Anthony Caiafa, Et Al. V. Sea Containers, Ltd., Et Al. 06-CV-02565

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

ANTHONY CAIAFA on behalf of himself and all others similarly situated,

Plaintiff, CLASS ACTION COMPLAINT

SEA CONTAINERS LTD., JAMES B. SHERWOOD and IAN C. DURANT,

Defendants.

Plaintiff Anthony Caiafa, individually and on behalf of all other persons similarly situated, by his undersigned attorneys, upon information and belief, based upon, inter alia, the investigation of counsel, which includes, among other things, a review of public announcements made by defendants, Securities and Exchange Commission ("SEC") filings made by defendants, press releases, and media reports, except as to the paragraph applicable to plaintiff which is alleged upon personal knowledge, alleges on information and belief as follows:

SUMMARY OF ALLEGATIONS

1. This class action is brought on behalf of all persons who purchased the securities of Sea Containers Ltd. ("Sea Containers" or "the Company") during the period from March 15,

2004 to March 24, 2006 (the "Class Period"). During the Class Period, the defendants represented to the public that Sea Containers' reported financial results presented fairly, in all material respects, the financial position of the Company, and that Sea Containers had a system of internal controls that was adequate to ensure that the Company's reported financial results were accurate. Unbeknownst to plaintiff and the class, the true facts were as follows: a. Sea Containers' reported financial results were inaccurate and cannot be relied

upon;

b. Sea Containers' internal controls were inadequate to ensure the reliability of its

publicly reported financial results;

c. Sea Containers had materially overstated the value of (and failed to write down

the value of) the value of its investment in the common stock of Orient-Express

Hotels Ltd.; and

d. The value of the Sea Containers' ferry and container assets was materially

impaired.

2. Sea Containers' shares traded at prices as high as approximately $2 1 per share

during the Class Period based on defendants' false statements concerning its financial results.

When Sea Containers shocked Wall Street by revealing that it would have to take a mammoth writedown of its assets in a sum that it estimated as $500 million, that it would miss the deadline for filing its 2005 annual report, and that its publicly reported financial results for the first three quarters of 2005 should not be relied upon and will have to be restated, the Company's stock plummeted from a close of $12.06 per share on March 23,2006 to as low as $7.34 on March 24,

2006 before closing at $7.45- a drop of 38% in a single day!

JURISDICTION AND VENLE

3. This Court has jurishction over the subject matter of this action pursuant to the

Securities Exchange Act of 1934 (the "Exchange Act") (15 U.S.C. 5 78aa), and 28 U.S.C. 5

1331.

4. Plaintiff brings this action pursuant to Sections 10(b) and 20(a) of the Exchange Act as amended (15 U.S.C. 5 78j(b) and 78t(a)) and Rule 1Clb-5 promulgated thereunder (17

C.F.R. 5 240.10b-5). Venue is proper in this District because defendants conduct business in

this District, the Company's shares were listed on the New York Stock Exchange in this District

at all relevant times, and certain of the wrongful acts alleged herein took place or originated in

this District.

5. In connection with the acts alleged in this Complaint, defendants, directly or

indirectly, used the means and instrumentalities of interstate commerce, including, but not

limited to, the mails, interstate telephone communications and the facilities of the national

securities markets.

6. In connection with the acts, conduct and other wrongs alleged in this complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including but not limited to, the United States mails, interstate telephone communications and the facilities of the national securities exchanges.

PARTIES

7. Plaintiff Anthony Caifa ("plaintiff'), as set forth in the certification annexed hereto as Exhibit 1, purchased Sea Containers stock at artificially inflated prices during the Class

Period pursuant to and traceable to the Prospectus as hereinafter defined and has been damaged thereby.

8. Defendant Sea Containers is a Bermuda corporation having its principal place of business at 22 Victoria Street, Hamilton, Bermuda. Sea Containers provides passenger and freight transport and marine container leasing. It operates in four segments: Ferry, Rail,

Container, and Leisure. Ferry segment provides passenger and freight ferry services in the northern Baltic Sea between Finland, Sweden, Estonia, Germany, and Russia; in the English

Channel between England and France; and in the northern Irish Sea between Scotland and

Northern Ireland. It also owns a commuter ferry service operating in New York harbor, and a

50% interest in a ferry service in the Adriatic Sea. Rail segment offers passenger rail transport services through Great North Eastern Railway (GNER) in Great Britain between London and

Scotland. As of December 3 1,2004, GNER operated a fleet of 42 train sets totalling 488 cars and locomotives. Container segment's operations are principally conducted through the Company's

GE SeaCo SRL joint venture with General Electric Capital Corporation. It offers services to liner ship operators, road and rail operators, forwarders, and exporters. Leisure segment engages in the ownership or part ownership and management of hotels, restaurants, tourist trains, and river cruiseship through Orient-Express Hotels, Ltd. As of October 3 1, 2005, Sea Containers had

26,145,152 Class A common shares and 14,321,195 Class B common shares of common stock outstanding. Sea Containers shares trade on the New York Stock Exchange under the ticker symbol "SCR."

9. Defendant James B. Sherwood ("Shemood) was the Company's President and

Chief Executive Officer at times relevant hereto.

10. Defendant Ian C. Durant ("Durant") was the Company's Senior Vice President for

Finance and Chief Financial Officer at times relevant hereto. Defendants Sherwood and Durant are sometimes hereinafter jointly referred to as the "Individual Defendants.

CLASS ACTION ALLEGATIONS

11. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all persons who purchased or otherwise acquired the securities of Sea Containers during the period from March 15, 2004 to

March 24, 2006 (the "Class Period"), and who were damaged thereby. Excluded from the Class are defendants, the officers and directors of the Company, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest.

12. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Sea Containers' securities were actively publicly traded.

While the exact number of Class members is unknown to Plaintiff at this time and can only be ascertained through appropriate discovery, Plaintiff believes that there are at least hundreds of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by Sea Containers or its transfer agent and may be notified of the pendency of this action by mail, using the forms of notice similar to those customarily used in securities class actions.

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

14. Plaintiff will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation.

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

a. whether the federal securities laws were violated by defendants' acts as alleged

herein; b. whether statements made by defendants to the investing public during the Class

Period misrepresented material facts about Sea Containers' financial results; and,

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

measure of damages.

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

MISSTATEMENTS AND OMISSIONS OF MATERIAL FACTS

A. Sea Containers Reported Its Financial Results During the Class Period, and Defendants Expressly Certified that the Companv's Financial Results Were Accurate and Could Be Relied Upon And That Sea Containers Had Adequate Internal Controls

17. On March 15, 2004, the first day of the Class Period, the Company reported its results for the year ending December 3 1, 2003, but failed accurately to assess the value of its assets. Accordingly, its financial statements were materially false, and were the remainder of such statements over the ensuing 12 months. On May 10,2005, the Company reported its financial results for the quarterly period ended March 3 1, 2005 in a filing with the SEC on Form

10-Q. The Company reported a net loss for the period of $6.8 million (loss of $0.26 per common share diluted) on revenue of $382 million, compared with a net loss of $16.9 million

($0.73 per common share diluted) on revenue of $373 million in the prior year. In the Form 10-

Q the Company stated that it had assets of $2,673,782,000, including investment assets of 18. Annexed to the May 10,2005 10-Q was a certification signed by defendant

Shenvood stating as follows:

I, James B. Sherwood, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sea Containers Ltd. for the quarter ended March 3 1,2005;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

19. Also annexed to the May 10,2005 10-Q was a certification signed by defendants

Sherwood and Durant stating as follows:

The undersigned hereby certify that this report of Sea Containers Ltd. for the periods presented fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of the company as of and for the periods presented in the report.

20. On August 9, 2005, the Company reported its financial results for the quarterly period ended June 30,2005 in a filing with the SEC on Form 10-Q. The Company reported net loss for the period of $17.7 million (loss of $0.64 per common share) on revenue of $458.0 million, compared with a net profit of $6.8 million ($0.30 per common share) on revenue of

$432.4 million in the second quarter of 2004. In the Form 10-Q the Company stated that it had assets of $2,551,764,000, including investment assets of $353,546,000.

21. Annexed to the August 9, 2005 10-Q was a certification signed by defendant

Sherwood stating as follows:

I, James B. Sherwood, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sea Containers Ltd. for the quarter ended June 30,2005;

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

22. Also annexed to the August 9,2005 10-Q was a certification signed by defendants

Shenvood and Durant stating as follows:

The undersigned hereby certify that this report of Sea Containers Ltd. for the periods presented fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the report.

23. On or about November 8,2005 the Company disseminated and incorporated by reference in an SEC filing on Form 8-K a press release stating in relevant part as follows:

SEA CONTAINERS TO RESTRUCTURE FERRIES DIVISION

o Restructuring charge of $157 million o Entertains offers to buy Silja and SeaStreak o Plans to sell Silja non-core ships o Hoverspeed withdraws from Dover-Calais route

Hamilton, Bermuda, November 3,2005. Sea Containers Ltd. (NYSE: SCRA and SCRB, www.seacontainers.com), the transport group engaged in marine container leasing, manufacturing, depot and logistics operations, railways operator, ferry operator and leisure industry investor, issued a statement today about a major restructuring of its ferries division and other matters.

BACKGROUND. The company's ferries business is composed of three units. The largest is Silja Oy Ab, the Finnish based leading Baltic operator of cruise ferries, ro-pax ships, fast ferries and cruise ships. The second is the company's car-carrying fast ferries business with 9 ships operating in European waters other than in the Baltic. The smallest unit is SeaStreak, the New York based commuter ferry service operating between New Jersey ports and Manhattan.

In 2005 the profits of Silja have declined significantly, due to a combination of higher fuel costs which could not be recovered except on services to Estonia, the unsuccessful m.v. Finnjet operation between Germany, Estonia and Russia, reduced profits from duty free sales and overcapacity in the Swedish market introduced by competitors. However, Silja still remains the leading operator in its region with an excellent brand name and reputation for quality, with its core business remaining profitable.

The company's car-carrying fast ferries incurred losses in 2005, due in large measure to high fuel prices. The ships burn light fuel which has doubled in price over the 2004-2005 period and it has been impossible to recover the extra cost through fuel surcharges. Other factors have impacted earnings. The ferry routes between France and England across the English Channel have suffered from declining passenger and car volumes, excess capacity and reduced profits from low tax merchandise sales. The company's subsidiary, Hoverspeed, operates between Dover and Calais in the English Channel.

Seastreak, operators of services employing 7 foot-passenger only fast ferries on three routes between New Jersey and Manhattan has also incurred a loss in 2005 due largely to high fuel costs. Passenger fares are being steadily increased to recover the extra cost but the market will only absorb such increases to a certain level before switching to cars, buses and trains.

In light of the situation described above, the board of Sea Containers met on November 2, 2005 and has decided to take measures that should eliminate or greatly reduce the operating losses being incurred.

24. The Company further announced that it would take restructuring charge of $70 million in connection with the plans outlined in the press release quoted in ¶ 23 in the fourth quarter of 2005. The Company also announced that its board had decided to suspend the payment of common share dividends with immediate effect in order to save $2.7 million in cash on an annualized basis. Finally, the Company announced that its board had identified specific containers which were to be sold, and obsolete spare parts and manufacturing machinery no longer required and would take a charge of $30 million in connection with said planned sales and obsolescence.

25. On November 9, 2005, the Company reported its financial results for the quarterly period ended September 30, 2005 in a filing with the SEC on Form 10-Q. The

Company reported a net loss of $34.4 million ($1.25 per common share di!uted) sr? revexe cf $456 million, compared with net earnings of $18.4 million ($0.77 per common share diluted) on revenue of $492 million in the third quarter of 2004. In the Form 10-Q the Company stated that it had assets of $2,447,763,000, including investment assets of $363,459.

26. Annexed to the November 9,2005 10-Q was a certification signed by defendant

Sherwood stating as follows:

I, James B. Sherwood, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sea Containers Ltd. for the quarter ended September 30,2005;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a> designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c> evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

a> all significant deficiencies and material weaknesses in the design or

operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

27. Also annexed to the November 9,2005 10-Q was a certification signed by defendants Sherwood and Durant stating as follows:

The undersigned hereby certify that this report of Sea Containers Ltd. for the periods presented fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the report.

28. The statements contained in m¶ 17-27 above were false and misleading because they overstated the value of the Company's assets and investment assets and understated the

Company's losses, and because they omitted to disclose the following material facts:

a. Sea Containers' reported financial results were inaccurate and cannot be relied b. Sea Containers' internal controls were inadequate to ensure the reliability of its

publicly reported financial results;

c. Sea Containers had materially overstated the value of (and failed to write down

the value of) the value of its investment in the common stock of Orient-Express

Hotels Ltd.; and

d. The value of the Sea Containers' ferry and container assets was materially

impaired.

B. Sea Containers Reveals That Its Financial Statements Were False When Made And Must Be Restated And Its Container and Ferrv Assets Are Materially Impaired. And Its Stock Gets Pummeled

29. Sea Containers' share price reached as high as $21 and higher per share during the Class Period, based on defendants' false statements concerning the Company's financial results and in reliance on the adequacy of the Company's internal controls. When Sea Containers revealed on March 24, 2006 that it would have to take a mammoth writedown of its assets in a sum that it estimated at $500 million, that it would miss the deadline for filing its 2005 annual report, and that its publicly reported financial results for the first three quarters of 2005 should not be relied upon and will have to be restated, the Company's stock plummeted from a close of

$12.06 per share on March 23 to as low as $7.34 on March 24, before closing at $7.45- a drop of

38% in a single day!

30. The Company stated in a press release on March 24, 2005 (in relevant part) as follows:

HAMILTON, Bermuda, March 24 IPRNewswire-Firstcall1 -- Sea Containers Ltd (NYSE: SCRA , NYSE: SCRB, www.seacontainers.com) announced today that at a meeting on March 20, 2006, the Board of Directors decided that the Company will withdraw completely from the ferry business. This decision, together with other matters outlined below, results in a total impairment charge in the fourth quarter of 2005 of approximately $500 million.

Sea Containers Ltd. will conduct a conference call today at 11.00am EST which is accessible at 2 12-23 1-6046.

On November 3,2005, the Company announced that it had begun a process of restructuring its ferry division, and that it would be entertaining offers to buy the core business of Helsinki-based Silja Oy Ab, which includes eight vessels operating on three routes in the Baltic. The Company also announced its intention to sell or charter out several additional ferry vessels and to entertain offers to buy its Seastreak business in New York. As a result of this restructuring, the Company announced an impairment charge of $99 million, of which $19 million was recorded in the 2005 third quarter results. These amounts were preliminary and subject to adjustment, based on changes in the restructuring plan.

At the time of the November announcement, it was uncertain whether Silja would be sold and, if so, what price could be obtained for the business. Subsequent to the announcement, the sale process was begun. Indications of interest and independent valuations of the Silja business were received, and preliminary bids for Silja's core business were received in January.

The Company also announced in November that it had identified specific containers to be sold, obsolete spare parts and manufacturing machinery no longer required and stated that, as a result, it would take an asset impairment charge of $30 million.

This announcement updates and provides further details regarding the previously disclosed asset impairments.

As a result of the proposed Silja sale, the management of the Company began to consider the possibility of withdrawing completely from the ferry business. In that connection, management of the Company engaged in the process of evaluating the recoverability of all of its long-lived ferry assets. Similarly, management of the Company began a process to evaluate the recoverability of all of its container assets. In the course of these processes, the Board of Directors has met on several occasions since November 3, 2005 to consider the proposals of management.

At the meeting of the Board held on March 20, 2006, the processes were concluded and management's proposals relating to these ferry and container matters were approved. 'The Company will recognize a non-cash pre-tax charge of approximately $500 million in the fourth quarter 2005, which includes the previously estimated fourth quarter 2005 impairment charge of $1 12 million reported in the November announcement. Of this approximate $500 million, approximately $415 million relates to the ferry business, and approximately $85 million relates to the container business. Further details regarding those charges are set forth below.

Ferries

Following the decisions announced in November, management of the Company began a process to entertain offers to sell its Silja business, including all related vessels. The sales process has continued to progress and the Company has obtained an indication of the range of sales prices likely to be achieved.

In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"), the Silja business will be classified as "held for sale" at December 31, 2005 and the related assets will be written down to fair value, less cost to sell. The operations of the Silja business, including related impairments, will be presented as discontinued operations in the Company's 2005 financial statements.

Because of the possibility of withdrawing completely from the ferry business, it was more likely than not at December 3 1, 2005 that there would be disposals of the Company's other six vessels in the ferry division prior to the end of their previously estimated useful lives. For this reason, an impairment review of these vessels was undertaken in accordance with SFAS 144. Based on this review, impairment charges will be recorded on these vessels at December 3 1,2005.

The total impairment of ferry assets to be recorded in the fourth quarter 2005 is estimated to be approximately $415 million on a pre-tax basis. The write-down is non-cash in nature.

Containers

Subsequent to the November announcement, the Company has identified additional containers being held for sale at December 3 1, 2005, which has increased the previously estimated charge to approximately $40 million. The expected loss on these sales initiated an impairment review on the Company's entire container fleet in accordance with SFAS 144. This review was done at a container-class level and determined that the carrying amount of one class of containers, refrigerated containers, was not fully recoverable. It has been estimated that an impairment charge will be recognized on these containers of approximately $40 million. In addition, $5 million of goodwill relating to container operations will be written off.

Thus the total impairment of container assets to be recorded in the fourth quarter 2005 is estimated to be approximately $85 million on a pre-tax basis. The write-down is non-cash in nature. Debt Covenants

The pre-tax asset impairment charges of approximately $500 million described above will reduce the Company's net worth by approximately $475 million after recognition of foreign currency translation consequences when the related assets are sold, with the result that the Company will not be able to comply with certain net worth covenants in certain of its bank borrowing agreements. The Company is currently in discussions with the bank lenders regarding appropriate covenant waivers or amendments. Professional advisors have been appointed to assist the Company.

Other Matters: Orient-Express Hotels Sale Gain

On March 20, 2006, the Company concluded that it would restate its condensed consolidated financial statements for the three months ended March 3 1, 2005, the six months ended June 30,2005 and the nine months ended September 30,2005 to correct the accounting related to the sale in March 2005 of shares in its Orient-Express Hotels investment, which was accounted for in the Company's financial statements in accordance with the equity method of accounting. The correction reduces the gain on the sale of Orient-Express Hotels shares by $10.3 million for the three months ended March 31, 2005, the six months ended June 30, 2005 and the nine months ended September 30, 2005 from the previously reported $41.1 million to $30.8 million. The correction is the result of an error in the accounting for the release of accumulated foreign currency exchange reserves related to this equity method investment. The change increases net losses in these periods, but has no impact on previously reported shareholders' equity and is a non-cash charge. As a result of the correction, the condensed consolidated financial statements for the interim periods ended March 3 I, 2005, June 30,2005 and September 30, 2005, previously filed with the U.S. Securities and Exchange Commission, should no longer be relied upon.

The Company expects to reflect the effects of these restatements in the comparative unaudited quarterly financial statements presented in its consolidated financial statements for the year ended December 3 1,2005 and in the comparative financial information for March 31, 2005, June 30, 2005 and September 30, 2005 which will be included in the Company's quarterly reports on Form 10-Q du~ing2006.

31. By announcing that the Company will have to restate its financial results for the first three quarters of 2005, defendants have admitted that the Company's reported financial results were materially false and misleading when disseminated.

DEFENDANTS' UNLAWFUL ACCOUNTING PRACTICES

32. GAAP are those principles recognized by the accounting profession as the conventions, rules and procedures necessary to define accepted accounting practice at a particular time. SEC Regulation S-X (17 C.F.R. 210.4-01(a)(l)) states that financial statements filed with the SEC which are not prepared in compliance with GAAP are presumed to be misleading and inaccurate, despite footnote or other disclosure. Regulation S-X requires that interim financial statements must also comply with GAAP, with the exception that interim financial statements need not include disclosure which would be duplicative of disclosures accompanying annual financial statements. 17 C.F.R. $2 10.10-01(a).

33. The fact that Sea Containers will restate its financial statements for the Class

Period is an admission that the financial statements originally issued were false and that the overstatement of assets and understatement of losses was material. Pursuant to GAAP, as set forth in Accounting Principles Board Opinion ("APB") No. 20, the type of restatement announced by Sea Containers was to correct for material errors in its previously issued financial statements. See APB No. 20, 7-1 3. The restatement of past financial statements is a disfavored method of recognizing an accounting change as it dilutes confidence by investors in the financial statements, it makes it difficult to compare financial statements and it is often difficult, if not impossible, to generate the numbers when restatement occurs. See APB No. 20, 14. Thus, GAAP provides that financial statements should only be restated in limited circumstances, i.e., when there is a change in the reporting entity, there is a change in accounting principles used or to correct an error in previously issued financial statements. The Company's restatement was not due to a change in reporting entity or a change in accounting principle but was rather due to errors in previously issued financial statements. Thus, the restatement is an admission by Sea

Containers that its previously issued financial results and its public statements regarding those results were false and misleading.

34. By reporting earnings (in this instance, reported operating losses that were artificially low) based on artificially high carrying values for the Company's assets, defendants violated Regulation S-X (17 C.F.R 5 210 et ses.) which requires that annual reports and interim financial statements comply with GAAP and creates a presumption that financial statements not in compliance with GAAP are misleading and inaccurate.

35. In addition, defendants have violated Section 13(b)(2) of the Exchange Act which requires them to "make and keep books, records, and accounts. which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer ... ."

SCIENTER ALLEGATIONS

36. As alleged herein, defendants acted with scienter in that defendants knew that the public documents and statements issued or disseminated in the name of the Company (including the Company's reported financial results) were materially false and misleading; knew that such statements or documents would be issued or disseminated to the investing public, and knowingly and substantially participated or acquiesced in the issuance or dissemination of such statements or documents as primary violations of the federal securities laws.

37. Defendants knew and/or recklessly disregarded the falsity and misleading nature of the information that they caused to be disseminated to the investing public. 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.

38. In addition, the Company and the Individual Defendants had substantial financial motives to make the false statements alleged herein, including a motive arising from the fact that

if Sea Containers had written down the value of the assets on its balance sheet during the Class

Period it would have violated the Company's financial covenants with its lenders.

EFFICIENT MARKET ALLEGATIONS

39. Plaintiff and the Class herein will rely, in part, on the efficient market hypothesis

and the "fraud on the market" doctrine. At all relevant times, the market for Sea Containers

securities was an efficient market for the following reasons, among others:

(a) Sea Containers stock met the requirements for listing, and was listed and actively traded on the New York Stock Exchange, a highly efficient and automated market;

(b) As a regulated issuer, Sea Containers filed periodic public reports with the

SEC and the New York Stock Exchange;

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

(d) Sea Containers was followed by several securities analysts who wrote reports concerning the Company, which were publicly disseminated.

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

NO SAFE HARBOR

41. The statutory safe harbor provided for forward-loolung statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this complaint.

Many of the specific statements pleaded herein were not identified as "forward-looking

statements" when made. 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-loolung statements. Alternatively, to the

extent that the statutory safe harbor does apply to any forward-loolung statements pleaded herein,

defendants are liable for those false forward-looking statements because at the time each of those

forward-looking statements was made, the particular speaker knew that the particular forward-

loolung statement was false, and/or the forward-loolung statement was authorized and/or

approved by an executive officer of the Company who knew that those statements were false

when made.

FIRST CAUSE OF ACTION

AGAINST THE COMPANY AND THE INDIVIDUAL DEFENDANTS FOR VIOLATION OF SECTION 10(b) OF THE SECURITIES EXCHANGE ACT

42. Plaintiff incorporates by reference and realleges each of the foregoing

paragraphs.

43. During the Class Period, Defendants carried out a plan, scheme and course of conduct which was intended to and, throughout the Class Period, did: (I) deceive the investing public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and other members of the Class to purchase Sea Containers securities at artificially inflated prices. In

furtherance ofthis unlawful scheme, plan and course of conduct, Defendants, and each of them, took

the actions set forth herein.

44. Defendants (a) employed devices, schemes, and artifices to defraud; (b) made

untrue statements of material fact andlor omitted to state material facts necessary to make the

statements not misleading; and c) engaged in acts, practices, and a course of business which operated

as a fraud and deceit upon the purchasers of the Company's securities in an effort to maintain

artificially high market prices for Sea Containers securities in violation of Section 10(b) of the

Exchange Act and Rule 10b-5.

45. Defendants directly and indirectly, by the use, means or instrumentalities of

interstate commerce andlor of the mails, engaged and participated in a course of conduct to conceal

adverse material information about the business, operations and future prospects of Sea Containers

as specified herein.

46. Defendants employed devices, schemes, and artifices to defraud, while in

possession of material adverse non-public information and engaged in acts, practices, and a course

of conduct as alleged herein in an effort to assure investors of the truth and accuracy of Sea

Containers' reported financial results, which included the making of, or the participation in the making of, untrue statements of material facts and omitting to state material facts necessary in order to make the statements made about Sea Containers and its financial results, internal controls, and the value of its assets in the light of the circumstances under which they were made, not misleading, as set forth more particularly herein, and engaged in transactions, practices and a course of business which operated as a fraud and deceit upon the purchasers of Sea Containers securities during the Class Period.

47. The Individual Defendants' primary liability, and controlling person liability, arise from the following facts: (I) the Individual Defendants were high-level executives at the Company during the Class Period and members of the Company's management team; (ii) by virtue of their responsibilities and activities as a senior officer of the Company, they were privy to and participated in the creation, development and reporting of the Company's internal budgets, plans, projections and/or reports; (iii) they enjoyed significant personal contact and familiarity with other members of the Company's management team, internal reports and other data and information about the

Company's finances, operations, and sales at all relevant times; and (iv) they were aware of the

Company's dissemination of information to the investing public which they knew or recklessly disregarded was materially false and misleading.

48. The Defendants had actual knowledge of the misrepresentations and omissions of material facts set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain and to disclose such facts, even though such facts were available to them. Such Defendants' material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect of concealing Sea Containers' operating condition and future business prospects from the investing public and supporting the artificially inflated price of its securities. As demonstrated by

Defendants' misstatements of the Company's business, operations and earnings throughout the Class

Period, Defendants, if they did not have actual knowledge of the misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by deliberately refraining from taking those steps necessary to discover whether those statements were false or misleading.

49. As aresult of the dissemination of the materially false and misleading information and failure to disclose material facts, as set forth above, the market price of Sea Containers securities was

artificially inflated during the Class Period. In ignorance of the fact that market prices of Sea

Containers' publicly traded securities were artificially inflated, and relying directly or indirectly on

the false and misleading statements made by Defendants, or upon the integrity of the market in which

the securities trades, and/or on the absence of material adverse information that was known to or

recklessly disregarded by Defendants but not disclosed in public statements by Defendants during the

Class Period, Plaintiff and the other members of the Class acquired Sea Containers securities during

the Class Period at artificially high prices and were damaged thereby.

50. At the time of said misrepresentations and omissions, Plaintiff and other members of

the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff and the other

members of the Class and the marketplace known the truth regarding the problems that Sea

Containers was experiencing, which were not disclosed by Defendants, Plaintiff and other members

of the Class would not have purchased or otherwise acquired their Sea Containers securities, or, if they had acquired such securities during the Class Period, they would not have done so at the artificially inflated prices which they paid.

5 1. By virtue of the foregoing, Defendants have violated Section 10(b) of the Exchange

Act, and Rule 10b-5 promulgated thereunder.

52. As a direct and proximate result of Defendants' wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with their respective purchases and sales of the Company's securities during the Class Period.

53. During the Class Period, Plaintiff and the Class purchased shares at artificially inflated prices. The price of Sea Containers stock declined as a consequence of the direct or indirect disclosure of the information misrepresented and omitted during the Class Period. The

causation of plaintiffs losses is additionally established by the following facts:

(a) Throughout the Class Period, as detailed herein, defendants engaged in a

scheme to deceive the market and a course of conduct that artificially inflated Sea Containers'

stock price and operated as a fraud or deceit on purchasers of Sea Containers stock by

misrepresenting Sea Containers' financial results, internal controls and the value of its assets.

Later, however, when defendants' prior misrepresentations and fraudulent conduct were disclosed

on March 24, 2006 when defendants revealed that Sea Containers would have to restate its

financial results for the first three quarters of 2005. Upon this revelation the Company's shares

fell $4.61 or 38% in a single day as the prior artificial inflation came out of Sea Containers' stock

price. As a result of plaintiffs purchases of Sea Containers stock, plaintiff suffered economic

losses, i. t?. , damages under the federal securities laws.

(b) By making the misstatements and omissions of fact alleged herein defendants

misrepresented Sea Containers' business and prospects. Defendants repeated and reiterated, and

never corrected, their false statements during the Class Period. The false and misleading

repetitions of and failure to revise, inter alia, the Company's statements, and the defendants'

failure to reveal the shoddy basis therefor, caused and maintained the artificial inflation in Sea

Containers' stock price until the truth was revealed.

c) Defendants' false and misleading statements had the intended effect and caused Sea Containers' stock to trade at artificially inflated levels of as high as $16.63 a share at times relevant hereto, including when plaintiff made his purchase. (d) The decline in Sea Containers' stock price was a direct and proximate result of the nature and extent of defendants' fraud finally being revealed to investors and the market. The timing and magnitude of Sea Containers' stock price declines negate any inference that the loss suffered by plaintiff was caused by changed market conditions, macroeconomic or industry factors or Company- specific facts unrelated to the defendants' fraudulent conduct.

AS AND FOR A SECOND CAUSE OF ACTION AGAINST THE INDIVIDUAL DEFENDANTS FOR VIOLATION OF SECTION 20(a) OF THE SECUFUTIES EXCHANGE ACT

54. Plaintiff repeats and realleges each and every allegation contained above as though fully set forth herein.

55. The Individual Defendants acted as controlling persons of Sea Containers within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, and knowledge of the Company's operations and knowledge of the false statements disseminated to the investing public, the Individual Defendants had the power to influence and control and did influence and control, directly or indirectly, the decision-making of the Conlpany, including the content and dissemination of the various statements which plaintiff contends are false and misleading. The Individual Defendants had unlimited access to copies of the

Company's reports, press releases, public filings and other statements alleged by plaintiff to be misleading prior to andlor shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected.

56. As set forth above, defendants each violated Section 10(b) and Rule lob-5 by their acts and omissions as alleged in this Conlplaint. By virtue of their positions as controlling persons, the Individual Defendants are liable pursuant to Section 20(4 of the Exchange Act. As a direct and proximate result of defendants' wrongful conduct, plaintiff and other members of the

Class suffered damages in connection with their purchases of the Company's securities during the

Class Period.

JURY TRIAL DEMANDED

57. Plaintiff hereby demands a trial by jury.

PRAYER FOR RELIEF

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

(a) Determining that this action is a proper class action, designating plaintiff as Lead

plaintiff and certifying plaintiff as class representative under Rule 23 of the Federal Rules of Civil

Procedure and plaintiffs counsel as Lead Counsel;

(b) Awarding compensatory damages in favor of plaintiff and the other Class

members against all defendants, jointly and severally, for all damages sustained as a result of

defendants' wrongdoing, in an amount to be proven at trial, including interest thereon;

c) Awarding plaintiff and the Class their reasonable costs and expenses incurred in

this action, including counsel fees and expert fees; and,

(d) Granting such other and further relief as to the Court may seem just and proper.

DATED: March 3 1,2006 Respectfully Submitted,

~aur6cieD. Paskowitr, Esq. (LP-7324) 60 East 42ndStreet46'h lo or New York, New York 10 165 Telephone: (2 12) 685-0969 Facsimile: (2 12) 685-2306

Roy L. Jacobs, Esq. (RIJ-0286) ROY JACOBS & ASSOCIATES 60 East 42nd Street 46th Floor New York, NY 10 165 Telephone: (2 12) 867- 1 156 Facsimile: (2 12) 504-8343

LAW OFFICES OF CHRISTOPHER J. GRAY, P.C. CHRISTOPHER J. GRAY 460 Park Avenue 2 1 st Floor New York, NY 10022 Telephone: 2 12-838-3221 212-937-3 139 (fax) EXHIBIT A

EXHIBIT A PLAIWTIFF'S CERTIFICATE

'The undersigned ("Plaintiff') declares, as to the claims asserted under thefedml secuntios laws, tbat: 1. PlaiatiKhas review4 the complaint against Sea Containers, Ltd.,C'SCL1'),and certain &a defendants, and authorizes its filin~ 2. Plairitiff did not acquire rhc stsurly that is the subjmt of this action at the directicm of plaintiffs counsel or in order to participate in thjs private action or any other litigation under the federal securities Inws. 3. PlaintiiYh witting to serve as a representative pufty on behalf of a class, including providing laatimony at deposition and trial, if necessfuy, 4. Plnintityrepratents md warrants ttia~it is fuIly aurhorized m enter into end execute this certification though its undemigneb managing partner, 5. Plai~iffwill not accept any paymem for sewing as a representative pan on beMf of the chrs beyond the Plaintiffs pro rata share of any recsvcry, exccpt such reasonable costs and expenses (including ton wage$) directly dating lo the representmian of the elm as ~pprovrdby the court. 6. Plaintiff has made no mmslction{s) during the Class Period in the common shara, of SLX, txccpt those sat forth below:

-, H urnbop Price Dsteca) Numbcr Priee of Sharer

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I- I 1 7, During thc three ywrs prior to rhc date of this Certificstion, Plaintiff has not served as a lead plaintiff, or a certified cless representative, faa class in an action filed under the federal sccuritia laws.

4. I dmlar~under padyof perjury. LH day d b &el,,?006+btthe infmatian abv.mumtc.