LIONEL Z. GLANCY #134180
PETER A. BINKOW #173848
LAW OFFICES OF LIONEL Z. GLANCY
1801 Avenue of the Stars
Suite 308
Los Angeles, California 90067
Phone: (310) 201-9150
Fax: (310) 201-9160
IRA M. PRESS
DANIEL HUME
KIRBY MCINERNEY & SQUIRE, LLP
830 Third Avenue, 10th Floor
New York, New York 10022
Phone: (212) 371-6600
Fax: (212) 751-2540
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
DAVID TAKEDA, individually and on ) Case No. 99 CV 00697 MMM
behalf of all others similarly )
situated, )
) CLASS ACTION COMPLAINT
Plaintiff, ) [filed Jan. 22, 1999]
)
v. ) JURY TRIAL DEMANDED
)
TURBODYNE TECHNOLOGIES, INC. and )
EDWARD HALIMI, )
)
Defendants. )
___________________________________)
Plaintiff, by his attorneys, for his Class Action
Complaint, alleges the following upon personal knowledge as to
himself and his own acts, and upon information and belief based
upon the investigation of plaintiff's attorneys as to all other
matters. The investigation includes the thorough review and
analysis of public statements, publicly-filed documents of
Turbodyne Technologies, Inc. ("Turbodyne" or the "Company"),
press releases, news articles and the review and analysis of
accounting rules and related literature. Plaintiff believes
that further substantial evidentiary support will exist for the
allegations set forth below after a reasonable opportunity for
discovery.
SUMMARY OF ACTION
1. This is a securities class action on behalf
of public investors who purchased the common stock of Turbodyne
during the period from March 1, 1997 through January 22, 1999
(the "Class Period"). Plaintiff complains of a fraudulent
scheme and deceptive course of business that injured purchasers
of Turbodyne stock during the Class Period.
2. Turbodyne is a Delaware corporation with its
principal place of business in Woodland Hills, California.
Turbodyne and its subsidiaries design, develop, manufacture and
market proprietary products that enhance performance and reduce
emissions of internal combustion engines and manufacture
aluminum cast automotive products, including engine components
and aftermarket specialty wheels.
3. Turbodyne was, until July 19, 1997, listed on
the Vancouver Stock Exchange. The Company commenced listing on
the NASDAQ Small Capital Exchange on March 24, 1997.
4. Throughout the time Turbodyne traded on both the
Vancouver exchange and NASDAQ, defendants issued a series of
public statements portraying Turbodyne as a booming company
which was experiencing and would continue to experience rapidly
rising sales and profits on its core products and new product
offerings. This case involves defendants' material omissions
and the dissemination of materially false and misleading
statements regarding the demand for and market acceptance of
Turbodyne's products, the strength of its technologies and its
competitiveness and the trends in its business, all of which
drove Turbodyne's stock price to a Class Period high of
approximately $16.00 per share.
5. These public statements represented, among other
things, that Turbodyne's "breakthrough" technology was
protected by more than 30 granted and pending patents in the
United States and internationally, that the United States
Environmental Protection Agency had certified certain of
Turbodyne's products for special urban bus retrofitting
projects,that the United Nations endorsed the Company's
products and that a United Nations representative accompanied
defendant Halimi to London and Moscow to assist in product
sales negotiations.
6. The false and misleading nature of defendants'
public statements remained undisclosed throughout the Class
Period, until NASDAQ announced on January 22, 1999, the last
day of the Class Period, that NASDAQ was joining EASDAQ in
halting trading in Turbodyne stock until at least February 3,
1999, while the EASDAQ Market Authority initiates disciplinary
proceedings against Turbodyne for allegedly issuing false or
misleading price sensitive information to the investing public.
JURISDICTION AND VENUE
7. This Court has jurisdiction over this
action pursuant to Section 27 of the Securities Exchange Act of
1934 (the "1934 Act"), 28 U.S.C. §§ 1331 and 1337. The claims
asserted herein arise under, Sections 10(b) and 20(a) of the
1934 Act, 15 U.S.C. §§78j(b), 78(n), and 78t(a), and Rule 10b-
5, 17 C.F.R. §240.10b-5, promulgated thereunder by the SEC.
8. Venue is proper in this District pursuant
to Section 22 of the 1933 Act, Section 27 of the 1934 Act, 15
U.S.C. §78aa, and 28 U.S.C. §1391(b). Defendants reside in
this District. Many of the acts giving rise to the violations
complained of, including the dissemination of false and
misleading public statements and financial information,
occurred in this District.
9. In connection with the wrongs alleged
herein, defendants used the instrumentalities of interstate
commerce, including the United States mails, interstate wire
and telephone facilities, and the facilities of the national
securities markets.
THE PARTIES
10. Plaintiff David Takeda purchased
shares of Turbodyne common stock during the Class Period and
was damaged thereby, as set forth in the Certification filed
with this action.
11. Defendant Turbodyne is a Delaware
corporation with its principal place of business in Woodland
Hills, California.
12. Defendant Edward Halimi ("Halimi") is
and was at all relevant times President, Chief Executive
Officer and Director of Turbodyne.
13. By virtue of his position as officer and/or
director of the Company, defendant Halimi had the authority and
ability to and, in fact, controlled the contents of the
Company's annual and quarterly reports filed with the SEC, and
press releases. Further, the actions of defendant Halimi
during the Class Period caused the material misstatement of the
Company's financial condition and results as alleged herein.
Defendant Halimi was aware of the contents of the Company's
publicly disseminated reports and press releases alleged herein
to be misleading prior to their issuance and had the ability
and opportunity to prevent their issuance or cause them to be
corrected, but failed to do so.
CLASS ACTION ALLEGATIONS
14. Plaintiff brings this action as a
class action pursuant to Rules 23(a) and 23(b)(3) of the
Federal Rules of Civil Procedure, individually and on behalf of
all other persons or entities who purchased or acquired
Turbodyne during the Class Period and were damaged thereby,
excluding the defendants herein, their affiliates and any
officers or directors of Turbodyne or its affiliates, and any
members of immediate families and their heirs, successors and
assigns (the "Class").
15. The Class is so numerous that joinder
of all the members of the Class is impracticable. Plaintiff
believes there are hundreds of record holders of the Company's
common stock located throughout the United States.
16. Plaintiff's claims are typical of the
claims of absent Class members. Members of the Class have
sustained damages arising out of defendants' wrongful conduct
in violation of the federal securities laws in the same way as
the plaintiff sustained damages from the unlawful conduct.
17. Plaintiff will fairly and adequately
protect the interests of the Class. He has retained counsel
competent and experienced in class and securities litigation.
18. A class action is superior to other
available methods for the fair and efficient adjudication of
the controversy. The Class is numerous and geographically
dispersed. It would be impracticable for each member of the
Class to bring a separate action. The individual damages of
any member of the Class may be relatively small when measured
against the potential costs of bringing this action, and thus
make the expense and burden of this litigation unjustifiable
for individual actions. In this class action, the Court can
determine the rights of all members of the Class with judicial
economy. Plaintiff does not anticipate any difficulty in the
management of this suit as a class action.
19. Common questions of law and fact exist
as to all members of the Class and predominate over any
questions affecting solely individual members of the Class.
These questions include, but are not limited to, the following:
a. whether defendants' conduct as alleged
herein violated the federal securities laws;
b. whether the SEC filings, press
releases and statements disseminated to the investing public
during the Class Period misrepresented Turbodyne's financial
condition and results;
c. whether defendants acted knowingly or
recklessly in omitting and/or misrepresenting material facts;
d. whether the market price of Turbodyne
common stock during the Class Period was artificially inflated;
and
e. whether the members of the Class have
been damaged, and if so, what is the proper measure of damages.
20. The statutory safe harbor provided for
forward-looking statements under certain circumstances does not
apply to any of the allegedly false statements pleaded in this
Complaint. To the extent that the Complaint alleges that any
forward-looking statements were materially misleading,
defendants made no meaningful cautionary statements identifying
important factors that could cause actual results to differ
materially from those in the purportedly forward-looking
statements and, in fact, defendants had no reasonable basis for
their forward looking statements.
FACTUAL BACKGROUND
21. Turbodyne is a Delaware corporation with its
principal place of business in Woodland Hills, California.
Turbodyne and its subsidiaries design, develop, manufacture and
market proprietary products that enhance performance and reduce
emissions of internal combustion engines and manufacture
aluminum cast automotive products, including engine components
and aftermarket specialty wheels.
22. Turbodyne was, until July 19, 1997, listed on
the Vancouver Stock Exchange. The Company commenced listing on
the NASDAQ Small Capital Exchange on March 24, 1997.
23. Throughout the time Turbodyne traded on both the
Vancouver exchange and NASDAQ, defendants issued a series of
public statements portraying Turbodyne as a booming company
which was experiencing and would continue to experience rapidly
rising sales and profits on its core products and new product
offerings. This case involves defendants' material omissions
and the dissemination of materially false and misleading
statements regarding the demand for and market acceptance of
Turbodyne's products, the strength of its technologies and its
competitiveness and the trends in its business, all of which
drove Turbodyne's stock price to a Class Period high of
approximately $16.00 per share.
24. These public statements represented, among other
things, that Turbodyne's "breakthrough" technology was
protected by more than 30 granted and pending patents in the
United States and internationally, that the United States
Environmental Protection Agency had certified certain of
Turbodyne's products for special urban bus retrofitting
projects,that the United Nations endorsed the Company's
products and that a United Nations representative accompanied
defendant Halimi to London and Moscow to assist in sales
negotiations.
25. The false and misleading nature of defendants'
public statements remained undisclosed throughout the Class
Period, until NASDAQ announced on January 22, 1999, the last
day of the Class Period, that NASDAQ was joining EASDAQ in
halting trading in Turbodyne stock until at least February 3,
1999, while the EASDAQ Market Authority initiates disciplinary
proceedings against Turbodyne for allegedly issuing false or
misleading price sensitive information to the investing public.
Turbodyne's Guidance To Securities Analysts And Use Of
Them As A Conduit To Provide False Information To The
Securities Markets
26. As described below, among other wrongful
conduct, defendants used communications with securities
analysts to promote the Company and to artificially inflate the
price of Turbodyne stock during the Class Period.
27. At all relevant times, Turbodyne was followed by
securities analysts employed by brokerage houses which issue
reports and make recommendations concerning Turbodyne's common
stock to their clients.
28. In writing their reports, analysts relied in
substantial part upon information provided by the Company,
public statements and reports of the Company, information
provided to them privately by defendants and assurances by
defendants and the Company that information in the analysts'
reports did not materially vary from the Company's internal
knowledge of its operations and prospects.
29. Defendants used their communications with
analysts to assure them that their analysis and estimates of
Turbodyne's business were accurate and repeatedly advised
securities analysts that the Company was on track to achieve
strong earnings and earnings growth.
30. Prior to and during the Class Period, it was the
Company's practice to have its top officers and key members of
its management team communicate regularly with securities
analysts on a regular basis to discuss, among other things, the
Company's operating results and anticipated revenues and to
provide detailed "guidance" to these analysts with respect to
the Company's business and anticipated revenues and earnings.
These communications included, but were not limited to,
conference calls, meetings, and analyst briefings where the
defendants discussed relevant aspects of the Company's
operations and financial prospects. Additionally, as described
below, Turbodyne representatives -- including defendant Halimi
-- also attended "conferences" sponsored by different
organizations throughout the Class Period and sponsored
"conference calls" with securities analysts and institutional
investors in connection with releases of earnings announcements
and other major corporate events during which they promoted the
Company's stock by disseminating materially misleading
information about the Company.
31. Defendants knew that by participating in these
regular and periodic direct communications with analysts, the
Company could disseminate information to the investment
community and that investors and the market would rely and act
upon such information (i.e., make purchases of the Company's
securities). Defendants had these communications with analysts
in order to cause or encourage them to issue favorable reports
concerning Turbodyne -- which the analysts did -- and
defendants used these communications to falsely present the
operations and allegedly successful prospects of Turbodyne to
the marketplace in order to artificially inflate the market
price of Turbodyne's common stock. Despite their duty to do
so, defendants failed to correct these statements (of which
they were the source or which they caused or facilitated)
during the Class Period.
32. The investment community and, in turn,
investors, relied and acted upon the information communicated
in these written reports that repeatedly recommended that
investors purchase Turbodyne common stock. Defendants
manipulated and inflated the market price of Turbodyne stock by
falsely presenting to analysts, through regular meetings and
during both telephonic and written communications, the
prospects of the Company and by failing to disclose the true
adverse information about the Company that was known only to
them.
33. During the Class Period, defendant Halimi
occupied a position that made him privy to non-public
information concerning Turbodyne. Because of this access,
defendant Halimi knew that the adverse facts specified herein
were being concealed and that the public statements being made
by the Company were false.
34. The market for Turbodyne's activities was open,
well-developed and efficient at all relevant times. As a
result of these materially false and misleading statements and
failures to disclose the full truth about Turbodyne and its
business, earnings momentum and future prospects, Turbodyne
common stock traded at artificially inflated prices during the
entire Class Period, reaching a Class Period high of
approximately $16.00 per share, until the time the adverse
information described above was finally provided to and
digested by the securities markets. Plaintiff and other
members of the Class purchased or otherwise acquired Turbodyne
securities relying upon the integrity of the market price of
Turbodyne stock and market information relating to Turbodyne,
or in the alternative, upon defendants' false and misleading
statements, and in ignorance of the adverse, undisclosed
information known to defendants, and have been damaged thereby.
Defendants' Knowing or Reckless Disregard of the
False and Misleading Financial Statements
35. Defendants' false representations and
material omissions were made with scienter in that: defendants
knew or recklessly disregarded that the public documents and
statements issued or disseminated by Turbodyne were materially
false and misleading as described above; knew or were reckless
in not knowing that the false financial results would be issued
or disseminated to the investing public; and knowingly and
substantially participated in the preparation and/or issuance
or dissemination of such statements or documents.
Inapplicability of Statutory Safe Harbor
36. The statutory safe harbor provided for forward-
looking statements under certain circumstances does not apply
to any of the allegedly false statements pleaded in this
complaint. Many of the statements pleaded herein were not
specifically identified as "forward-looking statements" when
made. To the extent there were any forward looking statements,
there were no meaningful cautionary statements identifying the
important then-present factors that could and did cause actual
results to differ materially from those in the purportedly
forward-looking statements. Alternatively, to the extent that
the statutory safe harbor does apply to any forward-looking
statements pleaded herein, defendants are liable for those
false forward-looking statements because at the time each of
those forward-looking statements was made, the particular
speaker knew that the particular forward-looking statement was
false or misleading, and/or the forward-looking statement was
authorized and/or approved by an executive officer of Turbodyne
who knew that those statements were false when made.
37. Any warnings contained in the press releases and
the financial statements quoted herein were generic statements
of the kind of risks that affect any high-tech computer company
and misleadingly contained no specific factual disclosure of
any of the looming problems with Turbodyne which placed
Turbodyne's profitability and growth at risk.
COUNT I
VIOLATIONS OF SECTION 10(b) OF THE EXCHANGE ACT
AND RULE 10b-5 PROMULGATED THEREUNDER
AGAINST ALL DEFENDANTS
38. Plaintiff repeats and realleges each
and every allegation contained in the foregoing paragraphs as
if fully set forth herein except for those allegations alleging
fraud.
39. At all relevant times, defendants,
individually and in concert, directly and indirectly, by the
use and means of instrumentalities of interstate commerce
and/or of the mails, engaged and participated in a continuous
course of conduct whereby they knowingly and/or recklessly made
and/or failed to correct public representations which were or
had become materially false and misleading regarding
Turbodyne's financial results and operations. This continuous
course of conduct resulted in the defendants causing Turbodyne
to publish public statements which they knew, or were reckless
in not knowing, were materially false and misleading, in order
to artificially inflate the market price of Turbodyne stock and
which operated as a fraud and deceit upon the members of the
Class.
40. Defendant Turbodyne is a direct
participant in the wrongs complained of herein. Defendant
Halimi is liable as a direct participant in and as a
controlling person of the wrongs complained of herein. By
virtue of his position of control and authority as officer and
director of Turbodyne, defendant Halimi was able to and did,
directly or indirectly, control the content of the aforesaid
statements relating to the Company, and/or the failure to
correct those statements in timely fashion once he knew or
became reckless in not knowing that those statements were no
longer true or accurate. Defendant Halimi caused or controlled
the preparation and/or issuance of public statements and the
failure to correct such public statements containing
misstatements and omissions of material facts as alleged
herein.
41. Defendant Halimi had actual knowledge
of the facts making the material statements false and
misleading, or acted with reckless disregard for the truth in
that he failed to ascertain and to disclose such facts, even
though same were available to him.
42. In ignorance of the adverse facts
concerning Turbodyne's business operations and earnings, and in
reliance on the integrity of the market, Plaintiff and members
of the Class acquired Turbodyne common stock at artificially
inflated prices and were damaged thereby.
43. Had plaintiff and the Class known of
the materially adverse information not disclosed by the
defendants, they would not have purchased Turbodyne common
stock at all or not at the inflated prices paid.
44. By virtue of the foregoing, defendants
have violated Section 10(b) of the 1934 Act and Rule 10b-5
promulgated thereunder.
COUNT II
VIOLATION OF SECTION 20(a) OF THE EXCHANGE
ACT AGAINST DEFENDANT HALIMI
45. Plaintiff repeats and realleges each
and every allegation contained in the foregoing paragraphs as
if fully set forth herein except for those alleging fraud.
46. This count is asserted against
defendant Halimi and is based upon Section 20(a) of the 1934
Act.
47. Defendant Halimi, by virtue of his
office, directorship, stock ownership and specific acts was, at
the time of the wrongs alleged herein and as set forth in Count
I, a controlling persons of Turbodyne within the meaning of
Section 20(a) of the 1934 Act. Defendant Halimi had the power
and influence and exercised the same to cause Turbodyne to
engage in the illegal conduct and practices complained of
herein by causing the Company to disseminate the false and
misleading information referred to above.
48. Defendant Halimi's position made him
privy to and provided him with actual knowledge of the material
facts concealed from plaintiff and the Class.
49. By virtue of the conduct alleged in
Count I, defendant Halimi are liable for the aforesaid wrongful
conduct and are liable to plaintiff and the Class for damages
suffered.
PRAYER FOR RELIEF
WHEREFORE, plaintiff demands judgment:
1. Determining that the instant action is a proper
class action maintainable under Rule 23 of the Federal Rules of
Civil Procedure;
2. Awarding compensatory damages and/or rescission
as appropriate against defendants, in favor of plaintiff and all
members of the Class for damages sustained as a result of
defendants' wrongdoing;
3. Awarding plaintiff and the Class the costs and
disbursements of this suit, including reasonable attorneys',
accountants' and experts' fees; and
4. Awarding such other and further relief as the
Court may deem just and proper.
Dated: January 22, 1999 LAW OFFICES OF LIONEL Z. GLANCY
By____________________________
Lionel Z. Glancy, Esquire
Peter A. Binkow, Esquire
1801 Avenue of the Stars
Suite 308
Los Angeles, California 90067
Phone: (310) 201-9150
Fax: (310) 201-9157
KIRBY MCINERNEY & SQUIRE, LLP
IRA M. PRESS
DANIEL HUME
830 Third Avenue, 10th Floor
New York, New York 10022
Phone: (212) 371-6600
Fax: (212) 751-2540
JURY DEMAND
Plaintiff hereby demands trial by jury.
Dated: January 22, 1999 LAW OFFICES OF LIONEL Z. GLANCY
By____________________________
Lionel Z. Glancy, Esquire
Peter A. Binkow, Esquire
1801 Avenue of the Stars
Suite 308
Los Angeles, California 90067
Phone: (310) 201-9150
Fax: (310) 201-9157
KIRBY MCINERNEY & SQUIRE, LLP
IRA M. PRESS
DANIEL HUME
830 Third Avenue, 10th Floor
New York, New York 10022
Phone: (212) 371-6600
Fax: (212) 751-2540
Source: Emailed file from Law Offices of Lionel Z. Glancy