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UNITED STATES DISTRICT COURT . . , 1/4.IP )1• SOUTHERN DISTRICT OF NEW YORK . .. ,.._ _
) IN RE PRO NET LINK ) CIVIL ACTION NO. 03-CV-2298 CRC)) SECURITIES LITIGATION ) )
PLAINTIFFS THIRD CONSOLIDATED AMENDED CLASS ACTION COMPLAINT .
VIAN ALE & VIANALE LLP GAINEY and McKENNA _ - Kenneth J. Vianale (KV 4607) Thomas J. McKenna (TIM 7109) . Julie Prag Vianale (JP 4718) 295 Madison Avenue, 4' Floor ... 2499 Glades Road, Suite 112 New York, New York 10017 Boca Raton, Florida 33431 Tel: (212) 983-1300 Tel: (561) 392-4750 Fax: (212) 983-0383 . ... . -- Fax: (561) 392-4775 7 - ::...:1) .--;.,_ -- - ,
Lead Counsel for Lead Plaintiffs and the Class '
, Lead Plaintiffs, based upon the Court's Order dated December 8, 2005, hereby file their Third
Consolidated Amended Class Action Complaint.
Lead Plaintiffs make the following allegations, except as to allegations specifically pertaining to them, based Upon the investigation undertaken byplaintiffs' counsel, which investigation included analysis of publicly-available news articles and reports, public filings, press releases, statements issued by defendants cm-line, via internet message boards and other internet media, review of the record in the related bankruptcy proceedings in this District, interviews with former employees of
ProNetLink Corp. ("ProNetLink" or the "Company"), and consultation with a forensi c accountant.
INTRODUCTION
1. This is a class action on behalf of all purchasers of the common stock of ProNetLink between August 26, 1998 and July 1, 2001, inclusive, (the "Class Period"), seeking to pursue remedies under the Securities Exchange Act of 1934 (the "Exchange Act"). As particularized below, the individual defendants, principals of ProNetLink, engaged in a scheme to artificially inflate the price of the Company's shares so that they could reap substantial benefits. The individual defendants issued false and misleading statements to the public regarding, among other things, the Company's present and future financial prospects and the individual defendants' own plans regarding the sale of Company shares.
2. For example, during the Class Period, the individual defendants told the public that the Company was signing up thousands of subscribers for its website through which global trade transactions were to be effected. The individual defendants hid the fact, however, that the vast bulk of these subscribers were non-paying; it was only later in the class period, in January 2000, that the
Company disclosed that there were only 40 paid subscribers for the Pro:\TetLink website,
-2- 3. In addition, the individual defendants told the public repeatedly that they were abiding by a so-called lock-up agreement, under which the Company's President and CEO, defendant Jean
Pierre C011ardeau ("Collardeau"), agreed not to sell his ProNetLink stock. Nevertheless, Collard eau executed other sales in the names of nominees, in an intentional effort to hide his sales of
ProNetLink stock from the investing public. As a result, Collard eau, and persons associated with him, made millions of dollars on the sale ofProNetLink stock. On November 6, a federal grand jury in Newark, New Jersey, indicted Collardeau and others for securities fraud, wire fraud and money laundering in connection with the sale of Pro Net Link stock. The indictment charges, among other things, that Collardeau and others conspired to use nominee accounts to hide the true ownership of the Pro Net Link stock they were secretly trading. (A copy of the indictment in U.S. v. Pierre
Collardeau, et al., No. Cr. 03-800 (D. N.J.) (unsealed on 11/24/03) is annexed hereto as Ex. A and is incorporated by reference herein ("Collardeau Indictment")). Collardeau is believed to be in custody on these charges. The Company made no disclosure in any of its SEC filings that Co llardeau and others were the true owners (and sellers) of millions of shares of Pro Net Link stock.
4. Moreover, Collardeau personally sold approximately $ 4,568,760 in ProNetLink
Stock on April 17, 2000 at prices of $3 and $5 per share; these sales were suspicious in timing and in amount, as discussed below. A separate count is alleged for Collardeau's liability for this insider trading under Section 20A of the Securities Exchange Act of 1934.
5. Defendant Glenn Zagoren ("Zagoren"), the Company's Co-Chairman of the Board and Executive Vice President, with Collardeau's agreement, was given ProNetLink's television production division to keep as his own personal asset without paying any consideration to the
-3- Company. Zagorep either knew or was reckless in not knowing, of the fraudulent scheme alleged herein.
6. In 2001, the Company continued to assure the p ublic that it had sufficient operating capital to run the Company for the next 12 months. The individual defendants told the public that the Company still had access to a 55 million line of credit and other capital resources at its disposal.
These statements were blatantly false, as shown by the testimony of the Company's Chief Operating
Officer, David Walker, taken in connection with the Company's bankruptcy proceeding in this
District.
7. Nevertheless, the Company's outside auditor, Feldman Sherb ez Co., P.C. and its successors named as defendants herein (collectively referred to herein as "Feldman Sherb"), together with non-defendant Philip Weiner (a partner of Feldman Sherb), issued an unqualified audit opinion, dated September 28, 2000 on ProNetLink's financial statements that was contained in the
Company's annual report on SEC Form 10-K for fiscal year ending June 30, 2000. Feldman Sherb also authorized the Company's use of this unqualified audit opinion in a Registration Statement the
Company filed with the SEC on May 4, 2001. Feldman Sherb, however, knew or recklessly disregarded numerous red flags showing that the Company had inadequate resources to sustain operations for 12 months, and accordingly should have at least given ProNetLink a "going concern" opinion, rather than an unqualified opinion on its financial statements. For cxample, according to the Cc ll ardeau Indictment, on March 16, 2000, defendant Collardeau sent instructions to American
Stock Transfer to reissue 1,500,000 shares of Pro Net Link stock previously issued in the name of
one individual (Eric Niger) and reissued in the name of another (Muriel Prochasson). Feldman Sherb
ignored this red flag which should have alerted them to the defendants' securities fraud scheme.
-4- Although securities fraud was rife at Pro Net Link -- as the Collard eau Indictment readily shows --
Feldman Sherb either knew of the fraud or recklessly ignored it.
8. In a complete surprise to investors, the Company filed for bankruptcy protection on
July 1, 2001, which the Company annotuiced publicly on July 2, 2001, the close of the Class Period.
The Company's shares immediately became worthless and investors have sustained millions of
dollars in damages.
JURISDICTION AND VENUE
9. This Court has jurisdiction over the subject matter o f this action pursuant to 28 U.S.C.
§§1331, 1337 and 1367 and Section 27 of the Exchange Act (15 U.S.C. § 78aa).
10. This action arises under Sections 10(b), 20(a) and 20A of the Exchange Act (15
U.S.C. § § 78j (b) and 78t(a)) and Rule 10b-5 promulgated thereunder (17 C.F.R. § 240.10b-5).
11. Venue is proper in this District pursuant to Section 27 ofthe Exchange Act (15 U.S. C.
§ 78aa) and 28 U.S.C. § 1391(b) and (c). Substantial acts in furtherance of the alleged fraud and/or
its effects have occurred within this District and ProNetLink maintained its principal executive
offices in this District.
12. In connection with the acts and omissions alleged in this complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate telephone communications, and the facilities of the national securities markets.
-5- PARTIES
13. Lead Plaintiffs Doreen A. Labit, Scot Campbell, Craig Zy-chal, Daniel P. Provost and
Dennis Bell were appointed by the Court on September 2, 2003. The Lead Plaintiffs purchased
ProNetLink common stock during the Class Period, as set forth in the accompanying certifications which are incorporated herein by reference, and were damaged thereby.
14. ProNetLink is named herein as a nominal defendant pursuant to the Court's
December 8, 2005 Order. In re ProlVetLink Sec. Litig., 2005 U.S. Dist. LEXIS 32024 at *20-2]
(S:D.N.Y. Dec. 8, 2005) (Owen, S.). ProNetLink was formed in 1997 and stated in its public filings that its business focused on facilitating the conduct of international trade through various tools and services accessible through its intemet websitc. Its primary assets were (1) www.ProNetLink.com
("the ProNctLink website"), a web site marketed to the public as a resource for facilitating international business transactions among small and medium sized companies, and (2) PNL-TV, a facility for producing programming to be aired on-line via the ProNetLink and PNL-TV web sites.
ProNctLink was headquartered at 645 Fifth Avenue, New York, New York. ProNetLink stock traded exclusively on the "over-the-counter" market. ProNetLink filed for bankruptcy protection in
July 2001. ProNetLink was a penny stock within the meaning of the Exchange Act and accordingly any forward-looking statements made by the Company or the individual defendants are statutorily exempt from the `safe harbor" protection of Section 21E of the Exchange Act.
15. The Individual Defendants, at all times relevant to this action, served in the capacities listed below and re ceiv ed substantial co mp ens a do n
-6-
Name Position
. Glenn Zagoren Director since 5/98; Chairman of the Board (4/8/99 to 8/7/00); CO-Chairman of the Board and Executive VP (8/8/00 to 9/27/00); Chairman and/or Member of the Board (9/12/00 to 7/2/01).
Jean Pierre Collardeau President and Chief Executive Officer; Director and founder of the Company. Collard= is a French national and • currently maintains a residence in France. He also maintains an apartment at 117 Prince Street, Apt.4C, New York, NY 10017 and on Brickell Key, Miami, Florida.'
16. Defendant Feldman . Sherb was the Company's outside auditor; it audited the
Company's June 30, 2000 financial statements and provided an unqualified audit opinion that was
included in ProNetLink's June 30, 2000 Form 10-K filed with the SEC on October 13, 2000.
Feldman Sherb subsequently authorized this audit opinion to be used in a Form S-1 Registration •
Statement that ProNetLink filed with the SEC on May 4, 2001. According to a May 7, 2002 press • .
release issued by defendant Grassi & Co., P.C. ("Grassi"), Grassi merged with Feldman Sherb on •
May 7, 2002. According to the same press release, ProNetLink's former outside accountant Philip
Wein.er joined Grassi in this merger. Defendant Sherb & Co., LLP broke off from Feldman.S herb
at some time at or after the Grassi merger.
. 17. In addition, according to Philip Weiner, who spoke at ProNetLink's December 4,
2000 annual shareholders' meeting in Manhattan and was the Feldman Sherb engagement partner
on ProNetLink: Feldman Sherb represented "approximately 30 to 40 publicly held firms. Some are
- traded on the American Exchange, many are traded on the Nasdaq exchange." According to the SEC
1 Auguste Francis Vincent was a named defendant; he is not named as a defendant in this Complaint because plaintiffs were unable to effect service of process on him. Vincent was a director of ProNetLink and is a citizen of France, where it is believed he is now living.
• -7- filings of Voice Flash, another public company whose financial statements Feldman Sherb audited:
"Feldman Sherb & Co. was ... merged into Grassi & Co., CPA's, P.C. Some of the accountants from
the original Feldman Sherb & Co., P.C. left and started their own flint called Sherb & Co., LLP."
Stephen Feldman and Philip Weiner of Feldman Shcrb arc currently partners at the accounting firm
of Marcum & Kleigman LLP, New York. Steven Sherb is a partner in Sherb & Co., LLP.
SUBSTANTIVE ALLEGATION'S
A. The Scheme is Set Up
18. According to ProNetLink's publicly filed documents, ProNetLink was formed by defendant Jean Pierre Collardeau and began its operations on July 25, 1997 ("Inception") as
ProNetLink Corp., a Delaware corporation ("ProNet Delaware"). In September 1997, the fledgling
ProNetLink morphed into being as a public company by a technique commonly known as a "back- end merger." Holders of the common stock of ProNet Delaware, with the assistance of Marc
Armand Rousso and Philippe Hababou2, acquired control of Prevention Productions Inc., a Nevada corporation ("Prevention Productions"), a publicly-held corporation with no material operations.
According to ProNetLink's public statements, the acquisition of control of Prevention Productions occurred through an exchange of securities whereby, following a 30-- to-1 reverse stock split of the outstanding common stock of Prevention Productions (which left the shareholders of Prevention
Productions with an aggregate of 249,500 shares), Prevention Productions acquired 100% of the outstanding capital stock of ProNet Delaware in exchange for 28,400,000 shares of common stock
2 According to a personal acquaintance of Philippe Hababou, Mr. Hababou, during the period, sometimes used the names Philippe Solomon, Haim Solomon and IVIalko. A criminal docket sheet in a case against Mr. Hababou lists as his aliases "Hahn Solomon" and "Malko." Mr. Hababou will be referred to herein primarily as "Hababou."
-8- of Prevention Productions. Prevention Productions subsequently changed its name to "ProNetLink
Corp., "the publicly-held company at issue in this action.
19. According to a witness ('W-I") who is a friend and business associate of Philippe
Hababou, NV- 1., an Israeli native, met Hababou because W-1 rented Hababou a residence in Israel.
They subsequently became friendly. Hababo (who was known to W-1 as Philippe Solomon), told
W-1 that he worked in league with defendant Collardeau to execute the back-end merger that allowed Collardeau to convert ProNett,in_k into a public company. H ab abou acknowled ged to W-1 that he located the shell company, Prevention Productions, -Inc., for Collardeau, winch allowed
Collardeau to take ProNetLink public. According to Hababou (as reported by W-1), after
ProNetI ink became a public company, Hababou and ColIardeau were issued shares in their own names and in the names of nominees. By holding stock in nominee names, Collardeau and others could conceal from the investing public the true identities of the owners of ProNetLink stock.
According to Hababou (as told to W-1), both Collardeau and Hababou made significant sums of money on sales ofProNetLink stock during the class period. According to Hababou (as told to W-1), some of these trades, both for Collardea.0 and Hab abo it, were executed through nominee accounts.
20. After "going public" ProNetLink issued millions of shares of stock for pennies per share in a series of private placements. According to publicly available documents, in October and
November 1997, ProNetLink issued a total of 7,500,000 shares of common stock in private placements to two foreign companies and three foreign indi viduals pursuant to exemptions from registration pursuant to Rule 504 o f Regulation D under the Securities Act of 1933, as amended (the
"Act"). The ag gregate consideration received by ProNetLink was S150,000.
-9- 21. In October 1997, ProNetLink issued an aggregate of 1,700,000 shares of common stock in other private placements to two foreign companies and one foreign individual pursuant to exemptions from registration pursuant to Section 4(2) under the Act. The aggregate consideration received by ProNetLink was $170,000.
22. Unbeknownst to the investing public, a substantial portion of the common stock issued in these private placements, was issued to alter egos of Collardeau, Hababou and their cohorts, including Collardeau family members. Collardeau issued stock in private placements to these individuals so that he could cause the price of the Company's stock to be artificially driven up, and thereby reap profits by selling shares through his alter egos at inflated prices. On this issue, W-1 learned from Hababou and from other sources that Hababou sold 500,000 ProNetLink shares in April
1999 when ProNetLink was over $5.00, as did Collardeau family member Nicole Piegnier. W-1 further learned that (1) Hababou and Collardeau owned several offshore companies, and huge profits that they made on ProNetLink were sent there, and (2) Hababou and Collardeau also made millions in a similar scheme involving trading in a company called Starnet Communications.
23. According to a January 30, 2001 article in The Record (Bergen County, NJ), Philippe
Hababou pleaded guilty in U.S. District Court hi New Jersey in September 2000 to charges arising from his involvement in a series of illegal penny stock fraud schemes.
24. According to press articles describing the cases, Mr. Hababou's silent partner in this series of stock schemes was Marc Armand Rousso. According to a January 30, 2002 article in The
Record (Bergen County, NJ) , law enforcement authorities have "paint[ed]. . Marc Rousso as the guiding force behind a series of 'pump and dump schemes in the mid-1990's involving tens of millions of dollars of low-priced stocks." According to the same article, federal authorities have
-10- maintained that "Rousso hid his substantial holdings in a series of penny stocks that he illegally promoted and then sold after the price rose, leaving investors holding near-worthless stock."
According to a January 30, 2002 New York Times article:
Hiding his interest behind other associates like Mr. Hahabou, Mr. Rousso bought millions of shares of cheap stock, which he then fraudulently promoted with investors. When the value of the stocks rose, he quietly sold off the shares he controlled, making huge illicit profits.
According to the same New York Times article, the federal prosecutor handling the criminal case described the Rousso-Hababou operation as "a large, complex money-laundering and securities fraud scheme." According to the same article and the docket sheet from the District of New Jersey, Mr.
Rousso pleaded guilty in September 1999 to money launderin g and stock fraud charges. According to Mr. Rousso's docket sheet, Rousso is at libert y, awaiting sentencing. Collardeau, Hababou and
Rousso are named as co-conspirators in the Collardeau Indictment annexed hereto and are charged with engaging in the securities fraud scheme alleged herein.
25. Abundant circumstantial evidence demonstrates that Marc Rousso was also involved in setting up and executing the ProNetLink stock scheme alleged herein, along with the individual defendants. The Collardeau Indictment charges that Rousso and Collardea.0 engineered the reverse merger for the purpose of perpetrating this stock fraud. In addition, press reports and court filings on the Hababou.-Rousso criminal cases establish that Hababou and Rousso were partners. As the above-quoted article explained, Rousso routinely used Hababou and others to hide his interest in the companies that he fraudulently promoted. W-1 has provided information regarding Hababou's involvement in ProNetLink. Rousso's involvement can be inferred from his partner Hababou's involvement and from compelling circumstantial evidence, as follows.
-11- 26. First, a Press Release issued by ProNetLink on June 24, 1998 names Leon B. Lipkin as ProNetLink's legal counsel. According to a January 30, 2002 New York Times article, Leon B.
Lipkin also served as legal counsel to Marc Rousso. According to the some article, Mr. Lipkin pleaded guilty in 2001 to securities and wire fraud for his role in Rousso 's stock schemes_
27. A further connection between ProNetLink and Rousso arises from their apparent use of the same Canadian brokerage house to execute trades. An October 14, 2002 article in Canadian
Business identifies Pacific International Securities in Vancouver, Canada as one of the brokerage houses frequently used by Marc Rousso.
28. A review of SEC Poi ins 144 ("Notice of Proposed Sale of Securities Pursuant to Rule
144 Under The Securities Act of 1933") reflecting sales of ProNetLink stock shows that 23 Qf these forms, filed on behalf of 16 different ProNetLink "investors," lists "Pacific International
Securities, Inc.,. . .Vancouver, Canada" as the "Broker Through Whom the Securities are to be
Offered or. . Market Maker who is Acquiring the Securities."
29_ The use of the common brokerage house, Pacific International Securities, Inc., located a continent away from ProNetLink's offices, provides another link between the individual defendants and the activities of Marc Rousso. Many of these "individuals" and "entities" who filed these Forms
144 to sell ProNetLink restricted stock, also list their residence in France or in French territory, as follows:
• Jean E. Mula, 4 Ter Impasse Francois Raymond, Miens 63780, France (According to W-1, Jean
Mula is a relative of Collardeau's); 30,000 shares to be sold approximately 4/15/99;
• Pioneer Infosys Inc., (no address listed on Form 144), 50,000 shares to be sold approximately
9/15/98;
-12- , _
• Gilles Marret, 96 Boulevard Pereire, 75017 Paris, France; 9,200 shares to be sold approximately
4/15/99;
• Clande De/as, 74 Rue Lecourbe, 75015 Paris France, 10,000 shares to be sold
approximately12/23/98;
• Andre Martinez, 6 Rue Albert Dubout, Le Calypso PSTC Marseille, France 13008; 5,000 shares
to be sold approximately 12/23/98;
• Bernard Loller, 76 Ave. Andre Morikt Boulogne France 92100; 2,800 shares to be sold 12/23/98:
• Jean Emilio Mula, (no address listed); 8,414 shares to be sold approximately12/23/98;
• Jean Alain Searpaci, 32 Rue Du Calvaire, 92110 St. Cloud France; 48,913 shares to be sold
approximately 2/23/99;
• Gerald Testaniere, 104 Rue des Sable, 84100 Orange France; 4,802 shares to be sold
approximately 12/22/98;
• "Serge Tonitou" or "Serge Touttou", Latisscuer Cariase Alice Curacao 97222 Cose Pilote,
Martinique; 10,000 shares to be sold approximately12/23/98;
• Gerard Aehard, 2 Alice Des Aules, 60150 Villiers Skoudun, France; 56,500 shares to be sold
approximately 12/23/98;
• Gerard Achant 2 Allee Des Aules, 60150 Villiers Skoudun, France; 56,500 shares to be sold
approximately 12/23/98;
• Pioneer Infosys, St Amagasse 16, 0tt8027, Zurich, Switzerland; 1,500,000 shares to be sold
approximately 9/11/98;
• Usines Diffusion, La Quinta Alice de la Mari °faille 06370 Mouans-Sartoux; 154,000 shares to
be sold approximately12/22/98(signed by "Graham Burke").
-13- -
• Jean Alain Searpaei, 32 Rue Du Calvaire, 92110 Saint Cloud, France; 43888 shares to be sold
approximately12/23/98;
• Fode Diop, 01 BP 5280 Abidjan 01, Cote d'Ivoire,West Africa; 500,000 shares to be sold
approximately10/1/98. The Forni 144 states that these 500,000 shares were acquired from
proNetLink on 7/31/97 as "Repayment of debt."
• Fade Diop, 01 BP 5280 Abi Djandi, Cote D'Ivoire, West Africa; 200,000 shares to be sold on
approximately 9/2/98. Acquired from ProNethink on 7/31/97 as "Repayment of Dette;"
• rode Diop, 01 BP 5280 Abidjan 01 Cote d'Ivoire, West Africa; 20,000 shares to sell on
approximately 8/31/98. Acquired from ProNetLink on 7/31/97 as "Dette;"
• Charles Nisenbaum, 2000 Island Rd., Apt. 607, Miami, FL 33160; 79,667 shares to be sold on
approximately 8/8/98. (According to the docket sheet for U.S. v.Charles Nisenbaurn, Case No. 02-
CR-712-ALL, District of New Jersey, Nisenbaum was arrested in the Southern District of Florida
on 11/2/02. He waived indictment and pleaded guilty in Newark federal court on 10/21/03 on
charges relating to conspiracy to defraud the United States in connection with currency transactions
(31 USC §5324). According to the Form 144, Nisenbautn received the ProlVetLink shares from
"Fode Diop" as a "Finder's Fee" on 7/31/97.
• Amex Corp., 24 Route Demalagnau CH-1208, Geneva Switzerland; 200,000 shares to be sold
approximately 8/5/98. According to the Form 144, these shares were received from "Charles
Nissenbaum" on 7/31/97 as "Repayment of debt."
• Firstimpex, 24 Route Demalapau CH-1208, Geneva, Switzerland; 385,000 shares to be sold
approximately 8/5/98. According to the Form 144, the shares were acquired from "Fade Diop"
on 7/37/97 as "Repayment of Debt."
-14- • Judith Lerner, 14 Kebilot Yakob BNE Brack Israel; 200,000 shares to be sold approximately
8/5/98. According to the Form 144, the shares were acquired from "Fode Diop" on 7/3/197 as
"Repayment of Debt."
• Fode Diop, 847A Second Avenue, Suite 208, NY, NY 10017 (Collardeau listed his address on Forms 144 as 847A Second Avenue, Suite 329A, New York, NY 10017); 109,998 shares to be sold approximately 5/29/98 at an approximate market value of $800,000. According to the Form
144, the shares were received from "ProNetLink (Prevention Production) on 1211196 for
"Services."
30. Tn addition, Rousso 's business, Pacific Art, leased office space to ProNetLink at 645
Fifth Ave., Suite 303 ("the suite"). According to a former employee of Pacific Art, who later also worked for ProNettink ("W-2"), Rousso brought ProNetLink into the suite as a subtenant, and
ProNetLink and Pacific Art shared space for a number of months. The space shared by ProNetLink and Rousso had a common reception area and neighboring offices. According to W-2, Rousso and
ProNetLink shared space until approximately 6 - 8 months prior to Rousso's arrest. W-2 also stated that Hababou had "free room and board" in the suite. According to W-2, this co-tenancy allowed defendants Collardeau and Zagoren to have frequent contact with Rousso and Hababou
31. ProNetLink and the individual defendants are also linked to the activities of Marc
Rousso through a supposed ProNetLink investor named "Fode Di op." Based on a Form D ("Notice of Sale of Securities Pursuant to regulation D, Section 4(6), and lor Uniform Limited Offering
Exemption") filed with the SEC on October 28, 1997, "Fode Diop" received shares of ProNet Link as a "beneficial owner." The same form also lists defendant Coll ardeau and three Collardeau family members as recipients of ProNetLink stock. On this form, the home address of "rode Diop" is the
-15- same New York street address (different suite) as that of defendant Jean Pierre Collardeau and
Collardeau's family members. Subsequent SEC Forms 144, dated 9/2/1998 and 10/25/1998, reflect that during the class period , "Fade Diop" made millions of dollars on the sale ofProNetLink stock.
The Forms 144 for "Diop" reflect that these stock sales were handled by Pacific International
Securities. There is a strong inference that "Fade Diap," among others, was simply a nominee through which -Collardeau sold PraNetLink stock.
32. Marc Rousso apparently also held property under the name "Fade Dior)." In a
"Consent Judgment and Order of Forfeiture" in the case of United States v. Marc Armand Rousso,
99 Cr. 512 (D.N.J.), Mr. Rousso agreed to forfeit, inter alia, an account at Ivy & Mader Philatelic
Auctions, Inc. in the name of "Fade Diop." In addition, according to the Collardeau Indictment,
Marc Armand Rousso caused Fade Diop to be installed as the nominal President and sole director of Prevention Productions (the original shell corporation) and conspired with Collard eau to trade Pro
Net Link stock in Diop's name. (Collard eau Indictment, ¶1111-13).
33. To accomplish the goal of touting the Company and inflating the stock price,
Collardeau enlisted the aid of defendant Glenn Zagoren, the president of Zagoren-Zozzora, Inc.
("ZZI"), a strategic development and marketing company. ProNetLink stated in a March 27, 1998 press release that "[ZZI] has been retained to handle all marketing, advertising and promotion for the company." The Press Release stated that "Mr. Glenn Zagoren, President of [ZZI] will personally be[] hand] ing the account," and that "[ZZI] plans on a major marketing program for ProNetLink that will include direct mail, advertising, telemarketing, interne marketing and special events." Zagoren was appointed as a director of the Company in May 1998.
-16- 34. The alliance between Collardeau and Zagoren was formed with the intention of having Zagoren. promote ProNetLink, so that Collardeau and others could profit through the sale of
ProNetLink stock at inflated prices, and with the further intention of benefitting Zagoren by (1) providing him with substantial income as a paid consultant and employee of ProNetLink, (2) enhancing the value of his shares, and (3) providing him with a means of profiting through the use of other peoples money to create -7 PNL-TV-- a ProNetLink asset which Zagoren would later acquire from ProNetLink at no cost.
B. The Drum Beat of False Statements by the Defendants Begins
35. One of the primary methods by which Zagoren, Collardeau and Hababou and Rousso touted ProNetLink to the investing public was by distributing positive, but often false or misleading, information on the internet, both in promotional materials and by posting messages on message
"threads" on business-oriented websites such as Silicon Investor and Raging Bull. (These intemet and message board postings were printed in hard copy form by plaintiffs) Both Silicon Investor and
Raging Bull had message "threads" devoted to ProNctLink, on which current and prospective
ProNetLink investors could obtain information about the company and the stock. Zagoren and
Phillipe Hababou periodically posted information on these "threads."
36. In or about March 1998, ProNetLink paid thousands of dollars to a website called
"Stock Genic." Stock Genie is essentially an advertising tool, which, for a fee will promote a company and its stock to the investing public. Zagoren, in a posting on the Silicon Investor
ProNetLink thread, acknowledged that ProNetLink paid to he Stock Genie's profiled company of the month for March 1998. In this posting, Zagoren stated:
-17- Please be advised that the fee that ProNetLink paid to Stock Genie is payable over 2 years and not in one lump sum. It is a very inexpensive marketing tool and allows PNLIC news to get out very quickly. Sincerely, Glenn Zag,oren, President Zagoren- Zozzora, Inc., Marketing firm for ProNetLink
37. The Stock Genie Report on ProNetLink ("the Stock Genie Report" or "the Report") contained revenue and other financial projections which had absolutely no basis in fact. (According to the Stock Genie, "The information that Stock Genie relies on is generally provided by the featured companies and also may include information from outside sources and interviews conducted by
Stock Genie"). The Report's "Financial Highlights" section states the following:
According to the company's business plan, over the next 12 months the company anticipates signing up approximately 40,000 subscribers at an average of $360 each which would generate revenues of I 4.4 million dollars, whichw-ould be classified as subscriber revenue. Other revenue streams include, but are not limited to banner advertising revenue and fees for catalog listings, and others, which would produce gross revenues of approximately 21 million dollars in year one. For the first year the company estimates pre-tax income of approximately 16.1 million dollars, after-tax net income of approximately 8.7 million and an E.P.S. of 23 cents per share.
In the second full year of operation the company anticipates approximately 47,500 new subscribers and 33,600 renewal subscribers for a total subscriber base of 81,100. This estimated subscriber revenue of approximately 29.2 million (81,100 subscribers x 360 annual subscription) combined with additional revenue streams is expected to bring in 42 million dollars.
For the second year the company estimates pre-tax income of approximately 31.4 million dollars and after-tax net income of approximately 17 million dollars with an E.P. S. of 44 cents per share.
During early May 1998, after he had been named a Director of ProNetLink, Zagoren posted a message on the Silicon Investor ProNetLink thread reiterating that ProNetLink. "projects 40,000 members by the end of the year at $360 per year." Shortly after tins highly optimistic statement was made, ProNetLink stock reached its all time high on May 13, 1998 of $8.09.
-18- 38. The statements in the Stock Genie Report as reiterated in Zagoren's May 1998
in ternet posting, that ProNetLink would have 40,000 paying subscribers by year end 1998 had no
basis in fact, and was either knowingly false or made with a conscious disregard for its truth or
falsity. In its January 27, 2000, second amendment to its Form 10-Q for the quarterly period ended
September 30, 1999 with the SEC ("the September 30, 1999 Form 10-Q/A2"), the Company stated
that "as of September 30, 1998, ProNetLink had approximately 450 members (of which 40 were
subscription paying members)." There was no surge in subscriptions after September 1998. Based
on the September 30, 1999 Form 10-Q/A2, as of September 30, 1999, ProNetLink had only 22
subscription paying members. There can have been no credible basis for thc Company and
Zagoren's March and May 1998 projections of 40,000 paying subscribers by December 1998 if by
September 1998 ProNetLink had sold only 40 subscriptions. According to the Collardeati
" Indictment, Colla.rdeau enlisted the efforts of the Stockgenie.com to fraudulently "pump" Pro Net
Link stock. (Collard eau Indictment, rif22-26). Collard can and Irving Freiberg (who controlled
Stockgenie.com) are charged with conspiring to artificially inflate Pro Net Link's stock price.
Collazdeau signed a sham agreement with Freiberg stating that Freiberg's company (Sutton Capital
Corp.) would receive $50,000 for promoting Pro Net Link. (Collardeau Indictment, ¶24). Zagoren,
as a Director and Executive Vice President of Pro Net Link, was either aware of this fraudulent
"pump and dump" agreement with Stockgenie or was reckless in not knowing of it.
39. Moreover, a former employee ofProNetLink, who worked in the sales division of the
Company for approximately 13 months beginning in mid-1999 ("W-3"), states that W-3 "never saw
any focus on building a subscriber base" for the ProNetLink website. This witness states there was
no inside sales force at ProNetLink at all prior to August 1999, and nothing in place when this
-19- witness an-ived in Augusi 1999 that would have enabled the company to develop any significant p aid
subscriber base. The only concerted effort to sell subscriptions prior to August 1999 that this
employee was aware of was the use of outside telemarketers. Based on this witness' observation,
the telemarketing effort had produced a "0% return in terms of producing paid subscriptions." The
falsity of the subscription sales projections is supported by W-3' s observation of the absence of any
concerted plan for generating subscription sales at Pro.Netlink, and the dramatic difference between the "projected" sales (40,000 subscriptions) and the actual sales (well under 100).
40. At the Annual Shareholders' meeting held on December 4, 2000 at the Grand Hyatt
on East 42nd Street in Manhattan, a ProNetLink investor asked Zagoren how many premium
subscribers the Company had. Premium subscribers were paying users of the Company's web site.
After attempting to evade answering the question with a non-responsive answer, the shareholder posed the question again. Zagoren told her that ProNetLink had over 8,000 paid subscribers. In truth, however, ProNetLink had fewer than 20 paid or "premium" subscribers in 2000. According to the Company's Annual Report on Form 10-K filed 10/12/00, the Company had approximately
7,500 "registered users," i.e., non-paying users of the Company's w-ebsite. But the Annual Report makes clear that the Company only received $7,123 in "premium registration fees," which at the
$350 annual fee per user comes out to approximately 20 paying subscribers.
41. Zagoren's next step as chief marketer of ProNetLink was to introduce Jean Pierre
Collardeau to the investing public, via an April 27, 1998 Press Release entitled "ProNetLink
President and Founder. . . Jean Pierre ColIardeau A leader in the Import-Export business." This
Press Release stated, among other things, that "Collardeau has been called on to give frequent informative speeches and seminars aimed at educating members of import-export associations such
-20- as the Florida Trade Data Center (FTDC) [and] the World Trade Center (WTC)." This statement was misleading in that it suggested that Mr. Collardeau had spoken at the World Trade Center in
Manhattan, a prestigious hub of international commerce. Collardeau subsequently acknowledged that the "World Trade Center" referred to in this press release was the Florida World Trade Center, a regional trade association in Miami. Moreover, the chief operating officer of the Florida Trade
Data Center stated subsequent to this press release that Collardeau was never invited to speak. "He may have given some sort of speech at the center, but he certainly didn't give a speech for the center."
42. On May 20, 1998, a ProNetLink message "thread" was launched on the Silicon
Investor website. The messages posted to this "thread" are still available on the Silicon Investor website and have been read by counsel. This "thread" has received a steady stream of messages since 1998 from ProNetLink investors and others, including some o f the plaintiffs; According to the
Silicon Investor website 40,650 messages have been posted to this "thread" to date.
43. This ProNetLink "thread" was begun by a message from "Malko:" This message remains available for review on the Silicon Investor website, "Malko's" message read in part as follows:
Ladies and Gentleman:
If you've wondered where sound fundamentals have gone in the intemet sector...
If you've thought that profitless WE ratios are slightly missing in the logic department...
If you wished you could find a substantial company in their infancy for an investment..
If you're looking for a company with great vision and solid execution...
-21- If you think no company could be as good as this seems to imply...
Then we cordially invite you to study the business plan and the execution that has been conceived and achieved by the ProNetLink team. In the PNLK Research Website ... you will learn the history that attests to the vision, capabilities, organization, execution and the results of the Pronetlink Webtool evolution to date.
While gaining insight to ProNetLink consider this: Do you know any other company with the potential that ProNetLink offers as an investment? At the time of this initial updated writing (3-21-99) the share price was about S1.75.
Let us assert that as you examine this information, the investment value will quickly become self-evident. Upon further investigation, you may begin to think that your eyes are deceiving you. However, as you satisfy your own questions, we believe that you too will become members of the ProNetLink family of investors.
As has been stated by the company founders, "ProNetLink is a work in progress, which means that the Webtool is keeping pace with the changes in the technical, e- commerce and customer environments. It is never static. It will stay dynamic to satisfy the rigorous demands of this burgeoning industry -- about which, we believe, ProNetLink will be among its principle pacesetters. We members of this thread, along with many others, represent investors around the globe who applaud the efforts and achievements of all the ProNetLink team, and extend to them our encouragement. And now you have the opportunity to find out why...
Welcome to this thread!
44. Unbeknownst to the investing public, "Malko" was Phillip e Hab ab au' the individual who assisted defendant Coll ardeau in setting up ProNetLink as a public company and who told W-1 that he and Collarcleau had registered blocks of ProNetLink shares in nominee names with the intention of running the price up and eventually selling their shares at a profit.
45. On June 8, 1998, the Company issued a press release which touted the Company's new Internet trade news broadcast feature stating: "ProNetLink is now 3 weeks old as a live website.
It has achieved many of its initial goals as set forth in Phase 1 of development." Lauding the
' The docket sheet in Mr. flab abou's criminal case identifies "Malko" as one of Hababou's aliases.
-22-
• Company's daily trade news intemet broadcast, the press release stated: "This feature has been
activated and .3 times a day it is updated with current news from around the world."
46, The June 8, 1998 press release was intended to, and did, lull the investment
community into believing that the Company's intemet news broadcasting operation was a critical
component to the success of the business venture.
47, On June 24, 1998, ProNetLink issued a press release entitled "ProNetLink
Management Announces Voluntary Stock Lock-up," stating:
ProNetLink (OTC Bulletin Board: PNLK-news) announced today that the management of the company have signed a voluntary "lock-up" agreement that states that they Will not sell any of their restricted stock to the public for a period of one year from the date of the agreement. Jean Pierre Collardeau, ProNetLink President and CEO and the other members of the executive staff control 16,500,000 shares of restricted stock.
"We want to show the market and our investors that we are behind ProNetLink and we are here for the long term" said Mr. Collardeau, "Oar goal is to build the most comprehensive import-export tool on the internet."
The stock certificates will be held by the company's counsel Leon B. Lipkin. Contact: Glenn Zagoren[.]
48. According to court records, Attorney Leon B. Lipkin, "counsel" to ProNctLink as of -
June 24, 1998, has pleaded guilty to having been legal counsel to Marc Rousso in Rousso's stock
. schemes. As part of Rousso' s plea, he has agreed to forfeit his ProNctLink stock certificates, among
other things, according to court records from the U.S. District Court in Newark, New Jersey.
49. This press release. was intended to inspire confidence in investors, by assuring them
that insiders, and particularly Collardeau, were holding their shares for the "long tei IN." The June
24, 1998 press release was false and misleading in that it failed to reveal the information provided
-23- by W-1, to wit, that Mr. Collardeau and Hababou owned and were trading ProNetLink shares in the names of nominees at substantial profits.
C. The Class Period Begins
50. The Class Period begins on August 26, 1998. On this date, ProNetLink stock closed at a price of $1.55 on volume of 346,900 shares. During the class period, and as a result o f the false and misleading statements of the defendants as set out herein, the stock price rose to a high of 57.84
(April 15, 1999). The Company filed for bankruptcy protection on or about July 1 2001, rendering the company's shares worthless.
51. On August 26, 1998, the Company issued a press release which announced its first
"live" broadcast. This press release was intended to, and did, increase the level of interest in the
Company's intemet broadcast operations, and thus the price of the Company's stock. The price of the Company's stock, which closed at $1.52 on August 25, 1998, closed at $1.55 on August 26, 1998 and rose 11% to close at $1.72 August 27, 1998.
52. This press release was materially false and misleading because it failed to disclose that Collardeau had entered into the scheme desciibed by W-1 to have Zagoren and others promote the company, thereby allowing Collardeau to sell shares in secret nominee accounts through the
Pacific International Securities brokerage firm in Vancouver, Canada at artificially inflated prices.
53. During September and October 1998, ProNetLink issued 4,210,000 shares ofcommoll stock in private placements to three foreign companies pursuant to exemptions from registration pursuant to Rule 504 of Regulation D under the Act. The consideration received by ProNetLink was
$842,000. 54, As of December 1998, under a Securities Exchange Agreement between ProNeiLink and jean Pierre Collardeau, ProNetLink issued 1,162,920 shares of restricted common stock to
Collardeau, pursuant to an exemption from registration under Section 3 (a)(9) or 4(2) of the Securities
Act, in exchange for his surrender to ProNetLink of a Promissory Note of ProNetLink in favor of
Collardeau, which then had an outstanding principal balance plus interest of $232,584. (As described more fully below, Collardeau later sold these shares at prices of $3 and $5 per share, reaping profits exceeding $4 million. His stock sales were suspicious in timing arid amount.)
55. As of December 1998, under a Securities Exchange Agreement between ProNetLink and Micheline Baron, ProNetLink issued 1,056,150 shares of common stock, pursuant to an exemption from registration under Section 3(a)(9) or 4(2) of the Act, to Ms. Baron in exchange for the surrender to PmNetLink by Ms. Baron of a Promissory Note of ProNetLink in favor of Ms.
Baron, which at such time had an outstanding principal balance plus interest of S211,230,
56. In February 1999, ProNetLink issued 790,000 shares of common stock in private placements to one foreign individual pursuant to exemptions from registration pursuant to Rule 504 of Regulation D under the Act. The consideration received by ProNetLink was $158,000.
57. In February through April 1999, ProNctLink issued 5,000,000 shares of common stock in private placements to three foreign individuals and one foreign company pursuant to exemptions from registration pursuant to Rule 506 of Regulation D or otherwise under Section 4(2) of the Act. The consideration received by ProNctLink was $1,000,000.
58. As revealed by W-1, and unbeknownst to the investing public, a substantial portion of the common stock ProNetLink issued in private placements (and thus exempt from registration) was issued to alter egos and family members of Col lardeau, pursuant to a scheme whereby
-25- Collardeau would artificially drive up the price of the Company's stock and reap profits by selling through these alter egos and family members. In addition, the Collard.eau Indictment charges that defendant Collardeau and others used these nominee accounts to generate trading profits in Pro Net
Link stock for themselves, to avoid disclosure to investors. (Collardeau Indictment, 1N29-30). Each of the Forms 10-Q and Forms 10-1K and the Registration Statement that Pro Net Link filed with the
SEC during the Class Period was materially false and misleading because, among other things, they failed to disclose that Collardeau was the true beneficial owner of millions of shares u f Pro Net Link stock held in the names of others. (This allegation applies to all of Pro Net Link's quarterly and annual reports as well as the Registration Statement discussed below, and will not be repeated after the mention of each of these SEC filings.)
59. On November 2, 1998, the Company issued a press release entitled "ProNetLink
November Update" ("the November Update"). As of that date, the Company had issued no public statement revising the March and May 1998 projections that ProNetLink would have 40,000 paying subscribers by the end of the year. (It was revealed 14-months later in a SEC Form 10-Q/A filed on
January 27, 2000 that as of September 30, 1998, ProNetLink had only 40 subscription paying members). On the issue of volume of subscription sales, the November Update stated:
The current number ofpaying members in ProNetLink is lower than the original plan called for by this time but this is partly due to the increased time that was necessary for product development. The marketing program began in September and since then the membership has started going up. 'Due to development issues we were slower then we originally planned to bring the full marketable capabilities ofProNetLink to the end user,' said Jean Pierre Collardeau, President of ProNetLink. 'However, now that the development has reached the advanced stages, we expect accelerated growth in membership.'
-26- This statement was false and misleading when made because subscription sales had not "started going up" in any appreciable degree at that time or any time thereafter. Based on statements in the
Company's own filings (made long after the November Update), subscription sales went from 40 as of September 1998 to 22 as of September 1999. W-3, a former employee in ProNetLink's sales division, has stated that when he joined the company in 1999, he saw no evidence of a sales strategy ever having been in place at ProNetLink that could have generated subscription sales in the thousands, much less the tens of thousands.
60. ProNetLink stock saw a spike in volume of activity in the two days after the
November Update was issued; the price remained in the $1.00 range. The false and misleading statements in the November Update regarding the pace of subscription sales had the effect of artificially maintaining ProNetLink's already artificially elevated stock price.
61. In Press Releases beginning in early 1999, the Company anticipated the upcoming
"launch" of the "full version of the ProNetLink Global Trade Internetwork." This "launch" was scheduled for early April 1999.
62. On April 8, 1999, the Company issued a press release announcing the appointment of Glenn Zagoren as Chairman of the Board:
In a special meeting of the Board of Directors, it was unanimously accepted that it would be in the best interest of the company and its shareholders if Mr. Zagoren, a current Board member, were elevated to the position of Chairman. 'Mr. Zagoren has been working with ProNetLink since the early days of the company,' said Jean Pierre Collardeau, President of ProNetLink. 'He is critical to the continued growth of the company and we respect his business guidance and growth programs,' Mr. Collardeau continued, 'We also feel that this title gives him more prestige when working on our behalf with Governments and strategic alliances around the world.'
Mr. Zagoren is President of Zagoren-Zozzora, Inc. the strategic development and marketing company that has been working with ProNetLink since its inception... Mr.
-27- Zagoren has been Executive Producer on a number of Network Television Specials. 'Mr. Zagoren has a unique range of talents', Mr. Collardeau said. His core competencies includes strategic development, technology introductions, sales development, television production and marketing.. all of which we use at • ProNetLink His skills and understanding of ProNetLink will help us reach the next level of penetration into the global marketplace.' ***** Currently the ProNetLink site is in beta testing with its strategic alliances. The full version of the ProNetLink Global Trade Internetwork will be available to the p ub lie in early April.
63. On April 12, 1999, the Company issued a press release announcing that it would be launching its "new Global Trade Intemetwork and Portal" on the morning of Friday, April 16th. The
Press Release quoted Zagoren as stating:
'We have invested over two years building this business and preparing thr the upcoming release of our Global Trade Intel-network,' said Glenn Zagoren, ProNetLink's Chairrnan. 'We know that the marketplace has been anticipating the launch as much as we have. Our delivery date was set for the evening of April 14th however, after a long meeting we decided that it would make more sense not to compete with the IRS for attention on the 15th. After two years of development we wanted everyone focused on the launch of ProNetLink and not on their taxes. So, what's one more day?' ***** Later this month, ProNetLink will debut its Internet broadcast feature when, on April 21', a live cybercast of events from the 1999 International Business Expo °BEM]
ProNetLink stock closed on April 12, 1999 at $6.12, the second highest closing price in the stock's history.
64. The Apri112, 1999 press release was materially false and misleading because it failed to disclose, among other things, that Collardeau was holding stock in nominee names (accumulated during the "over two years" the individual defendants were "building this business"), awaiting an advantageous time to sell his shares at a profit. The press release also failed to correct information
-28-
• the individual defendants previously disseminated regarding the dramatically inflated sales subscription projections (40,000 subscriptions) and actual sales reality (22 subscriptions sold).
65. On June 15, 1999, the Company issued an announcement entitled "Management of
ProNetLink.com Continues Stock Lock-Up." This announcement stated:
ProNetLink.com(R) (OTC Bulletin Board: PNLK), http://ww-w.pronetlink.com (PNL), the Global Trade Intemetwork and Portal specializing in electronic international commerce, announced today that key management of the company will continue to voluntarily lock-up its stock to show its support for the company.
Jean Pierre Collardeau, the President of ProNetLink, who voluntarily locked up his shares last year will continue to do so for an additional year. In addition to the lock- up, Mr. Collardeau has not taken any salary or compensation since the start of the company. He is the only ProNetLink executive that has shares that could be traded in the public market in the immediate future. Mr. Collardeau had agreed with ProNetLink to extend the term of his lock-up agreement with respect to his shares of ProNetLink common stock. Under the terms of the original lock-up agreement, which was entered into as of June 23, 1998, Mr. Collardeau, together with members of his immediate family, agreed with the company not to sell 16,500,000 shares of ProNetLink common stock in the public market for at least one year
66. The foregoing statement was false and misleading because Collardeau had already set up numerous secret nominee accounts as alleged above, and had traded ProNetLink stock for substantial profits.
67. On June 21, 1999, the Company filed a Registration Statement (No. 000-26451) on
Form 10 with the SEC ("the June 1999 Registration Statement"). The June 1999 Registration
Statement was signed by Jean Pierre Collardeau. This filing marked the beginning of the Company becoming a reporting company with the SEC. The June 1999 Revistration Statement touted the uniqueness of the Company's "Global Trade Internetwork" and the import of its interaet broadcasting facility as follows:
-29- ProNetLink's Global Trade Intemetwork websitc consists of three functional areas. The first is a customized portal page that gives members important trade infoimation gathered from around the world about virtually any industry. The portal includes trade leads, business news and many other trade related data streams. The second is the trade directory and resource area where members can search the online directory of over 2.75 million companies...The third area is the interactive broadcast facility which has been designed to enable members to view or participate in live cybereasts of key trade events from around the world and to retrieve such cybercasts from ProNctLink's archives on demand...ProNetLink considers the Global Trade Intemetwork to be a multi-dimensional portal that offers great depth to users because it represents a true online trade community by combining the features o f an executive business club, a trade resource center and a broadcast network all in one easy-to-use web site.
68. Describing the Company's broadcast operations, the June 1999 Registration
Statement stated:
ProNetLink.com's interactive broadcast facility is designed to enable members to view or participate in live cybercasts of key trade events from around the world and retrieve such cybercasts from ProNetLink's archives on demand. ProNetLink launched its interactive broadcast feature on April 21, 1999 with a live cybercast of events from the 1999 International Business Exposition (the "IBE") presented jointly with World Trade Magazine. While the ME was held at the Jacob javits Convention Center in New York City, ProNetLink members worldwide were able to view the event byjust "tuning in" to www.pronetlink corn. Members were also able to submit questions via e-mail and have them answered by the guests on the show.
Currently, programming is produced in rented facilities as needed. ProNetLink is planning to build a new broadcast studio in New York City in Fall 1999, where it anticipates producing trade specific programming for the Global Trade Intemetwork, including trade news, special events seminars and presentations as well as interviews. ProNetLink also plans on using local broadcast crews to bring special events from around the world to the ProNetLi nk corn. ProNetLink anticipates that all programming will be available for advertisers to sponsor and companies will also have the opportunity to purchase "infomercial" time on the website.
ProNetLink continues to build the "global" portion of the website with marketing missions in various regions throughout the world. Currently, ProNetLink has opened sales and development offices in connection with local independent representative firms in Indonesia and Israel, and expects to expand elsewhere in Asia, the Middle East as well as Europe. As of June 9, 1999, ProNetLink was in negotiations with businesses and organizations in seven European markets to open sales and marketing
-30- offices, -but no assurances can be given that such negotiations will result in definitive agreements. ProNetLink is also working directly with 2overnment representatives and Chambers of Commerce and Trade associations in several nations to increase the amount of information that resides directly on the ProNetLink site... at this time therc does not appear to be any competitive site broadcasting trade specific information on a regular basis.
69. The June 1999 Registration Statement also stated four anticipated revenue streams,
"membership fees, advertising, strategic alliance corn missions and Internet broadcasting." The June
1999 Registration Statement did not provide information on the number of ProNetLink's paid subscribers.
70. The audited financial statements attached to the 1999 Registration Statement were prepared by Feldman Sherb Erlich 8z Co., P.C. -- defendant Feldman Sherb prior to a name change.
71. The foregoing statements in the June 1999 Registration Statement were materially false and misleading because:
a. membership fees were represented as one of the four "primary anticipated revenue streams," when the individual defendants knew that membership fees had fallen dramatically short of projections and had failed to produce any significant revenue during the Company's preceding two years of operation;
b. the broadcast operations, which was represented to be a key component of the
ProNetLink Global Trade Inlet-network website and a key source o frevenue, was being developed solely for the personal benefit of Zagoren as discussed above;
c. as of June 21, 1999, trade specific information was being broadcast by competitors on a regular basis;
-31- d. it failed to reveal the information reported by W-1, that Collardeau had entered into an alliance to issue false and misleading statements in order to create a market for the
Company's securities so that Collardeau and others could profit through the clandestine sale of stocks held in nominee names.
e. A substantial portion of the Company's 50,068,570 shares ofcommon stock was owned by alter egos and nominees of Collardeau.
72. On August 10, 1999, the Company issued a press release entitled "ProNetLink.com
Averages Over 1 Million Hits per Month Since Launch in April," stating:
While a million hits sounds like a small number compared to some of the huge consumer sites, the management of ProNetLink.com is pleased with this volume coming to a targeted business-to-business wide where members have to pay a subscription fee to get access. * * * The number of hits to the site is important for two reasons. First, it shows that the site is getting the attention that it needs in order to reach the next level of international expansion. Second, the number of hits to the site deter-nines the amount the site can charge for advertising.]
73. This press release was false and misleading for several reasons. First, it states management's satisfaction at having achieved these "hit" numbers on a site "where members have to pay a subscription fee to get access." The individual defendants knew, however, when this press release was issued that (1) the site had only approximately 22 paying members, a number inadequate to generate 1,000,000 "hits" per month, and (2) the vast majority of users were receiving free access.
74. Additionally, W-3, a former employee who came to work in sales for ProNetLink at the time of this press release, has stated that the number of "hits" to ProNetLink's site is a useless term. It does not reveal whether the site is being accessed for its intended purpose. Additionally,
-32- according to this witness, the ProNetLink's portal-based website was set up in a wa y that would be likely Co generate many "bits" for a single user session. In addition this witness is extremely skeptical of the truthfulness of these "hit" numbers, stating that the computers ProNetLink had at the time of this press release would not have been able to handle this kind of user volume.
75. On August 23, 1999, the Company issued an "August Update" press release, over the name of Glenn Zagoren, stating that the Company's Global Trade Internetwork(TM), "has received a positive reaction from the international business-to-business marketplace to its global business directory, data mining capabilities and on-line trade tools since its launch in April." The press release further stated:
In June, the company began a national 'f V advertising campaign that targeted the business-to-business marketplace. Membership from around the world climbed sharply and strong growth continued through July. The marketing and sale program will begin again in September and will have the additional support of new international sales offices and Chambers of Commerce partners. * * * * * The following is a company overview and member activity during the first 14 weeks since launch
Current users: 2,337 companies from 53 countries Average monthly hits: 1,182,242 Number of user sessions: 110,152 * * * * * Revenue Streams: Advertising, Subscriptions, e-com commissions & sales, Broadcasting
76. The August 23, 1999 press release was materially false and misleading because:
a_ membership from around the world had not "climbed sharply" or shown
"strong growth" through July 1999, as evidenced by the fact that as of September, 1999, Prol\.'etLink had only 22 paid subscribers, down from the September 1998 total of 40 paid subscribers;
-33- b. the press release falsely suggested that the user activity was attributable to
"members," when the individual defendants knew (1) that there were only a handful of paying
"members" at the time, and (2) ProNetLink was being accessed during this time primarily by non- members;
c. there was no significant or "positive" reaction from the international business- to-business marketplace to the Company's global business directory, data mining capabilities and on-line trade tools; and
d. it failed to disclose that Collardeau and Zagoren had entered into the above described alliance to use Company funds to develop ProNetLink's broadcasting division, which
Zagoren would receive cost free, at the same time that a market for the Company's securities was being developed so that Collardeau could sell his shares secretly at a substantial profit.
e. On September 28, 1999, the Company issued a press release which announced that the Company would "launch PNL-TV, the first internet B2B trade news network, on Monday,
October 4th." The press release stated:
NEW YORK, Sept. 28 /PRNewswire/-ProNetLink.com (OTC Bulletin Board: PIN-LK - news), the Global Trade Intemetwork(TM), today announced that it will launch PNL-TV, the first online news network focusing exclusively on breaking trade news and in-depth analysis of business-to-business international commerce issues, on. Monday October 4th. PNL-TV will broadcast alive newscast Monday through Friday at 11:00 a.m. EST featuring current global trade issues, interviews with government and international business leaders and reports from correspondents from around the world.
***** ProNetLink.com has built anew, state-of-the-art digital Internet broadcasting studio that features a two-camera stage and Chrorna Key b ackdrop, as well as a standard set. Digital switchers, graphics, effects, encoders and audio systems will provide broadcast standard live programming The studio also features non-linear digital editing for taped shows. PNL-TV will be distributed to the intemet at three modem
-34- speeds... PNL-TV represents the most advanced stage of the Internet and a great example of the convergence of the computer and television,' said Glenn Zagoren, Chairman ofProNetLink corn. 'We see PNL-TV as a way for -businesses from around the world to not only get current trade news, but to participate in the shows. ProNetLink.com has members in 53 countries which will allow PNL-TV to bridge traditional global news boundaries and change the way executives get their business- to-business and international trade news.'
77. W-2 and W-3, witnesses who were fanner employees at ProNetLink, both working there at the time of this press release, state that PNL-TV was Glenn Zagoren's pet proj ect. W-2, who served as office manager for ProNetLink, stated that Zagoren ran PNL-TV essentially as his own personal enterprise. This witness stated that, after PNL-TV was operational, ZaQoren in discussions with Company insiders made no secret of his wish to have the Company cede PNLTV to him. As will be explained more fully herein, this wish was fulfilled in 2001, when defendant Collardeau gave
PNL-TV to Zagoren.
78. On October 6, 1999, the Company, over the name of Glenn Zagoren, issued a press release stating that the Company's "netcasting division has successfully been launched and that viewer demand has set records in data stream rates according to a spokesperson at AT&T CerfNet, the company that monitors ProNetLink.com servers." The statement "viewer dem and has set records in data stream rates" could reasonably be interpreted to mean that PNL-TV had a large audience.
79. On November 15, 1999, the Company filed its SEC Form 10-Q for the quarterly period ended September 30, 1999 ("the September 30, 1999 Form 10-Q"). This document, which was signed by Collardeau, stated:
Due to our transition from our development stage to the implementation of our selling phase with the launch of the current version of our website in April of 1999, we have begun to generate more significant revenues. The Company's recent activities have included the launch of its Internet trade news facility, known as PNL-TV, whose programming includes paid advertising, and the hiring o f additional
-35- sales professionals. The Company believes that its revenues will increase as it continues to implement its business plan.
80. The September 30, 1999 10-Q was false and misleading because the individual
defendants knew as of the date of this filing that the Company was receiving no significant revenue
from subscription sales, a revenue source that supposedly formed the bedrock of the Company's
business plan. The filing was misleading because it did not reveal that, contrary to the previously
announced projection of thousands of subscribers, as of September 30, 1999 the Company only had
approximately 22 paid subscribers.
81. Moreover, the September 30, 1999 10-Q was false and misleading in its representation that the company had left the "development stage" (during which no significant
revenue could be expected) and entered the "selling phase" (during which increased revenue could
be expected). This transition (and the promise of increasing revenues) is belied by the Company's
subsequent 10-Q, for the quarterly period ending December 31, 2000 (filed on February 20, 2001)
("the December 31, 2000 10-Q"). The December 31, 2000 10-Q states that "during the six month period ended December 31, 2000 and December 31, 1999, ProNetLink was a development stage enterprise. Accordingly, it engaged in limited revenue generating operations." This statement is plainly contrary to ProNetLink's pronouncement in the September 30, 1999 10-Q that it had left its development stage and entered the selling phase.
82. The price of ProNetLink's stock rose from a closing price of $2.34 on November 12,
1999 to a closing price of $2.90 on November 15, 1999, based on the rosy, but false, prospects described in the December 30, 1999 10-Q.
-36- 83, A note to the financial statements (Note -3 Related Party Agreements) which were contained within the September 30, 1999 Form 10-Q purported to describe Zagoren's compensation
as follows:
On February 19, 1999, the Company entered into a consulting agreement with Zagoren-Zozzora, Inc. ("ZZI"), under which ZZI provides on-going marketing and business functions to Pro Net Link, including the development of marketing plans, general business consultation, supervision of marketing tools and the investigation and recommendation of strategic alliances and other business opportunities. Glenn Zagoren, the President of ZZI, currently serves as Chairman of the Board o f Directors ofProNetLink, and spends substantially all of his time in such capacity. The current consulting agreement, which expires in February 2000, provides that ZZI be paid $10,000 per month by ProNetLink for its services. For the quarter ended September 30, 1999, ProNetLink paid ZZ1 $30,000.
84. During the second quarter of fiscal 1999 (that is, between October 1, 1999 and
December 31, 1999), despite ProNetLink's lack of any meaningful revenue and without
contemporaneous disclosure to the investing public, ProNetLink began paying quarterly compensation of $75,000 to defendant Collardeau. Prior to the second quarter of fiscal 1999,
Collardeau had been receiving no compensation from ProNetLink
85. On December 8, 1999, the Company, over Zagoren's name, issued a Press Release entitled "November-December Update," which described the alleged success of PNL-TV and the plans for its expansion as follows:
November has been quite a month at ProNetLink.com We have been quite busy working on new elements for the PNL and PNLTV. COM sites. As you know we had our news team in Seattle for the WTO meetings. In my opinion, Bruce Blosil, our news anchor, did a great job. Thank you for your nice emails about the shows. Things were a mess in Seattle and yet he and the camera crew managed to duck the tear gas to be in the right places at the ri ght time. In fact, CNN used footage from PNLTV.com on the signing of the U.S./China Agriculture agreement. ..Some investors have asked why are we taking the time to build PNLTV.com and how does it fit into the ProNetLink.com business plan. The WTO broadcasts are your answer. We were able to bring to the world trade market news
-37- that was targeted to their needs and not to ratings. We were able to broadcast as much material as we could generate without the worry of network time constraints. We interviewed trade leaders from around the world and pushed for answers that affect businesses around the world. In the end we were the only news network dedicated to bringing daily news programming targeted to trade professionals. PNLTV.com helped put ProNetLink.com in the top of minds of the Trade Ministers of the world. It was a great honor to have Ministers that I have met during trade missions send me their regards while being interviewed by PNLTV.com . If global awareness is what we are looking for, PNI,TV.com is certainly helping us get it... ***** PNLTV.com is a news resource that brings business people from around the world to our site on a daily basis. It is also a revenue generator. And it is only the beginning of PNLTV.com "stay tuned" as they say. Advertising on PN LTV .com is where businesses want to be, since they can run their existing commercials and build their brand image... While PNLTV.com has been showing off in Seattle the rest of us have been working on ProNetLink,com back in New York. Our new and improved in- house tech team has been adding new features to the show on a regular basis... ***** • We have also been working on our international footprint. As a result of the trade mission to the Middle East we are now finalizing sales agreements with Jordan, Egypt, Abu Dhabi and Dubai. We see this region as an important area specifically with Dubai building the first free trade zone for e-commerce. We had some very promising meetings with them during our mission.
We have new sales agreements in the Netherlands (the 7th largest Internet user in the world) and California, our first in the US and one of the largest import/export markets in the world. In February, we will begin to expand the ProNctLink.com market into Latin America. ***** As you all have probably seen we have filed our Form 10 and our Form 10Q. We continue to provide our shareholders with the information that is needed to make a sound investment. We will be adding a new investor section to the site in the very near future, where you will be able to get up-to-the-minute information about what is going on at PNL.
86. On December 14, 1999, the Company filed an amendment to its Form 10-Q for the
quarterlyperiod ended September 30, 1999With the SEC ("the September 30, 1999 Form l0-Q/A.").
A note to the financial statements (Note - 3 Related Party Agreements) which were contained within
-38- the September 30, 1999 Foiln 10-Q/A disclosed additional data regardin g Zagoren's compensation
as follows: "the Companyrecognized $340,000 of non-cash compensation expense related to options
granted to Mr. Zagoren during the year ended June 30, 1999. An additional $660,000 will be
amortized through the remaining period of the consulting agreement."
87. On December 14, 1999, the Company also filed an SEC Form 10/A, Amendment to
General Form of Registration of Securities ("the December 14, 1999 Form 10A). The December 14,
1999 Form 10A did not correct any of the false and misleading statements contained in the Original
Registration Statement, detailed above. The December 14, 1999 Form 10A has attached to it an
Independent Auditors' Report issued by Feldman Sherb Horowitz & Co., P.C. and audited financial
statements.
88. In addition to the false and misleading statements pointed out in the Initial
Registration Statement, the December 14, 1999 Form 10A states that, "For the period from Inception through September 30, 1999, Jean Pierre Collardeau, the President of ProNettink. did not receive any compensation for services in any capacity to ProNetLink." This statement was misleading because it failed to state that the Company had begun paying Collardeau a a salary of $75,000 per quarter beginning in fiscal quarter 10/1/1999 - 12/31/1999.
89. On January 27, 2000, the Company filed a second amendment to its SEC Form 10-Q for the quarterly period ended September 30, 1999 ("the September 30, 1999 Form 10-Q/A2"). This
SEC filing disclosed the following information for the first time:
As of September 30, 1999, Prol'1/41-etLink had over 2,300 registered members from approximately 95 countries (of which 22 were subscription paying members and 40 were members who had previously paid subscription fees (and for whom the Company waived further payment)). As of September 30, 1998, ProNetLink had approximately 450 members (of which 40 were subscription paying members).
-39- 90. The September 30, 1999 Form 10-Q/A2 also touted that "The Company's revenue
increased from $11,759 for the three-month period ended September 30, 1998 to $241,802 ibr the
'three month period ended September 30, 1999. 99.3% of the revenue in 1999 occurred as a result
of ProNeti,ink's bartering transactions with approximately ten companies in exchange for website
development and marketing expenses."
91. These revenue Figures were false and misleading, in that they included barter as an
element of revenue. In November, 1999, two months prior to the filing of the September 30, 1999
Form 10-Q/A2 (1/27/00), the Financial Accounting Standards Board Emerging Issues Task Force
(EITF 99-17) issued a ruling concluding that revenue and expense from advertising barter
transactions should be recognized only when an entity has an historical practice of receiving or
paying cash for similar advertising. EITF 99-17 prohibited ProNetLink from recognizing the barter
revenue reflected in the September 30, 1999 Form 10-Q/A2. This accounting error was compounded
by narrative in the 10-Q/A2 touting the alleged increase in revenue. Contrary to the Company's
pronouncement of an increase in revenue for the quarter ending September 30, 1999, after
discounting the improper barter revenue, revenue actually decreased in September 30, 1999 as
compared to the quarter ending September 30, 1998.
92. On January 27, 2000 and February 9, 2000, the Company also filed second and third
Amendments to the SEC Form 10 Registration Statement that it had filed in June 1999 ("the Forms
10/A2 and 10/A3"). The Forms 10/A2 and 10/A3 did not correct any of the false and misleading
statements in the original Registration Statement, filed in June 1999 and in the Faun 10A
amendment filed on December 14, 1999.
-40- 93. On February 14, 2000, the Company filed its SEC Form 10-Q for the quarterly period ended December 31, 1999 ("the December 31, 1999 Form 10-Q"). This fling, signed by Collard eau, stated in a note to the financial statements:
On February 19, 1999, the Company entered into a consulting agreement with Zagoren-Zozzora, Inc. ("ZZI"), under which ZZT provides on- going marketing and business functions to ProNetLink, including the development of marketing plans, general business consultation, supervision of marketing tools and the investigation and recommendation of strategic alliances and other business opportunities. Glenn Zagoren, the President of ZZI, currently serves as Chairman of the Board of Directors of ProNetLink, and spends substantially all of his time in such capacity. The current consulting agreement which expires in February 2000 provides that ZZI be paid $10,000 per month by ProNetLink for its services. For the six months ended December 31, 1999 ProNetLink paid ZZI $60,000. In addition, the Company recognized $680,142 of non-cash compensation expense related to options granted to Mr. Zagoren during the prior fiscal year. An additional $320,000 will be amortized through the remaining period of the consulting agreement. Mr. Zagoren and the Company are in the process of negotiating a new agreement whereby Mr. Zagoren would become an employee of the Company.
94. Additionally, the December 31, 1999 Form 10-Q stated:
As of December 31, 1999, ProNctLink had over 3,800 registered members from approximately 102 countries (of which 21 were subscription paying members and 42 were members who had previously paid subscriptions fees (and for whom the Company waived further payment)). As of December 31, 1998, ProNetLink had approximately 750 registered members (of which 42 were subscription paying members).
This acknowledgment belied earlier statement by Zagoren and the Company that ProNetLink would grow to have 40,000 paying subscribers.
95. Additionally, the Company's December 31, 1999 Form 10-Q improperly recognized
$622,000 in barter revenue in violation of EITF 1# 99-17, as is explained more fully above. This accounting error was compounded by narrative in the December 31, 1999 Form 10-Q in which the
-41- Company trumpeted its improved revenue numbers and the "transition to its revenue generation
stage."
96. On February 15, 2000, the Company filed the fourth and final amendment to its June
1999 Registration Statement ("the Form 10/A4"). The Form 10/A4 repeated the false and misleading
statements contained in the initial Registration Statement and in the three subsequent amendments.
97. On February 16, 2000, the SEC approved ProNetLink's Registration Statement. A press release issued by the Company that day bearing Mr. Zagoren's name stated:
ProNetLink.com. . .announced that the L.S. Securities and Exchange Commission (SEC) has infoL 'lied the Company that its Form 10 registration statement is complete. While ProNetLink. com has been a fully reporting company since August of 1999, the completion of the Form 10 makes ProNetLink fully compliant with the OTC Bulletin Board's registration requirements.
The company has contacted the compliance division ofthe OTC Bulletin Board, and has initiated the process to remove the letter "e" from the company's symbol on the exchange. Based on the company's discussions with the OTC Bulletin Board, the company expects that its symbol will appear without the letter "e" within the next few trading days.
"It has been quite an interesting and time consuming process completing this registration statement but it is now behind us and we can once again focus completely on building our Global Trade Intel-network" commented Glenn Zagorcn, Chairman of ProNetLink.com. "This step moves ProNetLink.com closer to its objective of listing its stock on a major U.S. stock exchange" added Jean Pierre Collardean, President of ProNetLink.
ProNetI.,ink stock reacted very favorably to this announcement. The stock price had hovered in the
$2.50 - $3.00 range in the months prior to February 16, 2000. By February 23, 2000, the stock price had jumped to $3.47; by March 2, 2000, the stock price was $5.81.
98. The defendants obtained SEC approval of the Company's Registration Statement, and achieved the resulting jump in ProNetLink stock price based on false and misleading statements
-42- „
made to the SEC. ProNetLink completed its Registration Statement by submission to the SEC of
false and misleading Forms which failed to alert the SEC to material facts, includin.g the fact, as
revealed by W-4, that Collardeau had obtained shares in nominee names with the intention of
running up the stock price and selling, and the fact that the Company had previously misled the
investing public by disseminating revenue projections that had no basis in fact. Had the SEC known
these circuit's-lances, it is highly unlikely that they would have approved ProNetLink's Registration
Statement.
99. On March 16, 2000, the Company held a conference call and Bruce Basil, Vice
President of PNL-TV, stated: "Our goal at PNL-TV is to become the premier broadcaster on the
intemet for global trade news and information.” A key part of reaching that goal, he told listeners,
was "hiring a team of broadcast news specialists .„ ."
100. On April 5, 2000, the Company issued a press release announcing that Ms. Nicole
Domenici had joined PNL-TV as a Senior Producer. The press release stated that Ms. Domenici
would be responsible for producing the live news broadcasts and would work directly with News
Anchor Bruce Blosil. The press release also stated: "PNLTV.com now has viewers from over 53
countries "tuning in," said Jean Pierre Collardcau, President of ProNetLink.com ... As our network
grows we will continue to add broadcast and news executives" like Ms. Domenici.
101. On April 17, 2000, Jean Pierre Collardeau sold 1,162,920 shares of his previously-
restricted ProNetLink stock. Collardeau sold 622,920 shares at 53 per share, and 540,000 shares at
$5 per share, for total proceeds of $4,568,760. ColIardeau's profit on these sales was approximately
$4.3 million. These stock sales were suspicious in both timing and amount because the Company
had already issued several press releases stating that PNT NV was being developed and was a
-43- "leader" in its industry. In addition, the Company's Registration Statement was approved in
February 2000 which had the effect of substantially boosting the price of the Company's common
stock. The sales were also suspiciously timed because they were prior to the dissemination of any
adverse news on the Company which did not come out until mach later in the year and into the
following year. Collardeau's stock sales were at some of the highest prices for the stock at $3 and
$5 per share. As alleged in Count Ill these stock sales were made contemporaneously with stock purchases by lead plaintiffs Craig Zychal and Scot Campbell and are the basis for imposing civil
liability for Collardeau's insider trading.
102. On May 26, 2000, Zagoren disseminated a letter to shareholders which stated:
1 would like to say that T am very proud of the PNL and PNLTV teams and the product that they have brought to the market. Considering the funds that were available to build with I think this is even more outstanding. We have taken a $5 million investment and run the company for over two years, built an operational trade site with more functionality than most of the competition and launched a global trade news broadcast network. We have built all o f this for the amount of money that some our "competition" burns in about week... Recently there has been quite a lot of discussion as to where ProNetLink.com and PNLTV corn are heading. I want to address sonic of those questions.
A few months ago we were in meetings with a number of investment banks, value added investors and venture capitalists. Unfortunately, the market took a major turn for the worse and all technology companies paid the price. As a result our conversations were sidetracked. We have re-started those conversations and are moving forward with ways to fund the expanded growth of our company. One of the elements that impress many of the firms that we are meeting with is the fact that we have been able to build so much with so little. Just imagine what we could do with proper funding. ***** In my opinion the credibility of ProNetLink.com and PNLTV.com are of the highest level.
Yet, there are individuals out in the market that have taken to makin,g false and misleading statements about our company with the intent to drive the price of the
-44- stock downward. I can say that these individuals do not have any information or understanding of what it is we are building to back up what they are posting. While I have offered to speak to anyone who has any question about the company, very few have ever picked up the phone to call me. Frankly, I am surprised. If I had a problem with something and was given the opportunity to find out directly from the Chairman of the company the answers to my questions I would be on the phone in a second. The fact that these people continue to post false and misleadin g statements about the company without making any effort to contact us for the facts shows me that they are just out to scare investors. I am not sure who they are or whom they work for but if they are shareholders they serve no purpose in bashing the stock they have purchased. The only other alternative is that they do not own the stock and they are intentionally trying to drive the price downward.
Let Elle address the level of competition in the market. I have always stated that there will be competition in the area of global trade on the Internet. We welcome it. This is a major undertaking to change the way the world does business. Even if ProNetLink.com had all the funding in the world we could not do this job alone. The more companies join in the effort the faster we all move forward. Global trade is a $7 trillion business. There is plenty of room for many companies offering different services to the market. This is no different than the conventional business marketplace today. In fact, as an example, there are 87 rent-a-car companies in New York City alone that all manage to have a share of the business.
ProNetLink.com is at the center of the development of global trade on the Internet. We will continue to grow and continue to have a share of that market. We are working to ensure that we have as large a share as possible...
The management and staff of ProNetLink and PNLTV are giving 110% of their effort to make this company surpass our expectations... as well as yours.
103. On May 3, 2000, the Company told the public in a press release that Pl\TL TV would
"produce and air exclusive coverage of symposium addressing E-commerce and the Digital Divide:
The New World Order' in July.
104. On May 24, 2000, the Company issued another press release on PNL TV, stating it would provide coverage of the U.S. House vote to grant China permanent normal trade relations.
105. On June 6, 2000, the Company again told the public about PNL TV. The press release quoted Zagoren stating: "PNLTV.com is growing very quickly as the leader in international
-45- trade news programming." Zagoren announced that Fred Schwartzfarb had left , ON'T3C to join
PNLTV.com.
106. On June 22, 2000, the Company issued a press release under the headline:
"Management Continues to Show Strong Support of the Company." The press release stated that
"certain key shareholders of the company have voluntarily extended the lock-up restrictions on all
of their stock." It further stated:
Jean Pierre Collardeau, the President and Founder of ProNetLink, and members of his immediate family, who have voluntarily agreed over the last two years to abstain from trading any of their shares in the public markets, have agreed to extend the voluntary lock-up for a minimum of three months to September 23, 2000. Mr. Collard can is the only ProNetLink executive who currently has shares that can be traded in the public market.
The Board of Directors of ProNetLink, Corp. may release the Collarcleaus from the lock-up restrictions if the company consummates what the Board determines to be a significant financing transaction involving either ProNetLink.com and/or PNLTV.corn.
107. On August 8, 2000, the Company filed a Fowl 8-K with the SEC which reported that
John A. Bohn was appointed Chairman of the Board of Directors of the Company (and that Glenn
Zagoren, was appointed Co-Chairman of the Board and Executive Vice President of the Company).
It further slated: "In that capacity he [Zagoren] will focus his attention and energy on accelerating
the development of the Company's PNLTV.corn broadcast unit."
108. The August 8, 2000 Form 8-K was materially false and misleading because it led the
investment community to believe that the Company intended to continue to expand development of the Company's principal revenue-producing unit when, as particularized below, the Company planned to cease operations of this unit in a few months and transfer it to Zagoren in a cashless transaction.
-46- 109. On October 13, 2000, the Company filed its SEC Form 10-K for the fiscal year ended
June 30, 2000 ("the Fiscal 2000 Form 10-K"). The document, which was signed by defendants
Collardeau and Zagoren, touted the "unique content" of its Internet broadcasting facility, also known
as PNL-TV, which included live trade news, anchored by an experienced news journalist each
business day, coverage of trade events and interviews with people involved in the trade industry.
Citing an increased activity associated with the Company's PNL-TV news and special events
coverage, the document stated:
PNL-TV has been active in broadcasting trade-related special events since its inception. Key special event broadcasts for the year ended June 30, 2000 included • coverage of the World Trade Organization meetings in Seattle (November 1999), the Free Trade of the Americas conference in Guatemala (April 2000), the House vote on the China Permanent Normal Trade Relations bill (May 2000), the United States Department of Commerce's Alternate Dispute Resolution and Small Business E-Commerce summits (both June 2000), and the United Nation's New Millennium conference (June 2000.) We believe that producing and broadcasting such special events increases user access of the website, increases the sales possibilities for sponsorships of such broadcasts, and allows us to create valuable relationships with organizations such as the U.S. Department of Commerce and the United Nations . . . we recently signed a contract with Corporate Fairs and Exhibitions for the exclusive rights to broadcast the International Aid & Trade show, planned for June 2001. . . We have . . expanded the broadcast module of our website by building a full, in-house digital broadcast studio in our corporate offices in New York City. ProNetLink-owned cameras, digital switchers, non-linear digital editing, lighting and audio/video encoding systems are used to produce the trade-related programming, ..We intend to add to our sales and broadcast staff during fiscal year 2001."
110. The Fiscal 2000 Form 10-K also stated: "ProNetLink's website currently services approximately 7,500 registered users on the website from over 120 countries."
111. In addition, the Fiscal 2000 Form 10-K also disclosed that the Company had generated negative cash flows from operations in all periods since its inception and that it had previously relied upon funding through a series of private placements of equit y securities, conversion
-47- of debt ,placements to common equity arid shareholder loan advances, in addition to periodic hank borrow under a secured credit facility.
112. Reassuring the investment community that the Company had sufficient liquidity to operate through September 30, 2001, the Fiscal 2000 Form 10-K stated:
Subsequent to June 30, 2000, further debt and equity capital was injected into ProNetLink as described below:
• On August 8, 2000, ProNetLink's President, Jean Pierre Collardean, loaned ProNetLink an aggregate of $1,000,000 represented by a convertible note bearing interest at 12% per annum and due August 8, 2001. The note is convertible into shares of the Company's common stock at $1.89 per share, subject to adjustments as defined in the convertible note. On October 10, 2000, the note maturity date was extended by one year to August 8, 2002,
• On October 10, 2000, ProNetLink's President, Jean Pierre Collardeau, loaned ProNetLink $500,000 bearing interest at 12% per annum. The loan is repayable on October 10, 2002.
n On October 10, 2000, ProNetLink sold 666,667 of its shares of Common Stock in a private placement for $500,000.
• On October 10, 2000, the Company and its President entered into a Note Purchase Agreement (the "Agreement"). Pursuant to the Agreement, the President is obligated to lend the Company up to an aggregate principal amount of $2,000,000. The commitment terminates at the earlier of October 10, 2001 or the date by which the cumulative principal amount of borrowings under the Agreement reaches $2 million. On the date that the commitment terminates, amounts then outstanding will be combined into one note that will be due in two years. Borrowings will bear interest at 12% per amium.
It is projected that the arrangements described above will provide sufficient capital resources to meet our operating needs through September 30, 2001.
We currently estimate that our base cash requirements for the next 12 months, which will include operating and marketing expenses, in addition to further technology, and product development, will approximate $2,500,000. As at October 10, 2000, ProNetLink's cash balance stood at $656,309. At that date no borrowings had been made under the referenced $2 million Note Purchase Agreement.
-48- 113, The Fiscal 2000 Form 10-K was materially false and misleading because at the time
the foregoing representations were made, the Individual Defendants knew and failed to disclose that
the Company had no intention of:
a.C to develop its "unique" Internet broadcasting facility;
b. Adding personnel to its broadcast staff during fiscal year 2001;
c. Operating the Company's broadcast operations beyond January 2001 and had
planned to transfer it toZ onagtinoruigenn;
d. Renewing the marketing services contract with Zagoren's alter ego,
Zagoren-Zozzora, Inc., which was scheduled to expire on February 15, 2001; and
c. Broadcasting the International Aid & Trade show, planned for June 2001.
114. In addition, the Fiscal 2000 Form 10-K was materially false and misleading because,
at the time the foregoing representations were made, the Individual Defendants knew and failed to
disclose that:
a. The Company would soon file a provisional patent application for an integrated trade transaction ASP (Application Service Provider) solution called Master Transaction
Logic ("MTL") whose purpose is described below;
b. The Company did not have the technical capability to create the MTI.. software product and would have to pay millions above and beyond the projected cash need of $2,500,000 to have an experienced software developer develop it for the Company;
c. The Company's base cash requirements for the next 12 months, which included operating and marketing expenses, in addition to farther technology and product development, would approximate $10 million; and
-49- d. Thc Company did not have sufficient capital resources to meet its operating
needs through September 30, 2001.
D. The Individual Defendants Conceive the "MTh" Idea
115. According to testimony given on October 5, 2002 by David Walker, the Company's
Chief Operating Officer (11/98 to 7/2/01), given in the ProNetLink bankruptcy proceeding, in mid
2000. the individual defendants conceived "the MTL idea" -- a concept which constituted an entirely new business endeavor. and direction for the Company. d, the master Transaction Logic (mTL,,)
concept was intended to be a stand-alone transaction software module that could be accessed from within the ProNetLink.com site and licensed as an Application Service Provider ("ASP") system to
any Internet e-commerce entity seeking to engage in international trade. The Company intended the
MTL software to generate revenues by charging a transaction fee on each level of service selected by the users, and by licensing fees. In other words, it was intended to establish the Company as the
"America Online" of the international commerce world.
117. According to Walker, the Company's officers and directors recognized that they would have to either "train people to do this [create the MTL software] or hire somebody who already did it." They decided to engage the services of Commerce One because, in the words of
Walker: "Commerce One is in the business of building commerce systems, top of the line where people can E trade and do all of the things we needed to do."
118. Walker further testified: "We had negotiated with them since probably, September of the year, 2000" and finally struck a deal at approximately "one point two million for the market site" and "one point four million for the labor."
-50- . .
119, As a result of the individual defendants' decision to embark upon the MTL path, the
Company decided to sell the Internet broadcast unit and funnel all resources into the development
of MTL.
120. Also, according to Walker, at this time, the Board charged Zagoren with responsibility
for finding a buyer for the Company's Internet broadcasting operations, and "throughout the fall"
of 2000, Zagoren advised the Board that he had been searching for buyers but that "there were no
takers."
121. The Fiscal 2000 Form 10-K was materially false and misleading because none of the
foregoing facts, particularly the individual defendants' decision to gift the Company's existing
intemet broadcasting business to an officer (Zagoren) and to embark upon a new bet-the-Company
venture, were disclosed.
122. The foregoing facts were required to be disclosed pursuant to SEC Financial
Reporting Release No. 36 which states that the IVID&A should "give investors an opportunity to look
at the registrant through the eyes of management by providing a historical and prospective analysis
of the registrant's financial condition and results of operations, with a particular emphasis on the
registrant's prospects for the future." Examples of such revenue transactions or events that the staff
of the SEC has asked to be disclosed and discussed in accordance with its Financial Reporting .
Release No. 36 are "Changing trends in. . . a sales channel or separate class of customer that could
be expected to have a significant effect on future sales or sales returns . . . An increasing trend
toward sales to a different class of customer, such as a reseller distribution channel that has a lower
gross profit margin than existing sales that are principally made to end users."
-51- ,
123. The financial statements which were contained within the Fiscal 2000 Form 10-K
were materially false and misleading because they failed to comply with the GAAP (FAS13
Statement No. 121) which required the Company's financial statements to reflect the assets of the
Company's Broadcasting operations as "assets held for sale" at the lower of its carrying amount or
fair value less cost to sell, and to provide, among other thi ngs, the following information:
a. A description of a ssets to be disposed of; the facts and circumstances leading
to the expected disposal, the expected disposal date, and the carrying amount of those assets;
b. The loss resulting from the requirement that "assets held for sale" are to be
reflected at the lower of its carrying amount or fair value less cost to sell; and
c. The results of operations for assets to be disposed of to the extent that those
results are included in the entity's results of operations for the period and can be identified.
124. On November 14, 2000, the Company filed its SEC Form 10-Q for the fiscal quarter
ended September 30, 2000 with the SEC ("the September 30, 2000 Form 10-Q"), signed by
Collarcleau, which stated:
in fiscal year 2001, we are focused on supplementing our revenue base and realizing a return on the product development expenditures incurred to date by creating or penetrating markets for our various content remarketing, Leaders in Global Trade, Virtual Trade Show and other products that we believe are sufficiently developed to market. Website enhancement and the development of additional products and techno logy innovations also characterize our fiscal 2001 efforts.
125. The September 30, 2000 Form 10-Q, and in part teu. tar the foregoing statement, was
materially false and misleadinc, because the September 30, 2000 Form 10-Q failed to disclose all of
the facts specified above.
-52- 126. The financial statements which were contained within the September 30, 2000 Form
10-Q were also materially false and misleading because they failed to reflect the assets of the
Company's Broadcasting operations as "assets held for sale" at the lower of its can-ying amount or fair value less cost to sell and to provide the disclosures which were required by GAAP as particularized above.
E. The December 4, 2000 Annual Shareholders' Meeting
127. On December 4, 2000, the Company held its annual shareholder's meeting at the
Grand Hyatt on East 42" Street, in Manhattan. Lead plaintiffs Doreen 1:abit and Craig Zychal attended the meeting. Lead plaintiff Craig Zychal video taped the meeting in its entirety. Present at the meeting from the Company were Za goren, Collardeau and Auguste Francis Vincent, a Di rector of the Company. Zagoren introduced Philip Weiner from the Company's auditor, Feldman Sherb, as well as Steven Cutler from Kronish, Lieb, the Company's outside counsel. Zagoren first delivered some prepared remarks about the Company's past performance and Zagoren stated the Company had also signed a 5-year contract to produce "virtual trade shows" for the United Nations. Zagoren stated the Company had very strong revenue-producing possibilities, like the UN contract. Zagoren also stated that the Company had immediate revenue generators, like PNL-TV. Going forward, Zagoren stated: "I personally believe that the convergence concept of ProNetLink is strong and the right path to profitability."
128. Zagoren then took questions from the investors in the audience who attended the
Annual Meeting. One investor asked:
I have two questions. First, could you comment on management's current planning and positioning with regard to the lock up of shares because I think Mr. Coll arcleau had some shares to be sold in February and so I'd like to know about that.
-53- And the second thing is Tread where the burn rate of cash would take you through approximately September 30, 2001. I assume it's critical for the company. But the specific question is: a) is that correct; and b) will current funding take us through September 30?
129. Zagoren first told the audience that "I think that as shareholders you all have to agree that Mr. Collardeau has gone above and beyond the call of duty of any founder and CEO as having locked up his shares since the beginning of the Company." Collardeau was sitting through these statements in the front row of the audience alongside Director Auguste Francis Vincent, but said nothing.
130. Zagoren also stated that Collardeau had always done what was in the best interest of the Company. Zagoren told the audience that Collardeau could not sell his shares even if he wanted to because the market prevents him from selling all his stock into the market all at once: "The market and SEC prevents him [Collardeau] from putting all his shares into the market." Zagoren then asked outside counsel, Steven Cutler, to comment. Cutler stated: "There are some restrictions on shares that have been held for a certain period of time." Cutler stated that an insider just could not drop a large number of shares into the market because it would depress the price of the shares.
131. Zagoren then stated: "I think we're all in this together and I think that we'd be having a very different conversation today if we'd been selling our shares all along and we haven't been."
"It would have been very attractive to all of us to sell when the shares were much higher ."
Collardeau,. of course, remained silent about his trades through the nominees in the Vancouver brokerage account, Pacific Securities, and other accounts as charged in the Collardeau Indictment.
(See Collardeau Indictment, 113 (c), (d), (e), 16-19, 21).
-54- •
132. Zagoren then addressed the investor's question whether the Company would have enough money to last until September 30, 2001. Zagoren evaded answering this question by stating:
As far as the burn rate, we are doing what we can to control that burn rate knowing that we have a finite amount of funds available to us. We Will make them go as far as we can, but the mission in front of us is not to just see how long we can extend that burn rate, but to one, get additional funding to the company, and two, increase our revenues so that bum rate is offset by revenues rather than constantly be paying out money. Believe me, this is something we are frightfully aware of in the office and working now to reverse that process.
133. Zagoren thus never answered the investor's simple question, which was, does the
Company have sufficient capital to operate through September 2001. Zagoren's evasion of this question with rhetoric about the desirability of increasing the Company's revenues was a red flag to the Company's auditor, Philip Weiner, who was sitting in the audience throughout the Annual
Meeting. As discussed below, Feldman Sherb should not have issued a clean audit opinion on the
Company's financial statements contained in the 2000 Form 10-K. But even after issuing the clean audit opinion, the engagement partner, Philip Weiner witnessed Zagorcn's evasion of a simple question that called for a yes or no answer on whether ProNetLink had funding adequate to operate the Company until September 30, 2001. This should have alerted Accountant Weiner. Zagoren's failure to answer a direct question about the Company's available cash and financing to fund operations through the next 10 months -- through September 2001 -- put the auditor on notice that it needed to inquire further, but it did not.
134. Far from inquiring further, Feldman Sherb never retracted its clean audit opinion, dated September 28, 2000 (except note 12, as to which the date Was October 10, 2000) contained in the Company's 2000 Form 10-K, filed October 13, 2000. Moreover, Feldman Sherb consented to the inclusion of its clean audit opinion in the Company's Registration Statement filed May 4, 2001,
-55- five months after the December 4, 2000 Annual Shareholders' Meeting. (On May 1, 2001,
CoIlardeau sent instructions to American Stock Transfer to cancel 1,500,000 shares of stock previously issued in the name of a Monbaron company and reissue those shares in the name of Eric
Niger, according to the Collardeau Indictment (137q)). As alleged below, Feldman Sherb should have issued a "going concern" opinion, meaning that the Company did not have sufficient funds to continue operations for more than 12 months.
, 135. On February 5, 2001, the Company issued a press release stating that the Company had "signed an engagement agreement and drafl term sheet to obtain up to $10 million with an equity line of credit with Corpfin.com, Inc. . a. financial services company and member of NASD and
SEPC that raises private capital for small to mid-cap public companies across all industries, as well as providing access to such investment opportunities to institutional investors. The company has been introduced to potential investors by Corpfin. corn and has begun negotiations with them."
136. According to the press release: "The additional capital is needed to complete the development of the company's patent-pending integrated trade transaction ASP (Application Service
Provider) solution called Master Transaction Logic(TM) (MTL(TM)). A provisional patent application was filed for the MTL(TM) in January, 2001."
137. In addition, the February 5, 2001 press release stated that its Board of Directors had approved a plan to restructure the Company, focusing "on a reduction in operating expenses" and the sale of the Company's Internet broadcast services as follows:
The company is currently in negotiations With various parties for the sale of all or the majority of its Internet broadcast services, and expects to retain an equity interest in the broadcast services as a condition of sale. 'Broadcasting trade information is a solid business concept', said Glenn Zagoren, Chairman of ProNetLink.com , 'However, I believe that it is in the best interest of the company and its shareholders
-56- to allow the broadcast services to be sold to an organization that has the finding and resources needed to build an international news organization while allowing ProNetLink to retain equity and shareholder value in that new entity.'
All ongoing development will be focused on the Master Transaction Logic(TM) (MTL(TM)) platform, for which technical specifications have been completed and development has begun. The company intends for the MTL(TM) system to be an independent and open standard based Application Service Provider (ASP) solution that integrates a seamless "end-to-end" online process for SM Es engaged in international trade. The MTL(TM) is being developed to be a stand-alone transaction module that can be accessed from within the ProNetLink.com site and licensed as an ASP system to any Internet e-commerce entity that wants to profit from its • capabilities.
The company intends for the MTL(TM) system to generate revenues by charging a transaction fee on each level of service selected by the users and by licensing fees. 'Focusing on the delivery of a tailored trade solution, and delivering a rich user interface across a wide variety of networks, will help to position PNL in the fast growing Application Services Provider market', said Stephan Kneipp, Director of Technology for ProNetLink.
- 138. The February 5, 2001 press release was materially false and misleading because it failed to disclose the fact that the Company had discontinued its Internet broadcast operations (P.N L
TV) in January 2001.
139. Moreover, the February 5, 2001 press release was materially false and misleading because the Company was not "in negotiations with various parties for the sale of all or the majority of its Internet broadcast services" as represented. According to Walker's testimony in the
Bankruptcy Proceeding, no prospective purchaser ever asked to look at the PNI.-TV financial data;
-there were no takers;" there were no offers. This is not surprising given the fact that Zagoren, who was purportedly charged with finding a purchaser for the Company's broadcasting operations in the fail of 2000, had his own agenda -- the cashless acquisition of the Company's broadcasting for his own personal gain.
-57- 140. Zagoren's February 5, 2001 statements quoted above were materially false and misleading because, at the time they were made, he knew that it was not in the best interest of the
Company and its shareholders to allow the broadcast services unit to be sold. This unit was the only portion of the Company's operations that consistently earned revenue and had the potential to operate at a profit in the future as evidenced by the following testimony by Walker:
Q. Did PNL TV ever make any money for the company up until the point where you sold it?
A. Yes. PNL TV if, by meaning, that is all Internet broadcast activities under that umbrella, it did sell as a U.N. contract to video tape a U.N. event. It made some money . . . the leaders of global trade, as I had mentioned earlier. It was an audio/video, and that made some money, as well.
Q. Do you know approximately, how much revenue came from those two sources?
A. I believe, the U.N. was twenty thousand. Then, maybe, one hundred thousand total for the other one over the course of the year.
141. Moreover, the statements made by Zagoren in the February 5, 2001 press release were materially false and misleading because, at the time they were made, he knew, as co-Chaiixnan of the Board of directors and the sole individual responsible for finding a bu yer for the Company's broadcasting unit, that:
a. He would not seek to sell it to "an organization that has the funding and resources needed to build an international news organization.";
b. Through self dealing, he would acquire it (without shareholder approval) in a cashless transaction; and
c. The stockholders of the Company would not obtain any "shareholder value" upon the sale of the broadcasting unit to Zagoren.
-58- 142. On February 7, 2001, the Company filed a Form 8-K with the SEC which reported that its Board of Directors had approved a plan to restructure tilt.. Company, focusing "on a reduction in operating expenses, the sale of its Internet broadcast services, and the completion of the company's integrated trade transaction solution", and that the Company had engaged a financial services company to raise equity for the Company. As stated in this Form 8-IC;
ProNetLink is currently in negotiations with various parties for the sale of all or the majority of its interests in its Internet broadcast services. The Company currently intends to retain an equity interest in the broadcast services as a condition of sale. However, there can be no assurances that such a transaction will be consummated, or that any such transaction will be consummated in a form currently contemplated by the Company.
All ongoing development will be focused on the Master Transaction Logic (MTL) transaction platform, for which technical specifications have been completed and development has begun. The company intends for the MTL system to be an independent arid open standard based Application Service Provider (ASP) solution that integrates a seamless "end-to-end" online process for SMEs engaged in international trade. The MIL is being developed to be a stand-alone transaction module that can be accessed from within the ProNetLink.com site and licensed as an ASP system to any Internet e-commerce entity that wants to profit from its capabilities.
143. Addressing the Company's PNL-TV, the February 7, 2001 Form 8-K stated: "Pending the sale of the Company's broadcast services, the Company intends to retain the capability to fulfill broadcast services contracts."
144. The February 7, 2001 Fot 8-K was materially false and misleading because it failed to disclose that the Company's Internet broadcast facility had ceased operations in January 2001, that the Company had no intention of fulfilling its broadcast services contracts, and because it led the investment community to believe that negotiations with various parties for the sale of the broadcast unit were ongoing, when this was not true.
-59- 145. On February 20, 2001, the Company filed its SEC Form 10-Q for the fiscal quarter ended December 31, 2000 ("the December 31, 2000 Form 10-Q). This document, which was signed by Collardeau, stated:
On February 6, 2001, our Board ofDirectors announced that we had approved a plan to re-focus the Company and to engage a financial services firm to raise equity for the Company. The re-focusing called for a reduction in operating expenses, the sale of the Company's Internet broadcast services, and the completion of the Company's ASP (Application Service Provider) trade transaction solution, termed the "Master Transaction Logic," or "MTL". The Company has significantly reduced staffing, retaining the core executive, administrative and technical staff for the development of the MTL product and maintenance of the Company's website. We have also elected not to renew the marketing services contract with Zagoren-Zozzora, Inc. ("ZZ1"), which expired on February 15, 2001. These, and other cost reductions, we see as reducing monthly operating expenses (not including research and development of the MIL product) by over 50%. Glenn Zagoren, President of ZZI, remains as non-executive Chairman of the Board of the Company.
We are currently in negotiations with various parties for the sale of all or the majority of our interests in our Internet broadcast services, which include the Virtual Trade Show product, PNLTV, and various broadcast services. We currently intend to retain an equity or other interest in the broadcast services as a condition of sale. However, there can be no assurances that such a transaction will be consummated, or that any such transaction will be consummated in the form currently contemplated by us.
All ongoine development will be focused on the Master Transaction Logic (MTL) transaction platform, for which technical specifications have been completed and development has begun. We intend the MTL system to be an independent and open standard based Application Service Provider (ASP) solution that integrates a seamless "end-to-end" online process for SMEs (Small to Mid-Sized Enterprises) engaged in international trade. The MIL is bein g developed to be a stand-alone transaction module that can be accessed from within the ProNetLink.com site and licensed as an ASP system to any Internet 0-commerce entity that wants to profit from its capabilities. We filed a provisional patent application with the U.S. Patent Office for the MIL on January 18, 2001.
Although we will maintain our vvebsite and associated businesses (such as banner advertising and membership fees), we do not currently intend to focus any significant financial and managerial resources on sales and marketing to develop the revenue models associated with the website. Pending the sale of our broadcast services, We intend to retain the capability to fulfill broadcast services contracts.
-60-
' 146. The December 31, 2000 Form 10-Q was materially false and misleading for the same reasons that the February 7, 2001 Form 8-K was materially false and misleading.
147. The financial statements which were contained within the December 31, 2000 Form
10-Q were materially false and misleading because they failed to reflect the assets o f the Company's
Broadcasting operations as "assets held for sale" at the lower o f its carrying amount or fair valueless cost to sell and to provide the disclosures which were required by GAA_P as particularized above.
148, On April 13, 2001, the Board of Directors (Coll ardeau and Vincent voting), voted to give the PNL-TV assets to Zagoren for practically nothing, according to the minutes of the Board o f Directors. Collardeau and Vincent voted to enter into an Asset Purchase Agreement on behalf of the Company with Zagoren's Company, ZZZTV. All of PNL-TV's assets were given to Zagoren under the agreement; ProNetLink received nothing for the assets except Zagoren's promise to pay
20% of his profits and 40% of Zagoren' s profits received from advertising supplied by the Company.
149. On May 4, 2001, the Company filed a Form S-1 with the SEC which disclosed the fact that the Company's Internet broadcast facility had "ceased operations in January 2001" and
"was sold to ZZTV Inc. [a company owned by Zagoren] pursuant to an Asset Purchase Agreement dated April 13, 2001" in a transaction in which Zagoren paid nothing.
150. Discussing the Company's MTL project, the Form S-1 stated:
All ongoing development has been focused on the Master Transaction Logic transaction platform, for which technical specifications have been completed and development has begun. * * * *
On April 20, 2001, we signed a Master Software License Agreement, a Master Services Agreement, and a Task Order with Commerce One to build our Master Transaction Logic product.
-61- Although we will maintain our website and associated businesses (such as banner advertising and membership fees), we do not currently intend to focus any significant financial and managerial resources on sales and marketing to develop the revenue models associated with our website.
We believe that our success will depend, in large part, on our ability to develop the Master Transaction I .ogic/Application Service Provider product, to increase market awareness and acceptance for this product, to raise additional operating capital to build technology and non-technology infrastrUctures and to continue product research and development.
151. Discussing liquidity and monetary commitments the Form S-1 stated: "We believe that current financing arrangements and available funds will be sufficient to meet anticipated needs for working capital and capital expenditures for at least the next six months."
152. The foregoing statement was materially false and misleading because, as of May 4,
2001, as the individual defendants knew, the Company did not have the financing and available funds needed to meet the Company's anticipated needs for working capital and capital expenditures for at least the next six months. In fact, the Company did not even have the resources needed to make the initial June 2001 payment to Commerce One which had been contracted to develop the
Company's MTh product. According to testimony by Walker in the Bankruptcy Proceeding:
A. We signed the agreement in April.
Q. Was there any financial transfer of either money or was it stock between your company and Commerce One?
A. No.
Q. You just paid them for their service?
A. We didn't pay them. We signed the deal.
Q. There was an agreement to pay them?
-62- A. They extended over one hundred-and-twenty days. They said that there was no cash now, but in the future. But, that they would take a risk with us.
Q. What was the term of repayment?
A. It was I think, ninety days for a piece of it and another one hundred-and-twenty days payments in the summer. So, it would fall in June and July.
Q. Ninety days from the April date?
A. No. June was the first payment; then spread out thereafter.
Q. How much was to be paid to them?
A. One point two million for the market site, basic platform. They estimated the labor to be I think, one point four million for the labor. That stretched out over eighteen weeks in terms. They would be flexible they said, on this.
Q. Was any money paid to them?
A. No.
153. On May21, 2001, the Compan y filed its SEC Form 10-Q for the fiscal quarter ended
March 31, 2001 ("the March 31, 2001 Form 10-Q). This document, which was signed by
Collardeatt, stated:
On March 29, 2001, we entered into an equity line of credit facility with Wav eland Capital, LLC through a Common Stock Purchase Agreement and Registration Rights Agreement. We have the right (but not the obligation) to sell up to S5,000,000 worth of our common stock to Waveland in periodic draw downs made at our election. ***** Certain risks for us include, but are not limited to, having an unproven business model, capital requirements and, if we successfully expand our operations, management of growth. To address these risks, we must, among other things, raise significant capital by drawing on our equity credit line with Waveland Capital, LLC, to develop our Master Transaction Logic product, continue to develop and successfully execute our business and marketing plans, and complete the development of the Master Transaction Logic product technologically and to market it.
-63- •
***** We currently estimate that our base operating cash requirements (excluding projected expenses for research, development and marketing of the Master Transaction Logic product) for the next six months will approximate $700,000. Additionally, we will need to secure funding through the equity line of credit arrangement we recently entered into with Waveland Capital, LLC, or from other sources, to complete the development and marketing of the Master Transaction Logic/Application Services Provider product, We have a material commitment with Commerce One for $2,600,000 in connection with the development, implementation and marketing of our Master Transaction Logic/ Application Service Provider product. There can he no assurances that we will successfully raise the capital required to develop the product or to attain break-even cash flow in any future periods. In the absence of Such funding, we will not be able to pursue our primary product, and be forced to curtail operations. •
154. The foregoing statements were materially false and misleading because they led the
investment community to believe that the Company had a $5 million line of credit to draw upon,
when it did not, and because it led the investment community to believe that this $5 million line of
credit was sufficient to cover the Company's operating expenses (purported to approximate $700,000
for the next six months) and for the Company's cost of developing, implementing and marketing its
- Master Transaction Logic/Application Service Provider product (purported to approximate
$2,600,000). According to a principal at Waveland Capital, LLC, who was also responsible for
ProNetLink funding tinder the line of credit, ProNetLinles stock became too "diluted" to permit
Waveland Capital, LLC to extend arty additional financing to ProNetLink. According to this
witness, Wave/and Capital, LLC was unwilling to extend further capital to ProNetLink under
these circumstances.
155. One week later, on May 28, 2001, the Company's Board of Directors met to discuss
the fact that the Company did not have sufficient resources to continue operating. According to
testimony by Walker:
-64-- Q. You must have come to a conclusion at some point arid raised to the other principals of thi entity, "Things are looking bad. We have to consider closing at some point"?
A. The beginning of June.
Q. Was there a meeting of the parties, the Directors and Officers? Or, was it just the Officers?
A. Directors met on the 28th of May.
Q. What was the discussion, at that point in time?
A. Our discussion was, since the funding didn't seem to be like a return or a comeback, it didn't -- the task was to talk to Commerce One, our other partners, and to see if we could get it [the Company] purchased or bought or funding, or something. So, we had a whole list of things to do.
Q. Now, was there a discussion at the time, as to the alternative, that you would have to close shop if it didn't work?
A. Yes, at some point.
THE TRUTH IS REVEALED
156. On July 2, 2001., the Company issued a press release stating that it had filed a voluntary petition for bankruptcy under Chapter 7 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Southern District of New York. The case was assigned to
Judge Gerber, (case number 01-41827). According to the press release:
ProNetLink, which is a development stage corporation, elected to file for Chapter 7 bankruptcy due to: 1) ProNetLink's inability to meet its financial obligations as said obligations become due, 2) the continued absence of any significant revenue from business operations or otherwise, and 3) ProNetLink's inability to obtain new investment capital or to find a merger or acquisition partner to allow operaions to continue.
-65- AUDITOR LiABILITY
157. The books and records of the Company, which were openly available to Feldman
Sherb, plainly reflected the nature of the foregoing improper and undisclosed transactions and the amounts involved. Moreover, all of the Company's personnel had been made available to Feldman
Sherb without restriction or limitation. Thus, there was no concealment of any of the material facts particularized above.
158. In view of the fact that nothing was concealed from Feldman Shcrb, it is apparent that, in connection with its audit of the Company's financial statements during the Class Period,
Feldman Sherb did not comply with GA.AS in that it either (i) perfouned audit procedures in a manner which constituted an extreme departure from the standards of ordinary care or it (ii) failed to perform those audit procedures which were appropriate and necessary under the circumstances.
In this regard, Feldman's audit was so deficient that it amounted to no audit at all.
159. GAAS (AU Section 150) mandates that: "Due professional care is to be exercised in the planning and performance of the audit and the preparation of the report." Providing guidance on the concept of due professional care, GAAS (AU Section 230) states:
Due professional care requires the auditor to exercise professional skepticism. Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence. The auditor uses the knowledge, skill, and ability called for by the profession of public accounting to diligently perform, in good faith and with integrity, the gathering and objective evaluation of evidence.
Gathering and objectively evaluating audit evidence requires the auditor to consider the competency and sufficiency of the evidence. Since evidence is gathered and evaluated throughout the audit, professional skepticism should be exercised throughout the audit process.
-66- ,
The auditor neither assumes that management is dishonest nor assumes unquestioned honesty. In exercising professional skepticism, the auditor should not be satisfied with less than persuasive evidence because of a belief that management is honest.
160. During the perfomianee of its audit, Feldman Sherb either learned of and ignored, or
recklessly failed to learn numerous facts showing that the Company did not have sufficient funds on
hand to finance its operations for the next 12 months, and accordingly Feldman Sherb should not
have given the Company a clean audit opinion. Based on the facts below which Feldman S herb
knew or recklessly disregarded, ProNetLink had insufficient funds at the time Feldman Sherb issued
its clean audit opinion to continue in operation for the next 12 months. Feldman Sherb knew of or
reekles sly disregarded these red flags.
161. The Company's base cash requirements for the next 12 months, which included
operating and marketing expenses, in addition to farther technology and product development, would
approximate well more than the Comp any had on hand and would approach S6 to $10 million, even
according to the Company's COO, David Walker. Feldman Sherb either knew this and ignored it,
or recklessly disregarded this fact.
162. The Company's own Form 10-Q for the six months ended December 31, 2000 (filed
2/20101) stated that the Company would need a minimum of $700,000 to meet base operating
requirements, excluding research and development of the MTL. To develop MTL, the Company
estimated that it would need another $4 million, bringing total cash needs to $4.7 million for the next
6 months. As alleged above, the Company disclosed that at most it had far less than $4.7 million in
available financing for the next 12 months.
-67- . . ,
163. In addition, COO David Walker testified in connection with the Company's
bankruptcy proceeding that the Company would need $6 to $10 million to fund its business plan and
operations:
A. Well, our goals, we needed --
Q. Company goals?
A..We need about SiX to ten million dollars to fund everything (Walker Tr. at 12).
164. Walker testified that the Company had begun developing its MTL project in mid-2000
(Walker Tr. at 15-16). He also testified that by August 2000, the Company had alreadybeen moving
in a new direction to build out its MTL project. (Walker Tr. at 13). The Company had already
begun negotiating with Commerce One to build the MTL software by September 2000. (Walker Tr:
at 18). According to Walker, it would cost several million dollars just to develop the MTL software,
well more than the Company had on hand. (Walker Tr. at 12- 26).
165. hi. addition, as alleged above, Philip Weiner of Feldman Sherb was present at the
Annual Shareholders' Meeting on December 4, 2000, when Zagoren evaded an investor's direct
question whether the Company had enough money to fund operations through September 30, 2001.
This was a red flag that Weiner either consciously or recklessly ignored showing that the Company
understood it did not have sufficient money to fund operations until September 30, 2001. Feldman
Sherb nevertheless consented to the use of its clean audit opinion in the Company's Registration
Statement, filed May 2, 2001,
166. Moreover, according to the Collarcleau Indictment, the Company sent instructions on
March 26, 2001 to American Stock Transfer to reissue 1,500,000 shares of Pro Net Link stock
previously issued in the name of Eric Niger to be reissued in the name of Muriel Prochasson.
-68- . . ,
(Collardeau Indictment, 4,137(o)).. The reissue of a large number of shares of Company stock was a
red flag that Feldman Sherb failed to investigate. Had it investigated this large and unusual
transaction, it would have discovered the fraudulent scheme alleged herein, namely, the issuance of
Pro Net Link stock to various nominees, including Eric Niger and Muriel Prochasson as alleged in
the Collardeau Indictment. (Collardeau Indictment, Il`f5, 13, 21, 29, 34, 37(1), 37(n), 37(o), 37(q);
Count Three, ¶9.)
167. In addition, Feldman Sherb consented to the inclusion of its clean audit opinion in
the Company's Registration Statement filed May 4, 2001. On May 1, 2001, however, ColIardeau
sent instructions to American Stock Transfer to cancel 1,500,000 shares of stock previously issued
in the name of Monbaron Company and reissue those shares in the name of Eric Niger, according
to the Collar(leau Indictment, ¶37q. This stock reissue was a red flag that Feldman Sherb ignored.
168. Feldman Sherb also knew or recklessly ignored the following facts which rendered
their clean audit opinion materially false and misleading:
a. The Company had no intention of continuing to develop its "unique" Internet
broadcasting facility;
b. The Company had no intention of adding personnel to its broadcast staff
during fiscal year 2001;
c. The Company had no intention of broadcasting the International Aid & Trade
show, planned for June 2001;
d. The Company had no intention of operating and/or retaining the Company's
broadcast operations beyond January 2001;
-69-
' e. The Company had no intention of renewing the marketing services contract with Zagoren-Zozzora, Inc. ("ZZI"), which was scheduled to expire on February 15, 2001;
I'. The Company did not have the technical capability to create the WITL software product and would have to pay millions to have an experienced software developer develop it for the Company; and
g. The Company did not have sufficient capital resources to meet its operating needs through September 30, 2001.
169. Feldman Sherb either knew and ignored all of the foregoing and permitted the
Company to conceal these facts from the investing public, by among other things, failing to comply with the GAAP (FASB Statement No. 121) disclosure requirements particularized above, and also permitted the Company to represent that its financing arrangements, as of October 10, 2000, "will provide sufficient capital resources to meet our operating needs through September 30, 2001."
170. Due to the Company's fraudulent concealment of material facts and its failure to make those disclosures which were necessary to make the Company's financial statements not misleading, the overall impression created by the Fiscal 2000 Form 10-K was inconsistent with the business realities of the Company and, as a result, they were deceptive and materially misleading.
171. On September 28, 2000 (except note 12, as to which the date was October 10, 2000),
Feldman issued its unqualified opinion on the Company's June 30, 2000 financial statements. This opinion, which was included in FroNctLink's Form 10-K filed on October 13, 2000 for the fiscal year ended June 30, 2000 and which was addressed "To the Board of Directors and Shareholders of
ProNetLink Corp." stated:
-70- . ,
We have audited the accompanying balance sheets of ProNetLink Corp. (A Development Stage Enterprise) as of June 30, 2000 and 1999, and the related statements of operations, shareholders' equity and cash flows for the years ended June 30, 2000 and 1999, for the period from July 25, 1997 (inception) through June 30, 1998 and for the period from July 25, 1997 (inception) through June 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ProNetLink Corp. (A Development Stage Enterprise) as of June 30, 2000 and 1999, and the results of its operations and its cash flows for the years ended June 30, 2000 and 1999, for the period from July 25, 1997 (inception) through June 30, 1998 and for the period from July 25, 1997 (inception) through June 30, 2000 in conformity with generally accepted accounting principles.
172. Feldman Sherb's unqualified auditor's opinion on the June 30, 2000 -Financial
statements were materially false and misleading because these financial statements were not
presented in accordance with GAAP, nor were they audited in accordance with GAAS.
173. GAAS (AU Section 411) describes the meaning of "present fairly in conformity with
generally accepted accounting principles in the auditor's report" as follows:
The auditor's opinion that financial statements present fairly an entity's financial position, results of operations, and cash flows in conformity with generally accepted accounting principles should be based on his judgement as to whether (a) the accounting principles selected and applied have general acceptance; (b) the accounting principles are appropriate in the circumstances; (c) the financial statements, including the related notes, are informative of matters that may affect their use, understanding, and interpretation; (d) the information presented in the financial statements is classified and summarized in a reasonable manner, that is,
-71- neither too detailed nor too condensed; and (e) the financial statements reflect the underlyin2 events and transactions in a mariner that presents the financial position, results of operations, and cash flows stated within a range of acceptable limits, that is, limits that are reasonable and practicable to attain in financial statements.
174. The June 30, 2000 financial statements which were disseminated to the investing public during the Class Period were not presented "fairly in conformity with generally accepted accounting principles" because, as particularized above, the:
a. Accounting principles selected and applied in the preparation o f the June 30,
2000 financial statements did not have general acceptance;
b. Ac countingprincipl es which pervasively impacted the June 30, 2000 financial statements were not appropriate in the circumstances;
c. June 30, 2000 financial statements, including the related notes, were not informative of matters that affected their use, understanding, and interpretation; and
d. June 30, 2000 financial statements did not reflect the underlying events and transactions in a manner that presented the financial position and the results of operations within a range of acceptable limits that were reasonable and practicable to attain in financial statements.
175. Feldman Sherb knew or recklessly disregarded that it was required to adhere to standards and principles of GA AS, includin g the requirement that the financial statements comply in all material respects with GAAP. Feldman, in issuing its unqualified opinion, as alleged herein, knew that by doing so it was engaging in a gross departure from GAAS, or issued such certification with reckless disregard for whether or not GA_AS was being complied with.
176. In the introductory portion of Accounting Series Release No 173, the SEC made the following comments pertaining to economic substance:
-72- Another problem. . is the need for emphasizing the importance of substance over form in determining accounting principles to be applied to particular transactions and situations. In addition to considering substance over form in particular transactions, it is important that the overall impression created by the financial statements be consistent with the business realities of the company's financial position and operations.
We believe that the auditor must stand back from his resolution of particular accounting issues and assess the aggregate impact of the particutar issues upon a reasonable investor's perception of the economic substance of the enterprise for which the financial statements are being presented.
177. In opining on the fairness of the June 30, 2000 financial statements, Feldman Sherb
specifically represented that its audit included "assessing the accounting principles used by management, as well as evaluating the overall financial statement presentation." This representation was materially false and misleading because Feldman either failed to assess the propriety of the accounting principles used by the Company and the overall financial statement presentation, or did so in an egregiously reckless manner.
178. Feldman Sherb's September 28, 2000 (except note 12, as to which the date was
October 10, 2000) unqualified opinion, insofar as it stated that Feldman Sherb's audit of the
Company's financial statements were conducted in accordance with GAAS, was false and misleading because the following GAAS (AU Section 150) were knowingly or recklessly violated:
a. General Standard No. 1 was violated, which standard requires that the a.udi is to he performed by a person or persons having adequate technical training and proficiency as an auditor;
b. General Standard No. 3 was violated, which standard requires that due professional care is to he exercised in the performance of the audit and in the preparation of the report;
-73- c. Standard Of Field Work No. 1 was violated, which standard requires that the work is to he adequately planned and assistants, if any, are to be properly supervised;
d. Standard Of Field Work No. 2 was violated, which standard requires that a sufficient understanding of the internal control structure is to be obtained to plan the audit and to determine the nature, timing and extent of tests to be performed;
e. Standard Of Field Work No. 3 was violated, which standard requires that sufficient competent evidential matter is to be obtained through inspection, observation, inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial statements underexamination ;
f. Standard Of Reporting No. 1 was violated, which standard requires that the report shall state whether the financial statements are presented in accordance with nnerally accepted accounting principles; and
- g. Standard Of Reporting No. 3 was violated, which standard requires that informative disclosures in the financial statements are to be regarded as reasonably adequate unless otherwise stated in the report.
179. The Company was required to disclose in its financial statements the existence a f the material facts described above and to appropriately report transactions in conformity with GAAP.
The Company failed to make such disclosures and to account for and to report transactions in the
June 30, 2000 financial statements in conformity with GAAP. Feldman Sherh was, therefore, required pursuant to GAAS, to issue a report which expressed a qualified opinion (AU Sections 340 and 508) on the Company's financial statements and which included an explanatory paragraph
-74- . . ,
describing an uncertainty about the Company's ability to continue as a going concern for a
reasonable period of time.
180. Feldman Sherb knew or recklessly disregarded the facts which indicated that the June
30, 2000 financial statements were false and misleading for the reasons set forth herein and it either
knowingly or recklessly violated GAAS in failing to issue a report which expressed a qualified
opinion on the Company's June 30, 2000 financial statements and which included an explanatory
paragraph describing an uncertainty about the Company's ability to continue as a going concern for
a reasonable period of time.
18], As particularized above and more fully below, Feldman Sherb failed to comply with
GAAS in that it failed to perfolin its audit of the June 30, 2000 financial statement with a proper
degree of professional skepticism. In this regard, Feldman either identified and ignored evidence
that the Company's financial statements were materially misstated via fraudulent accounting or
recklessly failed to identify such fraudulent accounting.
182. Further, as particularized above and more fully below, Feldman Sherb either
identified and ignored, or recklessly failed to investigate extremely questionable transactions, and
made audit judgments that no reasonable auditor would have made if confronted with the same facts.
Accordingly, Feldman's audit was so deficient that it amounted to no audit at all.
183. Had Feldman Sherb undertaken the performance of those audit procedures which
were required by GAAS, and with the due professional care which was required by GAAS, it would
have known that the June 30, 2000 financial statements were materially false and misleading because
these financial statements were not presented in accordance with G_AAP. In reckless disregard of
-75- professional standards, as particularized above and more fully below, Feldman failed to audit the
June 30, 2000 financial statements in conformity with GAAS.
184. GAAS (AU Section 311) states that:
The auditor should obtain a level of knowledge of the entity's business that will enable him to plan and perform his audit in accordance with generally accepted auditing standards. That level of knowledge should enable him to obtain an understanding of the events, transactions, and practices that, in his judgment, may have a significant effect on the financial statements . . Knowledge of the entity's business helps the auditor in:
a. Identifying areas that may need special consideration.
b. Assessing conditions under which accounting data are produced, processed, reviewed, and accumulated within the organization.
c. Evaluating the reasonableness of estimates . .
d. Evaluating the reasonableness of management representations.
e. Making judgments about the appropriateness of the accounting principles applied and the adequacy of disclosures.
185. In planning and performing its audit, Feldman either failed to:
a. Identify areas that needed special consideration (such the Company's accounting for its broadcast operations and the Company's ability to continue as a going concern) or identified such areas and audited them in a manner which was so deficient that it amounted to no audit at all, while making audit judgments that no reasonable auditor would have made if confronted with the same facts;
b. Assess the conditions under which accounting data, such as asset impairments were produced, processed, reviewed, and accumulated within the organization or assessed such
-76- conditions and made audit judgments based upon said assessment that no reasonable auditor would have made if confronted with the same facts;
c. Evaluate the reasonableness of management's representations, such as its representations that the Company's financing arrangements would provide sufficient capital resources to meet the Company's operating needs through September 30, 2001, or evaluated it in a manner which was so deficient that it amounted to no evaluation at all;
d. Judge the appropriateness of the accounting principles applied and the adequacy of disclosures in the Company's financial statements, or did so and arrived at iudanents that no reasonable auditor would have arrived at if confronted with the same facts. In this regard, although Feldman Sherb's unqualified opinion stated that Feldman Sheri) had assessed the accounting principles used by the Company, Feldman Sherb failed to recognize that management had selected and used non-GA.AP and inappropriate accounting policies and failed to make those disclosures which were required in order to make the financial statements not misleading as particularized above.
186. GAAS (AU Section 311) states that audit planning involves developing an overall strategy for the expected conduct and scope of the audit. Accordingly, GAAS recognizes that the nature, extent, and timing of audit plannin2 vary with the size and complexity- of the company, experience with the company, and knowledge of the company's business. In this regard, GAAS (AU
Section 311) provides that in planning the audit, the auditor should "prepare a written audit program
(or set of written audit programs) for every audit" and that this audit program:
. . should set forth in reasonable detail the audit procedures that the auditor believes are necessary to accomplish the objectives of the audit . . In developing the program, the auditor should be guided by the results of the planning considerations
-77- and procedures. As the audit progresses, changed conditions may make it necessary to modify planned audit procedures.
187. In preparing this audit program, GAAS provided that the auditor should consider, among other things (AU Section 311):
a. Matters relating to the entity's business and the industry in which it operates;
b. The entity's accounting policies and procedures;
c. The methods used by the entity to process significant accounting information ;
d. Planned assessed level of control risk;
e. Preliminary judgment about materiality levels for audit purposes;
f. Financial statement items likely to require adjustment;
g. Conditions that may require extension or modification of audit tests.
188. Feldman Sherb failed to comply with the foregoing provisions of GAAS in that
Feldman Sherb knew and ignored or recklessly failed to know, prior to commencement of its audit of the Company's June 30, 2000 financial statements, of each of the material facts particularized above, and either failed to utilize this information in planning and performing its audit or utilized this information in a matmer that no reasonable auditor would have used if confronted with the sarne facts.
189. The Company held its annual shareholders' meeting on Monday, December 4, 2000 at the Grand Hyatt New York, Park Avenue at Grand Central Station (on 42nd Street between
Lexington Avenue and Park Avenue, New York, New York 10017). Representatives of Feldman
Sherb were present at this annual meeting, namely Mr. Phil Weiner, and were afforded an opportunity to make a statement regarding the Company's accounting practices and to answer
-78- questions that might have been asked by stockholders. At this annual meeting, Feldman Sherb's representative failed to disclose the fact that the Company was in violation of SEC rules which require a reporting company to make and keep books, records, and accounts, which in reasonable detail, accurately and fairly reflect the transactions of the company. Further, the Feldman Slierb representative failed to disclose the fact that the June 30, 2000 financial statements were not prepared in compliance with GAAP and that they were materially misleading.
PLAINTIFFS' CLASS ACTION ALLEGATIONS
190. Plaintiffs bring 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_ ProNetLink common stock between August 26, 1998 and July 1, 2001, inclusive (the
"Class Period"), arid who were damaged thereby. Excluded from the Class are defendants, members of the immediate family of each of the Individual Defendants, any subsidiary or affiliate of
ProNetLink and the directors, officers and employees of ProNetLink or its subsidiaries or affiliates, or any entity in which any excluded person has a controlling interest, and the legal representatives, heirs, successors and assigns of any excluded person.
191. 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 plaintiffs at this time and can only be ascertained through appropriate discovery, plaintiffs believe that there are thousands of members of the Class located throughout the United States. As of November 10, 2000, there were reportedly more than 52 million shares of ProNetLink common stock outstanding. Throughout the
Class Period, ProNetLink common stock was actively traded on the Over-The-Counter market (an open and efficient market) under the symbol "PNLK." (The stock currently trades under the symbol
-79- PNLKQ,PK.) Record owners and other members of the Class may be identified from records maintained by ProNetLink and/or its transfer agents and may be notified of the pendency of this action by mail, using a form of notice similar to that customarily used in securities class actions.
192. Plaintiffs' claims are typical of the claims of the other members of the Class as all members of the Class were similarly affected by defendants' wrongful conduct in violation of federal law that is complained of herein.
193. Plaintiffs will fairly and adequately protect the interests o f the members of the Class and have retained counsel competent and experienced in class and securities litigation.
194. 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 and omissions as alleged herein;
b. whether defendants participated in and pursued the common course ofconduct complained of herein;
c. whether documents, press releases, and other statements disseminated to the investing public and the Company's shareholders during the Class Period misrepresented material facts about the business, finances, financial condition and prospects of ProNetLink;
d. whether statements made by defendants to the investing public during the
Class Period misrepresented and/or omitted to disclose material facts about the business, finances, value, performance and prospects of ProNetLink;
-S 0- e. whether the market price of ProNetLink common stock during the Class
Period was artificially inflated due to the material misrepresentations and failures to correct the material misrepresentations complained of herein; and
f the extent to which the members of the Class have sustained damages and the proper measure of damages.
195. 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 suit as a class action.
APPLICABILITY OF PRESUMPTION OF RELIANCE: FRAUD-ON-THE-MARKET DOCTRINE
196. At all relevant times, the market for ProNetLink common stock was an efficient market for the following reasons, among others:
a. ProNetLink common stock was listed and actively traded, on the over-the- counter market, a highly efficient market;
b. As a regulated issuer, ProNetLink filed periodic public reports with the SEC;
c. ProNetLink stock was followed by securities analysts employed by major brokerage firms who wrote reports which were distributed to the sales force and certain customers of their respective brokerage firms. Each of these reports was publicly available arid entered the public marketplace.
-81- d. ProNetLink regularly issued press releases which were carried by national newswires. Each of these releases was publicly available and entered the public marketplace.
197. As a result, the market for ProNetLink securities promptly digested current information with respect to ProNetLink from all publicly-available sources and reflected such information in ProNetLink's 's stock price. Under these circumstances, all purchasers ofFTONetLiiik common stock during the Class Period suffered similar injury through their purchase of stock at artificially inflated prices and a presumption of reliance applies.
NO SAFE HARBOR
198. 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 specific statements pleaded herein were not identified as "forward-looking statements" when made.
Nor was it stated with respect to any of the statements forming the basis of this complaint that actual results "could differ materially from those projected." To the extent there were any forward-looking statements, there were no meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the purportedly forward-looking statements.
Alternatively, to the extent that the statutory safe harbor does apply to any forward-looking statements pleaded herein, defendants are liable for those false forward-looking statements because at the time each of those forward-looking was made the particular speaker knew that the particular forward-looking statement was false, and/or the forward-looking statement was authorized and/or approved by an executive officer of ProNetLink who knew that those statements were false when made. The statutory safe harbor does not apply to the statements at issue in this action because .. .
ProNetLink issued penny stock and is thus exempt from safe harbor protection under . Section 21E
of the Exchange Act.
SCIENTER ALLEGATIONS
199. As alleged herein, defendants acted with scienter in that defendants knew that the
public documents and statements, issued or disseminated by or in the name of the Company were
materially false and misleading; knew or recklessly disregarded 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 violators 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 ProNetLink and its
business practices, their control over and/or receipt of ProNetLink' s allegedly materially misleading
misstatements and/or their associations with the Company whwhich- h made them privy to confidential
proprietary information concerning ProNetLink were active and culpable participants in the
fraudulent scheme alleged herein. The Individual Defendants knew and/or recklessly disregarded
the falsity and misleading nature of the information which they caused to be disseminated to the
investing public. This case does not involve allegations of false forward-looking statements or
projections but instead involves false statements concerning the Company's business, finances and
operations. The ongoing fraudulent scheme described in this complaint could not have been
perpetrated over a substantial period of time, as has occurred, without the knowledge and complicity
of the personnel at the highest level of the Company, including the Individual Defendants.
200. The Individual Defendants engaged in such a scheme to inflate the Price of
ProNeffink common stock in order to: (i) protect and enhance their executive positions and the
-83- ..
substantial compensation and prestige they obtained thereby; , and (ii) enhance the value of their
personal holdings of ProNctLink common stock and options.
201. Pierre Collardcau sold his ProNetLink stock through secret nominees, as alleged
above, and in the Collardeau Indictment, annexed hereto and incorporated herein.
202. Pierre Collardeau sold his stock at a suspicious time and in a suspicious amount.
Collardeau sold 1,162,920 shares for S4,568,760.
203. Defendant Zagoren was motivated to commit the fraud alleged herein because he
sought to obtain -- and did obtain -- the Company's valuable PNL-TV assets for virtually nothing.
Tn addition, by virtue of his Executive Position in a small company with few employees, Zagoren
either knew of the fraudulent stock scheme alleged herein whereby Pro Net Link stock was sold
secretly in nominee accounts, or was reckless in not knowing it. According to Zagoren's own
statements at the December 4, 2000 Annual Shareholder's Meeting at the Grand Hyatt in New York
city, Pro Net Link had only himself and Collarcleau as the original employees of the Company for
the first year (1997-1998) and then added David Walker (the COO). At its height, according to
Zaooren, Pro Net Link had only approximately one dozen employees. Given the small number of
employees, there is a strong inference that Zagoren knew or recklessly disregarded the stock fraud
scheme alleged herein.
204. Defendant Feldman Sherb knew of or recklessly disregarded numerous red flags
described above in conducting its audit of the Company's year-end 2000 financial statements,
including the large stock transfers charged in the Collardeau Indictment.
-84- 205. Defendant Zagoren told an investor at the annual meeting on December 4, 2000 that
the Company had 8,000 paid subscribers when in fact, as he well knew, the Company had fewer than
20.
206. Defendant Zagoren intentionally evaded an investor's question at the December 4,
2000 shareholder meeting on whether the Company could fund operations through September 30,
2001.
FIRST CLAIM
Violations Of Section 10(b) Of The Exchange Act And Rule 10b-5 Promulgated Thereunder Against • All Defendants
207. Plaintiffs repeat and reallege each and every allegation contained above.
208. Each of the defendants: (a) knew or recklessly disregarded material adverse non-
: public information about nominal defendant ProNetLink's financial results and then existing
business conditions, which was not disclosed; and (b) participated in drafting, reviewing andlor
approving the misleading statements, releases, reports and other public representations of and about
ProNetLink.
209. During the Class Period, defendants, with knowledge of or reckless disregard for the
truth, disseminated or approved the false statements specified above, which were misleading in that
they contained misrepresentations and failed to disclose material facts necessary in order to make
the statements made, in light of the circumstances under which they were made, not misleading,
210. Defendants have violated § 10(b) of the Exchange Act and Rule 1 Ob-5 promulgated
thereunder in that they: (a) employed devices, schemes and artifices to defraud; (b) made untrue
S tatements of material facts or omitted to state material facts necessary in order to make statements
-85- made, in light of the circumstances under which they were made, not misleading; or (c) engaged in acts, practices and a course of business that operated as a fraud or deceit upon the purchasers of
ProNetLink stock during the Class Period.
211. Plaintiffs and the Class have suffered damage in that, in reliance on the integrity of the market, they paid artificially inflated prices for ProNetLink stock. Plaintiffs and the Class would not have purchased ProNetLink stock at the prices they paid, or at all, if they had been aware that the market prices had been artificially and falsely inflated by defendants' false and misleading statements.
SECOND CLAIM
Violation of Section 20(a) of The Exchange Act Against Individual Defendants Zagoren and Collardeau
212. Plaintiffs repeat and reallege each and every allegation contained above.
213. The Individual Defendants (Zagoren, Collardeau and Vincent) acted as controlling persons of nominal defendant ProNetLink within the meaning of Section 20(a) of the Exchange Act.
By reason of their senior executive and/or Board positions they had the power and authority to cause nominal defendant ProNetLink to engage in the wrongful conduct complained of herein.
214. By reason of such wrongful conduct, the Individual Defendants, Zagoren and
Collardeau, are liable pursuant to §20(a) of the Exchan ge Act. As a direct and proximate result of these defendants' wrongful conduct, plaintiffs and the other members of the Class suffered damages in connection with their purchases of ProNetLink stock during the Class Period.
-86- THIRD CLAINI
Violation of Section 20A of the Exchange Act Against Defendant Jean Pierre Collardeau: Liability for Contemporaneous Trading
215. Plaintiffs repeat and realle2e each and every allegation set forth above as if fully set forth herein.
216. Defendant Collarcleau sold 1,162,920 shares of his ProNetLink stock for proceeds of
4,568,760 on April 17, 2000, according to SEC-filed records.
217. According to the Company's publicly-filcd documents, defendant Collarcleau obtained these shares in exchange for Collardeau's forgiveness of a S232,584 loan to the Company.
218. When defendant Collardeau made these sales he was in possession of the adverse material non-public information set forth above about ProNetLink's true financial condition and prospects.
219. Lead plaintiff Scot Campbell purchased 5,000 shares of ProNetLink common stock at $2.00 per share on April 17, 2000.
220. Lead plaintiff Craig Zycha I purchased 2,650 shares of ProNetLink common stock at
51.875 per share on April 17, 2000.
221. Defendant Collardean's shares were sold contemporaneously with the purchases of
ProNetLink common stock by lead plaintiffs Campbell and Zy-clial.
222. Defendant Collardeau is liable to lead plaintiffs and the class for the profits he received from his sales transactions under Section 20A(b)(1) of the Exchange Act, to wit, $4,336,
172.
WHEREFORE, plaintiffs pray for relief and judgment, as follows:
-87-
- , . , , k
( JURY TRIAL DEMANDED
Plaintiffs hereby demand a trial by jury.
DATED: January 5, 2006
GAINEY & McICENNA By: v - d Thomas J. Kenna (TJM 7109) 295 Madison Avenue, 4th Floor New York, New York 10017 Tel: (212) 983-1300 Fax: (212) 983-0383
-and-
VIANALE & VIANALE LLP Kenneth J. Vianale (KY 4607) Julie Prag Vianale (JP 4718) (Members of the Bar of this Court) 2499 Glades Road, Suite 112 Boca Raton, FL 33431 Tel: (561) 392-4750 Fax: (561) 392-4775
Lead Counsel for Lead Plaintiffs and the Class
-89-
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UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY
UNITED STATES OF AMERICA Crim. No. 03-800
v. • Hon.
JEAN PIERRE COLLARDEAU, 18 U.S.C. .§ ,S 371, 982, 1956(h) FODE 0102, • and 2; 15 U.S.C. 78j(b) & IRVING FREIBERG, 78ff(a); and 17 C.F.R. IRVING STITSKY, • 240.10b-5 JEAN DANIEL MONBARON, NICOLE PEIGNIER, - MARTINE MEILLOT, ERIC NIGER and MURIEL PROCHASSON
INDICTMENT
The Grand Jury in and for the District of New Jersey, sitting in Newark, charges:
COUNT I
(Conspiracy to Commit SecurLties Fraud, Mail Fraud, and Wire Fraud)
The Defendants
1. At all times relevant to this Indictment, unless otherwise indicated:
a. Defendant JEAN PIERRE COLLARDEAU was a citizen of
France residing in New York, New York. He was the founder of Pro
Net Link Corporation ("ProNetLink" or and from in or about July 1997 to at least May 1999 was its President, Chief
Executive Officer, and Director. ,
b. Defendant FODE DIOR was a citizen of Senegal
residing in Rego Park, New York. c. Defendant IRVING YREIBERG was a citizen of the United States residing in Muttontown, New York and Boca Raton, Florida. d. Defendant rRVING STITSKY was a citizen of the United States residing in Brookville, New York. e. Defendant JEAN DANIEL MONBARON was a citizen of Switzerland residing in Prangins, Switzerland f. Defendant NICOLE PEIGNIER was COLLARDEAD's sister- in-law and a citizen of France residing in Gennevilliers, France. g. Defendant MARINE MEILLOT was a citizen of France residing in St. Martin, French West Indies. h. Defendant ERIC NIGER was a citizen of France residing in St. Martin, French West Indies. i. Defendant MURIEL PROCRASSON was a citizen of France residing in St. Martin, French West Indies. Co-conspirators 2. At all timcs relevant to this Indic,i-ment: a. Marc Armand Rcusso, a/k/a "Marc Armand" and "Mark Benson," who is named as a co-conspirator but not as a defenUant herein, was a naturalized citizen of the United States residing in New York, New York.
-2- . b. Philippe Hababou-, a/k/a 'Haim Solomon" and "Malko,' Who is named as a co-conspirator but not as a defendant herein, was a citizen of France and Israel residing in New York, New York.
c. Charles !Lsenbaum.,. who is named as a co-conspiratcr but not as a defendant herein, was a citizen of France residing in Miami, Florida; New York, New York; and Hollywood, Florida. d. M.B., who is named as a co-conspirator but not as a
defendant herein, was COLLARDEAU's longtime friend and a citizen of Belgium residing in St. Martin, French West Indies.
The Relevant Entities
3. At all times relevant to this Indictment: a. Pro Net Link Corporation was a publicly-traded Nevada corporation with principal offices located in New York, New York which purportedly provided import/export services via the Internet. Although initially organized in or about July 1997 as a private Delaware company, in or about Se p tember 1997 ProNetLink became a public company through a reverse merger with Prevention Productions, a public shell company. b. Sutton Capital Corp. ("Sutton") was a business entity based in Great Neck, New York, and Boca Raton, Florida,
that was controlled by defendant /RVING FREIBERG. Sutton in turn controlled Stockgenie.com Inc. ("Stockgenie"), a New York corporation, which promoted stocks on an Internet web site,
-3- Stockgcnie.com .
c. Pacific Internationa= Securities, Inc. ("Pacific
International") was a Canadian brokerage firm located in
Vancouver, British Columbia, at which the defendants maintained trading accounts in the names of co-conspirators and nominees.
d. Desjardins Securities ("Desjardins") was a Canadian brokerage firm located in Montreal, Quebec, at which the defendants maintained trading accounts in the name of co- conspirators and nominees.
e. Financiere Banque Nationale ("FBN") was a Canadian brokerage firm located in Montreal, Quebec, at which the defendants maintained trading accounts in the name of co- conspirators and nominees.
f. William V. Frankel 5 Company, Inc. ("Frankel &
Company") was a brokerage firm located in Jersey City, New
Jersey, which acted as a market maker of PNLK stock.
g. Hill, Thompson, Magid & Company, Inc. ("Hill
Thompson") was a brokerage firm located in Jersey City, New
Jersey, which acted as a market maker of PNLK stock.
h. PaineWebber was a brokerage firm with headquarters located in Weehawken, New Jersey.
i. Millennium Securities ("Millennium") was a brokerage firm located in New York, New York.
-4--- The SEC and the Securities Laws
4. At all times relevant to this Indictment:
a. The Securities and Exchange Commission (the "SEC")
was an independent agency of the United States which was charged
by law with the duty of protecting investors bv regulating and
monitoring the trading of sec u rities within the United States and
enforcing the federal securities laws. Among the national
securities markets regulated by the SEC was the over-the-counter
market, commonly known as the "OTC Bulletin Board."
b. A "market maker" was a brokerage firm registered with the SEC that bought and sold a particular security on a
continuous basis. To "make a :market" in a particular stock, a market maker would quote a bid price at which the market maker would purchase the stock and an ask price at which the market maker would sell the stock.
o. Under the federal securities laws, public companies and their officers and principal shareholders were required to file disclosure documents with the SEC to provide prospective investors and the investing public with information which investors would generall y consider material to their investment decision, including information concerning, among other things, the nature of the securities being offered and the backgrounds of various persons involved with the promotion of the securities offering.
-5- d. Pursuant to Section 13 and 15(d) of the Securities Exchange Act of 1934, a public company was required to file annual and quarterly statements with the SEC. Pursuant to 17 C.F.R. § 230.501 et seq., upon the first sale of unregistered securities a public company was required to tile a Form D, which was a brief notice identifying the background of various persons who promoted the securities and who held a beneficial ownership interest in the company. e. Pursuant to Rule 144 of the Securities and Exchange Act of 1934, codified at 17 C.F.R. 230.144, among the disclosure documents required to be filed by individual shareholders was the Form 144 related to the sale of restricted shares of stock. Restricted securities were securities acquired in unregistered, private sales from the issuer or from an affiliate of the issuer through a private placement offering or a Regulation D offering. Among other things, Rule 144 required a seller of restricted shares who had held those shares for less than two years to file a Form 144 before the restricted snares could be sold to the public.
The Ciongpiracy 5. From at least in or about July 1997 to in or about May 2001, in Jersey City in the District New Jersey, and elsewhere, defendants
JEAN PIERRE COLLARDEAU, FODE DIOP,
-6-- IRVING FREIBERG, IRVING STITSKY, JEAN • DANIEL MONBARON; NICOLE PEIGNIER, MARTINE MEILLOT, ERIC NIGER, and MURIEL PROCHASSON
did knowingly and willfully conspire and agree with Marc Armand
• Rousso, Philippe Hababou, Charles Nisenbaum, M.B., and others,
known and unknown, to commit offenses against the United States,
that is:
a. by use of the means and instrumentalities of
interstate commerce, the mails, and the facilities of
national securities exchanges, directly and indirectly,
kncwincly and willfully to use and employ manipulative
and deceptive devices and contrivances in contravention
of Title 17, Code of Federal Regulations, Section
240.1M-5 ("Rule 10b-5") in connection with the
purchase and sale of PNLK stock, by (i) employing de-
vices, schemes, and artifices to defraud holders of
PNLH stock and other members of the investing public;
(ii) making untrue statements of material facts and
omitting to state material facts necessar y in order to
make the statements made, in the light of the
circumstances under which they were made, not mis-
leading; and (iii) engaging in acts, practices, and
courses of business which operated and would operate as
-7- a fraud and decet on holders of PNLK stock and other
members of the investing p ublic, contrar y to Title 15,
United States Code, Sections 78j(b) and 78ff(a) and
Rule 10b-5;
b. to devise a scheme and artifice to defraud holders
of PNLK securities and other members of the investing
public, and for obtaining money and property by means
of material false and fraudulent pretenses, represen-
tations, and promises, and for the purpose of executing
such scheme and artifice, to place and cause to be
placed in post offices and authorized depositories for
mail matter, and to take and receive therefrom, and to
knowingLy cause to be delivered by mail according to
the directions thereon, and at the places at which they
were directed to be delivered by the persons to whom
they were addressed, mail matter and things to be sent
and delivered by the United States Postal Service,
contrary to Title 18, UniLed States Code, Section 1341;
and
c. to devise a scheme and artifice to defraud holders
of PNL.K. securities and other members of the investing public; and to obtain money and property by means of materially false and fraudulent pretenses, represen- tations and promises, and to use interstate wire
-8- communications for the lourpose . of executing such scheme
and artifice, contrary to Title 18, United States Code,
Section 1343.
Objects of the Conspiracy
6. It was an object of the conspiracy to create ProNetLink
• as a company and cause it to issue millions of
shares of stock in the names of nominees ot defendant COLLARDEAU
and his co-conspirator Marc Armand Rousso while concealing their
beneficial ownership of the stock from the SEC and the investing
public.
7. It was a further object of the conspiracy to disseminate
false and misleading statements, and make omiSsions of material
facts, about ProNetLink to the investing public in order to
fraudulently increase the stock price and trading volume of PNLF
stock.
8. It was a further object of the conspiracy to sell
millions of shares of PNLF stock to the investing public through
nominee accounts controlled by defendant COLLARDEAU and his co-
conspirator Rousso, thereby obtaining illegal profits to be
shared among the conspiratorsira tor sand used to promote the ongoing fraud.
The Means and Methods of the Conspiracy
9. Among the means and methods employed by the defendants and their co-conspirators to carry out the conspiracy and effect
-9- its unlawful objects were those set fOrth in Paragraphs 10
through 36 below.
Obtaining Control of ProNetLink and its Stock
10. In or about July 1997, defendant JEAN PIERRE COLLARDEAU
caused ProNetLink Corporation to be formed as a private company.
11. In or about 1997, Marc Armand Rousso obtained control
of Prevention Productions, a public shell compan y with
essentially no business operations. At or about the same time,
Rousso caused defendant FODE DIOR to be installed as the nominal
President and sole director of Prevention Productions.
12. In or about September 1997, in order to avoid the
disclosure requirements of an initial public offering, defendant
COLLARDEAU, his co-conspirator Rousso and others caused
ProNetLink to enter into a reverse merger with Prevention
Productions. As a result, ProNetLink emerged as a public company
of which defendant COLLARDEAU was the President and Chief
Executive Officer, and whose free-trading shares were listed and
traded on the OTC Bulletin Board under the stock symbol "PNLK."
13. On various occasions thereafter, defendant COLLARDEAU and his co-conspirator Marc Armand Rousso caused ProNetLink to
issue over 20 million shares of free-trading and restricted PNLK stock in the names of co-conSpirators and nominees, including defendants FODE D/OP, NICOLE PEIGNER, MARTINE MEILLOT, ERIC NIGER and MURIEL PROCHASSON, without disclosing to the SEC or the
- 10 - investing public that the stock held in these names was, in tact,
owned and controlled by defendant COLLARDEAU and Rousso.
14. Defendant COLLARDEAU and his co-conspirator Rousso also
caused some of this PNLK stock to be issued in the name of
nominal offshore entities controlled by the conspirators,
including Able Investments, Ltd. and Project Finance, Ltd., two
Swiss companies controlled by COLLARDEAU through defendant JEAN
DANIEL MONSARON, and Ildico, Ltd., a Bahamian company controlled
by Rousso. The conspirators also caused ProNetLink to issue-
large bocks of stock in the name of "Robert Sambou," a fictitious
identity:
15. In order to retain control over PNLK stock issued in
nominee names, defendant COLLARDEAU, Rousso and other
conspirators caused such stock to be deposited into nominee
accounts at brokerage firms which the y selected.
16. Initially the . conspirators caused most of the free-
trading. shares of PNLK stock issued in nominee names to be
deposited into accounts at Pacific International in Vancouver,
British Columbia, where conspirator Marc Armand Rousso had
previously established nominee accounts in the names of defendant
.FODE DIOP, co-conspirator Philippe Hababou, and Ildico, Ltd.
From in or about November 1997 to in or about Ma y 1998, the
conspirators caused new nominee accounts to be opened at Pacific
International in the names of defendant NICOLE PEIGNIER, co-
conspirators Charles Nisenbaum and M.B., and the fictitious
Robert Sambou.
11 - 17. The conspirators seleczed Pacific Inzornational in part
because they believed that Canadian brokerage firms would
scrutinize transactions by non-U.S. citizens _Less closely than
would Uniized States brokerage firms. In addition, the defendants
believed that by conducting transactions in Canada they would
make the discovery and investigation of their fraudulent scheme
more difficult for - U.S. law enforcement authorities.
18. From in or about November 1997 to in or about
September 1998, the conspirators caused more than nine million
shares of free-trading and restricted PNLK stock issued in •
nominee names to be transferred to and deposited in nominee
accounts at Pacific International.
19. From in or about 1998 to in or about 1999, defendant
COLLARDEAU and his co-conspirators also caused nominee trading
accounts to be opened in the names of defendants NICOLE PEIGNIER
and MURIEL PROCHASSON and co-conspirators Philippe Hababou and
M.B. at various brokerage firms in the U.S., including
PaineWebber, Millennium, and Hill Thompson. From in or abouL
1998 to in or about 1999, defendant COLLARDEAU and his co- conspirators caused more than three million shares of PNLK stock issued in nominee names to he transferred zo and deposited in these nominee accounts.
20. In or about January 1999, conspirator Marc Armand Rousso was arrested by law enforcement authorities for reasons unrelated to the facts of this Indictment. Thereafter, defendant
COLLARDEAU and other remaining conspirators continued to cause
- 12 - millions of shares of free-trading and restricted PNLK stock to be issued in nominee names and deposited in nominee trading accounts n the U.S. and Canada. 21. Among other things, from in or about early 1999 to in
or about 2000, defendant COLLARDEAU and his cc-conspirators caused new nominee trading accounts to be opened in the names of
defendants NICOLE PEIGNIER, MARTINE MEILLOT, ERIC NIGER and
MURIEL PROCHASSON and co-conspirator M.B. at Desjardins and/or FEN, two Canadian brokerage firms in Montreal. Thereafter,
defendant COLLARDEAU and his co-conspirators caused large blocks of PNLK stock issued in nominee names to be transferred to and deposited in these nominee accounts.
The Fraudulent Promotion: Stockgenie.com and Misleading Press Releases
22. In or about March 1998, defendants IRVING FREIBERG and
IRVING STITSKY agreed with defendant COLLARDEAU, Marc Armand Rousso, and Charles Nisenhaum to tout ProNetLink to the investing public on the Stockgenie.com web site, using profiles and press releases created by COLLARDEAU and FRIESERG, in order to spark interest and greater demand for PNLK stock. FREIBERG and STITSKY knew that COLLARDEAU and Marc Armand Rousso secretly controlled almost all the free-trading ProNetLink shares in nominee accounts at Pacific International.
23. For their efforts, FREIBERG and STITSKY were to receive a percentage of the illegal profits received from the sale of
- 13 - PNLK stock held in nominee accounts at Pacific International. In
order to allow FREIBERG and STITSKY to monitor the illegal
profits dne to them under this arrangement, defendant COLLARDEAU
and his co-conspirator Rousso allowed FREIBERG and STITSKY to
obtain daily lists of PNLK stock sold through nominee accounts at
Pacific International.
24. In order to conceal their corrupt arrangement,
defendants COLLARDEAU and FREIBERG signed a sham agreement that
stated, in substance and in part, that FRE/BERG's company Sutton
would receive a total of $50,000 in compensation for its efforts
to promote ProNetLink over the Stockgenie website.
25. From in or about March 1998 to in or about June 1998,
the cons p irators caused the dissemination to the investing
public, through the Stockgenie website and other means, PNLK
company profiles, updates, and press releases regarding
ProNetLink which were false and misleading and which contained
omissions of material facts. Among other things, the
disseminated information failed to disclose that COLLARDEAU and
Rousso were the beneficial owners of large blocks of the free-
trading shares of 2roNetLink; the fraudulent purpose of the
agreement between ProNetLink and Siitton/Stockgenie to "pump" the price and volume of PNIK stock; and the actual com p ensation which
FREIBERG and STITSKY were -CO receive in connection with their promotion of PNLK stock.
- 14 - 26. On various occasions_ from in or about . March 1998 to in or about May 1998, detondan7s FREIBERG and STITSKY received profits from the sale of PNLK stock held in nominee accounts, which payments totaled approximately $5.8 million.
The Fraudulent Sales and Purchases of PNLK Stock
27. On various occasions from in or about October 1997 to fin= about 2001, the defendants and their co-conspirators caused millions of shares of PNLK stock held in nominee trading accounts to be sold to the investing public through market makers located in Jersey City, New Jersey and elsewhere.
28. In order to carry out these sales, defendant COLLARDEAU and his co-conspirators caused sell orders to be placed from the nominee trading accounts and conveyed by telephone to PNLK market makers, including Frankel & Company and Hill Thompson. In connection with the execution of these sales, the market makers wire-transferred millions of dollars in illegal profits hack to the nominee trading accounts.
29. For example, the de-fondants and their co-conspirators caused the following sales of PNLK stock from nominee trading accounts located in the United States and Canada:
Date Number of Nominee Trading ApproximaLe Shares Account Illegal Sold Profits 11/6/97 7,500 Robert Sambou $33,000 Pacific International
- 15 -
Date Number of -Nominee Trading Approximate Shares Account Illegal • Said Profits 4/28/98 1,007,000 Robert Sam•ou $1,745,000 Pacific International 4/27/98 996,000 M.B. $1,097,000 Pacific International 5/1/98 463,000 Tldico, Ltd. $1,573,000 Pacific International 5/4/98 430,000 Ildico, Ltd. $2,023,000 Pacific International 5/4/98 25,000 Philippe Hababou $71,000 • Hill Thompson 5/13/98 415,000 NICOLE PE/GNIER $1,605,000 Pacific International 5/22/98 20,000 Philippe Habab•u $90,000 Pacific International 5/22/98 120,000 Charles Nisenbaum 8508,000 Pacific International
8/24/98 290,000 FODE DIOP $560,000 , Pacific international 2/5/99 213,000 M.B. $308,000 Millennium 3/19/99 30,000 Haim Eababou $49,000 (Philippe Hahabou) Hill Thompson
10/25/99 61,000 MURIEL PROCHASSON $159,000 • PaineWebber
Once theseillegalil eprofits ahad been deposited.into the 30. trading conspirators distributed the funds amongst themselves for their personal gain. In addition, some of these illegal funds were used to promote the conspirators' ongoing fraudulent scheme by,
- 16 - , .
among other things, financing the operations of ProNetLink; paying co-conspirators in order to ensure their continued participation in the scheme; and purchasing shares of PNLK stock. At times, the conspirators used some of these illegal funds to purchase shares of PNIZ stock on the OTC Bulletin Board, in an attempt to give the false appearance that the stock was actively traded and thereby create greater demand. 31. By the above means, the defendants and their co- conspirators received and shared in excess of $33 million in illegal profits from the sale of PNLK. stock. Concealment of the Fraudulent Scheme Through False Statements to the SEC 32. In order Lo conceal their fraudulent scheme from the SEC and the investing public, and to conceal the transfer of securities from one conspirator to another, the defendants and their co-conspirators filed or caused the filing of various false reports with the SEC. 33. For example, from on or about October 28, 1997 to on or about October 28, 1998, defendant JEAN PIERRE COLLARDEAU caused ProNetLink to file, by U.S. mail or commercial carrier, at least three false Form D reports with the SEC. Each Form D was false because, among other things, it failcd to identify the true beneficial owner of restricted PNLK stock, namely defendant COLLARDEAU or his co-conspirator Marc Armand Rousso. 34. In addition, on various occasions from in or about May - 17 - 1998 to in or about March 2001, defendant COLLARDEAU and his cc- conspirators caused the filing of numerous false 144 Fa= with the SEC related to the sale of restricted shares of PNLK stock. Each such Form 144, which was submitted by U.S. mail or commercial carrier, was false because, among other things, it failed to identify the true beneficial owner of the restricted
shares, namely COLLARDEAU or Rousso. False 144 Forms were
completed in the name of, among others: defendants FODE DIOP,
NICOLE PEIGNIER, and MURIEL PROCHASSON, and co-conspirators Charles Nisenbaum and M.B. 35. On various occasions from on or about September 30, 1999 to or or about March 31, 2001, in order to conceal the fraudulent scheme from the investing public and the SEC,
defendant COLLARDEAU signed and caused ProNetLink to file false 10K and 10Q periodic filings with tho SEC. Each of these filings was false because, among other things, it failed to disclose that
COLLARDEAU was the true beneficial ownor of millions of shares of PNLK stock held in the names of others. 36. In or about June 1998, the SEC commenced an investi- gation into the alleged manipulation of PNLK stock and issued subpoenas to defendants COLLARDEAU, FREIBERG, STITSKY, and co- conspirator Charles Nisenbaum. During the period of from in or about July 1998 to in or about October 1998, COLLARDEAU,
FREIBERG, and Rousso met and agreed to provide false testimony to
- 18 - the SEC in order to cDnceal their fraudulent scheme. Thereafter, the following conspirators testified falsely, under oath, at proceedings before the SEC on or about the dates indicated:
defendant JEAN PIERRE COLLARDEAU, JuLy 1998; co-conspirat:or Charles Nisenbaum, September 3, 1993 and November 5, 1998; defendant IRV/NG FREIBERG, October 15, 1998; and defendant /RVING
STITSKY, December 1, 1998.
- 19 - Overt Acts
37. In furtherance of the corspiracy and to effect its unlawful objects, the defendants and their co-conspirators,
committed the following overt acts, •mona others, in the District of New Jersey and elsewhere
a. On or about September 18, 1997, defendants JEAN
PIERRE COLLARDEAU, FODE DIOP and their coconspirator Marc Armand
Rousso caused the reverse merger between ProNetLink and
Prevention Productions to be completed, as a result of which
ProNetLink became a publicly-traded company.
b. On or about September 30, 1997, COLLARDEAU caused
2.5 million shares of restricted PNLK stock previously issued in his name to be reissued in the name of FODE DIOP, Rousso's nominee.
c. On or about October 17, 1997, COLLARDEAU instructed
Interstate Transfer Company to issue free-trading shares in the names of Philippe Hababcu (1,150,000 shares), Robert Sambou
(1,150,000 shares), and others, and to send the share cerLificates to COLLARDEAU.
d. On or about October 24, 1997, COLLARDEAU and Rousso caused 1,150,000 free-trading shares of PNLK stock issued in the name of Robert Sambou to be delivered to Pacific International.
e. On or about January 13, 1998, COLLARDEAU caused
1,500,000 free-trading shares of PNLK stock issued in the name of
- 20 - “
M.B. to be delivered to Pacific International.
f. On or about March 16, 1998, defendants COLLARDEAU
and IRVING IBERG signed a consulting agreement on behalf of
ProNetLink and Stockgenie.com , respectively.
g. On or about March 21, 1998, defendants COLLARDEAU,
FREIBERG, and IRVING STITSKY caused the Stockgenie.com web site to post ProNetLink as its stock pick of the month.
h. On or about April 24, 1998, COLLARDEAU and Rousso caused 1,500,003 free-trading shares of PNLK stock issued in the name of Ildico, Ltd. to be delivered to Pacific International.
i. On or about May 1, 1998, defendant NICOLE PEIGNIER opened a trading account in her name at Pacific International.
j. On or about June 9, 1998, PEIGNIER opened a trading account in her name at Millennium.
k. On or about August 25, 1998, COLLARDEAU caused
PEIGNIER to file a 144 Form with the SEC, giving notice of a proposed sale of 500,000 shares of restricted PNLK stock.
1. On or about February 15, 1999, COLLARDEAU caused
restricted shares of PNLK stock to be issued in the names of
defendants ERIC NIGER (1,500,000 shares;, MART/NE MEILLOT (1,500,000 shares) and co-conspirator Charles Nisenhaum (.500,000 shares).
- 21 m. On or about March 31, 1999, COLLARDEAU caused 1,500,000 shares of PNLK stock to be issued in the name of Wallflower Investments, a Panamanian comoany controlled by
COLLARDEAU through defendant JEAN DANIEL MONBARON.
n. On or about September 15, 1999, COLLARDEAU caused defendant MURIEL PROCHASSON to deposit 500,000 shares of PNLK stock into her trading account at PaineWebber.
o. On or about March 16, 2000, COLLARDEAU sent instructions to American Stock Transfer to reissue 1,500,000 shares of PNLK stock previously issued in the name of ERIC NIGER to be reissued in the name of MURIEL PROCHASSON.
p. On or about August 9, 2000, PROCHASSON arrived at the Montreal airport carrying stock certificates for 700,000 shares of restricted PNLK stock for delivery to Charles Nisenbaum.
• q. On or about May 1, 2001, COLLARDEAU sent instructions to American Stock Transfer to cancel 1,500,00C shares of stock previously issued in the name ot a MONBARON company and reissue those shares in the name of ERIC NIGER.
Al]. in violation of Title 18, United States Code, Section 371,
- 22 - COUNT 2
(Securities Fraud)
1. The allegations set forth in Paragraphs 1 through 4 and
6 through 37 of Count 1 of this Indictment are hereby realleged
and incorporated as though set forth in full herein.
2. From at least in or about July 1997 to in or about May
2901, in the District of New Jersey and elsewhere, defendants
JEAN PIERRE COLLARDEAU, FODE DIOP, IRVING FRE/BERG, IRVING STITSKY, JEAN DANIEL MONBARON, NICOLE PEIGNIER, MARTINE MEILLOT, ERIC NIGER, and MURIEL PROCHAS SON
did knowingly and willfully, by the use of means and instrumen-
talities of interstate commerce, the mails, and the facilities of
national securities exchanges, directly and indirectly (a) employ
devices, schemes, and artifices to defraud members of the
investing public and other persons and entities, (b) make untrue
statements of material facts to members of the investing public,
the SEC, and other persons and entities and omit 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 (c) engage in acts, practices, and courses of business which operated and would operate as a fraud and deceit on members of the investing public and other persons and
- 23 - entities, all as set forth in substance in Paragraphs 1 through 4 and 6 through 37 of Count 1 of this Indictment, in connection with the offer, purchase, and sale of securiLies, Lhat Ls, the sale by the defendants and their co-conspirators of the stock of ProNetLink to the investing public. In viniation of Title 15, United States Code, Sections 78j (b) and 78ff; Title 18, United States Code, Section 2; and Title 17, Code of Federal Regulations, Section 2.40.10b-5.
- 24 - COUNT 3
(Conspiracy to Commit Money Laundering) 1. The allegations set forth in Paragraphs 1 through 4 and 5 through 37 of Count 1 of this Indictment are hereby realleged and incorporated as though set forth in full herein. herein. 2. From in or about November 1997 to in or about December 1999, in the District of New Jersey and elsewhere, defendants
JEAN PIERRE COLLARDEAU, FODE DIOP, IRVING FREIBERG, IRVING STITSKY, JEAN DANIEL MONBARON, NICOLE PEIGNIER, MART INE MEILLOT, ERIC NIGER, and MURIEL PROCHASSON did knowingly and willfully cons'aire and agree with each ocher and with others, known and known, to:
a. transport, transmit, and transfer monetary instruments and funds totaling more than $33 million, from a place in the United States to and through a place outside the United States, with the intent to promote the carrying on of specified unlawful activity, that is, fraud in the sale of securities (Title 15, United States Code, Sections 78j (b) and 78ff(a) and Title 17, Code of Federal Regulations, Section 240.10b- . 5), and wire fraud (Title 18, United States Code,
- 25 - Section 1343) contrary to Title 18, United States Code, Section 1956(a)(2) (A); and b. engage in monetary transactions in criminally de:fived property that were each of a value greater than $10,000, and totaled in excess of $1.3 million, specifically transfers in or affecting interstate and foreign commerce of funds and monetary instruments by, through, and to a financial institution, and that were derived from specified unlawful activity, that is, fraud in the sale of securities (Title 15, United States Code, Sections 78j(b) and 78ff(a) and Title :7, Code of Federal Regulations, Section 240.10b-5), and wire fraud (Title 18, United States Code, Section 1343), contrar y to Title 18, United States Code, Section 1957. Means and Methods Of The Conspiracy 3. Among the means and methods employed by the defendants and their co-conspirators to carry out the constiracy and effect its unlawful objects were those set forth in Paragraphs 4 through 10 below. Promotion of Specified Unlawful Activity 4. From in or about 1997 to at least in or about 2000, at least $1.2 million in illeual funds derived from the sale of PNLK stock and transferred from the United States to Canada were used
- 25 -
, . ,
. ,. to finance the operations of ProNetLink. 5. From in or about March 1998 to in or about May 1998, approximately $5.8 million in illegal funds derived from the sale of PNLK stock and transferred from the United States to Canada
was used to make payments to defendants IRVING FREIBERG and
IRV/NG STITSKY in order to ensure their continued involvement in the scheme, namely their dissemination through the Stockgenie website of false and misleading information regarding ProNetLink.
6. On various occasions, defendant COLLARDEAU caused PNLK stock to be issued to nominees in staggered intervals, in order to ensure that his co-conspirators would not sell that stock for
their exclusive benefit contrary to his instructions. Only after illegal funds derived from the sale of PNLK stock had been
accounted for to defendant COLLARDEAU's satisfaction did he cause ProNetLink to issue the next block of PNLK stock in nominee names. 7. On various occasions, illegal funds derived from the sale of PNLK stock and transferred from the United States to Canada were used by the defendants and their co-conspirators to purchase shares of PNLK stock on the OTC Bulletin Board, n an attempt to give the false appearance that the stock was actively . traded and thereby create greater demand. 8. On various occasions, illegal funds derived from the sale of ?NLY stock and transferred from the United States to
- 27 - Canada lwereo usedLto payufor shares of PNLK stock acquired
Monetary Transactions in Property Derived from Specified Unlawful Activity 9. On various occasions from on or about September 24, 1999 to on or about December 28, 1999, the defendants caused shares of PN1K stock to he deposited in and sold from the MURIEL PROCHASSON trading account at PaineWebber in furtherance of the fraudulent scheme. The illegal profits gained from the trades constituted criminally derived property and were deposited into the MURIEL
PROCHASSON account at PaineWebber.
10. Thereafter, the defendants caused PaineWebber to initiate the wiring of the criminally derived property to domestic and foreign financial institutions. Each of these transactions involved criminally derived property of a value greater than $10,003, and the transactions totaled in excess of $1.3 million. Each of these transactions transferred in or affecting interstate and foreign commerce, was by, through, and to a financial institution, and was derived from specified unlawful activity, that is, fraud in the sale of securities. All in violation of Title 18, United States Code, Section 1956(h).
- 28 - “
FORFEITURE ALLEGATIONS The allegations, set forth in Count 3 of this Indictment are hereby realleged and incorporated as though set f•rLh in full herein for the purpose of noticing forfeitures pursuant:. Title 18, United States Code, Section 982. As the result of committing the money laundering offense in violation of 18 U.S.C. § 1956(h), contrary to 18 U.S.C. §§ 1956(a)(2)(A) and 1957, alleged in Count 3 of this Indictmen', the defendants and their co-conspirators, and others known and unknown, shall forfeit to the United States pursuant Lo 18 U.S.C. § 982, all property, real and personal, involved in the money laundering offense and all property traceable to such property, Including buL not limited to the following: I. MONEY JUDGMENT At least $33 million in United States currency, •representing illegal: funds obtained as a result of the violation of 18 U.S.C. .5 1956(h), contrary to 18 U.S.C. 1956(a)(2)(A) and 1957, alleged in Count 3 of this Indictment, for which the defendants are jointly and severall y liable. 2. REAL PROPERTY All that lot or carcel of land, together with its buildings, appurtenances, imcrovements, fixtures, attachments and easements, located at:
- 29 - a. 18559 Long Lake Drive, Boca Raton, Florida, more particularly described as: Lot 25 of Long Lake Estates Plat No. 1, according to Plat thereof, as recorded in Plat Book 33 at Page 154 of the Public Records of Palm Beach, Florida; b. 117 Prince Street, Apartment 4C, New York, New York 10012, and all ownership interest in same; c. 175 East 2" Street, Unit 25, New York, New . York, more particularly described as: Tax Lot 1008, in Block 397 of Section 2 of the Borough of Manhattan on the Tax Map of Real Property Assessment Department of the City of New York; and d. 146 West 5 t Street, Unit 12F, New York, New York 10019, more particularly described as: Page 782 in Block 1009 Lot 1231 of Section 4 of the Borough of Manhattan on the Tax Map of Real Property Assessment De partment of the City of New York.
3. FINANCIAL INSTITUTION ACCOUNTS a. The contents, including but not limited to all United States currency, funds or other monetary instruments, and stock, credited to and contained in the following accounts:
Account Number Name of Account Financial institution Holder 4026000902 Abbey Freiberg Wachovia Bank, Agency . United States CO-645598.0 NICOLE PEIGNIER UBS, Switzerland
CO-645.598N1 NICOLE PEIGNIER Swiss Bank Corp., Switzerland
- 30 -
. .
,- Account Number Name of Account Financial Institution Holder 44827360Y Societe Financiere UBS, Swjtzerlar.d du Lac
2504546173 M.B. Antilles Banking Corp., Netherlands Antilles 2404201905 MURIEL PROCHASSON Antilles Banking Corp., Netherlands Antilles 7881546365 MARTINE MEILLOT Antilles Banking Corp., Netherlands Antilles 7881546332 ERIC NIGER Antilles Banking Corp., • Netherlands Antilles
b. Up to $344,000 in United States currency, funds or
other monetary instruments credited to and contained in account
655007324 in the name of Societe Mirali/Mirelis at Bank America
International in Switzerland.
c. Up to $615,000 in United States currenc y , funds or
other monetary instruments credited to and contained in account
819639 in the name of J.J. Feder at UBS in Switzerland.
d. Ur. to $28,000 in United States currency funds or
other monetary instruments credited to and contained in account
0835269002082 in the name of Eurogold at UBS in Switzerland.
If any of the above-described forfeitable property, as a
result of any act or omission of the defendants and their co-
conspirators:
(1) cannot be located upon the exercise of due diligence;
(2) has been transferred or sold to, or deposited with, a
third person;
- 31 - (3) has been placed beyond the jurisdic.:_ion of the Court; (4) has been substantially diminished in value; or (5) has been commingled with •other property which cannot be subdivided without difficulty; it is the intent of the United States, pursuant to 18 U.S.C. § 982(b), to seek forfeiture of any other propert y of said defendants up to the value of the above forfeitable property. in violation of Title 18, United States Code, Section 9:21.
A TRUE B=
FOREPERSON
CHRISTOPHER J. CHRISTIE UNITED STATES ATTORNEY
- 32 -
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Re PRONETLINK COM
44"46r,04) 41,- 444/ (!!Plaintif) declares: 1. Plaintiff has reviewed a complaint and authorized its filing.
2. Plaintiff did not purchase the security that is the subject of this action at
the direction of plaintiffs counsel or in order to participate in this private •iction or any other litigation under the federal securities laws. 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 has made no transaction(s) during the Class Period! (August 26,
1998 thni July 1, 2001) in the debt or equity securities that are the subject of this action
except those set forth below: (use a separate sheet if necessary)
Date Transaction # of Shares Price Type ‘5Eb-- 7--ry-/-/--.D 5. During the three years prior to the d,ate of this Certificate, Plaintiff has
sought to serve or served as a representative party for a class in the follo-vving actions filed under the federal securities laws: IV 0
DioldvArdAca.gukattm maul: 4.0440134.. 6, The Plaintiff wilt not accept any payment for serving as a reprpsentative party on behalf of the class beyond the Plaintiffs pro rata share of any recoiery, except such reasonable costs and Expenses (including lost wages) directly relating k the representation of the class as ordered or approved by the court
I declare under penalty of perkily that the foregoing is true and correct
Executed this ,r day of 4-721 , 2003, Signed: / _ .4 a-,4,,z/
•
VkAaa soio2aokiec
,
42,-d 4: 0.(.04e- . (-?-e,e, • , , , Certification of PNLK Shares Bmight and Sold between the dates of August, 28,1998 and July 1, 2001 !
DATE # BUY SHARES # SELL SHARES PRICE TOTAL 01-28-00 500 3 1/16 $ 4583.50 02-09-00 175 221/32 505.09 02-16-00 1000 3 3082.25 02-25-00 200 4 11/16 :982.94 03-03-00 250 5 14 1054.75 03-13-00 150 427/32 :768:41 03-15-00 300 4.84 1092,25 03-16-00 500 425132 4460.77 03-23-00 500 3 11/16 4896.00 04-04-00 1000 2 27/32 . 21893.75 04-05-00 50(1 3.37 11697.95 04-12-00 100 3.00 :312.95 04-12-00 1000 _ 211/16 2739.75 04-13-00 1000 2 9/16 2614.75 04-19-00 350 2 7/8 4,p58.50 05-15-00 1600 2 5/16 3772.25 05-25-00 500 1.81 ' '919.20 07-17-00 1000 2 1/8 Z183.00 07-17-00 352 1.81 638.00 07-31-00 4000 1 31/32 7'0975.00 07-31-00 5000 1 31/32 94943.76 08-02-00 200 1.97 i 381.91 08-03-00 1000 1 15/16 1037.50 09-14-00 3000 L72 5097.57 09-22-00 5000 117/32 7696.75 09-26-00 1000 1 13/32 1066.50. 09-24-00 4500 1 13/32 4i.991.63 10-13-00 700 .813 -.': 582.07 10-26-00 25,477 .688 17i590.18 11-15-00 500 .70 ' 362.95 03-27-01 25,477 .155 3027.33 05-31-01 2400 .17 420.95 06-20-01 2000 .162 1376,00 06-20-01 5000. .09 ; 502.01 06-28-01 5000 .091 :503.00 ,-...... -- t 4" PIZ ...i.CY 1 °62...84 77 ; i #
4 97, Sii '34. I 4 0 3 a5;qt 707;;IL LArts 4 7107,f6e. VIANALE & VIANALE LLP CERTIFICATION OF PLAINTiFil PURSUANT TO iihDERAL SECURMES L6WS Re: PRONETLINX.COlvi -5 C-07 CAltii-PaaLL- ("Plaintiff') declares: 1. Plaintiff has reviewed a complaint and authorized its filing. 2. Plaintiff did not purchase the security that is the subject of this action at the directionon of plaint:der scomnsel or in order to partidpate in this private action or any other federal 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 has made no transaction(s) during the Class Period (August 26, 1998 thru. i-uly 1 2001) in the debt or equity securities that are the subject of this action except those set forth below; (use a. separate sheet if necessary)
Date Transaction IP of Shares Price Type PLEASE SEE ATTACHED PAGES 1-3
8, During the three years prior to the date of this Certificate, Plaintiff has sought to serve or served as a representative party for a class in the following actions 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 Plaintiffs pro rata share of any recovery, except
4.04.2033 such reasonable costs and expenses (including lost wages) directly re1atin5 to gm representation of the class as ordered or approved by the court
I declare under penalty of perjtuy that the foregoing is true and correct. Executed this. Li 'aay of :.-iu /4S 2003. SigneLS--.4,74
•
• - •
Vim& 6044003
, , PNLK Transaction Histiity 11/1/19913 -7/1/2001 SCOT CAMPBELL
DATE TRANSACT, TYPE # OF SHARES PRICE TOTAL 11/9/98 BUY 5000.00 1.280 6,412.00 11/30198 SELL 5000.00 1.700 -8,483.70 12124198 BUY 10000.00 0.840 8,461.50 2/22/99 BUY 6500.00 1.250 8,140.60 3/15/99 BUY 8500.00 1.438 12,242.75 1/14/99 BUY 5000.00 0.810 4,074.50 4/15199 SELL 10000.00 4.500 -45,000.00 4116199 BUY 10000.00 6.876 68,750.00 4/19/99 BUY 5000.00 7.000 35,000.001 4119199 BUY 5000.00 6.938 34,687.50; 4/21/99 SELL 1000.00 5.844 -5,831.55 4/22199 BUY 10000.00 5.063 50,649.00 4/28/99 111111 11 IM 17500.00 3.000 -52,486.25 4/29/99 SELL 1500.00 4.094 -6,128.42 12/30/99 BUY : 10000.00 2.250 20,336.50 3/27100 BUY 5000.00 3.750 18740.13 4117/00 . BUY 5000.00 2.000 10,012.00 5124/00 1 BUY 4000,00 1.688 6,774.00 7/10/00 BUY 3000.00 1.625 4,887.00 7111/00 BUY 3000.00 1.600 4,812.00 7113100 BUY 3000.00 1.500 4,496.38 7/25/00 BUY 3000.00 1.563 4,699.50 7125/00 BUY 3000.00 1.563 4,730.75 7/25/00 BUY 3000.00 1.563 4,711.50 8/16/00 BUY 3000.00 1.663 4,687.50 - 8125/00 SELL -978.00 1.656 -1,574.75 8/30/00 SELL -935.00 1.688 -1,532.75 9/18/00 BUY 5000.00 1.531 71704.25 9/22/00 BUY 2000.00 1.063 2,173.00 10/4/00 BUY 5000.00 0.813 4,107.50 ' 10/20100 BUY 5000.00 0.686 3,482.50 10/20/00 BUY 5000.00 0.625 3,170.00 11/30/00 BUY 1000.00 0.406 421.25, 12/4/00 BUY 500.00 0.438 233.75, 12/6/00 BUY 4600.00,0.469 2,174.05;
sir 1/03 Pane 1 CONFIDENTIAL FOR VIANALE
. . PNLK Transaction History 11/1/1998 - 7/1/2001 SCOT CAMPBELL
DATE I TRANSACT, TYPE 4 OF SHARES PRICE TOTAL 12/6/00 BUY 4600.00 0.438 2,170.05 1216/00 BUY 2500.00 , 0.438 1,108.75 12/6/00 BUY 400.00 0.438 176.20 12/6100 BUY 400.00 0_469 188.70 1217/00 BUY 300.00 0,438 146.25 12111/00 BUY 2500,00 0.438 1,108.75 12111100 BUY 700.00 0.438 321.25 1/19/01 BUY 5000.00 0.375 1,890.00 1/19/01 BUY 5000.00 0.375 1,890.00 1/19/01 BUY 5000.00 0.376 1,890.00 2/2/01 BUY 4200.00 0.218 915.00 2/2/01 BUY 2900.00 0.219 649.88 2/2/01 BUY 2100.00 0.218 463.5 6 2/2/01 BUY 1900.00 0.218 420.50 2/2/01 BUY _ 800.00 0.219 190.00 2J5101 BUY 1900.00 0.218 420.50 2/5/01 BUY 3000.00 0.219 680.25 2/5/01 BUY 3100.00 0.219 702.13 2/5/01 BUY 3100.00 0.218 678.51 2/5/01 BUY 5000.00 0.219 1,108.75 2/6/01 BUY 2000.00 0.219 452.60 2/7/01 BUY 5000.00 0.204 1,032.00 2/9/01 BUY 5000.00 0.175 887.00 2/9/01 BUY 5000.00 0.175 887.00 2/9/01 BUY 5000.00 0.175 887,00 . 212/212990110 /00111 BUY 5000.00 0.175 887.00 BUY 5000.00 0,175 887.00 BUY 1600.00 0.181 289.60 BUY 2250.00 0.188 466.88 2/20/01 BUY 2750.00 0.181 509.75 220/01 BUY 2800.00 0.188 537.00 3/6/01 BUY 5000.00 0.175 874.38 3/6101 BUY 5000.00 0.175 874.38 3/6/01 BUY 5000.00 0.175 874.38. 3/6101 BUY 5000.00 0.175 874 38
5/11103 Pag e "2 . CONFIDENTIAL FOR VIANALE . .
PNLX Transaction History. 11/1/1998 - 7/1/2001 SCOT CAMPBEU.
DATE TRANSACT. TYPE # OF SHARES PRICE TOTAL 316/01 BUY 5000.00 0.175 874.38 3/23/01 BUY 2500.00 0.162 405,6 3/23/01 BUY 5000.00 0.159 796.25 303/01 BUY 5000.00 0.159 795.25 3/27/01 BUY 2500.00 0.160 399.50 M - • BUY 5000.00 0.157 787.00 3/27/01 BUY 5000.00 0.157 787.00 6/24/01 BUY 20000.00 0,170 3,460.00 6/27/01 BUY 20000.00 0.140 2,860.00 6/29/01 BUY 20000.00 0_120 2,454.00
261,688.81
•
5/11/03 Page 3 CONFIDENTIAL FOR VIANALE VIANALE & V1A_NALE LLP CERTIFICATION OF PLAINTIFF' PURSUANT TO FEDERAL SECURITIES LAWS
Re: PRONETIENKCOM
Craig achal ("Plaintiff) declares:
1. Plaintiff has reviewed a complaint and authorized its filing. 2. Plaintiff did not purchase the security that is the subject of this action at
the direction of plaintiffs counsel or in order to participate in this private action or any other litigation under the federal securities laws.
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 has made rlio tiaiiiactione)• (firing the dass Period (August 26,
1998 thru July 1, 2001) in the debt or equity securities that are the subject of this iction
except those set forth Mow: (use a separate sheet if necessary) -
Date Transaction # of Shares Price Type See listing at end of
document
5. During the three years prior to the date of this Certificate, Plaintiff has
Sought to serVe or served as a represetalive part* for a class in the following actions
filed lint:ter focterai securiiies Taws: - 11Waatisserts and SettinKAOwneADesktapWatiacettanietantled-C4.2033C7.4oc /4, le2
• 6. The Plaintiff will not accept any payment for serving as a representative
party on behalf of the class beyond the Plaintiffs 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
From paragraph 4:
Gain & Loss Realized
Account: FA6378-0001 8998-8209 - Switch Accounts
# DT SI_D OT BOW SALE PRC P-RCH P-RC SECURITY OUAf4TITY OWLS) TR
1 07/02/01 02/01/99 0.023 1314 PNLK 1000 (1750)1
2 07102/01 03/31199 0.023 313/32" PNLK 500 (1712)
307102101 03/31/99 0,023 3 1/2 PNLK 3500 (12182) L 407/02101 03/31/99 0.022 31/2 PNLK 1500 (5217) L
507102/01 03/31199 0.022 37/16 P N LK 3500 (11954) L
607/02101 03/31/99 0.022 37116 PNLK 1500 (5123) L 7 07/02/01 03/31/99 0.022 3 1/2 PNLK 3500 (12173) L
8 07/02/01 03/31/99 0.021 3 1/2 PNLK 6500 (22613) L 907/02/01 03/31/99 0.021 3 13/32 PNLK 2500 (8463) L
10 07/02/01 03/31/99 0.021 3 9/16 PNLK 7000 (24790) L
11 07/02/01 06123/99 0.021 2.60 PNLK 1000 (2598) L
1207/02/01 07/14/99 0.021 2 13/16 PNLK 500 (1414) L 1307/02101 07114/99 0.021 2 13/16 PNLK 500 (1395) L
14 07/02101 08/25/99 0.021 1 7/8 PNLK 2000 (3727) L 1;t 1,04Ww146 Ind $(41±RPAOwfWr‘n.e.zo‘c.tifkmionvigamia4-c4-2023 cdc 6174 7# 3
15 07/02101 08/25/99 0.021 1 7/8 PNLK 10000 (18540) L 16 07/02/01 08127/99 0.021 1 718 PNLK 1500 (2781) L
17 07/02101 08130199 0.021 113/16 PNLK 23500 (42100) L
1807/02101 09108/99 0.021 3 I 3/32 PN LK 500 (1711)1
19 07102101 09/08/99 0.021 3 13/32 PNLK 160 (541) L
20 07102/01 12/28/99 0.021 2 1/8 PNLK 1860 (3932) L 21 07/02/01 01121/00 0.021 3 PNLK 930 (2789) L
2207102/01 03/27/00 0.021 33/4 PN1K 10550 (39359) 1
23 07102101 03/28/00 0.021 3 3/4 PNLK 11000 (41038) L
24 07/02/01 04/04/00 0.021 2 25/32 PNLK 350 (985)1
25 07/02/01 04117/00 0.021 1 7/8 PNLK 2650 (4932)
26 07/02/01 05/16100 0.021 2 5/32 PNLK 2000 (4270).E 27 07/02101 07/28/00 0.021 115/16 PNLK 500 9581S
2807/02/01 07131/00 0.021 2 PNLK 1000 (2013)
29 07/02/01 08/04/00 0.021 2.468 PNLK 1200 (29701 S 30 07102101 08107/00 0.021 2 314 PNLK 800 (2217) S 31 07/02/01 08/29/00 0.021 1 3/4 PNLK 1500 (2593) S
32 07/02/01 09/25/00 0.021 11/16 PNLK 2000 (2117) S
3307/02/01 11/02/00 0.021 1 PNLK 2000 (1977)$
3407/02/01 11/17100 0.021 11/16 PNLK 1000 (685) 8
3507/02/01 11/22100 0.021 1/2 PNLK 2000 (977) S
36 07/02/01 02/07/01 0.021 0.21 PNLK 6000 (1153) S 37 07/02/01 04/03/01 0.021 114 PNLK 2000 (477) S
Wocurftettia$ and SaLSPIp'S OWINENNelcicregaittaesdartVlicateet04-2633 CZ.IX
38 07/02101 05/14101 0.021 0.35 PNLK 10000 (3309) S
39 07/02/01 06114/01 0.021 0.1945 PNLK 10000 (1754) S 40 07102101 06129101 0.021 0.085 PNLK 10000 (659) S
- Total Long-Term Gain/(Loss) (278089) Total Commissions 559 - Total Short-Term Gaini(Loss) (23859) Total Fees
I declare under penalty of perjury that the foregoing is true and correct
Executed this 6th day of June, 2003.
Signed:
Satrap I, 0 wnee, D sabc pWerfaikatioreViAndea-54,X43 CEA« ,(,77r3 VIANALE VI kNALE LLF CERTIFICATION OF PLAINTIFF PURSUANT TO FEDERA t, SECURITItS LAWS
Re: PRONETLINK.COM
Daniel P. Provost ("Plaintiff') declares:
1. Plaintiff has reviewed a complaint and authorized its filing.
2. Plaintiff did not purchase the security that is the subject of this action at the
direction of plaintiffs counsel or in order to participate in this private action or any other litigation under the federal securities laws.
3. Plaintiff is willing to serve as a representative party on behalf of the d.ass, including providing testimony at deposition and trial, if necessary.
Plaintiff has made no transaction(s) dining the Class Period (August 26, 1998 . _ thru July 1, 2001) in the debt or equity securities that are the subje ct of this action exc:ept those set forth below: (use a sepaiate sheet if necessary)
TransactiT3pe ## of Shares Price
See attac1.).atehed list ?urthased 163,500 5n26,675 62
5. During the three years prior to the date of this Certificate, Plaintiff has sought to serve or served as a representative party for a class in the following actions filed under the federal securities laws: 6. The Plaintiff will not accept .aay payment for serviriz as a reyresentative paity
on behalf of the class beyond the Plaintiffs pro rata share of any recovery, except such
reasonable costs and expenses (incl iz &lig lost wages) directl y relating to the re„presenta don oi
the class as ordered or approved by the court.
dedare under penalty of Feircuy that the foregoing is true and correct. Executed this
7th cia.ir of JUNE, 2003.
Sipa:
. PAGE 2 Of 3
•.
. - ......
PNLK Trade Activity for Daniel P. Prevost .
Account !Date TrarSaction Nurnber of PricelS hare Total Cost . . • Type . Shares
9245 3/8/2000 Purchase 1.730 $4825 9511.20 9256 318/2000 Purchase 100 34.7812 3508.07 9265 7/26/2000 Purchase 900 91.6875 . 91,548.70 9265 7/2512000 Purchase 1600 91.7600 92,343.00 • 9265 7/2512000 Purchase 4000 31.7.300 97,120.00 9255 7/26/2000 Purchase 19400 31,7500 334,53 2.00 9265 813/2000 Purchase 21000 92.0000 • 342,530.00 9265 811 7/2000 Purchase 1500 $1.6250 52,402.50 9265 8118/2000 Purchase 23000 31.5250 $38,015.00 - 9265 8/18/2000 Purchase '1000 $1.5937 51,623.70 9265 8/21/2000 Purchase . 3500 • 51.6250 3.5,792.50 9248 111211999 Purchase 5000 30.8E00 $4,550.00- 9248 8/17/2000 Purchase 10000 $1.6250 518,550.00. . 9248 8117t2000 Purchase 500 • 31.7500 3904.50 9248 8/21/2000 Purchase 5000 $1.6200 58,250.00 9248 8121 /2000 Purchase 2800 51.6250 : S463400 9242 5/2612000 Purchase 400 31.8750 9779.95 9242 5/24/2000 Purchase 4000 31,5260 36,620.00 . . . 9242 5/2412000 Purchase . . 1000 31.6250 51,655.00 .9242 9/29/2000 Purchase - 5000 50.7000 93,605.00 9242 9/2612000 Purchase 5000 31.0000 55,150.00 9242 8/3/2000 Purchase 2500 $2.0312 95,153.00 9242 10/28/1598 Purchase 1000 31.1870 31,137.00 9242 2/22/1999 Purchase 2000 31.3535 $2,707.00 - 9242 4113/1999 Purchase 1000 34.1450 • $4,145.00 9242 4/14/1999 Purchase 1000 84.1450 • 34,145.00 92 42 4/22/1999 . Purchase . 1000 33.6450 53,645.00 9242 515/1999 .Purchase . 4000 53.0650 5124020.00 . 9242 6/3/1999 Purchase 2500 $3_4300 $8,575.00 9242 645/1999 Purchase 800 33.0250 . $2,420.00 9242 . 7/14/1999 Purchase 100 32.9500 - 3295 .00 ' 9242 9/13/1999 Purchase 3000 • 53:0070 59,020.00 9242 9/14/1999 Purchase 5600 321570 . $15,440.00 9242 1/6/2000 Purchase 100 32.4500 $245.00 9242 1/2412000 Purchase 100 33.0700 5307.00 . 9242 2/1112000 Purchase 2800 32.2570 56,320.00 9242 3)23/2000 Purchase . 300 33.6900 51,107.00 9242 4/412000 Purchase 1200 32.7570 $3,320.00 9242 4'512000 PU roh ase 3600 33.0060 310,520.00 9242 4/7/2000 Purchase 100 . 52.8800 5288.00 • 9242 4/7/2000 . Purchase . 3500 52.9495. $10,301.00 9242 4/7/2000 Purchase 8400 33.0020 $25,220.00 9242 4111/2000 Purchase 1000 . 33.0200 • 33,020.00 9242 4/1 442 DO 0 Purchase - 400 32.5175 $1,007.00 9242 4/26/2000 Purchase • 1200 82.5170 33,0 20.00 AMER 7n/2000 Purchase 1500 31.8750 92,825.50 AMER 7/1712000 . Purchase • 100 31.5000 3163.00 163.500 8326,675,82 PAGE 3 of3
..
. _ _ •
V1ANALE & VIANALE LLP CERTWICATION OF PLAINTIFF FSMAFII LIC) SC1JRITf ES
Re: P RONETLINK.COM
is1:1_11/ 10xlejeig_. &4-04.4-4/ii.efi(Plaintiffi declares:
1. Plaintiff has reviewed a complaint and authorized its filing.
2. Plaintiff did not purchase the security that is the subject of this action at the
direction of plaintiffs counsel or in order to participate in this private action or any other litigation
under the federal securities laws.
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 has made to transaction(s) during the Class Period (August 26,1998
thni July 1, 2001) it the debt or equity securities that are the subject of this action except those set
forth below: (use a separate sheet if necessary)
Transaction # of Shares Price Type Date
sEE pitrie-Lfd EAVO 1,v_Ak 7),14 2,6-100o
e.arrt14410P' 74- 5. Dating the three years prior to the date of this Certificate, Plainiiffhas sought
to serve or served as a representative party for a class in the foilowing actions fded under the fedora securities laws: - 4-.1.••nn••1
6. The Pthiatiff will not accept any payment for serving as a representative party
on behalf of the class beyond the Plaintiffs pro rata share of arty recovery, except such mumble
costs and expenses (including lost wages) directly relating to the representation of the class as ordered or approved by the court.
I declare under penalty of perjury that the foregoing is true and correct Executed this i q day Of ZuArt. , 2003.
Signed: 7,.03a4e. f4,
,
I p j:.e. so";
. . . U):: 7 OA P Z T 4 L / E- 7-;e4.1.de 2 Coo "' SkA a #c sgock 4 ,..., 0, ,..1 . F-Wv.4,26 rgE
Ly .5/i g 1, i co -INIL._x (6) 9 g Y, 5"-. :.1Ys' 15* i 5"
Ltoo Tiq i. ,9-, -Wr 9 qr. i t cL ci --"'
J/ :R000 PNLV 73, 9V5.9f .3A 2- 1 cl ci C .3,. coo -TNLK 5 S'..2t.e.2c. I 4 i i.qs-- ( i , 6-a) 22, 13 (i.6"C. _
.. . . . „ . .
i • 27: ?e,F-er‘ ----77e/e/416' :D/efe/
9- ZZ' eil . ,;.40z/o/- ...— .„ '7625 .;2 4/ g- IS— .01. - Z 2 . o it ooc., Y62 c/49 9-1.A, 1.1-$.'. 46x/ 3. 22 --C:6 4 ez.c> 41,7.23. $6", V z-L. r:-.22s /, i 2_50 3- 2.3-a) i 5',?..3e 3 ' 2.- 4 -ct; I, OM 1-72 9 l . 2a Oizr- 2 ."." L' -- _3- ou ... /0 / 3 jji-o= ';' eR- .-" I, I-1 - q -a) i s/32 6-,..6-%`3.7d ',Ili, 7. .9 c t ; 71 4 - 5 -CV /, 5-co ' -, i / .3 s r
4 - 5---00 .___..e 6 YSIO .3 - : t,,, q, q 5"' ,,
13.5-00 Si,944 7 g (?, f,.)
• dOL' 9.eacw,C - W ow # ?Moo* [- A-JciPilve sti/KI
4 4 TOW- A90 T-1: Via (&'3 2 - q 9
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- g'0174.0.4E-44-.1:;a0:.F.7.AAVA ..4,'";";`,!'1'n"-;0,*'':,"Off.71,',,q,!.-.17•.:'„--;-..;::;•„?:--c..*ir;t:p100!=eirr; , ^rr•;,- ' • • 10.'• 14.4. :.:°,:,`".-Yt.'44.T2' 7.4 ';4';:'•4;• 04-'''';'...t3,5="rit'Ma r.• "i-v;
4'3 57i 4.116 •- ••4 .
1 -2 2 1 0 8 2
TRADE DATE $013B,Fir PBCCS.SSDATk INT2AL M PACIFIC ENTERTAINMENT 03/17/00 03/22/00 3/17/00 518670 6 1 DENNIS L BELL 881 W MORTON, 57E. A Tax cern1PIcAtiOni AcCOUNT NUMINR T c RR PORTERV I LLE CA 93257-3185 939-71688 1 7 /iTW
C4.131r NUMBER aliCURITr. I 7166 B-03 WEARE PLEATED TO CONF/RM FOLLOWING TBADHSACTION ' " O15°° 0 PC° 114° 5 PNLj( YOUR CASH AND/OR sEcuRruEs 639 SHOULD ALREADY BE IN YOUR ACCOUNT YOU BOUGHT
PRO NET LINK CORP QUANTITY 2.00 0 I MTERNET ORDER PRICE A 3/4 UNSOLICITED PRINCIPAL. . 9,500.00 . . COMMISSION 19.95 NET AMOUNT 9,5/9.95 . . . .
. . • • . • . . , . . . FOR THE ACCOUNT OF WIT CAPITAL CORPORATION TELE. (212) 253-4400 P.O. BOX 722 NEW YORK, NY 10276
. .
77- , . • 7. ' "" •
-
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. ,R0a6sspATE iwar. ;.,. . MANDAN senwp.„
PACIF IC ENTERTAINMENT • -03127/00 03;i6/66 7 37i1Y06 46553O5 1- DENNIS L BELL -rAx.ovreiCA11011 A4VNYNT NuMSER VI •881 •W MORTON .. STEW A •, ' PORTERVILLE CA 932/37-31'85 • 9 39 -7 1 68 8 1 7 HTW CIAP NUIdaM • ZliCtiPiTY • %Mel
74266F 100000 P00 11405 PNLK O 3 -VVE ARE PLEASED ii:CcoNium iroukiviRGr TRANSACTION YOUR CASH AND/OR SECURITIES SHOULD ALREADY BE IN YOUR ACCOUNT YOU 3OI.IGI1T . PRO NET LINK CORP QUANT I TY 3,000 I NTERNET ORDER PRI CE 3.74000 UNSOL I CI TED PRINCIPAL 11,220.00 • , CoMMI SS ION 19.95 NET AMOUNT 11,239.95
. • • • . , •
- FoRIFIEJI.mouhrrow WIT CAPITAL CORPORATION TELE. (212) 263-4400 P.O. BOX 722 NEW YORK/ NY 10276 . .
. . . _
• • - 4*.11!,44
r. • 4:4 . . t • . .4AS;V:-.neSt s-trms NY. IP ".4t 4'Irtiet.A
•
44/96
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414 „ , . r'. t ,s7 •51: • 1, 1 • E;'..N•••'-' `.! r 4:^ !' , V,' - r ••• II:::'.1414ffj --11•1f:Z:•te"Air'CL.P43`k-EPTI; ,Ms•j. ; ;' • ; , • •'1 -tt :ft% n r I • '! n '1.grik 7 r• .'1:',1447Z/4,'SIV;f.f1404%.":7,'''':,:l 4 '1S71'2 34,01. F I: 1,44 jr ;AZ.Ft 1411.:77141-13r 14, :41:4Falt ar' - .$7,f^riNi/V
1-211174 1-R4E:Ewe strigreert pRocEXSCIATS INTratiAt. Mc . PACIFIC ENTERTAINMENT 03/23/00 03/31/00 3/28/00 46033D 6 1 , DENNIS L BELL 881 W MORTON, STE. A TAX IDENTirithrON =RUNT NUMS I c RR PORTERV I L LE CA 93257-3185 939-71688 1 7 MTW aaPMMWR' MMmR
WE ARE MASED TO CONFIRM Tat roLLowykro TRANsAcnoN 74266 F 1 °°°°C1 P004405 PN LK B.-QS YOUR CASH AND/OR SECURITIES SHOULD ALREADY HE IN YOUR ACCOUNT • • YOU BOUGHT '
• • . . . PRO NET LINK CORP QUANTITY 5,000 INTERNET ORDER ' PRICE 3 3/4 . UNSOLICITED PRINCIPAL 18,750.00 • COMMISSION 19.95 T 18,769.95 • NET AMOUNT • . . . . . • ....' ' • 7 , • . „ • . . •
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VITE ARE PLEASED To CONFIRM THE FOLLOWING TRANSACTION 74266F 100000 P004405 p m 1K B0— 3 YOUR CASH ANI)/OR SECURITIES SHOULD ALREADY BE ri Y01.112 ACCOUNT
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PRO NET LINK CORP QUANTITY • 5,000 INTERNET ORDER • PRICE 3 27/32 UNSOLICITED • PRINCIPAL 18,281.25 COMMISSION. 18,301.20 • NET AMOUNT , .
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". . • • ' TRApE DATE Salikeerr PROCESS DATE INT..e_ftAL M . . PACIFI C ENTERTAINMENT . 03/3 / /DO 04105/00 03131/00 56633D 6-1 -' D E NN I S I. BELL - ACC.OUNT MIRIP r t W . mdaToN ST ' 'A" - ", • • ••• . TAXJJ:0411PrAll= - • • • PORTE RVIE, LE. CA 93257-3185 • - 939-71688 1 7 MN GUMP Numem . sscuArry . KINDER 74266F 100000 PO04405 P,N114 B-03 WE ARE PLEASED TO CON MTHIOLLOWINGT11MCflON7 YOUR CASH AND/OR SECURED:ES SHOULD ALREADY BE DI YOUR ACCOUNT
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• . - • PRO NET LINK CORP QUANT I TY 5,000 iNTERNET ORDER PRICE 3 3/8 UNSOLICITED PRINCIPAL 16,875.00 CONKISSION . 19.95 NET AMOUNT 16,894.95 ". •
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PACIFIC ENTERTAfNMENT 04/10100 04/13/00 4/10/00 466410 6 1 DENNIS L BELL mimalna, Tax pEbrripoAtioN Accom NUMZER T C • 881 W MORTON. ST E . A PORTERVILLE CA 93257-3185 939-71688 1 7 MTW CUSP Nvmea9 FECLMTY NUMSO - P004405 PNLK 8-03 WE MOE FiLEMD TO CoNVER114'111E1,011,0wING TRANSACTION 74266F 100000 YDUR CASH AND/OR SECURITIES 639 SHOULD ALREADY BE DT 'YOUR ACCOUNT • YOU BOUGHT PONT LINK -CORP QUANTITY 5,000 INTERNET ORDER PRICE 2 31/32 UNSOLICITED PRINCIPAL I4,843.75 'COMMISSION 19,95 • NET AMOUNT 14,863.70 • .• . , • , . , • •
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LINISER • 6.U1s" NuCERY INE PX.Y.ASED To cONFTRIVI THE F01.10'WMG TRANSACTION ?4256F100000 POD4405 PNLK B -D3 YOUR CASH AND/OR SECURITIES 639 SHOI.ILD ALREADY BE IN YOUR ACCOU NT • YOU SOUGHT •, . . • . . _ . PRO NET LINK CORP QUANTITY 2,500 INTERNET ORDER PRICE 2 9/32 UNSOLICITED PRINCIPAL 5,703.13 _ . COMMISSION 19.95 NET AMOUNT 5,723.08
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PACIFIC ENTERTAINMENT OB/06/00 08/11/004 siostop 259140 k DENNIS L BELL 881 W MORTON,- STE, A uxmagrommi ACCOUNTNUMETEli T C . . . . - PORTER VILLE CA 93257-3185 935 - 71688 1 7 MTW CLOP KUMBEA E54117
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YOU BOUGHT • „. PRO NET LINK CORP QUANTITY 10,000 INTERNET ORDER • PktCE 1 27/32 UNSOLICITED PRINCIPAL 18.437.60 COMMISSION 19.95 , . . . ' NET AMOUNT 18,457.45 , . . . • . . • . • . • •
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PACIFIC ENTERTAINMENT 08/30/00-09/05/00 8/30/00 - 274810 6 1 DENNIS J. BELL 881 V MORTON, STE . A TAX PENTIRCAIION AccoLfoir NINEJER T Fri PORTERVILLE CA 93257-3185 939-71680 1 7 MTV CUM P NUMBER =CURD( NUMI414
WE A Mt PIFASEO TO CONFIRM TM!. FOLLOWING TRANSAcTioN 74266F10000 PO04405 PNLK 8-03 YOUR CASH AND/OR SECURITIES SHOULD ALREADY BE IN YOUR ACCOUNT YOU DOU6HT • PRO NET LINK CORP QUANT I TY 5,000 INTERNET ORDER PRICE 1 23/32 UNSOL I C I TED PRINCIPAL 8.593.75 COM I SS ON 39.95 NET ANOUNT 8,613.70 • • •
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PACIFIC ENTERTAINMENT c 09/0//00 09/07/00 09/01/00 30641D6 1 • • • DENNIS L BELL J limmwm=111n14m • TAX iDeNTIFICA710N ACCOUNT N WAVER T C RR 88 W NORTON, STE. A • PORTERVI LLE CA 93257-3185 939-71588 1 7 HIV Amillommswm QUM' Numesn 1SEM5ER
WE ARE FLEASIID TO CONFIRM THE FOLLOWING TRANSACTION 74266F 1 00000 P004405 PNLH 8:-17$ YOUR CASH AND/OR SECURITIES 639 SHOULD ALREADY BE IN YOUR ACCOUNT YOU BOUGHT - • • PRO NET LINK CORP QUANTITY 5,000 INTERNET ORDER PRICE 1 23/32 UNSOLICITED PRINCIPAL 8,593.75 COMMISSION 19.95 NET AMOUNT 8,513.70 L. . •n • ...•• • • • • • •,.• • • ••• ••• • ; .• • .
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. . _ . . . . _ • • • • • CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished via U.S. First Class Mail, this 5th day January, 2006, to the following:
WILSON, ELSER, MOSKOWITZ, CLAYMAN & ROSENBERG EDELMAN Si DICKER LLP Brian D. Linder, Esq. Joseph Francoeur 305 Madison Ave. Matthew Greenberg New York NY 10165 3 Gannett Drive White Plains NY 10604 Attorneys for Glenn Zagoren
Attorneys for Grassi & Co. and FRIEDMAN KAPLAN SEILER Sherb & Co. & ADELMAN LLP Paul Fishman LESTER, SCHWAB, KATZ Anne E. Beaumont & DWYER, LLP 1633 Broadway, 46th Floor Lawrence Steckman New York NY 10019 120 Broadway Tel: (212) 833-1100 New York NY 1027 Fax: (212) 833-1250
Attorneys for Feldman Sherb & Co. Attorneys for Jean Pierre Collardeau
)11 Thomas j. Mcittinna
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