordinary, equitable, and/or injunctive
relief as permitted by law, equity, and federal statutory provi-
sions sued hereunder, including rescission, the imposition of a
constructive trust upon the proceeds of defendants' insider
trading, pursuant to Rules 64, 65, and any appropriate state lawremedies; and
5. Awarding such other relief as this Court may deem justand proper.
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JURY DEMAND Plaintiff demands a trial by jury.
DATED: May 5, 1998 MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH
DARREN J. ROBBINS
/s/
______________________________
WILLIAM S. LERACH
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
SPECTOR & ROSEMAN, P.C.
ROBERT M. ROSEMAN
2000 Market Street
12th Floor
Philadelphia, PA 19103
Telephone: 215/864-2400
SPECTOR & ROSEMAN, P.C.
ELLEN GUSIKOFF STEWART
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/338-4514
REINHARDT & ANDERSON
RANDALL H. STEINMEYER
E-1000 First National
Bank Building
332 Minnesota Street
St. Paul, MN 55101
Telephone: 612/227-9990
Attorneys for Plaintiff
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