Arlette Miller, Et Al. V. Lazard Ltd., Et Al. 05-CV-05630-Consolidated

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

x ARLETTE MILLER, Individually and On Electronically Filed Behalfof All Others Similarly Situated ,

Plaintiff, Civil Action No . 1 :05-CV-5630 (VM) (ECF Case) vs. CONSOLIDATED AMENDED CLASS LAZARD LTD., BRUCE WASSERSTEIN, ACTION COMPLAINT FOR VIOLATION STEVEN J . GOLUB, WILLIAM M. LEWIS, OF THE FEDERAL SECURITIES LAW S MICHAEL J. CASTELLANO and GOLDMAN SACHS & CO., : JURY TRIAL DEMANDED Defendants . x Lead Plaintiffs Diana B . Lien, Charles F . Lin, and Edward Schonberg and Plaintiffs

Lawrence O. Viands and Nanette Katz (collectively, "Plaintiffs"), by their undersigned attorneys, individually and on behalf of all others similarly situated, make the following allegations fo r their Consolidated Amended Class Action Complaint . These allegations are based on Plaintiffs ' personal knowledge as to themselves, and on information and belief derived from investigation s of their counsel as to all other matters. The investigations of counsel included, among other things: (a) review and analysis of filings made by Lazard Ltd ("Lazard" or the "Company") wit h the United States Securities and Exchange Commission ("SEC") ; (b) review and analysis o f press releases, public statements, news articles, securities analysts' reports and other publication s disseminated by or concerning Lazard; (c) interviews with former Lazard employees ; and (d) other publicly available information about Lazard. Most of the facts supporting the allegations contained herein are known only to the Defendants or are within their control . Plaintiffs believe that the ongoing investigations of their counsel will yield further information in support of the claims alleged herein .

NATURE OF THE ACTION

1 . This is a class action on behalf of purchasers of the common stock of Lazard who purchased such securities pursuant and/or traceable to the Company's false and misleadin g

Registration Statement and Prospectus declared effective on May 4, 2005, as amended (th e

"Registration Statement/Prospectus"), issued in connection with the initial public offering of

Lazard common stock (the "IPO"), together with those who purchased shares of Lazard commo n stock in the open market between May 4, 2005 and May 12, 2005, inclusive (the "Class Period") , seeking to pursue remedies under the Securities Act of 1933 (the "Securities Act") and th e

Securities Exchange Act of 1934 (the "Exchange Act").

-1- 2. Lazard is an investment bank that was founded in New Orleans in 1848 .

Currently based in New York City and with operations in Europe, North America, Asia, and

Australia, Lazard operates primarily as a financial advisory and asset management firm . It provides services for mergers and acquisitions, restructurings, and various other corporate finance matters for corporate, partnership, institutional, government, and individual clients .

Services include evaluating potential acquisition targets; providing valuation analyses ; evaluating and proposing financial and strategic alternatives ; and rendering opinions . In addition, Lazard provides investment management and advisory services to institutional clients, financial intermediaries, private clients, and investment vehicles worldwide .

3 . Prior to its IPO, Lazard was a family company. Indeed, until the IPO, descendents of the founding brothers owned approximately a one-third stake in the Company.

4. On May 5, 2005, Lazard went public via a group of securities offerings (th e

"Offerings") that included the private offering of Equity Securities Units, a private offering of

Lazard Group 7 .125 percent Senior Notes, a private placement of securities with IXIS -

Corporate & Investment Bank, and the IPO. The Offerings were designed to end Lazard's connection to the founding family and in particular the Company's former Chairman, Michel

David-Weill ("David-Weill"), a descendant of the Company's founders . Lazard's Chief

Executive Officer, Defendant Bruce Wasserstein ("Wasserstein"), planned to use the proceeds from the Offerings to buy out David-Weill and other so-called "Historical Partners" (defined in the Registration Statement/Prospectus as "Eurazeo S .A., descendants and relations of our founders, several historical partners of our predecessor entities, several current and former managing directors and the other members of these classes") .

-2- 5. Initially, David-Weill opposed Wasserstein's plan to take Lazard public, bu t ultimately yielded after Wasserstein promised that Lazard would buy out the 36 percent stak e held by David-Weill and the Historical Partners for more than $1 .6 billion, which Wasserstein planned to generate from the Offerings . Wasserstein also promised David-Weill that the transaction would be completed by the end of 2005 or he would quit.

6. Lazard planned to sell its Equity Securities Units at $25 per unit for an aggregat e price of $287 .5 million, and raise net proceeds of approximately $276 .5 million; Lazard's 7 .125 percent Senior Notes offering was expected to raise approximately $550 million ; and a private placement of Lazard securities with IXIS-Corporate Investment Bank would bring in approximately $200 million ($150 million in equity security units, and $50 million in commo n stock).

7. With the private securities offerings expected to raise approximately $1 .026 billion, the Defendants were left with a $775 million funding gap to be filled by the IPO . At an offering price $25 per share, the IPO was expected to raise gross proceeds of $854 .5 million, which would net the Company approximately $788 million, thus reaching the Defendants' goal of raising $1 .6 billion to complete the buy out of David-Weill and the Historical Partners (plu s an additional $200 million needed to complete the Company's restructuring and repay certain outstanding notes). However, if the IPO was priced at lower than $25 per share, Lazard woul d not net enough to complete the buy-out . At this time, given prevailing market forces, th e maximum price that Lazard could obtain in the IPO was $22 per share . A $22 price would leave

Wasserstein and the other Defendants with a funding shortage of approximately $100 million and they would be unable to complete the buy-out of David-Weill and the Historical Partners .

For this reason, despite knowing that the market would not support the $25 offering price ,

-3- Defendants pushed forward with the IPO of 34,183,162 shares of Lazard common stock at a price of $25 per share, on May 4, 2005 .

8. Prior to the IPO, Defendants were well aware that a $25 price was unrealistic and would not be supported by the market . To determine the initial price, the lead underwriter,

Defendant Goldman Sachs & Co ("Goldman Sachs"), distributed preliminary prospectuses to it s clients and other potential purchasers of the IPO . The recipients of the preliminary prospectuses then provided Goldman Sachs with "indications of interest," which are essentially preliminar y orders reflecting the quantity and price at which they would be interested in acquiring shares i n the IPO. The indications of interest are highly objective and are then used to set the IPO's initial price.

9. Since this was a firm commitment underwriting, Goldman Sachs and the othe r underwriters were committed to purchasing certain amounts of stock. If the underwriters could not sell the shares of stock that they had committed to sell, they would be forced to keep th e unsold shares for themselves and absorb any associated losses.

10. Goldman Sachs' corporate finance department had developed indications o f interest that showed that the market would accept, at most, an IPO price between $21 and $2 2 per share - a fact that was communicated to Lazard. Despite knowing from the indications of interest and from the lackluster response to "road shows" and other marketing attempts that th e market would support at most a $22 offering price, Lazard and Wasserstein nonetheless insisted that the IPO be priced at $25 per share so that they could effectuate their plan to buy out th e remaining Lazard heirs .

11 . If the IPO took place, Wasserstein stood not only to gain control of Lazard fro m

David-Weill and the other heirs but also to make a handsome personal profit . If the IPO were

-4- completed at $25 per share, the value of the $30 million that Wasserstein had invested in th e

Company only three years before would soar to $300 million . Additionally, Wasserstein woul d own 11 percent of the Company and be paid an annual salary of $4 .8 million for each of the thre e years following the IPO . Significantly, if the IPO could not be completed at $25 per share, the n

Wasserstein would have to quit in accordance with his prior promise .

12. Goldman Sachs was largely unsuccessful in selling Lazard shares to its clients a t the $25 per share IPO price. Leading up to the IPO, Goldman Sachs was so unsuccessful in selling Lazard shares at $25 that it was forced to sell shares to hedge funds and other "flippers, " i.e., investors who would immediately sell their shares in the aftermarket once trading began .

Even after selling shares to these flippers, Goldman Sachs was still stuck with millions of unsold shares. Indeed, in a Form 3 filed with the SEC on or about May 23, 2005, Goldman Sach s reported that it was only able to sell approximately 4 .2 million shares (approximately 40% of it s

IPO allocation in the IPO) . Goldman Sachs knew that once Lazard shares began trading, the market price would plummet because there was no real demand to purchase Lazard shares at $2 5 per share.

13 . Once Lazard's stock began trading on May 5, 2005, Goldman Sachs was forced t o buy an unprecedented amount of Lazard stock in an attempt to create the false impression of strong demand. Specifically, on May 5, 2005, Goldman Sachs purchased more than 2 .4 million shares of Lazard stock in the open market at prices between $24 and $25 per share . Between

May 6 and May 10, 2005, Goldman Sachs purchased an additional 741,180 shares at price s ranging from $22.89 to $25.00. By May 10, 2005, Goldman Sachs owned 6 .2 million shares, or more than 18% of the IPO.

-5- 14. Ultimately, even this manipulative trading could not buoy the price in the face of overwhelming market disinterest. After Goldman Sachs ended its massive intervention, the price of Lazard common stock plummeted. By May 12, 2005, Lazard's stock fell to $21 .61 per share

- or 15 percent below the IPO price - almost exactly the price that the indications of interest before the IPO had shown.

15. The method of setting the IPO offering price and of supporting that price in th e market - choosing a price solely to reach a pre-selected financial goal when market indicator s objectively showed a significantly lower price - and Goldman Sachs' manipulative trading t o artificially inflate the price renders the statements in the Registration Statement/Prospectus fals e and misleading . Defendants are therefore liable to Plaintiffs under the Securities Act and th e

Exchange Act.

JURISDICTION AND VENUE

16. The claims asserted herein arise under and pursuant to sections 11, 12(a)(2) an d

15 of the Securities Act, 15 U.S .C. §§77k and 77o, and sections 10(b) and 20(a) of the Exchange

Act, 15 U.S .C . §§78j(b) and 78t(a), and Securities and Exchange Commission ("SEC") Rule

IOb-5 , 17 C.F .R. §240.1Ob-5 .

17. This Court has jurisdiction over the subject matter of this action pursuant to 28

U.S.C. § 1331, section 27 of the Exchange Act, and section 22 of the Securities Act.

18. Venue is proper in this District pursuant to section 22 of the Securities Act , section 27 of the Exchange Act, and 28 U.S.C. §1391(b) as many of the acts complained o f herein occurred in this District and Defendants Lazard and Goldman Sachs maintain thei r corporate headquarters in this District .

19. In connection with the acts alleged in this complaint, Defendants, directly o r indirectly, used the means and instrumentalities of interstate commerce, including, but not -6- limited to, the mails, interstate telephone communications and the facilities of the national securities markets .

PARTIES

20. (a) Lead Plaintiffs Diana B. Lien, Charles F. Lin and Edward Schonberg purchased shares of Lazard pursuant and/or traceable to the Registration Statement/Prospectus issued in connection with the IPO and/or on the open market during the Class Period, as set forth in their certifications previously filed with the Court and incorporated herein by reference and have been damaged thereby. In an order dated September 14, 2005, the Court appointed Lien,

Lin, and Schonberg as Lead Plaintiffs in this action .

(b) . Plaintiff Lawrence O. Viands purchased shares of Lazard pursuant to the

Registration Statement/Prospectus issued in connection with the IPO, as set forth in his certification previously filed with the Court and incorporated herein by reference, from defendant Morgan Stanley & Co . Incorporated and has been damaged thereby .

Registration Statement/Prospectus issued in connection with the IPO, as set forth in her certification previously filed with the Court and incorporated herein by reference, from

defendants Merrill Lynch, Pierce, Fenner & Smith, Inc . and Morgan Stanley & Co . Incorporated,

and has been damaged thereby.

21 . Defendant Lazard is a financial advisory and asset management firm . Lazard and

its subsidiaries, including Lazard Group, are incorporated under the laws of Bermuda . Lazard

maintains its principal place of business in New York City and was the issuer of the common

stock sold pursuant to the Registration Statement/Prospectus that contained false and misleading

statements and omissions at issue in this action .

-7- 22. Defendant Goldman Sachs is a global investment banking and securities firm and also provides asset management and securities services . Goldman Sachs is incorporated unde r the laws of the State of Delaware and maintains its principal place of business in New York ,

New York. Goldman Sachs was lead underwriter, sole book-running manager and representativ e of the underwriters for Lazard's IPO .

23 . Defendant Citigroup Global Markets Incorporated was an underwriter of Lazard' s

IPO.

24. Defendant Lazard Freres & Co. LLC was an underwriter of Lazard's IPO .

25. Defendant Merrill Lynch, Pierce, Fenner & Smith, Inc . was an underwriter o f

Lazard's IPO.

26. Defendant Morgan Stanley & Co . Incorporated was an underwriter of Lazard' s

IPO .

27 . Defendant Credit Suisse First Boston LLC was an underwriter of Lazard's IPO.

28 . Defendant J .P. Morgan Securities Inc. was an underwriter of Lazard's IPO .

29. The Defendants named in TT22-28 are referred to collectively as the "Underwrite r

Defendants ."

30. Defendant Wasserstein served, at all relevant times, as the Chairman of the Boar d of Directors, Chief Executive Officer and Chairman of the Executive Committee of Lazard .

Wasserstein signed the Company's Registration Statement/Prospectus pursuant to th e requirements of the Securities Act .

31 . Defendant Steven J . Golub ("Golub") was, at all relevant times, Vice Chairman ,

Managing Director and Chairman of the Financial Advisory Group of the Company and signe d

-8- the Company's Registration Statement/Prospectus pursuant to the requirements of the Securitie s

Act.

32 . Defendant Michael J. Castellano ("Castellano") was, at all relevant times, Chie f

Financial Officer, Principal Accounting Officer, Vice President and Managing Director of the

Company. Castellano signed the Company's Registration Statement/Prospectus pursuant to th e requirements of the Securities Act.

33. Defendant Scott D . Hoffman ("Hoffinan") served as General Counsel of Lazar d since May 2005 and signed the Company's Registration Statement/Prospectus pursuant to the requirements of the Securities Act .

34. The Defendants referenced above in ¶¶30-33 are referred to herein as the

"Individual Defendants ."

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

36. The Individual Defendants, by reason of their positions, are "controlling persons"

within the meaning of §15 of the Securities Act and §20(a) of the Exchange Act and had th e power and influence to cause the Company to engage in the unlawful conduct complained o f

-9- herein. Because of their positions of control, the Individual Defendants were able to and did, directly or indirectly control the conduct of the Company's business .

37 . It is appropriate to treat the Individual Defendants as a group for pleading purposes and to presume that the false, misleading and incomplete information conveyed in th e

Company's public filings, press releases and other publications as alleged herein are th e collective actions of the narrowly defined group of Defendants identified above . Each of the above officers of Lazard, by virtue of their high-level positions with the Company, directly participated in the management of the Company, was directly involved in the day-to-day operations of the Company at the highest levels and was privy to confidential proprietar y information concerning the Company and its business, operations, products, growth, financia l statements, and financial condition, as alleged herein. The Individual Defendants were involved in drafting, producing, reviewing and/or disseminating the false and misleading statements and information alleged herein (and were responsible for failing to disclose the material omission s described herein) and were aware, or recklessly disregarded, that the false and misleadin g statements were being issued regarding the Company (and important disclosures were neve r made), and approved or ratified these statements, in violation of the federal securities laws.

38. As officers and controlling persons of a publicly held company whose commo n stock was, and is, registered with the SEC pursuant to the Securities Act, and was and is trade d on the New York Stock Exchange ("NYSE") and governed by the provisions of the federal securities laws, the Individual Defendants each had a duty to disseminate promptly accurate an d truthful information with respect to the Company's financial condition and performance, growth, operations, financial statements, business, products, markets, management, earnings and presen t and future business prospects, and to correct any previously issued statements that had becom e

-10- materially misleading or untrue, so that the market prices of the Company's publicly traded securities would be based upon truthful and accurate information. The Individual Defendants' misrepresentations and omissions during the Class Period violated these specific requirements and obligations .

SUBSTANTIVE ALLEGATIONS

39 . Lazard is a financial advisory and asset management firm. It offers an array of financial advisory services regarding mergers and acquisitions, restructurings, and various other corporate finance matters for corporate, partnership, institutional, government, and individual clients . The Company's services include evaluating potential acquisition targets ; providing valuation analyses ; evaluating and proposing financial and strategic alternatives ; and rendering opinions. In addition, Lazard provides investment management and advisory services to institutional clients, financial intermediaries, private clients, and investment vehicles worldwide .

40. Founded by three brothers in New Orleans in 1848, Lazard expanded shortl y afterwards to provision the needs of the California gold rush and eventually evolved its business exclusively into financial services with three independent "Houses" in New York, London and

Paris. Through the early and mid-twentieth century, the three Lazard Houses continued to grow their respective operations independently of each other, with the New York House coming under the leadership of Andre Meyer in 1944 . Under Mr . Meyer and continuing with Felix Rohatyn, the New York House further developed its reputation as a preeminent mergers and acquisitions advisory firm . Michel David-Weill, a descendant of the founding families, joined Lazard Freres et Cie in Paris in 1956, ascended to a leadership role within the French operations and later moved to the New York House, where he became senior partner in 1977 . The three Houses were unified in 2000 under the banner of Lazard Group . By 2005, the sole remaining member of the

original family who was a member of the firm was former Chairman David-Weill. -11- 41 . Defendant Wasserstein, who, in 2000, had sold the investment bank boutiqu e

Wasserstein Perella & Co., which he had co-founded, joined the top management of Lazard i n

2002.

42. Wasserstein wanted to take Lazard public and obtain control of the Compan y from David-Weill and the remaining "Historical Partners ." Initially, according to an article published in Barron 's on May 9, 2005, entitled "King's Ransom for Lazard : Wasserstein, Other

Insiders Benefit Royally Over New Shareholders" (the "Barron's article"), David-Weill opposed taking Lazard public, but was convinced by Wasserstein's promise to buy them out for $1 . 6 billion:

It's hard to argue that the Lazard IPO was done to benefit shareholders . Wasserstein wanted to take the firm public and ran into opposition from the 73- year-old David-Weill, a Lazard veteran with nearly a half-century of service .

To win over David-Weill, retired Lazard partners and descendants of the founding families, Wasserstein agreed to cash them out of their Lazard stakes for $1 .6 billion - almost three times their equity in the firm . David-Weill and the former partners negotiated a very sweet deal for themselves, since they not only had a claim on their invested capital in Lazard but a roughly 36% interest in the firm's profits.

43 . A similar story was repeated by a former Lazard Vice President, who reporte d that the decision to go public was "controversial" and that there was a "major debate" within

Lazard about going public . At the forefront of this "huge philosophical debate," according to th e former Vice President, was Gerardo Braggiotti, the Company's former deputy Chairman in

Europe who left shortly after the IPO . Although Braggiotti was among the leaders of those wh o believed Lazard should remain a private partnership, the former Vice President stated that in th e end, Wasserstein "bought [the dissenters'] votes ."

-12- 44. However, the Company lacked sufficient capital to complete the buy-out o f

David-Weill and the Historical Partners on the agreed-upon terms . As the Barron 's article noted, under Wasserstein, the Company's spending had grown dramatically :

Lazard's problem in recent years is that Wasserstein, who became its head in 2002, went on a hiring binge that resulted in a nearly 50% increase in the number of managing directors to 131 in Lazard's financial advisory business . These hires resulted in ballooning compensation costs, which totaled 74% of revenue in 2004 .

45. The Registration Statement/Prospectus contains information demonstrating

Lazard's weakened financial condition before its IPO . Under the heading, "Consolidated

Statement of Financial Condition Data," Lazard reported that since 2000, the Company's deb t had mushroomed :

Consolidated Statement of Financial Condition Data 2000 2001 2002 2003 2004 Total Debt $85,246 $134,048 $144,134 $320,078 $322,323

46 . Indeed, according to an article in Financial News Online dated September 1 ,

2005, entitled "Lazard Director Launches Stinging Attack on Wasserstein's Strategy," the las t direct descendent of the Lazard brothers to work in the banking group, Bernard Sainte-Marie , sternly criticized the Company's debt level in an email :

A stinging attack on Lazard chief executive Bruce Wasserstein's decision to take the bank public was launched yesterday by Bernard Sainte-Marie, the last descendant of the founding brothers to work at the bank who leaves today after 32 years . In an email seen by Financial News, Sainte-Marie described the initial public offering as "an even bolder act of financial wizardry than [Defendant Wasserstein's] sale of Wasserstein Perella," wished the senior bankers "every success . . . in their task of working down Lazard's mountain of debt," and noted ruefully that with his departure there will be no descendants of the founding Lazard brothers left working at the bank .

47. To raise the capital needed to buy out David-Weill and the Historical Partners ,

Wasserstein was left with one option - going public . In the IPO, Lazard planned to sell approximately one-third of the equity interest in the Company for gross proceeds of $85 5

-13- million, as well as issue debt and convertible securities for an added $950 million in gros s proceeds . Importantly, according to an April 13, 2005 article in the International Herald

Tribune entitled, "Lazard IPO Filing Hints That Chief Is on Verge of Goal," Wasserstein completed the deal to avoid being fired :

[Lazard's] revised filing, made on Monday with the Securities and Exchange Commission, indicates that Wasserstein, the head of Lazard, is on the verge of winning his long-running feud with the bank's chairman and patriarch, Michel David-Weill .

David-Weill, a great-grandson of the bank's founders, had ferociously fought the public offering but conceded last year when he gave Wasserstein an ultimatum : Complete the offering by the end of 2005, or risk being fired . With most of the firm's financial details now filed, an offering could take place as early as next month. Under the offering plan, David-Weill and other founding partners will be bought out for $1 .6 billion.

48. But Wasserstein had bigger plans than just keeping his job . According to th e same April 13, 2005 International Herald Tribune article, Wasserstein had a substantial financial motive for completing the Offerings . If the IPO were priced at $25 a share, the value of

Wasserstein's investment in the Company would jump from $30 million to $300 million, h e would own l 1 percent of the Company, and be paid an annual salary of $4 .8 million:

Lazard's filing may explain why Wasserstein has pushed so hard for a public offering. If the offering is completed, the $30 million investment that Wasserstein made in Lazard three years ago would be worth about $300 million. He and his family's trust would own about 11 percent of the company. He would also be paid a base salary of $4.8 million for each of the next three years, as well as a bonus.

49. According to the International Herald Tribune article, defendants Golub ,

Castellano and Hoffman were similarly motivated by their own opportunities to profit from the

IPO:

-14- Castellano, the chief financial officer, would be paid $2 million ; and Scott Hoffman, the general counsel, would be paid $2 .25 million.

50. Similarly, an April 12, 2005 article in the New York Post, entitled "Bruce Is Loose

- Wasserstein's Lazard IPO to Net Him $315m (M) -Bruce Has Juice - Wasserstein's Lazard

IPO to Net Him $315M," observed :

Wall Street heavy Bruce Wasserstein expects to raise about $824 million from taking the venerable Lazard banking group public - and will personally gain about $315 million .

Thus, in light of the Company's financial position and the need to raise $1 .6 billion to buy out David-Weill and the Historical Partners, Wasserstein and Lazard needed to price the stock at least $25 .

51 . Despite the Individual Defendants' obvious incentives to make the deal a reality, there was one problem - the IPO price had to be at least $25 per share in order to complete the buy-out.

52 . Specifically the planned offerings needed to raise total proceeds in excess o f

$1 .824 billion to complete Lazard's reorganization and to buy out David-Weill and the Historical

Partners: the Company needed $67 million and $83 million to recapitalize LFCM Holdings and

LAZ-MD Holdings, respectively, and $57 .6 million to repay certain notes, in addition to the

$1 .6 billion for David-Weill and the Historical Partners .

53. Lazard's private securities offerings, which were fully subscribed, were expected to raise net proceeds of approximately $1 .026 billion. Specifically, the Company was selling its

Equity Securities Units at $25 per unit for an aggregate price of $287 .5 million, which was expected to raise net proceeds of $276 .5 million; Lazard's 7 .125 percent Senior Notes offering were going to be sold for $550 million ; and a private placement of Lazard securities with IXIS-

Corporate Investment Bank was expected to raise $200 million ($150 million in equity security

units, and $50 million in common stock) .

-15- 54. Assuming that the private securities offerings raised approximately $1 .026 billion, the Defendants would be left with a $775 million funding gap to be filled by the IPO . At an offering price of $25 per share, the IPO was expected to raise gross proceeds of $854.5 million, which would net the Company approximately $788 million, thus reaching the Defendants' goal of raising $1 .8 billion. However, if the IPO were priced at $22 a share, i.e., the maximum price supported by the true demand for the Company's stock, Lazard would net approximately $686 million from the IPO . This would leave Wasserstein and the Defendants with a funding shortage of approximately $100 million and, more importantly, unable to complete the buy-out of David-

Weill and the Historical Partners . For this reason, despite knowing that the market would not support the $25 offering price, Defendants nevertheless pushed forward with it .

55 . Lazard and the Individual Defendants, like Goldman Sachs and the other

Underwriter Defendants, specialize in taking companies "public," and had intimate knowledge of how the pricing of shares in IPOs is determined as well as the implications of "indications of interest," which are advance orders for IPO shares. Indications of interest are highly objective factors used to set an initial offering price.

56. In an IPO, the lead underwriter's job is to negotiate an initial public offering price for the securities with the issuer, purchasing the securities from the issuer at a discount an d reselling them on the market at the public offering price . The difference or "spread" between the amount the underwriter pays for the securities and the price at which the securities are sold to the public makes up the underwriter's compensation for its services . Because in a firm commitment underwriting the lead underwriter owns the securities, and is obligated to pay the issuer for the securities regardless of whether it can resell them, it may assemble a group of underwriters, known as a syndicate, to help absorb the risk.

-16- 57. After the underwriter develops indications of interest, the issuer's management begins marketing the IPO by going from city to city talking with large investors, such as institutional investors . This marketing tour is referred to as the "road show ." During the road show, companies try to impress institutional and other large investors so that at least a few of them are willing to purchase a significant stake in the company .

58 . Before the IPO, Goldman Sachs's corporate finance department had developed indications of interest by distributing preliminary, pre-IPO prospectuses to its existing clients an d other potential purchasers of the IPO . The recipients of the preliminary prospectuses then provided indications of interest reflecting the quantity and price at which they would be willing to purchase shares in Lazard's IPO . These indications of interest showed that the market would accept, at most, an IPO price of $21 and $22 per share - well below the $25 IPO price that

Wasserstein and Lazard needed and were insisting on .

59 . From these indications of interest, Goldman Sachs knew that the market would trade Lazard's shares between $21 and $22 a share in the aftermarket. Nonetheless, Wasserstein and Lazard pushed for the $25 price, and Goldman Sachs ultimately agreed . Indeed, Goldman

Sachs was highly motivated to complete the IPO so that it could obtain its share of the $42 .7 million in underwriting fees . Goldman Sachs set the price at that level in part because it was dealing with a sophisticated client in Lazard and, according to a May 29, 2005 The New York

Times article titled, "Wasserstein's Latest Coup : Trumping Goldman Sachs" (the "May 29 New

York Times article"), as a result of pressure from Lazard and Wasserstein :

Under pressure from Lazard to get the highest possible price, Goldman set the original range between $25 and $27 a share. That was probably a bit too high, and that mistake was compounded when the final price had to be determined . Instead of lowering it to about $22 a share - a price point some bankers internally championed because of weak demand - Goldman decided to push for $25 a share ,

-17- the minimum it had promised to Lazard and the amount required to allow Mr. Wasserstein to pay Mr. David-Weill.

While banks usually set the share price with input from their clients, this client was different: Lazard is an investment bank that had its own views .

60. Indeed, according to the former Company Vice President, Goldman Sachs' decision to underwrite the Lazard IPO was "fairly controversial" within Goldman Sachs .

According to this former insider, Wasserstein exerted a lot of pressure on Goldman Sachs to ge t the highest possible price for the IPO . "It was classic Bruce [Wasserstein] . He pushed

[Goldman Sachs ] to the limit in terms of valuation ," the former Vice President said.

61 . Unbeknownst to the investing public, Wasserstein would not sign off on the

Registration Statement/Prospectus unless the IPO was priced at $25 . Absent Wasserstein' s agreement, the IPO could not go forward, which would mean that Goldman Sachs would lose it s share of the $42 .7 million in underwriting fees, as well as $10 million for due diligence wor k related to the IPO. Moreover, since Goldman Sachs's fees increased with a higher IPO price,

Goldman Sachs had a strong incentive to accede to Wasserstein's insistence on the $25 offerin g price.

62. Knowing the $25 per share offering price was too high, Wasserstein, Goldma n

Sachs and Lazard created a scheme to artificially inflate the stock price in order to mitigate th e risk Goldman Sachs would face if it would not be able to sell all of the stock it promised to bu y from Lazard as lead underwriter. Specifically, Goldman Sachs made arrangements to sel l

Lazard's common stock to hedge funds and other "flippers," that is, short-term investors wh o buy IPO shares, swiftly spinning them out into public markets for a quick profit . Goldman Sach s would then buy the shares on the market to cover the flippers' selling and to further create th e false appearance of strong demand .

-18- 63 . Flippers are market participants who try to get shares of stock at the IPO price an d immediately sell the shares in the aftermarket . While many flippers are small players looking fo r a point or two of quick profit, large, well-known hedge funds also practice flipping . It is a controversial practice because the underwriters want to control the trading in the IPO immediately after it goes public and the company wants their shares placed with long-ter m investors.

64. Underwriters typically avoid selling IPO shares to flippers and instead try to plac e stock in the hands of long term investors, particularly ones that have promised aftermarke t orders. Nevertheless, flippers who are identified by underwriters move on to flip again b y setting up new firms . Brokerage firms try to curb flipping by individual investors by imposin g waiting periods and fees on sellers and a penalty bid on the investor's broker . To the underwriter's dismay, however, the largest institution investors and hedge funds continue to fli p with impunity because of their great size and influence .

65. As Judge Scheindlin stated in her opinion in In re Initial Public Offering

Securities Litigation , 241 F. Supp. 2d 281 , 388 n.108 (S.D.N.Y. 2003),

"Flipping" is a practice that many consider disruptive to syndicated underwriting . Flipping occurs when persons who purchase shares in initial public offerings ("subscribers") turn around and sell their shares quickly . It is often appealing for a subscriber to flip because the combination of public offering publicity and the practice of purposely underpricing offerings serves to drive-up the stock price in initial trading. However, if many subscribers flip, their collective action can cause a glut of shares to enter trading, depressing the stock price. The depressed stock price, in turn, can disrupt the efficient distribution of the stock .

66. According to the May 29 New York Times article, Goldman Sachs sold shares o f

Lazard stock to the flippers and then bought up the excess stock in the market in an effort t o manipulate the market price to maintain the market price of Lazard's common stock near it s artificially high initial offering price of $25 per share :

-19- To meet Lazard's demands, Goldman sold many of the shares to hedge funds with quick trigger fingers . That meant the moment the stock began trading, thousands of shares flooded the market. Hoping to blunt the selloff, Goldman stepped in, as underwriters often do, to try to establish a floor for the stock by buying up the shares itself.

67. While underwriters are permitted to engage in limited trading to stabilize the price of securities in an IPO, Goldman Sachs' trading was far from typical and was not permissible .

Goldman Sachs knew that the initial $25 per share price was well above the $21-22 per share the market would accept pre-IPO, and knew that it was assuming the risk of absorbing the difference between the initial price and the price at which the stock would legitimately trade . Goldman

Sachs' conduct was unlawful and manipulative because it knew the initial offering price of $25 per share was too high and was not based on objective market indicators but instead was dictated by Wasserstein's and Lazard's need to raise capital to buy out David-Weill and the Historical

Partners.

68. The Lazard IPO debuted on May 5, 2006 at $25 a share . Predictably, the market did not support the $25 per share offering price, and as a result, the stock plummeted almost immediately. According to a Form 3 filed with the SEC on or about May 23, 2005, at the close of trading on May 5, 2005, Goldman Sachs owned 6,075,000 shares of Lazard stock . Thus,

Goldman Sachs was only able to sell to its clients at the IPO price approximately 4 .2 million out of approximately 10.2 million shares, or 40% of its allocation.

69. Because it was unable to sell much of the Lazard common stock to long-term investors, Goldman Sachs was forced to buy up an unprecedented amount of Lazard stock in an attempt to create the false impression of strong demand . According to an article in the New York

Post dated May 26, 2005 and titled, "IPO Backlash - Goldman Took $15M Bath on Lazard

Offering" (the "May 26 New York Post article"), Goldman Sachs' need to repurchase so soon

after Lazard's stock hit the market in fact showed that it had purposefully sold to flippers: -20- Goldman's equity syndicate desk wound up buying back over 10 percent of the stock on May 5 and 6 as institutional money managers traded out of a stock many had seen as sharply overpriced at its initial offering price of $25 .

Goldman spent $75.8 million between May 5 and May 13 to try and stabilize the sinking stock. After trading up slightly to $25 .10 on May 5, the stock began a slide that eventually forced the price down $1, rare for an IPO of a high-profile company like Lazard.

The filings show that Goldman's traders bought stock in both small and large amounts all the way down to $24.10.

In fact, the filings show that by the time the price got to $24.90, Goldman had already bought 3 .8 million shares, an indication that Goldman had sold much of the Lazard IPO to so-called "flippers," which are hedge funds who buy the deal hoping to capture a small profit before selling it.

Once the price started to tick down, Goldman was bombarded with stock as their customers sought to avoid losses.

70. As the May 26, New York Post Article repo rted, once aftermarket trading in

Lazard stock began, Goldman Sachs began its massive buying of Lazard shares to artificially inflate Lazard's stock price and give investors the false impression that there was strong deman d for the shares . On May 5, 2005, the first day of trading, Goldman Sachs purchased more than

2.4 million shares of Lazard in the open market at prices between $24 and $25 per share .

Between May 6 and May 10, 2005, Goldman Sachs continued its manipulative trading in order to maintain the artificially inflated price of Lazard' s shares, and purchased an additional 741,180 shares of Lazard common stock at prices from $22.89 to $25 .00. These purchases, along with a small number of sales of Lazard stock, were confirmed in several Form 4s filed with the SEC on or about May 23, 2005 .

71 . By May 10, 2005, Goldman Sachs owned more than 6 .2 million shares o f

Lazard - a staggering 18% of the total shares sold in the IPO . Once Goldman Sachs realized it could no longer artificially-inflate the market price for Lazard stock, it abandoned it s manipulative trading and the stock price plunged to levels reflecting its true demand . From May

-21- 10 to May 12, the closing price of Lazard common stock fell from $24 .00 to $21 .61, a decline of

9%. On May 12, 2005, only days after the IPO, and right after Goldman Sachs stopped buying the Company's shares, the price of Lazard's shares plunged to close at $21 .61 per share - almost exactly the price the indications of interest had shown . Lazard stock continued trending downward over the next several trading days, falling to a low of $20 .40 on May 17, 2005, a decline of approximately 19% from the $25 .00 offering price . During this same period, the S&P

500 index actually increased from 1,166 on May 10, 2005 to 1,173 on May 17, 2005 .

72. Goldman Sachs continued its deceptive and manipulative conduct even after its massive intervention in the trading of Lazard's stock ended by delaying the filing of SEC form s disclosing its trades . The Form 3 and Form 4s, which detailed Goldman Sachs' ownership of and trading in Lazard stock, were filed more than two weeks past the deadline as required by the

SEC. Had these Forms been filed on a timely basis, investors would have been made aware that

Goldman Sachs was manipulating the aftermarket in Lazard's stock in order to artificially inflate its price.

73. Goldman Sachs' manipulative trading of Lazard's common stock falls outside the protection of Rule 104 of Regulation M of the Exchange Act, which allows for limited trading by underwriters until a public distribution of shares has been completed . Rule 104 provides, in part, however, that "[n]o stabilizing shall be effected at a price that the person stabilizing knows or has reason to know is in contravention of this section, or is the result of activity that is fraudulent, manipulative, or deceptive under the securities laws, or any rule or regulation thereunder." 17 C .F.R. §242.104(a). By dominating and controlling Lazard's public float in the

IPO aftermarket, Goldman Sachs' conduct violated the antifraud provisions of the Exchange Act .

-22- 74. Although it took in $25 million through the Lazard IPO, Goldman Sachs eventually spent a total of $15 million buying and selling Lazard stock in the IPO . According to the May 26 New York Post article :

Goldman Sachs' plum role as the lead underwriter of Lazard Freres' initial public offering three weeks ago has cost the investment banking powerhouse $15 million.

Bringing Lazard public quickly proved costly to Goldman as investors dumped the stock and forced Goldman to spend $15 million of its own cash to keep Lazard's stock from tanking, according to SEC filings .

Lazard, which sold 34.2 million shares on May 5 through an underwriting group led by Goldman and including Merrill Lynch and CitiGroup, raised $855 million in an IPO that capped two years of brutal infighting that almost cost CEO Bruce Wasserstein his job.

Goldman earned $25 million on the IPO .

75 . In contrast to the Lazard IPO, the recent similar IPO for Greenhill & Co .

("Greenhill"), an investment banking boutique, was an immediate success . As the Barron 's

article observed, the difference in results was due to the differences between the companies :

The bull case for Lazard is it offers the purest play on rising global merger-and- acquisition activity and that its shares trade at a discount to Greenhill & Co . (GHL), the only comparable public company . Greenhill, the investment banking boutique headed by veteran dealmaker Robert Greenhill, has done well since its IPO last May, rising 83% to a recent 32, valuing the company at a lofty 22 times projected 2005 profits of $1 .43 a share.

But Greenhill has certain attributes lacking in Lazard, including a clean balance sheet with a positive book value of $4 a share and reputation as a well-managed outfit that lacks the fractious history of Lazard . And even with these advantages, Greenhill's valuation still is rich, a lofty eight times book value . That casts Lazard in an even more unfavorable light.

76. As investment banking professionals, Defendants were well aware of the succes s

of Greenhill's IPO, the reasons why it was a success : unlike Lazard's, Greenhill's IPO was

priced in accordance with the Company's value and the concomitant market demand .

Defendants were able use the Greenhill IPO as a gauge and knew that the Lazard IPO woul d

-23- suffer a different outcome. Defendants knew that the initial IPO price of Lazard's common stock was set too high for market demand and that Lazard's IPO stock would not sell at the initial $2 5 price .

MATERIALLY FALSE AND MISLEADING STATEMENTS ISSUED DURING THE CLASS PERIOD

77. On May 6, 2005, Lazard filed the Registration Statement/Prospectus . Regarding the factors relied on in setting the initial offering price for Lazard's stock, the Registration

Statement/Prospectus represented that Defendants considered prevailing market conditions an d market valuations of companies in related summaries:

Prior to this offering, there has been no public market for the shares of our common stock. The initial public offering price has been negotiated between us and the representative. Among the factors considered in determining the initial public offering price of the shares , in addition to prevailing market conditions, were our historical performance, estimates of our business potential and earnings prospects , an assessment of our and LAZ-MD Holdings' management and the consideration of the above factors in relation to market valuation of companies in related businesses. [Emphasis added.]

78 . The statements quoted in the preceding paragraph were materially false and misleading when issued because the Defendants failed to disclose that the price of Lazard's IP O was dictated, in large part, by Wasserstein's need to raise $100 million more than the Company would receive from an offering at $22 per share to pay David-Weill and the Historical Partners , and that Defendants disregarded the prevailing market conditions, including the objective dat a obtained through indications of interest, as alleged herein . In fact, every market indication given to Defendants suggested an initial price of $21-22 per share, as evidenced by the indications of interest submitted to the Underwriter Defendants before the IPO .

79. The Registration Statement/Prospectus purported to warn potential investors i n the Lazard IPO that Goldman Sachs might trade in Lazard securities for limited purposes prior to the closing of the IPO: -24- Purchases to cover a short position and stabilizing transactions may have the effect of preventing or retarding a decline in the market price of the company's stock and, together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of shares of our common stock . As a result, the price of shares of our common stock may be higher than the price that otherwise might exist in the open market . If these activities are commenced, they may be discontinued at any time . These transactions may be effected on the NYSE, in the over-the-counter market or otherwise .

80. The statements quoted in the preceding paragraph were materially false and misleading when issued because the Defendants failed to disclose that :

(a) Defendants knew that the initial $25 price was significantly higher than the true level of demand for Lazard stock, which could only support an offering price in th e range of $21-22;

(b) Defendants knew that Goldman Sachs would be required to engage in the manipulative trading alleged herein to artificially bolster and sustain the price of Lazard' s common stock in the post-IPO market .

81 . The Registration Statement/Prospectus was also false and misleading when issue d because Defendants failed to disclose the following material adverse facts :

(a) that to "create a market" and thereby manufacture an appearance tha t

Lazard's IPO was fairly and properly priced, Goldman Sachs arranged to sell millions of share s to hedge funds with side agreements that they could immediately "flip the shares" without negative consequences such as penalty bids or being locked out of future IPOs by Goldma n

Sachs;

(b) that a market for the IPO at a price of $25 per share did not exist . In fact, the $25 price was arrived at because Wasserstein dictated it . If the IPO took place at any price below $25 per share, Wasserstein would be unable to fund the acquisition of David-Weill' s equity stake by only using the proceeds of the IPO . Defendants knew that a "market" above $2 2

-25- per share did not exist for Lazard stock. Instead of lowering the IPO price to about $22 per share

- a price level Goldman Sachs recommended because of weak demand and objective factor s received through the indications of interest - Goldman Sachs decided to push for $25 per share , the minimum amount required to allow Wasserstein to pay David-Weill ; and

Regulation S-K Item 505 which requires a prospectus to describe "the various factors considere d in determining the offering price" when common shares without an established public tradin g market are being registered.

THE TRUTH BEGINS TO EMERGE

82. On May 23, 2005, a Form 4 was filed with the SEC reporting that between May 5,

2005 and May 6, 2005 Goldman Sachs purchased 2,417,500 shares of Lazard stock for betwee n

$24 and $25 per share . Although SEC regulations require that Form 4s be filed within 48 hours after consummating a buy or sell, Goldman Sachs filed its Form 4s more than 2 weeks late .

83 . Also on May 23, 2005, a Form 4 was filed with the SEC reporting that betwee n

May 6, 2005 and May 10, 2005 Goldman Sachs purchased 590,080 shares of Lazard stock for between $22.89 and $25 per share . This Form 4 was also filed more than 2 weeks after it wa s due, i.e., 48 hours after consummating a buy or sell .

84. On May 29, 2005, an article entitled "Wasserstein's Latest Coup : Trumping

Goldman Sachs" appeared in The New York Times . The article stated in part:

Lazard's offering went off the rails long before it began trading on the New York Stock Exchange under the symbol LAZ. Under pressure from Lazard to get the highest possible price, Goldman set the original range between $25 and $27 a share. That was probably a bit too high, and that mistake was compounded when the final price had to be determined. Instead of lowering it to about $22 a share - a price point some bankers internationally championed because of weak demand - Goldman decided to push for $25 a share, the minimum it had promised to Lazard and the amount required to allow Mr. Wasserstein to pay Mr . David- Weill. -26- While banks usually set the share price with input from their clients, this client was different : Lazard is an investment bank that had its own views .

To meet Lazard's demands, Goldman sold many of the shares to hedge funds with quick trigger fingers . That meant the moment the stock began trading, thousands of shares flooded the market . Hoping to blunt the selloff, Goldman stepped in, as underwriters often do, to try to establish a floor for the stock by buying up the shares itself.

85 . Thus, it was now clear why Goldman Sachs and Lazard deliberately overpriced the IPO:

(a) The Underwriter Defendants reaped nearly $43 million in underwritin g proceeds for the IPO alone, with Goldman Sachs securing a substantial portion of that amount; and

(b) Wasserstein, with the assistance of Goldman Sachs, raised the requisit e funds for Wasserstein to pay David-Weill for his interest in Lazard. It now trades on the New

York Stock Exchange . Its shares are fungible . Moreover, Lazard received $138 million more than it would have raised had the IPO taken place at $22 .00, which Wasserstein used to make up for the differential in what was owed/promised to David-Weill.

ADDITIONAL SCIENTER ALLEGATION S

86. The facts alleged herein compel a strong inference that Goldman Sachs engaged in a manipulative scheme to artificially inflate the price of Lazard's common stock in order t o complete the IPO and reap millions of dollars in banking and underwriting fees .

87 . Goldman Sachs' scheme involved: (a) deceiving the investing public regarding demand for shares of Lazard stock in the IPO ; (b) manipulating Lazard's share price in th e aftermarket so that that investors falsely believed that there was real demand for Lazard stock ; and (c) filing more than two weeks late the required SEC filings that detailed Goldman Sachs ' ownership of, and trading in, Lazard stock to cover up the scheme . This scheme cause d

-27- Plaintiffs and other members of the Class to purchase Lazard's common stock at artificiall y inflated prices and suffer damages once Goldman Sachs' manipulative scheme ended .

88. As reported in an April 13, 2005 article in the International Herald Tribune entitled, "Lazard IPO Filing Hints That Chief Is on Verge of Goal," Wasserstein completed the deal to avoid being fired:

89. According to the same April 13, 2005 article in the International Herald Tribune, by completing the Lazard IPO, Wasserstein and other Lazard directors and officers received a substantial financial windfall :

Other top Lazard executives stand to make a windfall . Its vice chairman, Steven Golub, would be guaranteed $3 million in annual base pay for the next three years. The president, Charles Ward 3rd, would also be paid $3 million ; Michael Castellano, the chief financial officer, would be paid $2 million ; and Scott Hoffman, the general counsel, would be paid $2 .25 million.

-28- APPLICABILITY OF THE FRAUD-ON-THE-MARKET PRESUMPTION OF RELIANC E

90. Plaintiffs and the members of the Class are entitled to the presumption of relianc e upon Defendants' fraudulent misrepresentations and omissions that is provided by the fraud o n the market doctrine because, at all relevant times, the market for Lazard common stock wa s efficient, i.e., the market promptly digested information regarding Lazard's operations an d prospects from all publicly available sources and reflected such information in the price o f

Lazard common stock .

91 . The following factors, among others, caused the market for Lazard common stock to operate efficiently:

(a) During the Class Period, Lazard common stock met the requirements for listing on, and was listed and actively traded on, the NYSE, a highly efficient market;

(b) As a regulated issuer, Lazard filed periodic public reports with the SEC;

(c) Lazard regularly communicated with public investors via established market communication mechanisms such as the regular dissemination of press releases on major news wire services, regular communications with the financial and trade press and through meetings with institutional investors and other major Lazard shareholders ; and

(d) Lazard was followed by several securities analysts employed by majo r brokerage firms and institutional investors, who analyzed the Company's operations an d prospects on a regular basis and who recommended the purchase or sale of Lazard stock on th e basis of those analyses .

LOSS CAUSATION/ECONOMIC LOS S

92. During the Class Period, as detailed herein, Defendants engaged in a scheme t o deceive the market and a course of conduct that artificially inflated Lazard's stock price an d

-29- operated as a fraud or deceit on Class Period purchasers of Lazard stock. Defendants artificially inflated the price of Lazard's common stock by :

(a) Setting an initial price for the IPO that Defendants knew was unacceptable to the market; -

(b) Entering into a scheme to sell shares to "flippers" and then buy back th e stock.

93 . As a result of their purchases of Lazard stock du ring the Class Period, Plaintiffs and other members of the Class suffered economic loss, i.e. damages under the federal securitie s laws. When the scheme to inflate the price of Lazard stock finally ceased at the end of the Clas s

Period, shares of Lazard stock declined and the artificial inflation came out of Lazard's stoc k price.

94. Defendants' false and misleading statements and scheme to defraud had th e intended effect and caused Lazard stock to trade at artificially inflated levels, reaching on May 5,

2005 as high as $25 .20 per share. By the close of trading on May 12, 2005, Lazard's stock pric e had dropped to $21 .61 per share.

CLASS ACTION ALLEGATIONS

95 . 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 those who purchased the shares of Lazard pursuant and/or traceable to the Company's false and misleading Registration

Statement/Prospectus, issued in connection with the IPO, together with those who purchased

their shares in the open market between May 5, 2005 and May 12, 2005, inclusive, and who were

damaged thereby (the "Class"). Excluded from the Class are Defendants, the officers and

directors of the Company, at all relevant times, members of their immediate families and thei r

-30- legal representatives, heirs, successors or assigns and any entity in which Defendants have or had a controlling interest.

96. The members of the Class are so numerous that joinder of all members i s impracticable. Throughout the Class Period, Lazard shares were actively traded on the NYSE .

While the exact number of Class members is unknown to Plaintiffs at this time and can only b e ascertained through appropriate discovery, Plaintiffs believe that there are hundreds or thousand s of members in the Class . Record owners and other members of the Class may be identified fro m records maintained by Lazard or its transfer agent and may be notified of the pendency of thi s action by mail, using. the form of notice similar to that customarily used in securities clas s actions .

97. Plaintiffs' claims are typical of the claims of the members of the Class as al l members of the Class are similarly affected by Defendants' wrongful conduct as complained o f herein.

98. Plaintiffs will fairly and adequately protect the interests of the members of the

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

99. 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 a s alleged herein;

(b) whether statements made by Defendants to the investing public during th e

Class Period misrepresented material facts about Lazard ; and

-31- (c) to what extent the members of the Class have sustained damages and th e proper measure of damages.

100. 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 .

COUNT I

Violation of Section 11 of the Securities Act

(Against All Defendants )

101 . Plaintiffs repeat and reallege each and every allegation contained above as if fully

set forth herein, except that, for purposes of this claim, Plaintiffs expressly exclude and disclaim

any allegation that could be construed as alleging fraud or intentional or reckless misconduct .

102. This claim is brought on behalf of a Class of all purchasers of Lazard common

stock who purchased such shares pursuant to and/or traceable to the May 2005 Registration

Statement/Prospectus and who were damaged thereby, seeking to pursue remedies under the

Securities Act against Lazard, the issuer of the stock, the Individual Defendants who were

Lazard's directors and/or signatories of the Registration Statement/Prospectus for the May 2005

IPO and the Underwriter Defendants who were the Underwriters of the IPO . Lazard and the

Individual Defendants signed the Registration Statement/Prospectus, which contained untrue

statements of material fact or omitted to state facts required to be stated therein or necessary to

make the statements therein not misleading, and are liable under section 11(a)(1) and (2) .

-32- 103. Each of the Defendants named in this Count is liable under section 11(a) of the

Securities Act because the Registration Statement/Prospectus , when it became effective, contained untrue statements of material fact or omitted to state mate rial facts required to be stated therein or necessary to make the statements therein not misleading .

104. Lazard went public on May 5, 2005 in an IPO pursuant to the Registration

Statement/Prospectus filed and effective with the SEC, at $25 per share, in which Lazard sold

34.18 million shares, raising over $855 million in total gross proceeds .

105 . Defendants Wasserstein, Golub, Hoffman and Castellano each signed the

Registration Statement/Prospectus . Because the Registration Statement /Prospectus contained untrue statements of material fact or omitted to state a material fact required to be stated therein or necessary to make the facts stated therein not misleading , each of these Defendants is liable as

"a person who signed the Registration Statement ," under section 11 (a)(l), 15 U .S.C. §77k(a)(1).

106. Defendants Wasserstein, Golub, Hoffman and Castellano were directors of Lazard when the Registration Statement/Prospectus became effective. Because the Registration

Statement /Prospectus contained untrue statements of material fact or omitted to state material facts required to be stated therein or necessary to make the facts stated therein not misleading, each of these Defendants is liable as a director under section 11 (a)(2), 15 U.S .C . §77k(a)(2).

107 . The Underwriter Defendants were underwriters, as that term is used in Section

11(a)(5) of the Securities Act, with respect to the shares sold in the IPO through the Registration

Statement/Prospectus . The Underwriter Defendants were required to investigate with due diligence the representations contained therein to confirm that they did not contain materially misleading statements or omit to state material facts . The Underwriter Defendants did not make a reasonable investigation or possess reasonable grounds for the belief that the statement s

-33- described herein, which were contained in the Registration Statement/Prospectus, were true, were without omission of any material facts, and/or were not misleading .

108. Each of the Underwriter Defendants was an underwriter within the meaning of th e

Securities Act.

109. Plaintiffs and other members of the Class purchased shares of Lazard pursuant to and traceable to the stock offering without knowledge of the untruths or omissions alleged herein, and sustained damages as a result . Plaintiffs and the other members of the Class coul d not have reasonably discovered the nature of Defendants' untruths and omissions prior to their purchases.

110. This action was brought within one year after the discovery of the untru e statements and omissions and less than three years after the stock offering .

COUNT II

Violations of Section 12(a)(2) of the Securities Ac t

(Against the Underwriter Defendants)

111 . Plaintiffs repeat and reallege each and every allegation contained above, except that, for purposes of this claim, Plaintiffs expressly exclude and disclaim any allegation tha t could be construed as alleging fraud or intentional or reckless misconduct.

112. This Count is brought pursuant to Section 12(a)(2) of the Securities Act, on behalf of the Class, against the Underwriter Defendants .

113 . Defendants were sellers and offerors and/or solicitors of purchasers of the share s offered pursuant to the Registration Statement/Prospectus .

114. The Registration Statement/Prospectus contained untrue statements of materia l facts, omitted to state other facts necessary to make the statements made not misleading, an d concealed and failed to disclose material facts . The Individual Defendants' actions o f -34- solicitation included participating in the preparation of the false and misleading Registratio n

Statement/Prospectus .

115. Defendants owed to the purchasers of Lazard shares, including Plaintiffs an d other class members, the duty to make a reasonable and diligent investigation of the statements contained in the IPO materials, including the Registration Statement/Prospectus contained therein, to ensure that such statements were true and that there was no omission of a material fact required to be stated in order to make the statements contained therein not misleading .

Defendants knew of, or in the exercise of reasonable care should have known of, th e misstatements and omissions contained in the IPO materials as set forth above .

116. Plaintiffs and other members of the Class purchased or otherwise acquired Lazar d shares pursuant to and/or traceable to the defective Registration Statement/Prospectus . Plaintiffs did not know, or in the exercise of reasonable diligence could not have known, of the untruth s and omissions contained in the Registration Statement/Prospectus .

117. Plaintiffs, individually and representatively, hereby offer to tender to Defendant s those securities that Plaintiffs and other Class members continue to own, on behalf of al l members of the Class who continue to own such securities, in return for the consideration pai d

for those securities together with interest thereon. Class members who have sold their Lazard

shares are entitled to rescissory damages .

118 . By reason of the conduct alleged herein, these Defendants violated, and/or

controlled a person who violated, § 12(a)(2) of the Securities Act . Accordingly, Plaintiffs and

members of the Class who hold Lazard shares purchased in the IPO have the right to rescind an d

recover the consideration paid for their Lazard shares and hereby elect to rescind and tender thei r

-35- Lazard shares to the Defendants sued herein . Plaintiffs and Class members who have sold thei r

Lazard shares are entitled to rescissory damages .

COUNT II I

Violation of Section 15 of the Securities Act

(Against Defendants Wasserstein, Golub, Castellano, and Hoffman )

119. Plaintiffs repeat and reallege each and every allegation contained above as if full y set forth herein, except that, for purposes of this claim, Plaintiffs expressly exclude and disclai m any allegation that could be construed as alleging fraud or intentional or reckless misconduct.

120. Wasserstein, Golub, Castellano, and Hoffman were each a "control person" of the

Company within the meaning of Section 15 of the Securities Act, by virtue of their positions o f operational control and/or authority over the Company . Wasserstein, Golub, Castellano, an d

Hoffman directly and/or indirectly had the power and authority, and exercised the same, to caus e

Lazard to engage in the wrongful conduct complained of herein . Wasserstein, Golub,

Castellano, and Hoffman issued, caused to be issued, and participated in the issuance o f materially false and misleading statements in the Registration Statement/Prospectus .

121 . Pursuant to Section 15 of the Securities Act, by reason of the foregoing ,

Wasserstein, Golub, Castellano, and Hoffman are liable to Plaintiffs to the same extent as are

Defendants for the violations of sections 11 and 12 of the Securities Act alleged in this action .

122. By virtue of the foregoing, Plaintiffs and the other Class members are entitled t o damages against Wasserstein, Golub, Castellano, and Hoffman .

-36- COUNT IV

Violation of Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c)

(Against Defendants Goldman Sachs, Lazard, Wasserstein, Golub, Castellano, and Hoffman )

123. Plaintiffs repeat and reiterate each and every allegation contained above as if full y set forth herein.

124. During the Class Period, Goldman Sachs, Lazard, and Wasserstein, Golub ,

Castellano, and Hoffman (the "10(b) Defendants") engaged in a scheme to manipulate the pric e of Lazard's common stock by purchasing massive amounts of the stock both in the IPO and in the aftermarket. These purchases created an artificial market for Lazard's stock and gav e investors the false impression that there was real demand for the Company's shares at or around the IPO p rice of $25 .00 . In fact, there was little such demand.

125 . The manipulative scheme .employed by the 10(b) Defendants particularized in this

Complaint directly or proximately caused, or was a substantial contributing cause of, the damages sustained by Plaintiffs and other members of the Class. The 10(b) Defendants ' manipulative scheme resulted in Plaintiffs and other members of the Class purchasing th e

Company's common stock at artificially inflated prices, thus causing the damages complained o f herein.

126. During the Class Period, the 10(b) Defendants directly engaged in a commo n plan, scheme, and unlawful course of conduct, pursuant to which they knowingly or recklessl y engaged in acts, transactions, practices, and courses of business that operated as a fraud an d deceit upon Plaintiffs and the other members of the Class, and engaged in various deceptive an d manipulative acts . The nature, purpose and effect of the scheme, plan, and unlawful course o f conduct was, among other things, to deceive the investing public, including Plaintiffs and th e -37- other members of the Class, to induce Plaintiffs and the other members of the Class to purchase

Lazard's common stock during the Class Period at artificially inflated prices, to artificially inflate the stock price in order to mitigate Goldman Sachs ' risk, and to further create the artificial, false, and fraudulent appearance of demand .

127. As a result of the 10(b) Defendants' scheme, the market price of Lazard' s common stock was artificially inflated during the Class Period . Unaware of the manipulative devices and contrivances employed by the 10(b) Defendants, Plaintiffs and the other members of the Class relied, to their detriment, on the integrity of the market price of the stock in purchasing

Lazard's common stock . Had Plaintiffs and the other members of the Class known the truth , they would not have purchased Lazard's common stock or would not have purchased it at the inflated prices that they did. Once the 10(b) Defendants' manipulation of Lazard stock ended, the market price of Lazard common stock plunged from the IPO price of $25 .00 per share to

$20 .40 per share on May 17, 2005, a decline of approximately 19%.

128. Plaintiffs and the other members of the Class have suffered damages as a result of the wrongs herein alleged in an amount to be proved at trial .

129. The 10(b) Defendants engaged in the manipulative scheme in order to sell Lazard shares to the public at $25 in the IPO and in the case of Goldman Sachs, to receive its full underwriting and banking fees in connection with the IPO .

130. By reason of the foregoing, the 10(b) Defendants violated Section 10(b) of the

Exchange Act and Rule 1Ob-5 promulgated thereunder and are liable to Plaintiffs and the other members of the Class for damages that they suffered in connection with their purchases of

Lazard's common stock during the Class Period.

-38- COUNT V

Violation of Section 20(a) of the Exchange Ac t

(Against Defendants Wasserstein, Golub, Castellano, and Hoffman)

131 . Plaintiffs repeat and reallege each and every allegation contained above as if fully set forth herein.

132 . Defendants Wasserstein, Golub, Castellano, and Hoffman acted as controllin g persons of Lazard within the meaning of §20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, and their ownership and contractual rights, participation in and/or awareness of the Company's operations and/or intimate knowledge of the false statements filed by the Company with the SEC and disseminated to the investing public, Wasserstein, Golub,

Castellano, and Hoffman had the power to influence and control and did influence and control, directly or indirectly, the decision-making of the Company, including the content and dissemination of the various statements which Plaintiffs contend are false and misleading .

Wasserstein, Golub, Castellano, and Hoffman were provided with or had unlimited access to copies of the Company's reports, press releases, public filings and other statements alleged by

Plaintiffs to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected .

133. In particular, Wasserstein, Golub, Castellano, and Hoffman had direct and supervisory involvement in the day-to-day operations of the Company and, therefore, are presumed to have had the power to control or influence the particular transactions giving rise to the securities violations as alleged herein, and exercised the same .

134. As set forth above, the 10(b) Defendants each violated § 10(b) and Rule I Ob-5 by their acts and omissions as alleged in this Complaint . By virtue of their positions as controlling

-39- persons, Wasserstein, Golub, Castellano, and Hoffman are liable pursuant to section 20(a) of th e

Exchange Act.

135. As a direct and proximate result of Wasserstein's, Golub 's, Castellano's, an d

Hoffman's wrongful conduct, Plaintiffs and other members of the Class suffered damages in connection with their purchases and sales of the Company's publicly traded securities during the

Class Period.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray for relief and judgment, as follows :

A. Determining that this action is a proper class action and certifying Plaintiffs a s

Class representatives under Rule 23 of the Federal Rules of Civil Procedure ;

B. Awarding compensatory damages in favor of Plaintiffs and the other Class members against all Defendants, jointly and severally, for all damages sustained as a result o f

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

C . Awarding Plaintiffs and the Class rescission on Count II to the extent they stil l hold Lazard shares, or if sold, awarding rescissory damages in accordance with Section 12(a)(2 ) of the Securities Act ;

D. Awarding Plaintiffs and the Class their reasonable costs and expenses incurred i n this action, including counsel fees and expert fees ; and

E. Such equitable/injunctive, legal and/or other relief as deemed appropriate by th e

Court.

-40- JURY DEMAN D

Plaintiffs hereby demand a trial by jury .

DATED: October 31, 2005 LERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LL P SAMUEL H. RUDMAN (SR-7957) DAVID A. ROSENFELD (DR-7564)

DAVID A. ROSENFELD

200 Broadhollow Road, Suite 406 Melville, NY 11747 Telephone : 631/367-7100 631/367-1173 (fax)

LERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LL P DARREN J. ROBBINS 401 B Street, Suite 1600 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax)

Lead Counsel

SCHIFFRIN & BARROWAY, LLP SEAN M. HANDLER ERIC LECHTZIN THOMAS W. GRAMMER 280 King of Prussia Road Radnor, PA 19087 Telephone: 610/667-7706 610/667-7065 (fax)

ZWERLING SCHACHTER & ZWERLING LLP JEFFREY C. ZWERLING KEVIN M. MCGEE 41 Madison Avenue New York, NY 10010 Telephone 212-223-3900 212/371-5969 (fax)

Plaintiffs' Executive Committe e -41- CERTIFICATE OF SERVICE

I, David A. Rosenfeld, hereby certify that on October 31, 2005, I caused a tru e and correct copy of the attached :

Consolidated Amended Class Action Complaint, to be served via first-class mail to all counsel on the attached service list.

David A. Ros nfeld LAZARD (LEAD) Service List - 10/31/2005 (05-0139) Page 1 of 1

Counsel For Defendant(s) Francis P. Barron Bernard W. Nussbaum Cravath, Swaine & Moore LLP Wachtell, Lipton, Rosen & Katz 825 Eighth Avenue, Worldwide Plaza 51 West 52nd Street New York, NY 1001 9 New York, NY 10019 212/474-1000 212/403-1000 212/474-3700(Fax) 212/403-2000(Fax)

Counsel For Plaintiff(s ) Samuel H . Rudman Marc A. Topaz David A. Rosenfeld Richard A. Maniskas Mario Alba, Jr. Tamara Skvirsky Lerach Coughlin Stoia Geller Rudman & Schiffrin & Barroway, LLP Robbins LLP 280 King of Prussia Road 200 Broadhollow Road , Suite 406 Radnor, PA 1908 7 Melville, NY 11747 610/667-7706 631/367-7100 610/667-7056 (Fax) 631/367-1173 (Fax)

Richard A. Speirs Shaye J. Fuchs Zwerling, Schachter & Zwerling, LLP 41 Madison Avenue, 32nd Floor New York, NY 1001 0 212/223-3900 212/371-5969(Fax)