3. This action arises under Sections 10(b) and 20(a) of the Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder (17 C.F.R. § 240.10b-5).

4. Venue is proper in this District pursuant to Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. §1391(b) and (c). Substantial acts in furtherance of the alleged fraud and/or its effects have occurred within this District and Billing Concepts maintains its principal executive offices in this District.

5. In connection with the acts and omissions alleged in this complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate telephone communications, and the facilities of the national securities markets.

7. Defendant Billing Concepts is incorporated under the laws of the State of Delaware with its principal place of business at 7411 John Smith Drive, Suite 200, San Antonio, Texas. Billing Concepts is a leading provider for the telecommunications industry of custom convergent billing solutions and professional services as well as clearing house of information management services.

8. (a) The individual defendants, at all times relevant to this action, served in the capacities listed below and received substantial compensation:

 

Name	Position
Parris H. Holmes, Jr.	Chief Executive Officer and Chairman of the Board
Alan W. Saltzman	President and Director
Paul L. Gehri	Vice-President
Andie W. Long	Vice-President
James E. Sowell	Director
Thomas G. Loeffler	Director

9. It is appropriate to treat the Individual Defendants as a group for pleading purposes and to presume that the false, misleading and incomplete information conveyed in the Company's public filings, press releases and other publications as alleged herein are the collective actions of the narrowly defined group of defendants identified above. Each of the above officers and/or directors of Billing Concepts, by virtue of their high-level positions with the Company, directly participated in the management of the Company, was directly involved in the day-to-day operations of the Company at the highest levels and was privy to confidential proprietary information concerning the Company and its business, operations, financial statements, business practices, finances, and financial condition, as alleged herein. Said defendants were involved in drafting, producing, reviewing and/or disseminating the false and misleading statements and information alleged herein, were aware (or recklessly disregarded) that the false and misleading statements were being issued regarding the Company and approved or ratified these statements, in violation of the federal securities laws.

10. As officers and/or directors and controlling persons of a publicly-held company whose common stock was, and is, registered with the SEC pursuant to the Exchange Act, traded on the NASDAQ National Market System, and governed by the provisions of the federal securities laws, the Individual Defendants each had a duty to disseminate promptly accurate and truthful information with respect to the Company's financial condition and performance, operations, business, business practices, management, earnings and present and future business prospects, and to correct any previously-issued statements that had become materially misleading or untrue, so that the market price of the Company's publicly-traded securities would be based upon truthful and accurate information. The Individual Defendants' misrepresentations and omissions during the Class Period violated these specific requirements and obligations.

11. The Individual Defendants participated in the drafting, preparation, and/or approval of the various public and shareholder and investor reports and other communications complained of herein and were aware of or recklessly disregarded the misstatements contained therein and omissions therefrom, and were aware of their materially false and misleading nature. Because of their Board membership and/or executive and managerial positions with Billing Concepts, each of the Individual Defendants had access to the adverse undisclosed information about Billing Concepts business practices, prospects and financial condition and performance as particularized herein and knew (or recklessly disregarded) that these adverse facts rendered the positive representations made by or about Billing Concepts and its business issued or adopted by the Company materially false and misleading.

12. The Individual Defendants, because of their positions of control and authority as officers and/or directors of the Company, were able to and did control the content of the various SEC filings, press releases and other public statements pertaining to the Company during the Class Period. Each Individual Defendant was provided with copies of the documents alleged herein to be misleading prior to or shortly after their issuance and/or had the ability and/or opportunity to prevent their issuance or cause them to be corrected. Accordingly, each of the Individual Defendants is responsible for the accuracy of the public reports and releases detailed herein and is therefore primarily liable for the representations contained therein.

13. Each of the defendants is liable as a participant in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of Billing Concepts common stock, by disseminating materially false and misleading statements and/or concealing material adverse facts. The scheme: (i) deceived the investing public regarding Billing Concepts business, its finances and the intrinsic value of Billing Concepts common stock; and (ii) caused plaintiff and other members of the Class to purchase Billing Concepts common stock at artificially inflated prices.

15. The members of the Class are so numerous that joinder of all members is impracticable. While the exact number of Class members is unknown to plaintiff at this time and can only be ascertained through appropriate discovery, plaintiff believes that there are thousands of members of the Class located throughout the United States. As of June 30, 1998, there were reportedly more than 33.8 million shares of Billing Concepts common stock outstanding. Throughout the Class Period, Billing Concepts common stock was actively traded on the NASDAQ National Market System. Record owners and other members of the Class may be identified from records maintained by Billing Concepts and/or its transfer agents and may be notified of the pendency of this action by mail, using a form of notice similar to that customarily used in securities class actions.

16. Plaintiff's claims are typical of the claims of the other members of the Class as all members of the Class were similarly affected by defendants' wrongful conduct in violation of federal law and state law that is complained of herein.

17. Plaintiff will fairly and adequately protect the interests of the members of the Class and have retained counsel competent and experienced in class and securities litigation.

18. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are:

i) whether the federal securities laws were violated by defendants' acts and omissions as alleged herein;

ii) whether defendants participated in and pursued the common course of conduct complained of herein;

iii) whether documents, press releases, and other statements disseminated to the investing public and the Company's shareholders during the Class Period misrepresented material facts about the business, finances, financial condition and prospects of Billing Concepts;

iv) whether statements made by defendants to the investing public during the Class Period misrepresented and/or omitted to disclose material facts about the business, finances, value, performance and prospects of Billing Concepts;

v) whether the market price of Billing Concepts common stock during the Class Period was artificially inflated due to the material misrepresentations and failures to correct the material misrepresentations complained of herein; and

vi) to what extent the members of the Class have sustained damages and the proper measure of damages.

The results of the quarter demonstrate the momentum we are gaining in 1998. The last three months have seen this company add significant management to support the structure of the company we are building to be a major player in this market. Our core LEC Billing business billed 110 million call records in the month of December, a 47% increase over December a year ago. We continue to increase our sales and technical staff in Billing Concepts Systems. We are encouraged with the acceptance our Modular Business Applications ("MBA") platform is receiving in the marketplace, and it has also been chosen to replace a number of billing systems currently in operation at a major Competitive Local Exchange Carrier. The much anticipated Invoice Ready Billing product ballied through two local exchange carriers in both November and December. We feel that based on the Company's historical trends and how we are positioned for the future, the Company will continue to build momentum throughout the year.

22. On January 30, 1998, Billing Concepts issued a press release over the PR Newswire. Defendant Holmes stated:

We generally do not respond to analyst comments; however, given the level of inquiry from the investment community, I would like to reiterate what I stated on January 20th. The results of the first quarter demonstrate the momentum we are gaining in 1998 and that the Company will continue to build momentum throughout the year. All lines of business are operating as we have indicated in prior releases. This past year, we stated that the zero business would turn up in the fall, and it has in fact done so. In addition, our zero customer base remains strong and is intact. We have no indication of the loss of any customer, and no individual customer accounts for more than 5% of revenues. we also have begun to see some revenues from the Universal Services Fund and are encouraged about the future opportunities this will provide. In summary, we are comfortable with our position in the marketplace and we are confident about our growth potential in 1998 and the future.

The results of the second quarter are in line with our expectations and demonstrate the momentum the Company is gaining in the marketplace. Traditionally, our second quarter has been our most challenging quarter due to seasonality and fewer business days. However, the success we have experienced financially is a confirmation of the growth that our LEC Billing business is experiencing, the strength of our client relationships and the acceptance in the marketplace of our convergent billing platform.

The continued growth in our LEC Billing business is encouraging. As we have mentioned in the past, most of our contracts are long term, encompassing one to three years. This past quarter we signed 23 new accounts and had 17 contract renewals. In addition, the Billing Concepts Systems ("BCS") sales pipeline is strong. During the quarter, we sold two turnkey systems, signed six service bureau agreements and two existing customers have expanded their billing platform with BCS to include the Local Access Billing Module. The professional services division of BCS is proving to be fruitful as well, with several customers expanding their original contracts to include these additional services. Based on the Company's historical trends and our position in the billing arena, we believe that the Company should continue to build momentum.

During the last few months, the Federal Communications Commission, the Bell Operating Companies, other major LECs and the media have brought a great deal of visibility to the "slamming and cramming" issues that have occurred in the long distance industry. Their approach to resolving these issues has been decisive and is healthy for the industry and the consumer. Unfortunately, the various temporary moratoriums that have been established by some of the LECs have affected the ability of certain of our customers to market some of their services. Consequently, the number of call records processed for billing is below earlier expectations for this quarter. We believe that this pressure on revenues will continue through the next quarter, but should return to historical trends thereafter. There is no fundamental change in the LEC billing industry, and these issues have not affected the majority of our customers.

If the quarter continues to develop in this manner, our revenues are expected to be between $38 Million and $40 million, and earnings per share should be between $0.19 and $0.20. These issues may cost the Company up to $0.04 next quarter when compared to analysis' expectations, however, other growth in our business may reduce this shortfall. Long-term, we believe that the LEC billing industry will continue to grow at a 10% to 15% annual rate and that we will capture a significant portion of that growth. In the systems side of our business, Billing Concepts Systems ("BCS") is growing as expected. The sales pipeline remains strong and we are encouraged by the many opportunities that have been brought to the Company because of our convergent billing platform. We also are exploring several opportunities to expand our software offering that would further broaden our footprint in the billing industry.

26. The foregoing statements were all false and misleading because they failed to reveal the negative impact that the actions of the Federal Communications Commission ("FCC") were having on its revenue growth and because, in light of the FCC action on cramming and slamming issues, Billing Concepts growth and business prospects and the defendants representations of them were inaccurate.

The results of the fourth quarter are in line with our expectations expressed in the press release on June 8, 1998. At that time, we discussed the impact that 'slamming' and 'cramming' issues were having on the Local Exchange Carrier ("LEC") billing business and that we needed more time to fully assess any future impact of these issues. Since then, we have played a very active role in assisting certain local telephone companies, the Federal Communications Commission ("FCC") and certain Public Utilities Commissions ("PUCs") in providing the best solution to eliminate these issues from the telecommunications industry. Billing Concepts will continue to adhere to the Best Billing Practices, and we are determined to work with the local telephone companies to reduce the level of consumer complaints. As a proactive measure, we are taking action against certain customers that will include, but is not limited to, the cessation of billing for certain new or existing products. While it is still unclear what monetary impact these actions will have on the LEC billing business in the future, it is clear that there is still much work to do to bring the nature and level of complaints to acceptable levels. Consequently, we believe that growth in the LEC billing business could be minimal in 1999. While there are opportunities outside these parameters, there are too many uncertainties surrounding these opportunities to factor them into any type of forecast.

28. The market for Billing Concepts common stock was open, well-developed and efficient at all relevant times. As a result of these materially false and misleading statements and failures to disclose, Billing Concepts common stock traded at artificially inflated prices during the Class Period until the time the fact that Billing Concepts had engaged in the wrongful course of conduct described herein was finally communicated to an understood by the securities markets. Plaintiff and other members of the Class purchased or otherwise acquired Billing Concepts common stock relying upon the integrity of the market price of Billing Concepts stock and market information relating to Billing Concepts and have been damaged thereby.

29. During the Class Period, defendants materially misled the investing public, thereby inflating the price of Billing Concepts stock, by publicly issuing false and misleading statements and omitting to disclose material facts necessary to make defendants' statements, as set forth herein, not false and misleading. Said statements and omissions were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about the Company, its business, finances and operations, including, inter alia:

(a) that the Company's growth rates were no longer sustainable due to the FCC crackdown on "slamming" and "cramming" practices;

(b) that the Company's past growth was, in large part, derived from revenues gained by certain of the Company's customers that engaged in unlawful "slamming" and "cramming;" and

(c) that the Company's estimates, projections and opinions as to its expected revenues, earnings, income and value of its stock were lacking in reasonable basis at all relevant times.

(a) that the Company's growth rates were no longer sustainable due to the FCC crackdown on "slamming" and "cramming" practices;

(b) that the Company's past growth was, in large part, derived from revenues gained by certain of the Company's customers that engaged in unlawful "slamming" and "cramming;" and

(c) that the Company's estimates, projections and opinions as to its expected revenues, earnings, income and value of its stock were lacking in reasonable basis at all relevant times.

(a) Billing Concepts' common stock met the requirements for listing, and was listed and actively traded, on the NASDAQ National Market System, a highly efficient market;

(b) As a regulated issuer, Billing Concepts filed periodic public reports with the SEC and the NASD;

(c) Billing Concepts' stock was followed by securities analysts employed by major brokerage firms who wrote reports which were distributed to the sales force and certain customers of their respective brokerage firms. Each of these reports was publicly available and entered the public marketplace. Among the securities firms that followed the Company during the Class Period were: Lehman Brothers and J.C. Bradford.

(d) Billing Concepts regularly issued press releases which were carried by national news wires. Each of these releases was publicly available and entered the public marketplace.

36. Defendants were motivated to conceal the true state of affairs at the Company in order to permit Billing Concepts insiders to profit from insider trading, as identified below.

37. The Individual Defendants engaged in such a scheme to inflate the price of Billing Concepts common stock in order to: (i) protect and enhance their executive positions and the substantial compensation and prestige they obtained thereby; (ii) enhance the value of their personal Billing Concepts securities; and (iii) permit Billing Concepts insiders to engage in profitable insider sales.

38. Moreover, defendants' insider selling is highly probative of defendants' scienter and is part of defendants' scheme, artifice to defraud or acts, practices or course of business in violation of Section 10(b) and Rule 10b-5. As set forth above, while defendants were issuing false favorable statements about the Company's business and concealing or obscuring negative information, the Individual Defendants who had access to confidential information and were aware of the truth about the Company and its operations, were benefiting from the illegal course of business or course of conduct described in this complaint by selling the Company's common stock at artificially inflated prices without disclosing the material adverse facts about the Company to which they were privy. Such sales were unusual in their amount and in their timing. The following table shows the insider selling of certain of the Individual Defendants during the Class Period:

                                       # OF      % OF
NAME               DATE               SHARES   HOLDINGS    PRICE     PROCEEDS

Parris Holmes      2/18/98-2/27/98    40,000              $26.71   $1,068,400
  CEO              5/12/98-5/14/98   120,000      60%      22.46    2,695,200

Audie Long         2/24/98-2/25/98    60,000     100%      28.38    1,702,800
  Vice-President

Alan Saltzman      5/12/98            20,000       9.6%    23.98      479,600
  President

Paul Gehri         2/23/98            20,000               28.34      566,800
  Vice-President   5/18/98             3,400      78%      24.88       84,592

James Sowell       2/23/98            20,000     100%      28.77      574,200
  Director

Thomas Loeffler    2/23/98            60,000     100%      27.25    1,635,000
  Director

     TOTAL                           343,400                       $8,806,592

41. During the Class Period, defendants, and each of them, carried out a plan, scheme and course of conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and other Class members, as alleged herein; (ii) artificially inflate and maintain the market price of Billing Concepts common stock; and (iii) cause plaintiff and other members of the Class to purchase Billing Concepts common stock at artificially inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them, took the actions set forth herein.

42. Defendants (a) employed devices, schemes, and artifices to defraud; (b) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and (c) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon the purchasers of the Company's common stock in an effort to maintain artificially high market prices for Billing Concepts common stock in violation of Section 10(b) of the Exchange Act and Rule 10b-5. All defendants are sued as primary participants in the wrongful and illegal conduct charged herein. The Individual Defendants also are sued as controlling persons of Billing Concepts, as alleged below.

43. In addition to the duties of full disclosure imposed on defendants as a result of their making of affirmative statements and reports, or participation in the making of affirmative statements and reports to the investing public, the Individual Defendants had a duty to promptly disseminate truthful information that would be material to investors in compliance with the integrated disclosure provisions of the SEC as embodied in SEC Regulation S-X (17 C.F.R. § 210.01 et seq.) and S-K (17 C.F.R. § 229.10 et seq.) and other SEC regulations, including accurate and truthful information with respect to the Company's operations and performance so that the market prices of the Company's publicly traded securities would be based on truthful, complete and accurate information.

44. Billing Concepts and the Individual Defendants, individually and in concert, directly and indirectly, by the use of means of instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuous course of conduct to conceal adverse material information about the business, finances, financial condition, performance, operations, value and future prospects of Billing Concepts as specified herein. Billing Concepts and the Individual Defendants employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information and engaged in acts, practices, and a course of conduct as alleged herein in an effort to assure investors of Billing Concepts value and performance and continued substantial growth, which included the making of, or the participation in the making of, untrue statements of material facts and omitting to state material facts necessary in order to make the statements made about Billing Concepts and its business, finances, operations and future prospects in the light of the circumstances under which they were made, not misleading, as set forth more particularly herein, and engaged in transactions, practices and a course of business which operated as a fraud and deceit upon the purchasers of Billing Concepts common stock during the Class Period.

45. Each of the Individual Defendants' primary liability, and controlling person liability, arises from the following facts: (i) each of the Individual Defendants was a high-level executive and/or director of the Company during the Class Period and was a member of the Company's senior management; (ii) each of the Individual Defendants, by virtue of his responsibilities and activities as a senior executive officer and/or director of the Company, was privy to and participated in the preparation of the Company's financial statements and reporting of the Company's financial condition, operations and performance; (iii) the Individual Defendants enjoyed significant personal contact and familiarity with each other and were advised of and had access to other members of the Company's management team, internal reports, and other data and information about the Company's financial condition and performance at all relevant times; and (iv) the Individual Defendants were aware of the Company's dissemination of information to the investing public which they knew or recklessly disregarded was materially false and misleading.

46. The defendants had actual knowledge of the misrepresentations and omissions of material facts set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain and to disclose such facts, even though such facts were available to them. Such defendants' material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect of concealing Billing Concepts operating condition, finances, value and future business prospects from the investing public and supporting the artificially inflated price of its stock. As demonstrated by defendants' misstatements of the Company's business and finances throughout the Class Period, defendants, if they did not have actual knowledge of the misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by deliberately refraining from taking those steps necessary to discover whether those statements were false or misleading.

47. As a result of the dissemination of the materially false and misleading information and failure to disclose material facts, as set forth above, the market prices of Billing Concepts common stock was artificially inflated at all relevant times. In ignorance of the fact that the market price of Billing Concepts common stock was artificially inflated, and relying directly or indirectly on the false and misleading statements made by defendants, or upon the integrity of the market in which the securities trade, and the truth of any representations made to appropriate agencies as to the investing public, at the times at which any statements were made, and/or on the absence of material adverse information that was known to or recklessly disregarded by defendants but not disclosed in public statements by defendants during the Class Period, Plaintiff and the other members of the Class acquired Billing Concepts securities during the Class Period at artificially high prices and were damaged thereby.

48. At the time of said misrepresentations and omissions, plaintiff and other members of the Class were ignorant of their falsity, and believed them to be true. Had plaintiff and the other members of the Class and the marketplace known of the true financial condition, finances and business prospects of Billing Concepts, which were not disclosed by defendants, plaintiff and other members of the Class would not have purchased or otherwise acquired their Billing Concepts common stock during the Class Period, or, if they had acquired such common stock during the Class Period, they would not have done so at the artificially inflated prices which they paid.

49. By virtue of the foregoing, defendants have violated Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder.

50. As a direct and proximate result of defendants' wrongful conduct, plaintiff and the other members of the Class suffered damages in connection with their purchases of the Company's common stock during the Class Period.

52. The Individual Defendants acted as controlling persons of Billing Concepts within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, participation in and/or awareness of the Company's operations and/or intimate knowledge of the Company's financial condition, finances and its business practices, the Individual Defendants had the power to influence and control and did influence and control, directly or indirectly, the decision-making of the Company, including the content and dissemination of the various statements which plaintiff contends are false and misleading. Each of the Individual Defendants was provided with or had unlimited access to copies of the Company's reports, press releases, public filings and other statements alleged by plaintiff to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected.

53. In particular, each of the Individual Defendants had direct involvement in the day-to-day operations of the Company and, therefore, is presumed to have had the power to control or influence the particular transactions giving rise to the securities violations as alleged herein, and exercised the same.

54. Pursuant to Section 20(a) of the Exchange Act, by virtue of their positions as controlling persons, the Individual Defendants are liable jointly and severally with and to the same extent as the Company for the Company's aforesaid violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. As a direct and proximate result of defendants' wrongful conduct, plaintiff and other members of the Class suffered damages in connection with their purchases of the Company's securities during the Class Period.

WHEREFORE, plaintiff prays for relief and judgment, as follows:

i) Determining that this action is a proper class action, designating plaintiff as Lead Plaintiff and certifying plaintiff as class representative under Rule 23 of the Federal Rules of Civil Procedure and their counsel as Lead Counsel;

ii) Awarding compensatory damages in favor of plaintiff and the other Class members against all defendants, jointly and severally, for all damages sustained as a result of defendants' wrongdoing, in an amount to be proven at trial, including interest thereon;

iii) Awarding plaintiff and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and

iv) Such other and further relief as the Court may deem just and proper.

DATED: ______________
 

Ben Bingham BINGHAM & LEA, P.C. 333 Convent Street San Antonio, TX 78205 (210) 224-1819 By:__________________________________    BEN BINGHAM Steven E. Cauley (#94012) Scott E. Poynter (#90077) LAW OFFICES OF STEVEN E. CAULEY, P.A. 2200 N. Rodney Parham Road, #218 Little Rock, AR 72212 (501) 312-8500 David R. Scott Neil Rothstein Brian Robbins SCOTT & SCOTT, LLC 108 Norwich Ave. P.O. Box 192 Colchester, CT 06415 (860) 537-3818 Attorneys for Plaintiff

Source: Emailed file from Law Offices of Steven E. Cauley, P.A.