COMPLETE DRAFT OF COMPLAINT VS TERAYON:
whafh.com
a few tidbits:
"5. Defendants' materially false and misleading statements, however, did not escape the attention of CableLabs. On several occasions during the Class Period, and most pointedly in a cease and desist letter dated February 2, 2000 ("cease and desist letter"), CableLabs notified Terayon and the individual defendants that CableLabs emphatically and categorically denied that: (a) S-CDMA had been accepted as any current or future DOCSIS standard; (b) a DOCSIS 1.2 standard had been agreed upon (therefore, Terayon's S-CDMA technology could not be part of the standard); and (c) any standard had been set for consideration after DOCSIS 1.1. CableLabs has also admonished Terayon to cease and desist making false and unsubstantiated claims about its products and technology.
6. The cease and desist letter, as well as the other admonishments, did not deter defendants. Defendants not only continued to misrepresent that Terayon's S-CDMA technology was the industry standard, but they also denied that the cease and desist letter ever existed. Thus, when an investigative journalist raised the possibility of a cease and desist letter from CableLabs, in an article in Fortune's March 20, 2000 edition (which was published on March 6, 2000), Z. Rakib denied that any such letter existed - even though Terayon had the letter for over a month. The market accepted his denial. Defendants only confirmed the existence of the cease and desist letter during the Company's first quarter 2000 conference call on April 11, 2000, when they could no longer deny it. During that call, a call-in participant told investors that copies of the cease and desist letter had been posted on the Internet by an anonymous source. The disclosure of the cease and desist letter and the fact that Terayon's S-CDMA technology was not certified by CableLabs were in shocking contrast to the materially false and misleading statements made by defendants throughout the Class Period. Further, the revelation of these facts had a material adverse impact on the price of Terayon stock, leading to a precipitous decline in Terayon's share value which has caused plaintiffs and other Terayon investors to suffer substantial and material damages. Terayon's insiders, however, avoided these losses by selling their stock at artificially inflated prices before the truth was disclosed.
7. Defendants' scheme: (a) deceived the investing public regarding Terayon's business, new product capabilities and acceptability as an industry standard technology, foreseeable product demand, growth, operations and the intrinsic value of Terayon common stock; (b) allowed defendants to register and/or sell over $478 million worth of Terayon shares at artificially inflated prices via share-for-share acquisitions of other companies, which acquisitions also allowed defendants to appropriate valuable proprietary technologies previously owned by other companies; (c) allowed Company insiders, several of whom are named as defendants herein, to sell over 337,000 shares of their privately held Terayon common stock, during the Class Period, while in possession of materially adverse, undisclosed information, allowing them to reap illicit proceeds of at least $49 million and to profit from the artificial inflation in the price of Terayon stock which their scheme had created; and (d) caused plaintiffs and other members of the Class to purchase Terayon common stock at artificially inflated prices." |
