1 steven j. toll daniel s. sommers cohen milstein...
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Case 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 1 of 31
1 Steven J. TollDaniel S. Sommers
2 Matthew K. HandleyCOHEN MILSTEIN SELLERS & TOLL PLLC
3 1100 New York Avenue, N.W.West Tower, STE 500
4 Washington, D.C. 20005-3964Telephone: (202) 408-4600
5 Facsimile: (212) 408-4699
6 Lynn Lincoln SarkoJuli E. Farris
7 KELLER ROHRBACK L.L.P.1201 Third Avenue, Suite 3200
8 Seattle, Washington 98101Telephone: (206) 623-1900
9 Facsimile: (206) 623-3384
10 Ron Kilgard, AZ No. 005902KELLER ROHRBACK, P.L.C.
11 3101 North Central Avenue, Suite 1400Phoenix, Arizona 85012
12 Telephone: (602) 248-0088Facsimile: (602) 248-2822
13Attorneys for Plaintiff
14UNITED STATES DISTRICT COURT
15
16 DISTRICT OF ARIZONA
17 DIMITRIY KARPOV, Individually and On CIVIL ACTION NO.Behalf of All Others Similarly Situated,
18Plaintiff, CLASS ACTION COMPLAINT
19vs.
20 JURY TRIAL DEMANDED INSIGHT ENTERPRISES, INC.,
21 TIMOTHY A. CROWN, RICHARD A.FENNESSY, STANLEY LAYBOURNE,
22 GLYNIS A. BRYAN, KAREN K.MCGINNIS, LARRY A. GUNNING,
23 ERIC J. CROWN, ROBERTSON C.JONES, MICHAEL M. FISHER,
24 BENNETT DORANCE, KATHLEEN S.PUSHOR and DAVID J. ROBINO,
25Defendants.
26
27 Plaintiff, Dimitriy Karpov ("Plaintiff), alleges the following based upon the investigation
28COHEN, MILSTEIN,
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I by Plaintiff's counsel, which included, among other things, a review of the defendants' public
2 documents, conference calls and announcements made by defendants, United States Securities
3and Exchange Commission ("SEC") filings, wire and press releases published by and regarding
4Insight Enterprises, Inc. ("Insight" or the "Company"), securities analysts' reports and advisories
5
6about the Company, and information readily available on the Internet, and Plaintiff believes that
7 substantial additional evidentiary support will exist for the allegations set forth herein after a
8 reasonable opportunity for discovery.
9NATURE OF THE ACTION AND OVERVIEW
10
11 1. This is a federal class action on behalf of purchasers of Insight's securities
12 between April 22, 2004 and February 6, 2009, inclusive (the "Class Period"), seeking to pursue
13 remedies under the Securities Exchange Act of 1934 (the "Exchange Act").
14
2. Insight provides brand-name information technology hardware, software, and
15services to large enterprises, small to medium-sized businesses, and public sector institutions in
1617 North America, Europe, the Middle East, Africa, and Asia-Pacific. The Company offers various
18 products, including notebooks and personal digital assistants, desktops and servers, network and
19 connectivity, storage devices, printers, memory and processors, supplies and accessories,
20 monitors and video, and hardware. The Company also offers services, such as lifecycle services,
21 networking and communication, high performance systems, and enterprise software.
22
3. On February 9, 2009 the Company shocked investors when it announced that it23
would be restating previously reported earnings because management had identified errors in the24
25way it historically accounted for certain aged trade credits.
26 4. Upon the release of this news, the Company's shares declined $2.85 per share, or
27 43.8 percent, to close on February 9, 2009 at $3.05 per share, on unusually heavy trading
28 volume.COHEN, MILSTEIN,
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1 5. The Complaint alleges that, throughout the Class Period, defendants failed to
2 disclose material adverse facts about the Company's financial well-being. Specifically,
3defendants failed to disclose or indicate the following: (1) that the Company committed errors in
4the manner in which it accounted for certain aged trade credits; (2) that the Company's financial
5
6statements were not prepared in accordance with Generally Accepted Accounting Principles
7 ("GAAP"); (3) that the Company lacked adequate internal and financial controls; and (4) that, as
8 a result of the foregoing, the Company's financial statements were materially false and
9 misleading at all relevant times.
10
6. As a result of defendants' wrongful acts and omissions, and the precipitous
11decline in the market value of the Company's securities, Plaintiff and other Class Members have
12suffered significant losses and damages.
13
14JURISDICTION AND VENUE
15 7. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of
16 the Exchange Act, (15 U.S.C. §§ 78j(b) and 78t(a)), and Rule 10b-5 promulgated thereunder (17
17 C.F.R. § 240.10b-5).
18
8. This Court has jurisdiction over the subject matter of this action pursuant to
19Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331.
20
219. Venue is proper in this Judicial District pursuant to Section 27 of the Exchange
22 Act, 15 U.S.C. § 78aa and 28 U.S.C. § 1391(b). Many of the acts and transactions alleged
23 herein, including the preparation and dissemination of materially false and misleading
24 information, occurred in substantial part in this Judicial District. Additionally, Insight's principal
25 executive offices are located within this Judicial District.
26
10. In connection with the acts, conduct and other wrongs alleged in this Complaint,27
defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,28
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I including but not limited to, the United States mails, interstate telephone communications and
2 the facilities of the national securities exchange.
3PARTIES
4
11. Plaintiff, Dimitriy Karpov, as set forth in the accompanying certification,5
6incorporated by reference herein, purchased Insight's securities at artificially inflated prices
7 during the Class Period and has been damaged thereby.
8 12. Defendant Insight is a Delaware corporation with its principal executive offices
9 located at 6820 South Hari Avenue, Tempe, Arizona.
10
13. Defendant Timothy A. Crown ("Timothy Crown") was, at relevant times, the
11Company's Chairman of the Board of Directors.
12
14. Defendant Richard A. Fennessy ("Fennessy") was, at relevant times, the1314 Company's President and Chief Executive Officer ("CEO").
15 15. Defendant Stanley Laybourne ("Laybourne") was, at relevant times, the Chief
16 Financial Officer. ("CFO")
17 16. Defendant Glynis A. Bryan ("Bryan") was, at relevant times, the Company's
18Chief Financial Officer. ("CFO")
19
17. Defendant Karen K. McGinnis ("McGinnis") was, at relevant times, the2021 Company's Chief Accounting Officer.
22 18. Defendant Larry A. Gunning ("Gunning") was at relevant times, a member of the
23 Company's Board of Directors.
24 19. Defendant Eric J. Crown ("Eric Crown") was at relevant times, a member of the
25 Company's Board of Directors.
26
20. Defendant Robertson C. Jones ("Jones") was, at relevant times, a member of the27
Company's Board of Directors.28
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1 21. Defendant Michael M. Fisher ("Fisher") was, at relevant times, a member of the
2 Company's Board of Directors.
3
22. Defendant Bennett Dorrance ("Dorrance") was, at relevant times, a member of the4
Company's Board of Directors.5
623. Defendant Kathleen S. Pushor ("Pushor") was, at relevant times, a member of the
7 Company's Board of Directors.
8 24. Defendant David J. Robino ("Robino") was, at relevant times, a member of the
9 Company's Board of Directors.
10
25. Defendants Timothy Crown, Fennessy, Laybourne, Bryan, McGinnis, Gunning,
11Eric Crown, Jones, Fisher, Dorrance, Pushor, and Robino are collectively referred to hereinafter
12as the "Individual Defendants." The Individual Defendants, because of their positions with the
13
14Company, possessed the power and authority to control the contents of Insight's reports to the
15 SEC, press releases and presentations to securities analysts, money and portfolio managers and
16 institutional investors, Le., the market. Each defendant was provided with copies of the
17 Company's reports and press releases alleged herein to be misleading prior to, or shortly after,
18their issuance and had the ability and opportunity to prevent their issuance or cause them to be
19corrected. Because of their positions and access to material non-public information available to
20them, each of these defendants knew that the adverse facts specified herein had not been
21
22 disclosed to, and were being concealed from, the public, and that the positive representations
23 which were being made were then materially false and misleading. The Individual Defendants
24 are liable for the false statements pleaded herein, as those statements were each "group-
25 published" information, the result of the collective actions of the Individual Defendants.
26
27
28COHEN, MILSTEIN,
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1 SUBSTANTIVE ALLEGATIONS
2 Background
3 26. Insight is a provider of brand-name information technology (IT) hardware,
4software and services to large enterprises, small to medium-sized businesses (SMB) and public
5sector institutions in North America, Europe, the Middle East, Africa and Asia-Pacific. The
6Company operates in tlu-ee geographic operating segments: North America; Europe, Middle East
7
8 and Africa (EMEA), and Asia and Pacific (APAC). Insight is located in 22 countries, and
9 supports clients in 170 countries, transacting business in 17 languages and 13 currencies. The
10 Company's offerings in North America and the United Kingdom include brand-name IT
11hardware, software and services. In March 2007, the Company completed the sale of PC
12Wholesale, a division of its North America operating segment, which was engaged in the
13
14business of selling IT products.
15 Materially False and MisleadingStatements Issued During the Class Period
1627. The Class Period begins on April 22, 2004. On that date, the Company issued a
17press release entitled "Insight Enterprises Inc. Reports First Quarter Results; Net Sales of $733
18
19Million and Diluted Earnings Per Share of $0.34." Therein, the Company stated in relevant part:
20 "I am pleased to report our fourth consecutive quarter of sequential growth inboth net earnings and earnings per share," said Timothy A. Crown, chief
21 executive officer. "The migration of Insight's small to medium-sized business("SMB") account executives serving United States' customers to our new
22 Maximus system was completed in January, and although the quarter got off to a
23slow start while our account executives were becoming familiar with the newsystem, March was a strong month and momentum seems to have continued into
24 April."
25 Net sales for the quarter ended March 31, 2004 increased 3 % to $732.7 millionfrom $711.3 million in the same period in 2003. Net earnings and diluted
26 earnings per share for the first quarter of 2004 were $16.6 million and $0.34,
27respectively, compared to first quarter 2003 net earnings and diluted earningsper share of $7.0 million and $0.15, respectively. Excluding income recognized
28 in the quarter ended March 31, 2004 resulting from a reduction in liabilitiesCOHEN, MILSTEIN,
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1 assumed in a previous acquisition of $2.9 million net of taxes, net earnings anddiluted earnings per share were $13.7 million and $0.28, respectively.
2 Excluding income recognized in the quarter ended March 31, 2003 resulting from
3 a reduction in liabilities assumed in a previous acquisition of $2.5 million net oftaxes and restructuring expenses of $1.9 million net of taxes, net earnings and
4 diluted earnings per share were $6.4 million and $0.14, respectively. A tabularreconciliation of financial measures prepared in accordance with accounting
5 principles generally accepted in the United States ("GAAP") to these non-GAAP
6financial measures is included below. [Emphasis added.]
28. On May 10, 2004, Insight filed its Quarterly Report with the SEC on Form 10-Q7
8 for the 2004 first fiscal quarter. The Company's 10-Q was signed by the defendants Laybourne
9 and Timothy Crown and reaffirmed the Company's financial results previously announced on
10 April 22, 2004.
1129. The Company's 10-Q filed on May 10, 2004 also contained Sarbanes-Oxley
12required certifications, signed by defendants Timothy Crown and Laybourne who stated.
13
1. I have reviewed this Quarterly Report on Form 10-Q of Insight
14 Enterprises, Inc.;
15 2. Based on my knowledge, this report does not contain any untrue statementof a material fact or omit to state a material fact necessary to make the
16 statements made, in light of the circumstances under which suchstatements were made, not misleading with respect to the period covered
17 by this report;
18 3. Based on my knowledge, the financial statements, and other financialinformation included in this report, fairly present in all material respects
19 the financial condition, results of operations and cash flows of the
20registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
21 establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) for the
22 registrant and have:
23 a. Designed such disclosure controls and procedures, or caused suchdisclosure controls and procedures to be designed under our
24 supervision, to ensure that material information relating to theregistrant, including its consolidated subsidiaries, is made known
25 to us by others within those entities, particularly during the period
26in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
27 and procedures and presented in this report our conclusions aboutthe effectiveness of the disclosure controls and procedures, as of
28COHEN, MILSTEIN,
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1 the end of the period covered by this report based on suchevaluation; and
2c. Disclosed in this report any changes in the registrant's internal
3 control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal
4 quarter in the case of an annual report) that has materially affected,or is reasonably likely to materially affect, the registrant's internal
5 control over financial reporting; and
6 5. The registrant's other certifying officer and I have disclosed, based on ourmost recent evaluation of internal control over financial reporting, to the
7 registrant's auditors and the audit committee of registrant's board ofdirectors (or persons performing the equivalent function):
8a. All significant deficiencies and material weaknesses in the design
9 or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to
10 record, process, summarize and report financial information; and
11 b. Any fraud, whether or not material, that involves management orother employees who have a significant role in the registrant's
12 internal control over financial reporting.
13 30. On January 27, 2005, the Company issued a press release entitled "Insight
14 Enterprises Inc. Reports Fourth Quarter Results' Net Sales - $806 Million; GAAP Diluted EPS
15- $0.62; Non GAAP Diluted EPS - $0.31." Therein, the Company stated, in relevant part:
16Jan. 27, 2005--Insight Enterprises Inc. today reported results of
17 operations for the three months and year ended Dec. 31, 2004.
18 Fourth Quarter Highlights:
19 •• Quarterly net sales growth of 9% from $739.2 million in Q4 2003 to
20 $805.7 million in Q4 2004.
21 • 2491 year-over year growth in quarterly non-GAAP(A) diluted EPS from$0.25 in Q4 2003 to $0.31 in Q4 2004.
22Insight North America posted non-GAAP(A) earnings from operations•
23 as a percentage of net sales of 2.7% -- the highest operating margin for
24 Insight North America in the past 10 quarters.
25 • Sold remaining shares in PlusNet, a leading Internet service provider inthe United Kingdom, and recorded gain on sale in Q4 2004 of $17.1
26 million.
27 • Announced hiring of Richard A. Fennessy as chief executive officer
28 effective Nov. 15, 2004.
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1"The fourth quarter was another strong quarter resulting in year-over-
2 year growth in net sales and non-GAAP diluted earnings per share of 9%and 2491, respectively," said Richard A. Fennessy, chief executive officer.
3 "I am pleased with the results of the quarter and strategic direction we aretaking to continue this growth into 2005 and beyond." [Emphasis added.]
431. On March 7, 2005, Insight filed its Annual Report for fiscal year 2004 with the
5
6 SEC on Form 10-K. The Company's 10-K was signed by the defendants Fennessy, Laybourne,
7 Timothy Crown, Eric Crown, Gunning, Jones, Fisher, and Dorrance, and reaffirmed the
8 Company's financial results previously announced on January 27, 2005. The Company's 10-K
9 also contained Sarbanes-Oxley required certifications, substantially similar to the certifications
10contained in lf 29, supra.
1132. On January 26, 2006, the Company issued a press release entitled "Insight
12
13Enterprises Inc. Reports Fourth Quarter Results." Therein, the Company stated, in relevant part:
14 Insight Enterprises today reported results of operations for the three months andyear ended Dec. 31, 2005.
15Fourth Quarter Highlights:
16
17-- Quarterly net sales growth of 3.4% from $805.7 million in Q4 2004 to $832.9million in Q4 2005.
18Non-GAAP(a) net earnings growth of 9%from $15.4 million in Q4 2004 to
19 $16.8 million in Q4 2005. (GAAP net earnings decline of 64%)
20 --13 % year-over-year growth in non-GAAP(a) diluted EPS from $0.31 in Q4
21 2004 to $0.35 in Q4 2005. (GAAP diluted EPS decline from $0.62 in Q4 2004 to$0.23 in Q4 2005.)
22-- Quarterly non-GAAP(a) operating margin of 3.3%. (GAAP operating margin of
23 2.4%.)
24 -- Quarterly net sales and non-GAAP(a) earnings from operations growth for
25 Insight North America of 3.8% and 19%, respectively, over prior year.-- Quarterly non-GAAP(a) earnings from operations growth for Insight UK of
26 14% over. prior year.
27 -- "I am pleased to announce that Insight Enterprises Inc. had another solid
28quarter, obtaining year-over-year growth in net sales, non-GAAP net earnings,
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1 and non-GAAP diluted earnings per share while reaching our highest non-GAAP operating margin since Q12002," said Rich Fennessy, chief executive
2 officer. [Emphasis added.]
333. On February 17, 2006, Insight filed its Annual Report for fiscal year 2005 with
4the SEC on Form 10-K. The Company's 10-Q was signed by the defendants Fennessy,
56 Laybourne, Timothy Crown, Eric Crown, Gunning, Jones, Fisher, Dorrance, and Pushor, and
7 reaffirmed the Company's financial results previously announced on January 26, 2006. The
8 Company's 10-K also contained Sarbanes-Oxley required certifications, substantially similar to
9 the certifications contained in 129, supra.
10 34. On January 30, 2007, the Company issued a press release entitled "Insight
11Enterprises, Inc. Reports Preliminary Fourth Quarter Results." Therein, the Company stated, in
12relevant part:
13
14Fourth Quarter Highlights:
15 -- Quarterly net sales growth of 57% from $812.1 million in Q4 2005 to $1.27billion in Q4 2006.
16-- Quarterly non-GAAP(1) net earnings growth of 25% from $17.0 million in
17 Q4 2005 to $21.2 million in Q4 2006 (GAAP net earnings grew 69% from
18 $11.1 million to $18.8 million).
19 Non-GA4P(1) diluted EPS growth of 23 %from $0.35 in Q4 2005 to $0.43in Q4 2006 (GAAP diluted EPS grew 65% from $0.23 in Q4 2005 to $0.38 in
20 Q42006).
21 -- North America quarterly net sales and non-GA4P(1) earnings from
22 operations increased 33% and 32%, respectively, over the prior year (GAAPearnings from operations increased 180).
23EMEA quarterly net sales and non-GAAP(1) earnings from operations
24 increased 190% and 158%, respectively, over the prior year (GAAP earningsfrom operations increased 253%).
25
26 APAC quarterly net sales and non-GAAP(1) earnings from operations were$23.4 million and $835,000, respectively (GAAP earnings from operations were
27 $824,000).
28 2006 Full Year Highlights:COHEN, MILSTEIN,
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1-- Annual net sales growth of 20% from $3.18 billion in 2005 to $3.82 billion
2 1n2006.
3-- Annual non-GA4P(1) net earnings growth of 20% from $64.0 million in
4 2005 to $76.7 million in 2006 (GAAP net earnings grew 39% from $54.7million to $76.2 million).
5 Non-GAAP(1) diluted EPS growth of 21 %from $1.30 in 2005 to $1.57 in
62006 (GAAP diluted EPS grew 39%from $1.12 in 2005 to $1.56 in 2006).
7 "I am very pleased to announce that Insight had a great quarter, whichprovided a strong ending to a very exciting and successful 2006, " said Rich
8 Fennessy, chief executive officer. '7 am proud to say we achieved recordquarterly and annual net sales, non-GAAP net earnings and non-GAAP
9 diluted earnings per share." [Emphasis added.]
10 35. On July 26, 2007, Insight filed its Annual Report for fiscal year 2006 with the
11SEC on Form 10-K. The Company's 10-K was signed by the defendants Fennessy,
12Laybourne, Timothy Crown, Eric Crown, Gunning, Jones, Fisher, Dorrance, Pushor and
1314 Robino, and reaffirmed the Company's financial results previously announced on January 30,
15 2007. The Company's 10-K also contained Sarbanes-Oxley required certifications,
16 substantially similar to the certifications contained in lf 29, supra
17 36. On February 6, 2008, the Company issued a press release entitled "Insight
18Enterprises, Inc. Reports Fourth Quarter and Full Year 2007 Results." Therein, the Company
19stated, in relevant part:
20Insight Enterprises today reported results of operations for the quarter and year
21 ended December 31, 2007.
22Fourth Quarter and 2007 Full Year Highlights
23-- Net sales for the fourth quarter increased 5% to $1.28 billion, and annual net
24 sales increased 34% to $4.80 billion.
25 -- Gross profit for the fourth quarter grew 10% to $173.3 million, and annual
26 gross profit grew 40% to $661.1 million.
27 -- Net earnings from continuing operations for the fourth quarter increased29% to $23.8 million, while annual net earnings from continuing operations
28 increased 13% to $72.0 million.COHEN, MILSTEIN,
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1-- Diluted EPS from continuing operations for the fourth quarter increased 3091
2 to $0.48, while annual diluted EPS from continuing operations increased 1091
3 to $1.44.
4 -- Q4 2007 results include expenses of $334,000, $201,000 net of tax, forprofessional fees and costs associated with our stock option review, while 2007
5 full year results include expenses of $13.0 million, $7.9 million net of tax, for
6such professional fees and costs and $2.6 million, $1.5 million net of tax, forseverance and restructuring expenses. Q4 2006 and full year 2006 results include
7 expenses of $1.6 million, $1.0 million net of tax, for professional fees associatedwith our stock option review and $729,000, $454,000 net of tax, for severance
8 and restructuring expenses.
9 "I am very pleased to announce that the overall performance of our
10geographic operating segments produced a solid fourth quarter, whichprovided a strong ending to a successful 2007, " said Rich Fennessy,
11 President and Chief Executive Officer. "As expected, our business delivered aseasonally stronger fourth quarter, and for the full year our overall financial
12 results exceeded our own internal expectations." [Emphasis added.]
13 37. On February 27, 2008, Insight filed its Annual Report for fiscal year 2007 with
14the SEC on Form 10-K. The Company's 10-K was signed by the defendants Fennessy, Bryan,
15Timothy Crown, Dorrance, Fisher, Gunning, Jones, Pushor, Robino, and McGinnis, and
1617 reaffirmed the Company's financial results previously announced on February 6, 2008. The
18 Company's 10-K also contained Sarbanes-Oxley required certifications, substantially similar to
19 the certifications contained in lf 29, supra.
20 38. On May 8, 2008, the Company issued a press release entitled "Insight Enterprises,
21 Inc. Reports First Quarter 2008 Results." Therein, the Company stated, in relevant part:
22Insight Enterprises, Inc. today reported results of operations for the quarter ended
23 March 31, 2008.
24 First Quarter Highlights
25 -- Net sales for the first quarter of 2008 decreased 1 % to $1.11 billion.
26-- Gross profit for the first quarter remained flat at $153.2 million.
27-- Net earnings from continuing operations for the first quarter decreased 14% to
28 $10.5 million.COHEN, MILSTEIN,
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1-- Diluted EPS from continuing operations for the first quarter decreased 12% to
2 $0.22.
3-- First quarter 2008 results from continuing operations include $1.9 million,
4 $1.1 million net of tax, for severance and restructuring expenses. First quarter2007 results include expenses of $5.7 million, $3.5 million net of tax, for
5 professional fees and costs associated with our stock option review.
6 "The first quarter of 2008 was a very challenging quarter for our business.
7 While overall our EMEA and APAC segments performed as expected, ourNorth America segment did not meet our internal expectations for profitability
8 during the quarter," stated Rich Fennessy, President and Chief ExecutiveOfficer. "As a result, we implemented a number of critical actions across our
9 business focused on increasing net sales and gross profit and reducing our
10expense base to improve our overall earnings performance for the balance of theyear in this challenging market environment," added Fennessy.
1139. Also on May 8, 2008, Insight filed its Quarterly Report with the SEC. The
12Company's 10-Q was signed by the defendants Fennessy and Bryan, and reaffirmed the
1314 Company's financial results previously announced that day. The Company's 10-Q also
15 contained Sarbanes Oxley required certifications, substantially similar to the certifications
16 contained in 1f29, supra.
17 40. On August 11, 2008, the Company issued a press release entitled "Insight
18Enterprises, Inc. Reports Second Quarter 2008 Results." Therein, the Company stated, in
19relevant part:
20Insight Enterprises, Inc. (Nasdaq . NSIT) (the "Company") today reported results
21 of operations for the quarter ended June 30, 2008.
22Second Quarter Highlights
23-- Net sales increased 9% to $1.40 billion.
24
25-- Gross profit grew 9% to $201.7 million.
26 -- Net earnings from continuing operations before a charge for goodwillimpairment remained flat at $26.9 million.* (Net loss from continuing
27 operations of ($174.3 million) including charge for goodwill impairment.)
28 -- Diluted EPS from continuing operations before a charge for goodwillCOHEN, MILSTEIN,
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1 impairment grew 7% to $0.58.* (Diluted EPS from continuing operations of
2($3.74) including charge for goodwill impairment.)
3 -- Second quarter 2008 results from continuing operations include $313.9million, $201.2 million net of tax, for a non-cash goodwill impairment charge,
4 which represented the entire goodwill balance of the North America operatingsegment.
5
6-- Second quarter 2008 results from continuing operations include $3.5 million,$2.3 million net of tax, for severance and restructuring expenses. Annualized
7 savings of $4.0 million to $5.5 million are targeted from restructuring activitiesin the second quarter.
8--Second quarter 2007 results include severance expenses of $2.8 million, $1.7
9 million net of tax, and expenses of $4.3 million, $2.6 million net of tax, for
10professional fees and costs associated with the Company's stock option review.
11 --Completed the acquisition of Calence, LLC on April 1, 2008.
12 "We are pleased with our overall results in the second quarter and feel we haveregained some of the ground we lost in the first quarter," said Rich Fennessy,
13 President and Chief Executive Officer. "Having said this, we still have our workcut out for us in the second half of the year as we continue to compete in a
14 challenging demand environment."
15 41. Also on August 11, 2008, Insight filed its Quarterly Report with the SEC on Form
16 10Q. The Company's 10-Q was signed by the defendants Fennessy and Bryan, and reaffirmed
17 the Company's financial results previously announced that day. The Company's 10-Q also
18contained Sarbanes-Oxley required certifications, substantially similar to the certifications
19contained in lf 29, supra.
20
2142. On November 6, 2008, the Company issued a press release entitled "Insight
22 Enterprises, Inc. Reports Third Quarter 2008 Results." Therein, the Company stated, in relevant
23 part:
24 Insight Enterprises, Inc. today reported results of operations for the three monthsended September 30, 2008.
25
26Third Quarter Highlights
-- Net sales for the quarter increased 5% to $1.17 billion.27
28-- Gross profit for the quarter grew 3% to $154.1 million.
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 15 of 31
1 -- Net earnings from continuing operations for the quarter decreased to $6.7million from $9.1 million.
2-- Diluted EPS from continuing operations for the quarter declined to $0.15 from
3 $0.18.
4 -- Third quarter 2008 results include $3.3 million of foreign currency losses,primarily resulting from the strengthening of the U.S. dollar against the Euro and
5 the British Pound Sterling and the volatility of those exchange rates during thequarter. The 2007 results included $849,000 of net foreign currency losses.
6--Third quarter 2008 results include $1.1 million of tax benefit related to federal
7 and state research and development credits recorded during the quarter. -- Thirdquarter 2007 results include expenses of $2.5 million for professional fees
8 associated with our stock option review.
9 --Completed the acquisition of MINX Limited on July 10, 2008.
10 "In the third quarter, the demand environment for IT solutions continued to bevery challenging as the overall economy worsened, especially in September," said
11 Rich Fennessy, President and Chief Executive Officer. "In this environment, aswe finish out 2008 and head into 2009, we are focused on optimizing our new
12 sales coverage model and taking actions to reduce our base infrastructure costsand discretionary spending."
1343. On November 7, 2008, Insight filed its Quarterly Report with the SEC on Form
1410-Q. The Company's 10-Q was signed by defendants Fennessy and Bryan, and reaffirmed the
1516 Company's financial results previously announced on November 6, 2008. The Company's 10-Q
17 also contained Sarbanes-Oxley required certifications, substantially similar to the certifications
18 contained in lf 29, supra.
19 44. The statements contained in tf 27-43 were materially false and misleading when
20 made because defendants failed to disclose or indicate the following: (1) that the Company
21committed errors in the manner in which it accounted for certain aged trade credits; (2) that the
22Company's financial statements were not prepared in accordance with GAAP; (3) that the
23
24Company lacked adequate internal and financial controls; and (4) that, as a result of the
25 foregoing, the Company's financial statements were materially false and misleading at all
26 relevant times.
27
28COHEN, MILSTEIN,
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 16 of 31
1 The Truth Begins to Emerge
2 45. On February 9, 2009, the Company shocked investors when it issued a press
3release entitled, "Insight Enterprises, Inc. Reports Preliminary (Unaudited) Fourth Quarter 2008
4Results." Therein, the Company stated, in relevant part:
5Insight Enterprises, Inc. today announced preliminary financial results for the
6 fourth quarter of 2008 and its perspective on the 2009 market environment. TheCompany also said management has identified errors in the way it historically
7 accounted for certain aged trade credits generated in the ordinary course ofbusiness. Consequently, management and the Audit Committee of the Board of
8 Directors have determined that the Company will restate previously reportedearnings as further explained below.
9
10 The Company will host a conference call and live webcast today at 9:00 a.m. ETto discuss preliminary fourth quarter 2008 results of operations and the proposed
11 restatement.
12 Preliminary (Unaudited) Fourth Quarter Highlights
13The Company stated that it is still working tlu-ough its annual close process and
14 audit, and therefore, all financial results announced today are preliminary andsubject to final adjustments. These results specifically exclude the effect of the
15 proposed restatement and other final year end tax adjustments. Additionally,these results exclude certain possible non-cash adjustments resulting from the
16 determination of the utilization of foreign tax credits and the completion of the
17 Company's annual goodwill impairment testing.
18 • Net sales for the quarter are expected to decrease 10% to $1.16 billion.
19• Gross profit for the quarter is expected to decline 10% to $155.4 million.
20 • Net earnings from continuing operations for the quarter are expected to
21 decrease to $5.4 million from $23.8 million for the fourth quarter of 2007.
22 • Diluted earnings per share from continuing operations for the quarter areexpected to decline to $0.11 from $0.48 for the fourth quarter of 2007.
23
24• Fourth quarter 2008 results include $3.2 million in severance expense,
resulting from workforce reductions of over 280 positions in response to
25 the overall demand environment.
26• Fourth quarter 2008 results include $6.2 million of net foreign currencyexchange losses, primarily resulting from the strengthening of the U.S.
27 dollar against the Canadian dollar and the Euro against the British Pound
28Sterling, as well as the volatility of those exchange rates during the
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 17 of 31
1 quarter.
2 • The Company's focus on cash management initiatives resulted in the pay
3 down of $103 million in debt in the fourth quarter.
4 "While softening demand for IT solutions led to fourth quarter resultsbelow management expectations, our successful efforts in 2008 to reduce
5 our base cost infrastructure and refine our go-to-market model partiallymitigated these results," said Rich Fennessy, President and Chief
6 Executive Officer. "Insight's underlying business strategy remains strong,and the Company will continue to take the necessary actions to ensure our
7 long-term success."
8 * * *
9 Restatement of Previously Issued Financial Statements
10 Following an internal review, the Company has determined that theCompany's historical accounting treatment, since 1996, of certain aged
11 trade credits created in the ordinary course of business was in error. Theerror
12rektes primarily to the release of certain aged trade credits from its
balance sheet to its statement of earnings prior to the complete release of the
13 underlying liabilities under applicable legal requirements. Insight isworking with its auditors and external advisors to quantify the related
14 liabilities and to establish new policies going forward. The review,covering trade credits since 1996, is' ongoing, but the Company expects that
15 it will restate financial statements which are included in the Company's
16most recently fled Annual Report on Form 10-K, for the year endedDecember 31, 2007, and in the Quarterly Reports on Form 10-Q for the first
17 three quarters of fiscal year 2008. The Company also expects that therestatement of its fuzancial statements will include a material reduction of
18 retained earnings as of December 31, 2004, related to the accumulation ofsuch errors in prior periods'. The cumulative restatement dject is expected to
19 be $50 million to $70 million, before consideration of any tax djects. Given
20the high volume of individual transactions involved and complexity ofresearching each item, the Company expects that the final settlement of these
21 liabilities may take multiple years and may eventually be settled for less thanthe estimated liability. Any difference between the restated amounts
22 accrued by the Company and the final settlement with counterparties
23will be reflected in the periods in which any such resolution occurs.
24 "Insight is committed to fairly and completely addressing the impactof our historical accounting practices and to putting this matter
25 definitively in the past," Mr. Fennessy said. "In fact, Insight hasalready made a number of important changes in our finance activities,
26 including new management in certain key finance roles, as well asupdates to our systems and policies to ensure the Company's
27 accounting practices are fully compliant going forward."
28COHEN, MILSTEIN,
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 18 of 31
1 The Company has informed the administrative agent and lenders underits primary secured credit facilities of its intention to restate its
2 financial statements. The errors and consequent restatement constitute
3 a default under the Company's primary credit facilities. Accordingly,the Company sought and has received the waivers required to resolve
4 this default.
5 The Company will not release final fourth quarter and full year 2008
6results until it has finalized its year end closing process and audit,including the accounting related to the proposed restatement, at which
7 time it will file its 2008 financial statements with the Securities andExchange Commission ("SEC"). [Emphasis added.]
8
46. On this news, the Company's shares fell $2.85 per share, or 48.3 percent, to9
10close on February 9, 2009 at $3.05 per share, on unusually heavy trading volume.
11 INSIGHT'S VIOLATION OF GAAP RULESIN ITS FINANCIAL STATEMENTS FILED WITH THE SEC
12
47. These financial statements and the statements about the Company's financial13
14results were false and misleading, as such financial information was not prepared in
15 conformity with GAAP, nor was the financial information a fair presentation of the
16 Company's operations due to the Company's improper accounting for, and disclosure about
17 its revenues, in violation of GAAP rules.
18
48. GAAP are those principles recognized by the accounting profession as the
19conventions, rules and procedures necessary to define accepted accounting practice at a
20
21particular time. Regulation S-X (17 C.F.R. § 210.401 (a) (1)) states that financial statements
22 filed with the SEC which are not prepared in compliance with GAAP are presumed to be
23 misleading and inaccurate. Regulation S-X requires that interim financial statements must also
24 comply with GAAP, with the exception that interim financial statements need not include
25 disclosure which would be duplicative of disclosures accompanying annual financial statements.
2617 C.F.R. § 210.10-01(a).
27
49. The fact that Insight will restate its financial statements, and disclosed that these28
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 19 of 31
1 financial statements should not be relied upon is an admission that they were false and
2 misleading when originally issued (APB No.20, 77-13; SFAS No. 154,1j25).
350. Given these accounting irregularities, the Company announced financial results
4that were in violation of GAAP and the following principles:
5
6(a) The principle that "interim financial reporting should be based upon the
7 same accounting principles and practices used to prepare annual financial
8 statements" was violated (APB No. 28,10_0);
9 (b) The principle that "financial reporting should provide information that is
10 useful to present to potential investors and creditors and other users in
11making rational investment, credit, and similar decisions" was violated
12(FASB Statement of Concepts No. 1,1j34);
13
14(c) The principle that "financial reporting should provide information about
15 the economic resources of an enterprise, the claims to those resources, and
16 effects of transactions, events, and circumstances that change resources
17 and claims to those resources" was violated (FASB Statement of Concepts
18No. 1,140);
19(d) The principle that "financial reporting should provide information about
20
21an enterprise's financial performance during a period" was violated
22 (FASB Statement of Concepts No. 1, ¶ 42);
23 (e) The principle that "financial reporting should provide information about
24 how management of an enterprise has discharged its stewardship
25 responsibility to owners (stockholders) for the use of enterprise resources
26entrusted to it" was violated (FASB Statement of Concepts No. 1, lf 50);
27
28COHEN, MILSTEIN,
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 20 of 31
1 The principle that "financial reporting should be reliable in that it
2 represents what it purports to represent" was violated (FASB Statement of
3Concepts No. 2, tf 58-59);
4(g) The principle that "completeness, meaning that nothing is left out of the
5
6information that may be necessary to insure that it validly represents
7 underlying events and conditions" was violated (FASB Statement of
8 Concepts No. 2,179); and
9 (h) The principle that "conservatism be used as a prudent reaction to
10 uncertainty to try to ensure that uncertainties and risks inherent in business
11situations are adequately considered" was violated (FASB Statement of
12Concepts No. 2,1j95).
13
1451. The adverse information concealed by Defendants during the Class Period and
15 detailed above was in violation of Item 303 of Regulation S-K under the federal securities law
16 (17 C.F.R. §229.303).
17 PLAINTIFF'S CLASS ACTION ALLEGATIONS
18
52. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
19Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased Insight
20
21securities between April 22, 2004 and February 6, 2009, inclusive (the "Class Period") and who
22 were damaged thereby. Excluded from the Class are defendants, the officers and directors of the
23 Company, at all relevant times, members of their immediate families and their legal
24 representatives, heirs, successors or assigns and any entity in which defendants have or had a
25 controlling interest.
26
53. The members of the Class are so numerous that joinder of all members is27
impracticable. Throughout the Class Period, Insight's securities were actively traded on the28
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 21 of 31
1 NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and
2 can only be ascertained tlu-ough appropriate discovery, Plaintiff believes that there are hundreds
3or thousands of members in the proposed Class. Record owners and other members of the Class
4may be identified from records maintained by Insight or its transfer agent and may be notified of
56 the pendency of this action by mail, using the form of notice similar to that customarily used in
7 securities class actions.
8 54. Plaintiff's claims are typical of the claims of the members of the Class as all
9 members of the Class are similarly affected by defendants' wrongful conduct in violation of
10 federal law that is complained of herein.
11
55. Plaintiff will fairly and adequately protect the interests of the members of the12
Class and has retained counsel competent and experienced in class and securities litigation.13
1456. Common questions of law and fact exist as to all members of the Class and
15 predominate over any questions solely affecting individual members of the Class. Among the
16 questions of law and fact common to the Class are:
17 (a) whether the federal securities laws were violated by defendants' acts as
18alleged herein;
19(b) whether statements made by defendants to the investing public during the
20
21Class Period misrepresented material facts about the business, operations
22 and management of Insight; and
23 (c) to what extent the members of the Class have sustained damages and the
24 proper measure of damages.
25 57. A class action is superior to all other available methods for the fair and efficient
26adjudication of this controversy since joinder of all members is impracticable. Furthermore, as
27the damages suffered by individual Class members may be relatively small, the expense and
28COHEN, MILSTEIN,
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 22 of 31
1 burden of individual litigation make it impossible for members of the Class to individually
2 redress the wrongs done to them. There will be no difficulty in the management of this action
3as a class action.
4UNDISCLOSED ADVERSE FACTS
5
658. The market for Insight's securities was open, well-developed and efficient at all
7 relevant times. As a result of these materially false and misleading statements, and failures to
8 disclose, Insight's securities traded at artificially inflated prices during the Class Period.
9 Plaintiff and other members of the Class purchased or otherwise acquired Insight's securities
10 relying upon the integrity of the market price of Insight's securities and market information
11relating to Insight, and have been damaged thereby.
12
59. During the Class Period, defendants materially misled the investing public,13
14thereby inflating the price of Insight's securities, by publicly issuing false and misleading
15 statements and omitting to disclose material facts necessary to make defendants' statements, as
16 set forth herein, not false and misleading. Said statements and omissions were materially false
17 and misleading in that they failed to disclose material adverse information and misrepresented
18the truth about the Company, its business and operations, as alleged herein.
19
60. At all relevant times, the material misrepresentations and omissions20
21particularized in this Complaint directly or proximately caused or were a substantial
22 contributing cause of the damages sustained by Plaintiff and other members of the Class. As
23 described herein, during the Class Period, defendants made or caused to be made a series of
24 materially false or misleading statements about Insight's financial well-being. These material
25 misstatements and omissions had the cause and effect of creating in the market an
26unrealistically positive assessment of Insight and its financial well-being, thus causing the
27Company's securities to be overvalued and artificially inflated at all relevant times. Defendants'
28COHEN, MILSTEIN,
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 23 of 31
I materially false and misleading statements during the Class Period resulted in Plaintiff and other
2 members of the Class purchasing the Company's securities at artificially inflated prices, thus
3causing the damages complained of herein.
4LOSS CAUSATION
5
661. The defendants' wrongful conduct, as alleged herein, directly and proximately
7 caused the economic loss suffered by Plaintiff and the Class.
8 62. During the Class Period, Plaintiff and the Class purchased Insight's securities at
9 artificially inflated prices and were damaged thereby. The price of Insight's securities
10 significantly declined when the misrepresentations made to the market, and/or the information
11alleged herein to have been concealed from the market, and/or the effects thereof, were revealed,
12causing investors' losses.
13
14SCIENTER ALLEGATIONS
15 63. As alleged herein, defendants acted with scienter in that defendants knew that the
16 public documents and statements issued or disseminated in the name of the Company were
17 materially false and misleading; knew that such statements or documents would be issued or
18disseminated to the investing public; and knowingly and substantially participated or acquiesced
19in the issuance or dissemination of such statements or documents as primary violations of the
20
21federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their
22 receipt of information reflecting the true facts regarding Insight their control over, and/or receipt
23 and/or modification of Insight's allegedly materially misleading misstatements and/or their
24 associations with the Company which made them privy to confidential proprietary information
25 concerning Insight, participated in the fraudulent scheme alleged herein.
26
64. Additionally, during the Class Period, and with the Company's securities trading27
at artificially inflated prices, Company insiders sold 2,287,309 shares of the Company's stock for28
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 24 of 31
1 gross proceeds of $49,069,799 including over $32 million in gross proceeds received by the
2 Individual Defendants.
3Applicability of Presumption of Reliance:
4 Fraud on the Market Doctrine
5 65. At all relevant times, the market for Insight's securities was an efficient market
6 for the following reasons, among others:
7(a) Insight's securities met the requirements for listing, and were listed and
8actively traded on the NASDAQ, a highly efficient and automated
9
10market;
11 (b) As a regulated issuer, Insight filed periodic public reports with the SEC
12 and the NSADAQ;
13 (c) Insight regularly communicated with public investors via established
14market communi cati on mechani sms, including tlu-ough regular
15disseminations of press releases on the national circuits of major newswire
16
17services and through other wide-ranging public disclosures, such as
18 communications with the financial press and other similar reporting
19 services; and
20 (d) Insight was followed by several securities analysts employed by major
21 brokerage firms who wrote reports which were distributed to the sales
22force and certain customers of their respective brokerage firms. Each of
23these
24
25reports was publicly available and entered the public marketplace.
26 66. As a result of the foregoing, the market for Insight's securities promptly
27 digested current information regarding Insight from all publicly-available sources and reflected
28 such information in the price of Insight's securities. Under these circumstances, all purchasersCOHEN, MILSTEIN,
SELLERS TOLL Class Action Complaint 24PLLCTTORNFYS AT AW
ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 25 of 31
1 of Insight's securities during the Class Period suffered similar injury through their purchase of
2 Insight's securities at artificially inflated prices and a presumption of reliance applies.
3NO SAFE HARBOR
4
67. The statutory safe harbor provided for forward-looking statements under certain5
6circumstances does not apply to any of the allegedly false statements pleaded in this
7 Complaint. Many of the specific statements pleaded herein were not identified as "forward-
8 looking statements" when made. To the extent there were any forward-looking statements,
9 there were no meaningful cautionary statements identifying important factors that could cause
10 actual results to differ materially from those in the purportedly forward-looking statements.
11Alternatively, to the extent that the statutory safe harbor does apply to any forward-looking
12statements pleaded herein, defendants are liable for those false forward-looking statements
1314 because at the time each of those forward-looking statements was made, the particular speaker
15 knew that the particular forward-looking statement was false, and/or the forward-looking
16 statement was authorized and/or approved by an executive officer of Insight who knew that
17 those statements were false when made.
18FIRST CLAIM
19 Violation of Section 10(b)ofThe Exchange Act and Rule 10b-5
20 Promulgated Thereunder Against All Defendants
21 68. Plaintiff repeats and realleges each and every allegation contained above as if
22fully set forth herein.
23
69. During the Class Period, defendants carried out a plan, scheme and course of24
25conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing
26 public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff
27 and other members of the Class to purchase Insight's securities at artificially inflated prices. In
28 furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them,COHEN, MILSTEIN,
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 26 of 31
1 took the actions set forth herein.
2 70. The defendants (i) employed devices, schemes, and artifices to defraud; (ii)
3made untrue statements of material fact and/or omitted to state material facts necessary to
4make the statements not misleading; and (iii) engaged in acts, practices, and a course of
5
6business which operated as a fraud and deceit upon the purchasers of the Company's securities
7 in an effort to maintain artificially high market prices for Insight's securities in violation of
8 Section 10(b) of the Exchange Act and Rule 10b-5. All defendants are sued either as primary
9 participants in the wrongful and illegal conduct charged herein or as controlling persons as
10 alleged below.
11
71. The defendants, individually and in concert, directly and indirectly, by the use,12
means or instrumentalities of interstate commerce and/or of the mails, engaged and1314 participated in a continuous course of conduct to conceal adverse material information about
15 Insight's financial wellbeing, as specified herein.
16 72. These defendants employed devices, schemes and artifices to defraud, while in
17 possession of material adverse non-public information and engaged in acts, practices, and a
18course of conduct as alleged herein in an effort to assure investors of Insight's value and
19performance and continued substantial growth, which included the making of, or the
20
21participation in the making of, untrue statements of material facts and omitting to state material
22 facts necessary in order to make the statements made about Insight and its financial results in
23 light of the circumstances under which they were made, not misleading, as set forth more
24 particularly herein, and engaged in transactions, practices and a course of business which
25 operated as a fraud and deceit upon the purchasers of Insight's securities during the Class
26Period.
27
73. Each of the Individual Defendants' primary liability, and controlling person28
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 27 of 31
I liability, arises from the following facts: (i) the Individual Defendants were high-level
2 executives and/or directors at the Company during the Class Period and members of the
3Company's management team or had control thereof; (ii) each of these defendants, by virtue of
4their responsibilities and activities as a senior officer and/or director of the Company, was
5
6privy to and participated in the creation, development and reporting of the Company's internal
7 budgets, plans, projections and/or reports; (iii) each of these defendants enjoyed significant
8 personal contact and familiarity with the other defendants and was advised of, and had access
9 to, other members of the Company's management team, internal reports and other data and
10 information about the Company's finances, operations, and sales at all relevant times; and (iv)
11each of these defendants was aware of the Company's dissemination of information to the
12investing public which they knew or recklessly disregarded was materially false and
13
14misleading.
15 74. The defendants had actual knowledge of the misrepresentations and omissions
16 of material facts set forth herein, or acted with reckless disregard for the truth in that they
17 failed to ascertain and to disclose such facts, even though such facts were available to them.
18Such defendants' material misrepresentations and/or omissions were done knowingly or
19recklessly and for the purpose and effect of concealing Insight's financial well-being, from the
20
21investing public and supporting the artificially inflated price of its securities. As demonstrated
22 by defendants' overstatements and misstatements of the Company's financial well-being,
23 throughout the Class Period, defendants, if they did not have actual knowledge of the
24 misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by
25 deliberately refraining from taking those steps necessary to discovery whether those
26statements were false or misleading
27
75. As a result of the dissemination of the materially false and misleading information28
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 28 of 31
I and failure to disclose material facts, as set forth above, the market price of Insight's securities
2 was artificially inflated during the Class Period. In ignorance of the fact that market prices of
3Insight's securities were artificially inflated, and relying directly or indirectly on the false and
4misleading statements made by defendants, or upon the integrity of the market in which the
5securities trades, and/or in the absence of material adverse information that was known to or
6
7 recklessly disregarded by defendants, but not disclosed in public statements by defendants during
8 the Class Period, Plaintiff and the other members of the Class acquired Insight's securities during
9 the Class Period at artificially high prices and were damaged thereby.
10
76. At the time of said misrepresentations and omissions, Plaintiff and other members
11of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff and the
12other members of the Class and the marketplace known the truth regarding the problems that
1314 Insight was experiencing, which were not disclosed by defendants, Plaintiff and other members
15 of the Class would not have purchased or otherwise acquired their Insight securities, or, if they
16 had acquired such securities during the Class Period, they would not have done so at the
17 artificially inflated prices which they paid.
18
77. By virtue of the foregoing, defendants have violated Section 10(b) of the
19Exchange Act and Rule 10b-5 promulgated thereunder.
20
2178. As a direct and proximate result of defendants' wrongful conduct, Plaintiff and
22 the other members of the Class suffered damages in connection with their respective purchases
23 and sales of the Company's securities during the Class Period.
24 SECOND CLAIMViolation of Section 20(a) of
25 The Exchange Act Against the Individual Defendants
26
79. Plaintiff repeats and realleges each and every allegation contained above as if27
fully set forth herein.28
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 29 of 31
1 80. The Individual Defendants acted as controlling persons of Insight within the
2 meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level
3positions, and their ownership and contractual rights, participation in and/or awareness of the
4Company's operations and/or intimate knowledge of the false financial statements filed by the
56 Company with the SEC and disseminated to the investing public, the Individual Defendants
7 had the power to influence and control and did influence and control, directly or indirectly, the
8 decision-making of the Company, including the content and dissemination of the various
9 statements which Plaintiff contends are false and misleading. The Individual Defendants were
10 provided with or had unlimited access to copies of the Company's reports, press releases,
11public filings and other statements alleged by Plaintiff to be misleading prior to and/or shortly
12after these statements were issued and had the ability to prevent the issuance of the statements
13
14or cause the statements to be corrected.
15 81. In particular, each of these defendants had direct and supervisory involvement in
16 the day-to-day operations of the Company and, therefore, is presumed to have had the power to
17 control or influence the particular transactions giving rise to the securities violations as alleged
18herein, and exercised the same.
19
82. As set forth above, Insight and the Individual Defendants each violated Section20
2110(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of
22 their positions as controlling persons, the Individual Defendants are liable pursuant to Section
23 20(a) of the Exchange Act. As a direct and proximate result of defendants' wrongful conduct,
24 Plaintiff and other members of the Class suffered damages in connection with their purchases
25 of the Company's securities during the Class Period.
26WHEREFORE, Plaintiff prays for relief and judgment, as follows:
27
28COHEN, MILSTEIN,
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 30 of 31
1 (a) Determining that this action is a proper class action under Rule 23 of the Federal
2 Rules of Civil Procedure;
3(b) Awarding compensatory damages in favor of Plaintiff and the other Class
4members against all defendants, jointly and severally, for all damages sustained as
5
6a result of defendants' wrongdoing, in an amount to be proven at trial, including
7 interest thereon;
8 (c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred in
9 this action, including counsel fees and expert fees; and
10 (d) Such other and further relief as the Court may deem just and proper.
11
12JURY TRIAL DEMANDED
13Plaintiff hereby demands a trial by jury.
14
15Dated April 23, 2009
Respectfully submitted,
16
17 By: /s/ Matthew K. Handley Matthew K. Handley
18 Steven J. TollDaniel S. Sommers
19 COHEN MILSTEIN SELLERS& TOLL PLLC
20 1100 New York Avenue, N .W.West Tower, STE 500
21 Washington, D.C. 20005-3964Telephone: 202-408-4600
22 Facsimile: 202-408-4699
23
24
25
26
27
28COHEN, MILSTEIN,
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ase 2:09-cv-00856-SRB Document 1 Filed 04/23/2009 Page 31 of 31
1
2 By: /s/Ron Kilgard
3 Ron KilgardKELLER ROHRBACK, P.L.C.
4 3101 North Central Avenue, Suite 1400Phoenix, Arizona 85012
5 Telephone: 602-248-0088Facsimile: 602-248-2822
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7 Lynn Lincoln SarkoJuli E. Farris
8 KELLER ROHRBACK L.L.P.1201 Third Avenue, Suite 3200
9 Seattle, Washington 98101Telephone: 206-623-1900
10 Facsimile: 206-623-3384
11 Attorneys for Plaintiff
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28COHEN, MILSTEIN,
SELLERS TOLL Class Action Complaint 31P.L.L.C.
Case 2:09-cv-00856-SRB Document 1-2 Filed 04/23/2009 Pagel of 1
CERTIFICATION OF PLAINTIFFPURSUANT TO FEDERAL SECURITIES LAWS
1, —V tc4 ITR kft-Rpol , ("Plaintiff') declare, as to the claims assertedunder the federal securities laws, that:
1. I have reviewed a class action complaint asserting securities claims against InsightEnterprises, Inc. (NSIT), and wish to join as a plaintiff retaining Cohen Milstein Sellers & Toll, PLLC asmy counsel.
2. Plaintiff did not purchase the security that is the subject of this action at the direction ofplaintiffs counsel or in order to participate in this private action.
3. Plaintiff is willing to serve as a representative party on behalf of the class, includingproviding testimony at deposition and trial, if necessary.
4. My transactions in Insight Enterprises, Inc. (NSIT) during the Class Period were asfollows:
DATE TRANSACTION (buy/sell) NO. OF SHARES PRICE PER SHARE
IZ6/07 Buy 5'16 .513
5. During the three years prior to the date of this Certificate, Plaintiff has not sought to serveor served as a representative party for a class in any action under the federal securities laws except asfollows:
6. Plaintiff will not accept any payment for serving as a representative party on behalf of theclass beyond plaintiffs pro rata share of any recovery, except such reasonable costs and expenses(including lost wages) directly relating to the representation of the class as ordered or approved by thecourt.
I declare under penalty of perjury that the foregoing true and correct.
Executed this 15 Day of APA-i
is\ Alti /009.. 41/4147
•
Case 2:09-cv-00856-SRB Document 1-3 Filed 04/23/2009 Page 1 of 1.JS 44 (Rev. 12/07) CIVIL COVER SHEETThe JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service ofpleadings or other papers as required by law, except as providedby local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiatingthe civil docket sheet (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM)
1. (a) PLAINTIFFS DEFENDANTS
DIMITRIY KARPOV, Individually and On Behalf of All Others INSIGHT ENTERPRISES, INC., TIMOTHY A. CROWN,Similarly Situated gi RICHARD A. FENNESSY, STANLEY LAYBOURNE, GLYNIam
(b) County of Residence of First Listed Plaintiff Maricooa County of Residence of First Listed Defendant Maricopa (EXCEPT IN US. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY)
NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THELAND INVOLVED.
(g) Attorney's (Firm Name, Address, and Telephone Number) Attorneys Of Knovm)
KELLER ROHRBACK, P.L.C., 3101 North Central Avenue, Suite1400, Phoenix, Arizona 85012; Tel: 602-248-0088 la
II. BASIS OF JURISDICTION (Place an "X" in One Box Only) III. CITIZENSHIP OF PRINCIPAL PARTIES(P120: an "X" in One Box for PlaintiffFor Diversity Cases Only) and One Box for Defendant)
0 I US. Government is 3 Federal Question PTF DER PTF DEFPlaintiff (U.S. Government Not a Party) Citizen of This State X 1 0 1 Incorporated or Pnncipal Place 0 4 X 4
of Business In This Slate
0 2 U.S. Govemmem 0 4 Diversity Citizen of Another State 0 2 0 2 Incorporated and Principal Place 0 5 0 5Defendant
of Business In Another State(Indicate Citizenship of Parties in Item 111)
Citizen or Subject of a 0 3 0 3 Foreign Nation 0 6 0 6Foreign. Comte
IV. NATURE OF SUIT 'lace ein"X" in One Box a
110 Insurance PERSONAL INJURY PERSONAL INJURY 0 610 Agriculture 0 422 Appeal 28 USC 158 0 400 State Reapportionment120 Marine 0 310 Airplane 0 362 Personal Injury - 0 620 Other Food & Drug 0 423 Withdrawal 0 410 AXIMILSt
130 Miller Act 0 315 Airplane Product Med. Metal:laic° 0 625 Drug Related Seizure 28 USC 157 0 430 Banks and Banking140 Negotiable Inswurnent Liability 0 365 Personal injury - of Property 21 USC 881 0 450 Commerce150 Recovery of Overpayment 0 320 Assault, Libel & Product Liability 0 630 Liquor Laws !Mannar 0 460 DelsutalI04
&Enforcement of Judgment Slander 0 368 Asbestos Personal 0 640 R.R. & Truck 0 820 Copyrights 0 470 Racketeer Influenced and151 Medicare Act 0 330 Federal Employers Injury Product 0 650 Airline Regs. 0 830 Patent Corrupt Organizations152 Recovery of Defaulted Liability Liability 0 660 Occupational 0 840 Trademark 0 480 Consumer Credit
Student Loans 0 340 Manic PERSONAL PROPERTY Safety/Health 0 490 Cable/Sat TV(Excl. Veterans) 0 345 Marine Product 0 370 Other Head 0 690 Other 0 810 Selective Service
0 153 Recovery of Ovemaytnent Liability 0 371 Truth in Lending X 850 Securitatt/Commodities/of Vetam's Benefits 0 350 Motor Vehicle 0 380 Other Personal 0 710 Fair Labor Standards 0 861 H1A (1395ff) Exchange
0 160 Stockholders' Suits 0 355 Motor Vehicle Property Damage Act 0 862 Black Lung (923) 0 875 Customer ChallengeO 190 Other Contract Product Liability 0 385 Property Damage 0 720 Labor/Mgmt. Relations 0 863 DIWC/D1WW (405(g)) 12 USC 3410O 195 Contact Product Liability 0 360 Other Pernonal Product Liability 0 730 Labor/Mgmt.Reporting 0 864 SSD Title XVI 0 890 Other Statutory ActionsO 196 Franchise : . & Disclosure Act 0 865 RSI 405: 0 891 Agricultural Acts
0 210 Land Condemnation 0 441 Voting 0 510 Motions to Vacate 0 790 Other Labor Litigation 0 870 Taxes (U.S. Plaintiff 0 893 Enyircannental M:Mers0 220 Foreclosure 0 442 Employment Sentenr,e 0 791 Empl. Rel. Inc. or Defendant) 0 894 Energy Allocation Act0 230 Rent Lease & Ejectment 0 443 Housing/ Habeas Corpus: Security Act 0 871 IRS—Third Party 0 895 Freedom of Information0 240 Torts to Land Accommodations 3 530 General 26 USC 7609 Act0 245 Tort Product Liability 0 444 Welfare 3 535 Death Paudty 1 0 900Appeal of Fee Determination0 290 All Other Real Progeity 0 445 Amer. w/Disabilities - 3 540 Mandiaran & Other • 4. N ration - • • ration Under Equal Access
EIIIIII0Sment 3 550 Civil Rights 0 463 Habeas Corpus - to JusticeO 446 Amer. w/Disabilities - 0 555 Risen Condition Alien Detainee 0 950 Constitutionality of
Other 0 465 Other Immigration State StatutesO 440 Other Civil Rights Actions
V. ORIGIN (Place an"' in One Box Only) Aural to Dis/rict21 Original 0 2 Removed from 0 3 Remanded from 0 4 Reinstated or 0 5 Transferred from 0 6 Multidistrict 0 7
Proceeding State Court Appellate Court Reopened another districtDimciA9
Litigationincrement
Cite the U.S. CiviL Statute under which you.are filing (Op Apt cite Jurisdittionalitatutes unteisillyersitvl .rursuant to sec. Zr or me ffxcnange AGE (10 U.b.l.:. sec. (brae) ana as u.s.u. Sec. 13.31.
VI. CAUSE OF ACTION Brief description of conve:Gommoti law misrepresentations and traud
VII. REQUESTED IN CI CHECK w THIS IS A CLASS ACTION DEMAND $ CHECK YES only if demanded in complaint:
COMPLAINT: UNDER F.R.C.P. 23 JURY DEMAND: el Yes 0 No
VHI. RELATED CASE(S)(See instructions):
IF ANY JUDGE DOCKET NUMBER
DATE SIGNATURE OF ATTORNEY OF RECORD
04/23/2009 Ron KilgardFOR OFt10E USE ONLY
RECEIPT II AMOUNT APPLYING IFP JUDGE MAO, 1130438
Case 2:09-cv-00856-SRB Document 14 Filed 04/23/2009 Page 1 of2
c1U4A0 440 (Rev. 8/01) Summons in a Civil Action
UNITED STATES DISTRICT COURT
Distridof Arizona
DIMITRIY KARPOV, Individually and On
Behalf of All Others Similarly Situated, SUMMONS IN A CIVIL CASEV.
INSIGHT ENTERPRISES, INC., TIMOTHY
A. CROWN, RICHARD A. FENNESSY, CASE
STANLEY LAYBOURNE, GLYNIS A. BRYAN,
KAREN K. McGINNIS, LARRY A. GUNNING,
ERIC J. CROWN, ROBERTSON C. JONES,
MICHAEL M. FISHER, BENNETT DORANCE, KATHELEEN
S. PUSHOR and DAVID J. ROBIN°
TO: (Name and address of Defendant)
INSIGHT ENTERPRISES, INC . , TIMOTHY A . CROWN, RICHARD A. FENNE S SY ,
STANLEY LAYBOURNE , GLYN I S A. BRYAN, KAREN K. Mc G I NN I S , LARRY A. GUNNING,
ERIC J. CROWN, ROBERTSON C. JONES, MICHAEL M. FISHER, BENNETT DORANCE ,
KATHE LEEN 5. PUSHOR and DAVID J. ROBIN°
YOU ARE HEREBY SUMMONED and required to serve on PLAINTIFF S ATTORNEY (name and address)
Ron Kilgard
Keller Rohrback, P . L . C .
3101 North Central Avenue
Suite 1400
Phoenix, Arizona 85012
an answer to the complaint which is served on you with this summons, within 20 days after serviceof this summons on you, exclusive of the day of service. If you fail to do so, judgment by default will be taken against you forthe relief demanded in the complaint. Any answer that you serve on the parties to this action must be filed with the Clerk of thisCourt within a reasonable period of time after service.
CLERK DATE
(By) DEPUTY CLERK
Case 2:09-cv-00856-SRB Document 1A Filed 04/23/2009 Page 2 of 2
c1a4A0 440 (Rev. 8/01) Suirmions in a Civil Action
RETURN OF SERVICEDATE
Service of the Summons and complaint was made by Mel
NAME OF SERVER (PRINT) TITLE
Check one box below to indicate appropriate method of service
O Served personally upon the defendant. Place where served:
O Left copies thereof at the defendant's dwelling house or usual place of abode with a person of suitable age anddiscretion then residing therein.
Name of person with whom the summons and complaint were left:
O Returned imexecuted:
O Other (specify):
STATEMENT OF SERVICE FEES
TRAVEL SERVICES TOTAL
DECLARATION OF SERVER
I declare under penalty of perjury under the laws of the United States of America that the foregoing informationcontained in the Return of Service and Statement of Service Fees is true and correct.
Executed onDate Signature of Server
Adafress of Server
(1) As to who may serve a summons see Rule 4 of the Federal Rules of Civil Procedure.