higginbotham, et al. v. baxter international, inc., et al...

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UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

DENNIS HIGGINBOTHAM, .individua lly and on behalf of all others .sim ilarly situated, :

Plaintiff,

-against-

BAXTER INTERNATIONAL, INC.,HARRY M. JANSEN KRAEMER, JR.,BRIAN P. ANDERSON, and .JOHN GREISCH,

Defendants.

FILFT7

JAN 1 0

is - i S

Civil Action No. 04 C 4909Honorable William T. Hart

#g- CKETED12009

JURY TRIAL DEMANDED

CONSOLIDATED AMENDED CLASS ACTION COMPLAIN T

Plaintiffs, the City of Sterling Heights Police & Fire Retirement System, the City of St Clai r

Shores Police & Fire Retirement System, the City of Roseville Employees Retirement System an d

the City of Sterling Heights General Employees Retirement System (collectively, the "Michigan

Funds") and the Steelworkers Pension Trust (together, the "Lead Plaintiffs"), individually and on

behalf of all other persons similarly situated , by their undersigned attorneys , for their complaint

against defendants, allege the following based upon personal knowledge as to themselves and thei r

own acts, and information and beliefas to all other matters, based upon, inter alia, the investigation

conducted by and through their attorneys, which included, among other things, a review of the

defendants' public documents, conference calls and announcements made by defendants, Unite d

States Securities and Exchange Commission ("SEC") filings, wire and press releases published by

and regarding Baxter International, Inc . (`Baxter" or the "Company"), securities analysts' reports

and advisories about the Company, information obtainable on the Internet, documents procured from

confidential sources at the Brazilian Ministry of Justice, and interviews with certain former Baxter

employees and Brazilian health officials . Lead Plaintiffs believe that substantial evidentiary support

will exist for the allegations set forth herein after a reasonable opportunity for discovery.

NATURE OF THE ACTION

1 . This is a federal class action on behalf of purchasers of the securities of Baxte r

between April 19, 2001 and July 21, 2004, inclusive (the "Class Period"), seeking to pursue remedies

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

2. On July 22, 2004, Baxter stunned the market by announcing that it planned to restat e

its financial results for the years 2001 through 2003, and for the first quarter of 2004. The effect of

the restatement, as particularized herein below, was to decrease previously reported net sales results

by $37 million and to decrease previously reported net income by $33 million .

3. The need to restate was due to an undisclosed breakdown in the Company's interna l

controls . As a result of this breakdown, the financial results of Baxter's Brazilian operations wer e

falsified by: (i) sales to fictitious customers ; (ii) fictitious sales to actual customers ; (iii) illegal

kickbacks ; and (iv) a scheme to illegally rig the bidding process utilized by the Brazilian Ministry

of Health for the purchase of blood products .

4. The restatement was attributed by the Company itself to incorrect revenue

recognition and inadequate provisions for bad debts in Brazil during the Class Period, in violation

of Generally Accepted Accounting Principles ("GAAP") .

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5. GAAP are those principles recognized by the accounting profession as the

conventions, rules and procedures necessary to define accepted accounting practice at a particular

time .

6 . Regulation S-X (17 C.F.R. §210.4-01 (a)(1)) states that financial statements filed with

the SEC which are not prepared in accordance with GAAP are presumed to be misleading an d

inaccurate. Regulation S-X (17 C.F.R. §210 .10-01(a) also requires that interim financial statement s

comply with GAAP .

7. On August 6, 2004, the company restated previously issued financial information fo r

2001 through 2003 that was contained in its Forms 10-K for the years ended December 31, 2003,

2002 and 2001, by filing a Form 10-K/A for the year ended December 31, 2003 . The Company's

previously reported quarterly financial information was also restated by the filing of Forms 10-Q/A

for the quarters ended March 31, 2004 and September 30, 2003, also on August 6, 2004 .

8. Baxter's August 6, 2004 Form 10-K/A and Forms 10-Q/A (collectively, th e

"Restatement") is an admission that the representations made in the financial statements for fisca l

years 2001, 2002, and 2003 and for the first quarter of 2004, were materially false and misleading

when made. APB No. 20 ¶ 13 .

9. News of the restatement caused shares ofBaxter 's common stock to fall $1 .48 per

share, or 4.59 percent, to close at $30 .79 per share on unusually heavy trading volume, thereby

damaging Lead Plaintiffs and the Class . By way of comparison, on that same day, the Dow Jones

Industrial Average rose by 4 points; the Nasdaq Composite Index rose by 15 points ; and the NYSE

Health Care Index (of which Baxter is a component) rose by 28 points .

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JURISDICTION AND VENUE

10. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of

the Exchange Act, (15 U.S.C. §§ 78j(b) and 78t(a)), and Rule 10 -b promulgated thereunder (1 7

C.F.R. § 240.14b-5).

11 . This Court has jurisdiction over the subject matter of this action pursuant to § 27 of

the Exchange Act (15 U.S.C . § 78aa) and 28 U.S.C. §§ 1331 .

12. Venue is proper in this Judicial District pursuant to § 27 of the Exchange Act, 1 5

U.S.C. § 78aa and 28 U.S.C. § 1391(b) . Many of the acts and transactions alleged herein, including

the preparation and dissemination of materially false and misleading informa tion, occurred in

substantial part in this Judicial District . Additionally, the Company maintains a principal executive

office in this Judicial District, at One Baxter Parkway, Deerfield, Illinois, 60015 .

13. In connection with the acts , conduct and other wrongs a lleged in this complaint,

defendants, directly or indirectly, used the means and instrumenta lities of interstate commerce ,

including but not limited to, the United States mails, interstate telephone communications and the

facilities of the national securities exchange .

PARTIES

14. Lead Plaintiff, Steelworkers Pension Trust, as set forth in the accompanying

certification, attached hereto and incorporated by reference herein, purchased Baxter securities at

artificially inflated prices during the Class Period and has been damaged thereby.

15. Lead Plaintiff, the City of Sterling Heights Police & Fire Retirement System, as set

forth in the accompanying certification, attached hereto and incorporated by reference herein ,

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IL1. A,

purchased Baxter securities at artificially inflated prices during the Class Period and has been

damaged thereby .

16. Lead Plaintiff, the City of St . Clair Shores Police & Fire Retirement System, as set

forth in the accompanying certification, attached hereto and incorporated by reference herein ,

purchased Baxter securities at artificially inflated prices during the Class Period and has bee n

damaged thereby .

17. Lead Plaintiff, the City ofRoseville Employees Retirement System , as set forth in the

accompanying certification, attached hereto and incorporated by reference herein, purchased Baxte r

securities at artificially inflated prices during the Class Period and has been damaged thereby .

18. Lead Plaintiff, the City of Sterling Heights General Employees Retirement System,

as set forth in the accompanying certification, attached hereto and incorporated by reference herein,

purchased Baxter securities at artificially inflated prices during the Class Period and has been

damaged thereby .

19. Defendant Baxter is a Delaware corporation with its principal executive office s

located at One Baxter Parkway, Deerfield, Illinois, 60015. Baxter operates as a global medica l

products and services company with expertise in medical devices, pharmaceuticals an d

biotechnology to assist healthcare professionals and their patients with the treatment of comple x

medical conditions, including hemophilia, immune disorders, infectious diseases, cancer, kidney

disease, trauma and other conditions . The Company's continuing operations consist of thre e

segments : Medication Delivery, which provides a range of intravenous solutions and specialty

products that are used in combination for fluid replenishment, general anesthesia, nutrition therapy ,

pain management, antibiotic therapy and chemotherapy; BioScience, which develops

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biopharmaceuticals, biosurgery products, vaccines and blood collection, processing and storag e

products and technologies for transfusion therapies, and Renal, which develops products and

provides services to treat end -stage kidney disease. The company generates approximately 50% of

its revenues outside the United States, selling its products and services in over 100 countries .

Baxter's principal international markets are Europe, Japan, Canada, Asia and Latin America .

20. Defendant Harry M . Jansen Kraemer, Jr. ("Kraemer") was a director of Baxter since

1995 and Chairman of the Board since January 2000 . Kraemer was also President of Baxter sinc e

1997 and Chief Executive Officer since January 1999. Kraemer announced his resignation from

Baxter on January 26, 2004, but continued in the posi tion unt il his successor, RobertParkinson, was

named in April 2004. In 2001, Kraemer received a salary of $880,000. In each of 2002 and 2003 ,

Kraemer received a salary of $925,000. His 2001, 2002 and 2003 incentive based bonuses amounted

to an additional $528,000 , $403,000 and $647,500, respectively. Kraemer was also awarded a tota l

of 1,275,000 options from 2001-2003 .

21 . Defendant Brian P . Anderson ("Anderson") was, from February 1998 unti l June 21 ,

2004, the Company's Senior Vice President and Chief Financial Officer . Anderson was responsible

for all finance functions, supply chain, and information technology . Anderson 's 2001 , 2002 and

2003 salaries were $470,000, $486,154 and $490,000 respectively . He also received bonuses of

$248,500, $128,600 and $175,616 in those years, as well as 45,420 options .

22. Defendant John J. Greisch ("Greisch") joined the Company in 2002 and became

Baxter's Chief Financial Officer on June 21, 2004 . Previously, Greisch served as a Corporate Vice

President of Baxter World Trade Corporation and Baxter Healthcare Corporation, and as President

of Baxter's BioScience business .

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23 . Kraemer, Anderson, and Greisch - the Company' s senior management throughout

the majority of the Class Period - are collectively referred to hereinafter as the "Individua l

Defendants ."

24. As set forth in Baxter's May 19, 2004 Proxy Statement , "[m]anagement is responsible

for Baxter 's internal controls and the financial reporting process ." May 19, 2004 Proxy Statement

at p. 20 .

25 . Additionally, during the Class Period , each of the Individual Defendants, as senior

executive officers of Baxter were privy to non-public information concerning its business, i=ces,

products, markets and present and future business prospects via access to internal corporate

documents, conversations and connections with other corporate officers and employees, attendance

at management and Board of Directors meetings and committees thereof and via reports and other

information provided to them in connection therewith. Because of their possession of suc h

information, the Individual Defendants knew or recklessly disregarded the fact that adverse fact s

specified herein had not been disclosed to, and were being concealed from, the investing public .

CLASS ACTION ALLEGATIONS

26. Lead Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a class, consisting of all those who purchased or otherwis e

acquired the securities of Baxter during the Class Period and who were damaged thereby . Excluded

from the Class are defendants, the officers and directors of the Company at all relevant times,

members of their immediate families and their legal representatives, heirs, successors or assigns and

any entity in which defendants have or had a controlling interest .

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C.

27. The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period, the New York Stock Exchange was the principa l

market on which the company's common stock was traded . At January 30, 2004, there were

approximately 63,088 holders of record of the company 's common stock. While the exact number

of Class members is unknown to Lead Plaintiffs at this time and can only be ascertained through

appropriate discovery, Lead Plaintiffs believe that there are thousands of members in the propose d

Class. Record owners and other members of the Class may be identified from records maintained

by Baxter or its transfer agent and may be notified of the pendency of this action by mail, using the

form of notice similar to that customarily used in securities class actions .

28. Lead Plaintiffs' claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by defendants' wrongful conduct in violation of federa l

law that is complained of herein.

29. Lead Plaintiffs will fairly and adequately protect the interests of the members of th e

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

30. Common questions of law and fact exist as to all members of the Class and

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

questions of law and fact common to the Class are :

(a) whether defendants violated the federal securities laws as alleged herein;

(b) whether defendants were responsible for overseeing and accurately reportin g

the financial results for the Company' s Brazilian operations;

(c) whether defendants were responsible for insuring Baxterhad adequate interna l

controls ;

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(d) whether statements made by defendants to the investing public during the

Class Period misrepresented the Company's financial results ;

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

Class Period misrepresented material facts about the business, operations , internal controls and

management of Baxter ;

(f) whether the Individual Defendants had the ability to control the financial

reporting of Baxter; and

(g) to what extent the members of the Class have sustained damages and the

proper measure of damages.

31 . A class action is superior to all other available methods for the fair and efficien t

adjudication of this controversy since joinder of all members is impracticable . Furthermore, as the

damages suffered by individual Class members may be relatively small, the expense and burden o f

individual litigation make it impossible for members of the Class to individually redress the wrongs

done to them. There will be no difficulty in the management of this action as a class action.

SUBSTANTIVE ALLEGATIONS

Background

32. Baxter operates a global medical products and services company with expertise in

medical devices, pharmaceuticals and biotechnology . The Company' s business consists of three

segments: Medication Delivery, BioScience, and Renal, with operations in North America, Europe ,

Latin America, and Asia .

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The Breakdown of Internal Controls in Brazil

33. On July 22, 2004, Baxter announced that it planned to restate its financial results fo r

the years 2001 through 2003, and for the first quarter of 2004 .

34. As set forth in the August 6, 2004 Restatement, "[t]he restatement is primarily the

result of the inappropriate application of accounting principles for revenue recognition an d

inadequate provisions for bad debts in Brazil during the period ."

35. A comprehensive investigation by the Audit Committee of the Board of Directors

revealed: (i) "an ineffective control environment maintained by senior management in Brazil ,

including intentional overrides by senior management in Brazil of internal controls" ; (ii) "inadequate

revenue recognition controls in Brazil"; (iii) "inadequate controls in Brazil to ensure adherence to

generally accepted accounting principles for loss contingencies , including bad debts"; and (iv)

"ineffective financial review by management responsible for the Intercontinental region, which

includes Latin America" . See Restatement at Item 9A.

36. These issues caused the Company itself to conclude that collectively, they "constitut e

a material weakness in the company' s internal contro ls over financial reporting." Ld.

37. Certain of the improperly recognized revenues were derived from sales to fictitious

customers, fictitious sales to actual customers, and the illegal rigging of bids for the sale of blood

byproducts to the Brazilian government . Certain of the inadequate provisions forbad debts were the

result of Baxter's Brazilian management 's involvement in a kickback scheme with product vendors.

Fictitious Contracts

38. According to a former Baxter executive employed throughout the Class Period an d

knowledgeable regarding the Brazi lian situation which prompted Baxter to restate ("Confidential

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Witness 1" or "C W 1 "), the Brazilian operation's financial accounting was performed by Baxter

employees in Brazil, under the direction of the Finance Director, Robert Vlasak, and his staff of

thirty people .

39. According to CWl, the financial results for Baxter' s Brazi lian operations were

inputted both manually and automatically, and recorded on a stand-alone local ledger system . The

financial results, including receivables and bad debts, were calculated in reals (Brazilian currency) ,

inputted to Baxter's global system where it was converted to U.S. Dollars, and then forwarded to

senior Baxter management in Deerfield, on a monthly basis, specifically including defendant

Greisch .

40, As described by CWI, the Company's Brazilian management set its own goals and

quotas, and forwarded those expectations to senior management in Deerfield for approval .

41 . The Brazilian managers responsible for setting those targets were Finance Director

Vlasak, President Giancarlo Prestinoni , and Sales Manager Nelson Sanches.

42. According to CW1, Vlasak, Prestinoni, and Sanches doctored the company's books

by booking sales to fictitious customers and booking fictitious sales to existing customers ,

presumably in order to meet the sales quotas they had previously set and represented to senior

management. These fictitious sales were , according to C W 1, the primary reason for the restatement .

43. These fictitious contracts were brought to the attention of defendant Greisch on a

regular basis, and to defendant Anderson at least as early as May 2004 .

44. Additionally, the Individual Defendants were responsible for regularly determinin g

the proper allowance for doubtful accounts, yet failed to do so for several years . As set forth in the

Restatement, "In determining the amount of the allowance for doubtful accounts, management

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considers historical credit losses, the past due status of receivables, payment history and othe r

customer-specific information, and any other relevant factors or considerations . Receivables are

written off when management determines they are uncollectible." Restatement at p. 46 (emphasis

added) .

Operation Vampire

45. On April 29, 2004, Baxter was accused by the Brazilian Ministry of Justice, Offic e

of the Secretary of Economic Rights, Department of Economic Protection and Defense, and a n

administrative proceeding was initiated, to prosecute an alleged cartel practice in bidding processes

administered by the Ministry of Health for the purchase of blood byproducts (elements derived from

blood - plasma, platelets , erythrocytes, etc. - and used individually by transfusion to treat various

diseases) . This was done in response to the publication of a "complaint" in the newspaper Correio

Brasiliense on April 20, 2004.

46. On May 19, 2004, as part of "Operation Vampire", which investigated severa l

irregularities in the blood products sector, the Brazilian Federal Police launched several search and

seizure operations . Press reports suggested that the scheme had been operating since the early

1990's, and resulted in losses of nearly 2 billion reals for the government coffers.

47. Also on May 19, 2004, Luiz Claudio Gomes da S ilva, the head of the Brazilian Health

Ministry's office for government-supplied medicines , and other alleged members of the so-called

"Blood Mafia" were arrested . Among those arrested was former Baxter employee Elias Esperidiao

Abboadalla .

48. On May 21, 2004, the newspaper Correio Brasiliense published a report (Section 1 ,

page 14) stating that the Brazilian General Accounting Office (TCU) conducted an audit to analyze

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the bidding processes administered by the Ministry of Health from 1998 to 2002, and its report

indicated the existence of a cartel among the producers of blood byproducts :

"According to the TCU, the companies agreed upon prices in advance ( . . .) The TCUalso indicates that the participants divided up lots. The bidder with the lowest bidonly bid on a percentage of the product . Thus, the second-place bidder (andsometimes the third and fourth-place bidders also) were called upon to offer the restof the lot at the same price as the winner ( . . .) There were no appeals or cha llengesin the bidding processes . "

49. Also on May 21, 2004, the newspaperFolha de Sao Paulo published areport (Section

1, page A4) stating the names of the 9 (nine) companies that would be most cited in the TCU report :

lmmuno AG, Octapharma AG, Centeon LLC, American National Red Cross [sic] (ARC), Biotest

Pharma, Baxter Export Corporation, Alpha Thereapeutic Corporation, Bio Products Laboratory

(BPL), and LFB (the latter was cited as a non-profit institution).

50. According to the interim Minister of Health, GastAo Wagner, the suspects have been

over billing the foreign purchase of factors 8 and 9 , two blood byproducts essential for the

coagulation of blood used in treating hemophi liacs . Brazil does not yet have the technologica l

resources to produce them .

51 . On May 26, 2004, the Secretary of Economic Rights ordered that a preliminary

investigation be launched against several companies, including Baxter.

The Kickback Schem e

52. According to a former Brazilian Baxter executive ("Confidential Witness 2" or

"CW2"), several Brazilian Baxter employees were terminated this year , following the company' s

internal audit team's preliminary investigation. Those individuals included Elias Esperidiao

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Abboadalla, the former Marketing Director (arrested by the Brazilian Federal Police in connection

with Operation Vampire), and Cornelia Helga Bauer, the General Director .

53. CW2 became aware of Baxter 's unlawful activities in June 2004, based on a

complaint from a vendor who said that he had been approached by Ramis Abub who require d

kickbacks on the purchase of products . The vendor identified Massimo Di Gioacchino, Human

Resources Director ; Giancarlo Prestinoni, President ; and Robert Vlasak, Finance Director, as also

being involved in the kickback scheme . Nelson Sanches, Sales Manager, was also identified as bein g

involved in the activity and he was very close to the above mentioned subjects and participated in

all meetings with them.

54. According to CW2 , Di Gioacchino, Prestinoni , and Vlasak were the primary

participants in the kickbacks, each had huge amounts of outstanding bad debts owed to Baxter, and

each would continuously give unwarranted lengthy extensions on debts owed Baxter .

55. Di Gioacchino, Prestinoni, and Vlasak were also each aware that Baxter's forme r

Marketing Director, Elias Abboadalla, was involved in payoffs to various Government of Brazi l

officials which resulted in the Federal Police investigation, code named Operation Vampire.

56. In June 2004, CW2 advised Cornelia Helga Bauer of the unlawful schemes and o f

the involvement of the Baxter executives .

Materially False And MisleadingStatements Issued During The Class Period

57. During the Class Period, each of Baxter's SEC filings on Forms I0-Q and 10-K, as

well as each earnings related press release, was materially false and misleading, as set forth below .

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It

58. The Class Period commences on April 19, 2001 . At that time, Baxter announced its

financial results for the first quarter of 2001 . The Company stated that it continued its sales and

earnings growth momentum in the first quarter . Net earnings for the quarter grew 12 percent to $21 4

million, while earnings per diluted share grew 9 percent to $0 .71 . This compared to the $19 1

million, or $0.65 per diluted share, that Baxter reported for the same period last year. Net earnings

for the first quarter of 2001 excluded the one-time, non-cash impact of adopting new accounting

rules . Commenting on the results, defendant Kraemer stated :

"We continued our very strong sales and earnings momentum with first quarterperformance consistent with our expectations[ .] . . .I expect Baxter to continue toaccelerate our sales and earnings growth through enhancements to our productpipeline, increased production capacity, continued improvements in operationalefficiency, and global expansion."

59. On May 15, 2001, Baxter filed its quarterly report with the SEC on Form 10-Q. The

Company's Form I0-Q was signed by defendant Andersen and reinforced the previously announced

financial results. Additionally and with respect to the presentation of the Company 's financial

results, Baxter stated:

In the opinion of management, the interim condensed consolidated financialstatements reflect all adjustments necessary for a fair presentation of the interimperiods. All such adjustments are of a normal, recurring nature . The results ofoperations for the interim period are not necessarily indicative of the results ofoperations to be expected for the full year.

60. On July 19, 2001, Baxter announced financial results for the second quarter of 2001 .

The Company posted healthy gains in sales and earnings for the second quarter of 2001 . Baxter

reported a 15 percent increase in sales before the impact of foreign exchange, or 10 percent after th e

impact of foreign exchange . Sales totaled $1 .87 billion in the second quarter, which compared t o

the $1 .69 billion reported last year . Domestic sales grew 23 percent in the quarter, while

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international sales were flat (or up 9 percent before the impact of foreign exchange) . Earnings grew

13 percent in the quarter to $253 million, up from the $223 million reported for the same period last

year. Earnings per diluted share increased 11 percent to $0 .42. This compared to the $0.38 per

diluted share reported in the second quarter last year . Commenting on these results, defendant

Kraemer stated:

"We continued our strong momentum in the second quarter, delivering excellentsales and earnings growth[ .] . . . Baxter BioScience experienced exceptional growthin the quarter. The investments we are making to expand our biosciencemanufacturing capacity are enabling us to provide more products to patients who relyon these vital therapies ."

61 . On August 9,200 1, Baxter filed its quarterly report with the SEC on Form 10-Q. The

Company's Form 10-Q was signed by defendant Andersen and reinforced the previously announced

financial results . Additionally and with respect to the presentation of the Company's financia l

results, Baxter stated :

In the opinion of management, the interim condensed consolidated financialstatements reflect all adjustments necessary for a fair presentation of the interimperiods. All such adjustments are of a normal, recurring nature . The results ofoperations for the interim period are not necessarily indicative of the results ofoperations to be expected for the full year .

62. On October 18,200 1, Baxter announced financial results for the thirdquarter of 2001 .

Baxter's sales in the third quarter rose 13 percent to $1 .90 billion, up from the $1 .69 billion in sales

posted last year. Excluding the impact of foreign exchange, Baxter's sales grew 16 percent in the

third quarter. Domes tic sales grew 27 percent, while international sales were flat (or up 7 percent

excluding the impact of foreign exchange). The Company's earnings in the first nine months of this

year rose 15 percent to $739 million, up from the $645 million reported last year. Earnings per

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diluted share advanced 13 percent to $1 .22, from the $ 1 .08 reported last year. Commenting on thes e

results, defendant Kraemer stated :

"We will continue to build on our strong momentum with continued focus onoperational excellence while significantly increasing our sales and earnings growthrates over time. In order to achieve these goals, we will increase our investments inresearch and development and capital expenditures .

We are well positioned to not only deliver solid growth in 2002, but also tosubstantially increase our investment in a number of growth initiatives, includingdevelopment of new recombinant proteins, vaccines, drug delivery platforms,oncology products and renal dialysis solutions, as well as continued expansion ofourBioScience production capacity."

63. On November 11, 2001, Baxter filed its quarterly report with the SEC on Form 1O-Q .

The Company's Form 10-Q was signed by defendant Andersen and reinforced the previousl y

announced financial results . Additionally and with respect to the presentation of the Company's

financial results, Baxter stated:

In the opinion of management, the interim condensed consolidated financialstatements reflect all adjustments necessary for a fair presentation of the interimperiods . All such adjustments are of a normal, recurring nature. The results ofoperations for the interim period are not necessarily indicative of the results ofoperations to be expected for the full year .

64. On January 24, 2002, Baxter announced financial results for the full year of 2001 .

The Company achieved its 2001 annual financial commitments of sales growth in the low-double

digits, earnings growth in the mid-teens and operational cash flow in excess of $500 million. Sales

in the fourth quarter totaled $2 .14 billion, up 11 percent from the $1 .93 billion reported for the same

period last year. Excluding the impact of foreign exchange, Baxter's sales rose 13 percent in the

quarter. Domestic sales grew 19 percent, while international sales rose 3 percent (or 7 percent

excluding the impact of foreign exchange) . For the full year, Baxter reported sales of $7.66 billion,

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an increase of 11 percent over the $6 .90 billion reported for 2000 . Baxter's earnings in the quarter

excluding special charges, rose 20 percent to $324 million, from the $270 mi ll ion reported in 2000.

Earnings per diluted share grew 18 percent to $0.53, from the $0.45 reported last year . For the fu l

year, Baxter's earnings grew 16 percent to $1 .06 billion, up from the $915 million reported last year.

Earnings per diluted share grew 14 percent to $1 .75 in 2001, up from the $1 .53 reported last year.

Commenting on these results, defendant Kraemer stated :

"We generated an excellent shareholder return of 23 percent in 2001, and achievedour annual financial commitments for 2001, while investing more than $1 .2 billionin research and development and capital expenditures to drive our future growth[ .] .. . I am very proud of the progress the entire Baxter team has made . We continuedto improve our operational excellence, achieved significant milestones across ourentire business portfolio, and implemented several exciting growth initiatives ."

65. On March 12, 2002, Baxter filed its annual report with the SEC on Form 10-K . The

Company's Form 10-K was signed by defendants Kraemer and Anderson and reaffirmed the

Company's previously announced financial results. Additionally, the Company's Form 10-K

contained the following representation by its auditors, PricewaterhouseCoope rs LLP, who stated :

,,in our opinion, this financial statement schedule presents fairly, in all material respects, th e

information set forth therein when read in conjunction with the related consolidated financia l

statements ."

66. On April 18, 2002, Baxter reported strong growth in sales and earnings in the firs t

quarter. Sales advanced 11 percent to $1 .95 billion, up from the $1 .76 billion reported for the same

period last year, fueled by increased sales of the Company's recombinant and plasma-derive d

hemophilia products, as well as growth in its vaccines, oncology and drug delivery busi nesses .

Without the impact of foreign exchange, Baxter' s sales grew 14 percent Domestic sales increased

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12 percent, while international sales rose 10 percent (or 15 percent excluding the impact of foreign

exchange) . BioScience sales rose 18 percent in the quarter, totaling $746 million . Sales of

Medication Delivery products grew 10 percent to $739 mi llion, while Renal sales advanced 2 percent

to $465 million. Baxter's net income in the quarter rose 18 percent to $253 million, from the $21 4

million reported last year (before a 2001 accounting change) . Earnings per diluted share grew 1 7

percent to $0 .41, an increase from the $0.35 per share reported last year .

67. Commenting on these results, defendant Kraemer stated :

"Our strong financial performance for the quarter reflects our focus and disciplinearound operational excellence and our commitment to achieve growth that issustainable, profitable and capital efficient. We continue to benefit from thegroundwork we've laid with expanded manufacturing capacity, continued successfulintegration of acquisitions, and advancement of key new technologies like ourprotein-free recombinant manufacturing, vero-cell vaccine and drug deliveryplatforms[ .]"

68 . On May 3, 2002, Baxter filed its quarterly report with the SEC on Form 10 -Q . The

Company's Form 10-Q was signed by defendant Andersen and reaffirmed its previously announce d

financial results . Additionally and with respect to the presentation of the Company 's financial


In the opinion of management, the interim condensed consolidated financialstatements reflect all adjustments necessary for a fair presentation of the interimperiods . All such adjustments are of a normal, recurring nature . The results ofoperations for the interim period are not necessarily indicative of the results ofoperations to be expected for the full year.

69. On July 18, 2002, Baxter reported that its sales grew 8 percent in the second quarter ,

while earnings declined as a result of acquisition-related and impairment charges. Baxter's sales in

the quarter rose 8 percent to $2.02 billion, up from the $1 .87 billion reported last year. Excluding

the impact of foreign exchange, sales rose 9 percent in the second quarter . Sales within the United

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States grew 7 percent to $1 billion, while sales outside the United States grew 10 percent (or 1 2

percent excluding foreign exchange) to $1 .02 billion . BioScience sales rose 7 percent to $73 2

million, Medication Delivery sales advanced 15 percent to $817 million and Renal sales declined

1 percent to $473 mill ion. Baxter ' s net earnings in the second quarter totaled $200 million, or $0.32

per diluted share, a decline of 21 percent from the $253 million, or $0 .42 per diluted share reported

last year . The second quarter results included two special charges that reduced Baxter's earnings by

$0.16 per diluted share. The Company recorded a $51 million pre-tax charge for in-process research

and development related to its acquisition ofFusion Medical Technologies, Inc ., which closed during

the second quarter . Baxter also recorded $70 million in pretax impairment charges to reflect th e

significant decline in the market value of minority interests that it holds in two public companies .


"Our business fundamentals remain strong, and, excluding special charges, oursecond quarter earnings were in line with our expectations[ .] . . . With continuedstrong sales of Medication Delivery products and Recombinate hemophilia therapy,as well as improvements in BioScience production yields and cycle times, we expectour sales growth to accelerate in the second half of this year."

71 . On August 17, 2002, Baxter filed its quarterly report with the SEC on Form 10-Q.

The Company's Form l0-Q was signed by defendant Andersen and reaffirmed its previousl y

announced financial results. Additionally and with respect to the presentation of the Company' s


In the opinion of management, the interim condensed consolidated financialstatements reflect all adjustments necessary for a fair presentation of the interimperiods. All such adjustments are of a normal, recurring nature. The results ofoperations for the interim period are not necessarily indicative of the results ofoperations to be expected for the full year.

20

Appended to the Form 10-Q were certi fications attesting to its accuracy signed by defendant s

Kraemer and Anderson, as required under the Sarbanes-Oxley Act of 2002 ("SOA") (effective July

30, 2002), 15 U.S .C. §7241 .

72. On October 17, 2002, Baxter reported increases in sales and earnings for the third

quarter. Baxter's sales advanced 11 percent in the quarter, totaling $2 .10 billion, up from the $1 .90

billion reported last year. Excluding the impact of foreign exchange, sales rose 9 percent in the

quarter. Sales within the United States increased 3 percent to $1 .02 billion, while sales outside the

United States grew 19 percent (or 15 percent excluding the impact of foreign exchange) to $1 .09

billion. BioScience sales rose 14 percent to $776 million, Medication Delivery sales increased 1 6

percent to $832 million and Renal sales declined 2 percent, with sales of $494 million in the quarter.

Contributing to sales growth in the quarter were vaccines, biosurgery products and the Company' s

Recombinate Factor VIII therapy used in the treatment of hemophilia . Recombinate salesrose nearly

25 percent in the quarter. Also contributing to sales growth in the quarter were drug delivery ,

anesthesia and parenteral nutrition products. Baxter's net earnings totaled $316 million in the third

quarter, an increase of 16 percent over the $272 million reported last year. On a per share basis,

Baxter's third quarter earnings totaled $0 .51 per diluted share , a 13 percent increase over the $0.45

per diluted share reported in the same period last year . Baxter 's investments in research and

development grew 16 percent in the quarter, to $122 million .

73 . Commenting on these results, defendant Kraemer stated :

"One of the keys to our success is effectively balancing short-term focus anddiscipline with investments in long-term growth[ .] . . . There are a number ofinnovative new products and technologies that we expect to launch, including ournew plasma and albumin free recombinant Factor VIII therapy, the ALYX bloodcomponent collection system, and the INTERCEPT pathogen inactivation system fo r

21

platelets. We continue to make strategic investments in these product launches, aswell as our R&D pipeline, in expanded manufacturing capacity and in acquisitionsand alliances to position the company for accelerated growth over the long term . Asa result, we believe we are well-positioned to achieve sales growth in the low-doubledigits, earnings per diluted share growth in the mid-teens, and to generate $500million in operational cash flow for full-year 2003."

74. On November 11, 2002, Baxter filed its quarterly report with the SEC on Form 10-Q .

The Company's Form 10-Q was signed by defendant Andersen and reaffirmed its previously

announced financial results . Additionally and with respect to the presentation of the Company's



Appended to the Form 10-Q were certifications attesting to its accuracy signed by defendants

Kraemer and Anderson, as required under the SOA .

75 . On January 22, 2003, Baxter announced financial results for the fourth quarter an d

full-year 2002, with sales from continuing operations advancing 10 percent in the quarter and for the

year. Sales from continuing operations in the fourth quarter totaled $2 .26 billion, up from the $2.06

billion reported for the same period last year . Foreign exchange contributed 2 percentage points of

growth in the quarter. Domestic sales grew 5 percent, and international sales increased 14 percent .

For the full year, Baxter reported sales from continuing operations of $8 .11 billion, an increase from

the $7.36 billion reported for 2001 . Foreign exchange had no effect on the full-year sales. Domestic

sales totaled $3 .97 billion, an increase of 7 percent over last year, and international sales totaled

$4.14 billion, an increase of 14 percent. For the full year, excluding discontinued operations and

charges, Baxter's earnings increased 15 percent to $1 .24 billion, or 13 percent to $2.00 per diluted

22

share, from the $1 .07 billion, or $1 .77 per diluted share reported last year . Including charges and

discontinued operations, Baxter's net earnings totaled $778 million, or $1 .26 per diluted share. This

compared with net income of $612 million, or $1 .00 per diluted shared, reported in 2001 .


"Despite a challenging environment, we delivered solid sales and earnings growthand cash flow in 2002[.) . . . We advanced several exciting products through ourpipeline and the regulatory review process, expanded our production capacity,invested in new technologies, and completed a number of important acquisitions . Allof these initiatives position us well to drive long-term growth that is profitable,sustainable and capital efficient ."

77. On March 12, 2003, Baxter filed its annual repo rt with the SEC on Form 10-K. The

Company's Form 10-K was signed by defendants Kraemer and Anderson and reaffirmed the

Company's previously announced financial results . Additionally, the Company's Form 10-K

contained the fo llowing representation by its auditors , PricewaterhouseCoopers LLP, who stated :

"In our opinion, this financial statement schedule presents fairly, in a ll material respects, the


statements ." Also, appended to the Form 10-K were certifications attes ting to its accuracy signed

by defendants Kraemer and Anderson, as required under the SOA .

78. With respect to internal controls, the 2002 year-end Form 10-K further stated :

"Within 90 days of the filing date of this report, the Company carried out anevaluation, under the supervision and with the participation of the Company'sDisclosure Committee and the Company's management, including the ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of the Company'sdisclosure controls and procedures. . . The Company's disclosure controls andprocedures are designed to ensure that information required to be disclosed by theCompany on the reports it files or submits under the Exchange Act is recorded,processed, summarized and reported on a timely basis . Based on that evaluation, theChief Executive Officer and Chief Financial Officer concluded that the Company'sdisclosure controls and procedures are effective in alerting them in a timely fashion

23

to material information relating to Baxter required to be included in reports that theCompany files under the Exchange Act. There have been no significant changes inBaxter's internal controls or in other factors that could significantly affect internalcontrols subsequent to the date of their evaluation .

79. On April 16, 2003, Baxter reported that it achieved its sales and diluted earnings per

share ("EPS") goals for the first quarter of 2003 . Baxter's sales grew 6 percent in the first quarter ,

while earnings declined as a result of product mix and competi tive pricing in the plasma market.

Baxter's sales from continuing operations in the quarter rose to $2 .0 billion, up from $1 .88 billion

reported for the same period last year . The increase in sales for the first quarter included a 4

percentage-point benefit from foreign exchange . Sales within the United States grew 4 percent to

$956 million, while sales outside the United States grew 9 percent to $1 .04 billion (or declined l

percent excluding the impact of foreign exchange). First quarter sales for Renal grew 2 percent t o

$407 million and sales in BioScience were down 1 percent at $740 million . Medication Delivery

sales grew 17 percent to $850 million . Contributing to the growth in Medication Delivery were

strong sales of anesthesia and drug delivery products, as well as sales from ESI Lederle, which

Baxter acquired at the end of 2002. Baxter's earnings from continuing operations in the first quarter

totaled $217 million, or $0 .36 per diluted share, a decline of 14 percent from the $253 million, or

12 percent from the $0.41 per diluted share reported last year . The first quarter results included a

pre-tax impairment charge of $13 million to reflect the decline in the market value of a minority

investment .


"Despite the current challenges in the plasma protein business , I expect our salesgrowth for the full year to be in the 8 to 12 percent range and our EPS growth to bein the $2.10 to $2.20 range , in addition to generating cash flows from continuingoperations of $1 .3 billion to $ 1 .5 billion before capital expenditures[ .] . . . With the

24

many new product launches we have planned for 2003, combined with our ongoingexpansion with current products into new markets, we believe we are well positionedto achieve our goals."

81 . On May 17, 2003, Baxter fi led its quarterly report with the SEC on Form 10-Q. The

Company's Form 10-Q was signed by defendant Andersen and reaffirmed its previously announced

financial results. Additionally and with respect to the presentation of the Company's financia l

results, Baxter stated:




82. On July 17, 2003, Baxter reported its second quarter results, with sales increasing 1 1

percent and income from continuing operations declining primarily as a result of a previously

announced restructuring charge. Sales in the second quarter totaled $2 .16 billion, an increase of l 1

percent. Foreign exchange favorably impacted sales by 5 percent. Baxter's sales within the United

States increased 4 percent to $997 million, while sales outside the United States grew IS percent

(including an 1 I percent benefit from foreign exchange) to $1 .17 billion. In the second quarter,

Medication Delivery sales grew 17 percent to $938 million, Renal sales grew I 1 percent to $452

million, and BioScience sales grew 5 percent to $773 million. Income from continuing operations

totaled $49 million or $0.08 per diluted share in the second quarter, including a special charge

resulting from the company's recently announced restructuring plans . The charge totals $33 7

million, or $202 million after-tax (approximately two-thirds cash and one-third non-cash), or $0.33

25

per share . This charge includes severance costs for approximately 3,200 employees, representing

about 6 percent of Baxter's global workforce, and the write-down of certain facilities. The second

quarter results compare to income from continuing operations of $204 million, or $0.33 per diluted

share, in the same period last year, including charges . Cash flows from continuing operations in the

second quarter were $228 million, an increase of $144 million from the same period last year .


"While our financial results for the second quarter were in line with our expectations,we are confident that our recently announced actions will drive greater profitability,cash flows and shareholder returns over the long term[ .] . . . Specifically, we aresimplifying our infrastructure by consolidating functions and facilities, as well ascontinuing to prioritize and focus our R&D investments ."

84. On August 13, 2003, Baxter filed its quarterly report with the SEC on Form 10-Q .

The Company's Form 10-Q was signed by defendant Andersen and reainned its previousl y

announced financial results. Additionally and with respect to the presentation of the Company' s

financial results, Baxter stated :

In the opinion of management, the interim condensed consolidated financialstatements reflect all adjustments necessary for a fair presentation of the interimperiods. All such adjustments are of a normal, recurring nature. The results ofoperations for the interim period are not necessarily indicative of the results ofoperations to be expected for the fall year.



85. On October 16, 2003, Baxter reported its third quarter results, with sales g rowth of

nine percent and earnings per diluted share from continuing operations of $0.47. Sales in the third

quarter totaled $2.22 billion, with foreign exchange favorable impacting sales by three percent.

Baxter's sales within the United States increased 10 percent to $1 .07 billion, while sales outside the

26

United States grew nine percent (including a seven percent benefit from foreign exchange) to $1 .1 5

billion. In the third quarter, Medication Delivery sales grew 16 percent to $948 million, BioScienc e

sales grew 6 percent to $820 million and Renal sales grew 4 percent to $451 million. Contributing

to the growth in the quarter were strong sales of anesthesia, biosurgery, drug delivery and IV therap y

products and record sales of recombinant clotting factor, which rose 14 percent in the quarter.

Income from continuing operations totaled $278 million or $0 .47 per diluted share in the third

quarter. The third quarter results compare to income from continuing operations of $317 mi llion,

or $0.51 per diluted share, in the same period last year.


"The third quarter financial results were in line with our expectations[ .]. . . Theactions we have taken to improve our operational efficiency and simplify our capitalstructure, together with the launch of new products, position us well to achieve ourgoals for the year . "

87. November 16, 2003, Baxter filed its quarterly report with the SEC on Form 1O-Q.

The Company' s Form 10-Q was signed by defendant Andersen and reaffirmed its previously

announced financial results . Additionally and with respect to the presentation of the Company' s



Appended to the Form lO-Q were certifications attesting to its accuracy signed by defendant s


27

88. On January 29, 2004, Baxter reported fourth quarter results, ending the year at $8 . 9

billion in sales and net earnings per diluted share from continuing operations of $1 .52. Additionally,

the Company stated :

Summary of Fourth Quarter Result s

Baxter's sales in the fourth quarter grew 12 percent to $2 .5 billion, favorableimpacted by 6 percentage points from foreign exchange . Domestic sales grew 12percent and international sales grew 13 percent. Baxter's Medication Delivery salesfor the first time exceeded $1 billion in a quarter, growing 14 percent to $1 .1 billion,driven by strong drug delivery and anesthesia sales . BioScience sales increased I lpercent in the fourth quarter, totaling $938 million, led by strong sales ofrecombinant products used in the treatment of hemophilia, which grew 27 percentBaxter's Renal business benefited from the favorable impact of foreign exchange inthe quarter, growing 9 percent to $497 million .

Earnings from continuing operations in the fourth quarter totaled $378 million, or$0.62 per diluted share . The company's fourth quarter results included a $0 .03 perdiluted share gain from the sale of Baxter's stake in Acambis, Inc., as well as $0.04per diluted share benefit from the initiatives completed to date relating to therestructuring previously announced in July 2003 .

Summary of Full-Year 2003 Financial ResultsFor the full-year, Baxter's sales grew 10 percent to $89 billing, favorable impactedby 5 percentage points from foreign exchange . Domestic sales grew 8 percent to $4 .3billion and international sales grew 12 percent to $4.6 billion. Medication Deliverysales totaled $3 .8 billion for the year, an increase of 16 percent. BioScience salesgrew 6 percent to $3 .3 billion, and Renal sales were up 6 percent in 2003, totaling$1 .8 billion .

For ful l-year 2003, earnings from continuing operations totaled $922 million or $1 .52per diluted share . Baxter's 2003 results included a second quarter re structuringcharge of $0 .33 per diluted share .

89. On March 12, 2004, Baxter filed its annual report with the SEC on Form 10-K . The

Company's Form 10-K was signed by defendants Kraemer and Anderson and reaffirmed th e

Company's previously announced financial results . Additionally, the Company's Form 10-K

contained the following representation by its auditors, PricewaterhouseCoopers LLP, who stated:

28

"In our opinion, this financial statement schedule presents fairly, in all material respects, the


statements ."

90. In its 2003 year-end Form 10-K, Baxter further stated that :

"The Company has adopted a code of ethics, called the Global Business PracticeStandards, that applies to members of Baxter's Board of Directors and all employeesat the Company, including the Chief Executive Officer, Chief Financial Officer,Controller and other senior financial officers ."

The Global Business Practice Standards were set forth on Baxter's website at www.Baxter.com

under "Corporate Governance" and were incorporated by reference . The website states, among other

things, that :

"Baxter strives for leadership in business ethics and standards, which aresignificantly shaped by our commitment to values-based decision making . Integritydefines the structure of everything we do . It guides our decisions and protects uswith its strength."

91 . Also, appended to the Form 10-K were certifications attesting to its accuracy signed

by defendants Kraemer and Anderson, as required under the SOA . In paragraph 4 of these

certifications, defendants Kraemer and Anderson each represented that :

The registrant's other certifying officer and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) for the registrant and have :

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

b) evaluated the effectiveness of the registrant's disclosure controls andprocedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this reportbased on such evaluation ; and

29

c) disclosed in this report any change in the registrant's internal control overfinancial reporting that occurred during the registrant's most recent fiscal quarter (theregistrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal controlover financial reporting.

92. On April 22, 2004, Baxter reported its financial results for the first quarter , with sales

increasing 11 percent and earnings per diluted share from continuing operations totaling $0.31 ,

compared to the company's guidance of $0.28 to $0.31 per diluted share . Baxter's sales totaled

$2.21 billion in the first quarter, with foreign exchange favorably impacting sales by 7 percentage

points. Sales within the United States grew 7 percent to $1 .02 billion, while sales outside the Unite d

States grew 14 percent (including a 12 percentage point benefit from foreign exchange) to $1 .1 9

billion. Sales from Baxter's BioScience business increased 9 percent to $810 million, while the

company's Medication Delivery business grew 9 percent in the first quarter to $929 mill ion, and

Renal sales grew 16 percent to $470 million.

93. Commenting on these results, defendant Andersen stated :

"While organic sales growth was in line with our expectations, we need to takefurther actions to realign our cost structure to drive greater profitability[ . .] . . .Therefore, we will implement a number of additional initiatives to better leverage ourresources, with a focus on standardizing and consolidating work processes andreducing capacity in our plasma business, in order to drive sustainable improvementsin our financial performance ."

94. On May 10, Baxter filed its quarterly report with the SEC on Form 10-Q . The

Company's Form 10-Q was signed by defendant Andersen and reaffirmed its previously announced

financial results . Additionally and with respect to the presentation of the Company' s financial


In the opinion of management, the interim condensed consolidated financialstatements reflect all adjustments necessary for a fair presentation of the interimperiods. All such adjustments are of a normal, recurring nature . The results of

30

operations for the interim period are not necessarily indicative of the results ofoperations to be expected for the full year .

Appended to the Form 10-Q was a certification attesting to its accuracy signed by defendan t

Anderson, as required under the SOA .

95. The statements contained in I 58-94 were materially false and misleading when

made because defendants failed to disclose or indicate the following: (1) that the Company' s

financial results during the Class Period were materially overstated; (2) that the overstatement

occurred because the Company improperly and "incorrectly" recognized $37 million in net sales and

$33 million in net income, and maintained inadequate and "incorrect" provisions for bad debt s

relating to its Brazilian operations; (3) that the Company's Brazilian operations were involved in a n

illegal cartel to rig the bidding process for the Brazilian government's purchase of blood byproducts ;

(4) that certain of the Company's Brazilian employees were involved in kickback scheme with

product vendors; (5) that the Company' s Brazilian employees were booking fictitious sales to

existing customers ; (6) that the Company's Brazilian employees were booking sales to fictitious

customers; (7) that the Company' s financial results were in violation of GAAP; (8) that theCompany

lacked adequate internal controls to prevent the booking of fictitious sales, kickbacks, and unlawful

bid rigging ; (9) that the Company lacked adequate information and/or supervision to fiilfill it s

obligations under Sarbanes-Oxley; and (10) that as a result of the above, the Company' s financial

results, were materially and artificially inflated at all relevant times, as set forth in 1196-98 herein.

31

1 I,

The Restatement

96. The following chart , as set forth in the Restatement, il lus trates and particularizes the

material effect of Baxter's restatement adjustments on the previously reported consolidated

statements of income for 2001, 2002 and 2003 :

Consolidated Statements of Income for the Three Years End December 31, 2003

Year ended Year ended Year endedDecember 31, 2003 December 31, 2002 December 31, 200 1

(in millions, except per share data) As originally As As originally As As originally Asreported restated reported restated reported restated

Net sales $8,916 $8,904 $8,110 $8,099 $7,356 $7,342Costs of goods sold 4,951 4,951 4,318 4,314 3,944 3 .939Marketing and administrative expenses 1,796 1,805 1,562 1,566 1,440 1,448Research and development expenses 553 553 501 501 426 426In-process R&D charges - - 163 163 280 280Restructuring charges 337 337 26 26 - -Charge relating to A, AF and AX series dialyzers - - - - 189 189Goodwill amortization - - - - 43 4 3Net interest expense 87 87 51 51 68 68Other expense (income) 42 42 92 92 (13) (13)

Total costs and expenses 7,766 7,775 6,713 6,713 6,377 6,380

Income from continuing operations before income taxe sand cumulative effect of accounting changes 1,150 1,129 1,397 1,386 979 962Income tax expense 228 222 364 360 304 298

Income from continuing operations before cumulative effec tof accounting changes 922 907 1,033 1,026 675 664Loss from discontinued operations (24) (24) (255) (255) (11) (11)

Income before cumulative effect of accounting changes 898 883 778 771 664 653Cumulative effect of accounting changes, net of incom etax benefit (17) (17) - - (52) (52)

Net Income $881 $866 $778 $771 $612 $601

Earnings per basic common shareContinuing operations, before cumulative effect o faccounting changes $1.54 $1 .51 $1.72 $1.71 $1 .15 $ 1 .13Discontinued operations (0.04) (0.04) (0.43) (0.43) (0.02) (0.02)Cumulative effect of accounting changes (0.03) (0.03) -- - (0.09) (0.09)

Net Income $1.47 $1.44 $1.29 $128 $1 .04 51.02

32

Earnings per diluted common shareContinuing operations, before cumulative effect o faccounting changes $1.52 $1.50 $1.67 $1 .66 $1 .11 $1.09Discontinued operations (0.04) (0.04) (0.41) (0.41) (0.02) (0.02)

Cumulative effect of accounting changes (0.03) (0.03) - - (0.09) (0.09)

Net Income $1 .45 $ 1 .43 $1 .26 $1 .25 $1 .00 $0.98

97. The following chart, as set forth in the Restatement, illustrates and particularizes the

material effect of Baxter's restatement adjustments on its previously reported balance sheets for 200 2

and 2003:

Consolidated Balance Sheets at December 31, 2003 and 2

(in millions, except shares)

AssetsCurrent AssetsCash and equivalentsAccounts and other current receivablesInventoriesShort- term deferred income taxesPrepaid expenses and other

December 31, 2003 December 31, 2M

As originally As As originally Asreported restated reported restated

$927 $925 $1,169 51,1691,979 1,914 1,838 1,7932,101 2,104 1,745 1,752140 140 125 125290 277 283 268

Total current assets 5,437 5,360 5,160 5,107

Property, plant and equipment, net 4 ,585 4,592 3,907 3,912

Other asset sGoodwill 1,648 1,648 1,494 1,494Other intangible assets 611 611 526 526Other 1,498 1,498 1,391 1,391

Total other assets 3,757 3,757 3,411 3,41 1

Total assets $13,779 $13,709 $12,478 $12,430

LiabilitiesCurrent LiabilitiesShort-term debt $150 $150 $112 5112Current maturities of long-term debt and lease obligations 3 3 108 108Accounts payable and accrued liabilities 3,105 3,107 3,043 3,047Income taxes payable 561 538 588 570

Total current liabilities 3,819 3,798 3,851 3,837

33

Long-term debt and lease obligations 4,421 4,421 4,398 4,398

Other long-term liabi lities 2,216 2,216 1,290 1,290

Commitments and contingencies

Stockholders ' equityCommon stock, S1 par value, authorized 2,000,000,000 shares ,issued 648,574, 109 shares in 2003 and 626,574,109 shares in 2002 649 649 627 627

Common stock in treasury, at cost, 37,273,424 shares in 2003 an d

27,069,808 shares in 2002 (1,863) (1,863) (1,326) (1,326)

Addi tional contributed capital 3,773 3,773 3,223 3,223Retained earnings 2,194 2,145 1,689 1,655

Accumulated other comprehensive loss (1,430) (1,430) (1 ,274) (1,274)

Total stockholders ' equity 3,323 3,274 2,939 2,905

Total liabilities and stockholders' equity $13,779 $13,709 S12 ,478 $12,430

98. The following chart, as set forth in the Restatement, illustrates and particularizes the

material effect of Baxter's restatement adjustments on its previously reported quarterly financial

results for 2002 and 2003 :

Quarterly Financial Resul ts and Market for the company 's Stock (Unaudited)

First qua rter Se cond quarter 11iird quarter Fourth quarter Total ysw

years ended December 31 (in As As As As As As As As As Asmil lions, except per share dam) 01111i i►ialty restated ~~ ally restated ngina [ly restated originally restated ongfmally wed

Net Wes 31,997 $1,995 $2,163 32,162 $2,219 $2,216 $2,537 $2,531 SR 916 $8,901

Gross profi t 880 878 973 971 972 969 1140 1135 3965 3953

Income from continuing operations before 217 215 49 46 278 275 378 371 922 907cumulative effect of accounting changes '

Net income' 216 214 38 35 256 253 371 364 831 86 6

Per common share

Income from continuing operation sbefore

cumulative effect of accounting changes'

Basic 0.36 0.36 0.09 0 .08 0 .4 7 0- 47 0-62 0.61 1.54 15 1

1 The first qua rter of 2003 includes a $13 million pre-tax impairment charge for an invesmne t whose decline is value wn demand od th an brmporai yThe second quarter of 2003 includes a $337 million pre- tax rettruthaing charge and an $11 million peek acpensc r el at ing to the early cdin 8 slinicia o(debt. Thefourth quarter of 2003 includes $42 million is pre-tax gains relating to asset divestitures and $21 million of pre-tax impaamm charges for musunwo whaee declines

value were deemed other than tempor ary.

34

First quarter Second quarter Third quarter Fourth quarter yewTotal

years ended December 31 (in As As As As As As As As As Asmipions, except per share data) originall y

mpor=r e s t a t e d originally

reportedrestated oripuffy

reporWn o t a t e d ~ restated arigirially

rq)odwmood

Diluted 0 .36 0.36 0. 08 0 .08 0 .47 0.46 0.62 0.6 1 .52 1 S

Net income'

Basic 0 .36 0.36 0.06 0 .06 0 .43 0.43 0.61 0.6 1 .47 1 .44

Diluted 0 .35 0.35 0.06 0 .06 0 .43 0 .42 0.61 0.59 L45 1 .43

Dividends declared - N/A - N/A - N/A 0.582 NIA 0 .582 N/A

Market price

High 31 .2 N/A 26 .45 NIA 30.66 N/A 31 .1 N/A 312 WA

Low 18.64 NIA 18 .56 N/A 23.99 WA 26 .44 NIA 1856 WA

Net sales $1,875 $1,873 $1,945 $1,942 $2,029 82,027 $2,261 $2,257 58.110 39.099

Grow profit 880 878 914 912 940 939 1058 1056 3792 3785

Income from continuing operations= 253 251 204 203 317 315 259 257 1033 1026

Net income2 253 251 200 199 316 314 9 7 778 77 1

Per common share

Income from continuing operations'

Basic 0.42 0.42 0.34 0.34 0 .52 0.52 0.43 0.43 1 .72 1 .71

Diluted 0.41 0.41 0.33 0.33 0 .51 0.51 0.42 0.41 1 .67 1 .66

Net income=

Basic 0.42 0.42 0 .33 0 .33 0 .52 0.52 0.01 0.01 129 128

Diluted 0.41 0.41 0 .32 0 .32 0.51 0.51 0-02 0.01 1 .26 125

Dividends declared - N/A - NIA - NIA 0.582 WA 0582 N/A

Market price

High 59.6 WA 59 .48 NIA 43-41 N/A 32.09 WA 59.6 NM

Low 51 .43 NIA 44 .09 N/A 30.55 WA 2422 N/A 2422 N/A

The Truth Begins to Emerge

99. On July 22, 2004, Baxter announced that it planned to restate its financial results for

the years 2001 through 2003, and for the first quarter of 2004, causing shares of Baxter's common

stock to fall $1 .48 per share, or 4.59 percent, to close at $30 .79 per share on unusually heavy tradin g

2 The second quarter of 2002 includes a $70 million we tax impaicmenl cMrw far investments whose declines value was doomed olhw that uempwa zyand a $51 million pre-tax IPR&D charge relating to the acquisition of Fusion . T e fourth quarto of 2002 includes a 5112 m"on pre-lax IPRAD charge p uith lyrelating to the acquisition of ESI and Epic, and a $26 mi llion charge relating to the prioritization of the company's R&D activities

35

volume, thereby damaging Lead Plaintiffs and the Class . By way of comparison, on that same day,

the Dow Jones Industrial Average rose by 4 points ; the Nasdaq Composite index rose by 15 points ;

and the NYSE Health Care Index (of which Baxter is a component) rose by 28 points .

100. As set forth in the August 6, 2004 Restatement, "[ t]he restatement is primarily the

result of the inappropriate application of accounting principles for revenue recognition an d

inadequate provisions forbad debts in Brazil during the period ." As noted by Baxter' s management,

as a result of the restatement, in aggregate, net sales decreased $37 million and net income decrease d

$33 million over the three year period ended December 31, 2003 . For the first quarter of 2004, net

sales were unchanged as a result of the restatement and net income was decreased by $2 million.

GAAP Violations

101. GAAP states that "revenue should not be recognized unt il it is realized or realizable

and earned ." FASB Concepts Statement No. 5, 183. The conditions for the recognition of revenu e

are met when "persuasive evidence of an arrangement exists, delivery has occurred or services hav e

been rendered, the seller's price is fixed or determinable, collectibility ofthe sales price is reasonabl y

assured and when the entity has substantially performed the obligations which entitle it to the

benefits represented by the revenue ."

102. Baxter 's own company policy "is to recognize revenues from product sales and

services when earned , as de fined by GAAP." Restatement at p. 44.

103. Here, throughout the Class Period, Baxter improperly recognized revenue when

revenue from such transactions was not realizable and earned, which is in violation of both GAAP

and Baxter's own purported policy.

36

104. Given these admitted accounting irregularities, the Company announced financia l

results that were in violation ofGAAP, the Company's own announced revenue recognition policies ,

and the following principles :

(a) The principle that "interim financial reporting should be based upon the same

accounting principles and practices used to prepare annual financial statements: was violated (APB

No. 28, 110);

(b) The principle that "financial reporting should provide information that is

useful to present and potential investors and creditors in making rational investment, credit an d

similar decisions" was violated (FASB Statement of Concepts No . 1, ¶ 34) ;

(c) The principle that "financial reporting should provide information about the

economic resources of an enterprise, the claims to those resources, and the effects of transactions ,

events, and circumstances that change resources and claims to those resources" was violated (FAS B

Statement of Concepts No. 1, ¶ 40) ;

(d) The principle that "financial reporting should provide information about an

enterprise's financial performance during a certain time period" was violated (FASB Statement o f

Concepts No. 1, ¶ 42) ;

(e) The principle that "completeness, meaning that nothing is left out of the

information that may be necessary to insure that it validly represents underlying events an d

conditions" was violated (FASB Statement of Concepts No . 2,179);

(f) The principle that "financial reporting should be reliable in that it represent s

what it purports to represent" was violated (FASB Statement of Concepts No . 2,'1 58-59); and

37

(g) The principle that "conservatism be used as a prudent reaction in uncertainty

to try to ensure that uncertainties and risk inherent in business situations are adequately considered"

was violated (FASB Statement of Concepts No . 2, 1195) .

Efficient Market

105. The market for Baxter 's securities was open, well-developed and efficient at all

relevant times. Indeed, Baxter was covered by many well known brokerage firms . Throughout the

Class Period, Baxter was followed by analysts at the following firms, among others : (i) AG Edwards;

(ii) Argus Research Corp., (iii) Banc of America.; (iv) Bear Steams; (v) Buckingham Research; (vi)

CIBC World Markets ; (vii) Crowell, Weedon & Co. ; (viii) Dominick & Dominick, (ix) Goldman

Sachs & Co.; (x) J .P. Morgan ; (xi) Leerink & Swann; (xii) Merrill Lynch; (xiii) Morgan Stanley

Dean Witter; (xiv) RBC World Markets ; (xv) SG Cowen; (xvi) Wachovia ; and (xvii) William Blair.

106. Asa result ofthese materially false and misleading statements and failures to disclose,

Baxter's securities traded at artificially inflated prices during the Class Period . Lead Plaintiffs and

other members of the Class purchased or otherwise acquired Baxter securities relying upon th e

integrity of the market price of Baxter's securities and market information relating to Baxter, and

have been damaged thereby.

107. During the Class Period, defendants materially misled the investing public, thereby

inflating the price of Baxter's securities, by publicly issuing false and misleading statements and

omitting to disclose material facts necessary to make defendants' statements, as set forth herein, no t

false and misleading. Said statements and omissions were materially false and misleading in that

they failed to disclose materially adverse information and misrepresented the truth about th e

Company, its business and operations , as alleged herein.

38

108. At all re levant times, the material misrepresentations and omissions particularized

in this complaint directly or proximately caused or were a substantial contributing cause of th e

damages sustained by Lead Plaintiffs and other members of the Class. As described herein, durin g

the Class Period, defendants made or caused to be made a series of materially false or misleading

statements about Baxter's business, prospects and operations . These material misstatements and

omissions had the cause and effect of creating in the market an unrealistically positive assessment

of Baxter and its business, prospects and operations, thus causing the Company's securities to b e

overvalued and artificially inflated at all relevant times . Defendants' materially false and misleadin g

statements during the Class Period resulted in Lead Plaintiffs and other members of the Class

purchasing the Company's securities at artificially inflated prices, thus causing the damages

complained of herein.

Additional Scienter Allegations

109. According to a former Baxter executive who worked in Deerfield, Minis, and who

was employed throughout most ofthe Class Period ("Confidential Witness 3" or "CW3"), defendan t

Greisch had been the Senior Vice President of Finance in the Renal Division and had oversight of

the Brazilian opera tions, before being promoted to Chief Financial Officer .

110. Also according to CW3, in September 2003, there was agreat deal ofconcern among

the senior members of the firm that in the period from 2002-2003 there had been a deterioration o f

the ethical climate at Baxter . CW3 acknowledged that the Company's CEO, defendant Kraemer,

had begun to overstate the Baxter corporate performance to analysts on Wall Street . For example,

the CEO would be told that earnings would be between 5 and 7 cents in a particular segment of the

corporation, and he would then tell the analysts that earnings were projected to be 10 cents. This

39

practice put increasing pressure on individual segments to achieve better than expected results ,

including in Brazil .

111 . During the Class Period, defendants availed themselves of the fraudulent financial

reporting by: (i) raising capital by issuing additional shares of Baxter's artificially inflated stoc k

through equity offerings ; (ii) using its artificially inflated stock as currency for acquisitions; (iii)

raising addi tional capital through hybrid debt/equity offerings; and (iv) raising additional capital

through debt offerings, as set forth below in ¶1112-118 .

112. During the Class Period, in May 2001, Baxter issued $800 mi llion of convertible

debentures, which bore a 1 .25% coupon rate .

113. In August 2001, Baxter acquired Cook Pharmaceutical Solutions for $111 million in

cash and 2,111,047 shares of artificially inflated Baxter common stock .

114. In April 2002, Baxter issued $500 million of term debt, which matures in May 200 7

and bears a 5 .25% coupon rate .

115. In May 2002, Baxter acquired Fusion Medical Technologies, Inc . for2,806,660 shares

of artificially inflated Baxter common stock.

116. In December 2002, Baxter issued 25 million 7% equity units for $1 .25 billion in an

underwritten public offering . Each equity unit was comprised of $50 principal amount of senior

notes ($1 .25 billion in total) that mature in February 2008 and a purchase contract obligating th e

holder to purchase and the company to sell shares of Baxter common stock in February 2006 .

117. In March 2003, Baxter issued $600 million of term debt, which matures in March

2015 and bears a 4 .625% coupon rate.

40

118. Finally, as described in Note 8 to the 2003 Form 10-K/A, Baxter " issued 22 million

and 14.95 million shares of common stock pursuant to underwritten offerings in 2003 and 2002,

respectively, and received net proceeds of $644 million and $414 million, respectively" .

119. Absent the fraud, Baxter would not have been able to complete these offerings and

acquisitions, or would not have been able to do so on such favorable terms .

120. Additionally, certain insiders availed themselves of the fraud to dump their

personally owned artificially inflated shares on the unsuspecting market, shortly before the

announcement of the Restatement. For instance, defendant Anderson sold 44,902 shares of his

Baxter stock for proceeds totaling $1,458,865 .98 on April 26, 2004 . On April 29, 2004, insider and

Senior Vice President, Carlos A. Del Salto, sold 140,000 shares of Baxter Stock at prices ranging

from $31 .57 - $32. 18 per share, for proceeds totaling $4 ,444,890.

121 . During the Class Period, each of the Individual Defendants, as senior executive

officers of Baxter were privy to non-public information concerning its inadequate internal controls,

business, finances, products, markets and present and future business prospects via access to internal

corporate documents specifically including the Brazilian segment's monthly financial repor ting,

conversations and connections with other corporate officers and employees, attendance at

management and Board of Directors meetings and committees thereof and via reports and other

information provided to them in connection therewith . Because of their possession of such

information, the Individual Defendants knew or recklessly disregarded the fact that adverse fact s

specified herein had not been disclosed to, and were being concealed from, the investing public .

122. Because of the Individual Defendants' positions with the Company, they had access

to the adverse undisclosed information about the Company' s inadequate internal controls, business,

41

operations, operational trends, financial statements, markets and present and future busines s

prospects via access to internal corporate documents (including the Brazilian operating plans,

budgets and forecasts and reports of actual operations compared thereto), conversations an d

connections with other corporate officers and employees, attendance at management and Board of

Directors meetings and committees thereof and via reports and other information provided to them

in connection therewith.

123. It is appropriate to treat the Individual Defendants as a group for pleading purpose s

and to presume that the false, misleading and incomplete information conveyed in the Company' s

public filings, press releases and other publications as alleged herein are the collective actions ofth e

narrowly defined group of defendants identified above .

124. Each of the above officers of Baxter, by virtue of their high-level positions with the

Company, directly participated in the management ofthe Company, was directly involved in the day-

to-day operations of the Company at the highest levels and was privy to confidential proprietar y

information concerning the Company and its business, operations, growth, financial statements ,

financial condition, and internal controls, as alleged herein . Said defendants were involved in

drafting, producing, reviewing and/or disseminating the false and misleading statements and

information alleged herein, were aware, or recklessly disregarded, that the false and misleading

statements were being issued regarding the Company, and approved or ratified these statements, i n

violation of the federal securities laws .

125 . As officers and controlling persons ofapublicly-held company whose securities were,

and are, registered with the SEC pursuant to the Exchange Act, and are traded on the NYSE and

governed by the provisions of the federal securities laws, the Individual Defendants each had a dut y

42

to disseminate promptly, accurate and truthful information with respect to the Company' s internal

controls, financial condition and performance, growth, operations, financial statements, business ,

markets, management, earnings and present and future business prospects, and to correct any

previously-issued statements that had become materially misleading or untrue, so that the market

price of the Company's publicly-traded securities would be based upon truthful and accurate

information. The Individual Defendants' misrepresentations and omissions during the Class Period

violated these specific requirements and obligations .

126. The Individual Defendants participated in the drafting, preparation, and/or approval

of the various public and shareholder and investor reports and other communications complained

of herein and were aware of, or recklessly disregarded, the misstatements contained therein and

omissions therefrom, and were aware of their materially false and misleading nature. Because of

their executive and managerial positions with Baxter, each of the Individual Defendants had access

to the adverse undisclosed information about Baxter's internal controls, financial condition, and

performance as particularized herein and knew (or recklessly disregarded) that these adverse facts

rendered the positive representations made by or about Baxter and its business issued or adopted by

the Company materially false and misleading.

127 . The Individual Defendants, because of their positions of control and authority a s

officers of the Company, were able to and did control the content of the various SEC filings, press

releases and other public statements pertaining to the Company during the Class Period. Each

Individual Defendant was provided with copies of the documents alleged herein to be misleading

prior to or shortly after their issuance and/or had the ability and/or opportunity to prevent their

issuance or cause them to be corrected . Accordingly, each of the Individual Defendants is

43

responsible for the accuracy of the public reports and releases detailed herein and is therefore

primarily liable for the representations contained therein . Additionally, as set forth in Baxter 's May

19, 2004 Proxy Statement, " [m]anagement is responsible for Baxter' s internal controls and the

financial reporting process ." May 19, 2004 Proxy Statement at p. 20 .

128. Scienter is further evident as to defendants Kramer and Andersen and defendant

Baxter by virtue of their having filed false certifications of Baxter 's internal controls . Certification

of public companies' SEC filings by their senior officers is required under the Sarbanes-Oxley Act

of 2002 ("SOA") (effective July 30, 2002), 15 U.S.C. §7241 . Under §302 of SOA, as interpreted

in "Final Rule: Certification of Disclosure in Companies' Quarterly and Annual Reports," Release

Nos. 33-8124,34-46427 (Aug. 29, 2002), senior officers must certify, among other things that they

are responsible for establishing, maintaining and regularly evaluating the effectiveness of, the

issuer's internal controls; they have made certain disclosures to the issuer 's auditors and the audi t

committee of the board of directors about the issuer's internal controls ; and they have included

information in the issuer's quarterly and annual reports about theirevaluation and whether there hav e

been significant changes in the issuer's internal controls or in other factors that could significantl y

affect internal controls subsequent to the evaluation . Under §906 of SOA, 18 U.S .C. § 1350,

criminal penalties may be imposed for knowing and willful filing of false certifications .

129. Each of the Defendants is liable as a participant in a fraudulent scheme and course

of business that operated as a fraud or deceit on purchasers of Baxter securities by dissemination o f

materially false and misleading statements and/or concealing material adverse facts . The scheme:

(i) deceived the investing public regarding Baxter' s internal controls, business, operations ,

44

management and the intrinsic value of Baxter securities ; and (ii) caused Lead Plaintiffs and other

members of the Class to purchase Baxter securities at artificially inflated prices .

130. As alleged herein, defendants acted with scienter in that defendants knew that th e

public documents and statements issued or disseminated in the name of the Company wer e

materially false and misleading ; knew that such statements or documents would be issued o r

disseminated to the investing public ; and knowingly and substantially participated or acquiesced in

the issuance or dissemination of such statements or documents as primary violations of the federal

securities laws . As set forth elsewhere herein in detail, defendants, by virtue of their receipt o f

information reflecting the true facts regarding Baxter, their control over, and/or receipt and/o r

modification of Baxter's allegedly materially misleading misstatements and/or their associations with

the Company which made them privy to confidential proprietary information concerning Baxter,

participated in the fraudulent scheme alleged herein .

131 . Defendants knew and/or recklessly disregarded the falsity and misleading nature of

the information which they caused to be disseminated to the investing public. The ongoing

fraudulent scheme described in this complaint could not have been perpetrated without the

knowledge or reckless disregard of the personnel at the highest level of the Company, including th e

Individual Defendants .

Applicability Of Presumption of Reliance:Fraud-On-The-Market Doctrine

132, At all relevant times, the market for Baxter securities was an efficient market for the

following reasons, among others :

45

(a) Baxter stock met the requirements for listing, and was listed and activel y

traded on the NYSE, a highly efficient market ;

(b) As a regulated issuer, Baxter filed periodic public reports with the SEC and

the NYSE ;

(c) Baxter regularly communicated with public investors via established marke t

communication mechanisms, including through regular disseminations of press releases on th e

national circuits ofmajor newswire services and through other wide-rangingpublic disclosures, suc h

as communications with the financial press and other similar reporting services ; and

(d) Baxter was followed by several securities analysts employed by majo r

brokerage firms, as set forth in ¶ 105 above, who wrote reports which were distributed to the sales

force and certain customers of their respective brokerage firms . Each of these reports was publicly

available and entered the public marketplace .

133. As a result of the foregoing, the market for Baxter securities promptly digeste d

current information regarding Baxter from all publicly-available sources and reflected such

information in Baxter's stock price . Under these circumstances, all purchasers of Baxter securities

during the Class Period suffered similar injury through their purchase of Baxter securities at

artificially inflated prices and a presumption of reliance applies.

No Safe Harbor

134. The statutory safe harbor provided for forward-looking statements under certain

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

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

when made. To the extent there were any forward-looking statements, there were no meaningful

46

cautionary statements identifying importantfactors that could cause actual results to differ materially

from those in the purportedly forward-looking statements . Alternatively, to the extent that the

statutory safe harbor does apply to any forward-looking statements pleaded herein, defendants ar e

liable for those forward-looking statements because at the time each of those forward-lookin g

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

false, and/or the forward-looking statement was authorized and/or approved by an executive office r

of Baxter who knew that those statements were false when made.

FIRST CLAIM FOR RELIEF

(Violation Of Section 10(b) Of The Exchange Act and Rule 10b-5Promulgated Thereunder Against A ll Defendants)

135. Lead Plaintiffs repeat and reallege each and every allegation contained above as if

fully set forth herein .

136 . During the Class Period, defendants carried out a plan, scheme and course of conduct

which was intended to and, throughout the Class Period, did : (i) deceive the investing public,

including Lead Plaintiffs and other Class members, as alleged herein ; and (u) cause Lead Plaintiffs

and other members of the Class to purchase Baxter securities at artificially inflated prices. In

furtherance of this unlawful scheme, plan and course ofconduct, defendants, and each of them, took

the actions set forth herein.

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

statements of material fact and/or omitted to state material facts necessary to make the statement s

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

and deceit upon the purchasers of the Company's securities in an effort to maintain artificially high

47

market prices for Baxter securities in violation of Section 10(b) of the Exchange Act and Rule I Ob-5 .

All defendants are sued as primary participants in the wrongful and illegal conduct charged herein

and as controlling persons as alleged below .

138. Defendants, individually and in concert, directly and indirectly, by the use , means or

instrument al ities of interstate commerce and/or of the mails, engaged and participated in a

continuous course of conduct to conceal adverse material information about the business, operation s

and future prospects of Baxter as specified herein .

139. These defendants employed devices, schemes and artifices to defraud, while in

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

of conduct as alleged herein in an effort to assure investors of Baxter's value and performance an d

continued substantial growth, which included the making of, or the participation in the making of

untrue statements of material facts and omitting to state material facts necessary in order to make the

statements made about Baxter and its business operations and future prospects in light of the

circumstances under which they were made, not misleading, as set forth more par ticularly herein,

and engaged in transactions, practices and a course of business which operated as a fraud and deceit

upon the purchasers of Baxter securities during the Class Period .

140. Each of the Individual Defendants' primary liability, and controlling person liability,

arises from the following facts: (i) the Individual Defendants were high-level executives at th e

Company during the Class Period and members of the Company' s management team or had cont rol

thereof; (ii) each ofthese defendants, by virtue ofhis responsibilities and activities as a senior o fficer

of the Company was privy to and participated in the creation , development and reporting of the

Company's internal budgets, plans, projections and/or reports ; (iii) each of these defendants enjoyed

48

significant personal contact and familiarity with the other defendants and was advised of and ha d

access to other members of the Company's management team, internal reports and other data and

information about the Company's finances, operations, and sales at all relevant times ; and (iv) each

of these defendants was aware ofthe Company's dissemination of information to the investing publi c

which they knew or recklessly disregarded was materially false and misleading .

141 . The defendants had actual knowledge of the misrepresentations and omissions o f

material facts set forth herein, or acted with reckless disregard for the truth in that they failed t o

ascertain and to disclose such facts, even though such facts were available to them . Such defendants '

material misrepresentations and/or omissions were done knowingly or recklessly and for the purpos e

and effect of concealing Baxter's operating condition and future business prospects from the

investing public and supporting the artificially inflated price of its securities . As demonstrated by

defendants' overstatements and misstatements of the Company' s business, operations and earnings

throughout the Class Period, defendants , if they did not have actual knowledge of the

misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by

deliberately refraining from taking those steps necessary to discover whether those statements were

false or misleading.

142. As a result of the dissemination of the mate ria lly false and misleading information

and failure to disclose material facts, as set forth above, the market price of Baxter securities was

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

publicly-traded securities were artificially inflated, and relying directly or indirectly on the false and

misleading statements made by defendants, or upon the integrity ofthe market in which the securities

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

49

disregarded by defendants but not disclosed in public statements by defendants during the Clas s

Period, Lead Plaintiffs and the other members of the Class acquired Baxter securities during the

Class Period at artificially high prices and were damaged thereby .

143 . At the time of said misrepresentations and omissions, Lead Plaintiffs and othe r

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

Plaintiffs and the other members of the Class and the marketplace known the truth regarding th e

problems that Baxter was experiencing, which were not disclosed by defendants, they would no t

have purchased or otherwise acquired their Baxter securities, or, if they had acquired such securities

during the Class Period, they would not have done so at the artificially inflated prices which they

paid .

144. By virtue of the foregoing, defendants have violated Section 10(b) of the Exchang e

Act, and Rule lOb-5 promulgated thereunder.

145. As a direct and proximate result ofdefendants' wrongful conduct,Lead Plaintiffs and

the other members of the Class suffered damages in connection with their respective purchases and

sales of the Company's securities during the Class Period .

SECOND CLAIM FOR RELIEF

(Violation Of Section 20(a) Of The Exchange ActAgainst The Individual Defendants)

146. Lead Plaintiffs repeat and reallege each and every allegation contained above as if

fully set forth herein .

147. The Individual Defendants acted as controlling personsofBaxter within the meaning

of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, and

50

their ownership and contractual rights, participation in and/or awareness of the Company's

operations and/or intimate knowledge of the false financial statements filed by the Company with

the SEC and disseminated to the inves ting public, the Individual Defendants had the power t o

influence and control and did influence and control, directly or indirectly, the decision-making o f

the Company, including the content and dissemination of the various statements which Lea d

Plaintiffs contend are false and misleading. The Individual Defendants were provided with or ha d

unlimited access to copies of the Company's reports, press releases, public filings and other

statements alleged by Lead Plaintiffs to be misleading prior to and/or shortly after these statements

were issued and had the ability to prevent the issuance of the statements or cause the statements t o

be corrected .

148. In particular, each of these defendants had direct and supervisory involvement in the

day-to-day operations of the Company and, therefore, is presumed to have had the power to con trol

or influence the particular transactions giving rise to the securities violations as alleged herein, and

exercised the same.

149. As set forth above, Baxter and the Individual Defendants each violated Section 10(b)

and Rule I Ob-5 by their acts and omissions as alleged in this complaint. By virtue oftheir positions

as controlling persons, the Individual Defendants are liable pursuant to Section . 20(a) of the

Exchange Act. As a direct and proximate result of defendants' wrongful conduct, Lead Plaintiffs

and other members of the Class suffered damages in connection with their purchases of th e

Company's securities during the Class Period.

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

51

(1) Determining that this action is a proper class action under Rule 23 of th e

Federal Rules of Civil Procedure ;

(2) Awarding compensatory damages in favor of Lead Plaintiffs and the other

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

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

(3) Awarding Lead Plaintiff and the Class their reasonable costs and expenses

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

(4) Such other and further relief as the Court may deem just and proper.

JURY TRIAL DEMANDED

Lead Plaintiffs demand a trial by jury on all issues so triable .

Dated: January 10, 2005 Respectfully submitted,

MERANTZ HAUDEK BLOCKGROSSMAN & GROSS, LLP

Patrick V. DahlstromOne North LaSalle Street, Suite 2225Chicago, IL 60602-390 8(312) 377-118 1(312) 377-1184 (Fax)

Liaison Counsel for the Class

52

BERGER & MONTAGUE, P.C.Sherrie R. SavettArthur StockPhyllis ParkerDouglas M. Risen1622 Locust StreetPhiladelphia, PA 19103(215) 875-3000(215) 875-4636 (fax )

GLANCY BINKOW & GOLDBERG LLPLionel Z. GlancyPeter A. Binkow1801 Avenue of the StarsSuite 31 1Los Angeles, CA 90067(310) 201-9150(310) 201-9160 (fax)

Co-Lead Counsel for the Clas s

amended complaiatwpd

53

ti

BATTER INTERNATIONAL, INC. (NYSE: BAX)AMENDED CERTIFICATION PURSUANT TO iH FEDERAL M=MES [ES LAWS

Steelworkers Pension Trust ('Plaintiff"), duly swears and says, as to the claims assertedunder the federal . securities laws, that :

1 . . Plaintiff has reviewed a draft complaint against Baxter International, Inc .("Baxter") and certain of its officers, approves of its contents, and authorizes its filing .

2. Plaintiff did not purchase the security that is the subject of this action at thedirection of its counsel or in order to participate in this private action .

3 . Plaintiff is willing to serve as a representative plaintiff on behalf of the class,including providing testimony at deposition and trial, if necessary .

4. Plaintiff's transactions in the securities of Baxter between and including April 19,2001 through July 21, 2004 (the "Class Period ") are as follows: -

SHARESPURCHASED

See Attached Schedule

SHARESSOLD

See Attached Schedule

DATE OF PRICE PERPURCHASESHARE

DATE OF PRICE PERSALE MAM

5. Plaintiffhas sought to serve as a class representative in the following other ac tionsfiled under the United States federal securities laws in the past three (3) years preceding the date-on which this certification is signed:

The Steelworkers Pension Trust, et al. v. Norrel Networks Corporation, et air , CivilAction No . 04-CV-2249 (GBD) (S .D.N.Y. 2004).

In re Excelsior, Federated and Scudder Mutual Funds Investment Litigation,Civil Action No . 04-md-15861 -03 (D. Md. 2004) (Post-Retirement Health Insurance Plan)

385311_03 .wpd

. ` 6

6. Plaintiff has been appointed as a lead plaintiff or an officer, director, or fiduciaryof a lead plaintiff, in the following securities class action(s) during the past three (3) year period :

In re Exce&ior, Federated and Scudder Mutual Funds Investment Litigation ,Civil Action No . 04-md-15861 .03 (D.. Md. 2004) (Post-Retirement-Health insurance plan)

7 . Plaintiff has not and w ill not accept any payment for serving as a representativeplaintiff on behalf of the class beyond its pro rata share of any recovery, or as ordered orapproved by the court, including any award for reasonable costs and expenses (including lostwages) directly relating to the representation of the class .

I declare under penalty of perjury under the laws of the United States that the foregoingis true and correct. Executed this- day of - , 2004 .

By :

Title : General Counsel - - - - - - - - - - - - - - - -Steelworkers Pension Trust

3853I1_03_wpd

beelworke Pension Trust • schedule of transac0

Date of - Sham : Prkobjmhaso Purchased Per she09/20/02 . 7,025 132.4700W25/02 1475 $32,16690/0W02 2,550 $28.34170/10/02 5,800 $28.73012(24102- 2,450 $2840507/18103 15.425 $25.76807/22/03 3,825 $26.00004/20104 8,3.00 $ 33 .27006/10104 44,210 $3132008/10/04 22.85 $32.72004121/04 11.700 . $3425004127104 - 0,900 $3277005113/04 3,900 $31 .800

Total No. of Shams Purchased 135,796

Date of - $ ,hares PriceSale 501 Per sham -

03116103 5,500 $19.576.06103 - 13.800 $19.+40 4

total No. of Share* $old 19,300

rP '

GLANCY SINKOW & GOLDBERG LLPSWORN CERTIFICATION OF PLAINTIFF

BAXTER INTERNATIONAL, INC. SECURniEs LITIGATION

THE CITY OF STERLING HEIGHTS POLICE AND FIRE RETIREMENT SYSTEM declaresthe following as to the claims asse rted, or to be asserted under the federal secwltles laws

1 . 1 Michael E. Moco, am general counsel to the Board of Trustees of the City ofSterling Heights Police and Fire Retirement System and I have been duly au or¢ed by the Board ofTrustees to commence litigation against BAXTER INTERNATIONAL. INC. and the otherdefendants. -

2. I have reviewed the Complaint and authorimd its filing.

2, The City of Sterl ing Heigh Police and Fire Retirement System did not purchaseBAXTER INTERNATIONAL INC. . the securhy that Is the subjed of M ac tion, at the trec cn ofplafntiffs counsel or in order to participate in any private a ckin arising under this trite.

3. The City of Sterling Heights Police and Fire Ret>:ement System is wing to serve asrepresentative party on behalf of a class and -will testily at deposition and trial, if necessary.

4. The City of Sterling Heights Po lice and Firs Retirement System's o c ocs inBAXTER INTERNATIONAL, INC. during the Class Period set forth in the Complaint are as folio

(SEE ATTACHED SCHEDULE)

5.- The City of Sterling Heights Police and Fire Retirement System has not sougtd toserve or served as a representative party on behalf of a class under this title during the last threeyears, except EI Paw, Fifth Third, Lab Corp, and AXT securities iil#gabons.

6. The City of Sterling Heights Police and Fire Retirement System will not accept anypayment for serving as a representative paft except to receive a pro rata share of any recovery oras. ordered or approved by the court, Including Me award to a represe tatve plaln#f of raasonalcosts and expenses (including lost wages) directly relating to the representation of the cla w

❑ Check here if you are a current employee or former employee of the defendantCompany.

declare under penalty of peJury that the

Dated:

Debc1t, Michigan 48201(313) 578.1200MMoco@ vmttaw 00IDWebsfte: www.vmdaw.com

79 Alfred Street

A , r

EXHIBIT

Transactions of the City of Sterling Heights Police& Fire Retirement etn In BgXIMInternational, Inc.

Baxter International (Mg transactions

Sterling Heights P&F

Date # shares Price bought Total bought Price sold Total said Balance8/1/2001 12,600 S 50.0280 $(630,352.80)

1/24/2002 1,800 $ 53.2500 $ (95.850.00).6/14/2002 -14,400 $ 462500 $ 666,000.00 $ (6),202.80)

' i

GLANCY BINKOW & GOLDBERG LLPSWORN CERTIFICATION OF PfAVVTIFF

BAXTER INTERNATIONAL, INC. SECURITIES LITIGATION

THE CITY OF ST. CLAIR SHORES POLICE AND FIRE RETIREMENT SYSTEM dacesthe following as to the claims asse rted , or to be asserted under ft f l securities laws:

1. 1 Michael E . Moco, am general counsel to the Board of Trustees of the City of SLClair Shores Police and Fire Retirement System and I have been duly authorized by the Board ofTrustees to commence litigation against BAXTER INTERNATIONAL, INC . and the otherdefendants.

2. I have reviewed the Complaint and authorized Its filing.

2. The City of St Clair Shores Police and Fire Retirement System did not purchaseBAXTER INTERNATIONAL, INC ., the security that is the subject of this action, at the direction ofptaintlffs counsel or in order to participate in any private action arising under this title .

3. The City ofSt. Clair Shores Police and Fire Retirement System is willing to serve asa representative party on behalf of a class and will testify at deposition and trial , if necessary.

4. The City of St. Clair Shores Ponce and Fire Retirement System 's tan=dons InBAXTER INTERNATIONAL, INC. during the Class Period set forth in the Comp laint a re as foils


5. The City of St. Clair Shores Police and Fire Retirement System has not sought toserve or served as a representative party on behalf of a class under this We du ring the last Vvesyears, except Fifth Third BankCorp . Watson Pharmaceuticals . Bisys. Krispy Kreme, Slebel Systemsand Corinthian Colleges securities Iltigatlons.

S. The City of St Clair Shores Police and Fire Retirement System will not accept anypayment for serving as a representative party, except to receive a pro rata share of any recovery oras ordered or approved by the court, including the award to a representative plaintiff of reasonablecosts and expenses (including lost wages) directly relating to the representation of the lass.

0 Check here If you are a current employee or former employee of the defendantCompany.

I declare under penalty of perjury that the foregoing are :rug and correct

Dated:

Michael E. Moco79 Alfred StreetDetroit Michigan 48201(313) 578-1200MMaoo[c ymtt" CAMWebsite: www.vngfaw.com

EXHIBIT

Transactions of the City of St Clair Shores Police& Fire Retirement System In Baxt Inte ational n

St Clair Shores P&F

Date # shams Price bought11/22/2002 3,350 $ 31.539511125/2002 3,990 $ 31.874112/26/2002 150 $ 28.2300

1/9/2003 4.420 $ 30.06292125/2003 330 $ 27.65004/312003 -1,1904/4/2003 -1,1904/712003 -1,1904/812003 -1,260

4114!2003 -9704/15/2003 -7404/15/2003 -1,4104/17/2003 -1,4804121/2003 -1,3904/2712003 -1,440

St Clair Shores

Date # shares Price bought11/22/2002 90 $ 31 .539511125/2002 100 $ 31 .8741

1/9/2003 110 $ 30.06294/3/2003 -304/4/2003 -304/7/2003 -304/812003 -30

4/14/2003 -204/15/2003 -204/1662003 -30411712003 -404121/2003 -30412212003 -40

Total bought Price sold$(105,657.33)$(127,177 .66)$ (4,234.50)$(132,878.02)$ (9,124.50)

$18.9857$18.6504$19.1558$18.9661;19.8038$ 20.1050$19.4930$192814$19.5370$19.9742

Total bought Price sold$ (2,838.56)$ (3,187.41)$ (3.306.92)

Total sold Balance

$ 22,592.98$ 22,193.98$ 22,795.40$ 23,89729$ 19,209.69$ 14,877.70$ 27,485.13$ 28,150.84$ 27,156.43$ 28,762.85 $(141,949.72)

Total sold Bal co

$18.9887 $ 569.57$18.6504 $ 559.51$19.1558 $ 574.67S18.9661 $ 568.98$19.8038 $ 398.08$ 20.1050 $ 402.1 0$19.4930 $ 584.79$19.2814 $ 77128$ 19.5370 $ 586.1 1$19.9742 $ 798.97 $ (3.520.84)

t AP it

GLANCY BINKOW & GOLDBERG LLPSWORN CERTIFICATION OF PLAINTIFF


THE CITY OF ROSEVILLE EMPLOYEES' RETIREMENT SYSTEM declares thefolbwingas to the claims asserted, or to be asserted under the federal securities laws:

1 . I Michael E. Moco, am general counsel to the Board of Tnlstees of the CRy ofRoseville Employees' Retirement System and I have been duly authwrtzed by the Board of Trusteesto commence litigation against BAXTER INTERNATIONAL. INC. and the otlwdefendants.

2 1 have reviewed the Complaint and author its filing .

2. TheCity of Roseville Employees' Retirement System did not purchase BAXTERINTERNATIONAL, INC, the security that is the subject of th is action , at the direction of p[airdiflscounsel or In order to participa te in any private action arising under this Mle.

3. The City of Ros"le Employees' Retirement System is Wiling to serve as arepresentative party on behalf of a class and wil l testify at deposition and trial, if necessary.

4. TheCity of Roseville Employees' Retirement System 's transactions in BAXTERINTERNATIONAL, INC. during the Class Period set forth In the Complaint are as follows


5. The City of Roseville Employees' Retirement Systan has not sought to sears orserved as a representative patty on behalf-of a class under this title during the fast three years,except El Paso . Interstate Bakeries , Motorola. 8isys and Siebel Systems securities litigations .

6. The City of Roseville Employees' Retirement System wld not accept any pa went forserving as a representative party, except to receive s pro rats share of any recovery or as ordered orapproved by the court, including the award to a representative plaintiff of reasonable Costs WWIexpenses (Including lost wages) directly relating to the representation of the class.

❑ Check here if you are, a current employee or former employee of the defendantCompany.

1 declare under penally of perjury that th e

Dated: "1 '11 200

79 Attired StreetDetroit, Michigan 48201(313) 573-1200MMxoavtntlaw.comWabsfte: www.vmtlaw.com

` fr

EXHIBIT

Transactions of the City of Roseville EmployeesRetirement System in Baxter International, Inc..

Baxter International (BA)Q transactions

RosevilleDate # shares Price bought Total bought Price sold Total sold Balance

9/20/200,2 4,200 $ 32.4697 $(136,372.74)9126/2002 2,100 $ 32.7696 $ (68,816.16)7/18/2003 3,275 $ 25.7586 $ (84,359.42)

11/21/2003 0550 $ 28.9200 $ 14,806.006/18/2004 -525 $32.6400 $ 17.083.50

90-day avg -8,500 $ 31 .1026 $264 .372.10 $ 6.713.28

Roseville

Date # shares Price bought Total bought Price sold Total sold Balance6/17/2002 300 $ 472968 $ (14,189.04)7130!2002 -3M $ 38.3855 S 11,516.658/19/2002 310 $ 35.1844 $ (10,907.16)11/26/2002 -310 S 313428 S 9,71621 $ (3,864.35)

Roseville

Date # sha res Price bought Total bought Price sold Total sold Balance11l2212DD2 1,360 S 31 .5395 $ (42,893.72)i 1/25/2002 1,610 8 31 .8741 $ (51,317 .30)

119/2003 1,770 $ 30.0629 S (53,211 .33)41312003 -460 S 18.9857 $ 8,733.42414/2003 -460 $18.6504 $ 8,579.1 8417/2003 -460 $19.1558 $ 8,811 .6741812003 -490 $ 18.9661 $ 9,293.39

4/14/2003 -370 S 19.8038 $ 7,327.414/15/2003 -290 $ 20.1050 $ 5,830.454/16/2003 -550 $ 19.4930 $ 10,721 .1 54/17/2003 -560 $ 19.2814 $ 10,797 .584/21/2003 -540 $19.5370 $ 10,549.984/22/2003 -560 $19.9742 $ 11,185.55 S (55.59267)

4 y p ri

GLANCY B1N1(0W & GOLDBERG LLB'SWORN CERTIFICATION OF PLAINTIFF


THE CITY OF STERLING HEIGHTS EMPLOYEES' RETIREMENT SYSTE M declares thefollowing as to the ctalms asserted . or to be asserted under the federal securities laws:

I. I Michael E Moco , am general counsel to the Board of Trustees of the City ofStarling Heights Employees' Retirement System and I have been duly authorized by the Beard ofTrustees to commence litigation against BAXTER INTERNATIONAL, INC. and the otherdefendants .

2. 1 have reviewed the Complaint and authorized its fling .

2. The City of Sterling Heights Employees' Retie ement System did not purchaseBAXTER INTERNATIONAL, INC., the security that is the subject of this action, at the direction ofplaintiffs counsel or In order to participate in any private ac tion arising under this title.

3. The City of Sterling Heights Employees: Retirement System is willing to serve as arepresentative party on behalf of a class and will testify at deposition and trial, If nary.

4. The City of Sterling Heights Employees ' Retirement System's transactions InBAXTER INTERNATIONAL. INC. during the Class Period set forth In the Complaint are as folo


5. The City of Sterling Heights Employees ' Retirement System has not sought to sawor served as a representative party on behalf of a class under'this We during the last three years .except El Paso , Fifth Third, First Energy . Lab Corp. Watson Pharmaceuticals, B1sys. Krlspy Krems.and Corinthian Colleges securities Iitigadons.

6. The City of Sterling Heights Employees' Retirement System wig not accept anypayment for serving as a representative party, except to receive a pro rata share of any recovery oras ordered or approved by the court including the award to a representative plaintiff of reasonablecosts and expenses (Including lost wages) directly relating to the representa tion of the class.

O Check here If you are a currant employes or former employee of the defendantCompany .

I declare under penalty of perjury that the

Dated: zl-2w~MichaefE. Moco79 Alfred StreetDetroit Michigan 4= 1(313) [email protected]: www.vmdaw.com

4, a,

EXHIBIT

Transactions of the City of Sterling Heights GeneralEmpioye, Retirement r In Baxter intematienaL lnc .

Baxter International (AX) transactions

Sterling Heights General

Date # shares Price bought Total bought Price sold811/2001 5,600 $ 50.0280 $(280,156.80)6/14/2002 -5,600 $462500

Total sold Balance

259,000.00 $ (21,158.80)

T

CERTIFICATE OF SERVICE

I hereby certify that on this day, January 10, 2004, I caused a true and correct copy of theConsolidated Amended Class Action Complaint to be served upon the following :

VIA HAND DELIVERY

Marvin Alan Miller, Esq .Jennifer Winter Sprengel, Esq .Christopher B. Sanchez, Esq.HULLER FAUCHER & CAFFERTY LLP30 North LaSalle Street, Suite 320 0Chicago, IL 60602T: (312) 782-4880F: (312) 782-4485

Carol V. Gilder, Esq.Conor R. Crowley, Esq.MUCH, SHELIST FREED,DENENBERG, AMENT &RUBENSTEIN PC191 North Wacker Drive, Suite 1800Chicago, IL 60605-2000T. (312) 521-2000F: (3I2) 521-2100

Matthew R. Kipp, Esq.Dhananjai Shivakumar, Esq .Donna L. McDevitt, Esq.Lanelle K. Meidan, Esq.SKADDEN, ARPS, SLATEMEAGHER & FLOM LLP333 West Wacker Drive, Suite 2100Chicago, IL 60606T: (312) 407-0700F: (312) 407-041 1

VIA OVERNIGHT DELIVERY

Marc A . Topaz, Esq .Richard A Maniskas, Esq .SCHIFFRIN, CRAIG & BARROWAY3 Bala Plaza East, Suite 40 0Bala Cynwyd, PA 19004-3481T: (610) 667-7706F: (610) 667-7056

David Barry Kahn, Esq.Mark E. King, Esq.DAVID B. KAHN & ASSOCIATES LTDOne Northfield Pl aza, Suite 100Northfield, IL 60093T: (847) 501-5083F: (847) 501-5086

Sherrie R. Savett, Esq .Arthur Stock, Esq.Douglas M . Risen, Esq.Phyllis M. Parker, Esq .BERGER & MONTAGUE, PC1622 Locust StreetPhiladelphia, PA 19103T: (215) 875-3000F: (215) 875-4604

E. Powell Miller, Esq .MILLER SHEA PC950 West University Drive, Suite 300Rochester, MI 48307T: (248) 841-2200F: (248) 652-2852

Lionel Z. Glancy, Esq .Michael Goldberg, Esq.GLANCY BJI KOW & GOLDBERGLLP1801 Avenue of the Stars, Suite 31 1Los Angeles, CA 90067T: (310) 201-9150F: (310) 201-9160

Paul Y ada

higginbotham, et al. v. baxter international, inc., et al...

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