MILBERG WEISS BERSHAD
HYNES & LERACH LLP
REED R. KATHREIN (139304)
100 Pine Street, Suite 2600
San Francisco, CA 94111
Telephone: 415/288-4545
415/288-4534 (fax)
    - and -
WILLIAM S. LERACH (68581)
DARREN J. ROBBINS (168593)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
619/231-7423 (fax)

BULL & LIFSHITZ, LLP
JOSHUA M. LIFSHITZ
PETER D. BULL
246 West 38th Street
New York, NY 10018
Telephone: 212-869-9449
212/869-5632 (fax)

Attorneys for Plaintiff

1. This is a securities fraud class action on behalf of all purchasers of the common stock of New Focus, Inc. ("New Focus" or the " Company") between 1/31/01 and 3/05/01, inclusive (the "Class Period"), seeking to pursue remedies under the Securities Exchange Act of 1934 (the "Exchange Act"). This action involves, among other things, the dissemination of false and misleading statements designed to conceal the Company's deteriorating financial condition and declining demand for its products long enough to allow several officers and directors, named as defendants herein, to sell or arrange to sell over $61 million of their privately held New Focus common stock.

2. The claims asserted herein arise under and pursuant to §§10(b) and 20(a) of the Exchange Act [15 U.S.C. §§78j(b) and 78t(a)] and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission ("SEC") [17 C.F.R. §240.10b-5].

3. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§1331 and 1337 and §27 of the Exchange Act [15 U.S.C. §78aa].

4. Venue is proper in this District pursuant to§27 of the Exchange Act and §28 U.S.C. §1391(b). Many of the acts alleged herein, including the preparation and dissemination of materially false and misleading information, occurred in substantial part in this District. Additionally, defendants maintain their chief executive offices and principal place of business within this District.

5. In connection with the acts 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.

6. Plaintiff Jacob Deutsch purchased the common stock of New Focus at artificially inflated prices during the Class Period, as detailed in the attached certification, and was damaged thereby.

7. Defendant New Focus is a Delaware corporation with its principal executive offices located at 5215 Hellyer Avenue, Suite 100, San Jose, California. According to the Company, New Focus purports to design, manufacture and market fiber optic products for next-generation optical networks, which enable networking solutions with increased channel counts, higher data rates, longer reach lengths and new services.

8. The defendants identified below (the "Individual Defendants") served at all times material to the claims set forth herein as senior officers and/or directors of New Focus in the positions set forth below:

(a) Defendant Milton Chang ("Chang") is, and at all relevant times was, Chairman of the Board and a beneficial owner of at least 10% of the Company. During the Class Period and as part of the fraudulent scheme, defendant Chang sold, or arranged to sell, 200,000 shares of his privately held New Focus common stock valued at $11.6 million.

(b) Defendant Kenneth E. Westrick ("Westrick") is, and at all relevant times was, President, Chief Executive Officer and a director of the Company. During the Class Period and as part of the fraudulent scheme, defendant Westrick sold, or arranged to sell, 100,000 shares of his privately held New Focus common stock valued at $5.8 million.

(c) Defendant Nicola Pignati ("Pignati") is, and at all relevant times was, Chief Operating Officer of the Company. During the Class Period and as part of the fraudulent scheme, defendant Pignati sold, or arranged to sell, 42,000 shares of his privately held New Focus common stock valued at $2.3 million.

(d) Defendant John A. Dexheimer ("Dexheimer") is, and at all relevant times was, a director of the Company. During the Class Period and as part of the fraudulent scheme, defendant Dexheimer sold, or arranged to sell, 25,000 shares of his privately held New Focus common stock valued at $1.4 million.

(e) Defendant R. Clark Harris ("Harris") is, and at all relevant times was, a director of the Company. During the Class Period and as part of the fraudulent scheme, defendant Harris sold, or arranged to sell, 10,000 shares of his privately held New Focus common stock valued at 526,500.

(f) Defendant Timothy Day ("Day") is, and at all relevant times was, Chief Technology Officer and Vice President of Engineering for the Company. During the Class Period and as part of the fraudulent scheme, defendant Day sold, or arranged to sell, 91,000 shares of his privately held New Focus common stock valued at $4.6 million.

(g) Defendant Robert A. Marsland ("Marsland") is, and at all relevant times was, Vice President of Focused Research for the Company. During the Class Period and as part of the fraudulent scheme, defendant Marsland sold, or arranged to sell, 65,500 shares of his privately held New Focus common stock valued at $3.3 million.

(h) Defendant George D. Yule ("Yule") is, and at all relevant times was, Vice President Supply Chain Management for the Company. During the Class Period and as part of the fraudulent scheme, defendant Yule sold, or arranged to sell, 30,000 shares of his privately held New Focus common stock valued at $1.7 million.

(i) Defendant Winston S. Fu ("Fu") is, and at all relevant times was, a director of the Company. During the Class Period and as part of the fraudulent scheme, defendant Fu sold, or arranged to sell, 500,000 shares of his privately held New Focus common stock valued at $26 million.

(j) Defendant Bao-Tong Ma ("Ma") is, and at all relevant times was, Vice President and General Manager of New Focus Pacific Co. During the Class Period and as part of the fraudulent scheme, defendant Ma sold, or arranged to sell, 80,000 shares of his privately held New Focus common stock valued at $3.8 million.

9. Because of the Individual Defendants' positions with the Company, they had access to the adverse undisclosed information about its business, operations, products, operational trends, financial statements, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management and/or Board of Directors meetings and committees thereof and via reports and other information provided to them in connection therewith.

10. 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 New Focus, 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, products, growth, financial statements, 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 of or deliberately 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.

11. 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 Nasdaq National Market System (the "Nasdaq"), 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, growth, operations, financial statements, business, products, markets, 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 common stock would be based upon truthful and accurate information. The Individual Defendants' misrepresentations and omissions during the Class Period violated these specific requirements and obligations.

12. The Individual Defendants participated in the drafting, preparation, and/or approval of the various public, shareholder and investor reports and other communications complained of herein and were aware of, or deliberately 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 New Focus, each of the Individual Defendants had access to the adverse undisclosed information about New Focus's business prospects, financial condition and performance as particularized herein and knew (or deliberately disregarded) that these adverse facts rendered the positive representations made by or about New Focus and its business issued or adopted by the Company materially false and misleading.

13. 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.

14. 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 New Focus common stock through the dissemination of materially false and misleading statements and/or concealment of material adverse facts. The scheme: (i) deceived the investing public regarding New Focus's business, new product demand, growth, operations and the intrinsic value of New Focus common stock; (ii) artificially inflated the value of New Focus shares long enough to allow the insiders, named as defendants herein, to sell or arranged to sell over 1.1 million shares of their privately held New Focus common stock valued at over $61 million, while in possession of material, non-public information; and (iii) caused plaintiff and other members of the Class to purchase New Focus common stock at artificially inflated prices.

15. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of a Class consisting of all persons who purchased New Focus common stock during the Class Period and who were damaged thereby. Excluded from the Class are defendants, the officers and directors of the Company, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest.

16. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, New Focus common shares were actively traded on the Nasdaq. As of 10/1/00, there were approximately 63.9 million shares of New Focus common stock issued and outstanding. 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 hundreds or thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by New Focus or its transfer agent and may be notified of the pendency of this action by mail, using a form of notice similar to that customarily used in class actions.

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

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

19. 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:

(a) whether the federal securities laws were violated by defendants' acts as alleged herein;

(b) whether statements made by defendants to the investing public during the Class Period misrepresented material facts about the business, operations and financial statements of New Focus; and

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

20. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action.

21. On 1/30/01, after the market closed, almost a full month into its 1Q:01, New Focus issued a release reporting "Strong" results for its 4Q:00, the period ended 12/31/00, and raised its revenue guidance for FY:01 as follows:

The company's revenue expanded sharply during the fourth quarter, marking the third consecutive quarter of strong sequential growth in the company's fiber optic and photonics tool businesses. The company also increased revenue guidance for fiscal year 2001 based upon higher revenue expectations for its current businesses and incremental revenue from its new wholly-owned subsidiary, JCA Technology, Inc..

"We expect that fiscal year 2001 will represent another significant chapter in the growth of New Focus. On December 19, 2000 we announced our decision to proceed with the second phase of the expansion of our manufacturing facilities in Shenzhen, China based on the strength of our existing fiber optics business. With the completion of the acquisition of JCA Technology, Inc. earlier this month, we added a new product line of fiber optic products to our product portfolio. This new product line includes high-speed clock amplifiers and broadband data driver amplifiers for OC-48 and OC-192 modulators. Combining the expected revenue contributions from our existing businesses and JCA's products, we are raising our revenue guidance for fiscal year 2001 from $150 million to $240 million," said Westrick.

''We again saw significant improvement in our gross margin percentage in the recently completed quarter and expect further improvement throughout fiscal 2001. With the addition of the JCA product family, we now expect that our gross margin performance in the fourth quarter of 2001 will increase to 43-48% from our previously targeted margin range of 40-45%. Our targeted gross margin and revenue performance for fiscal 2001 should allow us to record positive pro forma operating income during the third and fourth quarters of 2001 and put us in position to move the breakeven point for operating income into the first half of 2001 should revenue growth accelerate beyond the targeted level,'' said Westrick.

(a) At the time defendants published their 4Q:00 results and provided their bullish revenue and earnings projections for FY:01 they were already aware of, or deliberately disregarded, the fact that inventory was building up at a rate much greater than the Company's plan, as key customers delayed or canceled orders and as market conditions rapidly deteriorated around the Company;

(b) As a result of this inventory build-up and sudden slowdown in demand for New Focus's products, defendants also knew, or deliberately disregarded, that the Company would not be able to execute its announced "expansion plans," because, as defendants concealed and failed to disclose, the Company had already made plans to drastically cut its workforce due to slowing growth in the networking and telecommunications equipment sector, such that the announced goals would be impossible to attain; and

(c) Based on market conditions which defendants knew existed at that time, or which they deliberately disregarded, they lacked any reasonable basis to issue their bullish revenue and earnings projections, and issued such projections only as part of a scheme to artificially inflate the value of New Focus stock.

23. As evidence that investors did not know the undisclosed adverse conditions at New Focus, the market reacted positively to the Company's 1/30/01 announcement and on 1/31/01 shares of New Focus jumped over 20%, or $10.81 per share, to close trading on 1/31/01 at $60.19 per share, after reaching an intra-day high of $62.88 per share, on tremendous trading volume of over 10.5 million shares.

24. Defendants were motivated to conceal the true condition of the Company and to make false statements concerning its business and future growth prospects, in order to artificially inflate the value of New Focus shares long enough to allow them to race to the market to sell or arrange to sell over $61 million of their privately held Company stock. Immediately after defendants issued the 1/31/01 release, between 2/02/01 and 2/06/01, defendants sold or arranged to sell their privately held New Focus shares into the open market as follows:
 

INSIDER	DATE	NO. SHARES	PROCEEDS ($/est.)
Chang	2/02/01	200,000	11,600,000
Fu	2/02/01	500,000	26,000,000
Pignati	2/02/01	42,000	2,300,000
Dexheimer	2/02/01	25,000	1,432,813
Harris	2/02/01	10,000	526,500
Day	2/02/01	91,000	4,641,000
Marsland	2/02/01	65,500	3,340,500
Yule	2/02/01	30,000	1,740,000
Ma	2/06/01	80,000	3,840,000
Westrick	2/02/01	100,000	5,800,000
TOTAL		1,143,500	61,220,813

25. In addition to causing the huge increase in price of New Focus shares on 1/31/01, statements issued by defendants also had the effect of misleading securities analysts. Immediately after New Focus issued its bullish FY:01 predictions, Epoch Partners ("Epoch") senior analyst Mark Langley raised his FY:01 revenue estimate for New Focus to $243.7 million from $161.8 million and his FY:01 EPS estimate to $0.23 from $0.15. In addition, the Epoch report stated:

New Focus: Stellar Quarter; Revenue Guidance Bumped 60%

* * *

* New Focus' fourth-quarter revenues of $33.9 million outdistanced our estimate of $27.4 million and Street consensus of $26.4 million.

* Higher-than-expected gross margins and operating leverage pushed the company into profitability one quarter sooner than anticipated. Pro forma EPS was $0.04; we had estimated a loss of $0.01, and the Street a loss of $0.03.

* Management was upbeat in a conference call, raising guidance for gross margins and boosting its 2001 revenue target from $150 million to $240 million.

* On the product front, the company plans to ship three new passive optical components in the first half of 2001, and tunable transmission lasers remain on track to ship in sample quantities in the first half of the year, with shipments for revenue in the second half.

26. On 3/5/01, only 5 weeks after defendants' published their bogus 1/30/01 release assuring investors that the Company was experiencing explosive growth, and only weeks after insiders unloaded or arranged to unload over $61 million worth of their privately held New Focus shares on unsuspecting investors, New Focus shocked the market by issuing another release which now lowered FY:01 guidance well below expectations. New Focus now claimed that:

Noting a widespread softening in the U.S. economy and the telecommunications industry, New Focus lowered guidance for its fiscal 2001 net revenue to $170-190 million. Previous revenue guidance for fiscal 2001, released in conjunction with the company's fourth quarter earnings press release on January 30, 2001, was $240 million. For fiscal year 2000 New Focus reported net revenue of $80.4 million.

''While our business will continue to demonstrate strong year-over-year growth, recent order cancellations and push-outs have changed our revenue outlook for fiscal 2001. First quarter 2001 net revenue will be up relative to our reported fourth quarter net revenue of $33.9 million, but will decline relative to the pro forma combined results for the December quarter. As customers continue to adjust inventory levels in response to the slower industry growth now expected for this year, we will most likely see a sequential decline in net revenue between the first and second quarters. In light of these new revenue expectations, we will modify the rate of growth in our spending levels.''

27. The stock market's reaction to New Focus's shocking disclosure was punitive and immediate. On 3/6/01, Company shares closed at $18.88 per share, after trading as low as $18 per share, a decline of over $44 per share from its Class Period high of $62.88 reached on 1/31/01.

28. On 3/07/01, following the Company's revised earnings warning, Langley at Epoch immediately slashed his earnings and revenue projections for FY:01 as follows:

* New Focus lowered its revenue guidance for its first and second quarters and full-year 2001, based on inventory build-up, delayed and canceled orders and reduced visibility into what its customers' actions might be.

* Management also announced plans to furlough approximately 260 employees at its operations in Shenzhen, China (representing 22% of the employee base there) and reduce its U.S. workforce by approximately 70 people (representing 8% of the company's domestic employee base).

* Based on the revised outlook, we are reducing our 1Q01 revenue estimate to $38.4 million from $46.5 million, our 2Q01 revenue estimate to $37.8 million from $55.3 million, and our full-year 2001 revenue estimate to $177.3 million from $243.7 million. We are also reducing our 1Q01 earnings per share (EPS) estimate to a loss of $0.03 from a profit of $0.02 and our 2Q01 EPS estimate to a loss of $0.05 from a profit of $0.04. Down the line, we have also reduced our full-year EPS estimate to reflect a loss of $0.07 from a profit of $0.23.

29. The market for New Focus common stock was open, well-developed and efficient at all relevant times. As a result of these false and materially misleading statements and failures to disclose, New Focus common stock traded at artificially inflated prices during the Class Period. The artificial inflation continued until the time New Focus admitted that its bullish revenue and earnings growth projections for FY:01 were false, and this admission was communicated to, and/or digested by, the securities markets. Plaintiff and other members of the Class purchased or otherwise acquired New Focus common stock relying upon the integrity of the market price of New Focus common stock and the market information relating to New Focus, and have been damaged thereby.

30. During the Class Period, defendants materially misled the investing public, thereby inflating the price of New Focus common 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 false and misleading in that they failed to disclose material adverse information and misrepresented the truth about the Company, its business and operations, including, inter alia:

(a) That, at the time defendants published their 4Q:00 results and provided their bullish revenue and earnings projections for FY:01 they were already aware of, or deliberately disregarded, the fact that inventory was already building up at a rate much greater than the Company's plan as key customers delayed or canceled orders and as market conditions rapidly deteriorated around the Company;

(b) That, as a result of this inventory build-up and sudden slowdown in demand for New Focus products, defendants also knew, or deliberately disregarded, that the Company would not be able to execute its announced "expansion plans," because, as defendants concealed and failed to disclose, the Company had already made plans to drastically cut its workforce due to slowing growth in the networking and telecommunications equipment sector, such that the announced goals would be impossible to attain; and

(c) That, based on market conditions which defendants knew existed at that time, or which they deliberately disregarded, they lacked any reasonable basis to issue their bullish revenue and earnings projections, and issued such projections only as part of a scheme to artificially inflate the value of New Focus stock.

31. At all relevant times, the material misrepresentations and omissions particularized in this Complaint directly or proximately caused or were a substantial contributing cause of the damages sustained by plaintiff and other members of the Class. As described herein, during the Class Period, defendants made or caused to be made a series of false and/or materially misleading statements about New Focus's business, prospects and operations. These material misstatements and omissions had the cause and effect of creating in the market an unrealistically positive assessment of New Focus and its business, prospects and operations, thus causing the Company's common stock to be overvalued and artificially inflated at all relevant times. Defendants' false and materially misleading statements during the Class Period resulted in plaintiff and other members of the Class purchasing the Company's common stock at artificially inflated prices, thus causing the damages complained of herein.

32. All of the insider sales, listed below, either occurred or were scheduled to occur immediately after the Company issued its bogus 1/30/01 release which caused the rapid artificial inflation in the price of New Focus shares. As a result of defendants' illicit scheme, defendants either sold or arranged to sell over $57 million worth of their stock within 2 days after the inception of the Class Period, and over $61 million worth within one week thereafter.
 

INSIDER	DATE	NO. SHARES	PROCEEDS ($/est.)
Chang	2/02/01	200,000	11,600,000
Fu	2/02/01	500,000	26,000,000
Pignati	2/02/01	42,000	2,300,000
Dexheimer	2/02/01	25,000	1,432,813
Harris	2/02/01	10,000	526,500
Day	2/02/01	91,000	4,641,000
Marsland	2/02/01	65,500	3,340,500
Yule	2/02/01	30,000	1,740,000
Ma	2/06/01	80,000	3,840,000
Westrick	2/02/01	100,000	5,800,000
TOTAL		1,143,500	61,220,813

33. As alleged herein, defendants acted with scienter in that defendants knew that the public documents and statements issued or disseminated in the name of the Company were materially false and misleading, that such statements or documents would be issued or disseminated to the investing public and knowingly and substantially participated or acquiesced in the issuance or dissemination of such statements or documents in violation of the federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their receipt of information reflecting the true facts regarding New Focus, their control over, and/or receipt and/or modification of New Focus's allegedly materially misleading misstatements and/or their associations with the Company which made them privy to confidential proprietary information concerning New Focus, participated in the fraudulent scheme alleged herein.

34. Despite the fact that it is illegal for any officer or director or controlling person of an issuer to sell stock in that issuer when in possession of material, adverse information about the issuer, which would significantly affect the market price of the issuer's security, the insiders of New Focus sold or prepared to sell thousands of their privately held Company shares directly to the unsuspecting public in open market transactions, while concealing the scheme to artificially inflate the price of New Focus common stock.

35. At all relevant times, the market for New Focus stock was an efficient market for the following reasons, among others:

(a) New Focus stock met the requirements for listing, and was listed and actively traded on the Nasdaq, a highly efficient and automated market;

(b) As a regulated issuer, New Focus filed periodic public reports with the SEC and the Nasdaq;

(c) New Focus regularly communicated with public investors via established market communication mechanisms, including through regular disseminations of press releases on the national circuits of major newswire services and through other wide-ranging public disclosures, such as communications with the financial press and other similar reporting services; and

(d) New Focus was followed by several 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.

36. As a result of the foregoing, the market for New Focus stock promptly digested current information regarding New Focus from all publicly available sources and reflected such information in New Focus's stock price. Under these circumstances, all purchasers of New Focus common stock during the Class Period suffered similar injury through their purchase of New Focus common stock at artificially inflated prices and a presumption of reliance applies.

37. 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 there were any forward-looking statements, there were no meaningful cautionary statements identifying important factors that could 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, and/or the forward-looking statement was authorized and/or approved by an executive officer of New Focus who knew that those statements were false when made.

38. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein.

39. During the Class Period, New Focus and the Individual 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 New Focus common stock long enough to allow the insiders named as defendants herein to sell or arrange to sell over $61 million worth of their privately held New Focus stock; and (iii) cause plaintiff and other members of the Class to purchase New Focus 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.

40. Defendants (a) employed devices, schemes, and artifices to defraud; (b) made untrue statements of material fact and/or omitted to state material facts necessary in order to make the statements made 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 stock in an effort to maintain artificially high market prices for New Focus stock in violation of §10(b) of the Exchange Act and Rule 10b-5. All defendants are sued either as primary participants in the wrongful and illegal conduct charged herein or as controlling persons as alleged below.

41. 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, 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 Regulation 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, financial condition and earnings so that the market price of the Company's stock would be based on truthful, complete and accurate information.

42. New Focus and the Individual Defendants, individually and in concert, directly and indirectly, by the use, means or 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, operations and future prospects of New Focus as specified herein.

43. These 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 New Focus's 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 New Focus and its business 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 New Focus common stock during the Class Period.

44. Each of the Individual Defendants' primary liability, and controlling person liability, arises from the following facts: (i) the Individual Defendants were high-level executives and/or directors at the Company during the Class Period and members of the Company's management team or had control thereof; (ii) each of these defendants, by virtue of his responsibilities and activities as a senior officer and/or director of the Company, was privy to and participated in the creation, development and reporting of the Company's internal budgets, plans, projections and/or reports; (iii) each of these defendants enjoyed significant personal contact and familiarity with the other defendants and was 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 finances, operations, and sales at all relevant times; and (iv) each of these defendants was aware of the Company's dissemination of information to the investing public which they knew or deliberately disregarded was materially false and misleading.

45. The defendants had actual knowledge of the misrepresentations and omissions of material facts set forth herein, or acted with deliberate 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 deliberately and for the purpose and effect of concealing New Focus's operating condition and future business prospects from the investing public and supporting the artificially inflated price of its securities. As demonstrated by defendants' overstatements and misstatements of the Company's business, operations and earnings throughout the Class Period, defendants, if they did not have actual knowledge of the misrepresentations and omissions alleged, were deliberate in failing to obtain such knowledge by refraining from taking those steps necessary to discover whether those statements were false or misleading.

46. 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 price of New Focus common stock was artificially inflated during the Class Period. In ignorance of the fact that the market price of New Focus 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 stock trades, and/or on the absence of material adverse information that was known to or deliberately disregarded by defendants, but not disclosed in public statements by defendants during the Class Period, plaintiff and the other members of the Class acquired New Focus common stock during the Class Period at artificially high prices and were damaged thereby.

47. 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 and business prospects of New Focus, which were not disclosed by defendants, plaintiff and other members of the Class would not have purchased or otherwise acquired their New Focus common stock, or, if they had acquired such common stock during the Class Period, they would not have done so at the artificially inflated prices they paid.

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

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

50. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein.

51. The Individual Defendants acted as controlling persons of New Focus within the meaning of §20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, and their ownership and contractual rights, participation in and/or awareness of the Company's operations and/or intimate knowledge of the true market demand for New Focus products, which was significantly declining throughout the Class Period, 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. The Individual Defendants were 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. New Focus controlled each of the Individual Defendants and all of its employees.

52. In particular, each of these defendants had direct and supervisory 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.

53. As set forth above, New Focus and the Individual Defendants each violated §10(b) and Rule 10b-5 by their acts and omissions as alleged in this complaint. By virtue of their positions as controlling persons, defendants are liable pursuant to §20(a) of the Exchange Act. 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 common stock during the Class Period.

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

A. Determining that this action is a proper class action pursuant to Rule 23 of the Federal Rules of Civil Procedure;

B. 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;

C. Awarding extraordinary, equitable and/or injunctive relief as permitted by law, equity and the federal statutory provisions sued hereunder, pursuant to Rules 64, 65 and any other appropriate state law remedies;

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

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

Plaintiff hereby demands a trial by jury.
 

DATED: March 19, 2001

MILBERG WEISS BERSHAD  HYNES & LERACH LLP REED R. KATHREIN           ___________________________ REED R. KATHREIN 100 Pine Street, Suite 2600 San Francisco, CA 94111 Telephone: 415/288-4545 415/288-4534 (fax) MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH DARREN J. ROBBINS 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax) BULL & LIFSHITZ, LLP JOSHUA M. LIFSHITZ PETER D. BULL 246 West 38th Street New York, NY 10018 Telephone: 212-869-9449 212/869-5632 (fax) Attorneys for Plaintiff

Pursuant to Civil L.R. 3-16, the undersigned certifies that as of this date, other than the named parties, there is no such interest to report.
 

_____________________________
ATTORNEY OF RECORD FOR
PLAINTIFF JACOB DEUTSCH