Richard Kaplan, Et Al. V. Gaming Partners International Corporation

G. Mark Albright, Esq. (NV Bar No. 001394) David A.P. Brower Martin A. Muckleroy, Esq. (NV Bar No. 009634) BROWER PIVEN ALBRIGHT STODDARD WARNICK & A Professional Corporation ALBRIGHT 488 Madison Avenue, Quail Park I, Building D-4, 801 South Ranchero Dr Eighth Floor Las Vegas, Nevada 89106 New York, NY 10022 Telephone: (702) 384-7]11 Telephone : (212) 501-9000 Facsimile: (702) 384-0605 Facsimile : (212) 501-0300 E-mail: [email protected] E-mail : [email protected] Liaison Counsel for Lead Plaintiff Kim E. Miller Robert J. Kaplan KAHN GAUTHIER SWICK, LLC 12 E. 41st St., 12th Floor New York, New York 10017 Telephone : (212) 696-3730 Facsimile : (504) 455-1498 E-mail : [email protected] Co-Lead Counsel for Lead Plaintiff Robert J. Kaplan UNITED STATES DISTRICT COURT DISTRICT OF NEVADA ROBERT J. KAPLAN, NO.: 2:07-CV-00849 Individually and On Behalf of All Others Similarly Situated, CLASS ACTION Plaintiff, vs. CONSOLIDATED AND AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF GERARD P. CHARLIER, THE FEDERAL SECURITIES LAWS MELODY SULLIAN a/k/a/ MELODY SULLIVAN YOWELL, DAVID W. JURY TRIAL DEMANDED GRIMES, CHARLES T. MCCULLOUGH, ERIC P. ENDY, ELISABETH CARRETTE, and GAMING PARTNERS INTERNATIONAL CORPORATION, Defendants. CONSOLIDATED AND AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS 1 NATURE OF THE ACTION 1. This is a class action on behalf of all persons who purchased or otherwise acquired the common stock of Gaming Partners International Corp. ("GPIC" or the "Company") between May 15, 2006 and March 28, 2007, inclusive (the "Class Period"), seeking to pursue remedies under the Securities Exchange Act of 1934 (the "Exchange Act"). 2. Lead Plaintiff, Robert Kaplan, (`Plaintiff'), alleges the following based upon information and belief, except as to those allegations concerning the Plaintiff, which are based upon personal knowledge. Plaintiff's information and belief is based upon, among other things: (a) review and analysis of filings made by GPIC with the United States Securities and Exchange Commission ("SEC"); (b) review and analysis of press releases, public statements, news articles, securities analysts' reports and other documentation concerning GPIC; and (c) other publicly available information about GPIC. Most of the facts supporting the allegations contained herein are known only to the Defendants or are exclusively within their control. Plaintiff believes that substantial additional evidentiary support exists for the allegations set forth in this Consolidated Amended Class Action Complaint ("Complaint") that can only be obtained after a reasonable opportunity for discovery. 3. GPIC is a publicly traded company engaged in the manufacture and supply of casino table game equipment to casinos worldwide. The company sells its non-casino poker chips to wholesalers in the United States, and it markets its products directly to end-users and through distributors. The Company's business activities include the manufacture and/or supply of gaming equipment and supplies such as gaming chips, CONSOLIDATED AND AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS 2 table layouts, playing cards, dice, gaming furniture, table accessories and other products that are used with casino table games such as blackjack, poker, baccarat, craps and roulette and selling casino products to licensed casinos for new openings and to existing casino operations, worldwide. 4. During 2006 and early 2007, GPIC portrayed itself as a company experiencing explosive growth with such strong demand for its product that it experienced a consistent backlog of orders. Particularly, in early 2006, the Company consistently announced the anticipated growth the Company would experience with the opening of the new casino in Macao, China.. 5. Throughout the Class Period, Defendants' representations concerning the Company's purported financial condition, growth, income, earnings and prospects disseminated to the investing public through published press releases, investor conference calls or at investor conferences, and/or filed in quarterly or annual reports with the SEC were materially false and misleading and/or omitted to state necessary facts, under the circumstances to make the statements made not false and misleading. 6. In fact, GPIC's reported financial results were attributable to improper accounting practices, including, but not limited to, improper revenue recognition that materially overstated the Company's reported revenues and earnings. 7. Throughout the Class Period, defendants represented to investors that the Company had successfully integrated Paul-Son Gaming's business with Etablissements Bourgogne et Grasset and its former subsidiary, the Bud Jones Company, and that it maintained adequate internal controls and procedures in compliance with Generally Accepted Accounting Principles ("GAAP") and SEC accounting rules. Defendants' CONSOLIDATED AND AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS 3 representations concerning the Company's purported financial condition, growth, income, earnings and prospects disseminated to the investing public through published press releases, quarterly reports and annual reports with the SEC, were materially false and misleading and/or omitted to state necessary facts, under the circumstances to make the statements made not false and misleading. In fact, GPIC lacked adequate financial controls and competent financial staff, and its reported financial results were attributable to improper accounting practices. 8. Unbeknownst to investors, throughout the Class Period the Company's purported internal accounting and financial reporting controls and procedures were seriously defective or virtually non-existent. As a result, the Company reported historical financial results that were materially incorrect and without a basis in fact. Thus, contrary to Defendants public statements, the Company's earnings were not increasing in the amounts that had been represented by Defendants, and the Company's reported earnings statements for interim and annual periods, which were in substantial violation of ("GAAP") and SEC reporting regulations, misstated the Company's financial condition. 9. At the time these false and misleading statements were being issued during the Class Period, which caused the price of GPIC securities to be artificially inflated in value, Individual Defendant, Eric P. Endy, a director of the Company (as defined below), engaged in improper insider sales, profiting at the direct expense of Plaintiff and the Class. 10. On March 28, 2007, GPIC published a press release which revealed, for the first time, in part, that "deficiencies in the Company's accounting control procedures CONSOLIDATED AND AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS 4 were identified... [t]he Company expects to identify certain of these deficiencies as material weaknesses. " The Company shocked investors when they announced that the Company was delaying the filing of its full-year 2006 report due to deficiencies in accounting control procedures. Prior to the March 28, 2007 announcement, GPIC shares were trading at $19.50 per share. 11. In response to these revelations, GPIC' s share price dropped almost 8% in that single day's trading, to close at $18.10 per share. The next day, GPIC shares continued to sharply decline and shares of GPIC were trading as low as $17.26 per share. This substantial share price decline caused material harm to investors, and also caused substantial losses and damages to GPIC shareholders. 12. Then on April 16, 2007, the Company announced that the filing of its annual report on Form 10-K for the year ended December 31, 2006 ('10-K 2006") would be delayed beyond the April 17, 2007 extended filing date. 13. In response to this announcement, on April 18, 2007, the Company received a NASDAQ staff determination letter indicating that the Company was not in compliance with Marketplace Rule 4310(c)(14), which requires timely filing of periodic reports with the SEC for continued listing of the Company's common stock and that the Company's stock was subject to delisting from the NASDAQ Global Market. 14. Defendants' representations during the Class Period concerning the Company's internal operational controls and financial procedures were either patently untrue, or were made with reckless disregard of the true material adverse facts. The undisclosed, material adverse facts about GPIC included the following: (a) Defendants materially misstated the existence of GPIC' s internal CONSOLIDATED AND AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS 5 operational controls and financial procedures, and defendants had propped up the Company's results by manipulating GPIC's accounting procedures; (b) Contrary to defendants' representations, GPIC did not have adequate systems of internal operational or financial controls, and therefore GPIC' s reported financial statements were not true, accurate or reliable. 15. Defendants were motivated to and did conceal the true operational and financial condition of GPIC, and materially misrepresented and failed to disclose the conditions that were adversely affecting GPIC throughout the Class Period, because notwithstanding Defendants' knowledge that GPIC lacked adequate operational and accounting controls, and its lack of experienced and competent financial and accounting staff, due to the nature of its business of providing purportedly security

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