<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act 1934
Date of Report: January 29, 1997
US DIAGNOSTIC INC.
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(Exact name of registrant as specified in charter)
DELAWARE
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(State or other jurisdiction of Company)
1-13392 11-3146389
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(Commission File Number) (IRS Employer Identification No.)
777 South Flagler Drive, West Palm Beach, Florida 33401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no. including area code: (407) 832-0006
--------------
<PAGE>
Item 5. Other Information
The attached press release was issued on January 29, 1997. The press release
announced the termination of the Company's relationship with Coyote Consulting
& Financial Services LLC ("Coyote") and Keith Greenberg. The terms of the
Termination Agreement are summarized below and the Termination Agreement is
attached hereto as Exhibit 10.41. Attached as Exhibit 99.3 and 99.4 hereto and
incorporated herein are copies of Mr. Greenberg's guilty pleas and his
permanent injunction.
As consideration for the execution of this Termination Agreement,
simultaneous with the execution of this Termination Agreement, the Company
paid to Coyote the sum of $620,000.00 in cash, on account of and being
one-half of the finder's fees that will be due Coyote upon closing of the
pending acquisitions of Medical Diagnostics, Inc. ($270,000.00) and American
Shared Hospital Services ($350,000.00). The remaining portion of the finder's
fees on such acquisitions shall be due and payable upon the closing of the
acquisitions. In the event that the Company's acquisition of either or both of
Medical Diagnostics, Inc. and American Shared Hospital Services do not close,
the payment on account of the finder's fees regarding such businesses by the
Company to Coyote hereunder shall be credited against any other finder's fees
due from the Company to Coyote by reason of other acquisitions referred to in
the preceding subsection, but shall not otherwise be refundable to the Company
by Coyote.
The Company agreed that notwithstanding the termination of the
Consulting Agreement, the Company shall pay Coyote a finder's fee in cash of
two percent (2%) of the Aggregate Purchase Price (as defined herein) of
certain listed business which are subsequently acquired by the Company or by
any subsidiary of the Company, payable in full at the closing of each
acquisition.
As partial consideration for such termination and for Coyote's waiver of its
rights contained in Sections 4, 5 and 9 of the Consulting Agreement, the
Company agreed that all unvested shares of restricted stock in the Company and
all unvested stock options for stock in the Company held by Coyote fully
vested as of the date of January 29, 1996, except that the 50,000 unvested
stock options for stock in the Company granted June 1, 1996, and exercisable
at $7.125 per share shall, pursuant to the term of the original grant, vest
only if the Company's common stock trades at a price in excess of $15.00 per
share prior to June 1, 1999.
On January 7 and 8, 1997, the Company was served in four class
action lawsuits all filed in the United States District Court for the Southern
District of Florida. The cases are entitled Lynne M. Golden, Trustee, UAD
1/6/96; Lynne M. Golden Trust; individually and on behalf of a class of all
persons similarly situated vs. U.S. Diagnostic Inc., Jeffrey A Goffman, Keith
G. Greenberg, Joseph A. Paul, Robert D. Burke; Amos F. Almand, III and Coyote
Consulting & Financial Services LLC; Muriel Edelstein vs. U.S. Diagnostic
Inc., Jeffrey A Goffman, Joseph A. Paul, Dr. Robert D. Burke and Keith G.
Greenberg; Steven Shapiro, vs. U.S. Diagnostic Inc., et al,: and Sandra
Neuman, vs. U.S. Diagnostic Inc., et al. All four cases contain similar
allegations relating to the disclosure of the Company's relationship with Mr.
Greenberg and Coyote and claim that
<PAGE>
the disclosure of his background (summarized below) was inadequate. All four
complaints charge the Company and certain of its officers with violations of
the Securities Exchange Act of 1934 and contain similar allegations that Mr.
Greenberg was one of the Company's co-founders and a senior executive of the
Company who received compensation identical in amount to the salary paid to
Jeffrey Goffman, the Company's Chairman and Chief Executive Officer. The
complaints also allege that the Company's stock price declined substantially
as a result of the public disclosure of Mr. Greenberg's background and that
the price of the Company's common stock was artificially inflated during the
claimed class period. The Company intends to vigorously defend these lawsuits,
although it believes it is premature to predict the ultimate outcome of the
cases.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
10.41 Termination Agreement dated January 29, 1997 among the Company,
Coyote Consulting & Financial Services LLC and Keith Greenberg.
99.1 Press release dated January 29, 1997
99.2 Complaints filed in the United States District Court of the Southern
District of Florida entitled Lynne M. Golden, Trustee, UAD 1/6/96;
Lynne M. Golden Trust; individually and on behalf of a class of all
persons similarly situated vs. U.S. Diagnostic Inc., Jeffrey A
Goffman, Keith G. Greenberg, Joseph A. Paul, Robert D. Burke; Amos
F. Almand, III and Coyote Consulting & Financial Services LLC:
Muriel Edelstein vs. U.S. Diagnostic Inc., Jeffrey A Goffman, Joseph
A. Paul, Dr. Robert D. Burke and Keith G. Greenberg: Steven Shapiro,
Plaintiff, vs. U.S. Diagnostic Inc., et al, Defendants: Sandra
Neuman, Plaintiff vs. U.S. Diagnostic Inc., et al., Defendants.
99.3 Permanent Injunction against Keith Greenberg
99.4 Information and Guilty Plea by Keith Greenberg
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
US DIAGNOSTIC INC.
/s/ Jeffrey A. Goffman
---------------------------------
Jeffrey A. Goffman, Chairman
Dated: January 31, 1997
<PAGE>
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT by and between US Diagnostic Inc., a
Delaware corporation having its principal office located at 777 S. Flagler
Drive, West Palm Beach, Florida 33401 (herein referred to as the
"Corporation") and Coyote Consulting & Financial Services LLC, having a
principal office located at 29 Windward Isle, Palm Beach Gardens, Florida
33418 (hereinafter referred to as "Coyote"), is made and entered into as of
the date of execution of the last of the parties so to execute.
W I T N E S S E T H:
WHEREAS, Corporation and Coyote entered into a Consulting Agreement
dated as of December 1, 1994, as amended to date (the "Consulting Agreement");
WHEREAS, the Corporation and Coyote desire to terminate the
Consulting Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. TERMINATION OF CONSULTING AGREEMENT
A. Subject to the terms and conditions herein set forth, the parties
hereby terminate the Consulting Agreement by the execution of this Termination
Agreement. Effective immediately, except for the obligations set forth herein,
all purported associations between the Corporation and Coyote and between the
Corporation and Keith G. Greenberg are terminated.
B. As partial consideration for such termination and for Coyote's
waiver of its rights contained in Sections 4, 5 and 9 of the Consulting
Agreement, the parties hereby covenant and agree that all unvested shares of
restricted stock in the Corporation and all unvested stock options for stock
in the Corporation held by Coyote shall fully vest as of the date of this
Agreement, except that the 50,000 unvested stock options for stock in the
Corporation granted June 1, 1996, and exercisable at $7.125 per share shall,
pursuant to the term of the original grant, vest only if the Corporation's
common stock trades at a price in excess of $15.00 per share prior to June 1,
1999. Simultaneous herewith, the Corporation shall deliver to Coyote a true
and correct certified copy of a resolution of the Board of Directors of the
Corporation approving this Termination Agreement and the provisions herein
contained with respect to stock options and rights. Within ten (10) days from
the date of this Termination Agreement, the Corporation shall deliver or cause
to be delivered to Coyote an opinion of legal counsel to the Corporation,
reasonably acceptable to Coyote, opining that this Termination Agreement has
been validly executed and is enforceable against the Corporation in accordance
with its terms, subject only to such usual and customary creditors' rights
exclusions as may be approved by counsel to Coyote. Simultaneous herewith,
Coyote shall deliver to the Corporation a true and correct certified copy of a
resolution of the Board of Managers, or of the Members, of Coyote, whichever
may be applicable, approving this Termination Agreement and the provisions
herein contained. Within ten (10) days from the date of this Termination
Agreement, Coyote shall deliver or cause to be delivered to the Corporation an
opinion of legal counsel to Coyote, reasonably acceptable to the Corporation,
opining that this Termination Agreement has been validly executed and is
enforceable against Coyote in accordance with its terms, subject only to such
usual and customary creditors' rights exclusions as may be approved by counsel
to the Corporation.
C. Notwithstanding the provisions of Section 7 of the Consulting
Agreement that contain certain restrictions on the activities of the
Consultant that purport to extend beyond the termination of the Consulting
Agreement, by the execution of this Termination Agreement the parties hereto
do hereby expressly terminate the effectiveness of the provisions of Section 7
of the Consulting Agreement as of the date hereof, and the restrictions
contained therein shall be of no further force or effect.
<PAGE>
SECTION 2. FINDER'S FEES AND EXPENSES
A. Attached hereto as Schedule A is a true, correct and complete
listing of various and sundry businesses that Coyote has previously brought to
the Corporation as potential acquisitions by the Corporation, all of which are
presently in various stages of negotiation between the Corporation and those
businesses. Of the businesses listed on Schedule A, Medical Diagnostics, Inc.
and American Shared Hospital Services are presently the subject of binding
agreements for acquisition by the Corporation, or are expected to be subject
of binding agreements for such acquisition within a short period of time after
the date hereof.
B. The Corporation acknowledges and agrees that Coyote found, and
introduced the Corporation to, all of the businesses set forth on Schedule A,
and that Coyote has performed all services required to be performed by it with
respect to all of the businesses set forth on Schedule A such that if such
businesses, or any of them, are acquired by the Corporation at any time in the
future, Coyote will be entitled to a finder's fee from the Corporation as
otherwise set forth in the Consulting Agreement.
C. The Corporation acknowledges and agrees that notwithstanding the
termination of the Consulting Agreement by this Termination Agreement, the
Corporation shall pay Coyote a finder's fee in cash of two percent (2%) of the
Aggregate Purchase Price (as defined herein) of any business listed on
Schedule A attached hereto which is subsequently acquired by the Corporation
or by any subsidiary of the Corporation, payable in full at the closing of
each acquisition. For purposes of this Termination Agreement, the Aggregate
Purchase Price on which the finder's fee due Coyote shall be computed shall be
the aggregate sum of all cash and securities (debt, equity or hybrid) issued
by the Corporation or any of its Affiliates to the seller(s) of such
businesses, together with all indebtedness incurred and/or assumed by the
Corporation or any of its Affiliates in connection with such acquisitions.
Except as provided in subsection D hereof, Coyote shall not be entitled to any
draw or advance against such finder's fees, and except for deduction by the
Corporation of the advance payment on account set forth in subsection D hereof
when the related acquisitions close, all finder's fee due to Coyote hereunder
shall be due and payable without offset of any kind whatsoever.
D. As further consideration for the execution of this Termination
Agreement, simultaneous with the execution of this Termination Agreement, the
Corporation shall pay to Coyote the sum of $620,000.00 in cash, on account of
and being one-half of the finder's fees that will be due Coyote upon closing
of the pending acquisitions of Medical Diagnostics, Inc. ($270,000.00) and
American Shared Hospital Services ($350,000.00). The remaining portion of the
finder's fees on such acquisitions shall be due and payable upon the closing
of the acquisitions. In the event that the Corporation's acquisition of either
or both of Medical Diagnostics, Inc. and American Shared Hospital Services do
not close, the payment on account of the finder's fees regarding such
businesses by the Corporation to Coyote hereunder shall thereupon be credited
against any other finder's fees due from the Corporation to Coyote by reason
of other acquisitions referred to in the preceding subsection, but shall not
otherwise be refundable to the Corporation by Coyote.
E. As to certain of the businesses set forth on Schedule A and
specifically designated by an asterisk thereon, one or more independent third
parties may be entitled to claim compensation in the nature of a portion of
any finder's fee payable in the event an acquisition of the business is
accomplished by the Corporation, and Coyote shall pay from its finder's fee
received hereunder with respect to each such acquisition the portion of the
finder's fee lawfully due to said independent third parties. As to the
finder's fees with respect to the designated transactions, Coyote covenants
and agrees to hold the Corporation harmless of and from any and all claims for
compensation in the nature of finder's or brokerage fees claimed by
independent third parties with whom Coyote dealt in bringing the proposed
transactions to the attention of the Corporation.
F. In addition to any finder's fees payable to Coyote hereunder, the
Corporation shall reimburse Coyote in cash in full for all out-of-pocket
travel and entertainment expenses incurred by Coyote and its employees and
agents in connection with a completed acquisition of any business set forth on
Schedule A by the Corporation incurred prior to the date hereof. With respect
to any expenses which are requested to be reimbursed to Coyote, Coyote agrees
to account to the Corporation in detail sufficient to entitle the Corporation
to claim an income tax deduction for such paid
-5-
<PAGE>
items if such item is deductible. Coyote shall submit a request for
reimbursement for such expenses to the Corporation and the Corporation shall
reimburse Coyote for such expenses simultaneous with the payment of the
finder's fees in subsection C hereinabove.
G. Until July 31, 1997, the Corporation shall have the exclusive
right to negotiate with the businesses set forth on Schedule A for acquisition
by the Corporation and Coyote will cooperate with the Corporation in that
regard and will not interfere with the Corporation's efforts in that regard.
SECTION 3. ENTIRE AGREEMENT
This instrument contains the entire agreement between the
Corporation and Coyote and may not be modified orally.
SECTION 4. NOTICES
Any notice or communication required or permitted thereunder shall
be given in writing and shall be considered to have been given on the date
such notice or communication has been delivered by hand to, mailed by
registered or certified mail, return receipt requested, postage prepaid,
directed to such party at the following address (or at such other address as
such party shall hereafter designate by written notice to the other):
US DIAGNOSTIC INC.
777 S. Flagler Drive
West Palm Beach, Florida 33401
Attention: Chairman
COYOTE CONSULTING & FINANCIAL SERVICES LLC
c/o Elise Nulman Greenberg
29 Winward Isle
Palm Beach
Gardens, Florida 33418
SECTION 5. CONSTRUCTION, GOVERNING LAW
This Agreement shall be governed by the laws of the State of
Florida. In the event of any litigation to enforce, interpret, or arising out
of this Termination Agreement, the prevailing party in such litigation shall
be entitled to an award of its reasonable attorneys' fees and costs.
SECTION 6. HEADINGS AND COUNTERPARTS
Headings are inserted for reference purpose only and shall not
affect the interpretation or meaning of this Agreement. This Agreement may be
executed in several counterparts, each of which shall be deemed to be an
original, but all of which, together will constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto executed this Agreement
on the dates respectively indicated.
Witnesses: US DIAGNOSTIC INC.
(2 as to each party)
By: /s/Jeffrey Goffman
--------------------------------
Jeffrey A. Goffman, Chairman
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Witness signature
Print name:
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<PAGE>
By: /s/ Joseph Paul
------------------------------
Joseph A. Paul, President
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Witness signature
Print name:
Date:
----------------------------
COYOTE CONSULTING & FINANCIAL SERVICE LLC
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Witness signature By: /s/Elise Nulman Greenberg
Print name: -----------------------------
Elise Nulman Greenberg
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Witness signature
Print name:
Date:
----------------------------
JOINDER
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The undersigned hereby joins in the execution of the foregoing
Termination Agreement as of the date indicated below.
/s/ Keith Greenberg
----------------------------------
- -------------------------------- Keith G. Greenberg
Witness signature
Print name:
- --------------------------------
Witness signature
Print name:
Date:
----------------------------
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<PAGE>
US DIAGNOSTIC INC.
INVESTOR CONTACT:
Joseph Scime
Director Investor Relations
(561) 832-0006
Website: www.usdl.com
FOR IMMEDIATE RELEASE
US DIAGNOSTIC ANNOUNCES TERMINATION OF
COYOTE CONSULTING AGREEMENT
WEST PALM BEACH, FL, JANUARY 29, 1997 - US Diagnostic Inc. (Nasdaq NMS: USDL)
announced today its agreement to terminate its existing relationship with
Coyote Consulting & Financial Services LLC ("Coyote") and Keith Greenberg. Mr.
Greenberg, through Coyote, served as the Company's director of mergers and
acquisitions and marketing. In addition, Mr. Greenberg both executed
documents, and was mentioned in public statements, in which he was identified
as a vice president or an executive vice president of the Company. Although
certain officers of the Company and outside counsel apparently knew of certain
of these instances, Mr. Greenberg was never elected an officer of the Company
by its Board of Directors or a director of the Company by the Board or its
stockholders.
The Company announced that its Board of Directors has appointed a
special committee of independent directors to review the Company's prior
relationship with Coyote Consulting and Keith Greenberg and its prior
disclosure regarding them.
On January 7 and 8, 1997, the Company was served in four class
action lawsuits all filed in the United States District Court for the Southern
District of Florida. The cases are entitled Lynne M. Golden, Trustee, UAD
1/6/96; Lynne M. Golden Trust; individually and on behalf of a class of all
persons similarly situated vs. U.S. Diagnostic Inc., Jeffrey A Goffman, Keith
G. Greenberg, Joseph A. Paul, Robert D. Burke; Amos F. Almand, III and Coyote
Consulting & Financial Services LLC; Muriel Edelstein vs. U.S. Diagnostic
Inc., Jeffrey A Goffman, Joseph A. Paul, Dr. Robert D. Burke and Keith G.
Greenberg; Steven Shapiro, vs. U.S. Diagnostic Inc., et al,: and Sandra
Neuman, vs. U.S. Diagnostic Inc., et al. All four cases contain similar
allegations relating to the disclosure of the Company's relationship with Mr.
Greenberg and Coyote and claim that the disclosure of his background
(summarized below) was inadequate. All four complaints charge the Company and
certain of its officers with violations of the Securities Exchange Act of 1934
and contain similar allegations that Mr. Greenberg was one of the Company's
co-founders and a senior executive of the Company who received compensation
identical in amount to the salary paid to Jeffrey Goffman, the Company's
Chairman and Chief Executive Officer. The complaints also allege that the
Company's stock price declined substantially as a result of the public
disclosure of Mr. Greenberg's background and that the price of the Company's
common stock was artificially inflated during the claimed class period. The
Company intends to vigorously defend these lawsuits, although it believes it
is premature to predict the ultimate outcome of the cases.
<PAGE>
The following events with respect to Mr. Greenberg happened prior to the
formation of USDL and are in no way related to USDL. On September 13, 1994,
Mr. Greenberg pleaded guilty to one count of conspiracy to commit mail fraud
and to defraud the Internal Revenue Service and another count of conspiracy to
commit mail fraud in the United States District Court for the Southern
District of New York. On August 24, 1995, Mr. Greenberg was sentenced to 30
days in prison, two years of supervised probation and ordered to perform 300
hours of community service. In addition, on June 23, 1993, Mr. Greenberg
agreed to the entry of an Order of Permanent Injunction in an action commenced
by the Securities and Exchange Commission in the United States District Court
for the Southern District of New York pursuant to which he agreed to be
permanently enjoined as a principal or aider and abettor from the (i) offer or
sale of any securities by the use of interstate commerce employing any device,
scheme or artifice to defraud, (ii) use of interstate commerce in the offer or
sale of securities by means of any untrue statement of a material fact or
omitting to state a material fact necessary to make the statements made, in
light of the circumstances in which they were made, not misleading, or
engaging in any transaction which would operated as a fraud or deceit upon
purchasers or prospective purchasers of securities, and (iii) in connection
with the purchase or sale of a security, using the mail or interstate commerce
to employ any device, scheme or artifice to defraud, making any untrue
statement of a material fact or omitting to state a material fact necessary in
order to make the statements made, in light of the circumstances under which
they were made, not misleading, or engaging in any act, practice or course of
business which operates or would operate as a fraud or deceit upon any person.
The Company has entered into an agreement that terminated the
existing five-year consulting agreement with Coyote. As consideration for the
termination, the Company agreed to vest the previously granted and unvested
stock options and restricted shares owned by Coyote and to advance Coyote
$620,000 or 50% of the $1,240,000 fee that will be due on the closing of the
previously announced Medical Diagnostics acquisition and the pending American
Shared Hospital Services acquisition. The Company also agreed to pay Coyote a
2% fee on the 32 transactions that Coyote has previously introduced to the
Company, and that the Company is reviewing, if and when such acquisitions are
completed.
In 1996 the Company paid Coyote cash compensation of approximately
$3.8 million, which represented 2% of the purchase price of transactions
introduced by Coyote (which had an aggregate value of approximately $190
million) and granted 100,000 options to purchase common stock at an exercise
price of $7.125 and 55,000 shares of restricted stock. Pursuant to its
consulting agreement, for 1996 Coyote was paid a minimum annual draw of
$185,000 which was deducted from finder's fees earned by Coyote in 1996. In
1995, the Company paid Coyote a minimum cash draw of approximately $126,000
against which no commissions were earned for that year. Also in 1995, Coyote
was granted 150,000 options to purchase common stock at an exercise price of
$5.125 and 50,000 shares of restricted stock. Pursuant to the terms of the
consulting agreement, the Company has leased or paid the cost of two
automobiles for use by Coyote during the term of the agreement, for which
$27,919 was paid in 1996 and $16,851 in 1995. It is believed that Coyote is
owned by Mr. Greenberg's wife Elise Nulman Greenberg and a family trust. Mrs.
Greenberg is a former employee of the Company.
U.S. Diagnostic Inc. is the leading provider of radiology services
focused on the acquisition, operation and management of multi-modality
diagnostic imaging centers and related medical facilities in the United
States. The Company currently owns 118 diagnostic imaging facilities and
manages 19 other facilities in 17 states.
<PAGE>
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
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STEVEN SHAPIRO,
Plaintiff,
v. SUMMONS IN A CIVIL ACTION
CASE NUMBER: 97-8016
U.S. DIAGNOSTICS INC., et al,
Defendants.
CIV-RYSKAMP
MAGISTRATE JUDGE
VITUNAC
To: (Names and Address of Defendant)
U.S. Diagnostic Inc.
777 S. Flagler Drive
West Palm Beach, FL
Serve: Officer of Company
YOU ARE HEREBY SUMMONED and required to file with the Clerk of this Court and
serve upon
PLAINTIFF'S ATTORNEY (name and address)
Michael J. Pucillo, Esq.
Burt & Pucillo
222 Lakeview Avenue
Suite 300 East
West Palm Beach, FL 33401
561/835-9400
an answer to the complaint which is herewith served upon you, within 20 days
after service of this summons upon you, exclusive of the day of service.
If you fail to do so, judgment by default will be taken against you for
the relief demanded in the complaint.
Carlos Juenke JAN 7, 1997
- --------------------------------- --------------------------
CLERK DATE
/s/ Irene Rivera
- ---------------------------------
BY DEPUTY CLERK
<PAGE>
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
NORTHERN DIVISION
STEVEN SHAPIRO, individually
and on behalf of a class of
all persons similarly situated,
Plaintiff,
v. CASE NO. 97-8016
U.S. DIAGNOSTIC INC.; JEFFREY A. CIV-RYSKAMP
GOFFMAN; KEITH G. GREENBERG; MAGISTRATE JUDGE
JOSEPH A. PAUL; ROBERT D. VITUNAC
BURKE; AMOS F. ALMAND III
and COYOTE CONSULTING & FINANCIAL
SERVICES LLC,
Defendants.
- ---------------------------------
CLASS ACTION COMPLAINT
----------------------
Plaintiff makes the following allegations upon information and belief,
except as to allegations specifically pertaining to the plaintiff and his
counsel, based on the facts alleged below, which are predicated upon the
investigation undertaken by plaintiff's counsel, and plaintiff believes that
further substantial evidentiary support will exist for the allegations set
forth below after a reasonable opportunity for discovery.
NATURE OF THE ACTION
--------------------
1. This is a class action on behalf of all purchasers of securities of
U.S. Diagnostic Inc. ("USD" or the "Company") between March 15, 1996 and
December 23, 1996, inclusive, (the "Class Period"), seeking to pursue remedies
under the Securities Exchange Act of 1934 (the "Exchange Act"). The class
action claims assert that the defendants failed to disclose material facts about
<PAGE>
defendant Keith Greenberg ("Greenberg"), an acknowledged member of the
Company's management team, which disclosures were required by
Regulation S-K, Item 401.
The failure to disclose this information injured purchasers of USD stock during
the Class Period because they purchased USD at higher prices than they
would have, had the truth about Greenberg been disclosed.
2. At all relevant items, USD's management item included Keith Greenberg--
a felon who previously pled guilty to charges of Conspiracy to Defraud the
United States and Fraud and Conspiracy to Defraud. Although Mr. Greenberg was
one of the Company's founders and has functioned in a management capacity with
the Company since its inception, USD and the other defendants have continuously
failed to disclose Greenberg's criminal history arising out of fraudulent
misconduct. Indeed, a review of the Company's various Securities and Exchange
Commission ("SEC") Filings indicates that the Company is in violation of SEC
rules and, with utter disregard for the investing public, largely omitted
references to Greenberg in an effort to conceal the fact that someone with a
criminal history and significant enforcement problems with the SEC, was
involved in management. On the occasions in which Greenberg was mentioned by
the Company, defendants failed to disclose his criminal record, an obviously
material fact to investors, and a fact which reputable securities firms with
which the Company deals and members of the investing community expect to be
disclosed.
3. The facts surrounding Greenberg's criminal history only come to light
by virtue of a securities analyst report dated
2
<PAGE>
December 23, 1996, disseminated by the firm of Bear Stearns. This disclosure
in the Bear Stearns report and news accounts of it had the immediate effect of
causing a substantial decline in the price of USD securities, as investors
recognized the woeful inadequacy of the Company's previous disclosures to the
public and the detrimental effect that the immediate and obvious lack of
credibility revealed in these disclosures would have on the Company's future
prospects.
4. Further investigation has revealed that, in addition to Greenberg's
criminal history, in June of 1993, the SEC obtained and Order of Permanent
Injunction against Greenberg enjoining Greenberg and those in active concert
or participation with him from, inter alia, committing fraud in the offer or
sale of any securities. Greenberg executed a consent and Stipulation agreeing
to the entry of the Order of Permanent Injunction.
JURISDICTION AND VENUE
----------------------
5. This Court has jurisdiction over the subject matter of this action
pursuant to 28 U.S.C. Sections 1331 and 1337, and Section 27 of the Exchange
Act (15 U.S.C. Section 78aa).
6. This action arises under Sections 10(b) and 20(a) of the Exchange Act
and Rule 10b-5 promulgated thereunder (17 C.F.R. Section 240.10b-5).
7. Venue is proper in this district pursuant to Section 27 of the Exchange
Act and 28 U.S.C. Section 1391(b). USD has its corporate headquarters and
principal place of business in this District at 777 South Flagler Drive, West
Palm Beach, Florida 33401, and the
3
<PAGE>
acts charged herein, including the preparation and dissemination of materially
false and misleading information, occurred in substantial part in this
District.
8. In connection with the acts alleged in this complaint, the 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.
PARTIES
-------
9. Plaintiff Steven Shapiro, as set forth in the accompanying
Certification, purchased 300 shares of USD common stock during the Class
Period, and was damaged thereby.
10. Defendant USD is a Delaware corporation, which maintains its executive
offices in West Palm Beach, Florida. Prior to October, 1996, USD's name was
U.S. Diagnostic Labs, Inc. USD acquires and owns medical services facilities
including both clinical and multi-modality diagnostic facilities. The
Company's facilities are used primarily be physicians to diagnose and monitor
diseases or other medical conditions using either clinical tests or anatomical
pathology tests.
11. Defendant Jeffrey A. Goffman ("Goffman") is and at all relevant times
was Chief Executive Officer and Chairman of the Board of Directors of the
Company. Goffman is described in the Company's 1995 Annual report as one of
the persons who "founded the company in 1993". Pursuant to an employment
agreement with the
4
<PAGE>
Company, Goffman receives an annual base salary of $185,000, and an annual
incentive bonus of up to $65,000, plus other perquisites.
12. Defendant Keith G. Greenberg ("Greenberg") is and at all relevant
times functioned as a senior executive, Executive Vice President and Director
of Marketing, Mergers and Acquisitions of the Company. Greenberg is described
in the Company's 1995 Annual Report and a 1996 investor relations package as
one of the Company's co-founders. As detailed below, pursuant to an unusual
consulting relationship which defendants used in an effort to evade disclosure
of Greenberg's involvement with the Company, Greenberg received an essentially
identical base salary and bonus package as Goffman, keeping him on a par with
Goffman. Greenberg is married to Elise Nulman Greenberg.
13. Defendant Robert D. Burke ("Burke") was President of the Company from
June 1994 until June 1996 when he resigned and became a consultant to the
Company. Burke is still being compensated pursuant to the terms of his five-
year employment entered into in June 1994. Defendant Burke was a Director of
the Company from January 1994 until approximately September 1996.
14. Defendant Joseph A. Paul ("Paul") has served as President and a
Director of the Company since July 1, 1996.
15. Defendant Amos F. Almand III ("Almand") is and at all relevant times
was Senior Vice President and a Director of the Company.
16. (a) Defendant Coyote Consulting & Financial Services LLC ("Coyote")
is and at all relevant times was a Florida Limited
5
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Liability Company existing in the State of Florida. According to a Consulting
Agreement between USD and Coyote dated December 1, 1994 (the "1994 Coyote
Consulting Agreement"), Coyote is owned by Elise Nulman (a/k/a Elise Nulman
Greenberg) and the Greenberg Trust. Coyote maintains its principal executive
offices at 29 Windward Isle, Palm Beach Gardens, Florida 33418, which is also
Keith Greenberg and Elise Nulman Greenberg's address. According to the
Company's Proxy Statement on Schedule 14A dated September 19, 1996, Coyote's
consulting services have been and continue to be provided by Keith Greenberg
and Elise Nulman Greenberg.
(b) According to the Company's September 19, 1996 Proxy Statement:
In December 1994, the Company entered into a five-year
consulting agreement with Coyote...amended in October
1995, pursuant to which it pays annual base consulting
fees of $185,000. Coyote is also entitled to receive
a bonus of up to $65,000 if certain financial targets
are met. Coyote provides the Company with various
management and consulting services including marketing,
public and financial relations, employee benefits and
due diligence services in connection with the Company's
acquisitions.
(c) The 1994 Coyote Consulting Agreement, as amended in October 1995,
provides, among other things, that "Consultant, through its various employers
shall act as a general adviser and consultant on all financial related matters
pertaining to the business of [USD]"; that USD will "reimburse the Consultant"
up to $100,000.00 per year for "expenses" incurred in hiring up to five
employees; that, additionally, "Consultant shall be reimbursed for all medical
and dental insurance premiums paid for its employees
6
<PAGE>
who are providing services to [USD]," and "for all expense for up to two
automobiles"; and that, "Consultant shall receive a finder's fee in cash
of two percent (2%) of the aggregate purchase price of any entity acquired by
[USD] as a result of introduction by Consultant."
(d) Coyote is and at all relevant times was defendant Greenberg's alter
ego.
17. Defendants Goffman, Greenberg, Burke, Paul and Almand are referred to
herein collectively as the "Individual Defendants." As officers, directors
and/or controlling persons of a Company which is registered with the SEC under
the federal securities laws, whose securities are registered with the SEC,
traded on the NASDAQ, and governed by the provisions of the federal securities
laws, the Individual Defendants and Coyote, as officers and directors of a
publicly-held company, and as controlling persons of USD, each had a duty to
disseminate promptly accurate and truthful information with respect to the
Company's control and management, and to correct and previously issued
statements from any source that was or had become materially false or
misleading, so that the market price of the Company's publicly traded
securities would be based upon truthful and accurate information. Under rules
and regulations promulgated by the SEC under the Exchange Act, specifically
Item 401 of Regulation S-K, the defendants also had a duty to identify each of
its officers, directors and significant employees and to report with respect to
each such individual and any control person, all criminal convictions or
pending criminal proceedings
7
<PAGE>
within the past five years, and any order, judgment or decree enjoining such
individual from engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any violation of
federal or state securities laws. The defendants' representations during the
Class Period violated these specific requirements and obligations.
18. The Individual Defendants and Coyote all participated in the drafting,
preparation, and/or approval of the various public and shareholder and investor
reports and other communications complained of hearing and were aware of or
recklessly disregarded the misstatements contained therein and omissions
therefrom, and were aware of their materially misleading nature. Because of
their Board membership and/or executive, managerial and controlling positions
with USD, each of the defendants had access to the adverse non-public
information about USD's management and Greenberg's role in that management and
his prior criminal conviction, SEC injunction and civil judgments, as
particularized herein and knew that these adverse facts rendered that positive
statements and omissions made by and about USD and its management materially
false and misleading.
19. The defendants, because of their positions of control and authority
as officers and/or directors or controlling persons of the Company, were able
to and did control the contents of the various quarterly and annual reports,
press releases and presentations to securities analysts pertaining to the
Company. Each defendant was provided with copies of USD press release
and other
8
<PAGE>
disseminations alleged herein to be misleading prior to or shortly after their
issuance and had the ability and opportunity to prevent their issuance or cause
them to be corrected. As a result, each of the defendants is responsible for
the accuracy of the public reports and releases detailed herein and is
therefore primarily liable for the representations contained therein.
PLAINTIFF'S CLASS ACTION ALLEGATIONS
------------------------------------
20. 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 or otherwise acquired shares of USD securities from
March 15, 1996 through December 23, 1996, inclusive (the "Class Period"), and
who were damaged thereby. Excluded from the Class are defendants, the officers
and directors of the Company at all relevant times, 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.
21. 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 hundreds, if not thousands, of
members of the Class. During the Class Period, there were over 23 million
shares of USD common stock outstanding and actively traded on NASDAQ, an
efficient market in which millions of shares of the Company's stock were
traded during the Class Period. Record owners and other
9
<PAGE>
members of the Class may be identified from records maintained by USD or its
transfer agent and may be notified of the pendency of this action by mail,
using the form of notice similar to that customarily used in securities class
actions.
22. 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.
23. 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. Plaintiff's interests are coincident with
and not antagonistic to absent Class Members' interests.
24. 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 defendants participated in and pursued the common course
of conduct complained of herein;
(c) Whether USD's public filings, press releases and other statements
disseminated to the investing public and the Company's shareholders during the
Class Period misrepresented or omitted material facts about the management of
USD, Greenberg's role in that management, and Greenberg's criminal past;
10
<PAGE>
(d) Whether statements made by defendants to the investing public
during the Class Period omitted or misrepresented material facts about the
management of USD, Greenberg's role in that management, and Greenberg's
criminal past;
(e) Whether the market price of USD's securities during the Class
Period was artificially inflated due to the material misrepresentations and
omissions and failure to correct the material misrepresentations complained
of herein; and
(f) To what extent the members of the Class have sustained damages
and the proper measure of damages.
25. 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
class action.
SUBSTANTIVE ALLEGATIONS
-----------------------
APPLICABILITY OF PRESUMPTION OF RELIANCE:
FRAUD-ON-THE-MARKET DOCTRINE
-----------------------------------------
26. Plaintiff will rely, in part, upon the presumption of reliance
established by the fraud-on-the-market doctrine in that, among other things:
(a) USD common stock met the requirements for listing, and was
listed, on the NASDAQ National Market System, a highly efficient and automated
market;
11
<PAGE>
(b) As a regulated issuer, the Company filed periodic public reports
with the SEC;
(c) The trading volume of the Company's stock was substantial,
reflecting numerous trades each day;
(d) USD was followed by securities analysts employed by several major
brokerage firms who wrote reports which were distributed to the sales force and
certain customers of such firms and which were available to various automated
data retrieval services;
(e) Defendants made public statements which failed to disclose
material facts during the Class Period;
(f) The omissions and misrepresentations were material;
(g) The misrepresentations alleged would tend to induce a reasonable
investor to misjudge the value of the Company's securities; and
(h) Plaintiff and the other members of the Class purchased USD common
stock without knowledge of the omitted and misrepresented facts.
27. Based upon the foregoing, plaintiff and the other members of the Class
are entitled to a presumption of reliance upon the integrity of the market for
the purpose of class certification as well as for ultimate proof of the claims
on their merits. Plaintiff will also rely alternatively and/or in part upon
the presumption of reliance established by material omissions and upon the
actual reliance of the Class Members.
12
<PAGE>
FACTUAL ALLEGATIONS
-------------------
General Background
- ------------------
28. USD was incorporated in Delaware on June 17, 1993. As set forth in
the Company's October 20, 1994 Prospectus, effective June 24, 1993, the Company
merged with Port Chester Distribution Services, Inc. ("Port Chester"), a New
York corporation, which was inactive and had no assets. However, the merger
resulted in the issuance to defendant Goffman and "Elise Nulman" (a/k/a Elise
Nulman Greenberg), who purportedly were shareholders of Port Chester, of
640,000 and 180,000 shares, respectively, of USD's common stock.
29. An earlier version of the October 1994 Prospectus, filed with the SEC
on or about December 23, 1993, stated that the merger with Port Chester
resulted in the issuance to defendant Goffman and "Ms. Nulman" of 800,000 an
225,000 shares, respectively, of USD's common stock. As noted in the 1993 draft
Prospectus, beneficial ownership of 225,000 shares would have resulted in
Mrs. Greenberg beneficially owning, after the 1994 offering, more than 5% of
USD's outstanding stock. Because, by agreement, these shares could not be sold
for at least a period of thirteen (13) months after the offering, Elise
Greenberg's holdings would have had to be disclosed, pursuant to Item 403 of
Regulation S-K, in the Company's subsequent public filings. In the final 1994
Prospectus, the number of shares reported as being issued to "Ms. Nulman" in the
Port Chester merger was reduced by 20% to 180,000 or only 4.8% after the
offering, thus eliminating the disclosure requirement.
13
<PAGE>
30. USD purports to be the fastest growing and largest provider of
outpatient radiology services in the United States, operating multi-modality
imaging centers. Imaging modalities include MRI, computed tomography
(CT scan), mammography, nuclear medicine, ultrasound and traditional X-Ray.
Roughly 90% of the Company's facilities provide two or more different types of
imaging processes, with MRI being the most prevalent.
31. This imaging industry is characterized as large and fragmented. In
terms of revenues, the entire radiology market exceeded $55 billion in 1995.
In terms of sites, there are approximately 6,000 in-patient hospital locations
across the country and 2,200 free standing imaging centers. The top three firms
in the outpatient segment of the industry account for less than ten percent of
the market.
32. As a result of this structure, the consolidation of the industry,
primarily through acquisitions, has been characterized as the vehicle to growth
in the industry. USD has engaged in at least twenty-three (23) transactions
since October 1993, and has been cast (in a Bear Stearns analyst report dated
December 9, 1996) as the "leading consolidator in the diagnostic imaging
marketplace."
Defendant Greenberg's Significant
Involvement With The Company
- ---------------------------------
33. The person at the Company most responsible for the Company's
acquisition strategies and implementation was, at all relevant times,
Keith Greenberg. Greenberg, who is one of the Company's co-founders, has
always (except for one brief 30 day period he apparently spent in jail) played
a crucial role in the
14
<PAGE>
Company's acquisitions strategies, analyses, negotiations and deals. In the
Company's 1995 Annual Report -- one of the few places in which the Company
admits that it has someone named Greenberg associated with it -- Greenberg is
described as follows under the heading "Team Management" (at page 7):
Keith G. Greenberg, is a co-founder of US Diagnostic and
serves as Director of Marketing, mergers and Acquisitions.
Mr. Greenberg was previously President of Yearwood
Investments, Ltd., a New York City-based investment banking
company. Mr. Greenberg was President, CEO and Executive
Vice President of QTV Communications and P.O.P. Radio,
companies engaged in interactive communications and
alternative media appliances.
34. Notwithstanding this identification of Greenberg as one of the six
members of the Company's "senior management team", and his obvious importance
to the Company's primary business objective -- acquisitions -- Greenberg's name
is otherwise non-existent in the Company's SEC filings, and he is never a
signatory to any Company filing. Indeed, Greenberg's name is entirely absent
from the Company's annual report on Form 10-KSB for the very same period except
in one oblique reference under the heading "Consulting Agreements".
35. Included in a May 1996 investor relations package is a document on
U.S. Diagnostic Labs, Inc. stationery which contains the heading "Directors and
Executive Officers." The document lists "Keith Greenberg 37 Executive Vice
President," among those listed following the sentence "The Directors and
Executive Officers of the Company are as follows:" A short biography is given
for each
15
<PAGE>
person listed in the roster of "Directors and Executive Officers," and the
document states in part:
Keith G. Greenberg, co-founder of USDL and a consultant since
the company's inception, became full time Executive Vice-President
in December, 1994. Greenberg was previously president of
Yearwood Investments, Ltd., a New York City-based investment
banking company, where he was responsible for financing and
consulting for companies engaged in energy, recycling, and
retailing. Prior to 1990, Greenberg was President and CEO of QTV
Communications and Amtich, companies engaged in the introduction,
design and development of interactive communications and
alternative media applications in conjunction with such companies
as Host/Marriott, Hertz, Esquire Magazine, NYNEX, CNBC, and
Liberty Travel. In 1985, Greenberg co-founded and was Executive
Vice President of P.O.P. Radio Inc., a pioneer of point of purchase
advertising. P.O.P. is used in most major supermarkets and drug
chains. Initially, Greenberg was a CPA employed by a national
accounting firm.
36. While noting Greenberg's position as President, CEO and Executive Vice
President of QTV Communications, defendants have never disclosed that on
February 20, 1996, a complaint was filed in federal court in New York by an
investor in QTV against Greenberg, QTV and others alleging violations of the
Federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), including
securities fraud, mail fraud and wire fraud, and that that complaint resulted
in a default judgment being entered against Greenberg and the other defendants
on November 8, 1996, for more than $1 million.
37. Defendants have also never disclosed that on December 11, 1990, a
complaint was filed in federal court in New York by an investor in Amtech
against Greenberg, Amtech, QTV and others
16
<PAGE>
alleging violations of Section 5 and 12(2) of the Securities Act of 1933
("Securities Act") and Section 10b of the Exchange Act and Rule 10b-5
promulgated thereunder, as well as common law fraud and other causes of action,
and that that complaint resulted in a default judgment being entered against
Greenberg and QTV on January 3, 1992 in the amount of $285,130.60.
38. Each of the following documents filed with the SEC during the Class
Period falsely and misleadingly excluded clear identifying references to
Greenberg, notwithstanding his obviously significant executive role with the
Company:
(a) The Company's Annual Report for the period ended December 31,
1995, on Form 10-KSB filed on or about March 15, 1996, signed by defendants
Goffman, Burke and Almand, which includes a section identifying Directors,
Executive Officers, Promoters and Control Persons at pages 21-22.
(b) The Company's Registration Statement on Form S-3 filed on or
about April 18, 1996, relating to the registration for sale of shares and
warrants of several "selling shareholders", signed by defendants Goffman,
Burke and Almand.
(c) The Company's Annual Report to shareholders disseminated on or
about April 26, 1996.
(d) The Company's Quarterly Report for the period ending March 31,
1996, on Form 10-Q, filed on or about May 15, 1996, and signed by defendant
Goffman.
17
<PAGE>
(e) The Company's Quarterly Report for the period ending June 30,
1996, on Form 10-Q, filed on or about August 14, 1996, and signed by defendant
Goffman.
(f) The Company's Proxy Statement on Schedule 14A, signed by Goffman
and filed on or about August 19, 1996.
(g) The Company's Quarterly Report for the period ending
September 30, 1996, on Form 10-Q, filed on or about November 14, 1996, and
signed by defendant Goffman.
39. Nevertheless, the Company has occasionally identified Greenberg as one
of its executives in statements to the public:
(a) On February 24, 1995, the Company issued a press release over
the PR Newswire concerning its estimated 1994 and first quarter 1995 earnings.
That press release quoted Greenberg on the Company's acquisition strategies,
and identified Greenberg as "Director of Strategic/Planning acquisitions".
(b) A September 8, 1995 article on USD in the South Florida Business
Journal identifies Greenberg as "the executive vice president" of USD and
quotes him at length and repeatedly in this capacity. According to the
article:
Greenberg got into the business with Jeffrey Goffman, who is
chairman of the board and chief financial officer. Both were,
Greenberg said, "two businessmen who didn't know imaging."
The article includes many quotations from Greenberg, referring to the Company
and himself collectively as one (e.g. "There are 3000 outpatient diagnostic
imaging centers in the U.S. We don't expect to own all 3,000 of them. But a
company that continues to grow its
18
<PAGE>
bottom line and have access to capital, we think has a unique opportunity";
"our philosophy has not just been to hand someone a couple of million dollars
and part company" (emphasis added)).
(c) On February 26, 1996, Greenberg was identified and referred to
as the Company's "executive vice president" in an article about USD's
acquisition of a facility in Charleston South Carolina in the Charleston Post
and Courier.
(d) On August 19 and 28, 1996, Greenberg was identified in press
releases issued by the Company and disseminated by it over the Business Wire
newswire service as "responsible for USDL's Mergers and Acquisitions".
(e) On November 1, 1996, Greenberg and other executives from USD met
with securities analysts form the firm of Bear Stearns, at which time Greenberg
was represented to be a member of the Company's management team.
40. At all relevant times, defendants failed to disclose Greenberg's exact
position with the Company.
41. Notwithstanding the undeniable importance of Greenberg, not only to the
formation of the Company but to its key business developments and strategic
pursuits, the Company did not identify Greenberg in any of its periodic reports
filed with the SEC, or in any of its other SEC filings, except the
September 19, 1996, proxy statement and the 1995 report on Form 10-KSB. As
explained below, the reason for this deception is now obvious: Greenberg is a
convicted felon. On September 13, 1994, Greenberg pleaded guilty to the
federal offenses of Conspiracy to Defraud the United States
19
<PAGE>
and Fraud and Conspiracy to Defraud. Greenberg was sentenced to thirty days
imprisonment, tow years of supervised release and 300 hours of community
service. Greenberg was also the subject of a civil SEC action which charged
Greenberg with aiding and abetting violations of Sections 17(a)(1), (2), and
(3) of the Securities Act and Section 10(b) of the Exchange Act in connection
with Greenberg's position as Chief Executive Officer of Amtech, another
publicly-held corporation, which SEC action resulted in the Order of Permanent
Injunction described above.
42. Greenberg's criminal past did not come to light until December 23,
1996, when Bear Stearns disseminated an analyst report disclosing that it was
"Removing our Buy Rating and Discontinuing Coverage." This report included
several revelations of material facts about Greenberg never previously
disclosed. The report stated in pertinent part:
We have learned information regarding the prior experiences and
background of an individual associated with U.S. Diagnostic, Inc.
that has caused us to lose confidence in our ability to assess
ongoing developments at the company. This individual, Keith
Greenberg, has, over the last year, been introduced to us and
described in written material published by [the] company as a
co-founder of USDL and a member of the management team (in the
1995 Annual Report and at meetings with a representative of Bear
Stearns on November 1, 1996). In the September 19, 1996 proxy
statement, Mr. Greenberg has been described as providing services
to U.S. Diagnostic through Coyote Consulting, which has a five year
agreement with the company. We have learned that Mr. Greenberg
plead guilty in the U.s. District Court in the Southern District of
New York on September 13, 1994 to 1) Conspiracy to Defraud the
United States and 2) Fraud and Conspiracy to Defraud.
Mr. Greenberg was sentenced to 30
20
<PAGE>
days imprisonment with two years of supervised probation on
August 24, 1995 and ordered to perform 300 hours of community
service.
Since the information we have learned was not disclosed to us by
the company and we believe it is material, we have lost confidence in
our ability to assess on-going developments at U.S. Diagnostic. As a
result, we are removing our BUY rating and discontinuing coverage of
U.S. Diagnostic, Inc. The issue we have uncovered relates
specifically to prior experiences of company management.
43. Disclosure of defendant Greenberg's criminal past and his intimate
involvement with the Company, his management of its affairs and his
communications with securities analysts, shocked the market, resulting in an
immediate and sharp decline in the Company's stock price. Thus, on
December 23, 1996, the price of USD stock declined 2 11/16 from an opening
price of 12 1/16 to close at 9 3/8, a one day loss in value of over 22%, on
exceptionally heavy volume of over 4 million shares. The Order of Permanent
Injunction obtained by the SEC has never been disclosed by USD.
DEFENDANTS MISREPRESENTED
AND FAILED TO DISCLOSE
MATERIAL FACTS
- -------------------------
44. In knowing or reckless disregard of the truth and/or as part of their
ongoing efforts to continue the illusion of USD's managerial quality,
defendants continued to issue and/or participate in the issuance of materially
false and misleading statements to the investing public as particularized
above. These representations were materially false and misleading when made
for the reasons set forth above and in that they falsely stated and/or failed
to disclose the following material, adverse facts about
21
<PAGE>
USD's management, which facts were known to or recklessly disregarded by
defendants:
(a) That defendant Greenberg functioned as a senior executive at
the Company and was a key and founding member of the Company's management
team;
(b) That defendant Greenberg is a convicted felon who pleaded guilty
to the federal crimes of Conspiracy to Defraud the United States and Fraud and
Conspiracy to Defraud;
(c) That defendant Greenberg is subject to and consented to a 1993
Order of Permanent Injunction resulting from an SEC action which charged
Greenberg with aiding and abetting securities fraud, and pursuant to which
Greenberg agreed not to engage directly or indirectly in securities fraud;
(d) That at least two default judgments totaling more than $1 million
have been entered against Greenberg as a result of complaints filed by
investors in companies headed by Greenberg, which complaints alleged, inter
alia, securities fraud;
(e) That at all relevant times the Company misrepresented who was in
its management, who held what precise positions and the exact nature of
Greenberg's relationship with the Company;
(f) That the Company's purported consulting relationship with
defendant Coyote was nothing more than a sham designed to evade the important
reporting requirements of the federal securities laws;
(g) That the Company's purported consulting relationship with
defendant Coyote, which resulted in payments to Greenberg
22
<PAGE>
which were identical in amount to payments made to defendant Goffman as salary,
made Greenberg a continuing senior executive at the Company on a par with
Goffman, without including Greenberg's name on the Company's books and records;
(h) That the Company's relationships with investors, securities
analysts and other members of the investment community were at all relevant
times in serious jeopardy because, upon discovery of the above concealed facts,
the Company's credibility would be immediately and irreparably damaged; and
(i) That the integrity of Company's public filings and statements
was at all relevant times materially impaired.
45. The market for USD's common stock was open, well-developed and
efficient at all relevant times. As a result of the above-described false and
misleading statements and failures to disclose the full truth about USD, its
management, Greenberg's role in that management and Greenberg's criminal past,
the Company's common stock traded at artificially inflated prices during the
entire Class Period until the time the adverse information described above was
finally provided to and digested by the securities market. Plaintiff and
other members of the Class purchased or otherwise acquired USD common stock
relying upon the integrity of the market price of USD stock and market
information related to the Company, or in the alternative, upon defendants'
false and misleading statements, and in ignorance of the adverse, undisclosed
information and false statements known to defendants, and have been damaged
thereby. Upon disclosure of the true facts
23
<PAGE>
regarding the Company, the market valuation of the Company's stock declined
precipitously. Had plaintiff and other members of the Class known of the
materially adverse information not disclosed by defendants, they would not have
purchased or acquired USD's common stock at the artificially inflated prices
that they did.
46. At all relevant times, the 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 statements and omissions
about USD's management and Greenberg's role in that management. These
misstatements and omissions caused the Company's common stock to be overvalued
and artificially inflated at all relevant times. Had plaintiff and the class
known the truth about Greenberg's role in USD's management and his prior
criminal conviction, permanent injunction and civil judgments, the price at
which they purchased USD's common stock, if they invested at all, would have
been significantly lower.
COUNT I
-------
[AGAINST ALL DEFENDANTS FOR VIOLATIONS OF
SECTION 10(B) OF THE EXCHANGE ACT]
-----------------------------------------
47. Plaintiff repeats and realleges each and every allegation set forth
above.
48. The defendants individually and in concert, directly and indirectly,
by the use of means or instrumentalities of interstate
24
<PAGE>
commerce and/or of the mails, engaged and participated in a continuous course
of conduct of conduct to conceal adverse material information about the
management of USD, Greenberg's role therein and his criminal past as well as
a SEC injunction and civil judgment being entered against him is connection
with complaints by investors alleging securities fraud, as specified herein.
The 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 conceal,
inter alia, USD's true management and Greenberg's role in that management as
well Greenberg's prior criminal history and SEC injunction, 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 in the light of the circumstances under which they
were made, not misleading, and engaged in transactions, practices and a course
of business which operated as a fraud and deceit upon the purchasers of USD
securities during the Class Period.
49. 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 USD's true management, Greenberg's
25
<PAGE>
role in that management and Greenberg's past from the investing public and
supporting the artificially inflated price of its stock.
50. 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 USD securities were artificially inflated during
the Class Period. In ignorance of the materially false and misleading nature
of the reports and statements described above, plaintiff and other members of
the Class relied, to their damage, on the reports and statements described
above and/or on the integrity of the market prices of USD securities and the
completeness and accuracy of the information disseminated to USD investors in
connection with their purchases of the Company's securities.
51. At the times of said misrepresentations and omissions, plaintiff and
other members of the Class were ignorant of their falsity, and believed them
to be true. In reliance on said misrepresentations and in reliance upon the
superior knowledge and expertise of defendants and on the integrity of the
market, plaintiff and other members of the Class were induced to and did
purchase USD securities at artificially inflated prices. Had plaintiff and
other members of the Class known the truth, they would not have taken such
action.
52. By virtue of the foregoing, defendants have violated Section 10(b)
of the Exchange Act, and Rule 10b-5 promulgated thereunder of the Exchange Act.
26
<PAGE>
53. Plaintiff and other members of the Class have been damaged by
defendants' violations as described in this Count and seek recovery for the
damages caused thereby.
COUNT II
--------
[AGAINST THE INDIVIDUAL DEFENDANTS AND COYOTE FOR
VIOLATIONS OF SECTION 20(A) OF THE EXCHANGE ACT]
-------------------------------------------------
54. Plaintiff repeats and realleges each and every allegation made above.
55. By reason of their control over the operations of USD, the Individual
Defendants and Coyote, as Greenberg's alter ego, are "controlling persons" of
the Company within the meaning of Section 20(a) of the Exchange Act and had the
requisite power and influence (which they exercised) to cause USD to engage in
the unlawful conduct complained of herein, and could have prevented such
violations from taking place but failed to do so.
56. By reason of these Individual Defendants and Coyote, as Greenberg's
alter ego, each being a "controlling person," as that term is defined in
Section 20(a) of the Exchange Act, of other persons primarily liable to
plaintiff and the Class pursuant to the claims arising under Section 10(b) of
the Exchange Act alleged above, the defendants named in this Count are
secondarily liable for those primary violations pursuant to Section 20(a) of
the Exchange Act.
57. As set forth above, USD and the other defendants each violated
Section 10(b) and Rule-5 by their acts and omissions as alleged in this
Complaint. By virtue of their positions as
27
<PAGE>
controlling persons, all defendants other than USD are liable pursuant to
Section 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
securities during the Class Period.
WHEREFORE, plaintiff prays for relief and judgment, as follows:
(a) Determining that this action is a proper class action,
certifying plaintiff as class representative under Rule 23 of the Federal
Rules of Civil Procedure and his counsel as class counsel;
(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 plaintiff and the Class their reasonable costs and
expenses incurred in this action, including counsel fees and expert fees; and
(d) Such other and further relief as the Court may deem just and
proper.
28
<PAGE>
JURY TRIAL DEMANDED
-------------------
Plaintiff demands a trial by jury.
Dated: January 1, 1997
BURT & PUCILLO
BY: /s/ Michael J. Pucillo
-------------------------------
Michael J. Pucillo
Fla. Bar No. 261033
Wendy H. Zoberman
Fla. Bar No. 434670
222 Lakeview Avenue
Suite 3000 East
West Palm Beach, FL 33401
(561) 835-9400
29
<PAGE>
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
-----------------------------------
Steven Shapiro ("Plaintiff") declares, as to the claims asserted under the
federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized its filing.
2. Plaintiff did not purchase the security that is the subject of this
action at the direction of plaintiff's counsel or in order to participate in
this private action.
3. Plaintiff is willing to serve as a representative party on behalf of
the Class, including providing testimony at deposition and trial, if necessary.
4. Plaintiff's transaction(s) in the security that is the subject of this
action during the Class Period is/are as follows:
<TABLE>
Security Transaction Date
-------- ----------- ----
<S> <C> <C>
Common Stock 300 shares at $12.00 11/7/96
per share
</TABLE>
5. During the three years prior to the date of this Certificate, Plaintiff
has not sought to serve or served as a representative party for a class in any
action filed under the federal securities laws.
6. The Plaintiff will not accept any payment for serving as a
representative party on behalf of the Class beyond the Plaintiff's pro rata
share of any recovery, except such reasonable costs and expenses (including
lost wages) directly relating to the representation of the Class as ordered or
approved by the Court.
<PAGE>
I declare under penalty of perjury that the foregoing is true and
correct. Executed this 6th day of January, 1997, at Palm Beach County,
Florida.
/s/ Steven Shapiro
-------------------------------------
Steven Shapiro
<PAGE>
=============================================================================
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
- -----------------------------------------------------------------------------
SANDRA NEUMAN,
Plaintiff, SUMMONS IN A CIVIL ACTION
V. CASE NUMBER: 97-8017
U.S. DIAGNOSTIC INC., et al., CIV-HURLEY
FRANK J. LYNCH, JR.
Defendants. UNITED STATES MAGISTRATE JUDGE
1/8/97
TO: (Name and Address of Defendant) 10:27 A
U.S. Diagnostic Inc. Paul Andrew Shaw/C.F.O.
------------------------
777 S. Flagler Drive PB C252
West Palm Beach, FL /s/ Daniel V. DeLois
-----------------------
Serve: Officer of Company Daniel V. DeLois
YOU ARE HEREBY SUMMONED and required to file with the Clerk of this
Court and serve upon
PLAINTIFF'S ATTORNEY (name and address)
Michael J. Pucillo, Esq.
Burt & Pucillo
222 Lakeview Avenue
Suite 300 East
West Palm Beach, FL 33401
561/835-9400
an answer to the complaint which is herewith served upon you, within 20 days
after service of this summons upon you, exclusive of the day of service. If
you fail to do so, judgment by default will be taken against you for the
relief demanded in the complaint.
/s/ Carlos Juenke January 7, 1997
- ----------------------------- -----------------------------
CLERK DATE
/s/ Irene Rivera
- -----------------------------
BY DEPUTY CLERK
<PAGE>
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
SANDRA NEUMAN, individually 97-8017
and on behalf of a class of CIV-HURLEY
all persons similarly FRANK J. LYNCH, JR.
situated, UNITED STATES MAGISTRATE JUDGE
FILED BY ___________________D.C.
Plaintiff, INTAKE
97 JAN - 7
v. PM 1:35
CARLOS JUENKE
U.S. DIAGNOSTIC INC.; JEFFREY A. CLERK U.S. DIST. CT.
GOFFMAN; KEITH G. GREENBERG; S.D. OF FLA. - WPB
ROBERT D. BURKE; JOSEPH A. PAUL;
AMOS F. ALMAND III and COYOTE
CONSULTING & FINANCIAL
SERVICES LLC,
Defendants.
- ----------------------------------
CLASS ACTION COMPLAINT
----------------------
Plaintiff for her Complaint alleges upon information and belief, except for
Paragraph 3 which is on personal knowledge, as follows.
JURISDICTION AND VENUE
----------------------
1. This action is brought as a class action on behalf of all purchasers of
common stock of U.S. Diagnostic Inc. ("U.S. Diagnostic" or the "Company")
between March 15, 1996 and December 23, 1996 (the "Class Period"), brought
pursuant to Section 10(b) and Section 20(a) of the Securities Exchange Act of
1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder (17 C.F.R.
Section 240.10b-5).
2. This Court has jurisdiction over the subject matter of this action
pursuant to 28 U.S.C. Sections 1331 and 1337, and Section 27 of the
Exchange Act (15 U.S.C. Section 78aa).
3. Venue is proper in this district pursuant to Section 27 of the Exchange
Act and 28 U.S.C. Section 1391(b). U.S. Diagnostic has its principal place of
business in this District at 777 South
<PAGE>
Flagler Drive, West Palm Beach, Florida 33401, and the acts charged herein,
including the preparation and dissemination of materially false and misleading
information, and omissions of material information occurred in this District.
4. In connection with the acts alleged in this complaint, the 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.
PARTIES
-------
5. Plaintiff Sandra Neuman ("Plaintiff") purchased 1,000 shares of U.S.
Diagnostic common stock on December 18, 1996, during the Class Period, and has
been damaged thereby.
6. Defendant U.S. Diagnostic operates medical service diagnostic facilities
throughout the United States. The Company employs clinical tests or anatomical
pathology tests at its centers.
7. Defendant Jeffrey A. Goffman ("Goffman") is and at all relevant times
was Chief Executive Officer and Chairman of the Board of Directors of the
Company. Goffman is described in the Company's 1995 Annual Report as having
"founded the company in 1993". Pursuant to an employment agreement with the
Company, Goffman receives an annual base salary of $185,000, and an annual
incentive bonus of up to $65,000.
8. Defendant Keith G. Greenberg ("Greenberg") is purportedly a consultant
to the Company. He also has acted as and has been
2
<PAGE>
held out as Executive Vice President and Director of Marketing, Mergers and
Acquisitions of the Company. Greenberg is described in the Company's 1995
Annual Report as one of the Company's co-founders. Defendant Greenberg received
a salary and bonus package similar, if not identical, to that of defendant
Goffman.
9. Defendant Robert D. Burke ("Burke") was President of the Company from
June 1994 until June 1996. He served as a director from January 1994 until
approximately September 1996.
10. Defendant Joseph A. Paul ("Paul") has served as President and a
Director of the Company since July 1, 1996.
11. Defendant Amos F. Almand III ("Almand") is and at all relevant times
was Senior Vice President and a Director of the Company.
12. Defendant Coyote Consulting & Financial Services LLC ("Coyote") is and
at all relevant times was a Florida Limited Liability Company existing in the
State of Florida. Coyote maintains its "offices" at 29 Windward Isle, Palm
Beach Gardens, Florida 33418, in a residential neighborhood. According to the
Consulting Agreement between U.S. Diagnostic and Coyote dated December 1, 1994,
Coyote is owned by Elise Nulman (a/k/a Elise Nulman Greenberg) and the
Greenberg Trust. According to the Company's Proxy Statement on Schedule 14A
dated September 19, 1996, Coyote's consulting services have been and continue
to be provided by Keith Greenberg and Elise Nulman Greenberg.
13. According to the Company's September 19, 1996 Proxy Statement:
3
<PAGE>
In December 1994, the Company entered into a five-year consulting
agreement with Coyote ... amended in October 1995, pursuant to which it
pays annual base consulting fees of $185,000. Coyote is also entitled
to receive a bonus of up to $65,000 if certain financial targets are
met. Coyote provides the Company with various management and consulting
services including marketing, public and financial relations, employee
benefits and due diligence services in connection with the Company's
acquisitions.
14. Defendants Goffman, Greenberg, Burke, Paul and Almand are referred to
herein collectively as the "Individual Defendants". As officers, directors
and/or controlling persons of a public company registered with the SEC, the
common stock of which is traded on NASDAQ, the Individual Defendants, as
promoters, officers and/or directors of a publicly-held company, and as
controlling persons of U.S. Diagnostic, had a duty to disseminate promptly
accurate and truthful information with respect to the Company's control and
management, and to correct any previously issued statements if such statements
were or had become materially false or misleading. Further, pursuant to Item
401 of Regulation S-K, promulgated pursuant to the Exchange Act, the defendants
also had a duty to identify each of its officers, directors and significant
employees and to report with respect to each such individual all criminal
convictions, pending criminal proceedings or other material information
including civil judgments within the past five years.
15. The Individual Defendants were aware of or recklessly disregarded the
misstatements and omissions in the SEC filings and releases, and were aware
that such filings and releases were materially misleading and deceptive.
Because of their executive,
4
<PAGE>
managerial and controlling positions with U.S. Diagnostic, each of the
defendants had access to the truth about the management of U.S. Diagnostic,
Greenberg's role in that management, and his prior criminal conviction and
civil judgments. These undisclosed adverse facts rendered the positive
statements made by and about U.S. Diagnostic and its business and management
materially false and misleading, as evidenced by, inter alia, Bear Stearns &
Co.'s withdrawal of coverage and a prior favorable recommendation on the
Company, upon disclosure of the truth about Greenberg as set forth herein.
16. The defendants, because of their positions of control were able to and
did control the contents of the various annual reports, quarterly reports,
press releases and presentations to securities analysts pertaining to the
Company. Each defendant was provided with copies of U.S. Diagnostic press
releases and other disseminations alleged herein to be misleading prior to or
shortly after issuance and had the ability and opportunity to prevent their
issuance or cause them to be corrected. As a result, each of the defendants is
responsible for the accuracy of the public reports and releases detailed herein
and is therefore primarily liable for the representations contained therein.
CLASS ACTION ALLEGATIONS
------------------------
17. Plaintiff brings this action as a class action pursuant to Federal
Rule of Civil Procedure 23(b)(3) on behalf of a Class, consisting of all
persons who purchased or otherwise acquired shares of U.S. Diagnostic
securities from March 15, 1996 through
5
<PAGE>
December 23, 1996, inclusive (the "Class Period"), and who were damaged
thereby. Excluded from the Class are the defendants named herein, all officers
and directors of the Company at all relevant times, members of their immediate
families and their heirs, legal representatives, successors or assigns, and any
entity in which any defendants has or had a controlling interest.
18. 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 by ascertained through appropriate discovery,
Plaintiff believes that there are hundreds, if not thousands, of members of the
Class. During the Class Period, there were over 23 million shares of U.S.
Diagnostic common stock outstanding and actively traded on NASDAQ. Record
owners and other members of the Class may be identifies from records maintained
by U.S. Diagnostic or its transfer agent and may be notified of the pendency of
this action by mail, using the form of notice similar to that customarily used
in securities class actions.
19. Plaintiff's claims are typical of the claims of all 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.
20. Plaintiff will fairly and adequately protect the interest of the
members of the Class, and has retained counsel competent and experienced in
class and securities litigation.
6
<PAGE>
21. 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 defendants participated in and pursued the common course of
conduct complained of herein;
(c) Whether the Company's SEC filings, press releases and other
statements disseminated to the investing public and the Company's shareholders
during the Class Period misrepresented material facts about the management of
U.S. Diagnostic;
(d) Whether statements made by defendants to the investing public
during the Class Period omitted or misrepresented material facts about the
management of U.S. Diagnostic;
(e) Whether the market price of U.S. Diagnostic's common stock was
artificially inflated during the Class Period due to the material
misrepresentations and failure to correct the material misrepresentations
complanied of herein; and
(f) To what extent the members of the Class have sustained damages and
the proper measure of damages.
22. A class action is superior to all other available methods for the fair
and efficient adjudication of this controversy since joinder of all members of
the Class is impracticable. Moreover, as the damages suffered by individual
Class Members may be relatively small, the expense and burden of individual
litigation make it
7
<PAGE>
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.
FRAUD-ON-THE-MARKET DOCTRINE
----------------------------
23. Plaintiff will rely, in part, upon the presumption of reliance
established by the fraud-on-the-market doctrine. That doctrine is appropriate
here because U.S. Diagnostic's common stock traded on the NASDAQ National
Market System, a highly efficient and automated market; the trading volume of
the Company's common stock was substantial; securities analysts employed by
major brokerage firms such as Smith Barney and Bear Stearns wrote reports
evaluating the Company; and the defendants made public statements which failed
to disclose material facts regarding defendant Greenberg which influenced the
price of the Company's stock.
24. Based upon the foregoing, Plaintiff and the other members of the Class
are entitled to a presumption of reliance upon the integrity of the market for
the purpose of class certification as well as for ultimate proof of the claims
on their merits.
SUBSTANTIVE ALLEGATIONS
-----------------------
25. U.S. Diagnostic holds itself out as one of the fastest growing and
largest providers of outpatient radiology services in the United States,
operating multi-modality imaging centers. Imaging modalities include MRI,
computed tomography (CT scan), mammography, nuclear medicine, ultrasound and
traditional X-Ray. Roughly 90% of the Company's facilities provided two or more
8
<PAGE>
different types of imaging processes, MRI being the most prevalent. In terms or
revenues, the U.S. radiology market exceeded $55 billion in 1995. In terms of
sites, there are approximately 6,000 in-patient hospital locations across the
country and 2,200 freestanding imaging centers. The top three firms in the
outpatient segment of the industry account for less than ten percent of the
market.
26. As a result of the relatively fragmented nature of the industry,
consolidation, primarily through acquisitions, has been characterized as the
vehicle to growth in the industry. U.S. Diagnostic has engaged in numerous
transactions in the past few years and has been cast (in a Bear Sterns analyst
report dated December 9, 1996) as the "leading consolidator in the diagnostic
imaging marketplace."
27. The individual at the Company most responsible for the Company's
acquisition strategies and implementation was, at all times, Keith Greenberg.
Greenberg is acknowledged to have been one of the Company's co-founders.
Greenberg played a critical role in the Company's acquisitions strategies,
analyses, negotiations and deals.
28. The Company's 1995 Annual Report described defendant Greenberg as
follows under the section heading "Team Management":
Keith G. Greenberg, is a co-founder of US Diagnostic and serves as
Director of Marketing, Mergers and Acquisitions. Mr. Greenberg was
previously President of Yearwood Investments, Ltd., a New York
City-based investment banking company. Mr. Greenberg was President, CEO
and Executive Vice PResident of QTV Communications and P.O.P. Radio,
companies engaged
9
<PAGE>
in interactive communications and alternative media appliances.
29. This was the first mention by the Company of Greenberg as a co-founder
and a member of the Company's management. Greenberg's name is otherwise not
found in the Company's SEC filings, and he was never a signatory to any Company
filing. Indeed, Greenberg's name is entirely absent from the Company's annual
report on Form 10-KSB filed with the SEC for the very same period, except for
one reference to him under the heading "Consulting Agreements".
30. The Form 10-KSB filed with the SEC at the commencement of the Class
Period misleadingly described Greenberg as a consultant, notwithstanding his
much more significant role with the Company. Therewith, in other filings with
the SEC, the Company failed to described truthfully and completely the role
that Greenberg played in the Company's management.
31. The Company has, contrary to public filings, on occasion acknowledged
Greenberg as an executive in statements to the public. Such statements include:
(a) On February 24, 1995, the Company issued a press release over the
PR Newswire concerning its estimated 1994 and first quarter 1995 earnings. That
release quoted Greenberg on the Company's acquisition strategies, and
identified Greenberg as "Director of Strategic/Planning acquisitions".
(b) On August 19, 1996, Greenberg was identified in a press release
issued by the Company and disseminated by it over the Business Wire newswire
services as "responsible for USDL's Mergers and Acquisitions".
10
<PAGE>
32. On November 1, 1996, Greenberg and other executives from U.S.
Diagnostic met with securities analysts from the firm of Bear Stearns, at which
time Greenberg was held out as a member of the Company's management team.
33. At all relevant times, defendants failed to disclose Greenberg's exact
position with the Company.
34. Notwithstanding the undeniable importance of Greenberg not only to the
formation of the Company but to its key business developments and strategic
pursuits, the Company did not fairly and accurately disclose Greenberg's role
in management in any of its periodic reports filed with the SEC, or in any of
its other SEC filings, except the September 19, 1996, proxy statement and the
1995 Annual Report on Form 10-KSB. Greenberg's identity and role in management
was not revealed because Greenberg is a convicted felon, who had been sued by
the SEC in a separate civil proceeding. In addition, on September 13, 1994,
Greenberg pleaded guilty to the federal offenses of Conspiracy to Defraud the
United States and Mail Fraud. Greenberg was sentenced to thirty days
imprisonment, two years of supervised release and 300 hours of community
service. In a separate civil proceeding, on June 2, 1993, Greenberg entered
into a consent judgment in an action brought by the SEC whereby he agreed not
to violate the securities laws as part of a settlement with the Commission.
35. The criminal conviction was not publicly disclosed until December 23,
1996, when Bear Sterns issued an analyst report disclosing that it was
"Removing our Buy Rating and Discontinuing
11
<PAGE>
Coverage." This report included several revelations of material facts about
U.S. Diagnostic never previously disclosed to the public. The report stated:
We have learned information regarding the prior experiences and
background of an individual associated with U.S. Diagnostic, Inc. that
has caused us to lose confidence in our ability to assess ongoing
developments at the company. This individual, Keith Greenberg, has,
over the last year, been introduced to us and described in written
material published by [the] company as a co-founder of USDL and a
member of the management team (in the 1995 Annual Report and at
meetings with a representative of Bear Stearns on November 1, 1996). In
the September 19, 1996 proxy statement, Mr. Greenberg has been described
as providing services to U.S. Diagnostic through Coyote Consulting,
which has a five year agreement with the company. We have learned that
Mr. Greenberg plead guilty in the U.S. District Court in the Southern
District of New York on September 13, 1994 to 1) Conspiracy to Defraud
the United States and 2) Fraud and Conspiracy to Defraud. Mr. Greenberg
was sentenced to 30 days imprisonment with two years of supervised
probation on August 24, 1995 and ordered to perform 300 hours of
community services.
Since the information we have learned was not disclosed to us by the
company and we believe it is material, we have lost confidence in our
ability to assess on-going developments at U.S. Diagnostic. As a
result, we are removing our BUY rating and discontinuing coverage of
U.S. Diagnostic, Inc. The issue we have uncovered relates specifically
to prior experiences of company management. (Emphasis added.)
36. Disclosure of defendant Greenberg's criminal past and his intimate
involvement with the Company, his management of its affairs and his
communications with securities analysts, shocked the market, resulting in an
immediate and sharp decline in the Company's stock price. Thus, on December 23,
1996, the price of
12
<PAGE>
U.S. Diagnostic stock declined 2 11/16 from an opening price of 12 1/16 to
close at 9 3/8, a one day loss in value of over 22%. There was extraordinary
volume in the Company's stock, with over 4 million shares traded. Greenberg's
prior consent judgment with the SEC had never been publicly disclosed.
37. In addition, Greenberg has been the subject of a number of civil
actions alleging securities fraud and violations of the Federal Racketeer
Influenced and Corrupt Organizations Act ("RICO"). One such action, brought by
an insvestor in Amtech (a company that Greenberg was officer and director in),
resulted in a judgment on January 3, 1992, in the amount of $285,130.60.
38. The defendants knowingly and/or recklessly issued and/or participated
in the issuance of materially false and misleading statements to the investing
public as particularized above. These representations were materially false and
deceptive when made for the reasons set forth above, in that they falsely stated
and/or failed to disclose material, adverse facts about U.S. Diagnostic's
business operations and management condition, which facts were known to or
recklessly disreguarded by defendants.
39. Greenberg in fact acted as a senior executive at the Company and was a
co-founder of the Company. While SEC rules (Regulation S-K, Item 401) require
that a convicted felon disclose his criminal history when involved in a
company's management, that was never done.
40. The Company's consulting relationship with defendant Coyote was simply
a fraudulent device designed to evade the
13
<PAGE>
reporting requirements of the federal securities laws by misleadingly concealing
the truth about Greenberg's actual position at the Company. The compensation to
Greenberg under that agreement was identical to defendant Goffman's salary.
Greenberg was, in reality, a founder and senior executive at the company on a
par with Goffman, but defendants could not state that without endangering the
sale of U.S. Diagnostic securities at all or at the inflated prices at which
such securities were sold.
41. As a direct and proximate result of the above-described materially
false and misleading statements and omissions of material facts, the Company's
common stock traded at artificially inflated prices during the entire Class
Period until the time the adverse described above was finally revealed by
Bear Sterns and analyzed by the securities markets. Plaintiff and the other
members of the Class purchased or otherwise acquired U.S. Diagnostic common
securities relying upon the integrity of the market price of U.S. Diagnostic
stock and market information related to the Company, or in the alternative,
upon defendants' materially false and misleading statements. At all times
during the Class Period, Plaintiff and the Class were in ignorance of the
adverse, undisclosed information and false statements know to
defendants, and have been damaged thereby. Upon disclosure of the true facts
regarding Greenberg's history and management role with the Company, the market
valuation of the Company's stock declined precipitously. Had Plaintiff and the
other members of the Class been aware of the materially adverse information
regarding
14
<PAGE>
Greenberg not disclosed by defendants, they would not have purchased or
acquired U.S. Diagnostic's common stock at all or at the artificially inflated
prices that they did.
42. As alleged above, throughout the Class Period, defendants made a series
of materially false and misleading statements about U.S. Diagnostic's
management, and Greenberg's role in that management. Defendants failed
completely to disclose in its public filings with the SEC the background
information required to be disclosed about Greenberg's prior criminal and SEC
civil proceeding as required by Item 401, Regulation S-K, or civil judgments
against Greenberg, a fact material to public investors. These misstatements and
omission caused the market price of the Company's common stock to be
overvalued and artificially inflated at all relevant times. Had Plaintiff and
the Class known of the true circumstances surrounding U.S. Diagnostic's
management, Greenberg's role in that management and his prior criminal history,
the market price which they paid for U.S. Diagnostic common stock would have
been significantly lower.
COUNT I
-------
[AGAINST ALL DEFENDANTS FOR VIOLATIONS OF
SECTION 10(B) OF THE EXCHANGE ACT]
-----------------------------------------
43. Plaintiff realleges each and every allegation set forth above as
though fully set forth herein.
44. Each of the defendants, directly and indirectly, engaged and
participated in a continuous course of conduct to conceal adverse material
information about the management of U.S. Diagnos-
15
<PAGE>
tic, Greenberg's role in that management, the prior criminal history of
Greenberg, and his SEC injunction. In so doing, the defendants employed
devices, schemes and artifices to defraud, engaged in acts, practices, and a
course of conduct as alleged herein in an effort to hide from investors U.S.
Diagnostic's true management team, the role of Greenberg in that management
team, the prior criminal history of Greenberg and the SEC action brought
against him which resulted in an injunction. These misleading and omissive
representations constituted transactions, practices and course of business
which operated as a fraud and deceit upon the purchasers of U.S. Diagnostic
securities during the Class Period.
45. The defendants had actual knowledge of the misrepresentations and
omissions of material facts set forth herein, or acted with reckless disregard
for the trust in that they failed to ascertain and to disclose such fact,
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 U.S. Diagnostic's management and
Greenberg's role in that management from the investing public, in order to
support the artificially inflated price of the Company's common stock.
46. As a result of the dissemination of the materially false and misleading
information and the failure to disclose material facts, as set forth above, the
market prices of U.S. Diagnostic securities were artificially inflated during
the Class Period, In ignorance of the materially false and misleading nature of
the reports and
16
<PAGE>
statement described above, Plaintiff and other members of the Class relied, to
their damaged, on the reports and statements described above and/or on the
integrity of the market prices of U.S. Diagnostic securities and the
completeness and accuracy of the information disseminated to U.S.Diagnostic
investors in connection with their purchases of the Company's securities.
47. At the times of said misrepresentations and omissions, Plaintiff and
other members of the Class were ignorant of the deception, and believed the
Company's reports to be true and accurate. Plaintiff and other Class Members
could not in the exercise of reasonable diligence have known the actual facts.
In reliance on said misrepresentations and in reliance upon the superior
knowledge and expertise of defendants and on the integrity of the market,
Plaintiff and other members of the Class were induced to and did purchase U.S.
Diagnostic securities at artificially inflated prices. Had Plaintiff and other
members of the Class known the truth, they would not have taken such action.
48. By virtue of the foregoing, defendants have violated Section 10(b) of
the Exchange Act, and Rule 10b-5 promulgated thereunder.
49. Plaintiff and other members of the Class have been damaged by
defendants' violations as described in this Count and seek recovery for the
damages caused thereby.
17
<PAGE>
COUNT II
--------
[AGAINST THE INDIVIDUAL DEFENDANTS AND COYOTE FOR
VIOLATIONS OF SECTION 20(A) OF THE EXCHANGE ACT]
-------------------------------------------------
50. Plaintiff realleges each and every allegations set forth above as
through fully set forth herein.
51. This Count is brought by Plaintiff against the Individual Defendants
and Coyote with respect to the entire Class Period and on behalf of the Class.
52. By reason of their control over the operations of U.S. Diagnostic and
its SEC filings and public releases, the Individual Defendants are "controlling
persons" of the Company within the meaning of [section] 20(a) of the Exchange
Act and had the power and influence (which they exercised) to cause U.S.
Diagnostic to engage in the unlawful conduct complained of herein, and could
have prevented such violations from taking place but failed to do so.
53. By reason of these Individual Defendants and Coyote, each being a
"controlling person," as that term is defined in Section 20(a) of the Exchange
Act, they are primarily liable to Plaintiff and the Class for claims arising
under Section 10(b) of the Exchange Act alleged above, the defendants named in
this Count are secondarily liable for those primary violations pursuant to
Section 20(a) of the Exchange Act.
54. As set forth above, U.S. Diagnostic and the other defendants each
violated Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in
this Compliant. By virtue of their positions as controlling persons, all
defendants other than U.S. Diagnostic are liable pursuant to Section 20(a) of
the Exchange
18
<PAGE>
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 securities during the Class period.
WHEREFORE, Plaintiff prays for relief and judgment, as follows:
(a) Certifying this action as a class action, and certifying Plaintiff
as class representative under Rule 23 of the Federal Rules of Civil Procedure
and her counsel as class counsel;
(b) Awarding compensatory damages in favor of Plaintiff and the other
Class Members against all defendants, jointly and severally, for all damages
substained as a result of defendants' wrongdoing, in an amount to be proven at
trial, including interest thereon;
(c) Awarding Plaintiff and the Class their reasonable cost and
expenses incurred in this action, including counsel fees and expert fees; and
(d) Such other further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED
-------------------
Plaintiff hereby demand a trial by jury.
Dated: January 7, 1997
BURT & PUCILLO
By: /s/ Michael J. Pucillo
-------------------------
Michael J. Pucillo
Fla. Bar No. 261033
Wendy H. Zoberman
Fla. Bar No. 434670
222 Lakeview Avenue
Suite 300 East
19
<PAGE>
West Palm Beach, FL 33401
(561) 835-9400
WEISS & YOURMAN
Joseph H. Weiss
Molshe Balsam
319 5th Avenue
New York, NY 10016
(212) 531-4171
and
STULL STULL & BRODY
Jules Brody
6 East 45th Street
New York, NY 10017
(212) 687-7230
20
<PAGE>
DECLARATION OF PLAINTIFF SANDRA NEUMAN
TO SERVE AS CLASS REPRESENTASTIVE
1. I make this declaration pursuant to Section 101 of the Private
Securities Litigation Reform Act of 1955 and as required by section 21D(a)(2)
of Title I of the Securities Exchange Act of 1934.
2. I have reviewed the attached securities class action complaint (the
"Complaint") filed on my behalf and on behalf of all others similarly situated
and authorize its filing
3. I did not purchase the security that is the subject of the compliant at
the direction of plaintiff's counsel or in order to participate in any private
action arising under Title I of the Securities Act of 1934.
4. I am willing to serve as a respresentative party on behalf of a class as
set forth in the Compliant, including providing testimony at deposition and
trial, if necessary.
5. To the best of my current knowledge, the following are all of my
transaction in the security that is the subject of the Compliant during the
class period specified in the Compliant: I purchased 1,000 shares of common
stock of U.S. Diagnostic on December 18, 1996 at a net price of $12.42 per
share.
6. During the three year period preceding the date on which this
certification is signed, I have not sought to serve as a representative party
on behalf of a class under Title I of the Securities Exchange Act of 1934.
<PAGE>
7. I agree not to accept any payment for serving as a representative party
on behalf of the class as set forth in the Compliant, beyond Plaintiff's pro
rata share of any recovery, except as ordered or approved by the Court.
8. I make this declaration without waiver of any applicable privileges and
without waiver of any right to challenge the necessity for, or the
constitutionally of, this declaration or to object to the filing of this
declaration on any ground whatsoever.
9. The matters stated in this declaration are true to the best of my
current knowledge, information and belief.
Executed under penalty of perjury under the laws of the United States of
America
Date: January 3, 1997 /s/ Sandra Neuman
-------------------------
Sandra Neuman
<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
- -------------------------------------------------------------------------------
LYNNE M. GOLDEN, TRUSTEE, UAD 1/6/96 SUMMONS IN A CIVIL ACTION
LYNNE M. GOLDEN TRUST
individually and on behalf of a class CASE NUMBER: 97-8010
of all persons similarly situated
v.
U.S. DIAGNOSTIC INC.; JEFFREY A.
GOFFMAN; KEITH G. GREENBERG; JOSEPH
A. PAUL; ROBERT D. BURKE; AMOS F. ALMAND III
and COYOTE CONSULTING & FINANCIAL SERVICES
LLC
To: (Name and Address of Defendant)
COYOTE CONSULTING & FINANCIAL SERVICES LLC
c/o Elise Greenberg
29 Windward Isle
Palm Beach Gardens, FL 33418
YOU ARE HEREBY SUMMONED and required to file with the Clerk of this Court
and serve upon
PLAINTIFF'S ATTORNEY (Name and Address)
BURT & PUCILLO
222 Lakeview Avenue
Suite 300 East
West Palm Beach, FL 33401
(561) 835-9400
an answer to the complaint which is herewith served upon you, within 20 days
after service of this summons upon you, exclusive of the day of service. If
you fail to do so, judgment by default will be taken against you for the
relief demanded in the complaint.
/s/ Carlos Juenke January 6, 1997
- ----------------------------- -----------------------------
CLERK DATE
/s/ Irene Rivera
- -----------------------------
BY DEPUTY CLERK
<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
- -------------------------------------------------------------------------------
LYNNE M. GOLDEN, TRUSTEE, UAD 1/6/96 SUMMONS IN A CIVIL ACTION
LYNNE M. GOLDEN TRUST
individually and on behalf of a class CASE NUMBER: 97-8010
of all persons similarly situated
v.
U.S. DIAGNOSTIC INC.; JEFFREY A.
GOFFMAN; KEITH G. GREENBERG; JOSEPH
A. PAUL; ROBERT D. BURKE; AMOS F. ALMAND III
and COYOTE CONSULTING & FINANCIAL SERVICES
LLC
To: (Name and Address of Defendant)
AMOS F. ALMAND III
c/o U.S. Diagnostic Inc.
777 S. Flagler Drive
West Palm Beach, FL 33401
YOU ARE HEREBY SUMMONED and required to file with the Clerk of this Court
and serve upon
PLAINTIFF'S ATTORNEY (Name and Address)
BURT & PUCILLO
222 Lakeview Avenue
Suite 300 East
West Palm Beach, FL 33401
(561) 835-9400
an answer to the complaint which is herewith served upon you, within 20 days
after service of this summons upon you, exclusive of the day of service. If
you fail to do so, judgment by default will be taken against you for the
relief demanded in the complaint.
/s/ Carlos Juenke January 6, 1997
- ----------------------------- -----------------------------
CLERK DATE
/s/ Irene Rivera
- -----------------------------
BY DEPUTY CLERK
<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
- -------------------------------------------------------------------------------
LYNNE M. GOLDEN, TRUSTEE, UAD 1/6/96 SUMMONS IN A CIVIL ACTION
LYNNE M. GOLDEN TRUST
individually and on behalf of a class CASE NUMBER: 97-8010
of all persons similarly situated
v.
U.S. DIAGNOSTIC INC.; JEFFREY A.
GOFFMAN; KEITH G. GREENBERG; JOSEPH
A. PAUL; ROBERT D. BURKE; AMOS F. ALMAND III
and COYOTE CONSULTING & FINANCIAL SERVICES
LLC
To: (Name and Address of Defendant)
ROBERT D. BURKE
c/o U.S. Diagnostic Inc.
777 S. Flagler Drive
West Palm Beach, FL 33401
YOU ARE HEREBY SUMMONED and required to file with the Clerk of this Court
and serve upon
PLAINTIFF'S ATTORNEY (Name and Address)
BURT & PUCILLO
222 Lakeview Avenue
Suite 300 East
West Palm Beach, FL 33401
(561) 835-9400
an answer to the complaint which is herewith served upon you, within 20 days
after service of this summons upon you, exclusive of the day of service. If
you fail to do so, judgment by default will be taken against you for the
relief demanded in the complaint.
/s/ Carlos Juenke January 6, 1997
- ----------------------------- -----------------------------
CLERK DATE
/s/ Irene Rivera
- -----------------------------
BY DEPUTY CLERK
<PAGE>
BSS
U.S. District Court
Southern District of Florida (W. Palm Beach)
CIVIL DOCKET FOR CASE #: 97-CV-8010
Golden v. Lynne Golden Trust, et al Filed: 01/06/97
Assigned to: Judge William J. Zloch Jury demand: Plaintiff
Demand: $0,000 Nature of Suit: 850
Lead Docket: None Jurisdiction: Federal Question
Dkt# in other court: None
Cause: 28:1331 Fed. Question: Securities Violation
LYNNE M. GOLDEN, Trustee, UAD Michael J. Pucillo
1/6/96 [COR LD NTC]
plaintiff Wendy Hope Zoberman
[COR LD NTC]
Burt & Pucillo
222 Lakeview Avenue
Suite 300 East
West Palm Beach, FL 33401
407-835-9400
LYNNE M. GOLDEN TRUST, Michael J. Pucillo
individually and on behalf of (See above)
a class of all persons [COR LD NTC]
similarly situated Wendy Hope Zoberman
plaintiff (See above)
[COR LD NTC]
v.
U.S. DIAGNOSTIC INC.
defendant
JEFFREY A. GOFFMAN
defendant
KEITH G. GREENBERG
defendant
JOSEPH A. PAUL
defendant
ROBERT D. BURKE
Docket as of January 7, 1997 4:19 pm Page 1
<PAGE>
BSS
Proceedings include all events.
9:97cv8010 GOLDEN v. LYNNE GOLDEN TRUST, et al
defendant
AMOS F. ALMAND, III
defendant
COYOTE CONSULTING & FINANCIAL
SERVICES LLC
defendant
Docket as of January 7, 1997 4:19 pm Page 2
<PAGE>
BSS
Proceedings include all events.
9:97cv8010 Golden v. Lynne Golden Trust, et al
Lynne M. Golden, Trustee, UAD 1/6/96 ; Lynne M. Golden
Trust, individually and on behalf of a class of all persons
similarly situated
plaintiff
v.
U.S. Diagnostic Inc.; Jeffrey A. Goffman; Keith G.
Greenberg; Joseph A. Paul; Robert D. Burke; Amos F. Almand,
III; Coyote Consulting & Financial Services LLC
defendant
Docket as of January 7, 1997 4:19 pm Page 3
<PAGE>
BSS
Proceedings include all events.
9:97cv8010 Golden v. Lynne Golden Trust, et al
1/6/97 1 CLASS ACTION COMPLAINT filed; FILING FEE $150.00 RECEIPT
#705797; A-7, BSS (pa)
1/6/97 -- Magistrate identification: Magistrate Judge Barry S.
Seltzer (pa) [Edit date 01/06/97]
1/6/97 2 SUMMONS (ES) issued for U.S. Diagnostic Inc., Jeffery A.
Goffman, Keith G. Greenberg, Joseph A. Paul, Robert D.
Burke, Amos F. Almand III, Coyote Consulting (pa)
Docket as of January 7, 1997 4:19 pm Page 4
<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
- -------------------------------------------------------------------------------
LYNNE M. GOLDEN, TRUSTEE, UAD 1/6/96 SUMMONS IN A CIVIL ACTION
LYNNE M. GOLDEN TRUST
individually and on behalf of a class CASE NUMBER: 97-8010
of all persons similarly situated
v.
U.S. DIAGNOSTIC INC.; JEFFREY A.
GOFFMAN; KEITH G. GREENBERG; JOSEPH
A. PAUL; ROBERT D. BURKE; AMOS F. ALMAND III
and COYOTE CONSULTING & FINANCIAL SERVICES
LLC
To: (Name and Address of Defendant)
JOSEPH A. PAUL
c/o U.S. Diagnostic Inc.
777 S. Flagler Drive
West Palm Beach, FL 33401
YOU ARE HEREBY SUMMONED and required to file with the Clerk of this Court
and serve upon
PLAINTIFF'S ATTORNEY (Name and Address)
BURT & PUCILLO
222 Lakeview Avenue
Suite 300 East
West Palm Beach, FL 33401
(561) 835-9400
an answer to the complaint which is herewith served upon you, within 20 days
after service of this summons upon you, exclusive of the day of service. If
you fail to do so, judgment by default will be taken against you for the
relief demanded in the complaint.
/s/ Carlos Juenke January 6, 1997
- ----------------------------- -----------------------------
CLERK DATE
/s/ Irene Rivera
- -----------------------------
BY DEPUTY CLERK
<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
- -------------------------------------------------------------------------------
LYNNE M. GOLDEN, TRUSTEE, UAD 1/6/96 SUMMONS IN A CIVIL ACTION
LYNNE M. GOLDEN TRUST
individually and on behalf of a class CASE NUMBER: 97-8010
of all persons similarly situated
v.
U.S. DIAGNOSTIC INC.; JEFFREY A.
GOFFMAN; KEITH G. GREENBERG; JOSEPH
A. PAUL; ROBERT D. BURKE; AMOS F. ALMAND III
and COYOTE CONSULTING & FINANCIAL SERVICES
LLC
To: (Name and Address of Defendant)
KEITH G. GREENBERG
29 Windward Isle
Palm Beach Gardens, FL 33418
YOU ARE HEREBY SUMMONED and required to file with the Clerk of this Court
and serve upon
PLAINTIFF'S ATTORNEY (Name and Address)
BURT & PUCILLO
222 Lakeview Avenue
Suite 300 East
West Palm Beach, FL 33401
(561) 835-9400
an answer to the complaint which is herewith served upon you, within 20 days
after service of this summons upon you, exclusive of the day of service. If
you fail to do so, judgment by default will be taken against you for the
relief demanded in the complaint.
/s/ Carlos Juenke January 6, 1997
- ----------------------------- -----------------------------
CLERK DATE
/s/ Irene Rivera
- -----------------------------
BY DEPUTY CLERK
<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
- -------------------------------------------------------------------------------
LYNNE M. GOLDEN, TRUSTEE, UAD 1/6/96 SUMMONS IN A CIVIL ACTION
LYNNE M. GOLDEN TRUST
individually and on behalf of a class CASE NUMBER: 97-8010
of all persons similarly situated
v.
U.S. DIAGNOSTIC INC.; JEFFREY A.
GOFFMAN; KEITH G. GREENBERG; JOSEPH
A. PAUL; ROBERT D. BURKE; AMOS F. ALMAND III
and COYOTE CONSULTING & FINANCIAL SERVICES
LLC
To: (Name and Address of Defendant)
JEFFERY A. GOFFMAN
c/o U.S. Diagnostic Inc.
777 S. Flagler Drive
West Palm Beach, FL 33401
YOU ARE HEREBY SUMMONED and required to file with the Clerk of this Court
and serve upon
PLAINTIFF'S ATTORNEY (Name and Address)
BURT & PUCILLO
222 Lakeview Avenue
Suite 300 East
West Palm Beach, FL 33401
(561) 835-9400
an answer to the complaint which is herewith served upon you, within 20 days
after service of this summons upon you, exclusive of the day of service. If
you fail to do so, judgment by default will be taken against you for the
relief demanded in the complaint.
/s/ Carlos Juenke January 6, 1997
- ----------------------------- -----------------------------
CLERK DATE
/s/ Irene Rivera
- -----------------------------
BY DEPUTY CLERK
<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
- -------------------------------------------------------------------------------
LYNNE M. GOLDEN, TRUSTEE, UAD 1/6/96 SUMMONS IN A CIVIL ACTION
LYNNE M. GOLDEN TRUST
individually and on behalf of a class CASE NUMBER: 97-8010
of all persons similarly situated
v.
U.S. DIAGNOSTIC INC.; JEFFREY A.
GOFFMAN; KEITH G. GREENBERG; JOSEPH
A. PAUL; ROBERT D. BURKE; AMOS F. ALMAND III
and COYOTE CONSULTING & FINANCIAL SERVICES
LLC
To: (Name and Address of Defendant)
U.S. DIAGNOSTIC INC.
c/o The Prentice Hall Corporation System, Inc.
1201 Hayes Street, Suite 105
Tallahassee, FL 32301
YOU ARE HEREBY SUMMONED and required to file with the Clerk of this Court
and serve upon
PLAINTIFF'S ATTORNEY (Name and Address)
BURT & PUCILLO
222 Lakeview Avenue
Suite 300 East
West Palm Beach, FL 33401
(561) 835-9400
an answer to the complaint which is herewith served upon you, within 20 days
after service of this summons upon you, exclusive of the day of service. If
you fail to do so, judgment by default will be taken against you for the
relief demanded in the complaint.
/s/ Carlos Juenke January 6, 1997
- ----------------------------- -----------------------------
CLERK DATE
/s/ Irene Rivera
- -----------------------------
BY DEPUTY CLERK
<PAGE>
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
NORTHERN DIVISION
LYNNE M. GOLDEN, TRUSTEE, UAD CASE NO. 97-8010
1/6/96 LYNNE M. GOLDEN TRUST,
individually and on behalf
of a class of all persons
similarly situated,
Plaintiff,
v.
U.S. DIAGNOSTIC INC.; JEFFREY A.
GOFFMAN; KEITH G. GREENBERG;
JOSEPH A. PAUL; ROBERT D.
BURKE; AMOS F. ALMAND III
and COYOTE CONSULTING & FINANCIAL
SERVICES LLC,
Defendants.
CLASS ACTION COMPLAINT
Plaintiff makes the following allegations upon information and belief,
except as to allegations specifically pertaining to the plaintiff and her
counsel, based on the facts alleged below, which are predicated upon the
investigation undertaken by plaintiff's counsel, and plaintiff believes that
further substantial evidentiary support will exist for the allegations set
forth below after a reasonable opportunity for discovery.
NATURE OF THE ACTION
1. This is a class action on behalf of all purchasers of securities of
U.S. Diagnostic Inc. ("USD" or the "Company") between March 15, 1996 and
December 23, 1996, inclusive, (the "Class Period"), seeking to pursue
remedies under the Securities Exchange Act of 1934 (the "Exchange Act"). The
class action claims complain
<PAGE>
of a fraudulent scheme and deceptive course of business that injured
purchasers of USD stock during the Class Period.
2. At all relevant times, USD's management team included Keith
Greenberg--a felon who previously pled guilty to charges of Conspiracy to
Defraud the United States and Fraud and Conspiracy to Defraud. Although Mr.
Greenberg was one of the Company's founders and has functioned in a
management capacity with the Company since its inception, USD and the other
defendants have continuously failed to disclose Greenberg's criminal history
arising out of fraudulent misconduct. Indeed, a review of the Company's
various Securities and Exchange Commission ("SEC") filings indicates that the
Company is in violation of SEC rules and, with utter disregard for the
investing public, largely omitted references to Greenberg in an effort to
conceal the fact that someone with a criminal history and significant
enforcement problems with the SEC, was involved in management. On the
occasions in which Greenberg was mentioned by the Company, defendants failed
to disclose his criminal record, an obviously material fact to investors, and
a fact which reputable securities firms with which the Company deals and
members of the investing community expect to be disclosed.
3. The facts surrounding Greenberg's criminal history only came to light
by virtue of a securities analyst report dated December 23, 1996,
disseminated by the firm of Bear Stearns. This disclosure in the Bear Stearns
report and news accounts of it had the immediate effect of causing a
substantial decline in the price of USD securities, as investors recognized
the woeful inadequacy of
2
<PAGE>
the Company's previous disclosures to the public and the detrimental effect
that the immediate and obvious lack of credibility revealed in these
disclosures would have on the Company's future prospects.
4. Further investigation has revealed that, in addition to Greenberg's
criminal history, in June of 1993, the SEC obtained an Order of Permanent
Injunction against Greenberg enjoining Greenberg and those in active concert
or participation with him from, inter alia, committing fraud in the offer or
sale of any securities. Greenberg executed a Consent and Stipulation agreeing
to the entry of the Order of Permanent Injunction.
JURISDICTION AND VENUE
5. This Court has jurisdiction over the subject matter of this action
pursuant to 28 U.S.C. Section Section 1331 and 1337, and Section 27 of the
Exchange Act (15 U.S.C. Section 78aa).
6. This action arises under Sections 10(b) and 20(a) of the Exchange Act
and Rule 10b-5 promulgated thereunder (17 C.F.R. Section 240.10b-5).
7. Venue is proper in this district pursuant to Section 27 of the Exchange
Act and 28 U.S.C. Section 1391(b). USD has its corporate headquarters and
principal place of business in this District at 777 South Flagler Drive, West
Palm Beach, Florida 33401, and the acts charged herein, including the
preparation and dissemination of materially false and misleading information,
occurred in substantial part in this District.
3
<PAGE>
8. In connection with the acts alleged in this complaint, the 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.
PARTIES
9. Plaintiff Lynne M. Golden, UAD 1/6/96 Lynne M. Golden Trust, as set
forth in the accompanying Certification, purchased 1,000 shares of USD common
stock during the Class Period, and was damaged thereby.
10. Defendant USD is a Delaware corporation, which maintains its executive
offices in West Palm Beach, Florida. Prior to October, 1996, USD's name was
U.S. Diagnostic Labs, Inc. USD acquires and owns medical services facilities
including both clinical and multi-modality diagnostic facilities. The
Company's facilities are used primarily by physicians to diagnose and monitor
diseases or other medical conditions using either clinical tests or
anatomical pathology tests.
11. Defendant Jeffrey A. Goffman ("Goffman") is and at all relevant times
was Chief Executive Officer and Chairman of the Board of Directors of the
Company. Goffman is described in the Company's 1995 Annual Report as one of
the persons who "founded the Company in 1993". Pursuant to an employment
agreement with the Company, Goffman receives an annual base salary of
$185,000, and an annual incentive bonus of up to $65,000, plus other
perquisites.
4
<PAGE>
12. Defendant Keith G. Greenberg ("Greenberg") is and at all relevant
times functioned as a senior executive, Executive Vice President and Director
of Marketing, Mergers and Acquisitions of the Company. Greenberg is described
in the Company's 1995 Annual Report and a 1996 investor relations package as
one of the Company's co-founders. As detailed below, pursuant to an unusual
consulting relationship which defendants used in an effort to evade
disclosure of Greenberg's involvement with the Company, Greenberg received an
essentially identical salary and bonus package as Goffman, keeping him on a
par with Goffman. Greenberg is married to Elise Nulman Greenberg.
13. Defendant Robert D. Burke ("Burke") was President of the Company from
June 1994 until June 1996 when he resigned and became a consultant to the
Company. Burke is still being compensated pursuant to the terms of his
five-year employment agreement entered into in June 1994. Defendant Burke was
a Director of the Company from January 1994 until approximately September
1996.
14. Defendant Joseph A. Paul ("Paul") has served as President and a
Director of the Company since July 1, 1996.
15. Defendant Amos F. Almand III ("Almand") is and at all relevant times
was Senior Vice President and a Director of the Company.
16. (a) Defendant Coyote Consulting & Financial Services LLC ("Coyote") is
and at all relevant times was a Florida Limited Liability Company existing in
the State of Florida. According to a Consulting Agreement between USD and
Coyote dated December 1,
5
<PAGE>
1994 (the "1994 Coyote Consulting Agreement"), Coyote is owned by Elise
Nulman (a/k/a Elise Nulman Greenberg) and the Greenberg Trust. Coyote
maintains its principal executive offices at 29 Windward Isle, Palm Beach
Gardens, Florida 33418, which is also Keith Greenberg and Elise Nulman
Greenberg's address. According to the Company's Proxy Statement on Schedule
14A dated September 19, 1996, Coyote's consulting services have been and
continue to be provided by Keith Greenberg and Elise Nulman Greenberg.
(b) According to the Company's September 19, 1996 Proxy Statement:
In December 1994, the Company entered into a five-year consulting
agreement with Coyote . . . amended in October 1995, pursuant to which it
pays annual base consulting fees of $185,000. Coyote is also entitled to
receive a bonus of up to $65,000 if certain financial targets are met.
Coyote provides the Company with various management and consulting
services including marketing, public and financial relations, employee
benefits and due diligence services in connection with the Company's
acquisitions.
(c) The 1994 Coyote Consulting Agreement, as amended in October 1995,
provides, among other things, that "Consultant, through its various employers
shall act as a general advisor and consultant on all financial related
matters pertaining to the business of (USD)"; that USD will "reimburse the
Consultant" up to $100,000.00 per year for "expenses" incurred in hiring up
to five employees; that, additionally, "Consultant shall be reimbursed for
all medical and dental insurance premiums paid for its employees who are
providing services to (USD)," and "for all expenses for up to two
automobiles"; and that, "Consultant shall receive a finder's
6
<PAGE>
fee in cash of two percent (2%) of the aggregate purchase price of any entity
acquired by (USD) as a result of introduction by Consultant."
(d) Coyote is and at all relevant times was defendant Greenberg's alter
ego.
17. Defendants Goffman, Greenberg, Burke, Paul and Almand are referred to
herein collectively as the "Individual Defendants". As officers, directors
and/or controlling persons of a Company which is registered with the SEC
under the federal securities law, whose securities are registered with the
SEC, traded on the NASDAQ, and governed by the provisions of the federal
securities laws, the Individual Defendants and Coyote, as officers and
directors of a publicly-held company, and as controlling persons of USD, each
had a duty to disseminate promptly accurate and truthful information with
respect to the Company's control and management, and to correct any
previously issued statements from any source that was or had become
materially false or misleading, so that the market price of the Company's
publicly traded securities would be based upon truthful and accurate
information. Under rules and regulations promulgated by the SEC under the
Exchange Act, specifically Item 401 of Regulation S-K, the defendants also
had a duty to identify each of its officers, directors and significant
employees and to report with respect to each such individual and any control
person, all criminal convictions or pending criminal proceedings within the
past five years, and any order, judgment or decree enjoining such individual
from engaging in any activity in
7
<PAGE>
connection with the purchase or sale of any security or commodity or in
connection with any violation of federal or state securities laws. The
defendants' representations during the Class Period violated these specific
requirements and obligations.
18. The Individual Defendants and Coyote all 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 misleading nature.
Because of their Board membership and/or executive, managerial and
controlling positions with USD, each of the defendants had access to the
adverse non-public information about USD's management and Greenberg's role in
that management and his prior criminal conviction, SEC injunction and civil
judgments, as particularized herein and knew that these adverse facts
rendered the positive statements and omissions made by and about USD and its
management materially false and misleading.
19. The defendants, because of their positions of control and authority as
officers and/or directors or controlling persons of the Company, were able to
and did control the contents of the various quarterly and annual reports,
press releases and presentations to securities analysts pertaining to the
Company. Each defendant was provided with copies of USD press releases and
other disseminations alleged herein to be misleading prior to or shortly
after their issuance and had the ability and opportunity to prevent
8
<PAGE>
their issuance or cause them to be corrected. As a result, each of the
defendants is responsible for the accuracy of the public reports and releases
detailed herein and is therefore primarily liable for the representations
contained therein.
PLAINTIFF'S CLASS ACTION ALLEGATIONS
20. 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 or otherwise acquired shares of USD securities from
March 15, 1996 through December 23, 1996, inclusive (the "Class Period"), and
who were damaged thereby. Excluded from the Class are defendants, the
officers and directors of the Company at all relevant times, 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.
21. 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 hundreds, if not thousands, of
members of the Class. During the Class Period, there were over 23 million
shares of USD common stock outstanding and actively traded on NASDAQ, an
efficient market in which millions of shares of the Company's stock were
traded during the Class Period. Record owners and other members of the Class
may be identified from records maintained by USD or its transfer agent and
may be notified of the pendency of
9
<PAGE>
this action by mail, using the form of notice similar to that customarily
used in securities class actions.
22. 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.
23. 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. Plaintiff's interests are coincident with
and not antagonistic to absent Class Members' interests.
24. 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 defendants participated in and pursued the common course of
conduct complained of herein;
(c) Whether USD's public filings, press releases and other statements
disseminated to the investing public and the Company's shareholders during
the Class Period misrepresented or omitted material facts about the
management of USD, Greenberg's role in that management, and Greenberg's
criminal past;
(d) Whether statements made by defendants to the investing public during
the Class Period omitted or misrepresented
10
<PAGE>
material facts about the management of USD, Greenberg's role in that
management, and Greenberg's criminal past;
(e) Whether the market price of USD's securities during the Class Period
was artificially inflated due to the material misrepresentations and
omissions and failure to correct the material misrepresentations complained
of herein; and
(f) To what extent the members of the Class have sustained damages and the
proper measure of damages.
25. 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 class action.
SUBSTANTIVE ALLEGATIONS
APPLICABILITY OF PRESUMPTION OF RELIANCE:
FRAUD-ON-THE-MARKET DOCTRINE
26. Plaintiff will rely, in part, upon the presumption of reliance
established by the fraud-on-the-market doctrine in that, among other things:
(a) USD common stock met the requirements for listing, and was listed, on
the NASDAQ National Market System, a highly efficient and automated market;
11
<PAGE>
(b) As a regulated issuer, the Company filed periodic public reports with
the SEC;
(c) The trading volume of the Company's stock was substantial, reflecting
numerous trades each day;
(d) USD was followed by securities analysts employed by several major
brokerage firms who wrote reports which were distributed to the sales force
and certain customers of such firms and which were available to various
automated data retrieval services;
(e) Defendants made public statements which failed to disclose material
facts during the Class Period;
(f) The omissions and misrepresentations were material;
(g) The misrepresentations alleged would tend to induce a reasonable
investor to misjudge the value of the Company's securities; and
(h) Plaintiff and the other members of the Class purchased USD common
stock without knowledge of the omitted and misrepresented facts.
27. Based upon the foregoing, plaintiff and other members of the Class are
entitled to a presumption of reliance upon the integrity of the market for
the purpose of class certification as well as for ultimate proof of the
claims on their merits. Plaintiff will also rely alternatively and/or in part
upon the presumption of reliance established by material omissions and upon
the actual reliance of the Class Members.
12
<PAGE>
FACTUAL ALLEGATIONS
GENERAL BACKGROUND
28. USD was incorporated in Delaware on June 17, 1993. As set forth in the
Company's October 20, 1994 Prospectus, effective June 24, 1993, the Company
merged with Port Chester Distribution Services, Inc. ("Port Chester"), a New
York corporation, which was inactive and had no assets. However, the merger
resulted in the issuance to defendant Goffman and "Elise Nulman" (a/k/a Elise
Nulman Greenberg), who purportedly were shareholders of Port Chester, of
640,000 and 180,000 shares, respectively, of USD's common stock.
29. An earlier version of the October 1994 Prospectus, filed with the SEC
on or about December 23, 1993, stated that the merger with Port Chester
resulted in the issuance to defendant Goffman and "Ms. Nulman" of 800,000 and
225,000 shares, respectively, of USD's common stock. As noted in the 1993
draft Prospectus, beneficial ownership of 225,000 shares would have resulted
in Mrs. Greenberg beneficially owning, after the 1994 offering, more than 5%
of USD's outstanding stock. Because, by agreement, these shares could not be
sold for at least a period of thirteen (13) months after the offering, Elise
Greenberg's holdings would have had to be disclosed pursuant to Item 403 of
Regulation S-K, in the Company's subsequent public filings. In the final 1994
Prospectus, the number of shares reported as being issued to "Ms. Nulman" in
the Port Chester merger was reduced by 20% to 180,000 or only 4.8% after the
offering, thus eliminating the disclosure requirement.
13
<PAGE>
30. USD purports to be the fastest growing and largest provider of
outpatient radiology services in the United States, operating multi-modality
imaging centers. Imaging modalities include MRI, computed tomography (CT
scan), mammography, nuclear medicine, ultrasound and traditional X-Ray.
Roughly 90% of the Company's facilities provide two or more different types
of imaging processes, with MRI being the most prevalent.
31. This imaging industry is characterized as large and fragmented. In
terms of revenues, the entire radiology market exceeded $55 billion in 1995.
In terms of sites, there are approximately 6,000 in-patient hospital
locations across the country and 2,200 freestanding imaging centers. The top
three firms in the outpatient segment of the industry account for less than
ten percent of the market.
32. As a result of this structure, the consolidation of the industry,
primarily through acquisitions, has been characterized as the vehicle to
growth in the industry. USD has engaged in at least twenty-three (23)
transactions since October 1993, and has been cast (in a Bear Stearns analyst
report dated December 9, 1996) as the "leading consolidator in the diagnostic
imaging marketplace."
DEFENDANT GREENBERG'S SIGNIFICANT
INVOLVEMENT WITH THE COMPANY
33. The person at the Company most responsible for the Company's
acquisition strategies and implementation was, at all relevant times, Keith
Greenberg. Greenberg, who is one of the Company's co-founders, has always
(except for one brief 30 day period he apparently spent in jail) played a
crucial role in the
14
<PAGE>
Company's acquisitions strategies, analyses, negotiations and deals. In the
Company's 1995 Annual Report--one of the few places in which the Company
admits that it has someone named Greenberg associated with it--Greenberg is
described as follows under the heading "Team Management" (at page 7):
Keith G. Greenberg, is a co-founder of US Diagnostic and serves as
Director of Marketing, mergers and Acquisitions. Mr. Greenberg was
previously President of Yearwood Investments, Ltd., a New York City-based
investment banking company. Mr. Greenberg was President, CEO and Executive
Vice President of QTV Communications and P.O.P. Radio, companies engaged
in interactive communications and alternative media appliances.
34. Notwithstanding this identification of Greenberg as one of the six
members of the Company's "senior management team", and his obvious importance
to the Company's primary business objective--acquisitions--Greenberg's name
is otherwise non-existent in the Company's SEC filings, and he is never a
signatory to any Company filing. Indeed, Greenberg's name is entirely absent
from the Company's annual report on Form 10-KSB for the very same period
except in one oblique reference under the heading "Consulting Agreements".
35. Included in a May 1996 investor relations package is a document on
U.S. Diagnostic Labs, Inc. stationery which contains the heading "Directors
and Executive Officers." The document lists "Keith Greenberg 37 Executive
Vice President," among those listed following the sentence "The Directors and
Executive Officers of the Company are as follows:". A short biography is
given for each
15
<PAGE>
person listed in the roster of "Directors and Executive Officers," and the
document states in part:
Keith G. Greenberg, co-founder of USDL and a consultant since the
company's inception, became full time Executive Vice-President in
December, 1994. Greenberg was previously president of Yearwood
Investments, Ltd., a New York City-based investment banking company, where
he was responsible for financing and consulting for companies engaged in
energy, recycling, and retailing. Prior to 1990, Greenberg was President
and CEO of QTV Communications and Amtech, companies engaged in their
introduction, design and development of interactive communications and
alternative media applications in conjunction with such companies as
Host/Marriott, Hertz, Esquire Magazine, NYNEX, CNBC, and Liberty Travel.
In 1985, Greenberg co-founded and was Executive Vice President of P.O.P.
Radio Inc., a pioneer of point of purchase advertising. P.O.P. is used in
most major supermarkets and drug chains. Initially, Greenberg was a CPA
employed by a national accounting firm.
36. While noting Greenberg's position as President, CEO and Executive Vice
President of QTV Communications, defendants have never disclosed that on
February 20, 1996, a complaint was filed in federal court in New York by an
investor in QTV against Greenberg, QTV and others alleging violations of the
Federal Racketeer Influenced and Corrupt Organizations Act ("RICO"),
including securities fraud, mail fraud and wire fraud, and that complaint
resulted in a default judgment being entered against Greenberg and the other
defendants on November 8, 1996, for more than $1 million.
37. Defendants have also never disclosed that on December 11, 1990, a
complaint was filed in federal court in New York by an investor in Amtech
against Greenberg, Amtech, QTV and others
16
<PAGE>
alleging violations of Sections 5 and 12(2) of the Securities Act of 1933
("Securities Act") and Section 10b of the Exchange Act and Rule 10b-5
promulgated thereunder, as well as common law fraud and other causes of
action, and that that complaint resulted in a default judgment being entered
against Greenberg and QTV on January 3, 1992 in the amount of $285,130.60.
38. Each of the following documents filed with the SEC during the Class
Period falsely and misleadingly excluded clear identifying references to
Greenberg, notwithstanding his obviously significant executive role with the
Company:
(a) The Company's Annual Report for the period ended December 31, 1995, on
Form 10-KSB filed on or about March 15, 1996, signed by defendants Goffman,
Burke and Almand, which includes a section identifying Directors, Executive
Officers, Promoters and Control Persons at pages 21-22.
(b) The Company's Registration Statement on Form S-3 filed on or about
April 18, 1996, relating to the registration for sale of shares and warrants
of several "selling shareholders", signed by defendants Goffman, Burke and
Almand.
(c) The Company's Annual Report to shareholders disseminated on or about
April 26, 1996.
(d) The Company's Quarterly Report for the period ending March 31, 1996,
on Form 10-Q, filed on or about May 15, 1996, and signed by defendant
Goffman.
17
<PAGE>
(e) The Company's Quarterly Report for the period ending June 30, 1996, on
Form 10-Q, filed on or about August 14, 1996, and signed by defendant
Goffman.
(f) The Company's Proxy Statement on Schedule 14A, signed by Goffman and
filed on or about August 19, 1996.
(g) The Company's Quarterly Report for the period ending September 30,
1996, on Form 10-Q, filed on or about November 14, 1996, and signed by
defendant Goffman.
39. Nevertheless, the Company has occasionally identified Greenberg as one
of its executives in statements to the public:
(a) On February 24, 1995, the Company issued a press release over the PR
Newswire concerning its estimated 1994 and first quarter 1995 earnings. That
press release quoted Greenberg on the Company's acquisition strategies, and
identified Greenberg as "Director of Strategic/Planning acquisitions".
(b) A September 8, 1995 article on USD in the South Florida Business
Journal identifies Greenberg as "the executive vice president" of USD and
quotes him at length and repeatedly in this capacity. According to the
article:
Greenberg got into the business with Jeffrey Goffman, who is chairman of
the board and chief financial officer. Both were, Greenberg said, "two
businessmen who didn't know imaging."
The article includes many quotations from Greenberg, referring to the Company
and himself collectively as one (e.g. "There are 3000 outpatient diagnostic
imaging centers in the U.S. We don't expect to own all 3,000 of them. But a
company that continues to grow its
18
<PAGE>
bottom line and have access to capital, we think has a unique opportunity";
"our philosophy has not just been to hand someone a couple of million dollars
and part company" (emphasis added)).
(c) On February 26, 1996, Greenberg was identified and referred to as the
Company's "executive vice president" in an article about USD's acquisition of
a facility in Charleston, South Carolina in the Charleston Post and Courier.
(d) On August 19 and 28, 1996, Greenberg was identified in press releases
issued by the Company and disseminated by it over the Business Wire newswire
service as "responsible for USDL's Mergers and Acquisitions".
(e) On November 1, 1996, Greenberg and other executives from USD met with
securities analysts from the firm of Bear Stearns, at which time Greenberg
was represented to be a member of the Company's management team.
40. At all relevant times, defendants failed to disclose Greenberg's exact
position with the Company.
41. Notwithstanding the undeniable importance of Greenberg, not only to
the formation of the Company but to its key business developments and
strategic pursuits, the Company did not identify Greenberg in any of its
periodic reports filed with the SEC, or in any of its other SEC filings,
except the September 19, 1996, proxy statement and the 1995 report on Form
10-KSB. As explained below, the reason for this deception is now obvious:
Greenberg is a convicted felon. On September 13, 1994, Greenberg pleaded
guilty to the federal offenses of Conspiracy to Defraud the United States
19
<PAGE>
and Fraud and Conspiracy to Defraud. Greenberg was sentenced to thirty days
imprisonment, two years of supervised release and 300 hours of community
service. Greenberg was also the subject of a civil SEC action which charged
Greenberg with aiding and abetting violations of Sections 17(a) (1), (2), and
(3) of the Securities Act and Section 10(b) of the Exchange Act in connection
with Greenberg's position as Chief Executive Officer of Amtech, another
publicly-held corporation, which SEC action resulted in the Order of
Permanent Injunction described above.
42. Greenberg's criminal past did not come to light until December 23,
1996, when Bear Stearns disseminated an analyst report disclosing that it was
"Removing our Buy Rating and Discontinuing Coverage." This report included
several revelations of material facts about Greenberg never previously
disclosed. The report stated in pertinent part:
We have learned information regarding the prior experiences and background
of an individual associated with U.S. Diagnostic, Inc. that has caused us
to lose confidence in our ability to access ongoing developments at the
company. This individual, Keith Greenberg, has, over the last year, been
introduced to us and described in written material published by (the)
company as a co-founder of USDL and a member of the management team (in
the 1995 Annual Report and at meetings with a representative of Bear
Stearns on November 1, 1996). In the September 19, 1996 proxy statement,
Mr. Greenberg has been described as providing services to U.S. Diagnostic
through Coyote Consulting, which has a five year agreement with the
company. We have learned that Mr. Greenberg plead guilty in the U.S.
District Court in the Southern District of New York on September 13, 1994
to 1) Conspiracy to Defraud the United States and 2) Fraud and Conspiracy
to Defraud. Mr. Greenberg was sentenced to 30
20
<PAGE>
days imprisonment with two years of supervised probation on August 24,
1995 and ordered to perform 300 hours of community service.
Since the information we have learned was not disclosed to us by the
company and we believe it is material, we have lost confidence in our
ability to assess on-going developments at U.S. Diagnostic. As a result,
we are removing our BUY rating and discontinuing coverage of U.S.
Diagnostic, Inc. The issue we have uncovered relates specifically to prior
experiences of company management.
43. Disclosure of defendant Greenberg's criminal past and his intimate
involvement with the Company, his management of its affairs and his
communications with securities analysts, shocked the market, resulting in an
immediate and sharp decline in the Company's stock price. Thus, on December
23, 1996, the price of USD stock declined 2 11/16 from an opening price of 12
1/16 to close at 9 3/8, a one day loss in value of over 22%, on exceptionally
heavy volume of over 4 million shares. The Order of Permanent Injunction
obtained by the SEC has never been disclosed by USD.
DEFENDANTS MISREPRESENTED
AND FAILED TO DISCLOSE
MATERIAL FACTS
44. In knowing or reckless disregard of the truth and/or as part of their
ongoing efforts to continue the illusion of USD's managerial quality,
defendants continued to issue and/or participate in the issuance of
materially false and misleading statements to the investing public as
particularized above. These representations were materially false and
misleading when made for the reasons set forth above and in that they falsely
stated and/or failed to disclose the following material, adverse facts about
21
<PAGE>
USD's management, which facts were known to or recklessly disregarded by
defendants:
(a) That defendant Greenberg functioned as a senior executive at the
Company and was a key and founding member of the Company's management team;
(b) That defendant Greenberg is a convicted felon who pleaded guilty to
the federal crimes of Conspiracy to Defraud the United States and Fraud and
Conspiracy to Defraud;
(c) That defendant Greenberg is subject to and consented to a 1993 Order
of Permanent Injunction resulting from an SEC action which charged Greenberg
with aiding and abetting securities fraud, and pursuant to which Greenberg
agreed not to engage directly or indirectly in securities fraud;
(d) That at least two default judgments totaling more than $1 million have
been entered against Greenberg as a result of complaints filed by investors
in companies headed by Greenberg, which complaints alleged, inter alia,
securities fraud;
(e) That at all relevant times the Company misrepresented who was in its
management, who held what precise positions and the exact nature of
Greenberg's relationship with the Company;
(f) That the Company's purported consulting relationship with defendant
Coyote was nothing more than a sham designed to evade the important reporting
requirements of the federal securities laws;
(g) That the Company's purported consulting relationship with defendant
Coyote, which resulted in payments to Greenberg
22
<PAGE>
which were identical in amount to payments made to defendant Goffman as
salary, made Greenberg a continuing senior executive at the Company on a par
with Goffman, without including Greenberg's name on the Company's books and
records;
(h) That the Company's relationships with investors, securities analysts
and other members of the investment community were at all relevant times in
serious jeopardy because, upon discovery of the above concealed facts, the
Company's credibility would be immediately and irreparably damaged; and
(i) That the integrity of Company's public filings and statements was at
all relevant times materially impaired.
45. The market for USD's common stock was open, well-developed and
efficient at all relevant times. As a result of the above-described false and
misleading statements and failures to disclose the full truth about USD, its
management, Greenberg's role in that management and Greenberg's criminal
past, the Company's common stock traded at artificially inflated prices
during the entire Class Period until the time the adverse information
described above was finally provided to and digested by the securities
market. Plaintiff and other members of the Class purchased or otherwise
acquired USD common stock relying upon the integrity of the market price of
USD stock and market information related to the Company, or in the
alternative, upon defendants' false and misleading statements, and in
ignorance of the adverse undisclosed information and false statements known
to defendants, and have been damaged thereby. Upon disclosure of the true
facts
23
<PAGE>
regarding the Company, the market valuation of the Company's stock
declined precipitously. Had plaintiff and other members of the Class known of
the materially adverse information not disclosed by defendants, they would
not have purchased or acquired USD's common stock at the artificially
inflated prices that they did.
46. At all relevant times, the misrepresentations and omissions
particularized in this complain 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 statements and
omissions about USD's management and Greenberg's role in that management.
These misstatements and omissions caused the Company's common stock to be
overvalued and artificially inflated at all relevant times. Had plaintiff and
the Class known the trust about Greenberg's role in USD's management and his
prior criminal conviction, permanent injunction and civil judgments, the
price at which they purchased USD's common stock, if they invested at all,
would have been significantly lower.
COUNT I
[AGAINST ALL DEFENDANTS FOR VIOLATIONS OF
SECTION 10(b) Of The Exchange Act]
47. Plaintiff repeats and realleges each and every allegation set forth
above.
48. The 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 management of USD, Greenberg's role
therein and his criminal past as well as a SEC injunction and civil judgment
being entered against him in connection with complaints by investors alleging
securities fraud, as specified herein. The 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 conceal, inter alia, USD's true management
and Greenberg's role in that management as well as Greenberg's prior criminal
history and SEC injunction, 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 in the light of
the circumstances under which they were made, not misleading, and engaged in
transactions, practices and a course of business which operated as a fraud and
deceit upon the purchasers of USD securities during the Class Period.
49. 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 USD's true
management, Greenberg's
24
<PAGE>
role in that management and Greenberg's past from the investing public and
supporting the artificially inflated price of its stock.
50. 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 USD securities were artificially inflated during
the Class Period. In ignorance of the materially false and misleading nature
of the reports and statements described above, plaintiff and other members of
the Class relied, to their damage, on the reports and statements described
above and/or on the integrity of the market prices of USD securities and the
completeness and accuracy of the information disseminated to USD investors in
connection with their purchases of the Company's securities.
51. At the times of said misrepresentations and omissions, plaintiff and
other members of the Class were ignorant of their falsity, and believed them
to be true. In reliance on said misrepresentations and in reliance upon the
superior knowledge and expertise of defendants and on the integrity of the
market, plaintiff and other members of the Class were induced to and did
purchase USD securities at artificially inflated prices. Had plaintiff and
other members of the Class known the truth, they would not have taken such
action.
52. By virtue of the foregoing, defendants have violated Section 10(b) of
the Exchange Act, and Rule 10b-5 promulgated thereunder of the Exchange Act.
25
<PAGE>
53. Plaintiff and other members of the Class have been damaged by
defendants' violations as described in this Count and seek recovery for the
damages caused thereby.
COUNT II
[AGAINST THE INDIVIDUAL DEFENDANTS AND COYOTE FOR VIOLATIONS OF SECTION 20(a)
Of The Exchange Act]
54. Plaintiff repeats and realleges each and every allegation made above.
55. By reason of their control over the operations of USD, the Individual
Defendants and Coyote, as Greenberg's alter ego, are "controlling persons" of
the Company within the meaning of (Section) 20(a) of the Exchange Act and had
the requisite power and influence (which they exercised) to cause USD to
engage in the unlawful conduct complained of herein, and could have prevented
such violations from taking place but failed to do so.
56. By reason of these Individual Defendants and Coyote, as Greenberg's
alter ego, each being a "controlling person," as that term is defined in
Section 20(a) of the Exchange Act, of other persons primarily liable to
plaintiff and the Class pursuant to the claims arising under Section 10(b) of
the Exchange Act alleged above, the defendants named in this Count are
secondarily liable for those primary violations pursuant to Section 20(a) of
the Exchange Act.
57. As set forth above, USD and the other defendants each violated Section
10(b) and Rule 10b-5 by their acts and omissions as alleged in this
Complaint. By virtue of their positions as
26
<PAGE>
controlling persons, all defendants other than USD are liable pursuant to
Section 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
securities during the Class Period.
WHEREFORE, plaintiff prays for relief and judgment, as follows:
(a) Determining that this action is a proper class action, certifying
plaintiff as class representative under Rule 23 of the Federal Rules of Civil
Procedure and her counsel as class counsel;
(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 plaintiff and the Class their reasonable costs and expenses
incurred in this action, including counsel fees and expert fees; and
(d) Such other and further relief as the Court may deem just and proper.
27
<PAGE>
JURY TRIAL DEMANDED
Plaintiff demands a trial by jury.
Dated: January 6, 1997
BURT & PUCILLO
By: /s/ Michael J. Pucillo
-------------------------------
Michael J. Pucillo
Fla. Bar No. 261033
Wendy H. Zoberman
Fla. Bar No. 434670
222 Lakeview Avenue
Suite 300 East
West Palm Beach, FL 33401
(561) 835-9400
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
David J. Bershad
Steven G. Schulman
Ralph M. Stone
One Pennsylvania Plaza
49th Floor
New York, NY 10119
(212) 594-5300
-and -
STARR & HOLMAN, LLP
Zachary Alan Starr
Jeremy Pull
10 East 40th Street
New York, NY 10016
(212) 684-6442
28
<PAGE>
REPRESENTATIVE PLAINTIFF'S CERTIFICATION
I, Lynne M. Golden, on behalf of the Lynne M. Golden Trust, hereby certify
that:
1. I have reviewed the Complaint in this class action and have authorized
the filing thereof by my attorneys, Starr & Holman, LLP.
2. I did not purchase any shares of the common stock of U.S. Diagnostic
Inc., the subject of the Complaint, at the request or direction of my counsel
or in order to participate in this private action.
3. I am willing to serve as a representative plaintiff on behalf of the
class defined in the Complaint, including providing testimony at deposition
and trial, if necessary.
4. I am presently aware of the following transactions involving the common
stock of U.S. Diagnostic Inc. during the Class Period defined in the
Complaint:
<TABLE>
<CAPTION>
TYPE OF TRANSACTION TRADE DATE NO. OF SHARES PRICE
- ------------------- ------------ --------------- -------
<S> <C> <C> <C>
Purchase 6/14/96 1000 14
Sale 12/23/96 1000 9 5/8
</TABLE>
5. During the three years preceding the date of this certification, I have
not sought to serve as a representative plaintiff on behalf of a class under
the federal securities laws.
6. I will not accept payment for serving as a representative plaintiff on
behalf of the class beyond my pro rata share of any recovery, except as
ordered or approved by the Court.
29
<PAGE>
7. Nothing herein shall be construed to be or constitute a waiver of my
attorney-client privilege.
/s/ Lynne M. Golden
-----------------------------------
Lynne M. Golden
Sworn to and subscribed
before me this 3rd day
of January, 1997
/s/ Martha Ramirez
- -----------------------
Notary Public
[Notary Public Stamp]
30
<PAGE>
CIVIL COVER SHEET
The JS-44 civil cover sheet and the information contained herein neither
replace nor supplement the filing and service of pleading or other papers as
required by law, except as provided by local rules of court. This form,
approved by the Judicial Conference of the United States in September 1974, is
required for the use of the Clerk of Court for the purpose of initiating the
civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.)
I(a) PLAINTIFFS : DEFENDANTS
:
Lynne M. Golden, Trustee, UAD 1/6/96 : U.S. Diagnostic Inc.; Jeffrey A.
Lynne M. Golden Trust, : Goffman; Keith G. Greenberg; Joseph A.
: Paul; Robert D. Burke; Amos F. Almand
: III and Coyote Consulting & Financial
: Services LLC
:
(b) COUNTY OF RESIDENCE OF FIRST : COUNTY OF RESIDENCE OF FIRST LISTED
LISTED PLAINTIFF : DEFENDANT Palm Beach
----------------- : -------------------------
(EXCEPT IN U.S. PLAINTIFF CASES) : (IN U.S. PLAINTIFF CASES ONLY)
9:97cv8010/Zloch/BSS : NOTE: IN LAND CONDEMNATION CASES, USE
: THE LOCATION OF THE TRACT OF LAND
: INVOLVED
- -------------------------------------------------------------------------------
(c) ATTORNEYS (FIRM NAME, ADDRESS, AND : ATTORNEYS (IF KNOWN)
TELEPHONE NUMBER) :
:
Michael J. Pucillo, Esq., Burt & :
Pucillo, :
222 Lakeview Avenue, #300 East, West :
Palm Beach, FL 33401, 561/835-9400 :
- -------------------------------------------------------------------------------
(d) CIRCLE COUNTY WHERE ACTION AROSE:
DADE, MONROE, BROWARD, PALM BEACH, MARTIN, ST. LUCIE, INDIAN RIVER,
OKEECHOBEE, HIGHLANDS
- -------------------------------------------------------------------------------
II. BASIS OF JURISDICTION
(PLACE AN X ONE BOX ONLY)
[ ] 1. U.S. Government [X] 3. Federal Question
Plaintiff (U.S. Government Not a Party)
[ ] 2. U.S. Government [ ] 4. Diversity
Defendant (Indicate Categories of Parties in
Item III)
- -------------------------------------------------------------------------------
III. CITIZENSHIP OF PRINCIPAL PARTIES
(For Diversity Case Only)
PTF DEF
Citizen of This State [ ] 1 [ ] 1
Citizen of Another State [ ] 2 [ ] 2
Citizen or Subject of a Foreign Country [ ] 3 [ ] 3
(PLACE AN X IN ONE BOX FOR PLAINTIFF
AND ONE BOX FOR DEFENDANT)
Incorporated of Principal Place of
Business in This State [ ] 4 [ ] 4
Incorporated and Principal Place of
Business in Another State [ ] 5 [ ] 5
Foreign Nation [ ] 6 [ ] 6
- -------------------------------------------------------------------------------
IV. CAUSE OF ACTION (CITE THE CIVIL STATUTE UNDER WHICH YOU ARE FILING
AND WRITE A BRIEF STATEMENT OF CAUSE.
DO NOT CITE JURISDICTIONAL STATUTES UNLESS DIVERSITY.)
15 USC Sections 78j(b) and 78t(a)
IVa. 10 days estimated (for both sides) to try entire case
- -------------------------------------------------------------------------------
V. NATURE OF SUIT (PLACE AN X IN ONE BOX ONLY)
<PAGE>
- -------------------------------------------------------------------------------
A CONTACT A REAL PROPERTY
- -------------------------------------------------------------------------------
[ ] 110 Insurance : [ ] 210 Land Contamination
:
[ ] 120 Marine : [ ] 220 Foreclosures B
:
[ ] 130 Miller Act : [ ] 230 Rent Lease and Treatment
:
[ ] 140 Negotiable Investment : [ ] 240 Tests to Land
:
[ ] 150 Recovery of Overpayments : [ ] 245 Test Product Liability
& Enforcement of Judgment :
: [ ] 290 All Other Real Property
[ ] 151 Medicare Act :
:
[ ] 152 Recovery of Defaulted Student :
Loans (Exit Veterans) B :
:
[ ] 153 Recovery of Overpayment of :
Veteran's Benefits B :
:
[ ] 160 Stockholder's Suits :
:
[ ] 180 Other Contract :
:
[ ] 195 Contract Product Liability :
- -------------------------------------------------------------------------------
A TORTS
- -------------------------------------------------------------------------------
PERSONAL INJURY
[ ] 310 Airplane [ ] 362 Personal Injury-Med Malpractice
[ ] 315 Airplane Product Liability [ ] 366 Personal Injury-Product
Liability
[ ] 320 Assault, Libel & Slander [ ] 368 Ambulance Personnel
Injury Product Liability
[ ] 330 Federal Employers Liability
PERSONAL PROPERTY
[ ] 340 Marine [ ] 370 Other Fraud
[ ] 345 Marine Product Liability [ ] 371 Trust in Landing B
[ ] 350 Motor Vehicle [ ] 380 Other Personnel
Property Damage
[ ] 355 Motor Vehicle Product
Liability [ ] 385 Property Damage
Product Liability
[ ] 360 Other Personal Injury
- -------------------------------------------------------------------------------
A CIVIL RIGHTS : B PRISONER PETITIONS
- -------------------------------------------------------------------------------
[ ] 441 Voting : [ ] 510 Motions to Vacate Sentence
:
[ ] 442 Employment : Habeas Corpus
:
[ ] 443 Housing/Accommodations : [ ] 530 General
:
[ ] 444 Welfare : [ ] 535 Death Penalty
:
[ ] 445 Other Civil Rights : [ ] 540 Manufacture & Other
:
: [ ] 550 Civil Rights
: A or B
- -------------------------------------------------------------------------------
B FORFEITURE PENALTY : A BANKRUPTCY
- -------------------------------------------------------------------------------
[ ] 610 Agriculture : [ ] 422 Appeal 28 USC 158
:
[ ] 620 Other Food and Drug : [ ] 423 Withdrawal 28 USC 157
:----------------------------------------
[ ] 625 Drug Related Seizure of : A PROPERTY RIGHTS
Property 21 USC 821 :----------------------------------------
: [ ] 820 Copyrights
[ ] 630 Liquor Laws :
: [ ] 830 Patent
[ ] 640 R.R. & Truck :
: [ ] 840 Trademark
[ ] 650 Airline Reps :----------------------------------------
: B SOCIAL SECURITY
[ ] 680 Occupational Safety/Health :----------------------------------------
: [ ] 861 MIA (1395A)
[ ] 690 Other :
- --------------------------------------: [ ] 862 Black Lung (923)
A LABOR :
- --------------------------------------: [ ] 863 DIWC, DIWW (405(g))
[ ] 710 Fair Labor Standards Act :
: [ ] 864 S.51D Title XVI
[ ] 720 Labor Management Relations B :
: [ ] 825 RSI (405(g))
[ ] 730 Labor Management :----------------------------------------
Reporting and Disclosure Act : A FEDERAL TAX SUITS
:----------------------------------------
[ ] 740 Railway Labor Act :[ ] 870 Taxes (U.S. Parent or
: Overseas)
[ ] 790 Other Labor Litigation :
:[ ] 871 IRS-Third Party 26 USC 7609
[ ] 791 Employee Rgt. Inc. Security :
Act B :
<PAGE>
- -------------------------------------------------------------------------------
A OTHER STATUS
- -------------------------------------------------------------------------------
[ ] 400 States Reappointment
[ ] 410 Antitrust
[ ] 430 Banks and Banking
[ ] 450 Commerce/ICC Rates etc. B
[ ] 460 Deportation
[ ] 470 Racketeer Influenced and Corrupt Organizations
[ ] 610 Selective Service
[ ] 650 Securities Commission Exchange
[ ] 675 Currencies Exchange 12USCJ410
[ ] 891 Agricultural Acts
[ ] 892 Economic Sublimation Act
[ ] 893 Environmental Matters
[ ] 894 Energy Allocation Act
[ ] 895 Freedom of Information Act
[ ] 900 Appeal of Free Determination Under Equal Access to Justice
[ ] 950 Constitutionality of State Statutes
[ ] 990 Other Statutory Actions A or B
- -------------------------------------------------------------------------------
VI. ORIGIN (PLACE AN X IN ONE BOX ONLY)
[X] 1. Original [ ] 4. Related [ ] 7. Appeal to District
Proceeding Judge from
[ ] 5. Transferred from Inadequate Judgment
[ ] 2. Removed From another district
State Court (Specify)
[ ] 3. Remanded from [ ] 6. Multidistrict litigation
Appellale Court
- -------------------------------------------------------------------------------
VII. REQUESTED CHECK IF THIS IS A CLASS ACTION DEMAND S
IN COMPLAINT [X] UNDER F.A.C.P. 20
[ ] Check YES only if demanded in Complaint: [X] YES
JURY DEMAND: [ ] NO
- -------------------------------------------------------------------------------
VIII. RELATED (See Instructions):
CASE(S) IF ANY
JUDGE DOCKET NUMBER
-------------- ---------------
- -------------------------------------------------------------------------------
DATE SIGNATURE OF ATTORNEY OF RECORD
1/6/97 /s/ Michael J. Pucillo Michael J. Pucillo
- -------------------------------------------------------------------------------
UNITED STATES DISTRICT COURT : FOR OFFICE USE ONLY:
Receipt No: 705797 Amount: 150.00
----------- ------------
Date Paid: 1/6/97 Mlfp:
------------ --------------
<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
- -------------------------------------------------------------------------------
MURIEL EDELSTEIN SUMMONS IN A CIVIL ACTION
CASE NUMBER: 97-8011
V.
U.S. DIAGNOSTIC INC., JEFFREY A.
GOFFMAN, JOSEPH A. PAUL, DR. ROBERT
D. BURKE, AND KEITH G. GREENBERG
TO: (NAME AND ADDRESS OF DEFENDANT)
U.S. DIAGNOSTIC INC.
c/o The Prentice Hall Corporation System, Inc.
1201 Hayes St., Suite 105
Tallahassee, FL 32301 or 777 S. Flagler Drive
West Palm Beach, FL
YOU ARE HEREBY SUMMONED and required to file with the Clerk of this Court
and serve upon
PLAINTIFF'S ATTORNEY (name and address)
BURT & PUCILLO
222 Lakeview Avenue
Suite 300 East
West Palm Beach, FL 33401
(561) 835-9400
an answer to the complaint which is herewith served upon you, within 20 days
after service of this summons upon you, exclusive of the day of service. If
you fail to do so, judgment by default will be taken against you for the relief
demanded in the complaint.
JAN 6, 1997
- -------------------------------------- ------------------------------------
CLERK DATE
/s/ Irene Revera
- --------------------------------------
BY DEPUTY CLERK
<PAGE>
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA
NORTHERN DIVISION
- -------------------------------------
MURIEL EDELSTEIN,
CIVIL ACTION NO. 97-8011
Plaintiff, CIV-RYSKAMP
MAGISTRATE JUDGE VITUNAC
- against - COMPLAINT-CLASS ACTION
U.S. DIAGNOSTIC INC., JEFFREY A.
GOFFMAN, JOSEPH A. PAUL, DR. ROBERT D. JURY TRIAL DEMANDED
BURKE, and KEITH G. GREENBERG,
Defendants.
- --------------------------------------
Plaintiff, Muriel Edelstein, individually and on behalf of all others
similarly situated, by her attorneys, alleges the following upon information
and belief, except as to allegations specifically pertaining to plaintiff
and her counsel, based upon the facts alleged below, which are predicated upon,
among other things, a review of public filings by the corporate defendant
with the United States Securities and Exchange Commission ("SEC"), securities
analysts' reports and advisories about the Company, press releases issued by
the Company and media reports about the Company.
NATURE OF THE ACTION
--------------------
1. Plaintiff, Muriel Edelstein, brings this action as a class action
on behalf of herself and all other persons or entities who purchased the stock
of U.S. Diagnostic Inc. ("U.S. Diagnostic" or "USDL" or the "Company"),
during the period beginning on October 20, 1994 through December 22, 1996,
inclusive (the "Class Period"), to recover damages caused
to the Class
<PAGE>
by defendants' violations of the federal securities laws. The suit alleges
a scheme to defraud or deceive purchasers of U.S. Diagnostic common stock
through defendants' nondisclosure and misrepresentation of information
concerning the criminal wrongdoing of Keith G. Greenberg, a co-founder of
U.S. Diagnostic and a member of its senior management team. This scheme,
inter alia, artificially inflated the price of U.S. Diagnostic common stock
and enabled defendants to complete public offerings of its common stock
and redeem its Class A and B Warrants, by which U.S. Diagnostic raised
cover $100 million.
JURISDICTION AND VENUE
----------------------
2. This action arises under Sections 10(b) and 20(a) of the Securities
and Exchange Act of 1934 (the "Exchange Act"),
15 U.S.C. sections 78j(b) and 78t(a),
and the rules and regulations promulgated thereunder, including S.E.C. Rule
10b-5, 17 C.F.R. 240.10b-5.
3. This Court has jurisdiction of this action under Section 27 of the
Exchange Act and 15 U.S.C. section 78aa, 28 U.S.C. section 1331.
4. Venue is proper in this District pursuant to Section 27 of the Exchange
Act, and 28 U.S.C. section 1391(b). Many of the acts alleged herein,
including the dissemination to the investing public of false and
misleading statements, occurred in substantial part in this District.
In addition, defendants' principal place of business and executive
offices are located in this District.
-2-
<PAGE>
5. In connection with the acts and conduct complained of, defendants,
directly or indirectly, used the means and instrumentalities of interstate
commerce, including the mails, interstate telephone communications, and the
facilities of a national securities exchange.
CLASS ACTION ALLEGATIONS
-------------------------
6. Plaintiff brings this action as a class action pursuant to Rule 23 of
the Federal Rules of Civil Procedure on behalf of a class (the "Class")
consisting of all persons who purchased shares of U.S. Diagnostic common stock
on the open market during the Class Period. Excluded from the Class are the
defendants herein, members of their immediate families, any subsidiary,
affiliate, or control person of any such person or entity, officers, directors,
and employees of U.S. Diagnostic and the legal representatives, heirs,
successors or assigns of any such excluded party.
7. The members of the Class are so numerous that the 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, at a minimum, several thousand
members of the Class. According to U.S. Diagnostic's Form 10-QSB filed with
the SEC on November 14, 1996, U.S. Diagnostic has in excess of 23.4 million
shares of its common stock outstanding. The holders of these shares are
believed to be geographically dispersed throughout the United States. U.S.
Diagnostic common
-3-
<PAGE>
stock is listed and actively traded on the NASDAQ/National Market System.
During the Class Period, millions of shares of U.S. Diagnostic were traded.
8. Plaintiff's claims are typical of the claims of the Class, as plaintiff
purchased shares of U.S. Diagnostic on the open market during the Class Period
and sustained damages arising out of defendants' conduct in violation of
federal law as complained of herein.
9. Plaintiff will fairly and adequately protect the interests of the
members of the Class, and has retained counsel competent and experienced in
class action and securities litigation. Plaintiff has no interests that are
contrary to or in conflict with those of the Class she represents.
10. Common questions of law and fact exist as to all members of the Class
and predominate over any questions affecting only individually members of the
Class. Among the questions of law and fact common to the Class which
predominate over any questions affecting individual members of the Class are:
(a) whether defendants violated Sections 10(b) and 20(a) of the
Exchange Act, and SEC Rule 10b-5 promulgated thereunder;
(b) whether defendants participated in and pursued the common course
of conduct complained of herein;
(c) whether documents, filings, releases and statements disseminated
to the SEC and the investing public, during the Class Period, omitted and/or
misrepresented material
-4-
<PAGE>
facts about Keith G. Greenberg and the business and management of the Company;
(d) whether the market price of U.S. Diagnostic's common stock
during the Class Period was artificially inflated due to the nondisclosure
and/or misrepresentations complained of herein;
(e) whether defendants acted knowingly, willfully, or recklessly in
omitting to state and/or misrepresenting material facts; and
(f) whether the members of the Class have sustained damages and,
if so, what is the proper measure of such damages.
11. A class action is superior to other available methods for the fair
and efficient adjudication of this controversy. Since the damages suffered by
individual class members may be relatively small, the expense and burden of
individual litigation make it virtually impossible for the class members to
seek redress for the wrongful conduct alleged. Plaintiff knows of no
difficulty which will be encountered in the management of this litigation
which would preclude its maintenance as a class action.
THE PARTIES
-----------
12. Plaintiff, Muriel Edelstein, purchased 1000 shares of common stock
of defendant U.S. Diagnostic, on the open market, during the Class Period,
and suffered damages thereby.
-5-
<PAGE>
13. Defendant U.S. Diagnostic is a Delaware corporation with its principal
executive offices located at 777 S. Flagler Drive, West Palm Beach, Florida
33401. U.S. Diagnostic acquires and owns medical services facilities including
both clinical and multi-modality diagnostic facilities. The Company's facilities
are used primarily by physicians to diagnose and monitor diseases or other
medical conditions using either clinical tests or anatomical pathology tests.
14. Defendant Jeffrey A. Goffman ("Goffman") was at all relevant times
Co-Founder, Chairman of the Board of Directors, Chief Executive Officer,
and Chief Financial Officer of the Company, capacities in which he received
substantial compensation.
15. Defendant Dr. Robert D. Burke ("Burke") was, until July 1, 1996,
President and a director of the Company. Since July 1, 1996, Burke has been a
consultant to the Company and is still being compensated pursuant to the terms
of his five-year employment agreement entered into with the Company in June,
1994, amended in October, 1995, which provides for annual compensation of
$120,000 and an automobile allowance. For 1995, Dr. Burke was entitled to a
bonus of up to $100,000 per year based on increases in the Company's net
income from the prior year.
16. Defendant Joseph A. Paul ("Paul") was at all relevant times,
beginning on July 1, 1996, President and a Director of the Company, capacities
in which he received substantial compensation.
-6-
<PAGE>
17. Defendant Keith G. Greenberg ("Greenberg") was at all relevant times
Co-Founder, Executive Vice President, and Director of Marketing, Mergers and
Acquisitions of the Company. Through Greenberg's consulting company, Coyote
Consulting & Financial Service LLC ("Coyote"), Greenberg received substantial
compensation from the Company. Greenberg is married to Elise Nulman Greenberg.
18. Defendants Goffman, Burke, Paul, and Greenberg are sometimes referred
to herein collectively as the "Individual Defendants."
19. It is appropriate to treat the Individual Defendants as a group for
pleading purposes and to presume that the false and misleading 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 or directors of
U.S. Diagnostic, by virtue of his 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 information concerning the Company, including its
management, operations, and business affairs; and Keith G. Greenberg's criminal
wrongdoing as alleged herein. Said defendants were involved in drafting,
producing, reviewing and/or disseminating the false and misleading statements
alleged herein, were aware that the false and misleading statements were being
-7-
<PAGE>
issued regarding the Company and approved or ratified these statements in
violation of the federal securities laws.
20. As officers, directors and/or controlling persons of U.S. Diagnostic,
each Individual Defendant had a duty to disseminate promptly accurate and
truthful information with respect to Greenberg's criminal background; and the
Company's management, operations, and business affairs.
21. 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 misleading nature.
22. 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 contents of the various quarterly and annual financial reports,
press releases and presentations to securities analysts pertaining to the
Company. Each Individual Defendant was provided with copies of U.S. Diagnostic's
shareholder and investor reports, press releases and other disseminations
alleged herein to be misleading prior to or shortly after their issuance
and had the ability and opportunity to prevent their issuance or cause them
to be corrected. As a result, each of the Individual Defendants is
responsible for the accuracy of the public reports and releases
-8-
<PAGE>
detailed herein and is therefore primarily liable for the representations
contained therein.
23. Each of the defendants is liable as a participant in a fraudulent
scheme and course of business that operated throughout the Class Period as
a fraud or deceit on purchasers of U.S. Diagnostic stock, by disseminating
materially false and misleading statements and/or concealing material, adverse
facts. The scheme: (i) deceived the investing public regarding U.S.
Diagnostic's management, business, and the intrinsic value of U.S.
Diagnostic's shares; and (ii) caused U.S. Diagnostic stock to trade at
artificially inflated prices.
APPLICABILITY OF PRESUMPTION OF RELIANCE:
FRAUD-OF-THE-MARKET DOCTRINE
----------------------------
24. At all relevant times, the market for U.S. Diagnostic stock was an
efficient market for the following reasons, among others:
(a) U.S. Diagnostic common stock met the requirements for listing,
and was listed and actively traded, on the NASDAQ/National Market System,
an efficient and automated market;
(b) As a regulated issuer, the Company filed periodic public reports
with the SEC and the NASD;
(c) U.S. Diagnostic 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
-9-
<PAGE>
marketplace. Among the brokerage firms which issued research reports on U.S.
Diagnostic during the Class Period were those identified in this Complaint.
25. As a result, the market for U.S. Diagnostic securities promptly
digested current information regarding U.S. Diagnostic from all publicly
available sources and reflected such information in U.S. Diagnostic's stock
price. Under these circumstances, all purchasers of U.S. Diagnostic shares
during the Class Period suffered similar injury through their purchase of
shares at artificially inflated prices and a presumption of reliance applies.
INAPPLICABILITY OF STATUTORY SAFE HARBOR
----------------------------------------
26. 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. The statements alleged to be false
and misleading herein all relate to then-existing facts and conditions. In
addition, to the extent certain of the statements alleged to be false may be
characterized as forward looking, they were not identified as "forward-looking
statements" when made, there was no statement made with respect to any of
those representations forming the basis of this complaint that actual results
"could differ materially from those projected," and 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
-10-
<PAGE>
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 had actual knowledge that the particular
forward-looking statement was false, and/or the forward-looking statement was
authorized and/or approved by an executive officer of U.S. Diagnostic who
knew that those statements were false when made.
THE FRAUDULENT SCHEME AND COURSE OF BUSINESS
--------------------------------------------
27. U.S. Diagnostic, founded by, among other individuals, defendants
Goffman and Greenberg, is a physician practice management provider
specializing in the acquisition, operation and management of multi-modality
diagnostic imaging centers and related facilities. Diagnostic imaging
procedures are used to diagnose various diseases and physical injuries
through the use of MRI, CT, mammography, X-ray, ultrasound, and other
technologies. The Company's objective is to be the largest and most profitable
network of diagnostic imaging centers in the United States. In order to
accomplish this objective, USDL's operating and growth strategy is to acquire
imaging centers from (i) radiologist owner/operators seeking management
expertise, access to managed care contracts and/or other resources offered
by physician practice management companies, (ii) physicians who may be
required by law to divest such facilities, and (iii) owners seeking to
leave the imaging business for various reasons.
-11-
<PAGE>
28. In or about October, 1994, U.S. Diagnostic announced that it would
initiate a public offering of its common stock to the market. However,
defendants knew, but failed to disclose publicly, that defendant Greenberg,
a convicted felon with a history of criminal wrongdoing, was intimately
involved in conducting U.S. Diagnostic's business and affairs.
29. Indeed, on August 4, 1994, defendant Keith G. Greenberg was indicted
on two counts of (1) Conspiracy to Defraud the United States, and (2) Fraud
and Conspiracy to Defraud. Thereafter, on September 13, 1994, Greenberg pled
guilty to both counts and was sentenced to thirty (30) days imprisonment with
two years of supervised probation and ordered to perform 300 hours of community
service.
30. Despite the defendants' knowledge of Greenberg's criminal record,
they never disclosed, during the Class Period, that Greenberg was intimately
involved in conducting U.S. Diagnostic's operations and business affairs.
31. Greenberg's consulting company, Coyote Consulting & Financial
Services LLC ("Coyote") located at 29 Windward Isle, Palm Beach Gardens,
Florida 33418, is a consulting firm engaged primarily in the business of
providing financial marketing and acquisition related consulting services.
Coyote's two lone employees are defendant Greenberg and his wife, Elise
Nulman Greenberg. On December 1, 1994, U.S. Diagnostic entered into a five-
year consulting agreement with Coyote Consulting & Financial Services LLC
("Coyote"), amended in October 1995, pursuant to
-12-
<PAGE>
which the Company pays annual base consulting fees of $185,000; a bonus of up
to $65,000 if certain financial targets are met; a 3% finder's fee of any
acquisitions referred; reimbursement for all expenses for up to two
automobiles; reimbursement for all medical and dental insurance premiums
paid for its employees; and reimbursement for any additional employees Coyote
hires up to an amount not to exceed $100,000. In connection with the finder's
fee, Coyote receives a finder's fee in cash of 3% of the aggregate purchase
price of any entity acquired by U.S. Diagnostic as a result of an introduction
by Coyote. Thus, through U.S. Diagnostic's acquisition strategy, Coyote has
received millions of dollars in proceeds from this financial arrangement.
32. U.S. Diagnostic's senior management was intimately aware of
Greenberg's involvement in the Company's business and affairs. In fact,
senior management directly participated in Greenberg's scheme to conceal
his involvement with U.S. Diagnostic. For example, even though Greenberg was
Co-Founder of the Company, Director of Marketing, Mergers and Acquisitions, and
a member of the Company's senior management team, defendants failed to mention
Greenberg as a member of management in its public filings with the SEC,
including its initial Prospectus issued on October 20, 1994. Indeed, in the
Prospectus, rather than risk the chance of a governmental entity, including
the SEC and/or NASD, holding up the Company's listing while it investigated
Greenberg's criminal background and intimate
-13-
<PAGE>
involvement with the Company's business and affairs, defendants instead listed
Greenberg's wife, under her maiden name, as a principal stockholder of the
Company owning approximately 8.6% of the Company's outstanding common stock.
33. In order to raise capital for the Company, defendants carried out
their fraudulent scheme and course of business by making false and misleading
statements that artificially inflated the price of its stock.
34. Defendants capitalized on this artificial inflation in U.S.
Diagnostic's stock by, among other things, arranging an initial and secondary
offering of U.S. Diagnostic's common stock, redeeming the Company's Class A
and B Warrants, netting proceeds in excess of $100 million, renegotiating
and increasing the Company's available credit line with financial
institutions, and enhancing the Company's relationships with Wall Street.
This, in turn, allowed the Company to proceed with its acquisition strategy,
and provided additional compensation to Greenberg's consulting firm, Coyote.
35. Defendants' scheme had its intended effect, U.S. Diagnostic stock
reached a market price high of $14 1/8 on June 14, 1996.
36. In sum, at all relevant times during the Class Period, and while
Greenberg was treated as an insider by the officers and directors of U.S.
Diagnostic and had a great deal of influence in the Company, defendants
failed to disclose that (a) Greenberg was a convicted felon; and (b)
Greenberg was continuing
-14-
<PAGE>
to consult with, and provide advice to, the Company even during his
incarceration, which began on September 27, 1995, and was advising the
defendants on matters of corporate concern, including possible acquisition
candidates for which he would receive substantial monies in the form of a
"finder's fee", throughout the Class Period. Moreover, defendants hid
Greenberg's substantial ownership interest in U.S. Diagnostic, by portraying
the stock as owned by one Elise Nulman (in reality Mrs. Greenberg).
37. On December 23, 1996, Bear, Stearns & Co. Inc. disclosed publicly
that defendant Greenberg was guilty of fraud in 1994, and, as a result, the
securities firm would remove its "Buy" rating and drop coverage of U.S.
Diagnostic stock.
38. Following this announcement, U.S. Diagnostic's stock price plunged
to $9 3/8 per share; a dramatic decline of approximately 22%.
FALSE AND MISLEADING STATEMENTS MADE DURING THE CLASS PERIOD
39. On October 20, 1994, the beginning of the Class Period, U.S.
Diagnostic (then known as U.S. Diagnostic Labs Inc.) completed an initial
public offering of 1.7 million units at $5.00 per unit. Each unit consisted
of one share of common stock, one Class A warrant and one Class B warrant.
At the time, the Company's common stock was traded on the Boston Stock
Exchange and the units, common stock and warrants traded on the NASDAQ SmallCap
Market. In connection with its initial public offering, U.S. Diagnostic
filed a Registration Statement with the
-15-
<PAGE>
SEC on October 20, 1994, and a Prospectus issued on October 20, 1994, to
offer the 1,700,000 shares of common stock, 1,700,000 redeemable Class A
warrants and 1,700,000 redeemable Class B warrants.
40. The Registration Statement, which incorporated the Prospectus, at the
time it became effective, was inaccurate and misleading, contained untrue
statements of material facts and/or omitted to state the following material
facts necessary to make the statements therein not misleading:
(a) although Greenberg was Co-founder, Executive Vice President, and
Director of Marketing, Mergers and Acquisitions of the Company, the Prospectus
failed to disclose, inter alia, Greenberg's executive managerial positions
within the Company; Greenberg's intimate involvement in conducting U.S.
Diagnostic's business and affairs; and that Greenberg plead guilty to fraud,
conspiracy to defraud, and conspiracy to defraud the United States; and
(b) as part of the common scheme to defraud, and in order to avoid any
governmental scrutiny, defendants had the Prospectus list Greenberg's wife,
Elise Nulman, as the beneficial owner of the Company's common stock. The
Prospectus stated that Ms. Nulman, owns 180,000 shares of the Company's common
stock or 8.6% of all the Company's outstanding shares before the offering and
4.8% after the offering. The 180,000 shares includes 90,000 escrow shares,
60,000 of which is listed under Ms. Nulman's name. The Prospectus failed to
list Greenberg as the beneficial owner
-16-
<PAGE>
of the Company's common stock, or the holder of any of its shares in escrow, or
his relationship to Elise Nulman.
41. On November 21, 1994, U.S. Diagnostic announced over Business Wire that
it had relocated its corporate headquarters from New York City to West Palm
Beach, Florida. Defendant Goffman stated that "[t]he move will most importantly
locate the corporate officers and key employees of USDL in one office."
42. The foregoing statement in the Company's November 21, 1996 announcement
was materially false and misleading when made because it failed to disclose
that:
(a) Greenberg, originally from New York City, had moved with the Company
to Florida, and maintained an office and secretary within the Company's new
corporate headquarters; and
(b) as a result of being described above by defendant Goffman as a
corporate officer and key employee of USDL, the Company failed to disclose
Greenberg's criminal background.
43. On February 24, 1995, it was reported over the PR Newswire that U.S.
Diagnostic presented at the Florida Healthcare Focus 95 its 1995 Business Plan
and forecasted earnings for its fourth quarter and fiscal year ended December
31, 1995. U.S. Diagnostic detailed its plans to grow the company through the
acquisition of diagnostic imaging business and increasing revenues and related
profitability at its existing sites. The article stated that:
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Keith Greenberg, Director of Strategic/Planning acquisitions stated,
"[w]e are focused on finding and closing on a minimum of five (5) US
outpatient diagnostic imaging centers in the 95 fiscal year. These
acquisitions will always have the positive attributes found in our
present facilities, mainly that they are the dominant if not only
outpatient facility in a community. In addition, we are innovating
new marketing techniques at our facilities by year end but will be
moving toward making our company the most profitable in the business."
44. On March 31, 1995, U.S. Diagnostic filed its Form 10-KSB with the SEC
for its fiscal year ended December 31, 1994. In the Form 10-KSB at p. 21 the
Company disclosed that:
In November 1994, the Company entered into a consulting agreement with
Coyote Consulting pursuant to which it pays annual consulting fees
of $120,000. Coyote has been providing the Company with financial,
advisory and due diligence services in connection with the Company's
acquisitions.
The Form 10-KSB listed the completed acquisitions to date by the Company,
since its initial public offering on October 20, 1994. These acquisitions
consisted of Alpha Laboratory, Morton Clinical Laboratory, Santa Fe Imaging
Center, Laborde Diagnostic Center, Community Radiology of Virginia, and Arrow
Medical Clinical Laboratory, which entities the Company acquired for a combined
purchase price of approximately $4.7 million and the issuance of approximately
400,000 shares of the Company's common stock. The Form 10-KSB was signed by
defendants Goffman and Burke.
45. The statements described above at paragraphs 43-44, were materially
false or misleading because, among other things, these statements continued to
conceal: that Greenberg,
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through Coyote and his position as Director of Mergers and Acquisitions for
the Company, who introduced some if not all of the above entities that were
acquired by U.S. Diagnostic, receiving a finder's fee of the aggregate purchase
price, plead guilty to fraud, conspiracy to defraud, and conspiracy to defraud
the United States, resulting in his imprisonment on September 27, 1995.
46. On May 16, 1995, it was reported over Business Wire that U.S.
Diagnostic announced at a meeting of investment analysts and brokers that it
plans to become the industry leader in the management and ownership of
Outpatient Diagnostic Imaging. According to defendant Goffman, the Company will
"continue to build on its present annual earnings level of approximately $3
million before income taxes by adding a minimum of one outpatient diagnostic
imaging center every other month with annual earnings ranging from $300,000
to $2.5 million." Goffman further stated that "[w]e are confident in making this
statement because we presently have the next six to ten acquisitions in the
works. In addition, as can be seen by analyzing our first quarter financial
results, our operating and marketing strategies have enhanced the bottom line
of each of prior acquisitions."
47. On June 19, 1995, U.S. Diagnostic announced that it filed a
registration statement with the SEC in connection with its proposed secondary
public offering of $6 million of units consisting of the Company's common
stock, Class A warrants and Class B warrants. Proceeds to the Company from
the offering will
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be used primarily to fund additional acquisitions by the Company. Attached as
Exhibit 10.23 to Amendment No. 1 to the registration statement filed with the
SEC on July 24, 1995, was the December 1, 1994, consulting agreement between
U.S. Diagnostic and Coyote.
48. On June 20, 1995, U.S. Diagnostic filed its Proxy Statement with the
SEC. In the Proxy the Company stated that:
In November, 1994, the Company entered into a consulting agreement
with Coyote Consulting pursuant to which it pays annual consulting
fees of $120,000. Coyote has been providing the Company with various
management and consulting services, including marketing, public and
financial relations, employee benefits and due diligence services in
connection with the Company's acquisitions.
49. The statements described above at paragraphs 46-48, were materially
misleading because, among other things, these statements continued to conceal
that although Greenberg was Co-founder, Executive Vice President, and Director
of Marketing, Mergers and Acquisitions of the Company, the above statements
and public filings failed to disclose, inter alia, Greenberg's executive
managerial positions within the Company and his intimate involvement with the
Company's business and affairs; Greenberg's relationship with Coyote; and
Greenberg's criminal background.
50. On August 15, 1995, the Company filed its Form 10-QSB with the SEC for
its second quarter ended June 30, 1995. In Part II of the Form 10-QSB, the
Company listed as Exhibit 10.23, the consulting agreement between itself and
Coyote dated December 1, 1994, incorporated by reference to the Company's
registration
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statement on Form SB-2, amended and filed with the SEC on July 24, 1995. The
Form 10-QSB was signed by defendant Goffman.
51. The Company's Form 10-QSB filed with the SEC on August 15, 1995,
omitted to state the following material facts necessary to make the statements
therein not misleading: although Greenberg was Co-founder, Executive Vice
President, and Director of Marketing, Mergers and Acquisitions of the Company,
the Form 10-QSB failed to disclose, inter alia, Greenberg's executive managerial
positions within the Company and his intimate involvement with the Company's
business and affairs; Greenberg's relationship with Coyote; and Greenberg's
criminal background.
52. On September 8, 1995, the South Florida Business Journal published an
article on U.S. Diagnostic. The article stated, in pertinent part:
Keith Greenberg travels the map scoping out doctors who no longer
want to own and operate their own diagnostic laboratories.
So far, Greenberg says he has found some pretty good deals.
But the executive vice president of West Palm Beach based U.S.
Diagnostics Labs says he won't be making many South Florida
acquisitions -- the local market is too competitive.
* * * *
Greenberg got into the business with Jeffrey Goffman, who is
chairman of the board and chief financial officer. Both were,
Greenberg said, "two businessmen who didn't know imaging."
He credits company president Dr. Robert Burke, a West Palm Beach
neuroradiologist, with giving them "an incredible crash course"
in the business of diagnostic imaging.
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* * * *
USDL is making acquisitions at a rate of about one per month and
expects to continue to make acquisitions at the rate of one every
other month. In its SEC filing USDL says it expects that by the end
of next year it will have net revenues of more than $100 million.
The company's strategy is not unlike Columbia/HCA Health Care Corp.,
which for several years has brought up hospitals at a rapid rate.
"There are 3,000 outpatient diagnostic imaging centers in the U.S.
We don't expect to own all 3,000 of them," Greenberg said. "But a
company that continues to grow its bottom line and have access to
capital, we think has a unique opportunity." (emphasis added.)
53. On October 5, 1995, U.S. Diagnostic announced that its stock will be
listed on the NASDAQ National Market effective Monday, October 9, 1995. The new
listing affects USDL's common stock (USDL) and its class A and B warrants (USDLW
and USDLZ, respectively). USDL's units (USDLU) will continue to trade on the
NASDAQ SmallCap Market.
54. On November 6, 1995, U.S. Diagnostic announced that it entered into an
agreement to purchase FutureCare Affiliates, Inc. for a purchase price of $3.2
million. The press release issued by the Company stated that: "[t]his
acquisition is significant because it is our first purchase of a corporation
owning and operation [sic] more than one Diagnostic Imaging site. We are not
only acquiring two strategically important successful sites, but several key
employees enhance [sic] with key contacts and abilities especially in the area
of Acquisition development,
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said Keith Greenberg, USDL executive responsible for acquisition and product
development." (emphasis added.)
55. The statements described above at paragraphs 52-54, were materially
misleading because, among other things, these statements continued to conceal:
that Greenberg, through Coyote and his positions as Executive Vice President and
Director of Mergers and Acquisitions for the Company, who introduced or will
introduce to the Company the entities that it acquired or will acquire,
receiving a finder's fee of the aggregate purchase price, plead guilty to
fraud, conspiracy to defraud, and conspiracy to defraud the United States,
resulting in his imprisonment on September 27, 1995.
56. On November 13, 1995, the Company filed its Form 10-QSB with the SEC
for its third quarter ended September 30, 1995. In Part II of the Form 10-QSB,
the Company listed as Exhibit 10.23, the consulting agreement between itself and
Coyote dated December 1, 1994, incorporated by reference to the Company's
registration statement on Form SB-2, amended and filed with the SEC on July 24,
1995, and Exhibit 10.31, amendment to the Coyote consulting agreement dated
October 1, 1995, incorporated by reference to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995. The Form 10-QSB was signed by
defendant Goffman.
57. The Company's Form 10-QSB filed with the SEC on November 13, 1995,
omitted to state the following material facts necessary to make the statements
therein not misleading: although
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Greenberg was Co-founder, Executive Vice President, and Director of Marketing,
Mergers and Acquisitions of the Company, the Form 10-QSB failed to disclose,
inter alia, Greenberg's executive managerial positions within the Company and
his intimate involvement with the Company's business and affairs; Greenberg's
relationship with Coyote; and Greenberg's criminal background.
58. On November 22, 1995, U.S. Diagnostic announced that it closed on the
purchase of FutureCare Affiliates, Inc. The press release issued by the Company
stated that "[t]his acquisition is significant because it is our first purchase
of an entity owning more than one diagnostic facility. With our management team
and operating efficiencies we are now comfortable purchasing multi-center
companies. This will be our focus for 1996, said Keith Greenberg, the USDL
executive responsible for acquisition and product development." (emphasis
added.)
59. On February 1, 1996, it was announced over Bloomberg Business Wire that
U.S. Diagnostic fell short of its projected 1994 earnings goal but defendant
Goffman stated that he's confident the company will meet 1995's and 1996's
forecasts. "The West Palm Beach, Florida-based acquiror and operator of medical
services facilities expects to meet its growth goals through an aggressive
acquisition strategy." U.S. Diagnostic, which raised approximately $10 million
from its initial public offering on October 20, 1994 and raised an additional
$10 million from a secondary offering in August, 1995, used substantially all
of those proceeds to acquire approximately eleven companies in
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1995. Defendant Goffman stated that U.S. Diagnostic will acquire one facility
at least every month for the rest of the year. "The Company will finance its
future acquisitions `through our relationships with Wall Street,' said Goffman."
The article stated that "Goffman declined to be more specific about U.S.
Diagnostic's `relationships with Wall Street.' "
60. On February 26, 1996, it was reported in The Post and Courier
(Charleston, SC) that U.S. Diagnostic announced that it had agreed to purchase
80 percent of Charleston Diagnostic Imaging. However, the article noted that
"[w]hat hasn't been made public, though, is the identity of Charleston
Diagnostic. Keith Greenberg, executive vice president, declined to disclose
the center's exact location, noting only that Charleston Diagnostic is the
corporate name. He said the deal would be revealed fully when the sale closes
in the next month or so."
(emphasis added.)
61. On February 27, 1996, U.S. Diagnostic announced record revenues and
earnings for its fourth quarter and fiscal year ended December 31, 1995. The
Company stated that it will issue its pro forma results in connection with its
Form 10-KSB on March 15, 1996. The Company anticipated reporting pro forma
net revenues in excess of $60 million and net income of $6.5 million, or
approximately $1.00 per share. Commenting upon these results, Goffman stated
that "[a]s a consequence of the successful implementation of our acquisition
strategy, USDL's 1995 revenues
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soared 468% over 1994 revenues, primarily a result of the acquisitions during
the year."
62. On March 15, 1996, U.S. Diagnostic filed its Form 10-KSB with the SEC
for its fiscal year ended December 31, 1995. In the Form 10-KSB at p. 26 the
Company disclosed that:
In December 1994, the Company entered into a five year consulting
agreement with Coyote Consulting & Financial Services LLC ("Coyote")
amended in October 1995, pursuant to which it pays annual base
consulting fees of $185,000. Coyote is also entitled to receive a
bonus of up to $65,000 if certain financial targets are met. Coyote
provides the Company with various management and consulting services
in connection with the Company's acquisitions. Keith Greenberg and
Elise Nulman Greenberg have been providing such services to the
Company on behalf of Coyote.
The amendment dated October 1, 1995 to the consulting agreement made as of
December 1, 1994 by and between U.S. Diagnostic and Coyote states that Coyote
shall receive a finder's fee in cash of two percent (2%) of the aggregate
purchase price of any entity acquired by the Company as a result of an
introduction by Coyote.
The Form 10-KSB stated on p. 19 that "[t]he Company has an unused line of
credit of $1 million at the prime interest rate with a bank, and plans to
renegotiate and increase the availability of such line after this offering."
The Form 10-KSB also listed completed and pending acquisitions by the Company
since its fiscal year ended December 31, 1994. These acquisitions consisted
of: Salisbury Imaging Center, Orange Park Diagnostic Center, San Francisco MRC,
Advanced Medical Imaging Center, FurtureCare Affiliates, Inc., Modesto Imaging
Center,
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Heights Imaging Center, South Coast Radiologist, DISC Imaging, Radiation
Oncology, and Allegheny MRI, which entities the Company acquired for a combined
purchase price in excess of approximately $20 million. The Form 10-KSB was
signed by defendants Goffman and Burke.
63. The statements described above at paragraphs 58-62, were misleading
because these statements continued to conceal: that Greenberg, through Coyote
and his positions as Executive Vice President and Director in charge of Mergers
and Acquisitions for the Company, who introduced some if not all of the above
entities that were acquired by U.S. Diagnostic, receiving a finder's fee of the
aggregate purchase price, plead guilty to fraud, conspiracy to defraud, and
conspiracy to defraud the United States, resulting in his imprisonment; and that
U.S. Diagnostic, which paid for the acquisitions of these entities from the
proceeds of its initial and secondary public offerings, and will pay for its
pending and future acquisitions of entities from its "relationships with Wall
Street" and the renegotiation and increase of its available credit line, knew
or recklessly disregarded that the disclosure of Greenberg's criminal background
would materially affect the market price of its common stock by destroying its
"relationships with Wall Street", including its relationship with the securities
firm Bear, Stearns & Co. Inc.
Further, the Company's Form 10-KSB filed with the SEC on March 15, 1996,
omitted to state the following material facts
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necessary to make the statements therein not misleading: although Greenberg
was Co-founder, Executive Vice President, and Director of Marketing, Mergers
and Acquisitions of the Company, the Form 10-KSB failed to disclose,
inter-alia, Greenberg's executive managerial positions within the Company and
his criminal background.
64. On March 29, 1996, U.S. Diagnostic announced that it sold in a
private offering $50 million of convertible subordinated debentures due in the
year 2003. The Debentures have a 9 percent coupon and are convertible into
shares of the Company's common stock at a price of $9.00 per share. The Company
stated that the proceeds from the Debentures are to be used to fund
acquisitions of diagnostic imaging and radiation therapy facilities.
65. On or about April 26, 1996, U.S. Diagnostic filed its 1995 Annual
Report with the Securities and Exchange Commission. In the 1995 Annual Report
at p. 7, under the caption "Team Management", the Company stated that "[s]ince
inception, it has been U.S. Diagnostic's philosophy to build a senior
management team that is comprised of seasoned executives with diverse
professional backgrounds." Immediately following this statement the Company
listed six executives of its management team along with a short bio of their
positions within U.S. Diagnostic's management. The six executives listed were:
Jeffrey A. Goffman, Chairman and Chief Executive Officer, founded the company
in 1993; Robert D. Burke, M.D., President; David Cohen,
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Senior Vice President; Amos F. Alman, III, Senior Vice President; Todd R.
Smith, Vice President and Chief Information Officer; and "Keith G. Greenberg,
is a co-founder of U.S. Diagnostics and serves as Director of Marketing,
Mergers and Acquisitions." (emphasis added.)
Further, in the Notes to Consolidated Financial Statements of the
1995 Annual Report, Note 14 Employment and Consulting Agreements, the Company
stated that:
In October 1995, the consulting agreement with Coyote Consulting and
Financial Services LLC ("Coyote") was amended and extended for four
years and provides for a $185,000 base cost, bonus of 35% up to
$65,000 based on certain acquisition growth targets and a 3% finder
fee of any acquisitions referred.
The letter to shareholders in the Annual Report dated April 26, 1996, was
signed by defendant Goffman.
66. The Company's 1995 Annual Report filed with the SEC omitted to
state the following material facts necessary to make the statements therein
not misleading: although Greenberg was Co-founder and Director of Marketing,
Mergers and Acquisitions of the Company, the 1995 Annual Report failed to
disclose, that Greenberg plead guilty to fraud, conspiracy to defraud, and
conspiracy to defraud the United States, resulting in his imprisonment.
67. On May 16, 1996, the Company filed its Form 10-QSB with the SEC
for its first quarter ended March 31, 1996. In Part II of the FORM 10-QSB, the
Company listed as Exhibit 10.23, the consulting agreement with Coyote,
incorporated by reference to
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the Company's registration statement on Form SB-2, amended and filed with the
SEC on July 24, 1995, and Exhibit 10.31, amendment to the Coyote consulting
agreement, incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1995. The Form 10-QSB was signed by
defendant Goffman.
68. The Company's Form 10-QSB filed with the SEC on May 16, 1996,
failed to disclose Greenberg's executive managerial positions within the
Company and his intimate involvement with the Company's business and affairs;
Greenberg's relationship with Coyote; and Greenberg's criminal background.
69. On May 28, 1996, U.S. Diagnostic announced that it will redeem
all 3.83 million of its Class A redeemable warrants on June 28, 1996 for $0.05
each or a total of $191,502, receiving net proceeds of approximately $23.3
million from the warrant redemptions. Defendant Goffman stated that it expects
the Company to use the proceeds from the redemption of the warrants to
continue to aggressively pursue acquisitions.
70. On June 7, 1996, U.S. Diagnostic announced the filing of a
registration statement with the SEC relating to the resale of $57.5 million
principal amount of 9% Convertible Subordinated Debentures due 2003, the
underlying USDL common stock and an additional 880,445 shares of common stock
most of which are underlying warrants by certain stockholders of the Company.
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71. On June 10, 1996, U.S. Diagnostic announced that it has increased
its capital availability by increasing its credit line from $1 million to $15
million from Nations Bank of Florida. Defendant Goffman stated that "[t]he
additional capital provided by the increased credit line, combined with the
$57.5 million proceeds from our recently completed sale of convertible
debentures, allows us greater flexiblity to grow through acquisitions."
72. On June 20, 1996, U.S. Diagnostic announced that it had called
for redemption on July 31, 1996, all of its outstanding redeemable Class B
Warrants, at a price of $0.05 per warrant, receiving net proceeds of
approximately $62.9 million. Previously, the Company redeemed all its Class A
Warrants, raising approximately $23.3 million.
73. On August 8, 1996, U.S. Diagnostic announced that it received
proceeds of $63 million from the redemption of its Class B warrants. Defendant
Goffman stated that "the proceeds of the exercised warrants, in combination
with the $23 million previously redeemed from Class A Warrants and what's left
of $54 million in proceeds raised through a convertible debenture offering
will help the company finance future acquisitions."
74. The statements described above continued to conceal that: (a)
Greenberg, USDL's Executive in charge of Mergers and Acquisitions, plead guilty
to fraud, conspiracy to defraud, and conspiracy to defraud the United States,
which resulted in his imprisonment; and (b) U.S. Diagnostic, which paid
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for the acquisitions of entities from the proceeds of its public offerings,
exercised warrants, and redemption of its Class A and B Warrants, and will pay
for its pending and future acquisitions of entities from its "relationships
with Wall Street," and increased available credit line, knew or recklessly
disregarded that the disclosure of Greenberg's criminal background would
materially affect the market price of its common stock by destroying its
"relationships with Wall Street", including its relationship with the
securities firm Bear, Stearns & Co. Inc.
75. On August 14, 1996, the Company filed its Form 10-QSB with the
SEC for its second quarter ended June 30, 1996. In Part II of the Form 10-Q,
the Company listed as Exhibit 10.23, the consulting agreement with Coyote,
incorporated by reference to the Company's registration statements on Form
SB-2, amended and filed with the SEC on July 24, 1995, and Exhibit 10.31,
amendment to Coyote consulting agreement, incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1995.
The Form 10-QSB was signed by defendant Goffman.
76. The Company's Form 10-QSB filed with the SEC on August 14, 1996,
omitted to state the following material facts necessary to make the statements
therein not misleading: although Greenberg was Co-founder, Executive Vice
President, and Director of Marketing, Mergers and Acquisitions of the Company,
the Form 10-QSB failed to disclose inter-alia, Greenberg's executive
managerial positions within the Company and his intimate
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involvement with the Company's business and affairs; Greenberg's relationship
with Coyote; and Greenberg's criminal background.
77. On November 14, 1996, the Company filed its Form 10-QSB with the
SEC for its third quarter ended September 30, 1996. Defendant Goffman stated
that "[a] key factor in our third quarter was the redemption of our B warrants
which raised approximately $63 million in cash for the company. As a result,
today we have approximately $70 million in cash as well as a large, unused
credit facility. We will continue to utilize these financial sources for
accretive acquisitions. This will have a positive impact on future earnings
per share and will subsequently increase shareholder value."
In part II of the Form 10-Q, the Company listed as Exhibit 10.23, the
consulting agreement with Coyote, incorporated by reference to the Company's
registration statements on Form SB-2, amended and filed with the SEC on July
24, 1995, and Exhibit 10.31, amendment to the Coyote consulting agreement,
incorporated by reference to the Company's Annual Report on Form 10-QSB was
signed by defendant Goffman.
78. The Company's Form 10-QSB filed with the SEC on November 14, 1996,
omitted to state the following material facts necessary to make the statements
therein not misleading: although Greenberg was Co-founder, Executive Vice
President and Director of Marketing, Mergers and Acquisitions of the Company,
the Form 10-QSB failed to disclose, inter alia, Greenberg's executive
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managerial positions within the Company and his intimate involvement with the
Company's business and affairs; Greenberg's relationship with Coyote; and
Greenberg's criminal background.
THE TRUTH IS REVEALED
79. On December 9, 1996, U.S. Diagnostic was rated "Buy" in new
coverage by analyst Albert J. Rice at Bear, Stearns & Co. Inc.
80. On December 23, 1996, Bear, Stearns & CO. Inc. removed its "Buy"
rating and discontinued coverage of U.S. Diagnostic. In its report, Bear
Stearns stated:
We have learned information regarding the prior experiences and
background of an individual associated with U.S. Diagnostic, Inc.
that has caused us to lose confidence in our ability to assess
on-going developments at the company. This individual, Keith
Greenberg, has, over the last year, been introduced to us and
described in written material published by the company as a
co-founder of USDL and a member of the management team (in the 1995
Annual Report and at meetings with a representative of Bear, Stearns
on November 1, 1996). In the September 19, 1996 Proxy Statement, Mr
Greenberg has been described as providing services to U.S. Diagnostic
through Coyote Consulting, which has a five year agreement with the
company. We have learned that Mr. Greenberg plead guilty in the U.S.
District Court in the Southern District of New York on September 13,
1994 to: 1) Conspiracy to Defraud the United States and 2) Fraud and
Conspiracy to defraud. Mr. Greenberg was sentenced to 30 days
imprisonment with two years of supervised probation on August 24,
1995 and ordered to perform 300 hours of community service.
Since the information we have learned was not disclosed to us by the
company we believe it is material, we have lost confidence in our
ability to assess on-going developments at U.S. Diagnostic. As a
result, we are removing our BUY rating and discontinuing coverage of
U.S. Diagnostic. Inc. The issue we have uncovered
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relates specifically to prior experiences of company management.
(emphasis added.)
81. On December 23, 1996, it was reported over the Dow Jones Newswire
that Bear Stearns & Co. Inc. dropped coverage of U.S. Diagnostic after Bear
Stearns learned that U.S. Diagnostic co-founder Keith Greenberg plead guilty
to fraud in 1994, which information was not previously disclosed to Bear
Stearns. The Bear Stearns report stated that "[t]he issue we uncovered relates
specifically to prior experiences of company management," and that "the
situation has 'caused us to lose confidence in our ability to assess ongoing
developments at the company.'" The article also stated that the defendant
Goffman confirmed that Greenberg had plead guilty to fraud, and that Greenberg
was one of eight co-founders of the company and a consultant to the company
from its inception.
82. Thereafter, U.S. Diagnostic issued statements, in stark contrast
to those made by the Individual Defendants and U.S. Diagnostic during the
Class Period, in an attempt to halt the fast decline of its stock. In
responding to Bear Stearns' release, defendant Goffman stated over Business
Wire on December 23, 1996, that "Keith has been a consultant to the company
from inception and has been responsible for finding acquisitions. Keith has
never been an officer or director of USDL and has been compensated solely on
an incentive basis for completed transactions.
83. Further, over Reuters, it was reported that U.S. Diagnostic
challenged a Bear Stearns' charge that a "member of
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the management team" at U.S. Diagnostic was convicted for fraud and
conspiracy. In an interview with Reuters, defendant Paul "confirmed that
Greenberg had a criminal record. But Paul said Greenberg was only a
consultant, not a co-founder, and had never been a company officer or
director." Defendant Paul further told Reuters that while "it was true
Greenberg had been convicted in 1994, but he said Greenberg was an outside
consultant on acquisitions who has never been an officer or director." Paul
also said Greenberg, "while not a co-founder, was among several people who had
received founding shares in U.S. Diagnostic after the company was created in
1993." Paul further added that "He (Greenberg) was always an outside
consultant."
84. On December 24, 1996, The Wall Street Journal, reported that U.S.
Diagnostic Executives disclosed that "Mr. Greenberg had pleaded guilty to mail
fraud. However, the company added that he had no influence over day-to-day
operations and that he owns less than one-tenth of 1% of the Company's shares.
'His relationship has always been disclosed as an outside consultant,' Joseph
Paul, U.S. Diagnostic's president, said."
85. As a result of the announcement relating to Greenberg's criminal
background, the market price of U.S. Diagnostic's common stock immediately
declined $2 11/16 or 22% to $9 3/8 on trading of 4.2 million, more than eight
times the three-month daily average. Earlier in the day, the shares touched
$7 7/8. This decline also represented a $4 6/8 decline
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in market value (an approximately 33% loss in value) from a Class Period high
of $14 1/8 per share on June 14, 1996.
86. As a result of defendants' materially misleading statements and
failures to disclose the truth about U.S. Diagnostics's management, including
Greenberg's criminal background, U.S. Diagnostic common stock traded at
artificially inflated prices during the entire Class Period, reaching a class
period high of $14 1/8 per share, until the time the adverse information
described above was finally proved to and digested by the securities markets.
Plaintiff and other members of the Class purchased or otherwise acquired U.S.
Diagnostic securities relying upon the integrity of the market price of U.S.
Diagnostic stock and market information relating to U.S. Diagnostic, or in the
alternative, upon defendants' misleading statements, and in ignorance of
the adverse, undisclosed information known to defendants and have been damaged
thereby.
87. During the Class Period, defendants materially misled the
investing public thereby inflating the price of U.S. Diagnostic 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 Greenberg, the
Company, and its management.
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SCIENTER
88. 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;
knew 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 as primary
violations 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 U.S. Diagnostic, their control over, and/or receipt and/or
modification of U.S. Diagnostic's allegedly materially misleading
misstatements and/or their associations with the Company which made them privy
to confidential proprietary information concerning U.S. Diagnostic,
participated in the fraudulent scheme alleged herein. With respect to
non-forward-looking statements and/or omissions, defendants knew and/or
recklessly disregarded the falsity and misleading nature of the information
which they caused to be disseminated to the investing public. In particular,
defendants Goffman, Burke, Paul, and Greenberg knew of Greenberg's criminal
wrongdoing, and knew or recklessly disregarded that it would be difficult for
the Company to obtain Wall Street's and stockholders' confidence in the
Company's management and their ability to assess ongoing developments at the
Company, by virtue of the materiality of Greenberg's criminal
-38-
<PAGE>
history and his intimate involvement with the Company's business and affairs
through Coyote and his executive positions as Executive Vice President and
Director of Marketing, Mergers and Acquisitions.
89. The Individual Defendants engaged in such a scheme to inflate the
price of U.S. Diagnostic securities in order to: (i) protect and enhance their
executive positions and the substantial compensation and prestige they
obtained thereby; (ii) enlarge the proceeds from its public offerings and
redemption of its Class A and B warrants, enhance its relationships with Wall
Street, and increase its available credit line, thereby maintaining its
acquisition strategy; and (iii) enhance the value of their personal U.S.
Diagnostic securities.
FIRST COUNT
VIOLATIONS OF SECTION 10(B) OF THE EXCHANGE ACT
AND RULE 10B-5 PROMULGATED THEREUNDER
90. Plaintiff repeats and realleges each and every allegation
contained in the above paragraphs, as if fully set forth herein. This claim is
asserted against all defendants.
91. During the Class Period, the 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 U.S. Diagnostic
securities; and (iii) cause plaintiff and other members of the Class to
purchase U.S. Diagnostic securities at inflated prices. In furtherance of
-39-
<PAGE>
this unlawful scheme, plan and course of conduct, defendants, and each of
them, took the actions set forth herein.
92. 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 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 U.S. Diagnostic's securities in violation
of Section 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.
93. U.S. Diagnostic and the Individual Defendants, individually and
in concert, directly and indirectly, by the use of means and instrumentalities
of interstate commerce and/or of the mails, engaged and participated in a
continuous course of conduct to conceal adverse material information about
Greenberg's criminal background; and the Company's management, business, and
operations as specified herein. U.S. Diagnostic 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 U.S.
Diagnostic's management, value and performance and continued substantial
growth, which included the making of, or the
-40-
<PAGE>
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 Greenberg, U.S. Diagnostic's management, and business operations
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 U.S. Diagnostic securities during the Class Period.
94. 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 at the
Company during the Class Period and was a member of the Company's management
team; (ii) each of the Individual 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 drafting, reviewing and/or
approving the misleading statements, releases, reports and other public
representations of and about U.S. Diagnostic; (iii) each of the Individual
Defendants knew or had access to the material adverse non-public information
about Greenberg and U.S. Diagnostic's management and then existing business
conditions, which was not disclosed; and (iv) each of the Individual
Defendants was aware of the Company's dissemination of information to the
investing public which they
-41-
<PAGE>
knew or recklessly disregarded was materially false and misleading.
95. 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,
events 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 Greenberg's criminal background, and U.S.
Diagnostic's management, operating condition and future business prospects from
the investing public and supporting the artificially inflated price of its
stock. As demonstrated by defendants' statements throughout the Class Period,
if they did not have actual knowledge of the misrepresentations and
omissions alleged, defendants 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.
96. 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 U.S. Diagnostic securities were artificially
inflated during the class Period. In ignorance of the fact that market prices
of U.S. Diagnostic's publicly-traded securiites were artificially inflated,
and relying directly or indirectly on the false and misleading statements made
by defendants, or upon the integrity of the
-42-
<PAGE>
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 purchased U.S. Diagnostic's securities during the
Class period at artificially high prices and were damaged thereby.
97. 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 criminal background of Greenberg and his intimate
involvement with the Company's business and affairs, which were not disclosed
by defendants, plaintiff and other members of the Class would not have purchased
or otherwise acquired their U.S. Diagnostic securities during the Class Period,
or, if they had acquired such securities during the Class Period, they would
not have done so at the artificially inflated prices which they paid.
98. By virtue of the foregoing, defendants have violated Section 10(b)
of the Exchange Act, and Rule 10b-5 promulgated thereunder.
99. As a direct and proximate result of defendants' wrongful conduct,
plaintiff and the other members of the Class
-43-
<PAGE>
suffered damages in connection with their purchases of the Company's securities
during the Class Period.
SECOND COUNT
VIOLATION OF SECTION 20(A) OF THE EXCHANGE ACT
AGAINST THE INDIVIDUAL DEFENDANTS
100. Plaintiff repeats and realleges each and every allegation
contained in the above paragraphs, as if fully set forth herein. This claim is
asserted against the Individual Defendants.
101. The Individual Defendants acted as controlling persons of
U.S. Diagnostic within the meaning of Section 20(a) of the Exchange Act as
alleged herein. By virtue of their executive positions, Board membership and
stock ownership, as alleged above, 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 internal 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. U.S. Diagnostic
controlled each of the Individual Defendants and all of its employees.
102. In particular, each of the defendants had direct involvement in
the day-to-day operations of the Company and
-44-
<PAGE>
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.
103. As set forth above, U.S. Diagnostic and the Individual Defendants
each violated Section 10(b) and Rule 10b-5 by their acts and omissions as
alleged in this Complaint. By virtue of their positions as controlling persons,
the Individual Defendants are liable pursuant to Section 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 securities during the Class Period.
WHEREFORE, plaintiff prays for relief and judgment, as follows:
(a) Determining that this action is a proper class action, certifying
plaintiff as a class representative under rule 23 of the Federal Rules of Civil
Procedure and her counsel as class counsel;
(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 plaintiff and the Class their reasonable costs and
expenses incurred in this Action, including counsel fees and expert fees; and
-45-
<PAGE>
(d) Such other and further relief as the court may deem just and
proper.
PLAINTIFF DEMANDS A TRIAL BY JURY
Dated: December 31, 1996
BURT & PUCILLO
/S/ Michael J. Pucillo, Esq.
---------------------------------
Michael J. Pucillo, Esq.
Esperante, Suite 300 East
222 Lakeview Avenue
West Palm Beach, FL 33401
(561) 835-9400
Attorneys for Plaintiff
OF COUNSEL:
WOLF POPPER LLP
845 Third Avenue
New York, new York 10022
(212) 759-4600
-46-
<PAGE>
PLAINTIFF'S CERTIFICATION OF
SECURITIES FRAUD CLASS ACTION COMPLAINT
I, Muriel Edelstein, hereby certify that the following is true and
correct to the best of my knowledge, information, and belief:
1. I have reviewed the complaint prepared in Edelstein v. U.S.
Diagnostic Inc. et al. (the ("Complaint"), and have authorized its filing.
2. I am willing to serve as a representative party on behalf of the
class (the "Class") as defined in the Complaint, including providing testimony
at deposition and trial, if necessary.
3. My transactions in U.S. Diagnostic Inc. common stock during the
Class Period (as defined in the Complaint) are as follows:
<TABLE>
<CAPTION>
DATE PURCHASE OR SALE NUMBER OF SHARES PRICE PER SHARE
---- ---------------- ---------------- ---------------
<S> <C> <C> <C>
10/18/95 Purchase 100 $ 6.500
9/24/96 Purchase 900 $12.375
</TABLE>
4. I did not purchase these securities at the direction of my
counsel, nor in order to participate in any private action arising under the
federal securities laws.
5. During the three-year period preceding the date of my signing this
Certification, I have not sought to serve, nor have I served, as a
representative on behalf of a class in any private action arising under the
federal securities laws.
<PAGE>
6. I will not accept any payment for serving as a representative party
on behalf of the Class beyond my pro rata share of any possible recovery,
except for an award, as ordered or approved by the Court, for reasonable costs
and expenses (including lost wages) directly relating to my representation of
the Class.
Signed under the penalties of perjury this 2nd day of January, 1997.
/s/ Muriel Edelstein
-----------------------------
Muriel Edelstein
<PAGE>
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------
:
SECURITIES & EXCHANGE COMMISSION, :
:
Plaintiff, : CIVIL ACTION
: FILE NO. 93 CV 3650 (PNL)
:
v. :
: JUDGE PIERRE N. LEVAL
LEONARD J. MESSINA, :
KEITH G. GREENBERG, and :
EDWYN H. SCHRIER, :
Defendants. :
:
- -----------------------------------
STATE OF NEW YORK )
) SS:
COUNTY OF )
NOTICE AND ACKNOWLEDGEMENT
--------------------------
I, Edwyn H. Schrier, having first been sworn, depose and say that I
have received a copy of the Order of Permanent Injunction Against Edwyn H.
Schrier entered by the United States District Court for the Southern District
of New York in the above-captioned lawsuit.
/s/ Edwyn H. Schrier
------------------------------------------
Edwyn H. Schrier
DATED:
Subscribed and Sworn before me
this 20 day of July, 1993,
-- ----
/s/ Francine Lippe
- ------------------------------
NOTARY PUBLIC
My Commission Expires 9-30-93
FRANCINE LIPPE
Notary Public, State of New York
No. 50-4850030
Qualified in Westchester County
Commission Expires September 30, 1993
<PAGE>
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------
:
SECURITIES & EXCHANGE COMMISSION, :
:
Plaintiff, : CIVIL ACTION
: FILE NO. 93 CV 3650 (PNL)
:
v. :
: JUDGE PIERRE N. LEVAL
LEONARD J. MESSINA, :
KEITH G. GREENBERG, and :
EDWYN H. SCHRIER, :
Defendants. :
:
- -----------------------------------
STATE OF NEW YORK )
) SS:
COUNTY OF )
NOTICE AND ACKNOWLEDGEMENT
--------------------------
I, Keith G. Greenberg, having first been sworn, depose and say that I
have received a copy of the Order and Judgment of Permanent Injunction Against
Keith G. Greenberg entered by the United States District Court for the
Southern District of New York in the above-captioned lawsuit.
/s/ Keith G. Greenberg
------------------------------------------
Keith G. Greenberg
DATED:
Subscribed and Sworn before me
this 10th day of August, 1993,
/s/ Cathrine M. Foti
- ------------------------------
NOTARY PUBLIC
My Commission Expires 11/24/94
CATHERINE M. FOTI
Notary Public, State of New York
No. 31-4880245
Qualified in New York County
Commission Expires Nov. 24, 1994
<PAGE>
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a copy of the foregoing Notices and
Acknowledgements of Edwyn H. Schrier and Keith G. Greenberg were served upon
the following individuals by depositing them in the mails at 500 W. Madison St.,
Suite 1400 in Chicago, Illinois, by first-class mail, postage prepaid, on
December 29, 1993.
Steven G. Storch, Esq.
Storch, Amini & Munves, P.C.
405 Lexington Ave.
New York, New York 10174
Catherine M. Foti, Esq.
Morvillo, Abramovitz, Grand,
Iason & silverberg, P.C.
530 Fifth Ave.
New York, New York 10036-5101
Ronald P. Fischetti, Esq.
Fischetti & Russo
950 Third Ave.
Suite 3200
New York, New York 10022-2705
/s/ Lori A. Trowbridge
--------------------------------------
Lori A. Trowbridge (L T 6489)
One of the Attorneys for Plaintiff
Securities and Exchange Commission
500 West Madison Street, Suite 1400
Chicago, Illinois 60661
312/353-7390
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------
:
SECURITIES & EXCHANGE COMMISSION, : CIVIL ACTION
: FILE NO. 93 CIV 3650 (PNL)
:
Plaintiff, :
:
v. :
:
LEONARD J. MESSINA, :
KEITH G. GREENBERG, and :
EDWYN H. SCHRIER, :
Defendants. :
:
- -----------------------------------
ORDER AND JUDGMENT OF PERMANENT INJUNCTION
AGAINST KEITH G. GREENBERG
--------------------------
Plaintiff, Securities and Exchange Commission (Commission), having
filed a Complaint for Permanent Injunction (Complaint) in this matter, and
Defendant Keith G. Greenberg (Greenberg), having in his Consent and
Stipulation, attached hereto and incorporated herein, acknowledged receipt
of the Complaint and admitted to the jurisdiction of this Court over him
and the subject matter hereof, and without admitting or denying the
allegations of the Complaint, except as to jurisdiction, and without trial,
argument or adjudication of any fact or law herein, having consented to the
entry of this Order of Permanent Injunction, and both the Commission and
Defendant Greenberg having waived the entry of Findings of Fact and
Conclusions of Law as provided by Rule 52 of the Federal Rules of Civil
Procedure, and it further appearing that the Court has jurisdiction over
the parties and the subject matter hereof, and the Court being fully advised
in the premises:
<PAGE>
- 2 -
IT IS HEREBY ORDERED, ADJUDGED AND DECREED that Defendant Greenberg,
his officers, agents, servants, employees, attorneys and those persons in
active concert or participation with him who receive actual notice of this
Order of Permanent Injunction, by personal service or otherwise, and each of
them, be and hereby are, permanently restrained and enjoined from, directly
or indirectly, as principal or aider and abettor, in the offer or sale of any
securities, by the use of any means or instruments of transportation or
communication in interstate commerce or by the use of the mails, employing
any device, scheme or artifice to defraud.
II.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant Greenberg,
his officers, agents, servants, employees, attorneys and those persons in
active concert or participation with him who receive actual notice of this
Order of Permanent Injunction, by personal service or otherwise, and each of
them, be and hereby are, permanently restrained and enjoined from, directly or
indirectly, as principal or aider and abettor, in the offer or sale of any
securities, by the use of any means or instruments of transportation or
communication in interstate commerce or by the use of the mails, obtaining
money or property by means of any untrue statement of a material fact or
omitting to state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they were made, not
misleading,
<PAGE>
- 3 -
or engaging in any transaction, practice or course of business which operates
or would operate as a fraud or deceit upon purchasers or prospective purchasers
of such securities.
III.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant Greenberg,
his officers, agents, servants, employees, attorneys and those persons in
active concert or participation with him who receive actual notice of this
Order of Permanent Injunction, by personal service or otherwise, and each of
them, be and hereby are, permanently restrained and enjoined from, directly
or indirectly, as principal or aider and abettor, in connection with the
purchase or sale of any security, by the use of any means or instrumentality
of interstate commerce or of the mails or of any facility of any national
securities exchange:
A. employing any device, scheme or artifice to defraud;
B. making any untrue statement of a material fact or omitting to state
a material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not
misleading; or
C. engaging in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon any person.
IV.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the attached Consent
and Stipulation of Defendant Greenberg, be and hereby is
<PAGE>
- 4 -
incorporated herein with the same force and effect as if fully set forth
herein.
V.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that this Court shall
retain jurisdiction of this matter for all purposes.
VI.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that during the pendency of
this action against any remaining defendant(s), Defendant Greenberg will
remain a defendant in this action for purposes of discovery, including
the taking of his deposition, if any, upon appropriate notice, as well as
testifying at trial, as though a party to the action, without service upon
him of a subpoena.
VII.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that there being no just
reason for delay, the Clerk of the Court is hereby directed to enter this
Order of Permanent Injunction.
<PAGE>
PRO SE OFFICE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
OFFICE OF THE CLERK
U.S. COURTHOUSE
FOLEY SQUARE, NEW YORK, NY 10007
JAMES M. PARKINSON
CLERK
June 8, 1993
--------------
Date
Re: SEC v. Greenberg, et al. 93CN3650(PNL)
Dear Litigant:
Enclosed is a copy of the judgment entered in your case.
Your attention is directed to the provisions of Rule 4(a) (1) of the
Federal Rules of Appellate Procedure, which require that if the decision is
appealable and you wish to appeal it, you must file a notice of appeal within
30 days of the date of entry of the decision (60 days if the United States or
an officer agency of the United States is a party).
If you wish to appeal the judgment but for any reason you are unable to
file your notice of appeal within the required time, you may make a motion for
extension of time in accordance with the provision of FRAP 4(a) (5). That rule
requires you show "excusable neglect" or "good cause" for your failure to file
your notice of appeal within the time allowed. Any such motion must be filed
no later than 60 days from the date of entry of this decision (90 days if the
United States or an officer or agency of the United States is a party).
The enclosed forms 1, 2 and 3 cover some common situations and you
may choose to use one of them if appropriate to your circumstances.
The filing fee of a notice of appeal is $5.00 and the appellate docketing
fee is $100.00 payable to the Clerk of the District Court.
JAMES M. PARKISON
CLERK
By /s/ Jose F. R_________
---------------------------------
Deputy Clerk
encl.
CA/SNY 0887-Letter Form
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
- ------------------------------------
:
SECURITIES AND EXCHANGE COMMISSION : CIVIL ACTION
Plaintiff, : FILE NO. 93 CIV 3650 (PNL)
:
v. :
:
LEONARD J. MESSINA, :
KEITH G. GREENBERG, and :
EDWYN H. SCHRIER, :
Defendants. :
- ------------------------------------
CONSENT AND STIPULATION OF KEITH G. GREENBERG
A. Defendant Keith G. Greenberg (Greenberg):
1. Acknowledges receipt of a copy of the Complaint and Summons in
this action, and admits the jurisdiction of this Court over him
and the subject matter hereof;
2. Without admitting or denying the allegations of the Complaint,
except as to jurisdiction, hereby voluntarily consents to the
entry of the attached Order of Permanent Injunction against him
without further notice;
3. Acknowledges that no tender, offer, promise or threat of any kind
whatsoever has been made by the
<PAGE>
-2-
Plaintiff Securities and Exchange Commission or anyone else in
consideration of this Consent and Stipulation;
4. Understands that the terms of the Order of Permanent Injunction
are enforceable through contempt proceedings;
5. Agrees that he will not oppose enforcement of the Order of
Permanent Injunction on the grounds that it fails to comply with
Rule 65(d) of the Federal Rules of Civil Procedure and waives any
objections based thereon; and
6. Agrees that the court shall retain jurisdiction of the matter for
all purposes.
B. Said Defendant and Plaintiff Securities and Exchange Commission
waive entry of findings of fact and conclusions of law under Rule 52 of the
Federal Rules of Civil Procedure.
C. Said Defendant and Plaintiff Securities and Exchange Commission
agree that this Consent and Stipulation shall be made a part of the attached
Order of Permanent Injunction against Keith G. Greenberg to be entered by this
Court in this action.
<PAGE>
-3-
D. Greenberg hereby agrees that during the pendency of this action
against any remaining defendant(s), Greenberg will remain a defendant in this
action for purposes of discovery. Greenberg consents to the taking of his
deposition, if any, upon appropriate notice, and to testify at trial, as though
a party to the action, without service upon him of a subpoena.
/s/ Keith G. Greenberg /s/ Lori A. Trowbridge
- ------------------------------ -------------------------------
Keith G. Greenberg Lori A. Trowbridge (L T 6489)
One of the Attorneys for
Plaintiff Securities and
Exchange Commission
500 West Madison Street
Suite 1400
Chicago, Illinois 60661
Telephone: 312/353-7390
Dated: June 2, 1993
--------------
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
- -------------------------------------
SECURITIES AND EXCHANGE COMMISSION, : CIVIL ACTION
Plaintiff, : FILE NO.
v. : COMPLAINT FOR
LEONARD J. MESSINA, : PERMANENT INJUNCTION
KEITH G. GREENBERG, and : AND OTHER EQUITABLE
EDWYN H. SCHRIER, : RELIEF
:
Defendants. :
- -------------------------------------
Plaintiff, Securities and Exchange Commission (Commission), for its
Complaint for Permanent Injunction and Other Equitable Relief, alleges as
follows:
1. Defendant Leonard J. Messina (Messina), directly and indirectly, has
engaged and, unless enjoined, will continue to engage in transactions, acts,
practices and courses of business which constitute and will constitute
violations of Section 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act
of 1933 (Securities Act) [15 U.S.C. Sections 77q(a)(1), 77q(a)(2) and
77q(a)(3)], Section 10(b) of the Securities Exchange Act of 1934 (Exchange
Act) [15 U.S.C.
<PAGE>
-2-
Section 78j(b)] and Rules 10b-5 and 10b-9 [17 C.F.R. Sections 240.10b-5
and 240.10b-9] promulgated thereunder.
2. Defendants Keith G. Greenberg (Greenberg) and Edwyn H. Schrier (Schrier)
have aided and abetted and, unless enjoined, will aid and abet future
violations of Section 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act
[15 U.S.C. Sections 77q(a)(1), 77q(a)(2) and 77q(a)(3)], Section 10(b) of the
Exchange Act [15 U.S.C. Section 78j(b)] and Rule 10b-5 [17 C.F.R. Section
240.10b-5] promulgated thereunder.
3. The Commission brings this action to enjoin such transactions, acts,
practices and courses of business pursuant to Section 20(b) of the Securities
Act [15 U.S.C. Section 77t(b)] and Sections 21(d) and 21(e) of the Exchange Act
[15 U.S.C. Sections 78u(d) and 78u(e)].
JURISDICTION AND VENUE
4. The Court has jurisdiction over this action pursuant to Section 22(a)
of the Securities Act [15 U.S.C. Section 77v(a)] and Section 27 of the
Exchange Act [15 U.S.C. Section 78aa].
5. The transactions, acts, practices and courses of business constituting
the violations herein have occurred within the jurisdiction of the United
States District Court for the Southern District of New York, and elsewhere.
6. The Defendants will, unless enjoined, continue to engage in the
transactions, acts, practices and courses of business set forth in this
Complaint and in transactions, acts, practices and courses of business of
similar purport and object.
7. Each of the Defendants, directly and indirectly, has made use of the
mails and of the means and instrumentalities of interstate commerce in
connection with the transactions, acts, practices and courses of business
alleged herein in the Southern District of New York, and elsewhere.
8. Pursuant to the authority conferred on the Commission by Section 10(b)
of the Exchange Act [15 U.S.C. Section 78j(b)], the Commission has
promulgated Rules 10b-5 and 10b-9 [17 C.F.R.
<PAGE>
-3-
Sections 240.10b-5 and 240.10b-9], such Rules being in effect at all times
mentioned herein and at the present time.
THE DEFENDANTS
9. At all relevant times, Defendant Messina resided in Greenwich,
Connecticut or New York, New York and was the sole shareholder and director
of Amerigroup, Inc., which wholly owned Amerigroup Technologies, Inc. (ATI),
a Delaware corporation which acted as the general partner of the three
partnerships described herein. Messina was the President of ATI. In May
1989, Messina became Chairman of the Board of Advanced Marketing Technology
Corp. (Amtech), a New York corporation more fully described below.
10. At all relevant times, Defendant Greenberg resided in Jericho, New
York and was Amtech's Chief Executive Officer.
11. At all relevant times, Defendant Schrier resided in New York, New York
and was the sole officer, director and shareholder of Madison Equipment
Management Corp. (Madison Equipment), a privately-held New York corporation
engaged in the business of equipment leasing and administrative bookkeeping
services. From at least November 1988 through August 1989, Schrier, through
Madison Equipment, performed administrative bookkeeping services for Amtech,
ATI and the three partnerships described herein.
RELEVANT ENTITIES
12. At all relevant times, Advances Marketing Technology Corp. (Amtech),
was a publicly-held New York corporation based in
<PAGE>
-4-
New York, New York. Amtech developed and manufactured interactive
merchandising video consoles referred to as "Kiosks."
13. Amerivest Partners 318, L.P. (Amerivest 318), Amerivest Partners 418,
L.P. (Amerivest 418) and Amerivest Partners 718, L.P. (Amerivest 718)
(collectively the "Amerivest Partnerships") and Delaware limited partnerships.
The Amerivest Partnerships were formed to purchase Kiosks from Amtech and to
contract with Amtech to operate the Kiosks for the benefit of the partnerships
for a minimum five years period. ATI was the general partner of each
partnership.
FACTS
A. AMERIVEST PARTNERSHIP OFFERINGS
1. The Offer and Sale
14. From at least June 1988 to at least August 1989, Defendant Messina,
through ATI, promoted an offering for each of the three Amerivest
Partnerships. Each offering involved the sale of limited partnership units.
15. From at least June 1988 to at least August 1988, Amerivest 318 sold
limited partnership units to approximately 22 investors located in several
states, raising at least $495,000. Messina and his wife contributed an
additional $81,000 by purchasing several Amerivest 318 partnership units
through entities under their control. From at least August 1988 to at least
November 1988, Amerivest 418 sold limited partnership units to at least 19
investors located in several states, raising at least $576,000. From at least
November 1988 to at least August
<PAGE>
-5-
1989, Amerivest 718 sold limited partnership units to approximately 96
investors located in several states, raising at least $2,592 million.
16. Defendant Messina promoted the sale of each Amerivest Partnership's
units in the same manner. Messina's attorneys prepared a private placement
memorandum for each offering using information provided by Defendant Messina
concerning the particular partnership and information provided by Defendant
Greenberg concerning the Kiosks. Defendant Messina reviewed the memoranda
and distributed them to broker-dealers he hired to sell the partnership units.
Defendant Messina also provided the broker-dealers with a brochure describing
the Amerivest partnerships, a video tape describing the Kiosks and, for
Amerivest 718, a due diligence package. The brokers solicited prospective
investors for the offerings, and provided them with copies of the private
placement memoranda and other information given to them by Defendant Messina.
Defendant Messina also personally sold partnership units directly to investors.
2. Misrepresentations and Omissions
a. Amtech's Financial Condition
17. As part of Defendant Messina's scheme to defraud, the Amerivest 318 and
Amerivest 418 private placement memoranda each described Amtech's importance
to the overall success and profitability of the partnership. The memoranda
stressed each partnership's reliance on Amtech for its "experience and
expertise." Despite Amtech's importance to the success of the
<PAGE>
-6-
partnerships, investors in Amerivest 318 and Amerivest 418 were not told the
true extent of Amtech's tenuous financial condition. The private placement
memoranda simply stated that Amtech "has limited financial resources and if
the [Kiosks] generate less revenues than anticipated, Amtech may not be able
to pay rentals or perform other obligations to the Partnership."
18. This disclosure failed to inform Amerivest 318 and Amerivest 418
investors that, in fact, Amtech was dependent on Amerivest Partnership
offering proceeds just to continue its operations and without continued
funding from the Amerivest Partnership offerings, Amtech could not continue
to manufacture, place or operate the Kiosks and thereby generate profits for
the Amerivest Partnerships.
19. Moreover, this risk that Amtech's financial condition would preclude it
from manufacturing, placing or operating partnership-owned Kiosks
significantly increased the risks of investing in Amerivest 318 and Amerivest
418. Nonetheless, Defendant Messina caused memoranda to be distributed which
failed to disclose the extent of Amtech's financial predicament and the
increased risks of investing under these circumstances.
b. Messina's Undisclosed Control of
and Financial Interest in Amtech
20. As a further part of Defendant Messina's scheme to defraud, the private
placement memoranda for the Amerivest Partnerships falsely portrayed all
transactions with Amtech as arms-length transactions between unrelated parties.
<PAGE>
-7-
21. In fact, the agreements with Amtech were not a result of arms-length
transactions between unrelated parties. By at least June 1988 when the
Amerivest 318 offering began, Defendant Messina had obtained the means to
control Amtech as a result of Amtech's near total dependence on the Amerivest
Partnership offering proceeds just to continue operations. By at least July
1988, Defendant Messina, through First River Corp. (First River), another
entity he controlled, acquired a secured interest in all of Amtech's assets.
Defendant Messina used Amtech's dependence on the Amerivest Partnership
proceeds and First River's interest in Amtech's assets to control the
operations of Amtech. Defendant Messina caused Defendant Greenberg to raise
the sales price of Amtech's Kiosk to Amerivest 718; to place Defendant
Schrier and Madison Equipment in charge of Amtech's finances; and to make
Messina Chairman of Amtech's Board of Directors.
22. Investors in the three partnerships were not told that Defendant
Messina had control over the operations of Amtech and a direct financial
interest in Amtech's assets. As a result, Defendant Messina misled investors
about the arms-length nature of the Amerivest Partnerships' transactions with
Amtech.
c. Use of Proceeds
23. As a further part of the scheme to defraud, Defendant Messina
misrepresented to investors the true intended use of investor proceeds by
inflating equipment costs to conceal payments to Messina for Messina's own
personal benefit and the
<PAGE>
-8-
payment of additional undisclosed partnership promotional expenses.
24. The Amerivest 318 and Amerivest 418 private placement memoranda stated
that Madison Equipment would receive $25,875 from each partnership, a total of
$51,750 from the two partnerships, as an "Equipment Brokerage Fee." The
memoranda stated this fee was compensation for, among other things, Schrier's
involvement in "introducing Amtech to the General Partner." The memoranda
further represented specific commission costs, legal expenses and general
partner fees associated with Amerivest 318 and Amerivest 418 offerings.
25. Contrary to these representations, the equipment brokerage fee was not
compensation to Madison Equipment but was, instead, used to pay additional
undisclosed compensation to the brokers who sold Amerivest 318 and Amerivest
418 partnership units and the attorneys for the partnerships as well as to
make additional undisclosed payments to Messina and entities controlled by him.
26. Defendants Messina and Schrier entered into an undisclosed agreement
which allowed Defendant Messina to control disbursement of the equipment
brokerage fee. Pursuant to this agreement, Defendant Schrier disbursed Amerivest
318 and Amerivest 418 partnership proceeds at Defendant Messina's direction for
non-Madison Equipment expenses. Thus, with respect to the Amerivest 318 and
Amerivest 418 offerings, Defendant Messina misrepresented the true use of the
equipment brokerage
<PAGE>
-9-
fee and also understated commission costs, legal expenses and general partner
fees.
27. As a further part of the scheme to defraud, the Amerivest 718 private
placement memorandum represented the cost of each Kiosk as $185,000. The
memorandum further represented for Amerivest 718 specific commission costs,
legal expenses and general partner fees.
28. Contrary to these representations, the true price of each Kiosk to the
partnership was only $110,000. Defendant Messina made an agreement with
Defendant Greenberg to direct the remaining $75,000 from each Kiosk sale to
pay for Amerivest 718 partnership promotional expenses. Defendants Messina and
Schrier also made an agreement that these funds would be disbursed by
Defendant Schrier through Madison Equipment, at Defendant Messina's direction,
for non-Amtech expenses.
29. Pursuant to these agreements, Defendants Schrier and Greenberg, who had
joint authority over Amtech's funds, forwarded approximately $900,000 of the
funds received from the Amerivest 718 offering to Madison Equipment. Defendant
Schrier then disbursed these funds at Defendant Messina's direction to pay
additional undisclosed compensation to the brokers who sold Amerivest 718
units, the attorneys for the partnership and Defendant Messina and entities
controlled by him. These were all non-Amtech expenses. Thus, with respect to
the Amerivest 718 offering, Defendant Messina misrepresented to investors the
true
<PAGE>
-10-
cost of the Kiosks and understated the true commission costs, legal expenses
and general partner fees.
d. The All-or-None Offering
30. As a further part of the scheme to defraud, Defendant Messina provided
assurances to investors about the safety of their funds in the event the
offerings were not fully subscribed. The memorandum for Amerivest 318 and
Amerivest 418 each stated that investor proceeds would be held in an escrow
account until the offering was fully subscribed. Additionally, Amerivest 318
and Amerivest 418 were described as "all-or-none" offerings, in that investor
proceeds would be returned to the investors if the offerings were not fully
subscribed.
31. Contrary to the representation requiring use of an escrow account,
Defendant Messina never used an escrow account for the Amerivest 318 offering.
Additionally, contrary to the all-or-none term of the Amerivest 318 offering,
on or about August 19, 1988, Defendant Messina "closed" the offering and
disbursed partnership proceeds prior to full subscription of the offering.
Defendant Messina continued to sell Amerivest 318 partnership units even after
this date.
32. As further part of Defendant Messina's scheme to defraud, on or about
August 19, 1988, Defendant Messina purchased Amerivest 318 partnership units
through ATI, First River and Summer Stables, an entity controlled by
Defendant Messina's wife. The Amerivest 318 private placement memorandum
contained no authorization for Defendant Messina, his wife or entities under
<PAGE>
-11-
their control to purchase partnership units in the offering, much less
purchase units in an effort to close this otherwise unsuccessful all-or-none
offering.
33. Contrary to the all-or-none term of the Amerivest 418 offering, on or
about September 30, 1988, Defendant Messina "closed" the offering and
disbursed partnership funds from the partnership's escrow and bank accounts
prior to full subscription of the offering. Defendant Messina continued to
sell Amerivest 418 partnership units even after this date.
COUNT I
Violations of Section 17(a)(1) or the Securities Act
[15 U.S.C. Section 77q(a)(1)]
34. Paragraphs 1 through 33 are hereby realleged and incorporated by
reference herein.
35. From at least June 1988 to at least August 1989, Defendant Messina, in
the offer and sale of securities described in paragraph 15 above, by use of
the means and instruments of transportation and communication in interstate
commerce and by use of the mails, directly and indirectly, employed devices,
schemes and artifices to defraud, all as more fully described in paragraphs 17
through 33 above and paragraph 36 below.
36. In the offer and sale of Amerivest Partnership units and as part of the
scheme to defraud, Defendant Messina made, and caused to be made, untrue
statements of material facts and omitted to state material facts to investors
and prospective investors concerning, among other things, Amtech's financial
<PAGE>
-12-
condition, Messina's control over and financial interest in Amtech, the
intended use of investor proceeds and the all-or-none terms of the offerings.
37. Defendant Messina knew or was reckless in not knowing the facts and
circumstances described in paragraphs 34 through 36 above.
38. Defendants Greenberg and Schrier knowingly and substantially assisted
Messina's activities described in paragraphs 23 through 29 and 34 through 37
above, by, among other things, disbursing partnership proceeds for improper
purposes, all as more fully described in paragraph 26, 28 and 29 above.
39. By reason of the activities described in paragraphs 34 through 38 above,
Defendant Messina violated, and Defendants Greenberg and Schrier aided and
abetted violations of, Section 17(a)(1) of the Securities Act [15 U.S.C.
Section 77q(a)(1)].
COUNT II
Violations of Section 17(a)(2) and
17(a)(3) of the Securities Act
[15 U.S.C. Sections 77q(a)(2) and 77q(a)(3)]
40. Paragraphs 1 through 33 are hereby realleged and incorporated by
reference herein.
41. From at least June 1988 to at least August 1989, Defendant Messina, in
the offer and sale of the securities described in paragraph 15 above, by use of
the means and instruments of transportation and communication in interstate
commerce and by use of the mails, directly and indirectly, obtained money
and property by means of untrue statements of
<PAGE>
-13-
material facts and omitted to state material facts necessary in order to make
the statements made, in the light of the circumstances under which they were
made, not misleading; and engaged in transactions, practices and courses of
business which operated as a fraud and deceit upon purchasers and prospective
purchasers of such securities, all as more fully described in paragraphs 17
through 33 and paragraph 36 above.
42. Defendants Greenberg and Schrier knowingly and substantially assisted
Messina's activities described in paragraphs 23 through 29, 40 and 41 above,
by, among other things, disbursing partnership proceeds for improper purposes,
all as more fully described in paragraphs 26, 28 and 29 above.
43. By reason of the activities described in paragraphs 40 through 42 above,
Defendant Messina violated, and Defendants Greenberg and Schrier aided and
abetted violations of, Section 17(a)(2) and 17(a)(3) of the Securities Act
[15 U.S.C. Sections 77q(a)(2) and 77q(a)(3)].
COUNT III
Violations of Section 10(b) of the Exchange Act
[15 U.S.C. Section 78j(b)] and Rule 10b-5
[17 C.F.R. Section 240.10b-5] Promulgated Thereunder
44. Paragraphs 1 through 33 are hereby realleged and incorporated by
reference herein.
45. From at least June 1988 to at least August 1989, Defendant Messina, in
connection with the purchase and sale of the securities described in paragraph
15 above, by use of the means and instrumentalities of interstate commerce and
of the
<PAGE>
-14-
mails, directly and indirectly, employed devices, schemes and artifices to
defraud; made untrue statements of material facts and omitted to state
material facts necessary in order to make the statements made, in the light
of the circumstances under which they were made, not misleading; and
engaged in acts, practices and courses of business which operated as a fraud
and deceit upon purchasers and sellers of such securities, all as more fully
described in paragraphs 17 through 33 and paragraph 36 above.
46. Defendant Messina knew or was reckless in not knowing the facts and
circumstances described in paragraph 45 above.
47. Defendants Greenberg and Schrier knowingly and substantially assisted
Messina's activities described in paragraphs 23 through 29 and 44 through 46
above by, among other things, disbursing partnership proceeds for improper
purposes, all as more fully described in paragraphs 26, 28 and 29 above.
48. By reason of the activities described in paragraphs 44 through 47 above,
Defendant Messina violated, and Defendants Greenberg and Schrier aided and
abetted violations of, Section 10(b) of the Exchange Act [15 U.S.C. Section
78j(b)] and Rule 10b-5 [17 C.F.R. Section 240.10b-5] promulgated thereunder.
COUNT IV
Violations of Section 10(b) of the
Exchange Act [15 U.S.C. Section 78j(b)] and Rule 10b-9
[17 C.F.R. Section 240.10b-9] Promulgated Thereunder.
49. Paragraphs 1 through 33 are hereby realleged and incorporated by
reference herein.
<PAGE>
-15-
50. From at least June 1988 to at least November 1988, Defendant Messina,
in connection with the purchase and sale of the securities described in
paragraph 15 above, by use of the means and instrumentalities of interstate
commerce and of the mails, directly and indirectly, made representations to the
effect that the securities of the Amerivest 318 and Amerivest 418 partnerships
were being offered and sold on an "all-or-none" basis, and on a basis whereby
the consideration paid for the securities would be promptly refunded to the
purchasers if all of the securities were not sold, while the Amerivest
Partnership units were not part of an offering or distribution being made on
the condition that all or a specified amount of the consideration paid for such
securities would be promptly refunded to the purchasers unless all or a
specified number of the securities being offered were sold at a specified
price within a specified time, and the total amount due to the seller would be
received by him by a specified date, all as more fully described in paragraphs
30 through 33 above.
51. As part of such conduct, Defendant Messina improperly closed the
Amerivest 318 and Amerivest 418 offerings and disbursed partnership proceeds
prior to the sale of all partnership units. In addition, Defendant Messina
purchased Amerivest 318 partnership units for entities controlled by Defendant
Messina and his wife in an attempt to create the appearance that this
otherwise unsuccessful offering was fully subscribed.
<PAGE>
-16-
52. Defendant Messina knew or was reckless in not knowing the facts and
circumstances described in paragraphs 49 through 51 above.
53. By reason of the activities described in paragraphs 49 through 52 above,
Defendant Messina violated Section 10(b) of the Exchange Act [15 U.S.C. Section
78j(b)] and Rule 10b-9(a)(1) [17 C.F.R. Section 240.10b-9(a)(1)] promulgated
thereunder.
WHEREFORE, the Commission requests that the Court:
I.
Find that the Defendants committed the violations alleged above.
II.
Grant an order of Permanent Injunction, in a form consistent with Rule 65(d)
of the Federal Rules of Civil Procedure, enjoining Defendants Messina,
Greenberg and Schrier, their officers, agents, servants, employees and
attorneys and those persons in active concert or participation with them who
receive actual notice of the Order of Permanent Injunction by personal service
or otherwise, and each of them, as principal or aider and abettor, in the offer
or sale of any security, by the use of any means or instruments of
transportation or communication in interstate commerce or by the mails; from
directly or indirectly, employing any device, scheme or artifice to defraud.
<PAGE>
-17-
Grant an Order of Permanent Injunction, in a form consistent with Rule 65(d)
of the Federal Rules of Civil Procedure, enjoining Defendants Messina,
Greenberg and Schrier, their officers, agents, servants, employees and
attorneys and those persons in active concert or participation with them who
receive actual notice of the Order of Permanent Injunction by personal service
or otherwise, and each of them, as principal or aider and abettor, in the offer
or sale of any security, by the use of any means or instruments of
transportation or communication in interstate commerce or by the mails, from
directly or indirectly:
A. obtaining money or property by means of any untrue statement of a
material fact or omitting to state a material fact necessary in
order to make the statements made, in the light of the circumstances
under which they were made, not misleading; or
B. engaging in any transaction, practice, or course of business which
operates or would operate as a fraud or deceit upon purchasers or
prospective purchasers of such securities.
IV.
Grant an Order of Permanent Injunction, in a form consistent with Rule
65(d) of the Federal Rules of Civil Procedure, enjoining Defendants Messina,
Greenberg and Schrier, their officers, agents, servants, employees and
attorneys and those persons in active concert or participation with them
who receive
<PAGE>
-18-
actual notice of the Order of Permanent Injunction by personal service or
otherwise, and each of them, as principal or aider and abettor, in connection
with the purchase or sale of any security, by the use of any means or
instrumentality of interstate commerce or of the mails, or of any facility of
any national securities exchange, from directly or indirectly:
A. employing any device, scheme or artifice to defraud;
B. making any untrue statement of material fact or omitting to state a
material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not
misleading; or
C. engaging in any act, practice or course of business which operates
and would operate as a fraud and deceit upon any person.
V.
Grant an order of Permanent Injunction, in a form consistent with Rule 65(d)
of the Federal Rules of Civil Procedure, enjoining Defendant Messina, his
officers, agents, servants, employees and attorneys and those persons in active
concert or participation with him who receive actual notice of the Order of
Permanent Injunction by personal service or otherwise, and each of them, from
directly or indirectly, in connection with the offer, purchase or sale of any
security, by use of any means or instrumentality of interstate commerce or of
the mails, or if any facility of any national securities exchange, employing
any
<PAGE>
-19-
manipulative or deceptive devices or contrivances by: making the representation
that all or part of the consideration paid for such security will be refunded
to the purchaser if a specified number of the securities being offered are not
sold at a specified price within a specified time and the total due to the
seller is to be received by him by a specified date and failing to refund all
or part of the consideration paid when the specified number of securities are
not sold at the specified price or within the specified time or the total due
to the seller is not received by him on the specified date.
VI.
Grant an Order requiring Defendant Messina to disgorge his ill-gotten gains
from his violative conduct, including prejudgment interest on such
disgorgement.
VII.
Retain jurisdiction of this action in accordance with the principles of
equity and the Federal Rules of Civil Procedure in order to implement and carry
out the terms of all orders and decrees that may be entered or to entertain
any suitable application or motion for additional relief within the
jurisdiction of this Court.
<PAGE>
-20-
VIII.
Grant an order for such further relief as the Court may deem appropriate.
Respectfully submitted,
-----------------------------
Timothy L. Warren (T W 1997)
-----------------------------
Ronald E. Wood (R W 3749)
-----------------------------
Lori A. Trowbridge (L T 6489)
Attorneys for Plaintiff
Securities and Exchange Commission
500 West Madison Street, Suite 1400
Chicago, Illinois 60661
Telephone: 312/353-7390
Local Counsel:
- ----------------------------------
Robert B. Blackburn (R B 1545)
Securities and Exchange Commission
7 World Trade Center, Suite 1300
New York, New York 10048
Telephone: 212/748-8000
DATED: June , 1993
<PAGE>
UNITED STATES DISTRICT COURT
Southern District of New York
-------- --------
UNITED STATES OF AMERICA JUDGMENT IN A CRIMINAL CASE
(For Offenses Committed On or
V. After November 1, 1987)
KEITH GREENBERG Case Number 94 CR. 516 (LLS)
(Name of Defendant) Catherine M. Foti, Esq.
-----------------------------------
Defendant's Attorney
Amy Millard, AUSA
THE DEFENDANT:
[X] pleaded guilty to count(s) 1 & 2
-------------------------------------------------
[ ] was found guilty on count(s) after a
---------------------------------------
plea of not guilty.
Accordingly, the defendant is adjudged guilty of such count(s), which
involve the following offenses:
Date Offense Count
Title & Section Nature of Offense Concluded Number(s)
- --------------- ----------------- ----------- ---------
18 USC 371 CONSPIRACY TO COMMIT MAIL 1992 1
FRAUD AND TO DEFRAUD THE
INTERNAL REVENUE SERVICE
18 USC 371 CONSPIRACY TO COMMIT MAIL 6/92 2
FRAUD
The defendant is sentenced as provided in pages 2 through __4__ of
this judgment. The sentence is imposed pursuant to the Sentencing Reform Act of
1984.
[ ] The defendant has been found not guilty on count(s) _______________________
and is discharged as to such count(s).
[ ] Count(s) ___________________ (is)(are) dismissed on the motion of the United
States.
[x] It is ordered that the defendant shall pay a special assessment of $100,
----
for count(s) 1 & 2 , which shall be due [X] immediately
-----------------
[ ] as follows:
IT IS FURTHER ORDERED that the defendant shall notify the United
States attorney for this district within 30 days of any change of name,
residence, or mailing address until all fines, restitution, costs, and special
assessments imposed by this judgment are fully paid.
Defendant's Soc. Sec. No.: ###-##-####
-------------
Defendant's Date of Birth: 11/1/57 August 24, 1995
------------- ------------------------------
Date of Imposition of Sentence
/s/ Louis L. Stanton
Defendant's Mailing Address: ------------------------------
29 Windward Isle Signature of Judicial Officer
- ------------------------------
Palm Beach Gardens, FL 33418 LOUIS L. STANTON, U.S.D.J.
- ------------------------------ --------------------------------
Name & Title of Judicial Officer
Defendant's Residence Address:
August 24, 1995
same as above ------------------------------
- ------------------------------- Date
- -------------------------------
<PAGE>
Defendant: KEITH GREENBERG Judgment-Page 2 of 4
Case Number 94 CR. 516 (LLS) --- ---
IMPRISONMENT
The defendant is hereby committed to the custody of the United States
Bureau of Prisons to be imprisoned for a term of THIRTY (30) DAYS
-----------------------------
[ ] The court makes the following recommendations to the Bureau of Prisons:
[ ] The defendant is remanded to the custody of the United States marshal.
[ ] The defendant shall surrender to the United States marshal for this
district.
a.m.
[ ] at _______ p.m. on ________________
[ ] as notified by the United States marshal.
[X] The defendant shall surrender for service of sentence at the institution
designated by the Bureau of Prisons.
[X] before 2 p.m. on or before thirty (30) days from the date of
Judgment.
----------------------
[ ] as notified by the United States marshal.
[ ] as notified by the probation office.
RETURN
I have executed this judgment as follows:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Defendant delivered on ______________ to _____________________________ at
__________________________________, with a certified copy of this judgment.
---------------------------------------
United States Marshal
By
-------------------------------------
Deputy Marshal
<PAGE>
Defendant: KEITH GREENBERG Judgment-Page 3 of 4
Case Number: 94 CR. 516 (LLS) --- ---
SUPERVISED RELEASE
Upon release from imprisonment, the defendant shall be on supervised
release for a term of TWO (2) YEARS.
-------------------
While on supervised release, the defendant shall not commit another
federal, state, or local crime and shall not illegally possess a controlled
substance. The defendant shall comply with the standard conditions that have
been adopted by this court (set forth below). If this judgment imposes a
restitution obligation, it shall be a condition of supervised release that the
defendant pay any such restitution that remains unpaid at the commencement of
the term of supervised release. The defendant shall comply with the following
additional conditions:
[ ] The defendant shall report in person to the probation office in the district
to which the defendant is released within 72 hours of release from the
custody of the Bureau of Prisons.
[ ] The defendant shall pay any fines that remain unpaid at the commencement
of the term of supervised release.
[ ] The defendant shall not possess a firearm or destructive device.
The defendant is to perform THREE HUNDRED (300) HOURS of community service
as directed by Probation Office.
STANDARD CONDITIONS OF SUPERVISION
While the defendant is on supervised release pursuant to this
judgment, the defendant shall not commit another federal, state or local crime.
In addition:
1) the defendant shall not leave the judicial district without the permission
of the court or probation officer;
2) the defendant shall report to the probation officer as directed by the
court or probation officer and shall submit a truthful and complete
written report within the first five days of each month;
3) the defendant shall answer truthfully all inquiries by the probation
officer and follow the instructions of the probation officer;
4) the defendant shall support his or her dependents and meet other family
responsibilities;
5) the defendant shall work regularly at a lawful occupation unless excused
by the probation officer for schooling, training, or other acceptable
reasons;
6) the defendant shall notify the probation officer within 72 hours of any
change in residence or employment;
7) the defendant shall refrain from excessive use of alcohol and shall not
purchase, possess, use, distribute, or administer any narcotic or other
controlled substance, or any paraphernalia related to such substances,
except as prescribed by a physician;
8) the defendant shall not frequent places where controlled substances are
illegally sold, used, distributed, or administered;
9) the defendant shall not associate with any persons engaged in criminal
activity, and shall not associate with any person convicted of a felony
unless granted permission to do so by the probation officer;
10) the defendant shall permit a probation officer to visit him or her at any
time at home or elsewhere and shall permit confiscation of any contraband
observed in plain view by the probation officer;
11) the defendant shall notify the probation officer within seventy-two hours
of being arrested or questioned by a law enforcement officer;
12) the defendant shall not enter into any agreement to act as an informer or
a special agent of law enforcement agency without the permission of the
court;
13) as directed by the probation officer, the defendant shall notify third
parties of risks that may be occasioned by the defendant's criminal record
or personal history or characteristics, and shall permit the probation
officer to make such notifications and to confirm the defendant's
compliance with such notification requirement.
<PAGE>
Defendant: Keith Greenberg Judgment-Page 4 of 4
Case Number: 94 CR. 516 (LLS) --- ---
STATEMENT OF REASONS
[X] The court adopts the factual findings and guideline application in the
presentence report.
OR
[ ] The court adopts the factual findings and guideline application in the
presentence report except (see attachment, if necessary):
GUIDELINE RANGE DETERMINED BY THE COURT:
Total Offense Level: ________________________
Criminal History Category: __________________
Imprisonment Range: ________ to _______ months
Supervised Release Range: _____ to ____ years
Fine Range: $_____________ to $______________
[ ] Fine is waived below the guideline range, because of the defendant's
inability to pay.
Restitution: $_____________
[ ] Full restitution is not ordered for the following reason(s):
[ ] The sentence is within the guideline range, that range does not exceed
24 months, and the court finds no reason to depart from the sentence
called for by application of the guidelines.
OR
[ ] The sentence is within the guideline range, that range exceeds 24
months, and the sentence is imposed for the following reason(s):
OR
The sentence departs from the guideline range
[X] upon motion of the government, as a result of defendant's substantial
assistance.
[ ] for the following reason(s):
<PAGE>
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------
:
UNITED STATES OF AMERICA :
:
v. :
:
KEITH GREENBERG, :
:
Defendant. :
- -----------------------------
KEITH GREENBERG, the above-named defendant, who is accused of
violating Title, 18, United States Code, Section 371, being advised of the
nature of the charges and of his rights, hereby waives, in open Court,
prosecution by indictment and consents that the proceeding may be by
information instead of by indictment.
/s/ Keith Greenberg
-----------------------------------
Defendant
/s/ Helen Leivis
-----------------------------------
Witness
/s/ Chris Gunther
-----------------------------------
Counsel for Defendant
Date: New York, New York
August 4, 1994
<PAGE>
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------------
UNITED STATES OF AMERICA :
:
:
v. :
: INFORMATION
KEITH GREENBERG, :
:
:
Defendant. :
- ------------------------------------
COUNT ONE
The United States Attorney charges:
BACKGROUND
1. At all relevant times, Advanced Marketing Technology Corporation
("Amtech") was a New York corporation with its principal office located at
275 Madison Avenue, New York, New York. At all relevant times, KEITH GREENBERG,
the defendant, was Amtech's President and Chief Executive Officer.
2. Amtech was engaged in the business of developing, manufacturing,
marketing, and operating video consoles, called kiosks, for various commercial
applications. The kiosk manufactured by Amtech was an interactive merchandising
video console which was to be placed in airports and other public areas. The
kiosks would advertise products on overhead screens, and allow consumers to
view various products on a video screen. The kiosk's video screen would enable
consumers to order gift items paid for with credit cards.
3. Amtech sought to raise financing for its business operations through
the sale of limited partnership interests. In that connection, Amerigroup
Technologies, Inc. ("ATI"), a wholly
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owned subsidiary of Amerigroup Inc., a Delaware corporation, was formed to
become the general partner for limited partnerships that would provide the
financing for Amtech's business operations.
4. From in or about June 1988 through 1989, a series of limited
partnerships were created to finance Amtech, and were sold to the public
through private placements. The limited partnerships were: Amerivest Partners
318, L.P., Amerivest Partners 418, L.P., and Amerivest Partners 718, L.P.
(the "Amerivest Partnerships"). The general partner of each of the partnerships
was ATI.
AMERIVEST PARTNERS 318 AND 418, L.P.
5. The private placement memoranda describing the offerings for Amerivest
Partners 318, L.P. ("Amerivest 318") and Amerivest Partners 418, L.P.
("Amerivest 418"), dated June 1, 1988 and July 20, 1988, respectively, were
similar. Each offering was intended to raise $576,000 from the sale of thirty-
two limited partnership units priced at $18,000 per unit. The private placement
memoranda relating to these partnerships stated, among other things, that upon
the closing of the offering of thirty-two units, the partnership would purchase
three kiosks and appropriate software from Amtech, and Amtech would then lease-
back and operate the kiosks for the partnerships. Amtech would pay the
partnership a rental fee and a percentage of revenues based on advertising and
sales. The private placement memoranda also represented how investor proceeds
would be used.
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AMERIVEST PARTNERS 718, L.P.
6. Amerivest Partners 718, L.P. ("Amerivest 718") was formed in November
1988, and differed in some respects from the earlier partnerships. This
partnership was intended to raise $6,480,000 through the sale of 360 limited
partnership units priced at $18,000 per unit. Closings would take place on a
rolling basis each time the partnership sold twelve limited partnership units.
In contrast to the lease-back arrangement provided for in the Amerivest 318
and 418 partnerships, Amtech would contract with the partnership to operate
and manage the kiosks for the partnership. The private placement memorandum
also represented how investor proceeds would be used.
THE CONSPIRACY
7. From in or about June 1988, through in or about 1992, in the Southern
District of New York and elsewhere, KEITH GREENBERG, the defendant, and others
known and unknown, did unlawfully, wilfully and knowingly combine, conspire,
confederate and agree together and with each other to commit an offense
against the United States, specifically, to violate Title 18, United States
Code, Section 1341, and to defraud the United States and an agency thereof, to
wit, the Internal Revenue Service of the United States Department of Treasury.
OBJECTS OF THE CONSPIRACY
8. It was a part and object of the conspiracy that KEITH GREENBERG, the
defendant, and his co-conspirators, unlawfully, wilfully and knowingly, having
devised and intending
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to devise a scheme and artifice to defraud investors and to obtain money from
and property from investors by means of false and fraudulent pretenses,
representations, and promises, and for the purpose of executing such scheme
and artifice and attempting to do so, would and did cause certain mail matter
to be placed in post offices and authorized depositories for mail to be sent
and delivered by the United States Postal Service and would and did knowingly
cause to be delivered by mail according to the directions thereon such mail
matter, in violation of Title 18, United States Code, Section 1341.
9. It was a further object of the conspiracy that KEITH GREENBERG, the
defendant, and his co-conspirators, unlawfully, wilfully, and knowingly, would
and did defraud the United States by impeding, impairing, obstructing and
defeating the lawful governmental functions of the Internal Revenue Service
in the ascertainment, evaluation, assessment and collection of income taxes by
falsely inflating the acquisition costs of the kiosks, and thus the
depreciation costs of the kiosks, and by distributing documentation of such
costs to the limited partners causing them to file false returns based on the
false depreciation.
MEANS OF THE CONSPIRACY
10. Among the means by which KEITH GREENBERG, the defendant, and his
co-conspirators would and did carry out the conspiracy were the following:
a. GREENBERG and his co-conspirators promoted the
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sale of limited partnership interests to the public by means of false and
fraudulent private placement memoranda. The memoranda stated that partnership
proceeds would be distributed in a particular way, when, in fact, GREENBERG
and his co-conspirators had earlier agreeed to siphon off portions of the
proceeds to make substantial secret payments not disclosed in the private
placement memoranda. For example, in the private placement memoranda for
Amerivest 318 and 418, GREENBERG and his co-conspirators inflated by $50,000
the acquisition cost of each kiosk to the partnership in order to conceal from
investors the payment to a promoter who was hired to promote the sale of
limited partnership interests. At the closings for both Amerivest 318 and
Amerivest 418 in August and September, 1988, as per their pre-arranged
agreement, GREENBERG and his co-conspirators paid the promoter $50,000 for each
of the six kiosks acquired by the partnerships -- a total of approximately
$300,000 -- without disclosing those payments in the private placement
memoranda.
b. In addition, KEITH GREENBERG, the defendant, and his
co-conspirators used partnership proceeds to make commission payments to
brokers who sold interests in the limited partnerships in amounts above and
beyond the amounts of commission payments disclosed in the private placement
memoranda. In so doing, GREENBERG and his co-conspirators concealed from
investors that the brokers had an extraordinary pecuniary interest in the sale
of the limited partnerships. GREENBERG and
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his co-conspirators concealed these commission payments -- which totalled
approximately $38,835 -- from potential investors in Amerivest 318 and
Amerivest 418 by making the payments from proceeds that were falsely described
in the private placement memoranda as an "equipment brokerage fee" payable to
Madison Equipment Management Corporation ("Madison Equipment").
c. In the fall of 1988, GREENBERG and his co-conspirators inflated
the acquisition cost of each kiosk by an additional $70,000, raising the cost
of the kiosk to $185,000. The private placement memorandum for Amerivest 718
failed to disclose that GREENBERG and his co-conspirators had inflated the
acquisition cost of the kiosk to generate additional cash with which to make
secret payments. At the twelve closings for Amerivest 718, from about November
1988 through 1989, GREENBERG and his co-conspirators paid approximately
$900,000 from the inflated acquisition cost to, among others, the partnership's
lawyers, the brokers, and for the benefit of the general partner, without
disclosing those payments in the private placement memorandum.
11. In about April 1990, GREENBERG and his co-conspirators caused
Amerivest 318, Amerivest 418, and Amerivest 718 to file materially false
partnership tax returns for the calendar years ending December 31, 1989, each
of which return included a materially false deduction for depreciation based
on the inflated acquisition costs of the kiosks.
12. In about April 1990, schedule K-1's, which
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included false information as to depreciation deductions for the Amerivest
Partnerships, were prepared and mailed to the limited partners of Amerivest
318, Amerivest 418, and Amerivest 718, causing the limited partners to file
false personal tax returns based on that false information.
OVERT ACTS
13. In furtherance of the conspiracy and to effect the objects thereof,
KEITH GREENBERG, the defendant, and his co-conspirators committed the following
overt acts, among otheers, in the Southern District of New York and elsewhere:
a. In or about April 1988, GREENBERG met with his co-conspirators at
an office at 270 Madison Avenue, New York, New York, and had a conversation
about how payments could be made to an individual to promote the sale of
partnership interests without disclosing such payments in the partnership's
private placement memorandum.
b. In or about August 1988, Amtech paid approximately $150,000 to
attorneys for Geneva/Fiat, a company controlled by a promoter for the
Amerivest Partnerships.
c. In or about August 1988, at the direction of GREENBERG's
co-conspirators, Madison Equipment paid approximately $25,875 in payments to
brokers who sold partnership interests, over and above the commissions
disclosed in the private placement memorandum for Amerivest 318.
d. In or about March 1989, at the direction of GREENBERG's
co-conspirators, Madison Equipment paid approximately
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$54,000 to brokers and salespersons for selling interests in the Amerivest
Partnerships.
e. In or about August 1989, at the direction of GREENBERG's
co-conspirators, Madison Equipment paid approximately $38,880 to brokers and
salespersons for selling interests in the Amerivest Partnerships.
f. In or about August 1989, at the direction of GREENBERG's
co-conspirators, Madison Equipment paid approximately $17,700 to the attorneys
for the Amerivest Partnerships.
g. In or about April 1990, the Amerivest Partnerships caused
materially false Schedule K-1's to be mailed to the limited partners of the
Amerivest Partnerships.
(Title 18, United States Code, Section 371)
COUNT TWO
The United States Attorney further charges:
BACKGROUND
14. At all relevant times, KEITH GREENBERG, the defendant, was a principal
of Morgan Cromwell Ltd. ("Morgan Cromwell"), an investment banking firm.
15. In about September 1991, Morgan Cromwell contracted with Amalgamated
Communications Incorporated ("Amalgamated Communications"), an entity which
purportedly engaged in the distribution of video tapes, to assist Amalgamated
Communications in obtaining financing. In about the fall of 1991, Morgan
Cromwell assisted Amalgamated Communications in raising approximately $600,000.
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16. Shortly thereafter, KEITH GREENBERG, the defendant, and others
negotiated with the owners of Persimmon Corporation ("Persimmon"), a Utah
corporation, to merge Amalgamated Communications and Persimmon.
17. Following the agreement to merge the companies, but before the actual
merger, KEITH GREENBERG, the defendant, and his partner, another principal of
Morgan Cromwell, secretly acquired approximately 70 per cent of the common
stock of Persimmon. GREENBERG and his partner purchased the Persimmon stock
in the names of several entities which they controlled and in the names of
several family members. GREENBERG and his partner then deposited a block of
the secretly acquired Persimmon stock in an account that they controlled at
Alpine Securities, a Colorado brokerage firm which acted as a market maker for
the stock.
18. Following the merger of Persimmon and Amalgamated Communications in
January 1992, all outstanding shares of Persimmon and Amalgamated
Communications were converted to shares of Amalgamated Entertainment Inc.
("Amalgamated Entertainment"), the name of the new company which resulted from
the merger of Amalgamated Communications and Persimmon. All shares which had
been converted from Persimmon were freely tradeable; all shares which had been
converted from Amalgamated Communications were restricted stock and not freely
tradeable.
THE CONSPIRACY
19. From in or about September 1991 to in or about
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June 1992, in the Southern District of New York and elsewhere, KEITH GREENBERG,
the defendant, and others known and unknown, did unlawfully, wilfully and
knowingly combine, conspire, confederate and agree together and with each other
to commit offenses against the United States of America, specifically, to
violate Title 18, United States Code, Section 1341.
OBJECT OF THE CONSPIRACY
20. It was a part and object of the conspiracy that KEITH GREENBERG, the
defendant, and his co-conspirators, unlawfully, wilfully, and knowingly, having
devised and intending to devise a scheme and artifice to defraud investors and
to obtain money and property from investors by means of false and fraudulent
pretenses, representations, and promises, and for the purpose of executing such
scheme and artifice and attempting to do so, would and did cause certain mail
matter to be placed in post offices and authorized depositories for mail matter
to be sent and delivered by the United States Postal Service, and would and did
knowingly cause to be delivered by mail according to the directions thereon
such mail matter, in violation of Title 18, United States Code, Section 1341.
MEANS OF THE CONSPIRACY
21. In about April 1992, KEITH GREENBERG, the defendant, met with several
stockbrokers registered with Investors Associates, Inc., a brokerage firm
located in Hauppague, New York. GREENBERG agreed to pay the brokers secret
"under the table" cash payments of up to 30% of the sales price
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of any Amalgamated Entertainment stock they were able to sell to their
customers, including the Amalgamated Entertainment stock GREENBERG controlled
at Alpine Securities. GREENBERG understood that the Investors Associates
brokers would not disclose to any customers that they were to receive "under
the table" cash payments in connection with the sale of ???? ??
interest in selling the stock.
22. In or about June 1992, several of the brokers with whom Greenberg had
arranged the "under the table" cash payments for selling Amalgamated
Entertainment stock became registered brokers with Brooklyn Capital, located at
20 Exchange Place, New York, New York, or with Brill Securities, located at
342 Madison Avenue, New York, New York. GREENBERG agreed to continue the secret
payments to these brokers if they sold Amalgamated Entertainment stock from
their new brokerage firms.
23. From in or about April 1992 to in or about June 1992, brokers to whom
GREENBERG had agreed to make the "under the table" cash payments (the
"brokers") sold in excess of approximately $300,000 worth of Amalgamated
Entertainment stock to their customers. The brokers failed to disclose and
concealed from their customers their agreement with GREENBERG to receive
"under the table" cash payments in connection with the sale of Amalgamated
Entertainment stock.
24. GREENBERG paid the brokers a total of approximately $101,000 in
"under the table" cash payments, over
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and above what the brokers received as their normal commissions for selling the
stock. GREENBERG disguised the payments by paying the brokers with checks drawn
on a Morgan Cromwell account made payable to brokers' relatives, by paying cash
directly to the brokers, and by paying one broker's car payments.
OVERT ACTS
25. In furtherance of the conspiracy and to effect the objects thereof,
KEITH GREENBERG, the defendant, and his co-conspirators, committed the
following overt acts, among others, in the Southern District of New York and
elsewhere:
a. In or about April 1992, KEITH GREENBERG, the defendant, met in
Manhattan with two brokers from Investors Associates and had a conversation
with them about selling Amalgamated Entertainment stock in return for cash
payments in addition to their normal commissions.
b. On or about May 13, 1992, GREENBERG met with a broker at Investors
Associates and gave the broker a check for $4,000.
c. On or about May 22, 1992, GREENBERG met with a broker at Investors
Associates and gave the broker a check for $1,800 made payable to Chemical Bank
for the broker's car loan payment.
d. In about late June or early July 1992, KEITH GREENBERG, the
defendant, met with four brokers at Brooklyn Capital, 20 Exchange Place,
New York, New York, and had a conversation with them about the sale of
Amalgamated
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Entertainment stock.
e. In or about June 1992, GREENBERG met with brokers at Brooklyn
Capital, 20 Exchange Place, New York, New York, and gave them "under the table"
cash payments for selling Amalgamated Entertainment stock.
f. On or about June 11, 1992, GREENBERG gave a broker a check for
$11,000.
g. On or about May 21, 1992, a trade confirmation was caused to be
mailed to a customer who had purchased Amalgamated Entertainment stock from
a broker who had received "under the table" cash payments from GREENBERG.
(Title 18, United States Code, Section 371)
/s/ Mary Jo White
----------------------
MARY JO WHITE
United States Attorney
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8/4/94 -- Deft. GREENBERG, pres. w/ atty. Chris Gunther, and Amy Millard, AUSA,
pres. Deft. GREENBERG Fld. Waiver of Indictment and Pleads N/G to the
Information. Case is assigned to Judge Stanton for all purposes. Deft's Bail
Status -- Deft. released on $50,000 PRB -- co-signed by wife & parents within
2 Wks. PTS to be transferred to the Southern District of Florida. Travel
restriction to the Continental U.S. and Florida. If Deft. desires to travel
outside of Florida he must notify PSA-Office/Officer, and Marshals' for
processing.
/s/ Roberts, J.
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ROBERTS, J.
U.S.M.J.
H.L.
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UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
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:
SECURITIES & EXCHANGE COMMISSION, :
:
Plaintiff, : CIVIL ACTION
: FILE NO. 93 CV 3650 (PNL)
:
v. :
:
LEONARD J. MESSINA, :
KEITH G. GREENBERG, and : HONORABLE PIERRE N. LEVAL
EDWYN H. SCHRIER, :
Defendants. :
:
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NOTICE OF FILING
----------------
PLEASE TAKE NOTICE that Plaintiff Securities and Exchange Commission has
mailed today for filing the attached Notices and Acknowledgements of Defendants
Edwyn H. Schrier and Keith G. Greenberg.
/s/ Lori A. Trowbridge
------------------------------------------
Lori A. Trowbridge (L T 6489)
One of the Attorneys for Plaintiff
Securities and Exchange Commission
500 West Madison Street, Suite 1400
Chicago, Illinois 60661
312/353-7390
DATED: December 29, 1993
