• Stuart A. Liner, Esq. (SBN: 137495)

sliner@linerlaw.com 2 Ellyn S. Garofalo, Esq. (SBN: 158795)

egarofalo@linerlaw.com Kim Zeldin, Esq. (SBN: 135780)

kzeldin@linerlaw.com LINER GRODE STEIN YANKE LEVITZ SUNSHINE REGENSTREIF & TAYLOR LLP 1100 Glendon Avenue, 14th Floor Los Angeles, California 90024-3503 Telephone: (310) 500-3500 Facsimile: (310) 500-3501

Attorneys for Plaintiffs

• \ \0\ (\

C\1J'1 \:l'0 FILED {)(\q SUPER/OR COURT OF CAU \' COUNTYOFLOSANGE~

JOMA By

NOV 23 2010 e, Executive Officer/Cle

auny. w Deputy

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ROGER B. PEIKIN and ROGER B. PEIKIN, as Trustee for the ROGER B. PEIKIN 2002 REVOCABLE TRUST UTD 10-1-02, a California inter vivos trust

~ 10

II

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF LOS ANGELES, CENTRAL DISTRICT

12

13 ROGER B. PEIKIN, an individual; and ROGER ) B. PEIKIN, as Trustee for the ROGER B. )

14 PEIKIN 2002 REVOCABLE TRUST UTD 10-1-) 02, a California inter vivos trust, )

15 Plaintiffs,

16 vs.

17 ALETHEIA RESEARCH AND

18 MANAGEMENT, INC., a California corporation; PETER EICHLER, an individual;

19 PATRICIA BARNES, an individual; BRUCE LEE, an individual; and DOES 1 through 30,

20 inclusive,

21 Defendants.

22

23

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

----------------------------) 24

25

26

27

28

Case No. 8C450058

COMPLAINT FOR:

(1) BREACH OF FIDUCIARY DUTY (2) WRONGFUL TERMINATION IN

VIOLATION OF PUBLIC POLICY

(3) BREACH OF WRITTEN EMPLOYMENT AGREEMENT

(4) BREACH OF IMPLIED AGREEMENT

(5) BREACH OF THE IMPLIED COVENANT OF GOODFAITH AND FAIR DEALING

(6) INVASION OF PRIVACY (7) INTENTIONAL AND

NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS "0 "" '" co

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COMPLAINT

0020165/00 II 418682vO)

• • For their Complaint, Plaintiffs Roger B. Peikin (Peikin") and the Roger B. Peikin 2002

2 Revocable Trust UTD 10-1-02 (collectively, "Plaintiffs") allege as follows:

3 I. INTRODUCTION

4 1. This is a tale of unchecked greed and hubris. In 1997, Defendant Peter 1. Eichler, lr.

5 ("Eichler") and Plaintiff Roger B. Peikin ("Peikin") founded the investment adviser firm, Aletheia

6 Research and Management, Inc. ("Aletheia" or the "Company"). The endeavor has been hugely

7 successful. While Eichler is the brains behind the Company's investment strategies, Peikin has

8 steered the Company's behind the scenes business operations; serving as Althea's Executive Vice

9 President, General Counsel, Chief Financial Officer and Chief Compliance Officer. Working hand

lOin glove over the past thirteen years, Eichler and Peikin have parlayed a $1,000 initial investment

II into a company worth hundreds of millions of dollars.

12 2. Eichler who is widely viewed as a not-so-benevolent dictator, has now staged a coup

13 to oust his longtime partner and permit Eichler to seize unfettered control over Aletheia, its Board

14 of Directors and its assets, thereby divesting Peikin of any financial benefit from his 28% interest

15 in the Company. The rift between the former partners had its origins in Peikin's efforts to stand up

16 to the dictatorial Eichler and, among other things, force Eichler to place the Company's interests

17 before his own, and comply with regulations designed to protect shareholders and investors from

18 predatory and other errant practices.

19 3. Eichler commenced his scheme to strip Peikin of power in or about mid-2009,

20 shortly after bringing his son Peter Eichler [[[ into the Company. As a first step, in August 2009,

21 Eichler seized control of corporate bank accounts and stripped Peikin of check-signing authority

22 and on-line access to the accounts -- even though Peikin was Chief Financial Officer and Aletheia's

23 bylaws required two signatures on checks over $1,000. Once Peikin was frozen out of Company

24 'accounts, Eichler was free to loot them at will. Eichler also moved to isolate Peikin from corporate

25 affairs, walling him off from information necessary for Peikin to execute his corporate

26 responsibilities.

27 4. The final break came when Peikin objected to Eichler's handling of an ongoing

28 investigation by the United States Securities & Exchange Commission (the "SEC"). In or about

COMPLAINT

0020165/001/478682vOJ

,------------------- - -----

'" ". ',. M, OI. ',. ~", . ~);

• • May 2010, Eichler instructed Aletheia employees to intercept Peikin's mail, e-mail and telephone

2 calls, and to secretly search Peikin's office and image his computer hard drives. Then, in June

3 2010, Eichler stacked the Board with his allies, who voted to terminate Peikin as Executive Vice

4 President, General Counsel and Chief Financial Officer -- positions Peikin held since Aletheia's

5 inception. The coup was now complete. However, in a final attempt to rewrite history, Eichler

6 purged all references to Peikin from the Company website. The newly minted website does not

7 identify Peikin as an Aletheia Director and identifies Eichler as Aletheia's sole "Founder"--

8 eliminating the former reference to Peikin as Aletheia's "Co-Founder."

9 5. By hijacking control of Aletheia's Board and eliminating Peikin from all

10 management decisions, Eichler has successfully rid himself of all internal controls, allowing him

11 free reign to operate Aletheia as his personal fiefdom -- regardless of the interests of Aletheia's

12 clients and shareholders. Eichler -- who has a history of flouting agreements and government

13 regulations with equal abandon -- is now free to squander corporate assets, loot the company for his

14 own self aggrandizement, and trample on the interests of shareholders and clients alike.

15 6. Based on these facts and those alleged below, Peikin -- who remains a Director and

16 still holds 28% of Aletheia's outstanding voting shares -- seeks to recover monetary damages from

17 Aletheia, Eichler and Board members Patricia Barnes ("Barnes") and Bruce Lee ("Lee") for,

18 among other things, wrongful termination in violation of public policy, breach of fiduciary duty,

19 breach of contract, intentional and negligent infliction of emotional distress and accounting. A

20 shareholder's derivative complaint presented to the Aletheia Board concurrently with the filing of

21 this Complaint, also seeks Board intervention to stop Eichler from looting Company, restore sums

22 squandered for Eichler's personal benefit and compel the payment of distributions to Aletheia's

23 much aggrieved minority shareholders.

24 II.

25

THE PARTIES

7. Plaintiff Roger B. Peikin is, and all relevant times was, a resident of the State of

26 California, County of Los Angeles. Peikin is the co-founder and current Director of Aletheia.

27 Between January 1,1998 and June 2010, Peiken served as Aletheia's Executive Vice President,

28

2 COMPLAINT

0020165/001/478682v03

.', ", ", . . " ~~. '., ,', ~);

• • General Counsel, Chief Financial Officer, Secretary, Chief Compliance Officer and Head of

2 Human Resources,

3 8, Plaintiff the Roger B. Peikin 2002 Revocable Trust UTD 10-1-02 (the "Trust") is,

4 and at all relevant times was, an inter vivos trust organized and existing under the laws of the State

5 of California, The Trust holds approximately 28% of Aletheia's outstanding voting shares, Peikin

6 is the trustee of the Trust.

7 9, Defendant Aletheia Research & Management, Inc, is, and at all relevant times was,

8 a corporation organized and existing under the laws of the State of California, with its principal

9 place of business in Santa Monica, California,

10

II

12

13

14

IS

16

17

18

19

20

21

22

23

24

25

26

27

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10, Defendant Peter J, Eichler, Jr. is and at all relevant times was, a resident of the State

of California, County of Los Angeles, Eichler is a co-founder of Aletheia and is currently its

Chainnan, President, Chief Exec,utive Officer and majority shareholder. Eichler presently holds

approximately 53% of Aletheia's outstanding voting shares,

II, Defendant Patricia Barnes is, and at all relevant times was, a resident of the State of

California, County of Los Angeles, Barnes is, and at all relevant times was, a member of

Aletheia's Board of Directors, and a minority shareholder in the Company,

12, Plaintiffs are infonned and believe, and based thereon allege, that Defendant Bruce

Lee is, and at all relevant times was, a resident of the State of Illinois, Since on or about June 16,

2010, Lee purports to be a member of Aletheia's Board of Directors,

13, Plaintiffs are ignorant of the true names and capacities of the other defendants sued

herein as DOES I through 30, inclusive, and, therefore, sue these defendants by such fictitious

names pursuant to California Code of Civil Procedure Section 474, Plaintiffs will seek leave to

amend this complaint to allege the true names and capacities of such DOES I through 30,

inclusive, when ascertained, All references herein to the named Defendant or defendants, or any of

them, include the defendants named herein as Does,

14, Plaintiffs are infonned and believe, and based thereon allege, that except as

otherwise alleged, each defendant referred to herein, including DOES I through 30, inclusive, is

and at all times material herein was the agent, servant, employee, partner, joint venturer, subsidiary

3 COMPLAINT

00201651001/ 478682vO)

'" '" '" " . ... "~I'

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• • or affiliate of each of the other defendants and, in doing the things alleged herein, was acting within

2 the course and scope of such position with the permission, knowledge and consent of each of the

3 other defendants, and that the other defendants directed and ordered the action beforehand, or

4 alternatively, subsequently ratified and approved the conduct of the other defendants.

5 III. GENERAL ALLEGATIONS

6 A. Aletheia's Organization and Corporate Structure.

7 IS. In 1997, Eichler approached Peikin, his longtime lawyer, with the concept for an

8 investment advisory finn to manage assets for institutional investors and wealthy individuals, The

9 parties contemplated that that Eichler would contribute his skills as an investor and money

10 manager, while Peikin would be responsible for all aspects of the Company's business operations.

11 Peikin agreed to abandon his law practice and join Eichler in the new venture. Accordingly, on or

12 about January I, 1998, Eichler and Peikin opened Aletheia's doors for business. Eichler and Peikin

13 capitalized the fledgling Company with $1,000 in seed money. Today, Aletheia has approximately

14 $8 billion in assets under management.

15

16

17

18

19

20

21

22

23

24

25

26

27

28

16. From the outset, Eichler was Aletheia's majority shareholder, with approximately

53% of the outstanding Series A voting shares of Aletheia common stock, or 40% of the equity on

a fully diluted basis. Peikin is the next largest shareholder, with approximately 28% of Aletheia's

Series A voting shares of Aletheia's common stock, or 26% of the equity on a fully diluted basis.

B. The Friction Caused bv Eichler's Unorthodox Management Style.

17. Eichler's management style has been, to put it mildly, unconventional.

Domineering and controlling, Eichler rules Aletheia with an iron fist. Over the years, Eichler's

despotic rule has generated considerable unhappiness not only in Aletheia's ranks, but among

Aletheia clients, Eichler's behavior has resulted in numerous defections by statTmembers who

have simply withered under Eichler's relentless assaults. Eichler's brash and ruthless manner has

also led to the loss of institutional investors, and millions of dollars in assets under management.

Throughout their relationship, Peikin has attempted to act as a buffer between the mercurial Eichler

and Aletheia staff and clients. Eichler's pathological disdain for any internal or external

interference or control has led to a series of confrontations between Peikin and Eichler, culminating

4 COMPLAINT

0020165/001/478682v03

".

• • in Peikin's July 2010 ouster. Among other things, Peikin and Eichler have clashed over Eichler's

2 trading practices, general disregard for regulatory controls, wanton expenditure of corporate assets

3 for Eichler's personal benetit, and overall neglect of the business side of Aletheia's operations.

4 18. As explained below, as Eichler's ego grew with Aletheia's success, the friction

5 between the increasingly tyrmmical Eichler and Peikin escalated, culminating in Peikin's June 2010

6 ouster from the Company.

7

8 19.

1. Eichler's Objectionable Trading Practices

Eichler's rogue business practices were a source of simmering conflict. These

9 practices included the manipulation of client accounts through the late allocation of trades, the

10 "busting" of unfavorable trades and the re-allocation of under performing securities to Aletheia's

II broker-dealer errors account. The aforementioned trade practices were effectuated by Bames, who

12 performed trades at Eichler's direction and also served as the Chief Compliance Officer for

13 Aletheia's broker dealer. Also, even though Aletheia's compliance manual, which govemed the

14 personal trading of all Company employees, prohibited employees from using their Aletheia

15 accounts for anything other than Aletheia products, Eichler ignored this prohibition and utilized his

16 personal account to trade millions of dollars in securities.

17 20. Eichler's foray into exotic foreign exchange currency options triggered open warfare

18 between Eichler and Peikin. In or about May 2008, Eichler transferred at least $500,000 from

19 client accounts to Bank of American for the purchase of one year Chinese yuan option contracts.

20 Although client funds paid for the contracts, the securities were issued in Aletheia's name and were

21 held in Bank of America accounts for Aletheia's benefit. Accordingly, the options did not appear

22 on client account statements. In other words, clients paid for securities that were owned by

23 Aletheia. Needless to say, this practice was not likely to withstand regulatory scrutiny. Although

24 Peikin vociferously objected to what he deemed a prohibited co-mingling of client and Aletheia

25 funds, he was rebuffed by Eichler who proceeded with the transactions and wamed Peikin to do

1<", 26 what he was told. ' .. !\),

01. 27 ',. ," G);

28

5 COMPLAINT

0020165/001/ 478682v03

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~);

• • 2. Eichler's Refusal to Adequately Staff Aletheia

2 2l. Another longstanding dispute between Eichler and Peikin arose from Eichler's

3 refusal to employ adequate staff. In a misplaced effort to consolidate his control, Eichler

4 maintained a stranglehold over Aletheia's hiring, rebuffing all efforts by Peikin to adequately staff

5 Aletheia's legal, accounting and compliance departments. By tightly controlling hiring, Eichler has

6 built a staff of sycophants unwilling or unable to challenge Eichler's authority. Eichler has openly

7 admitted his paranoia over employing that any person would report and owe allegiance to Peikin,

8 rather than Eichler.

9 22. As a result, chronic understatling crippled Peikin's ability to effectively manage

10 Aletheia's legal, accounting and compliance departments. Financial statements and tax retums

11 were frequently late. The shortage of staff also impeded Peikin's efforts as General Counsel to

12 implement effective intemal controls and monitor the Company's compliance with state and federal

13 re!,'Ulations -- even assuming thaI Eichler would ever submit to such controls. This has created

14 signi ficant public relations and regulatory problems, culminating in the SEC investigation which

15 precipitated the final showdown between Eichler and Peikin.

16

17 23.

3. Eichler's Looting of Corporate Assets for His Personal Benefit

Eichler's use of Aletheia as his personal piggybank has been another bone of

18 contention between Eichler and Peikin. Despite the Company's spectacular financial success,

19 Eichler has refused to pay distributions to Aletheia's shareholders, preferring instead to plunder

20 Aletheia's coffers for his own personal benefit.

21

22

23

24

25

26

27

28

24. In addition to paying himself millions in compensation, Eichler helps himself to a

vast array of perks including gifts, travel and accommodations for Eichler, his family members and

friends. Corporate funds pay for lavish family vacations which include the use of private jets

expensive hotel suites ranging from $10,000 to $18,000 per night. Expensive European trips are

disguised as business travel when, in fact, the cost of travel far exceeds the revenue generated by

any client Eichler is purporting to visit. The Company also pays salary and benefits for Eichler's

personal driver, and is the source of hundreds of thousands of dollars used to promote Eichler's

6 COMPLAINT

002016510011 478682v03

"'" .,. ' .. ~,,) , OJ. ',. ~" , 01:

• • image on the charity circuit. There is no business justification for these extravagant expenditures,

2 which cost Aletheia and its shareholders millions of dollars a year.

3 25. In another striking example of corporate waste, Eichler spent approximately $7 .

4 million to renovate Aletheia's leased office space. Tenant improvements on the leased space cost

5 an astounding $600 per square foot. As Chief Financial Officer, Peikin was not consulted on the

6 budget or the wisdom of the expenditures. When Peikin protested the escalating costs of the

7 installation, he was simply ignored.

8 26. Eichler's friends and family members also feed at the trough. Some have been hired

9 to work at Aletheia at high compensation levels completely out of proportion to the work they

10 allegedly perform. For instance, Eichler friend Betsy Sanders ("Sanders") is paid an annual salary

11 of approximate $400,000 to serve as Aletheia's "Director of Research." In fact, Sanders is semi-

12 retired, is not an Aletheia employee, and has visited Aletheia's offices only five or six times over

13 past ti ve years.

14 27. In September 2009, Eichler caused Aletheia to form Aletheia Real Property, LLC

15 CARP"), for the ostensible purpose of engaging in real estate investments. Aletheia has never been

16 in the real estate investment business, ARP was formed without the approval of the Aletheia Board,

17 ARP is not licensed with the California Department of Real Estate and ARP has yet to generate any

18 revenue. ARP's expenses are paid entirely by Aletheia.

19 28. Plaintiffs are informed and believe, and based thereon allege, that ARP is not a

20 legitimate business, but a vehicle for Eichler to funnel money from Aletheia to Eichler's family and

21 friends. In this vein, ARP purports to employ John Eichler, Eichler's brother, at base salary of

22 $150,000 per year. John Eichler also received a $50,000 "signing bonus" and a $25,000 Christmas

23 bonus, all within the first year.

24 29. Aletheia funds are also used by ARP to pay a $250,000 annual fee to a well known

25 commercial real estate developer. The developer previously served for no compensation on

26

27

Aletheia's "Board of Advisors", which was hand picked by Eichler. The developer is not an

employee of Aletheia or ARP, and does not work from their offices. The services provided by the

28 developer to ARP remain a mystery.

7 COMPLAINT

0020 I 651()O 1/ 478682v03

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• • c. Eichler's Scheme To Sideline Peikin and Seize Control of Alethcia And

2 Its Assets.

3 1. The Proctor/Aletheia Agreements And Their Breach

4 30. Between its founding and November 3, 2006, Aletheia had a three member Board of

5 Directors, with two Directors constituting a quorum for the transaction of Company business.

6 During this timeframe, Eichler, Peikin and Barnes, a Senior Vice President (who owns

7 approximately 5.6% of Aletheia's Series B non-voting shares) constituted Aletheia's Board.

8 31. On November 3, 2006, Aletheia entered into an agreement with Proctor Investment

9 Managers, LLC ("Proctor), pursuant to which Proctor agreed to act as Aletheia's selling agent in

10 exchange for certain shareholder rights.

II 32. A Stock Purchase Agreement granted Proctor the right to acquire a 10% interest in

.12 the Company through the purchase of stock from Aletheia's individual shareholders. A Side Letter

13 Agreement to the Stock Purchase Agreement (the "SLA") required Aletheia to add an independent

14 director to its Board of Directors (the "Independent Director"). Section 6 of the SLA defines

15 "Independent Director" as "an individual who (i) is a nominee of a shareholder in the Company

16 that owns less than 25% of the aggregate of the then outstanding Series A and Series B shares of

17 the Company and (ii) is not an employee or officer of the Company or a member of the family of

18 an employee or officer of the Company."

19 33. As condition of the closing, the SLA required Aletheia to enter into written

20 employment agreements with key personnel including Eichler, Peikin and Barnes "in form and

21 substance satisfactory to Proctor." The SLA prohibited Aletheia from "mak[ing] any changes in

22 any employment agreement with key personnel" without the prior written consent of the

23 Independent Director.

24

25

26

27

34. The SLA required Aletheia to pay shareholder distributions "on a quarterly basis

proportionate to their equity ownership" in an amount equal to "at. least 45-50% of the pre-tax,

post-bonus pool income after the payment of all quarterly business expenses." The Board was

authorized "to adjust the level of distribution periodically, based upon the internal cash needs of the

28 Company."

8 COMPLAINT

00201651001/478682v03

, .. , .. , ' .. ~,. ". ',. ~" " ~);

• • 35. . Eichler and Aletheia initially complied with the SLA. On October 4, 2006, the

2 Company executed a written employment agreement pursuant to which Aletheia would continue to

3 employ Peikin as Aletheia's Executive Vice President, Chief Financial Officer, and General

4 Counsel "for the shorter of the period commencing on [October 6,2006] and ending December 31,

5 2011, or for so long as Proctor Investment Managers continues to be an equity owner of the

6 Company" (the "Employment Agreement"). The Employment Agreement was not intended to, and

7 did not, supersede the implied agreement for continued employment between Peikin and Aletheia,

8 but was intended solely to assure Proctor that Peikin would remain at Aletheia at least through

9 December 31, 20 II, or as long as Proctor retained its equity interest in Aletheia. A true and correct

10 copy of the Employment Agreement is attached and incorporated as Exhibit A hereto.

I I 36. On November 3, 2006, the Board approved a resolution increasing the number of

12 Board members from three to four to accommodate the appointment of Independent Director.

13 Proctor nominated James C. Coley II ("Coley") as the Independent Director and the nomination

14 was approved by the Board.

15

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22

23

24

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26

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37. Also, in compliance with the SLA, the Company paid three distributions to

shareholders during 2007 -- the first (and last) distributions in the Company's history.

38. Eichler's compliance with the SLA was extremely short lived. In or about

November 2007, the Independent Director nominated by Proctor resigned. The SLA expressly

provides that the replacement for an Independent Director "shall be designated by the shareholder

who (or who's (sic) affiliate) first designated such former Independent Director." Since Proctor

designated Coley, Proctor was to designate his replacement. On November 5, 2007, Proctor

nominated Mona Aboelnaga, Proctor's.Chief Executive Officer, as the Independent Director.

Eichler rejected Proctor's nominee and refused to take any action to replace Coley with another

Independent Director, even though the SLA provides that "[t]he Company shall use its best efforts,

consistent with its fiduciary duties, to cause and maintain the election of the Independent Director

to the Board of Directors and shall take such action as is reasonably necessary pursuant to this

Section 6 in connection therewith (including voting in favor of an Independent Director in

28 connection with any election of directors.)."

9 COMPLAINT

0020165/001/478682v03

r------------------------------ ---

• • 39. Once he was rid of an Independent Director, Eichler ceased distributions, preferring

2 to use Company revenues to support his lavish personal lifestyle. Since 2007, not a single cent has

3 been distributed to Aletheia shareholders, even though quarterly distributions are mandated by the

4 SLA. Eichler has vowed that Aletheia will not pay any distributions while Proctor retains its equity

5 interest in the Company.

6

7 40.

2. Eichler Orchestrates Peikin's Ouster

In or about May 2009, Eichler brought his twenty-three year old son, Peter Eichler

8 Ill, into the business. Plaintiffs are informed and believe, and based thereon allege, that at or about

9 this time, Eichler decided to oust Peikin and hijack Aletheia for the benefit of Eichler and his son.

10 41. As a first step, in or about August 2009, Eichler seized control of Aletheia's

II corporate accounts, and with Bames assistance, transferred them to a new bank. Peikin, Aletheia's

12 Chief Financial Officer, was stripped of his signing authority and denied on-line access to account

13 information. Although Aletheia's bylaws required two signatures for any expenditure over $1,000,

14 Eichler was now the only person with check signing authority over Aletheia's accounts. In this

15 manner, Eichler eliminated any meaningful oversight of his personal use of corporate funds.

16 42. The final straw in the troubled Eichler/Peikin relationship, was an SEC investigation

17 launched in or about January 2009. Eichler first insisted that Company counsel also represent

18 Eichler and Peikin. When conflicts became manifest, Eichler retained O'Melveny & Meyers as his

19 personal counsel in the SEC matter. Eichler insisted that Peikin agree to be represented by

20 O'Melveny. Peikin refused and retained independent counsel to represent him in the SEC matter.

21 O'Melveny then unilaterally abandoned Peikin in a civil action brought against the Company,

22 Eichler and Peikin by a former Director, Joe Boskovich; again forcing Peikin to retain his own

23 counsel. Notwithstanding a written indemnification agreement, Aletheia has refused to indemnify

24 Peikin in the SEC action, or advance legal fees and costs incurred by Peikin in defense of the SEC

25 investigation and Boskovich litigation.

26 43. Plaintiffs are also informed and believe, and based thereon allege, that beginning in

27 March 2010, Eichler worked with O'Me1veny to engineer a pretext for Peikin's ouster from the

28 Company. Hence, in the Spring of2010, Eichler and O'Melveny began to freeze Peikin out of

10 COMPLAINT

002016510011 478682v03

I"', ~.I , , . • 1. ". '" ". ~!I );

• • Company affairs. First, Eichler shifted all of Aletheia's day-to-day legal work from Peikin (who

2 remained General Counsel) to O'Melveny. Peikin was kept in the dark on existence and scope of

3 the legal work being handled by O'Melveny, making it virtually impossible for Peikin to carry out

4 his corporate responsibilities. Plaintiffs are informed and believe, and based thereon allege, that as

5 the SEC investigation intensified, O'Melveny and Eichler targeted Peikin as the scapegoat,

6 attempting to shift all blame for Eichler's conduct to Peikin.

7 44. The final confrontation between Peikin and Eichler occurred in or about April 20 I 0,

8 when Peikin discovered that Eichler had transferred $500,000 from Aletheia to Eichler's personal

9 account. A heated exchange ensued. Shortly thereafter, in or about May 2010, Eichler instructed

10 Aletheia employees, chief among them, Barnes, to intercept Peikin's mail (both hardcopy and

11 electronic) and telephone calls and route them to others, both inside and outside of Aletheia, to

12 handle.

13 45. Plaintiff is informed and believes, and base thereon alleges, that Eichler also

14 directed a covert search ofPeikin's office and computers. Plaintiff is informed and believes, and

15 based thereon alleges, that the search was conducted by Aletheia employees including Barnes, at

16 least one O'Melveny lawyer and investigators from Kroll. During the late night search, Peikin's

17 computers were accessed and the hard drives imaged. Information seized from the computers

18 includes Peikin's personal e mails and privileged communications between Peikin and his lawyers.

19 Peikin discovered the search was when he arrived unexpectedly at the office to find his computers

20 dismantled.

21 46. The die was now cast. However, Eichler still needed Board approval to terminate

22 Peikin. Three Directors were required for a quorum. The seat of the Independent Director

23 remained vacant and thus there were only three Directors, Eichler, Barnes and Peikin. As Peikin

24 was hardly likely to vote for his own ouster, Eichler needed a fourth, friendly Director to ensure a

25 quorum. Thus, on or about June 15,2010 -- 2 V, years after Coley's resignation -- Eichler

26 abandoned all pretense of complying with the SLA and purported to elect his college roommate

27 and longtime personal friend, Bruce Lee ("Lee"), as Aletheia's Independent Director.

28

11 COMPLAINT

0020165/001/478682v03

'" r'" ''''" I'! ~, ~:),

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• • 47. At Eichler's direction, Lee was nominated by nominal shareholder Betsy Sanders--

2 not Proctor as required by Section 6 of the SLA. Moreover, the appointment was made without a

3 meeting of Aletheia's shareholders, even though Aletheia's Bylaws require shareholder approval,

4 for the appointment of a Director. Plaintiffs are informed and believe, and based thereon allege,

5 that Eichler orchestrated Lee's appointment to the Board in order to facilitate Plaintiffs removal as

6 Chief Financial Officer, Vice-President and General Counsel -- positions Plaintiff held since

7 Aletheia's birth in 1997.

8 48. One day after purporting to appoint Lee to the Board, Eichler noticed an emergency

9 meeting of the Board for June 18,2010. This was the one and only Board meeting in Aletheia's

10 thirteen year history. At the meeting, Eichler proposed Peikin' s termination as Chief Financial

11 Officer. Not surprisingly, Eichler, Barnes and Lee voted in favor of the termination. The Board

12 provided no explanation for Peikin's termination as Chief Financial Officer. The improperly

13 constituted Board also lacked the written consent of an Independent Director appointed by Proctor

14 as required by the SLA.

15 49. On July 6,2010, the improperly constituted Board suspended Peikin with nominal

16 pay and stripped Peikin of his titles as Executive Vice-President, Corporate Secretary and General

17 Counsel -- positions Peikin held since Aletheia's formation. Again, the Board provided no

18 explanation for the suspension and purported termination. Furthermore, the termination was not

19 approved in writing by an Independent Director appointed by Proctor as required by the SLA.

20 50. On or about October 14,2010, without explanation, Aletheia ceased all payments to

21 Peikin. Peikin has also learned that his benefits, including medical and life insurance, were

22 summarily cancelled by Aletheia, without notification to Peikin. To add insult to injury, Aletheia

23 has revised its website to eliminate all mention of Peikin, misrepresenting that Eichler was

24 Aletheia's sole founder.

25 51. In sum, as a consequence of Plaintiffs' conduct, as described herein above, Peikin

26 has now been divested of all financial benefit from his equity interest in, and contributions to,

27 Aletheia -- leaving him with no salary, bonuses or other compensation, no benefits and no

28 distributions from his stock, and not even attribution for co-founding the company Eichler

12 COMPLAINT

0020165/0011 478682vO)

• • hijacked. True to his pattern, Eichler will likely find a way to bleed the Company, transfer its

2 accounts and assets to a new entity -- thereby depriving Plaintiff of any benefit for his 28% interest

3 in. and thirteen years of dedicated service to, Aletheia.

4

5

6

7 52.

FIRST CAUSE OF ACTION

(For Breach of Fiduciary Duty)

(Against All Defendants)

Plaintiffs repeat and reallege paragraphs 1 through 51 of this Complaint and

8 incorporate the same by reference as if fully set forth herein.

9 53. Aletheia, Eichler, Barnes and Lee owe a fiduciary duty to Aletheia's minority

10 shareholders, including Plaintiffs. Defendants therefore had the obligations of trustees and at all

II times were obligated to be truthful to Plaintiffs, to account to Plaintiffs in an accurate manner, to

12 refrain from secretly profiting at the expense of Plaintiffs, to avoid misappropriating Plaintiffs'

13 assets and opportunities, to avoid self dealing, and to refrain from any activity which might injure

14 or have the potential to injure Plaintiffs.

15 54. As a Director and officer and the majority shareholder of Aletheia, Eichler breached

16 his fiduciary duties to Plaintiffs by, among other things,

17 a. improperly stacking Aletheia's Board to force Peikin's ouster from the

18 Company;

19 b. purporting to appoint Lee to the Board in violation of the SLA, for the purpose

20 of facilitating Peikin termination;

21 c. causing Peikin's tennination in violation of public policy and his written

22 Employment Agreement;

23

24

25 records;

26

d. withholding information regarding corporate affairs from Peikin;

e. denying Peikin access to corporate books and records, including financial

f. squandering corporate funds for his personal benefit, thereby depleting

27 Aletheia's ability to make distributions to Plaintiffs;

28

13 COMPLAINT

0020165100 Ii 478682v03

'" , .. '" ". ~).

~;: ~);

• • g. using his control and authority to freeze Peikin out of the Company and the

2 Company's corporate affairs; and

3 h. using his majority position to effectively divest Plaintiffs of all benefit of their

4 28% equity interest.

5 55. Aletheia and members of its Board breached their fiduciary duty to Plaintiffs by,

6 among other things:

7 a. abandoning all responsibility for the welfare of the corporation and its minority

8 shareholders;

9 b. check Eichler's decisions to place his interests before those of the corporation

10 and its shareholders;

1 1 c. sanctioning Eichler's improperly stacking Aletheia's Board to force Peikin's

12 ouster from the Company;

13 d. failing to exercise independent judgment and voting in lockstep with Eichler

14 regardless of the best interests of the corporation or its shareholders;

15 e. permitting Eichler to take action without Board approval, where Board approval

16 is required by the Company's bylaws;

17 f. sanctioning the appointment of Lee to the Board in violation of the SLA, for the

18 purpose offacilitating Peikin' s termination;

19 g. voting for Peikin's termination in violation of public policy and his written

20 Employment Agreement;

21 h. permitting Eichler to squander corporate funds for his personal benefit, thereby

22 depleting Aletheia's ability to make distributions to Peikin;

23 i. permitting Eichler to use his control and authority to freeze Peikin out of the

24 Company and the Company's corporate affairs; and

25 J. permitting Eichler to use his majority position to divest and deprive Peikin of all

26 benefit of his 28% equity interest.

27 56. As a proximate result of the breaches of fiduciary duty by Defendants as herein

28 alleged, Plaintiffs have been damaged in an amount to be proven at the time of trial.

14 COMPLAINT

0020165/0011 478682v03

• • 57. In doing the things herein alleged, Defendants acted with malice, oppression or

2 fraud in conscious disregard of Plaintiffs' rights, thereby entitling Plaintiffs to an award of

3 exemplary and punitive damages in an amount appropriate to punish Defendants and deter others

4 from engaging in similar misconduct.

5 SECOND CAUSE OF ACTION

6 (For Wrongful Termination in Violation of Public Policy)

7 (Against All Defendants)

8 58. Plaintiffs repeat and reallege paragraphs I through 57 of this Complaint and

9 incorporate the same by reference as if fully set forth herein.

10 59. From on or about January I, 1998 to on or about June 18, 2010, Peikin was

11 employed by Aletheia as its Executive Vice President, General Counsel and Chief Financial

12 Officer.

13 60. Public policy requires corporations to abide by prevailing laws and regulations, act

14 in the best interests of the corporation and its shareholders, avoid placing the interests of one

15 shareholder over those of others, and at all times conduct corporate affairs in an honest, ethical and

16 transparent manner.

17 61. On June 18,2010, Aletheia's improperly constituted Board purported to terminate

18 Peikin as Aletheia's Chief Financial Officer. On July 6,2010, the improperly constituted Board

19 suspended Peikin with pay as Executive Vice-President, Corporate Secretary and General Counsel.

20 On or about October 15, 2010, Aletheia purported to tenninate Peikin as its Executive Vice

21 President, Corporate Secretary and General Counsel.

22 62. Defendants tenninated Peikin in retaliation for, among other things, (i) his

23 disclosure to SEC counsel of certain improper transactions in Aletheia client accounts, including

24 the co-mingling of funds; (ii) Peikin's objection to the dual representation of Eichler and Aletheia

25 by Eichler's personal counsel in connection with the SEC investigation and other civil litigation; I,,", fl'" 26 ' .. M.

(iii) Peikin's refusal to waive inherent conflicts and agree to be represented by counsel for Aletheia 0>. ',. 27 i"r, and/or Eichler; (iv) objecting to Eichler's waste of corporate funds for his personal benefit efforts I~P;

28 to disguise personal expenses as corporate expenses; (v) Eichler's draining of corporate accounts to

15 COMPLAINT

00201651001/478682,03

f·', ". 'r , . "'. ' .. ," ~);

• • avoid paying distributions to minority shareholders, and (v) Eichler's appointment of an

2 Independent Director to the Board in violation of the SLA and Aletheia's bylaws.

3 63. Defendants' tennination ofPeikin for the reasons set forth above, was wrongful and

4 in violation of public policy. Furthennore, Peikin's termination was invalid as it was not approved

5 by a properly constituted quorum and was not approved in writing by an Independent Director

6 appointed by Proctor, as required by the SLA.

7 64. In doing the acts set forth above, Defendants knew that their conduct violated the

8 rules and regulations applicable to investment advisor finns, and principles of corporate

9 govemance. Defendants nonetheless required Peikin to chose between violating said rules and

10 regulations, or losing his job.

I I 65. As a proximate result of Defendants' conduct, Plaintiff has suffered harm, including

12 lost eamings and other employment benefits, humiliation, embarrassment and mental anguish all to

13 his damage in an amount to be proven at trial.

14 66. In doing the things herein alleged, Defendants acted with malice, oppression or

15 fraud in conscious disregard ofPeikin's rights, thereby entitling Peikin to an award of exemplary

16 and punitive damages in an amount appropriate to punish Defendants and deter others from

17 engaging in similar misconduct.

18

19

20

21

22

23

24

25

26

27

THIRD CAUSE OF ACTION

(For Breach of Written Employment Agreement)

(Against Aletheia)

67. Plaintiffs repeat and reallege paragraphs I through 66 of this Complaint and

incorporate the same by reference as if fully set forth herein.

68. On or about October 4, 2006, Peikin and Aletheia entered into a written

Employment Agreement pursuant to which Aletheia agreed to employ Peikin as its Executive Vice

President, Chief Financial Officer and General Counsel for as long as Proctor continued to hold an

equity stake in Aletheia or December 31,2011, whichever came first. In exchange for Aletheia's

promise to employ Peikin, Peikin agreed to provide the stated services to Aletheia, for the

28 designated period of time.

16 COMPLAINT

0020165/001/478682vO)

~ .. , ". ',. "I, \II, ',. ". In;

• • 69. Peikin at all times fulfilled his duties and conditions of employment and has been

2 ready, willing and able to continue to perform them in a competent and satisfactory manner.

3 70. Notwithstanding Aletheia's express promise not to terminate Peikin prior to

4 December 3,2011, on or about June 18,2010, Aletheia summarily terminated Peikin as Aletheia's

5 Chief Financial Officer. On or about July 6,2010, Aletheia purported to suspend Peikin as

6 Aletheia's Vice-President and General Counsel. On or about October 14, 2010, Aletheia purported

7 to terminate Peikin as its Vice President and General Counsel.

8 71. As a result of Aletheia's breach of the Employment Agreement, Plaintiff has

9 suffered damages in an amount to be proven at trial.

10

11

12

13 72.

FOURTH CAUSE OF ACTION

(For Breach of Implied Agreement)

(Against Aletheia)

Plaintiffs repeat and reallege paragraphs 1 through 71 of this Complaint and

14 incorporate the same by reference as if fully set forth herein.

15 73. For over twelve years, from on or about January 1, 1998 to on or about June 18,

16 2010, Plaintiff was employed by Aletheia as its Executive Vice President, General Counsel and

17 Chief Financial Officer. Plaintiff, who owns 28% of Aletheia's outstanding shares and is a

18 member of Aletheia's Board, was assured on repeated occasions that he would not be terminated

19 arbitrarily, and that he would continue to be employed by the Company. Indeed, Eichler frequently

20 repeated to Peikin that he and Peikin were "lifers, in this together until the end."

21 74. By their conduct over a twelve year period, Aletheia and Peikin entered into an

22 implied contract that Peikin would not be discharged without good cause, even subsequent to the

23 expiration of the Employment Agreement.

24 75. Plaintiff at all times fulfilled his duties and conditions of employment and has been

25 ready, willing and able to continue performing tern in a competent and satisfactory manner.

26 76. Notwithstanding the implied promise to tenninate the employment only for good

27 cause, on or about June 18, 2010, Aletheia summarily terminated Peikin as Aletheia's Chief

28 FinancialOfticer. On or about July 6,2010, Peikin was suspended as Aletheia's Executive Vice-

17 COMPLAINT

0020165/001/47K682v03

• • President and General Counsel. On or about October 14, 2010, Aletheia purported to tenninate

2 Peikin as its Vice President and General Counsel. To date, the Company has not stated any cause

3 for Peikin's termination, or even specified whether Peikin was being tenninated with or without

4 cause:

5 77. As a proximate result of Defendant's breach of the employment agreement, Plaintiff

6 suffered and continues to suffer losses in earnings and other employment benefits to his damage in

7 an amount to be proven at trial.

8

9

10

11 78.

FIFTH CAUSE OF ACTION

(For Breach of the Implied Covenant of Good Faith and Fair Dealing)

(Against Aletheia)

Plaintiffs repeat and reallege paragraphs 1 through 77 of this Complaint and

12 incorporate the same by reference as if fully set forthherein.

13 79. Peikin's written and implied employment agreements, contained an implied

14 covenant of good faith and fair dealing, which obligated Defendants to perfonn the tenns and

15 conditions of the agreements fairly and in good faith and to refrain from doing any act that would

16 prevent or impede Peikin from perfonning an or all of the conditions of the contract that he agreed

17 to perfonn, or any act that would deprive Peikin of the benefits of the contract.

18 80. Defendants breached the implied covenant of good faith and fair dealing by, among

19 other things, (i) tenninating Plaintiff in violation of pub lie policy; (ii)discharging Plaintiff without

20 good cause and in violation of the implied agreement for continued employment and the express

21 tem1S of the written Employment Agreement; (iii) utilizing an improperly constituted Board to

22 approve Plaintiffs tcrmination; and (iv) depriving Plaintiff of the benefits of his employment.

23 81. As a result of Aletheia' s breach of the covenants of good faith and fair dealing

24 implied in his employment agreements, Plaintiff has suffered damages in an amount to be proven at

25 trial.

26

27

28

18 COMPLAINT

00201651001/478682v03

2

3

4 82.

• • SIXTH CAUSE OF ACTION

(Invasion of Privacy)

(Against All Defendants)

Plaintiffs repeat and reallege paragraphs 1 through 81 of this Complaint and

5 incorporate the same by reference as if fully set forth herein.

6 83. Peikin is informed and believes, and based thereon alleges, that on or about May

7 2010, Defendants, without Peikin's consent, invaded Peikin's privacy by conducting a covert

8 search ofPeikin's office, including Peikin's desk and files. Peikin is further informed and believes,

9 and based thereon alleges, that during the searches, Aletheia employees accessed Peikin's

10 computers, and reviewed and/or copied all electronic data, including e mails and other privileged

11 communications between Peikin and his lawyers. Eichler also instructed Aletheia employees to

12 intercept Peikin's mail (both hardcopy and electronic) and telephone calls and route them to others,

13 both inside and outside of Aletheia, to handle.

14 84. Peikin had a reasonable expectation of privacy in his office, files, mail, email and

15 information stored on his computers. At no time did Peikin consent to the searches, where were

16 conducted in secret, after business hours, by lawyers and investigators hired by Eichler.

17 85. The intrusion was offensive and objectionable to Peikin and to a reasonable person

18 of ordinary sensibilities.

19 86. As a proximate result of Defendants' conduct, Peikin suffered humiliation,

20 embarrassment, mental anguish and suffering, all to his general damage in an amount to be proven

21 at trial.

22 87. As a further proximate result of Defendants' conduct, Plaintiff suffered special

23 damages in an amount to be proven at trial.

24 88. In doing the things herein alleged, Defendants acted with malice, oppression or

25 fraud in conscious disregard of Peikin's rights, thereby entitling Peikin to an award of exemplary

26 and punitive damages in an amount appropriate to punish Defendants and deter others from

27 engaging in similar misconduct.

28

19 COMPLAINT

0020165/001/ 478682v03

". ". '\. I',), .t, ' .. ~"~ . il:

• • SEVENTH CAUSE OF ACTION

2 (For Intentional and Negligent Infliction of Emotional Distress)

3 (Against All Defendants)

4 89. Plaintiffs repeat and reallege paragraphs I through 88 of this Complaint and

5 incorporate the same by reference as if fully set forth herein.

6 90. Between on or about January I, 1998 and June 18,2010, plaintiff was an Aletheia

7 officer, director, employee and minority shareholders. As such, Peikin and Defendants shared a

8 special relationship. Nevertheless, as described hereinabove, Defendants engaged in extreme and

9 outrageous conduct directed at Peikin. Said conduct was so outrageous in character and so extreme

lOin degree as to go beyond all possible bounds of decency and to be regarded as atrocious and

i 1 utterly intolerable in a civilized community.

12 91. Eichler's conduct was intentional and malicious and done for the purpose of causing

13 Peikin to suffer humiliation, mental anguish and emotion and physical distress. The Director

14 Defendants' conduct in confirming and ratifying that conduct was done with knowledge that

IS Peikin's emotional and physical distress would thereby increase, and was done with a wanton and

16 reckless disregard of the consequences to Plaintiff.

17 92. As a proximate result of the acts alleged above, Peikin suffered humiliation, mental

18 anguish and emotional and physical distress, and has been injured in mind and body, all to Peikin' s

19 damage.

20 93. By reason of the acts alleged above, Peikin was prevented from attending to his

21 usual occupation and thereby lost earnings.' Peikinis informed and believes and based thereon

22 alleges that Plainti ff will thereby be prevented from attending to his usual occupation for a period

23 of time in the future which Peikin cannot ascertain, and will thereby sustain further loss of

24 eammgs.

25 94. The acts of Defendants as alleged above were willful, wanton, malicious and

26 oppressive and justify the award of exemplary and punitive damages.

27

28

20 COMPLAINT

0020 1 65/00 1/478682v03

• • EIGHTH CAUSE OF ACTION

2 (For Accounting)

3 (Against Aletheia)

4 95. Plaintiffrepeats and realleges parab'faphs I through 94 of this Complaint and

5 incorporate the same by reference as if fully set forth herein.

6 96. Plaintiffs hold 28% of Aletheia's outstanding Class A shares. As Aletheia

7 shareholders, Plaintiffs are entitled to access to corporate books and records, in order to ascertain

8 the value of Aletheia's assets and liabilities. In particular, Plaintiffs are entitled to an accounting to

9 ascertain sums being paid to, and for the benefit of, the majority shareholder. Absent an

10 accounting, Plaintiffs are unable to obtain the financial information necessary to detennine whether

II distributions have made to other shareholders and/or whether the majority shareholder is

12 misappropriating corporate assets for his own personal benefit or committing corporate waste.

13 97. Plaintiffs have demanded an accounting from Defendants; however, Defendants

14 have refused to provide an accounting or permit Plaintiffs access to Aletheia's financial books and

15 records.

16 PRAYER FOR RELIEF

17 WHEREFORE, Plaintiffs pray for judgment against Defendants and Does 1 through 30,

18 inclusive, and each of them, as follows:

19 ON THE FIRST CAUSE OF ACTION:

20 1. For damages according to proof; and

21 2. For exemplary and punitive damages.

22 ON THE SECOND CAUSE OF ACTION:

23 1. For damages according to proof; and

24 2. For exemplary and punitive damages.

25 ON THE THIRD CAUSE OF ACTION:

26

27

28

I. For damages according to proof.

ON THE FOURTH CAUSE OF ACTION:

1. For damages according to proof;.

21 COMPLAINT

0020165/001/478682v03

". ". ' .. '" ~ < t,o ~.

'" , .. ~i;

• • ON THE FIFTH CAUSE OF ACTION:

2 I. For damages according to proof.

3 ON THE SIXTH CAUSE OF ACTION:

4

5

I.

2.

For general and special damages according to proof; and

For exemplary and punitive damages.

6 ON THE SEVENTH CAUSE OF ACTION:

7 I. For general and special damages according to proof; and

8 2. For exemplary and punitive damages.

9 ON THE EIGHTH CAUSE OF ACTION:

10 I. F or an accounting.

II ON ALL CAUSES OF ACTION:

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

I. For costs of suit herein incurred;

2. For interest on damages recoverable; and

3. For such other and further relief as the Court deems just and proper.

Dated: November 23,2010 LINER GRODE STEIN Y ANKELEVITZ SUNSHINE REGENSTREIF & TAYLOR LLP

00201651001/478682v03

llyn S. Garofalo Attorneys for Plai ROGER B. PEIK ROGER B. PEIKIN, as Trustee or the ROGER B. PEIKIN 2002 REVOCABLE TRUST UTD 10-1-02, a California inter vivos trust

22 COMPLAINT

, .. ~h,

'\" " . ... ',. "'" (II);

• • DEMAND FOR JURY TRIAL

2 Plaintiffs hereby demand trial by jury of all claims and causes of action triable of right

3

4

5

6

7

8

9

10

II

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

before a jury.

Dated: November 23,2010

0020165/001/478682v03

LINER GRODE STEIN Y ANKELEVITZ SUNSHINE REGENSTREIF & TAYLOR LLP

llyn S. Garofalo Attorneys for Plaintiff: ROGER B. PEIKIN' d OGER B. PEIKIN, as Trustee he ROGER B. PEIKIN 2002 REVOCABLE TRUST UTD 10-1-02, a California inter vivos trust

23 COMPLAINT

," ". '., ". ,~. '., '" ~. I):

• •

, .. •.. '., N, OI. ' .. ••• II;

• • EMPLOYMENT AGREEMENT

This Employment Agreement ("Agreement"), dated as of October 4, 2006 (the "Effective Date"), is entered into by and between Aletheia Research and Management, Inc., a California corporation (the "Company"), and Roger B. Peikin a resident of the State of California, (the "Executive").

RECITALS

WHEREAS, The Company is an SEC Registered Investment Advisor;

WHEREAS, The Company desires to continue employment with the Executive, and the Executive desires to continue employment by the Company, upon the terms and subject to the conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants and agreements made herein, the Company and the Executive agree as follows:

1. Employment; Term. The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue to be employed by the Company, for the shorter of the period commencing on the date hereof and ending on December 31,2011, or for so long as Proctor Investment Managers continues to be an equity owner ofthe Company.

2. Position and Duties. The Executive will maintain his role, responsibilities, and title during the Employment Period. He shall remain Executive Vice President, Chief Financial Officer, and General Counsel. The Executive hereby represents and warrants that neither the entry into this Agreement nor the performance of his obligations hereunder will conflict with or result in a breach of the terms, conditions or provisions of any other agreement or obligation of any nature to which the Executive is a party or by which the Executive is bound, including, without limitation, any non-competition agreement or confidentiality agreement entered into by the Executive.

3. Responsibilities. During the Employment Period, the Executive shall perform, faithfully and loyally and to the best of the Executive's abilities, and shall devote the Executive's attention, knowledge and experience and give the Executive's best efforts, skills and abilities to promote the business and interests of the Company and its subsidiaries in a professional manner on a full-time basis.

4. Compensation.

(a) Base Salary. During the Employment Period, the Company shall pay to the Executive a salary of $750,000. ("Base Salary")

(b) Bonus. In addition to the Base Salary, the Executive shall be entitled to a quarterly bonus award payment (the "Bonus"), as determined by the management of the Company.

• • (c) Distributions. Separate and distinct from the compensation referenced

above, Executive shall be entitled to receive quarterly distributions based upon his relative equity ownership of the Company the same as all other shareholders commensurate with their relative ownership of the company. Entitlement to distributions is set forth herein for reference only, and is in no way tied to or conditioned upon Executive's employment with the Company or this Agreement.

(d) Employee Benefits. During the Employment Period, the Executive shall be entitled to participate in all of the Company's employee benefit programs as may be in effect from time to time, including with respect to group insurance programs, profit sharing, and paid vacation.

5. Non-competition; Non-solicitation; Nondisparagement.

(a) General. The Executive and the Company understand and agree that the purpose of the provisions of this Section is to protect the legitimate business interests of the Company and is not intended to eliminate the Executive's post-employment in the Business (as defined in clause (d) below), nor is it intended to impair or infringe upon the Executive's right to work, eam a living, or acquire and possess property from the fruits of his labor.

(b) Covenant. The Executive understands and agrees that the relationship between the Company and its Board of Directors, Officers (as such terms are defined in the Bylaws), employees, agents, brokers, representatives, consultants and customers constitutes a valuable asset of the Company and may not be converted to the Executive's own use. Accordingly, the parties acknowledge and agree that the Executive, during the Employment Period and for a period of twelve (12) months thereafter, shall not, without the prior written consent ofthe Company, directly or indirectly (i) solicit for employment or hire any member of the Board, Shareholder, Officer, employee, consultant or agent of the Company, the Company's affiliates or the Business or otherwise do anything to cause or encourage any member of the Board, Shareholder, Officer, employee, consultant or agent of the Company, the Company's affiliates or the Business to terminate or sever his or her employment or other relationship with the Company, the Company's affiliates or the Business, (ii) contact, soliCit, or otherwise do anything to cause or encourage any Person to terminate, sever or limit its relationship with the Company, the Company's affiliates or the Business or expand or develop its relationship with a competitor of the Company, the Company's affiliates or the Business for the purpose of competing with or proposing to compete with the Company, the Company's affiliates or the Business, or for the purpose of damaging the Company, the Company's affiliates or the Business in any way, (iii) contact or otherwise act in concert with, for purposes of competing, directly or indirectly, or aiding another to compete, directly or indirectly, with the Company, the Company's affiliates or the Business or of damaging the Company, the Company's affiliates or the Business in any way, any Person that became known to the Executive or the Company, or their respective Related Persons (as defined in clause (d) below), by or through the Business or whose name or business was obtained by or from the Company, the Company's affiliates or the Business.

• • (c) Non-Competition

(i) The Executive will not, during the Restricted Period (as defined below), directly or indirectly (whether as an owner, partner, shareholder, agent, officer, director, employee, independent contractor, consultant, or otherwise) own, operate, manage, control, invest in, perform services for, or engage or participate in any manner in, or render services to (alone or in association with any person or entity) or otherwise assist any person or entity that engages in, or owns, invests in, operates, manages or controls any venture or enterprise that engages in, the business of (i) providing investment management services and/or advice to investment funds and/or managed accounts or (ii) investing assets in financial instruments and securities and managing and making investment decisions on behalf of investment funds and/or managed accounts, except that passive investment or ownership shall be permitted.

(ii) The term "Restricted Period" means the period of time from the date of this Agreement until one (I) year after the termination of the Executive's employment relationship with the Company or any successor thereto.

(d) Non-Disparagement. The Executive shall not, during the term of his employment with the Company and for a period of two years thereafter, (i) make any oral or written statement that disparages or places the Company in a false or negative light, (ii) encourage or assist any person who files a lawsuit, charge, claim or complaint against the . Company unless such Executive is required to render such assistance pursuant to a lawful subpoena or other legal obligation or (iii) commit any other action that intentionally and materially injures or hinders the business relationship of the Company or any of their respective employees, officers, directors, members or equity holders.

6. Successors and Assigns. This Agreement will apply to, be binding in all respects upon, and shall inure to the benefit of (a) the Company, its successors and assigns, and any company with which the Company may merge or consolidate or to which the Company may sell substantially all of its assets, and (b) the Executive and the Executive's executors, administrators, heirs and legal representatives. Since the Executive's services are personal and unique in nature, the Executive may not transfer, sell or otherwise assign the Executive's rights, obligations or benefits under this Agreement.

7. Notice. Any notices, consents, waivers, and other communications under this Agreement shall be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by fax (with written confirmation of receipt), or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses or fax numbers set forth below (or to such other address, attention or fax number as a party may designate by notice to the other parties given in accordance with this Section:

If to the Company, to:

Aletheia Research and Management, Inc. 100 Wilshire Blvd., Suite 1960

~ .. , ~ .. , '" ". 'l. \'., )",

!I:

• Santa Monica, CA 90401 Attn: General Counsel

If to the Executive, to:

Aletheia Research and Management, Inc. 100 Wilshire Blvd., Suite 1960 Santa Monica, CA 90401 Attn: Roger B. Peikin

•

(a) Governing Law. This Agreement, and the application or interpretation of this Agreement, shall be governed exclusively by its terms and by the internal laws of the State of California, without giving effect to any conflict of laws provisions of such State.

(b) Jurisdiction and Venue. Each party hereto irrevocably submits to the co­exclusive jurisdiction of the courts of the State of California, County of Los Angeles, and the related federal district court for the Central District of California, for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby.

(c) Waiver. No provision of this Agreement may be waived in any manner except by written agreement. In the event any provision is waived, the balance of the provisions shall nevertheless remain in full force and effect and shall in no way be waived, affected, impaired or otherwise invalidated. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available, whether by contract, at law, in equity or otherwise.

/II

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/II

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• • IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of

the date first written above.

ALETHEIA RESEARCH AND EXECUTIVE

MANAGEMENT, INC.

By: __________________ __ By: ----------------------Peter I. Eichler, Ir Roger B. Peikin. Chairman, President, CEO, CIO Executive VP, CFO, Gen. Counsel

By: __________________ _

Roger B. Peikin Executive VP, CFO, General Counsel

By: ---------------------Patricia Barnes Senior VP

CM·010 ~nORNEY OR PARTY WITHOUT ATTORNEY (Name, Stare Bar number, and address): FOR COURT USE ONL Y

Stuart A. Liner, Esq. (SBN: 137495)

Ellyn S. Garofalo, Esq. (SBN: 158795) FILED Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP ~tmrCOURTOFCALIFORNIA 1100 Glendon Avenue, 14th Floor, Los Angeles, California 90024 YOFLOSANGELES

TELEPHONE NO.' (310) 500-3500 FAX NO.: (310) 500-3501 NOV 23 2010 ATTORNEY FOR (NDme): Plaintiffs

SUPERIOR COURT OF CALIFORNIA, COUNTY OF Los Angeles JOhn~e, Executive Officer/Clerk

STREET ADDRESS: 111 N. Hill Street BY 0

MAILING ADDRESS· r""'3ftaUDya Wesley eputy

CITY AND ZIP CODE: Los Angeles, California 90012 BRANCH NAME: Stanely Mosk Courthouse

CASE NAME: Roger B. Peikin, et al. v. Aletheia Research and Management, Inc., et al.

CIVIL CASE COVER SHEET Complex Case Designation CASE NUMBER:

r8J Unlimited 0 Limited D Counter D Joinder BC4.5nn"~·· (Amount (Amount

v _

demanded demanded is Filed with first appearance by defendant JUDGE: -

exceeds $25,000) $25,000 or less (Cal. Rules of Court, rule 3.402) DEPT:

Items 1-6 below must be completed (see instructions on paqe 2). 1. Check one box below for the case type that best describes this case:

Auto Tort Contract Provisionally Complex Civil litigation

D Auto (22) D Breach of contract/warranty (06) (Cal. Rules of Court, rules 3.400-3.403)

D Uninsured motorist (46) D Rule 3.740 collections (09) D AntitrustlTrade regulation (03)

Other PI/PDIWD (Personallnjury/Property D Other collections (09) D Construction defect (10) DamagelWrongful Death) Tort D Insurance coverage (18) D Mass tort (40) D Asbestos (04) D Other contract (37) D Securities litigation (28)

D Product liability (24) Real Property D Environmentalrroxic tort (30)

D Medical malpractice (45) D Eminent domain/Inverse D Insurance coverage claims arising from the

D Other PIIPD/WD (23) condemnation (14) above listed provisionally complex case

Non-PIIPDIWD (Other) Tort D Wrongful eviction (33) types (41)

D Business tort/unfair business practice (07) D Other real property (26) Enforcement of Judgment

D Civil rights (08) Unlawful Detainer D Enforcement of judgment (20)

D Defamation (13) D Commercial (31) Miscellaneous Civil Complaint

D Fraud (16) D Residential (32) D RICO (27)

D Intellectual property (19) D Drugs (38) D Other complaint (not specified above) (42)

D Professional negligence (25) Judicial Review Miscellaneous Civil Petition

D Other non-PIIPD/WD tort (35) D Asset forfeiture (OS) D Partnership and corporate governance (21)

Employment D Petition re: arbitration award (11) D Other petition (not specified above) (43)

[8J Wrongful termination (36) D Writ of mandate (02)

D Other employment (15) D Other judicial review (39)

2. This case D IS [8J IS not complex under rule 3.400 of the California Rules of Court. If the case IS complex, mark the factors requiring exceptional judicial management: a. D Large number of separately represented parties d. b. 0 Extensive motion practice raising difficult or novel 8.

issues that will be time-consuming to resolve

D Large number of witnesses D Coordination with related actions pending in one or more courts

in other counties, states, or countries, or in a federal court c. D Substantial amount of documentary evidence f. D Substantial post judgment judicial supervision

3. Remedies sought (check all that apply): a. [8J monetary b. D nonmonetary; declaratory or injunctive relief c. D punitive

4. Number of causes of action (specify): 8

5. This case D is [8J is not a class action suit. 6. If there are any known related cases, file and serve a notice of related case. (You may use form CM-DI5.) Date: November 23,2010

Ellyn S. Garofalo, Esq. TYPE OR PRINT NAME 51 NATUR OF PARTY ORNEY FOR PARTY

• Plaintiff must file this cover sheet with the first paper filed in ~h~:~~~n or proceeding (except s/ claims cases or cases filed under the Probate Code, Family Code, or Welfare and Institutions Code). (Cal. Rules of Court, rule 3.220.) Failure to file may result in sanctions.

• File this cover sheet in addition to any cover sheet required by local court rule. • If this case is complex under nule 3.400 et seq. of the California Rules of Court, you must serve a copy of this cover sheet on all

other parties to the action or proceeding. • Unless this is a collections case under rule 3.740 or a complex case, this cover sheet will be used for statistical purposes only.

Form Adopted for Mandalory Use Judicial Council of California CM-{)10 [Rev, July 1. 20071

CIVIL CASE COVER SHEET

Pao10f2

Cal. Rules of Court, rules 2.30, 3.220, 3.400-3.403, 3.740; Cal. Standards of Judicial Administration. std, 3.10

W\o\oW. courlinfo.ca. gOY

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SHORTTITLEo Roger B. Peikin, et al. v. Aletheia Research and Management, Inc., et al.

CASE NUMBER

CIVIL CASE COVER SHEET ADDENDUM AND STATEMENT OF LOCATION CERTIFICATE OF GROUNDS FOR ASSIGNMENT TO COURTHOUSE LOCATION

This form is required pursuant to LASC Local Rule 2.0 in all new civil case filings in the Los Angeles Superior Court.

Item I. Check the types of hearing and fill in the estimated length of hearing expected for this case:

JURY TRIAL? ~ YES. CLASS ACTION? 0 YES LIMITED CASE? 0 YES TIME ESTIMATED FOR TRIAL-1Q... 0 HOURSI ~ DAYS. Item II. Select the correct district and courthouse location (4 steps - If you checked "Limited Case", skip to Item III, Pg. 4):

Step 1: After first completing the Civil Case Cover Sheet Form, find the main civil case cover sheet heading for your case in

the left margin below, and, to the right in Column A, the Civil Case Cover Sheet case type you selected.

Step 2: Check Q!!.!1 Superior Court type of action in Column B below which best describes the nature of this case.

Step 3: In Column C, circle the reason for the court location choice that applies to the type of action you have checked. For any exception to the court location, see Los Angeles Superior Court Local Rule 2.0.

Applicable Reasons for Choosing Courthouse Location (see Column C below)

1. Class Actions must be filed in the County Courthouse, Central District. 2. May be filed in Central (Other county, or no Bodily Injury/Property Damage). 3. Location where cause of action arose.

6. Location of property or permanently garaged vehicle. 7. Location where petitioner resides. 8. Location wherein defendanVrespondent functions wholly.

4. Location where bodily injury, death or damage occurred. 9. Location where one or more of the parties reside. 5. Location where performance required or defendant resides. 10. Location of Labor Commissioner Office.

Step 4 4 I : Fill in the information requested on paqe in tem III; comp ete tem I S d I V. ,iqn the ec aratlon.

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A Civil Case Cover Sheet

Category No.

Auto (22)

Uninsured Motorist (46)

Asbestos (04)

Product Liability (24)

Medical Malpractice (45)

Other Personal Injury

Property Damage Wrongful Death

(23)

Business Tort (07)

Civil Rights (08)

Defamation (13)

Fraud (16)

CIV 109 (Rev. 01/07)

LASC Approved 03-04

B Type of Action

(Check only one)

o A7100 Motor Vehicle· Personal Injury/Property Damagel\Nrongful Death

DA7110 Personal Injury/Property Damagel\Nrongful Death - Uninsured Motorist

o A6070 Asbestos Property Damage

o A7221 Asbestos· PersonallnjuryNJrongful Death

o A7260 Product Liability (not asbestos or toxic/enVironmental)

o A7210 Medical Malpractice - Physicians & Surgeons

o A7240 Other Professional Health Care Malpractice

o A72S0 Premises Liability (e.g., slip and fall)

o A7230 Intentional Bodily Injury/Property DamageNJrongful Death (e.g., assault, vandalism, etc.)

o A7270 Intentional Infliction of Emotional Distress

o A7220 Other Personal Injury/Property Damagel\Nrongful Death

o A6029 Other Commercial/Business Tort (not fraud/breach of contract)

o ABOOS Civil Rights/Discrimination

o A6010 Defamation (slander/libel)

o A6013 Fraud (no contract)

CIVIL CASE COVER SHEET ADDENDUM AND STATEMENT OF LOCATION

C Applicable Reasons·

See Step 3 Above

1 .. 2.,4.

1 .. 2 .. 4.

2.

2.

1., 2 .. 3 . .4 .. 8.

1.,2.,4 .

1 .. 2., 4.

1 .. 2 .. 4.

1 .. 2 .. 4.

1 .. 2 .. 3.

1 .. 2 .. 4.

1 .. 2 .. 3.

1 .. 2 .. 3.

1 .. 2 .. 3.

1 .. 2 .. 3.

LAse, rule 2.0

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SHORT TITLE, Roger B. Peikin, et al. v. Aletheia Research and Management, Inc., et al.

CASE NUMBER

A Civil Case Cover Sheet Category No.

Professional o A6017 Negligence

OA6050 (25)

Other (35) o A6025

Wrongful Termination [8J A6037 (36)

Other Employment o A6024 (15) o A6109

Breach of Contract! o A6004 Warranty o A6008 (06)

(not insurance) o A6019

o A6028

Collections OA6002

(09) o A6012

Insurance Coverage o A6015 118)

Other Contract o A6009 (37) o A6031

o A6027

Eminent o A7300 Domain/Inverse Condemnation 114)

Wrongful Eviction o A6023 (33)

Other Real Property o A6018 (26) o A6032

o A6060

Unlawful Detainer- o A6021 Commercial (31)

Unlawful Detainer- o A6020 Residential (32)

Unlawful Detainer- o A6022 Drugs (38)

Asset Forfeiture (05) o A6108

Petition re Arbitration (11 ) OA6115

elv 109 (Rev. 01107)

. LASe Approved 03-04

B C Type of Action Applicable Reasons

(Check only one) ·See Step 3 Above

Legal Malpractice 1" 2" 3.

Other Professional Malpractice (not medical or legal) 1" 2" 3.

Other Non-Personallnjury/Property Damage tort 2" 3.

Wrongful Termination 1" 2., 3.

Other Employment Complaint Case 1" 2" 3.

Labor Commissioner Appeals 10.

Breach of Rental/Lease Contract (not Unlawful Detainer or wrongful eviction) 2" 5.

ContractIWarranty Breach"-Seller Plaintiff (no fraud/negligence) 2" 5.

Negligent Breach of ContractIWarranty (no fraud) 1.,2.,5.

Other Breach of ContractfWarranty (not fraud or negligence) 1" 2" 5.

Collections Case-Seller Plaintiff 2" 5., 6

Other Promissory Note/Collections Case 2" 5.

Insurance Coverage (not complex) 1.,2 ,5" 8.

Contractual Fraud 1" 2" 3" 5.

Tortious Interference 1" 2" 3" 5.

Other Contract Dispute(not breach/insurance/fraud/negligence) 1" 2" 3" 8.

Eminent Domain/Condemnation Number of parcels ___ 2.

Wrongful Eviction Case 2,6.

Mortgage Foreclosure 2" 6.

Quiet Title 2. ,6.

Other Real Property(not eminent domain, landlord/tenant, foreclosure) 2" 6.

Unlawful Detainer-Commercial (not drugs or wrongful eviction)

Unlawful Detainer-Residential (not drugs or wrongful eviction)

Unlawful Detainer-Drugs

Asset Forfeiture Case

Petition to Compel/ConfirmNacate Arbitration

CIVIL CASE COVER SHEET ADDENDUM AND STATEMENT OF LOCATION

2.,6.

2" 6.

2. ,6.

2" 6.

2" 5.

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SHORT TITLE, Roger B. Peikin, et al. v. Aletheia Research and Management, Inc., et al.

CASE NUMBER

A Civil Case Cover Sheet

Category No.

Writ of Mandate

(02)

Other judicial Review (39)

AntitrustITrade Regulation (03)

Construction Defect (10)

Claims Involving Mass Tort (40)

Securities Litigation (28)

Toxic Tort Environmental (30)

Insurance Coverage Claims from Complex

Case (41)

Enforcement of Judgment

(20)

RICO (27)

Other Complaints (Not Specified Above)

(42)

Partnership Corporation Governance(21 )

Other Petitions (Not Specified Above)

(43)

CIV 109 (Rev. 01/07)

LASC Approved 03-04

o A6151

o A6152

o A6153

o A6150

o A6003

o A6007

o A6006

o A6035

o A6036

o A6014

o A6141

o A616D

o A6107

o A6140

OA6114

o A6112

o A6D33

o A6030

o A6040

o A6011

o A6000

OA6113

o A6121

o A6123

o A6124

o A6190

OA6110

o A6170

o A6100

B C Type of Action Applicable Reasons -

(Check only one) See Step 3 Above

Writ - Administrative Mandamus 2 .. B.

Writ - Mandamus on Limited Court Case Matter 2.

Writ - Other Limited Court Case Review 2.

Other Writ IJudicial Review 2 .. B.

AntitrustITrade Regulation 1 .. 2 .. B.

Construction defect 1 .. 2., 3.

Claims Involving Mass Tort 1 .. 2 .. B.

Securities Litigation Case 1 .. 2 .. B.

Toxic TorVEnvironmental 1 .. 2 .. 3 .. B.

Insurance Coverage/Subrogation (complex case only) 1.,2 .. 5 .. B.

Sister State Judgment 2., 9.

Abstract of Judgment 2., 6.

Confession of Judgment (non~domestic relations) 2., 9.

Administrative Agency Award (not unpaid taxes) 2., B.

Petition/Certificate for Entry of Judgment on Unpaid Tax 2., B.

Other Enforcement of Judgment Case 2., B. ,9.

Racketeering (RICO) Case 1., 2.,B .

Declaratory Relief Only 1.,2., B.

Injunctive Relief Only (not domestic/harassment) 2., B.

Other Commercial Complaint Case (non~torVnon~complex) 1., 2., B.

Other Civil Complaint (non·torUnon-complex) 1.,2., B .

Partnership and Corporate Governance Case 2., B.

Civil Harassment 2., 3. ,9.

Workplace Harassment 2.,3.,9.

Elder/Dependent Adult Abuse Case 2., 3. ,9.

Election Contest 2.

Petition for Change of Name 2., 7.

Petition for Relief from Late Claim Law 2.,3. ,4., B.

Other Civil Petition 2., 9.

CIVIL CASE COVER SHEET ADDENDUM LASC, rule 2.0

AND STATEMENT OF LOCATION r:'-m-":-'''-OC"L'-9-:C,'NC",C"',C",,,-. --, Page 3 of 4 _.FonnsWorkflow.com

SHORT TITLE, Roger B. Peikin, et al. v. Aletheia Research and Management, Inc., et al.

CASE NUMBER

Item III. Statement of Location: Enter the address of the accident, party's residence or place of business, performance, or other circumstance indicated in Item II., Step 3 on Page 1, as the proper reason for filing in the court location you selected.

REASON: CHECK THE NUMBER UNDER COLUMN C ADDRESS:

WHICH APPLIES IN THIS CASE 100 Wilshire Blvd., Suite 1960

o 1.18J 2. 0 3. 04. 0 5. 0 6. 0 7. 08.09.010. CITY: STATE: ZIP CODE:

Santa Monica CA 90401

Item IV. Declaration of Assignment: I declare under penalty of pe~ury under the laws of the State of California that the foregoing is

true and correct and that the above-entitled matter is properly filed.for assignment to the Stanley Mosk courthouse in the

Central District of the Los Angeles Superior Court (Code Civ. Proc., § 392 et seq., and LASC Local Rule 2.0,

subds. (b), (c) and (d)).

Dated: November 23,2010

PLEASE HAVE THE FOLLOWING ITEMS COMPLETED AND READY TO BE FILED IN ORDER TO PROPERLY COMMENCE YOUR NEW COURT CASE:

1. Original Complaint or Petition.

2. If filing a Complaint, a completed Summons form for issuance by the Clerk.

3. Civil Case Cover Sheet form CM-010.

4. Complete Addendum to Civil Case Cover Sheet form LACIV 109 (Rev. 01/07), LASC Approved 03-04.

5. Payment in full of the filing fee, unless fees have been waived.

6. Signed order appointing the Guardian ad Litem, JC form FL-935, if the plaintiff or petitioner is a minor under 18 years of age, or if required by Court.

7. Additional copies of documents to be conformed by the Clerk. Copies of the cover sheet and this addendum must be served along with the summons and complaint, or other initiating pleading in the case.

CIV 109 (Rev. 01/07)

LASC Approved 03-04

CIVIL CASE COVER SHEET ADDENDUM LASC, rule 2.0

AND STATEMENT OF LOCATION Am",,," L",'Not. '"'. Page 4 of 4 www.FonnsWorknow.com