TABLE OF AUTHORITIES

INTRODUCTION

ARGUMENT

I. The PSLRA Requires That The NYS Pension Fund Group, The Movant Wth The Largest Financial Interest In The Relief Sought By The Class, Be Appointed Lead Plaintiff Of The Entire Litigation

II. There Is No Cognizable Basis For Fragmentation Of This Litigation

A. The Attempt Of The McKesson HBOC Lead Plaintiff Group To "Reinvent" Itself To Fit The Circumstances Cannot Be Countenanced

B. The McKesson HBOC Group's Recalculation Of The NYS Pension Fund Group's Losses Is Incorrect

C. Other Movants Seeking To Represent "Carve Outs" Have Not Demonstrated Any Supportable Basis For Their Motions

D. There Is No Impediment To The NYS Pension Fund Group Serving As Lead Plaintiff Because Its Members Are Governmental Pension Funds

E. The State Pension Fund Group's Motion To Be Appointed Co-Lead Plaintiff Must Be Rejected

CONCLUSION

The New York State Common Retirement Fund (the "CRF"), Florida State Board of Administration ("FSBA"), Anchorage Police & Fire Retirement System ("AP&RS"), and Public School Teachers' Pension and Retirement Fund of Chicago ("Chicago Teachers' Fund"), (collectively the "NYS Pension Fund Group") respectfully submit this reply memorandum to the opposition of certain movants who seek to be appointed lead plaintiff for subsets of the class in this litigation.

The criterion for the appointment of lead plaintiff set forth in the Private Securities Litigation Reform Act (the "PSLRA") is clear and unequivocal. The NYS Pension Fund Group with losses that exceed $246 million¹ undeniably has the "largest financial interest in the relief sought by the class." Therefore, under the PSLRA, it should be appointed Lead Plaintiff.

Unable to overcome the plain language of the statute, other lead plaintiff movants ("Other Movants") argue for carving out separate subclasses which, they assert require separate lead plaintiffs and lead counsel or simply adding themselves as additional lead plaintiffs. Essentially, they search for anything different that could form the basis for a claim that they should be appointed as a lead plaintiff and their lawyers as lead counsel. For example, one Other Movant, which originally moved for appointment as lead plaintiff for the entire litigation, now says that it only seeks to represent a subclass of persons with claims for violations of §10(b) with respect to open market purchases of McKesson HBOC, Inc. ("McKesson HBOC"). Certain of the Other Movants seek a subclass of persons who exchanged their HBO & Company ("HBOC") shares for McKesson HBOC shares in the Merger only with respect to their claim for violation of §11 of the Securities Act.² Others seek a subclass of persons with a claim for violation of §14(a) of the Exchange Act. Another seeks a subclass of persons who exchanged shares of Access Health, Inc. ("Access") in a merger with HBOC effected in December 1998. And yet another seeks a subclass of persons who exchanged shares of US Servis, Inc. ("Servis"), IMNET Systems, Inc. ("IMNET") and Access in mergers with HBOC effected between September and December 1998.³ Another seeks a subclass of options purchasers. Finally, another seeks a subclass of short sellers of HBOC.

Notwithstanding the explicit requirement of the PSLRA that the presumption that the movant with the largest financial interest in the relief sought, i.e. the NYS Pension Fund Group, is the most adequate plaintiff and should be appointed lead plaintiff may be overcome "only upon proof" that that plaintiff will not fairly and adequately protect the interests of the class, 15 U.S.C. §78u-4(a)(3)(B)(iii)(II) (emphasis added)⁴, none is offered. At most, some Other Movants conjure up speculative potential conflicts. That is not sufficient.

All of the arguments are unavailing. Any case can be artificially divided into innumerable categories based on the time the security was purchased, the type of security purchased, and the specific securities claim asserted. However, such a result would render the PSLRA and its lead plaintiff provisions a nullity, and would lead to a litigation of monumental inefficiency. Congress insisted on a unified leadership for securities class actions, requiring client-directed litigation and preferring institutions to assume the lead plaintiff role. The NYS Pension Fund Group fits precisely the role Congress created in the PSLRA. Having joined together, and selected the two firms they believe will best represent the Class. See, Declaration of Horace Schow, II, General Counsel of FSBA and Declaration of Randolph F. Treece, Counsel to the Comptroller of the State of New York, sole trustee of the CRF, attached as Exhibits B and C respectively to the Declaration of Robert A. Hoffman filed herewith ("Hoffman Decl."). The NYS Pension Fund Group is ready, willing and able to assert all claims on behalf of all purchasers or acquirors of the securities at issue. The Other Movants' desire for numerous lead plaintiffs, with multiple lead counsel proceeding on their own, would stand the PSLRA on its head.

The PSLRA sets forth very specific criteria for choosing lead plaintiffs and approving their selection of counsel for the Class. In part, the purpose of these provisions was to streamline the process: the movant with the largest financial loss, who also satisfies the requirements of Rule 23, is presumptively the lead plaintiff, unless a very particular showing of conflict or inadequacy is made. No such showing can be made here.

If the Court were to entertain the Other Movants' arguments, contrary to the intent of Congress in passing the PSLRA, then in every case plaintiffs, knowing that they did not have the "largest financial loss," would manufacture some niche, subclass or purported conflict and thereby undermine the simple criterion mandated by the PSLRA for the selection of lead plaintiffs, in effect letting the tail wag the dog. Indeed, the lengths to which Other Movants have gone here demonstrates why Congress sought to avoid satellite litigation over the lead plaintiff issues.

I. The PSLRA Requires That The NYS Pension Fund Group, The Movant With The Largest Financial Interest In The Relief Sought By The Class, Be Appointed Lead Plaintiff Of The Entire Litigation.

As demonstrated in the NYS Pension Fund Group's Opening Memorandum, Opposition Memorandum, and Memorandum of Points and Authorities in Reply to the Opposition of Other Movants Seeking Appointment as Lead Plaintiff For the Entire Litigation, filed concurrently herewith, it unequivocally has the largest financial interest in the litigation and otherwise satisfies the requirements of the PSLRA. Thus, the plain language of the statute dictates that it should be appointed Lead Plaintiff and its choice of counsel should be approved.

Notwithstanding the fact that the NYS Pension Fund Group has the largest financial interest in this litigation, counsel for various Other Movants have attempted to carve out some niche, no matter how small, unfounded or unnecessary, offering a litany of groundless arguments as to why their clients should be appointed lead plaintiff for the "subset" they have identified. As demonstrated at length in the NYS Pension Fund Group's Opposition Memorandum, their arguments are counter to controlling precedent or are based on a distortion of the cases in which some courts have appointed co-lead plaintiffs or co-counsel to prosecute a class action under the PSLRA. See Id. at 12-25.

Several cases were cited in opposition memoranda submitted by Other Movants as purported authority for the proposition that separate representation for certain "niche" groups is required that were not addressed by the NYS Pension Fund Group in its Opposition Memorandum. Thus, for example, the McKesson HBOC Lead Plaintiff Group cites to In re Alcatel Alsthom Sec. Litig., MDL No. 1263 (E.D.Tex. June 14, 1999) and Spiegel v. Physicians Computer Network, Inc., No. 2:98-CV-981 (MTB) (D.N.J. May 28, 1999), see opposition memorandum at 5; and the Rappaport Group in its "Omnibus Opposition" at 12 cites to Mark v. Fleming Cos., Inc., Case No. CIV-96-506-M, Orders (W.D. Okla. Mar. 26, 1997) and Harbour Court LPI v. Nanophase Tech. Corp., et al. No. 98 C 7447, Memorandum Opinion and Order (N.D. Ill. Sept. 27, 1999). In fact, none of these cases support an argument for separate representation in this litigation.

In Alcatel, separate lead plaintiffs and lead counsel for open market purchasers of Alcatel American Depository Shares (ADS) and former DSC shareholders who acquired ADSs pursuant to the merger of DSC and Alcatel were in fact appointed. However, the group seeking to represent the former DSC shareholders did not seek to represent the open market purchasers of ADS. As the Court noted, the Alcatel Plaintiffs Group's motion was unopposed. Alcatel, Memorandum Opinion and Order at 2. (Hoffman Decl. Ex. 6.) Had the court not appointed a separate lead plaintiff and counsel, the open market purchasers of ADS would not have had any representation.

Spiegel involved three types of claims: (i) §10(b) claims on behalf of all persons who acquired PCN common stock during the class period; (ii) §§11 and 12(a)(2) claims on behalf of all persons who acquired PCN common stock in the company's May 1996 public offering and; (iii) §§11 and 12(a)(2) claims on behalf of all persons who acquired PCN common stock in exchange for shares of Wismer-Martin, Inc. in a merger (the "Wismer-Martin Merger Claims"). The court appointed State of Wisconsin Investment Board ("SWIB") Lead Plaintiff to represent everyone in the Class with a §10(b) claim and all persons with §§11 and 12(a)(2) claims who acquired PCN common stock in the company's May 1996 public offering.⁵ As part of the lead plaintiff structure, SWIB agreed not to challenge the appointment of another plaintiff, John F. Perez, as lead plaintiff with respect to the Wismer-Martin Merger Claims which SWIB did not personally possess. Mr. Perez was thereafter appointed by the court as Lead Plaintiff solely with respect to prosecuting those claims.

In Fleming, the lead plaintiff appointed for the stockholders did not wish to represent the noteholders; and, similarly, the lead plaintiff appointed for the noteholders did not wish to represent the stockholders. The Order cited is the court's refusal to grant defendants' motion to have only one lead plaintiff for both groups. The court properly refused to force a plaintiff to represent a constituency when it did not wish to do so.

Finally, in Nanophase, the lead plaintiff appointed for the Securities Act claims had filed a complaint dated June 4, 1998 and a Corrected Consolidated Class Action Complaint dated November 24, 1998 only alleging claims for violation of the Securities Act. Its motion to be appointed lead plaintiff, dated August 3, 1998, was made only pursuant to the provisions of the Securities Act. By the time the Harbour Court plaintiffs filed their complaint on November 20, 1998, which only alleged violations of the Exchange Act, there was a significant record that the Securities Act lead plaintiffs had no interest in representing the Exchange Act claims. See, e.g., Lax v. First Merchants Acceptance Corp, 1997 WL 461036 at *7 (N.D. Ill. Aug. 11, 1997) (the fact that a group did not assert all claims raised a question of whether that group could adequately represent the interests of persons who had asserted other claims).

In marked contrast to each of these cases, the NYS Pension Fund Group has standing to, and intends to assert all viable claims against all possible defendants. There is no reason to fragment this action and appoint separate lead plaintiffs. All of the purchasers or acquirors of the securities at issue have the same overriding interest in demonstrating the falsity of the financial statements that form the linchpin in this litigation.

The positions of these Other Movants is, in reality, predicated on nothing more than an ipse dixit, i.e., their assertion that each identified subset "requires" separate representation. Having made that unsupported assertion, each of these Other Movants argues that it has the largest financial interest in the niche it has carved out and, therefore, should be designated lead plaintiff. These contentions are wrong as a matter of law and as a matter of fact. Moreover, the lengths to which some of these Other Movants have gone to "support" their contentions would replace the "professional plaintiffs," which Congress sought to eliminate by enacting the PSLRA, with an equally, if not more repugnant, approach to jockeying for position -- that of "sheer opportunism" that runs counter to both the letter and the spirit of the PSLRA.

II. There Is No Cognizable Basis For Fragmentation Of This Litigation.

A. The Attempt Of The McKesson HBOC Lead Plaintiff Group To "Reinvent" Itself To Fit The Circumstances Cannot Be Countenanced.

The McKesson HBOC Lead Plaintiff Group moved to be appointed lead plaintiff for the entire litigation based on the assertion that it possessed the largest financial interest, as required by the PSLRA. See Notice of Motion and Opening Memorandum of The McKesson HBOC Lead Plaintiff Group. As long as this movant believed it could satisfy the requirements of the PSLRA and be appointed lead plaintiff for the entire litigation, it saw no "conflict" in having one lead plaintiff appointed. After the opportunity to review the motions filed, which demonstrated that it did not have the largest financial interest in the litigation and, thus, would not be appointed, this movant, "reinvented" itself as the champion of a subclass that purportedly must have separate representation. See. McKesson HBOC Lead Plaintiff Opposition Memorandum at 1.⁶ As demonstrated in the New York State Pension Fund Group's Opposition Memorandum, this movant's newly discovered "conflict" between open market purchasers of McKesson HBOC, i.e. §10 (b) claimants and exchange persons , i.e., §11 claimants, has often been considered by the courts and regularly rejected.

More eggregious than the assertion of this meritless claim is the impunity with which this movant has attempted to become "a horse of another color." The underlying facts relating to the claims in this litigation have not changed; the type and amount of securities and claimed losses represented by this movant have not changed. The only thing that has changed is that the McKesson HBOC Lead Plaintiff Group now knows that it cannot succeed in its attempt to be appointed lead plaintiff for the entire litigation and, thus, "conflicts," which did not exist on June 28, 1999 when it filed its motion, have suddenly emerged.⁷ This tactic is anathema to the letter and spirit of the PSLRA. It cannot be countenanced.⁸

Finally, it should be noted that, as a matter of fact, the New York State Pension Fund Group's financial interest in the "subset" this movant now seeks to represent is far greater than this Other Movant's. The McKesson HBOC Lead Plaintiff Group, which now seeks to represent only open market purchasers of McKesson HBOC stock after the date of the Merger with respect to the § 10(b) claim, asserts that it has $37 million in losses. The NYS Pension Fund Group, however, has more than $90 million in losses from its open market purchases.⁹

B. The McKesson HBOC Group's Recalculation Of The NYS Pension Fund Group's Losses Is Incorrect.

The McKesson HBOC Group has submitted a declaration by John B. Torkelsen recalculating losses claimed by certain lead plaintiff applicants. Based upon these recalculations, the McKesson HBOC Group argues that it has the largest losses of any open market purchasers of McKesson HBOC stock after the Merger and should, therefore, be appointed lead plaintiff only for that portion of the class.¹⁰ Specifically, Torkelsen contends that the NYS Pension Fund Group, among other groups including NYC, improperly calculated its losses on HBOC shares exchanged in the Merger and that one of the funds in the NYS Pension Fund Group, the CRF, improperly calculated its losses on McKesson shares purchased on the open market by using the wrong purchase price. Torkelsen contends, based on his recalculations, that the CRF's losses should be lowered from approximately $64 million to approximately $14 million and that the losses of another member of the NYS Pension Fund Group, the FSBA, should be reduced by about $80 million. Torkelsen's conclusions are wrong as a matter of law with respect to the NYS Pension Fund Group's HBOC shares converted into McKesson HBOC shares in the Merger and wrong as a matter of fact with respect to its open market purchases.

Completely ignoring the statutory language of §11 of the Securities Act, Torkelsen claims that for HBOC shares converted to McKesson HBOC shares in the Merger, the correct measure of damages is the difference between the price at which the HBOC shares were purchased prior to the Merger and their value at the time suit was brought.¹¹ Based on this assumption, he estimates that losses of the CRF and FSBA on HBOC shares exchanged should be reduced by $20 million and $80 respectively.

But Torkelsen's premise is incorrect as a matter of law. The §11 claim in this case does not arise from open market purchases of HBOC shares; rather, it arises from the merger transaction where those shares were converted into McKesson HBOC shares on January 13, 1999. It is settled that a merger where shares of an acquired company are exchanged for new securities is a "sale" for purposes of §11 liability. 7547 Corp. v. Parker & Parsley Dev. Partners, L.P., 38 F.3d 211, 223 (5th Cir. 1994); Smallwood v. Pearl Brewing Co., 489 F.2d 579, 591 n.11 (5th Cir. 1974); Feit v. Leasco Data Processing Equip. Corp., 332 F. Supp 544, 586 (E.D.N.Y. 1971). Thus, the amount "paid" by shareholders of the acquired company is the price at the time of the transaction giving rise to the cause of action, not the price when the shares used to "purchase" the new shares were first acquired. Feit, supra; Freedman v. Value Health, Inc., Civil Action No. 3:95-CV-2038 (JCH) (D. Conn. Feb. 18, 1999) (unpublished opinion attached to the Hoffman Declaration as Exhibit A) at 5-6. In Freedman, on this exact issue, the court stated: "[T]he question of whether or not the value of the stock used to acquire stock of another company in a merger is artificially inflated is irrelevant to the damages calculus under § 11. Recovery is based on the market price of the shares used as currency in the merger, not on their intrinsic value." Id. at 6. Torkelsen's recalculation of losses on the CRF's and FSBA's HBOC shares exchanged in the Merger must therefore be rejected entirely. On January 13, 1999, the CRF and FSBA exchanged their HBOC shares to purchase McKesson HBOC shares at a price of $83.9375 per share. Thus, the calculation of losses for these converted shares set forth in the NYS Pension Fund Group's moving papers is correct.

With respect to the McKesson shares listed by NYS in its Local Rule 3-7(c) Statement¹² as purchased on January 13, 1999, Mr. Torkelsen is correct that these shares were in fact purchased before the merger, and not, as previously understood by the NYS Pension Fund Group, after the merger.¹³ He is incorrect, however, in his estimate that this error overstated CRF's losses by $29 million. Rather, the error resulted in an overstatement of losses by just $8 million. Mr. Torkelsen assumes that the CRF's §10(b) damages for these shares were computed simply by multiplying the number of shares by the amount the purchase price of $83.9375 exceeds the true value of those shares, or about $35. In fact, in computing Section 10(b) damages on these shares, assuming these shares had been purchased after the Merger, the loss on these shares was offset by gains from sales of McKesson HBOC after the Merger. Also, the number of shares, 597,900, was reduced by the 429,000 shares sold after the Merger. This significantly reduced the damages claimed for these shares. Because, however, these shares were purchased before the Merger, and the sales were actually of shares purchased before the Merger, no offset is required under the first-in-first-out method of calculating losses. Thus, elimination of the net § 10(b) damages claimed for the 597,900 shares only reduces the losses of the CRF by $7,919,116 to $56,254,275 and the losses of the NYS Pension Fund Group as a whole to $246,011,412. Exhibit G to the Hoffman Declaration shows the calculation of the CRF damages based upon the incorrect assumption of 597,900 McKesson HBOC purchased on the open market on January 13, 1999 and a corrected calculation showing damages based upon the fact that the 597,900 shares were purchased prior to the Merger.

C. Other Movants Seeking To Represent "Carve Outs" Have Not Demonstrated Any Supportable Basis For Their Motions.

As demonstrated in the NYS Pension Fund Group's Opposition Memorandum and herein, there is no legal basis for granting the motions of any of the Other Movants whose motions were and remain motions for appointment as lead plaintiff for purported subclasses. The law, which demonstrates that these motions are meritless and the distortions of the cases cited by these Other Movants in "support" of their contentions, to the extent not discussed herein at pp. 4-5, is set forth in the NYS Pension Fund Group's Opposition Memorandum. Rather than burden the Court with a restatement of this analysis, the Court is respectfully referred to the NYS Pension Fund Group's Opposition Memorandum pp. 12-25.

Again, it must be noted that, in addition to the fact that the assertions of these Other Movants that separate representation is required to solely represent the interests of these "carved out" niches are not supported as a matter of law; as a matter of fact, the NYS Pension Fund Group has standing to bring all viable claims against all possible defendants and its financial interest in the various "carved out" positions dwarfs those of these Other Movants. Thus, for example, while the HBOC Securities Act Group claims losses of approximately $513,000; the NYS Pension Fund Group's "exchange" claim losses are approximately $152,161,182. See Declaration of Rochelle Feder Hansen in Support of the New York State Pension Fund Group's Opposition Memorandum dated October 7, 1999, Ex. G ("Hansen Decl.").

Similarly, the contention by the Rappaport Group and the McKesseon Proxy Group that the §14(a) claimants require separate representation¹⁴ has been specifically and resoundingly rejected by the courts, including by the court in In re Reliance Acceptance Group, Inc., 1998 WL 388260 (W.D. Tex. June 29, 1998), a decision rendered one year after the Supreme Court's decision in Amchem Prods. v. Windsor, 521 U.S. 591 (1997) upon which the Other Movants so heavily rely.¹⁵

Again, as a matter of fact, notwithstanding the protestations of these movants that, unless a separate lead plaintiff which seeks to solely represent the interests of the §14(a) claim is appointed, the claim will not be vigorously or properly prosecuted, the financial interest of either or both of these movants collectively in the §14 (a) claim is dwarfed by that of the NYS Pension Fund Group. The total number of shares that these two groups represent is 132,534. In marked contrast, the New York State Pension Fund Group represents more than 400,000 shares with a § 14 (a) claim.¹⁶

The Uhl Access Plaintiffs' Group have also failed to demonstrate that they should be appointed lead plaintiff for the niche they would carve out either as a matter of law or fact. As demonstrated in the NYS Pension Fund Group's Opposition Memorandum at 21-22, the claim of this group, though couched in terms relating to the merger of Access and HBOC, in fact is dependent on its members having exchanged their HBOC shares in the Merger. Their interests are precisley aligned with all others who exchanged their HBOC shares in the Merger. In its Opposition Memorandum, the Access Group predicates its "conflict" argument on the purported conflict between the Exchange Act and Securities Act claimants. See Access Group Opposition Memorandum at 7-8. As already discussed, this argument has repeatedly been rejected by the courts. Finally, as a matter of fact, the NYS Pension Fund Group, which exchanged 165,200 shares of Access for HBOC, see Hansen Decl. Ex. G, has a far greater interest in protecting the claims of these persons than the Access Group which exchanged only 3,800 Access shares.¹⁷

Finally, the last Other Movant that submitted "opposition" papers, Senvest, seeking to represent short sellers of HBOC, does not even attempt to justify its appointment. It rests on the bald assertion that separate representation is required to "litigate issues that are unique to HBOC short sellers." Senvest Opposition Memorandum at 3. There is no hint of what these "unique issues" are, much less the requisite proof to establish that the NYS Pension Fund Group is not an adequate representative. As set forth in the NYS Pension Fund Group's Opposition Memorandum, this purported group is, in fact, subsumed within the group of all purchasers of HBOC common stock during the relevant period. This motion also must be denied.¹⁸

D. There Is No Impediment To The NYS Pension Fund Group Serving As Lead Plaintiff Because Its Members Are Governmental Pension Funds.

The McKesson Nationwide Group raises the specter of a conflict based on the fact that the members of the NYS Pension Fund Group are governmental pension funds. McKesson Nationwide Opposition Memorandum at 4-5. However, this movant merely speculates and offers no proof that public pension funds may be subject to unique defenses based upon their alleged sophistication, which purportedly is based upon their access to corporate management. This argument, while having no basis in fact, has also been regularly rejected by the courts. See, e.g., Chan v. OrthoLogic Corp., No. CIV 96-1514 PHX RCB, slip op. at 11-12 (D. Ariz. Dec. 19, 1996) ("[s]ophisticated investors are as entitled to rely on the fraud-on-the-market theory as anyone else," citing Hanon v. Dataproducts Corp., 976 F.2d 497, 506 (9th Cir. 1992) (Hansen Decl. Ex. I)); Modell v. Eliot Sav. Bank, 139 F.R.D. 17, 22 (D. Mass. 1991) (one's "status as a sophisticated investor renders him neither devoid of the protection of the securities law nor immune to injury by misrepresentation"); Rubinstein v. Collins, 162 F.R.D. 534 (S.D. Tex. 1995); Kirby v. Cullinet Software, Inc., 116 F.R.D. 303 (D. Mass. 1987). This Coges here, that the defendants in the case "might later challenge SWIB because it is a 'sophisticated' investor" and that SWIB "might not be an adequate representative because it would litigate the case with an eye toward balancing the long term interests of Cellstar with the interests of the class." Id. at 547-48. The court in Cellstar rejected the Group's attempt to challenge SWIB's adequacy merely by raising unsubstantiated concerns regarding SWIB's sophistication and its political considerations. Finding that the Group's arguments did not constitute "proof" of any conflict as required under the PSLRA, the court noted with respect to the Group's claim that SWIB would be an inadequate plaintiff because "it would litigate the case with an eye toward balancing the long term interests of Cellstar with the interests of the class" that Congress has precluded this argument from being a valid challenge to the appointment of an institutional investor as Lead Plaintiff. Clearly, Congress intended that institutional investors consider such [long term] interests, as evidenced by the legislative history of the Reform Act: "[the Committee believes that an institutional investor acting as lead plaintiff can, consistent with its fiduciary obligations, balance the interests of the class with the long-term interests of the company and its public investors." Id. at 548 (quoting Report on the Private Securities Litigation Reform Act of 1995, S. Rep. No. 98, 104th Congress, 1st Sess. 6 (1995), reprinted in 1995 USCC&AN 679, 690).

The McKesson Nationwide Group's arguments raise nothing but unsubstantiated and hollow allegations. As the Court in Cellstar held, a marked difference exists between affirmatively demonstrating inadequacy of a representative and simply claiming that a presumptive lead plaintiff may be subject to such arguments in the future. 976 F. Supp. at 547. Under the PSLRA and Cellstar, therefore, these allegations should be rejected and the New York State Pension Fund Group should be appointed lead plaintiff of the entire litigation.

E. The State Pension Fund Group's Motion to Be Appointed Co-Lead Plaintiff Must Be Rejected.

The State Pension Fund Group, comprised of pension funds from Utah, Colorado and Alabama, did not originally file a motion to be appointed lead plaintiff by themselves, but rather were part of a group of pension funds designating itself as the McKesson Institutional Investor Group. The latter also included the New York City Pension Funds, which have now filed a separate motion seeking appointment as lead plaintiff. In their Second Amended Notice of Motion for Appointment of Lead Plaintiff, dated September 23, 1999, and in their Memorandum of Law Proposing Appointment of Lead Plaintiff and Approval of Lead Counsel and Opposing Certain Plaintiffs' Motions For Lead Plaintiff Appointment dated October 8, 1999 (the "State PFG Memorandum"), the State Pension Fund Group for the first time seeks to be appointed as lead plaintiff in its own right and to have its counsel appointed as co-lead counsel. Recognizing that it does not have the largest financial interest in the litigation, as required by statute, the State Pension Fund Group seeks to be appointed as a co-lead plaintiff with the NYS Pension Fund Group as well as NYC.

This request to force a union of three sets of institutions that have not agreed on their own to serve as co-lead plaintiffs in this case must be denied. Curiously, the State Pension Fund Group correctly notes elsewhere in its memorandum that the courts have rejected efforts to "lump together" unrelated plaintiffs. See State PFG memorandum at 9. Yet it argues nevertheless that it should be "lumped together" with the NYS Pension Fund Group and NYC. But as the State Pension Fund Group stated in its October 8, 1999 memorandum: "lumping such investors together will dilute the class members' control over this case, thereby defeating a central goal of the PSLRA." Id.

Moreover, as the New York State Pension Fund Group pointed out in its Opposition Memorandum, the courts have rejected similar attempts by persons who do not have the largest financial interest to graft themselves to the presumptively most adequate plaintiffs for the sake of diversity or other reasons. See In re Cendant Corp. Litig., 182 F.R.D. 144, 147-48 (D.N.J. 1998); Steiner v. National Auto Credit, Inc., 1998 U.S. Dist. LEXIS 21804 at *15 (N.D. Ohio July 16, 1998); Gluck v. Cellstar Corp., 976 F. Supp. at 550.

The NYS Pension Fund Group's losses far outweigh those of any other group, and it is, therefore, the presumptive most adequate plaintiff. Not a single competing movant has demonstrated that the NYS Pension Fund Group is inadequate or does not otherwise meet the requirements of Rule 23 to serve as lead plaintiff. In this case, where a group of institutional investors clearly meets the statutory criteria for appointment as lead plaintiff, there is no reason for the Court to add other investors as additional lead plaintiffs. The State Pension Fund Group's request to be added as a co-lead plaintiff therefore should be rejected.

For the reasons set forth herein and in the other papers submitted in support of its motion, the New York State Pension Fund Group respectfully requests that the Court grant its motion for appointment as Lead Plaintiff and approve its selection of lead counsel.

¹ In its papers previously filed with the Court, the NYS Pension Fund Group identified $253 million in losses. As explained at pp. 9-10 below, this slight downward revision reflects an error in classifying certain shares. The revision in no way changes the order of magnitude of the NYS Pension Fund Group's interest in the litigation vis-a-vis the other movants.

² The Merger refers to the merger of HBOC and McKesson Corporation ("McKesson") that was effected on January 12, 1999.

³ This Other Movant, Stephen G. Sullivan ("Sullivan"), also asserts that he should represent a subclass of persons who exchanged their HBOC shares in the Merger. As set forth in the NYS Pension Fund Group's Opposition Memorandum dated October 8, 1999 ("Opposition Memorandum") at p. 23, not only is Sullivan's motion without merit but it is untimely. Sullivan has not filed any papers in opposition to the motion of the NYS Pension Fund Group.

⁴ The lead plaintiff provisions of the Securities Act and the Exchange Act are identical. Therefore, for the sake of simplicity we refer only to the Exchange Act provisions.

⁵ The court also approved SWIB's selection of Bernstein Litowitz Berger & Grossmann LLP as Lead Counsel in charge of the entire action.

⁶ As discussed in the NYS Pension Fund Group's Opposition Memorandum, Other Movant Sullivan similarly originally moved for appointment as lead plaintiff for the entire litigation and then filed an amended motion to be appointed lead plaintiff for the "McKesson Exchanger Class" and the HBOC Exchanger Class." Compare Sullivan Notice of Motion and Memorandum dated June 28, 1999 to his Amended Notice of Motion dated September 21, 1999.

⁷ Apparently recognizing the inconsistency of its positions, the McKesson HBOC Lead Plaintiff Group's Opposition Memorandum disingenuously makes no mention of its "altered state."

⁸ Additionally, this attempt to play both sides of the fence highlights the transparency of the arguments proffered by the other movants in support of "conflicts."

⁹ Similarly, while it is the NYS Pension Fund Group's position that Sullivan no longer has a motion properly before the Court, see NYS State Pension Fund Opposition Memorandum at 23, if the Court were to entertain his untimely motion, Mr. Sullivan who now seeks to represent the "McKesson Exchanger Class" composed of all persons and entities, except defendants, who acquired shares of McKesson HBOC in connection with the Merger and the "HBOC Exchanger Class" comprised of all persons and entities, except defendants, who acquired shares of HBOC common stock in exchange for the common stock of Servis, IMNET, and Access in connection with mergers consummated on September 29, 1998, October 30, 1998, and December 10, 1998 respectively, only has claimed losses of $1,112,524 relating to these claims whereas the NYS Pension Fund Group has losses in excess of $150 million.

¹⁰ It should be noted that even if the McKesson HBOC Group were correct in its recalculations, which it is not, the NYS Pension Fund Group would still have the largest loss of any movant and still should be appointed Lead Plaintiff.

¹¹ Section 11(e) of the Securities Act, 15 U.S.C. § 77k(e), provides that damages under Section 11 are the difference between the amount paid for the security...and (1) the greater of the value of the security as of the time such suit was brought or the amount at which it was sold after suit was brought but before judgment, or (2) the market price at which the security was sold before suit.

¹² Annexed as Exhibit 1 to the Declaration of Leonard Barrack in Support of Motion to Appoint the New York State Pension Fund Group as Lead Plaintiff Pursuant to §21D(a)(3)(B) of the Securities Exchange Act of 1934 and §27(a)(3)(B) of the Securities Act of 1933 and to Approve Lead Plaintiff's Choice of Counsel.

¹³ The NYS Pension Fund Group regrets this error, which was the result of incorrect information.

¹⁴ The assertion by the McKesson Proxy Group in its Opposition Memorandum, pp.5-6, of "conflict" between §14(a) claims and other claims, including §10(b), rings hollow. The complaint filed on behalf of one of the proposed lead plaintiffs in this group asserts both of these causes of action, see Hansen Decl. Ex. L, and as noted in the NYS Pension Fund Group's Opposition Memorandum at 21, this group, in arguing for consolidation of all the related actions, which include all the claims at issue, acknowledges, among other things, that all of the actions involve common questions of law and fact, allege the same or similar claims under the federal securities laws on behalf of the same or similar classes, and "will undoubtedly involve identical discovery."

¹⁵ A detailed discussion of the decision in In re Reliance Acceptance Group which demonstrates the baselessness of these Other Movants' contention appears at pp. 19-20 of the NYS Pension Fund Group's Opposition Memorandum.

¹⁶ As discussed above, a review of the supporting information regarding the CRF prompted by the Torkelsen Affidavit revealed that, in fact, there had been an error and that 597,900 shares,which were believed to be purchases of McKesson HBOC in the open market, in fact were "old" McKesson shares that were converted on the Merger. These shares were owned on the record date and on January 12, 1999. Of these shares, 168,900 were still held as of April 28, 1999. The shares reflect the CRF's financial interest in the § 14(a) claim. When added to the 235,500 §14 (a) shares held by the FSBA, see Hansen Decl. Exhibit G, the NYS Pension Fund Group represents 404,400 § 14 (a) shares.

¹⁷ Indeed, the NYS Pension Fund Group exchanged more Access shares than NYC Group as well. As set forth in ¶ 10 of the Affidavit of Alan Miller submitted in support of the NYC Group's motion, the NYC Group exchanged 73,796 shares of Access.

¹⁸ The last remaining Other Movant, James T. Flanigan, did not file any papers in opposition to the motion of the NYS Pension Fund Group.

Source: File to epost from Bernstein Litowitz Berger & Grossmann LLP