IN THE UNITED STATES DISTRICT COURT FOR THE ...securities.stanford.edu/filings-documents/1027/IBC03-01/...Defendant, IBC, is a Delaware corporation with its principal executive offices

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IN THE UNITED STATES DISTRICT COURTFOR THE WESTERN DISTRICT OF MISSOURI

WALTER E. SMITH, on behalf of :himself and all others : Case No.similarly situated, :

Plaintiff, : CLASS ACTION COMPLAINT: FOR VIOLATION OF: FEDERAL SECURITIES LAWS

VS. : :

INTERSTATE BAKERIES CORP., :FRANK W. COFFEY, MARK DIRKES, :JAMES R. ELSESSER, ROBERT P.: MORGAN, CHARLES A. SULLIVAN, :RICHARD D. WILLSON and :PAUL E. YARICK, :

:Defendants. : JURY TRIAL DEMANDED

Plaintiff, by his undersigned attorneys, by way of this Complaint, alleges the following

upon personal knowledge as to himself and his acts and as to all other matters upon information

and belief, based upon, inter alia, the investigation made by and through his attorneys, including a

review of the public filings of Interstate Bakeries Corporation (“IBC” or “the Company”) with the

Securities Exchange Commission (“SEC”), as well as certain published reports and news articles.

PARTIES.

1. 1. Plaintiff Walter E. Smith, as set forth in the attached certification,

which is incorporated herein by reference, purchased shares of IBC common stock in the open

market between September 17, 2002 and December 17, 2002 inclusive (the “Class Period”), and

suffered damages.

2. Defendant, IBC, is a Delaware corporation with its principal executive offices and

Case 4:03-cv-00142-FJG Document 1-1 Filed 02/20/2003 Page 1 of 30


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headquarters located in Kansas City, Missouri.

3. Defendant, Frank W. Coffey (“Coffey”), was, at all relevant times, the Chief

Financial Officer (“CFO”) of the Company.

4. Defendant, James R. Elsesser (“Elsesser”), was, at all relevant times, the Chief

Executive Officer and/or a Director of the Company.

5. Defendant, Mark Dirkes (“Dirkes”), was, at all relevant times, the Senior Vice

President of Marketing of the Company.

6. Defendant, Robert P. Morgan (“Morgan”), was, at all relevant times, an Officer of

the Company.

7. Defendant, Charles A. Sullivan (“Sullivan”), was, at all relevant times, the

Chairman and a member of the Board of the Company and/or the CEO of the Company.

8. Defendant, Richard D. Willson (“Willson”), was, at all relevant times, a Senior

Vice President of the Company.

9. Defendant, Paul E. Yarick (“Yarick”), was, at all relevant times, the Treasurer of

the Company.

10. Defendants, Coffey, Dirkes, Elsesser, Morgan, Sullivan, Willson and Yarick, are

collectively referred to in this Complaint as the “Individual Defendants.”

JURISDICTION AND VENUE.

11. This Court has jurisdiction over the subject matter of this action under the

Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78aa, and 28 U.S.C. §1331.

The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C.

§§ 78j(b) and 78t(a), as well as Rule 10b-5, 17 CFR § 240.10b-5, as promulgated by the SEC.



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12. Venue is proper in this judicial district pursuant to the provisions of the Exchange

Act and 28 U.S.C. § 1391(b). Many of the acts and transactions giving rise to the violations of

law complained of herein, including the preparation and dissemination to the investing public of

false and misleading information, occurred within this judicial district. In addition, IBC maintains

its headquarters, principal place of business and executive offices within this judicial district.

13. In connection with the acts, conduct and violations of law detailed in this

Complaint, Defendants, at all relevant times, directly and indirectly, utilized the means and

instrumentalities of interstate commerce, including the mails, telephone communications and the

facilities of national securities exchanges.

BACKGROUND

14. This is a securities class action brought on behalf of all persons, other than the

Defendants and related parties, who purchased or otherwise acquired shares of IBC common

stock and other securities in the open market during the Class Period (the “Class”).

15. IBC is the largest baker and distributor of fresh-baked bread and sweet goods in

the United States. The Company distributes its products under various national brand names

including Wonder, Hostess, Dolly Madison and Drake's and operates in excess of sixty (60)

bakeries throughout the United States where its products are manufactured. IBC’s sales of its

sweet goods (i.e., cakes) are its highest profit margin products and are critical to the Company

achieving positive earnings. From in or about 1989 until shortly after the commencement of the

Class Period, IBC was lead by Sullivan, who served as the Company’s CEO and Chairman of the

Board.

16. During 2002, prior to the commencement of the Class Period, IBC’s common



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stock generally traded in the range of between $24 and $28 per share. By early September, 2002,

however, just days before the commencement of the Class Period, IBC’s stock had fallen to as

low as $22.58 per share.

17. During 2002, the Company spent the majority of the year searching for a new CEO

to replace Sullivan who planned to leave IBC before the end of the year.

18. September 5, 2002, IBC announced that it had chosen defendant Elsesser to

assume the duties of CEO effective October 1, 2002. Elsesser had been a Director of IBC since

1995 and, in that capacity, had served on IBC’s Board for a period of seven (7) years under

Chairman of the Board Sullivan.

19. In a press release dated September 5, 2002, IBC highlighted the choice of Elsesser

as a person who (a) already was quite knowledgeable regarding IBC, and (b) would serve the

interests of shareholders and build shareholder value. The press release stated in pertinent part as

follows:

KANSAS CITY, Mo. - - (BUSINESS WIRE) - - Sept. 5, 2002 - - InterstateBakeries Corporation (NYSE:IBC), the nation’s largest baker and distributor offresh branded breadx and sweet goods, today announced that James R. Elsesser, aformer Vice President and Chief Financial Officer for the Ralston Purina Company,has been named Chief Executive Officer for the IBC effective October 1, 2002.

He will replace retiring CEO Charles A. Sullivan.

Mr. Sullivan had served as the Company’s Chairman of the Board and CEO for thepast 13 years. He will remain on the IBC Board as its Chairman.

Mr. Elsesser had served as Chief Financial Officer at Ralston Purina for 16 yearsand played a major role in the negotiations for the sale of Continental BakingCompany to IBC in 1995. He joined the IBC Board of Directors immediatelyfollowing the sale.



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“Jim has met criterion we had set in our search for our new chief executiveofficer,” Mr. Sullivan said. “We have a strong operating team in place that hasaccomplished a lot in the past year. So the Board felt they wanted a goodstrategic leader to complement that operating team and move the Companyto the next level. They also wanted someone who would continue to buildshareholder value and Jim’s track record at Ralston shows he knows how todo that.”

The choice of Mr. Elsesser as CEO ended an extensive search by the Board for asuccessor to Mr. Sullivan. Early in 2002, the Board formed a search committee,which sought assistance from a national executive search firm. The committeeconsidered a large number of highly qualified candidates, both within the Companyand externally, before agreeing that Mr. Elsesser was the best and a logical choice.

Mr. Sullivan said that from an IBC shareholder perspective, the hiring made goodsense.

“Jim has been an active Board member for the past seven years. He has agreat understanding of our business and a good appreciation of what it takesto get things done. With Jim at the helm, we will continue to be the industryleader with a renewed focus on continued growth,”he said.

Mr. Elsesser said he welcomed the new opportunity to take IBC “to the nextlevel.”

“In becoming familiar with IBC, its operations, its financial dealings and itscorporate culture over the past few years, I knew that I wanted to become apart of what Chuck and the IBC team have built here in Kansas City,” hesaid. “There always will be challenges, but we intend to maximize everyopportunity the market will allow and continue to build a company thatcreates and increases shareholder value.”

* * *

Interstate Bakeries Corporation is the largest baker and distributor of fresh bakedbread and sweet goods in the U.S. under various brand names including Wonder,Hostess, Dolly Madison and Drake’s. The Company, with 62 bakeries located instrategic markets from coast to coast, is headquartered in Kansas City, Missouri.

20. The announcement of Elsesser as IBC’s new CEO generally was viewed as

positive news by the press and analysts alike and contributed to the image that Sullivan had



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cultivated for IBC as a business concern on sound financial footing.

MATERIALLY FALSE AND MISLEADINGSTATEMENTS ISSUED DURING THE CLASS PERIOD

21. On September 17, 2002, Sullivan, who was still serving as IBC’s Chairman and

CEO, as well as Coffey, the Company’s CFO, Yarick, the Company’s Treasurer, and Mark

Dirkes, the Company’s Senior Vice President of Marketing, held a conference call with investors

to announce IBC’s first quarter of fiscal year 2002. The Company reported that earnings were

$0.10 cents per share greater than the same period in the prior year ($0.60 v. $0.50) and $0.02

cents per share greater than the consensus of market analysts ($0.60 v. $0.58). In addition,

during that conference call, IBC represented that sales would have been even better but for slower

cake sales (which Sullivan and Coffey represented had already rebounded) and that the Company

had strategically increased prices to capture greater revenues and reinvigorate cake sales.

Specifically, the following statements were issued by Sullivan, Coffey, Yarick and Dirkes, on

behalf of IBC, during the September 17, 2002 conference call:

CHARLES SULLIVAN, CHAIRMAN, CHIEF EXECUTIVE OFFICER,INTERSTATE BAKERIES CORP.: Thank you, Frank, good morning everyone. All in all we think it was a good quarter, a solid quarter. Principally because unitswere up, particularly bread up 4.5%. About half of that is private label the otherhalf brand. Cake, on the other hand due in large part to hot weather wasbasically flat, but now with cooler weather and back-to-school it’srebounding and doing very nicely. So for the quarter we were up 1.7% in sales,that’s $14 million. We continue to make share gains. It’s important to rememberthat whenever you look at IRI or Nielsen data, you don’t have Wal-Mart in it. And as Wal-Mart continues to grow those numbers become less precise. They’regood for trend purposes, but nonetheless not as accurate as they should be. Weknow what we are doing with Wal-Mart and we know that our share is basicallyunderstated. Even though we are showing gains, the gains would be greater ifWal-Mart were in the picture.

We are having particularly good success with our Home Price Premium Soft



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breads. We call them Premium because they are in the popular brand, or popularband rather, but nonetheless, our Stone Ground Potato, Wheat Berry, Buttermilkare enjoying better success that we expected which is in part due to the increase inbread units on the branded side. Although white bread is doing well. Everyonethinks white bread is kind of a dead category. That’s not the case at all. It’simproving both in terms of private label, as well as brand. We’ve taken thoseHome Pride labels and in the southeast in the Merita Division we are calling themMerita Country. And we are enjoying the same success in that part of the country.

Commodities as most of you know, are always a part of this business. Weindicated in our press release that we have - - we are into our fourth quarter interms of wheat coverage. That is of some comfort. However cocoa and sugar areup affecting our cake side of it. We don’t really feel that any of this isunmanageable. We have been through this before. It’s part of the business.

As far as pricing, we are quietly and selectively increasing prices where wecan. Frankly, when you look at history of this Company, when commoditiesare up we generally do better than we do when commodities are in our favor. Simply because it’s a more rational market. So, no question, we will protectour margins. We’re not just going to sit there and watch commodities doany particular damage. We did reduce debt about $35 million in this quarter. So all in all, we think we are off to a good start. We have no big concerns thatsecond, third and fourth quarter won’t continue as this first one have. I’llturn it over to Frank for more particular comments on the numbers themselves. Then we’ll open it up for Q&A.

FRANK COFFEY: Thanks, Chuck. The earnings per share for the firstquarter it 60 cents per diluted share versus last year’s 50 cents before othercharges. A 20% increase versus a year ago. Last year’s first quarter EPSafter other charges was 19 cents a share. Sales, as Chub said were $839 millionfor the quarter, an increase of $14 million or 1.7%. And again, as Chuck said, theincrease was primarily driven by favorable bread sales unit volume in all of ourregions. Bread sales units increased by 4.5% for the quarter while cake saleswere affected by unusually hot weather in our northern division, as unit salesfell by a little over 1%. On the cost of sales side, cost of sales was 61 basispoints higher than last year as a percent of net sales. The increase was a result ofhigher ingredient cost, primarily the sugar and cocoa as Jeff mentioned. Andhigher medical and other fringe benefits costs.

* * *

The quarter’s results, as Chuck said were affected by the softness in our cakebusiness which we see returning as the normal weather patterns are



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returning in these geographic territories, especially in the northern regions. Interest expense for the quarter was $8.5 million, down $1.25 million versus lastyear. During the quarter we reduced long-term debt by $35 million from $620million at year-end June 1 to $585 million at August 24. Our borrowing rate iscurrently about 5.3% versus 6.2% at the end of Q1 of fiscal ‘02. The businessobviously continues to generate strong cash flow. Effective income tax rates forthe current year is 36.9 versus last year’s 36.8. Net income for the first quarter of$27.1 million is about a million dollar improvement versus last year after addingback the after tax effects of other charges.

In summary, we are pleased with the quarter’s results in several areas. AsChuck mentioned, especially in bread as the Home Pride Select varieties, solidwhite bread performance in almost all regions and increases in our bun and rollbusiness. Our two-prong strategy to reduce operating cost structure continues towork effectively. Meaning number one, the investments to increase efficiency inour manufacturing system continues to pay dividends. Number two, the S Lbenefits continue to assist in reducing SG&A costs. And finally, our strong cashflow enables opportunities....

22. During the September 17, 2002 conference call, in response to questions regarding

the performance of its cake business, Sullivan, Yarick and Coffey specifically reiterated that IBC

was experiencing a rebound in cake sales which would eliminate the weakness experienced in that

segment of the Company’s market during the first quarter of Fiscal 2002:

MITCH PINHERO: Excellent. Okay. Thank you. You mentioned that unitswere down in the northeast by about 1%. How did you do in the other parts of thecountry?

CHARLES SULLIVAN: We didn’t say units were down in the northeast. Frank said cake units on a national basis were down about 1% due to the hotweather. We’re fine on units in the northeast.

* * *

MITCH PINHERO: And on the cake side perhaps the northeast is just a touchweak and everything else is up?

CHARLES SULLIVAN: That’s probably a fair assessment.

PAUL YARRICK: You know, say these northern regions, Mitch, because of the



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hot weather, they are all down on cake.

FRANK COFFEY: It was a very warm July-August, even in the first half ofSeptember. But we’re seeing cake bounce back right now.

23. During the September 17, 2002 conference call, the financial results and guidance

provided by IBC was treated by analysts as a triumph for Sullivan who literally and figuratively

was perceived as leaving IBC on a high note.

MITCH PINHERO: Okay. Just one final question concerning, you know, youwere on the last conference call, comfortable with the range of $1.90 to $1.95. Considering your pretty strong performance here, are you changing thatguidance at all?

CHARLES SULLIVAN: No. No. That’s exactly where we are at. Same asthe last call.

* * *

CHARLES SULLIVAN: Well, I think, John, that the day-to-day operations underMike and the team here in terms of execution is just fine. I think what Jim Elsesserbrings to the table is sort of a strategic vision, and where do we go from here? Asour customers consolidate and become bigger and stronger, even though we arethe largest baking company, we are still less than $4 billion in sales. We need toput more money through the registers of our customers. And how we do that andwhere we either make a larger acquisition, we are working on a few small onesright now. If that won’t turn the dial, I think that’s what Jim brings to the party. Iwill continue as Chairman for a reasonable period of time. I think that’s what Iwould be helping Jim to look at as well. Where do we go from here? What’s thenext chapter for the Company with recognition that day-to-day is running prettysmoothly. It’s a good position for Jim to come in. A good timing standpoint tocome in so we can concentrate on those issues.

JOHN MCMILLAN: Congratulations ongoing out on an uptick. It’s more thanPatrick Ewing did. [LAUGHTER].

24. The statements issued by IBC, Sullivan, Coffey, Yarick and Dirkes during the

September 17, 2002 conference call were materially false and misleading when issued because,

unbenownst to the investing public, all of these Defendants knew or, at a minimum, recklessly



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disregarded the fact that, as of September 17, 2002, IBC was actually experiencing a negative

variance with respect to cake sales as compared to the prior year and, therefore, had not seen any

indication of any rebound in cake sales. Moreover, the statements issued by IBC, Sullivan,

Coffey, Yarick and Dirkes during the September 17, 2002 conference call also were materially

false and misleading when issued because, unbenownst to the investing public, IBC did not

maintain sufficient centralized control over price increases to ensure that the Company could raise

prices on bread products without damaging profitability, Defendants knew that an increase in

prices typically would result in a sacrifice in market share and IBC actually was exposed to

significant risk with respect to its ability to attain profits based upon commodity prices (as

opposed to virtually immune as Sullivan had asserted).

25. In response to the Company’s positive earnings announcement, the price of IBC

common stock increased 7%.

26. On September 30, 2002, in a Form 10-Q filed with the SEC, IBC again confirmed

the financial results that it had first reported on September 17, 2002 and disclosed no weakness or

deviation in sales with respect to the critical area of cake sales or any inability to fulfill its

promised ability to increase prices for certain bread products and maintain its anticipated level

profitability in the face of increasing commodity prices.



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THE TRUTH BEGINS TO EMERGE

27. Then, on December 17, 2002, IBC unexpectedly and without any prior notice

reported extremely poor second quarter earnings and, as a result, IBC’s stock plunged in value by

over 35% from a close of $23.16 on December 16, 2002 to $15.00 on December 17, 2002 on

extremely heavy trading volume that was almost fifty (50) times more active than normal:

Associated Press News Wire - 12/17/02

KANSAS CITY, Mo. (AP) - Shares of Interstate Bakeries Corp., the nation’slargest wholesale baker, plunged more than 35 percent Tuesday after the companyreported second-quarter earnings that missed analysts’ targets by a wide margin.

The maker of Wonder Bread said second-quarter earnings were $11.6 million, or26 cents per share, down from $21 million, or 41 cents per share, during the sameperiod last year. Analysts surveyed by Thomson First Call had expected earningsof 48 cents per share.

Shares of Interstate Bakeries, which also makes Hostess and Dolly Madison cakes,fell $8.16 to $15 - their lowest price in 19 months - in trading on the New YorkStock Exchange.

Chief Executive James R. Elsesser blamed the poor earnings on decreased sales,increased costs for some ingredients, primarily cocoa and sweeteners, and highermedical and pension expenses.

Interstate Bakeries reported sales of $823 million for the quarter that ended Nov.16, compared with sales of $826 million during the same quarter last year.

Business Wire - 12/17/02

KANSAS CITY, Mo.- -(BUSINESS WIRE- -Dec. 17, 2002- -Interstate BakeriesCorporation (NYSE:IBC), the nation’s largest baker and distributor of fresh bakedbread and sweet goods, today reported lower earnings per share on slightlyreduced net sales for the second quarter of fiscal 2003, the twelve weeks endedNovember 16, 2002.

Earnings per diluted share for the quarter were $.26 compared to $.41 in the prioryear. Affecting earnings were one-time charges of $5,041,000, or $.07 per dilutedshare, related to the announced closing of the Tampa, Florida, bakery and an



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October 1,2002, common stock award to the former Chief Executive Officer. Earnings per share before these one-time charges were $.33 per diluted share.

Second-quarter highlights for the twelve-week period include:

- - Net sales of $823,213,000, a decrease of 0.3 percent in comparisonto the prior year’s $826,072,000,

- - operating income of $27,900,000, or 3.4 percent of net sales,compared to the previous year’s $41,640,000, or 5.0 percent ofnet sales. Before the one-time charges, operating income was$32,941,000, or 4.0 percent of net sales.

- - Net income of $11,636,000, or 1.4 percent of net sales,compared to the prior year’s $21,249,000, or 2.6 percent ofnet sales.

- - Diluted earnings per share of $.26, after one-time charges,compared to the prior year’s $.41.

* * *

IBC Chief Executive Officer, James R. Elsesser, said: “This has been an especiallydifficult quarter for sales after a series of quarters with very encouraging salesresults. The decline in net sales for the quarter resulted from a decline in sweetgoods volume and a decrease in branded bread sales volume versus the increase wehad been achieving in recent quarters.”

Fiscal 2003 other charges of $5,041,000, or .07 per diluted share for both thequarter and year-to-date periods, relate to liabilities incurred in conjunction withthe announced closing of our Tampa, Florida, bakery and an October 1, 2002,common stock award to our former Chief Executive Officer.

Dow Jones News Service - 12/17/02

Earlier Tuesday, the Kansas City company reported fiscal second-quarter netincome of $11.6 million, or 26 cents a share, on sales of $823.2 million, downfrom $21.2 million, or 41 cents a share, on revenue of $826.1 million a year ago.

Excluding special items, Interstate said it earned 33 cents a share in the latestquarter. Wall Street’s expectations were much higher, with analysts polled byThomson First Call having a consensus earnings estimate of 48 cents a share.

Executives also lowered their full-year earnings estimate to $1.30 a share beforeitems, from the $1.90 - to $1.95-a-share outlook given in mid-September. Analysts have a full-year view of $1.99 a share.



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Shareholders reacted by selling the stock. Interstate shares sank to a 52-week lowof $14.70, dropping below the previous 52-week low of $22.41 reached Dec. 10. The shares closed Tuesday at $15, down $8.16, or 35%, on volume of 12.8million, compared with average daily volume of 231,700...

28. In a conference call on December 17, 2002, Elsesser (IBC’s new CEO) and

Coffey, IBC’s CFO, identified poor cake sales as the primary cause of the Company’s poor

performance in the quarter and admitted that these poor cake sales had started in the first quarter

and were known to the Company before IBC’s rosy September 17, 2002 conference call:

JAMES ELSESSER, CHIEF EXECUTIVE OFFICER, INTERSTATEBAKERIES CORP.:

Thanks Frank, and good morning.

Suffice it to say that management in general and I, in particular, are displeased withthe results disclosed this morning. Results are due to increased personnel costs,which we can only offset by increasing sales, higher ingredient costs, and lowersales of our branded products. Frank will provide some details later, but I willprovide a broad overview.

* * *

Moving to cake, we had a very difficult quarter, as unit sales of single serve itemsdeclined about 5%. While unit sales of other items increased about 1%, maybe 2. Somewhere between 1 and 2%. Private label cake items are relatively small,although continuing to grow. Total cake units declined about 4%. The declineswere due to warm weather earlier in the quarter, competitive activity and productpromotions that were simply not as effective in increasing unit sales as they hadbeen in prior quarters. Additionally, cake has historically been more sensitive toeconomic conditions than bread, and it may be that the current economicenvironment has had an effect. We also lost sales in one region due to the decisionby a customer to move a significant portion of its business to centralizedwarehouse distribution for single-serve snack products versus short orderdistribution. That pricing in the cake category was unchanged from the prior year. We will be responding with more aggressive back-to-school promotions and newmerchandising program that will begin in January and continue for several months.

* * *



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FRANK COFFEY: Thank you, Jim. The earnings per share for the second quarterbefore one-time charges is 33 cents per diluted share versus 41 cents last year. One-time charges amounted to 7 cents and relate to the costs incurred as a resultof the closure - - our recent closure of our Tampa bakery and common stockaward to Chuck Sullivan. This gives us an EPS per diluted share after one-timecharges of 26 cents for the second quarter. Net sales were $823 million for thequarter, a slight decrease of .3% or $2.9 million versus last year. This decreasewas primarily a result of lower cake sales. Bread sales volume continues toincrease versus last year as total bread sales units increase 2.4%, driven as Jimmentioned primarily driven by our national brands of Wonder, Home Pride andBeef Steak, and new private label business that’s not yet cycles versus last year.

In summary, on bread, national brands are doing well, Merita brand is struggling. Cake sales, if we have to point really to one culprit for the quarter thatcaused most of the profit shortfall, I would point to cake. The normal seasonaltrends that drive our business looked - - in the first quarter, would be ourhamburger and hot dog business, would be what drives profitability in the firstquarter, and we saw that with the results that came out of this year’s first quarter. The normal lift in cake in the second quarter is what drives profitability inour business in the second quarter. We did not get that lift. We normally geta 5 to 6% lift versus the first quarter in cake. This year’s lift was only about 2%off a weak base in Q1. So, cake sales, as Jim has mentioned, have beendisappointed. To break it down a little further, multi-pack and donut sales are fine,they’re up about 2% year on year. The real problem is in the individual snackcategory, sales volume there as Jim said is down 5% versus a year ago. Individualsnacks are sold primarily in C-stores and vendor accounts and sales in both ofthese channels are off. The vending shortfall, we feel, is primarily related to theeconomy. The C-store business is a combination of things, increased competitionon single serve snacks. Fewer C-store customers getting inside those stores. Webelieve self-service gas had an impact there and the conditions that affect theimpulse buying of any snack business. The cost of sales increased by 76 basispoints as a percent of net sales versus last year. The major cost increases resultfrom higher ingredient costs, sugar was up 16% versus a year ago. Cocoa was up55% versus a year ago.

* * *

TERRY BIVENS (ph): I guess I just don’t understand, apparently a lot of peopledon’t, how we went from a relatively good quarter the last time to this. I mean iscake really the bottom line in your view, that was where the major damagewas?



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FRANK COFFEY: You know, Terry, you look at cake and that is the majordriver because it didn’t kick in to the seasonal lift that it normally would. Maybe there was some hint to that in the first quarter, but, you know, we’veseen that before and it really didn’t kick in. You know, the other issue, youknow, there are other issues on top of cake, which is certainly, you know, theSoutheast is a struggle right now. That’s always been a big contributor to us and,you know, we are getting some heavy, you know, competition against our veryprofitable Merita brand and, you know, we’re addressing that. So, you know,there is obviously not just one answer, but cake, if I had to point my finger atone, cake would be the major culprit at this point.

29. During the same conference call, in attempting to respond to analyst questions

regarding a massive sell-off of stock by IBC insiders immediately after IBC’s positive

pronouncements on September 17, 2002, Elsesser virtually admitted that there had been no basis

for the statements by IBC on September 17 that its cake sales were rebounding and in the process

of recovering:

JOHN MCMILLAN (ph), PRUDENTIAL: Prudential. I will say good morning,but it certainly is not for shareholders and analysts supporting your stock, Jim. What was the award, the size of the award given to Chuck?

JAMES ELSESSER: Approximately $3.5 million.

JOHN MCMILLAN (ph): Pretax?

JAMES ELSESSER: Yes.

JOHN MCMILLAN (ph): And you view that as non-recurring, I guess?

JAMES ELSESSER: Yes.

JOHN MCMILLAN (ph): Even though most companies kind of eat it in theoperating results, what was the earnings guidance, Frank, given in - - in mid-September when you had the first quarter conference call for this quarter?

FRANK COFFEY: You know, we had talked about around $1.90, John.

JOHN MCMILLAN (ph): I’m taking about for the quarter. For the quarter.



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FRANK COFFEY: We didn’t give a quarterly number, John.

JAMES ELSESSER: I think consensus was 49 cents, John.

FRANK COFFEY: Or 48.

JAMES ELSESSER: 48, 49.

JOHN MCMILLAN (ph): And, you know, the - - you got ask the questionbecause there was just such a large amount of insider selling, mostly by Chuck inthe month of October that it just kind of begs the question, you know, there wasso much insider selling that I called the company to find out what was going on. Did this quarter just like drop off a cliff in the month of November? Or was itconsistently bad? Because I think there’s real, you know, there’s ethics questionson Wall Street, but I think this whole thing kind of begs the question, what did youthink when everyone was selling in October?

FRANK COFFEY: John, these sales, which, you know, which is really what drovethe bottom line problem. It started to drop off as we moved into that Octobertimeframe and it really just dropped off the face of the earth, so to speak, withregard to cake. And - - and - - and - -, you know, and the Southeast. We didn’tget the kick-in of the cake business, and then the Southeast business just went inthe tank at the same time. So, it - - it really didn’t start to occur until about themiddle of the quarter, and, you know, you’re in the middle of the quarter and itstarts to occur and you just believe that it - - it comes back.

JOHN MCMILLAN (ph): Well, I hope you can forgive me for asking thequestion, because it just really smells bad.

JAMES ELSESSER: Well, you know, let me try to answer that, too. Youknow, basically, the second week of September there was a negative varianceversus the prior year. The negative variances were not very large then andbasically - - roughly the first or second week of October things started to get badat that point in time.

JOHN MCMILLAN (ph): Right.

JAMES ELSESSER: At that point in time, we put a freeze, I think the secondweek of October - -

FRANK COFFEY: Right.

JAMES ELSESSER: On any shares being sold because we knew we weren’t



-17-

going to be able to make it up at that point in time. So, you know there, was not -- you know, not in the first week, but, you know, starting roughly calendarweeks, second week of September, we underperformed versus the prior yearfor the first time. But they weren’t large, and it was certainly something thatcould be overcome in my mind. I wasn’t here until October 1, but basically I feltcomfortable. After the October first two weeks it was clear we weren’t going tomake it up at that point in time. Then, that’s what happened. We did put a freezeon it, John. Roughly the middle of the month of October. Once it became clear.LEONARD TITTLBAUM (ph): Mine is along the lines of John’s is. When didyou know it and why didn’t you preannounce that we had problems in the quarter? In stead of waiting for the numbers to be out? Frankly, that bothers me, I hopemore than it should, Frank and Jim, but, you know, when you’re going tocome out with results that look like something you’d scrape off your shoe,don’t you think you should at least alert the Street ahead of time, especially ifyou knew it going into September?

30. During the December 17, 2002 conference call, IBC also was forced to admit that,

contrary to the advice it had provided on September 17, 2002 that it would and could selectively

and strategically increase prices of certain bread products to increase profits, the Company’s

pricing decisions actually had been made at the local level and, as a result of its attempt to

increase prices for certain bread products in the Southeast Region, IBC had experienced

enormous losses in market share which lead to a dramatic decrease in revenues and profits derived

from that region. As a result, during that same conference call, IBC announced that it had been

necessary to replace certain management personnel. IBC did not explain, however, the basis for

its prior confident assertion during the September 17, 2002 conference call that it could increase

profits without losing market share. Instead, IBC now admitted that pricing of its bread products

had an extremely significant impact upon market share, thereby confirming the false and

misleading nature of the Company’s statements on September 17, 2002 regarding its ability and

intention to increase profits by selectively increasing prices.

31. In response to the negative announcement, the price of IBC common stock



-18-

dropped from $23.16 per share to $15.00 on extremely heavy trading volume.

32. Shockingly, in an interview after the conference call on December 17, 2002,

Coffey also admitted that profits had been hurt by increased ingredient/commodity prices -- a

factor that Sullivan had dismissed as effectively immaterial to profits for IBC just three months

beforehand.

33. Following the December 17, 2002 announcement, the business press literally

derided IBC and its executives for their misconduct. For example, Knight Ridder Tribune

commented upon IBC and its insiders as follows:

KRT Business News - 12/18/02

Dec. 18-Wall Street turned Interstate Bakeries Corp.’s stock to toast Tuesdayafter the baker of Wonder Bread, Ho Ho’s and Twinkies reported its second-quarter earnings plummeted more than 45 percent.

The disappointing earnings - 26 cents a share versus 41 cents a year ago and anaverage of 48 cents a share predicted by analysts - were announced in the morning,and the stock quickly plunged. It ended the day off more than 35 percent, thebiggest percentage loser on the New York Stock Exchange.

* * *

Besides being blindsided by the big earnings drop, some analysts appeareddismayed by disclosure of substantial insider selling from late September up untilOct. 16, two months into the quarter.

* * *

During a sometimes-terse conference call after the earnings release, analysts grilledInterstate’s management, including new Chief Executive Officer James Elsesser. He replaced Sullivan on October 1. Sullivan remains chairman and has an 18-month consulting contract with Interstate.

KRT Business News - 12/29/02



-19-

Market Timers of the Year: Top execs at Interstate Bakeries Corp., who unloadedscads of their stock holdings before the company reported shockingly bad financialresults, which turned Interstate’s stock price to toast.

WHILE IBC’S STOCK PRICE REMAINED HIGH,ITS INSIDERS ENGAGED IN A MASSIVE STOCK SELL OFF.

34. As described above, while IBC was issuing false and misleading statements about

its financial performance, stability and prospects, the Company’s insiders engaged in a massive

sell-off of IBC stock at artificially inflated prices. Specifically, during the Class Period, the

following IBC insiders sold over 637,500 shares of Company stock for approximate proceeds of

over $16 million:

Insider Sale Date(s) Shares Proceeds

Michael J. Anderson 10/8/02 1,200 $ 31,000

Frank W. Coffee 9/26 - 9/27/02 66,300 $ 1,735,734Chief Financial Officer

Frank E. Horton 9/20/02 20,000 $ 395,900Director

Charles A. Sullivan, 9/20/02 -10/16/02 524,000 $13,457,190Chairman of the Board

Richard D. Willson 10/7/02 16,000 $ 228,800Executive Vice President

Paul E. Yarick (sp) 10/16/02 10,088 $ 264,306

35. As reported by Tulsa World on October 27, 2002, the sales by Board Chairman

Sullivan between September 20 and October 9, 2002 alone constituted the “largest ever by a

non-institutional insider” and occurred after “Interstate Bakeries shares had improved from



-20-

their September low at the $22 level.” Even more astoundingly, Sullivan then proceeded to sell

an additional 341,000 shares of stock for additional proceeds of almost $9 million in the next

week!

PLAINTIFF’S CLASS ACTION ALLEGATION

36. Plaintiff brings this class action pursuant to Rule 23 of the Federal Rules of Civil

Procedure, on behalf of himself and all other persons who purchased or otherwise acquired IBC

common stock and/or other securities during the Class Period (i.e., between September 17, 2002

and December 16, 2002 inclusive). Excluded from the Class are IBC, its subsidiaries and

affiliates, the Individual Defendants, members of the immediate families of each of the Individual

Defendants, any entities in which any of the Defendants have a controlling interest, and the legal

representatives, heirs, successors, predecessors in interest, affiliates or assigns of any of the

Defendants.

37. This action may properly be maintained as a class action as a result of the

following facts:

a. During the Class Period, millions of shares of IBC’s common stock were

issued and outstanding and were actively traded on the New York Stock Exchange, a liquid,

efficient and impersonal trading market. The members of the Class for whose benefit this action is

brought are located throughout the United States, and are so numerous that joinder of all

members of the putative Class is impracticable. Millions of IBC shares were publicly traded

during the Class Period and, upon information and belief, there are hundreds or thousands of

members of the Class;

b. Plaintiff’s claims are typical of the claims of the other members of the



-21-

Class, and Plaintiff and all members of the Class sustained damages as a result of the defendants’

wrongful conduct complained of herein;

c. Plaintiff is a representative party who will fairly and adequately protect the

interests of the other members of the Class, and has retained counsel competent and experienced

in class action securities litigation. Plaintiff has no interests antagonistic to, or in conflict with, the

Class he seeks to represent;

d. A class action is superior to other available methods for the fair and

efficient adjudication of the claims asserted herein, because joinder of all members is

impracticable. Furthermore, because the damages suffered by the individual Class members may

be relatively small, the expense and burden of individual litigation make it virtually impossible for

the Class members to separately redress the wrongs done to them. The likelihood of individual

Class members prosecuting separate claims is remote;

e. Plaintiff anticipates no unusual difficulties in the management of this action

as a class action; and

f. The questions of law and fact common to the members of the Class

predominate over any questions affecting any individual members of the Class.

38. The questions of law and fact which are common to the Class include, among

others:

a. Whether the federal securities laws were violated by the Defendants’ acts

as alleged in this Complaint;

b. Whether the documents, press releases, reports and/or statements

disseminated to the investing public and to IBC shareholders during the Class Period omitted or



-22-

misrepresented material facts about the financial condition, business prospects and income of IBC;

c. Whether Defendants failed to correct previously issued statements that they

knew to be false or for which they recklessly disregarded the truth or falsity of such statements;

d. Whether Defendants failed to disclose material, adverse information at a

time when they were in the possession of such information and were engaged in the sale of IBC

stock;

e. Whether the Defendants acted with knowledge or with reckless disregard

for the truth in misrepresenting and omitting material facts;

f. Whether, during the Class Period, the market price of IBC common stock

and other securities was artificially inflated due to the material misrepresentations and omissions

complained of herein;

g. Whether the Defendants participated in and pursued the common course of

conduct complained of herein; and

h. Whether the members of the Class have sustained damages and, if so, what

is the proper measure thereof.

FRAUD-ON-THE-MARKET DOCTRINE.

39. Plaintiff relies, in part, upon the presumption of reliance established by the fraud-

on-market doctrine. The market for IBC common stock was, at all pertinent times, a liquid and

efficient market for, inter alia, the following reasons:

a. IBC met the requirements for listing, and was listed on the NYSE, a highly

efficient and liquid market;

b. As a regulated issuer, IBC filed periodic public reports with the SEC;



-23-

c. IBC’s securities trading volume was substantial during the Class Period;

d. IBC was covered by various securities analysts who wrote reports which

were available through various automated data retrieval services;

e. IBC disseminated information on a market-wide basis through various

electronic media services, and participated in open conference calls with stock analysts and

investors; and

f. The market price of IBC securities reacted rapidly to new information

entering the market.

40. The facts identified above reflect the existence of an efficient market for trading of

IBC common stock and make applicable the fraud-on-the-market doctrine. Similarly, Plaintiff and

the other members of the Class are entitled to a presumption of reliance with respect to the

misstatements and omissions alleged in this Complaint.

DEFENDANTS’ DUTIES AND MISCONDUCT.

41. As officers, directors and/or controlling persons of a publicly-held company whose

common stock is registered with the SEC under the Exchange Act, traded on the NYSE at all

pertinent times, and governed by the provisions of the Exchange Act, the Individual Defendants

had duty to disseminate accurate and truthful information in a timely manner with respect to the

Company’s operations, finances, financial condition, products, revenues and present and future

business prospects, to correct any previously issued statements from any source that had become

untrue, and to disclose any trends that would materially affect earnings and the present and future

financial operating results of IBC, so that the market price of the Company’s publicly traded

securities would be based upon truthful and accurate information.



-24-

42. During the Class period, each of the Individual Defendants was a senior executive

and/or director of IBC and was privy to confidential and proprietary information concerning IBC,

its operations, finances, financial condition, products, revenues and present and future business

prospects and regularly received reports regarding the same. As of his or her possession of such

information, each of the Individual Defendants knew or recklessly disregarded the fact that IBC

had materially overstated the quality of its financial condition during the Class Period and had not

disclosed critical information to the investing public which would have revealed that IBC’s prior

statements were materially misleading and false. As a result of their Board memberships and/or

executive and managerial positions with IBC, each of the Individual Defendants had access to

adverse non-public information about IBC’s operations, finances, financial condition, products,

revenues, expenses and earnings via access to internal corporate documents, conversations and

connections with other corporate officers and employees, and via reports and other information

provided to them in connection with the performance of their duties. In light of their possession

of such information, each of the Individual Defendants knew or recklessly disregarded the fact

that the reported financial results of IBC were materially overstated during the Class Period.

43. The Individual Defendants, as a result of their positions of control and authority as

officers and/or directors of the Company, were able to and did control the contents of the various

quarterly reports, SEC filings, press releases and presentations to securities analysts pertaining to

the Company. Each of the Individual Defendants was provided with copies of IBC‘s management

reports, press releases and SEC filings alleged in this Complaint to be misleading prior to, or

shortly after, their issuance and had the ability and opportunity to prevent their issuance or cause

them to be corrected. As a result, each of the Individual Defendants is responsible for the



-25-

accuracy of the challenged public reports and releases as “group published” information and is,

therefore, responsible and liable for the representations contained in those statements.

44. Each of the Individual Defendants is liable as a direct participant in, and a co-

conspirator with respect to, the wrongs complained of in this Complaint. In addition, the

Individual Defendants, by reason of their status as officers and/or directors of IBC and access to

material, non-public information, were “controlling persons” within the meaning of Section 20 of

the Exchange Act and had the power and influence to cause IBC to engage in the unlawful

conduct complained of in this Complaint. As a result of their positions of control, each of the

Individual Defendants were able to and did, directly or indirectly, control the conduct of IBC’s

business, the information contained in its filings with the SEC and public statements about its

business.

45. During the Class Period, Defendants, individually and in concert, directly and

indirectly, engaged and participated in a continuous course of conduct to misrepresent the results

of IBC’s operations, and to conceal adverse material information regarding the financial condition

and results of operations of IBC as specified in this Complaint. Defendants employed devices,

schemes, and artifices to defraud, and engaged in acts, practices, and the course of conduct

described herein in an effort to increase and maintain an artificially high market price for IBC

common stock and other securities. This included the formulations, making and/or participation

in the making of untrue statements of material facts, and the failure to state material facts

necessary in order to make the statements made, in light of the circumstances under which they

were made, not misleading, which operated as a fraud and deceit upon Plaintiff and the other

members of the Class.



-26-

COUNT I

VIOLATION OF SECTION 10(b) OF THESECURITIES EXCHANGE ACT AND RULE 10b-5 THEREUNDER

46. Plaintiff incorporates by reference paragraphs 1 through 45 of this Complaint as if

set forth herein at length.

47. Throughout the Class Period, Defendants, singly and in concert, directly or

indirectly, engaged in a common plan, scheme and course of conduct described herein, pursuant

to which they knowingly or recklessly engaged in acts, transactions, practices and a course of

business which operated as a fraud upon Plaintiff and the other members of the Class; made

various false statements of material facts and omitted to state material facts to make the

statements made not misleading to Plaintiff and the other members of the Class, and employed

manipulative or deceptive devices and contrivances in connection with the purchase and sale of

IBC common stock and other securities.

48. Individual Defendants, as executive officers and/or directors of IBC, had actual

knowledge of the falsity of the material statements set forth above, and intended to deceive

Plaintiff and the other members of the Class, or, in the alternative, acted with reckless disregard

for the truth by failing to ascertain and disclose the true facts in the statements made by them or

other IBC personnel to the SEC and the investing public, including Plaintiff and other members of

the Class.

49. The facts alleged herein, including the enormous insider sales of IBC stock,

compel a strong inference that the Defendants made material false and misleading statements to

the investing public with scienter, in that the Defendants knew that the public statements issued or



-27-

disseminated in the name of the Company were materially false and misleading; knew or recklessly

disregarded that such statements would be issued or disseminated to the investing public; and

knowingly and substantially participated or acquiesced in the issuance or dissemination of such

statements as primary violators of the federal securities laws.

50. As a result of the foregoing, the market price of IBC securities was artificially

inflated during the Class Period. In ignorance of the falsity of the reports and statements, and the

deceptive and manipulative devices and contrivances employed by the Defendants, Plaintiff and

the other members of the Class relied, to their detriment, on the reports and statements described

above and/or the integrity of the market price of IBC securities during the Class Period in

purchasing IBC securities at prices which were artificially inflated as a result of the Defendants’

false and misleading statements.

51. Had plaintiff and the other members of the Class known of the material adverse

information which the Defendants misrepresented, they would not have purchased IBC securities

at the artificially inflated prices that they did.

52. Defendants’ dissemination of this material information served only to harm Plaintiff

and the other members of the Class who purchased IBC securities in ignorance of the financial

risk to them as a result of such false and misleading information.

53. As a result of the wrongful conduct alleged herein, Plaintiff and other members of

the Class have suffered damages in an amount to be established at trial.

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

Exchange Act and Rule 10b-5 promulgated thereunder and are liable to Plaintiff and the other

members of the Class for the substantial damages which they suffered in connection with their



-28-

purchase of IBC securities during the Class Period.

COUNT II

VIOLATION OF SECTION 20(A)OF THE SECURITIES EXCHANGE ACT

55. Plaintiff incorporates by reference paragraphs 1 through 54 of this Complaint as if

set forth herein at length.

56. During the Class Period, each of the Individual Defendants, by virtue of his or here

office or offices at, and/or directorship of IBC and his or her specific acts, was a controlling

person of IBC within the meaning of Section 20(a) of the Exchange Act.

57. Each of the Individual Defendants’ position made him or her privy to, and

provided him or her with actual knowledge of, the material facts that IBC misrepresented and/or

concealed from Plaintiff and the other members of the Class during the Class Period.

58. Each of the Individual Defendants had the power and influence, and exercised the

same, to cause IBC to engage in the unlawful conduct and practices complained of herein by

causing IBC to disseminate the false and misleading information identified above.

59. By virtue of the foregoing, the Individual Defendants have violated Section 20(a)

of the Exchange Act.

60. By virtue of the conduct described above, Defendants are liable to Plaintiff and the

other members of the Class for the substantial damages that they suffered in connection with their

purchase of IBC common stock during the Class Period.

WHEREFORE, Plaintiff, on behalf of himself and the other members of the Class,

demands judgment against Defendants as follows:



-29-

a. Determining that this action is properly maintainable as a class action

pursuant to Rule 23 of the Federal Rules of Civil Procedure;

b. Certifying Plaintiff as the Class Representative and his counsel as Lead

Class Counsel;

c. Declaring and determining that the Defendants violated the federal

securities laws by reason of their conduct as alleged herein;

d. Awarding monetary damages against all of the Defendants;

e. Awarding Plaintiff the costs, expenses, and disbursements incurred in

prosecuting this action, including reasonable attorneys’ fees and other recoverable expenses of

litigation; and

f. Awarding Plaintiff and the other members of the Class such other and

further relief as the Court may deem appropriate and just under all of the circumstances.

JURY DEMAND

Plaintiff demands a trial by jury.

DATED: February 19, 2003

/s/ Tim E. Dollar #33123Tim Dollar, Esq. #33123

THE LAW OFFICES OF TIM DOLLAR, L.C.1201 Walnut Street, Suite 2200Kansas City, Missouri 64106(816) 221-3443(816) 221-8763 Facsimile

Michael J. Flannery



-30-

THE DAVID DANIS LAW FIRM, P.C.8235 Forsyth Boulevard, Suite 1100St. Louis, Missouri 63105(314) 725-7700

James E. MillerSHEPHERD, FINKELMAN, MILLER & SHAH, LLCOne Lewis StreetHartford, CT 06103(860) 246-0600

Samuel RudmanCAULEY GELLER BOWMAN COATES & RUDMAN,LLP200 Broadhollow Road, Suite 406Melville, NY 11747(631) 367-7263

Attorneys for Plaintiff


62/19 / 2883 15 :58 16313671173 CAULEY GELLER NY PAGE 02

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JS 44 ( Rev . 3199) CIVIL COVER SHEE Tie .IS-44 civil cover sheet and the information contained herein neither replace nor supplement the filing and se rv ice of pleadings or other papers as required byw except as provided by local rules of court. This form , approved by the Judicial Conference of the United States in Sep tember 1974, is required for the use ofe Clerk of Court for the purpose of initiating the civil docket sheet . (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM . )

(a) PLAINTIFFS I DEFENDANTS

WALTER E . SMITH, et al .

(b} County of Residence of First Listed Plaintiff

(EXCEPT IN U.S . PLAINTIFF CASES )

(c) Att orney ' s (Firm Name, Address, and Telephone Number)The Law Offices of Tim Dollar

1201 Walnut Suite 2200

Kansas City, MO 64106 (816) 221-344 3

1. BASIS OF JURISDICTION (Place an 'X" in One Box Only)

2 I U.S . GovernmentPlaintiff

3 2 U.S . Government

Defendant

3 Federal Questio n(U .S. Government Not a Pa rty )

❑ 4 Diversity(Indicate Citizenship of Partiesin Item III)

INTERSTATE BAKERIES CORP ., ET AL .

County of Residence of First Listed

(IN U .S. PLAINTIFF CASES ONLY )

NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE

LAND INVOLVED .

Attorneys (If Known)

~2 `- " rJIB

III. CITIZENSHIP OF PRINCIPAL PARTIES (Place an "X" in One Box for Plaintiff

(For Diversity Cases Only) and One Box for Defendant)PTF DEF PTF DEF

Citizen of This State ❑ 1 ❑ I Incorporated or Principal Place ❑ 4 ❑ 4of Business In This State

Citizen of Another State ❑ 2 ❑ 2 Incorporated and Principal ❑ 5 ❑ 5

of Business In Another Stale

Citizen or Subject of a 0 3 ❑ 3 Foreign Nation ❑ 6 ❑ 6

aT . rant' U % CYTr'r in[ . ., .,. . "v"+ ; .. n. . . 0-

CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTE S

1 1,10 Insurance PERSONAL INJURY PERSONAL INJURY ❑ 610 Agriculture 0 422 Appeal 28 USC 158 ❑ 400 State Reapportionment

I 1.20 Marine ❑ 310 Airplane ❑ 362 Personal Injury- ❑ 620 Other Food & Drug ❑ 410 Antitrust

2 130 Miller Act ❑ 315 Airplane Product Med. Malpractice ❑ 625 Drug Related Seizure ❑ 423 Withdrawal ❑ 430 Banks and Banking

1 140 Negotiable Instrument Liability ❑ 365 Personal Injury - of Property 21 USC 88 1L

28 USC 157 ❑ 450 Commerce/ICC Rates/etc.rtation❑ 460 De150 Recovery of Overpayment ❑ 320 Assault. Libel & Product Liability ❑ aw s630 Liquor po

& Enforcementofludgment Slander ❑ 368 Asbestos Personal ❑ 640 R.R. & Truck PROPERTY RIGHTS 0 470 Racketeer influenced and

] 151 Medicare Act ❑ 330 Federal Employers' Injury Product ❑ 650 Airline Regs .[] 820 Copyrights

Corrupt Organizations

7 152 Recovery of Defaulted Liability Liability D 660 Occupational❑ 830 Patent

❑ 910 Selective Service

Student Loans Q 340 Marine PERSONAL PROPERTY Safety/Health11 840 Trademark

11 850 Securities/Commodities/

(Excl. Veterans) ❑ 345 Marine Product ❑ 370 Other fraudi L i❑

❑ 690 Other Exchange

❑ 875 Customer Challenge1 -153 Recovery of Overpayment Liability n371 Truth end ng

of Veteran's Benefits ❑ 350 Motor Vehicle ❑ 380 Other Personal LABO R SOCIAL SECURITY 12 USC 341 0

2 160 Stockholders' Suits ❑ 355 Motor Vehicle Property Damage 710 Fair Labor Standards ❑ 861 (1❑ 891 Agricultural Acts

7 190 other Contract Product Liability DamageEl 385 Property Act 11 923)Lung662 Black Lung (923)❑ 892 Economic Stabilization Ac t

195 Contract Product Liability ❑ 360 Other Personal Injury Product Liability❑ 720 LaborNgmt. Relations ❑ 863 DIWClDIW W (405(g))

❑ 893 Environmental l Matterss

ocati on Ac t894 Energy A0REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS

❑ /M titR0 L b

❑

❑

864 SSID Title XV I665 RSI 405 )

895 o f❑gmor epor ng73 a (g)( Ac tInformatio n

10 Land Condemnation ❑ 441 Voting ❑ 510 Motions to Vacate & Disclosure Act 0 900Appeal of Fee

220 Foreclosure ❑ 442 Employment Sentence 173 740 Railway Labor ActFEDERAL TAX SUITS Determination Under

iE2 230 Rent Lease & Ejectment C1 443 Housing/ Habeas Corpus :

❑ 870 Taxes (U .S. PlaintiffAccess to Just cequal

I 140 Tors to Land Accommodations ❑ 530 General ❑ 790 Other Labor Litigation onesity ofCo n71245 Tort Product Liability ❑ 444 Welfare ❑ 535 Death Penalty Sta te Statutes-

.7 2~0 All Other Real Property ❑ 440 Other Civil Rights El 540 Mandamus & Other 11 791 Eropl . Ret Inc. El 87 1 ird Party 890 Other Statutory Action sC7 550 Civil Rights Security Act

26 USC26 USC 7609

❑ 555 Pri son Condition

V . ORIGIN (PLACE AN "X" IN ONE BOX ONLY) App eal to District

I Original D 2 Removed from [1 3 Remanded from C1 4 Reinstated 0 5 Tran sferred from ❑ 6 Multidistrict 0 7 Judge from

Proceeding State Court Appellate Courtor another district Litig

ation MagistrateReopened (soccify) Judgmen t

VI. CAUSE OF ACTION (i t he U.S.uCivil

a ct ut sues unless ore filing andwrite brief statement of cause,

15 USC 7 8 J (B) ; 15 USC 7 8 T (A) ;n cite J diversity.)

17 CPR Section 240 .108-5 Securities fraud

VII. REQUESTED IN CHECK IF THIS IS A CLASS ACTION DEMANDS Will CHECK YES only if demanded in complaint :

COMPLAINT : UNDER F .R.C .P. 23 SupplemQnY JURY DEMAND: Yea ONO

VIII. RELATED CASE(S)IF

ANY (See instructions ): JUDGE DOCKET

NUMBER

DATE SIGNATURE OF ATTORNEY OF RECORD

FOR OFFICE USE ONLY

TI.ECEIPT # AMOUNT APPLYING IFF JUDGE MAG. JUDGE

Documents

IN THE UNITED STATES DISTRICT COURT FOR THE ...securities.stanford.edu/filings-documents/1027/IBC03-01/...Defendant, IBC, is a Delaware corporation with its principal executive offices