UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF PENNSYLVANIA

AMALGAMATED BANK, as Trustee for

THE LONGVIEW COLLECTIVE

INVESTMENT FUND, Derivatively on Behalf

of AMERISOURCEBERGEN

CORPORATION,

Plaintiff,

vs.

R. DAVID YOST, ROBERT E. MARTINI,

RODNEY H. BRADY, CHARLES H.

COTROS, RICHARD C. GOZON, EDWARD

E. HAGENLOCKER, JANE E. HENNEY,

JAMES R. MELLOR, FRANCIS G.

RODGERS, J. LAWRENCE WILSON,

STEVEN H. COLLIS, CHARLES J.

CARPENTER and NEIL F. DIMICK,

Defendants,

– and –

AMERISOURCEBERGEN CORPORATION,

a Delaware corporation,

Nominal Defendant.

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Civ. Action No. 

VERIFIED SHAREHOLDER DERIVATIVE

COMPLAINT FOR BREACH OF

FIDUCIARY DUTIES, ABUSE OF

CONTROL, GROSS MISMANAGEMENT,

WASTE OF CORPORATE ASSETS,

UNJUST ENRICHMENT AND

USURPATION OF CORPORATE

OPPORTUNITY

DEMAND FOR JURY TRIAL

This writing/publication is a creative work fully protected by all applicable copyright laws, as well as by misappropriation,

trade secret, unfair competition and other applicable laws. The authors of this work have added value to the underlying factual

materials herein through one or more of the following: unique and original selection, coordination, expression, arrangement, and

classification of the information.

No copyright is claimed in the text of statutes, regulations, and any excerpts from analysts’ reports quoted within this work.

Copyright © 2004 by William S. Lerach and Milberg Weiss Bershad Hynes & Lerach LLP. William S. Lerach and Milberg

Weiss Bershad Hynes & Lerach LLP will vigorously defend all of their rights to this writing/publication.

All rights reserved – including the right to reproduce in whole or in part in any form. Any reproduction in any form by

anyone of the material contained herein without the permission of William S. Lerach and Milberg Weiss Bershad Hynes & Lerach

LLP is prohibited.

Case 2:04-cv-00972-WY Document 1 Filed 03/05/04 Page 1 of 48
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INTRODUCTION

1. This is a shareholder derivative action brought on behalf of the AmerisourceBergen

Corporation (“Amerisource” or the “Company”) for violations of applicable law, including breach

of fiduciary duty and waste of corporate assets, against Amerisource’s entire Board of Directors

and certain current and former key executive officers (collectively, “defendants”).

2. Amerisource is a wholesale distributor of pharmaceutical products and related

healthcare services. Amerisource does not manufacture the pharmaceutical products it sells.

Instead, Amerisource sells pharmaceutical products it acquires to a wide variety of doctors,

hospitals and pharmacies, as the drug manufacturers themselves typically only sell directly to the

largest hospitals and organizations. Amerisource, along with wholesalers McKesson and Cardinal

Health, collectively handle about 90% of the U.S. wholesale drug market. Until recently,

Amerisource was the nation’s largest drug wholesaler and Amerisource’s largest client was the

Veterans Administration (“VA”), which contributed about 7% of Amerisource’s fiscal 2003

revenue.

3. During the last decade, the Company and its predecessors have been investigated

repeatedly, and prosecuted numerous times for violations of state and federal law for overbilling

private and government patients, Medicaid and Medicare fraud, and for recycling and reselling

previously dispensed drugs from nursing homes. The Company was forced to pay substantial fines

and penalties, putting the Amerisource Board of Directors on clear notice that Amerisource’s very

future depended upon its compliance with the nation’s state and federal laws. 

4. Despite this, between 1999 and the present (the “Relevant Period”), defendants have

still permitted the Company to be subjected to massive exposure for civil and criminal liability to

its healthcare consumers who received tainted and/or altered prescription drugs the Company

purchased from smaller wholesalers in the so-called “grey market” of the wholesale drug industry.

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According to a recent detailed report following the investigations of a Florida grand jury, many of

these secondary wholesalers operating in the grey market are rogue operators with small, shoddy

shops selling medically sensitive drugs, often stolen, mishandled, smuggled from overseas and/or

illegally and dangerously recycled. Investigators found that some of the drugs Amerisource

procured from the secondary wholesalers of the grey market – at substantial discounts vis-a-vis the

price it would pay to buy directly from the manufacturers – had as little as 5% strength but had

been fraudulently relabeled as full-strength.

5. The wholesale drug industry is run at high volumes with razor-thin 1% profit

margins. If a large wholesaler like Amerisource can purchase drugs for less than the

manufacturer’s price in the grey market, the spread goes straight to its bottom line, making the

Company appear more profitable in the short-run – but resulting in tremendous potential liability

for the Company. Defendants admit that Amerisource’s executive compensation is “based

primarily on achieving both financial performance objectives and strategic and operating

objectives, with greater weight given to the financial performance objectives,” which has created

a perverse incentive to increase the Company’s bottom-line results at all costs. As a result,

defendants have caused Amerisource to purchase a substantial amount of drugs from the secondary

market in the past several years and have exposed the Company to unjustifiable levels of regulatory

scrutiny and criminal and civil liability.

6. Amerisource is also currently being investigated for fraud and money laundering

in connection with its drug transactions with the secondary market. By selling unneeded drugs to

institutional pharmacies (which receive deep discounts), who in turn sell the same drugs into the

secondary market, where Amerisource is alleged to repurchase the drugs, sometimes completing

Case 2:04-cv-00972-WY Document 1 Filed 03/05/04 Page 3 of 48
1 According to the “Profile of the Prescription Drug Wholesaling Industry !

Examination of Entities Defining Supply and Demand in Drug Distribution ! Final Report “

published by the FDA in 2001, a “Rebate” is the “amount that the manufacturer of the drug pays to

an insurer or health plan for each unit of drug dispensed. Rebate arrangements exist between drug

manufacturers and Medicaid agencies, HMOs, and other insurers or drug plans, and generally bypass

the pharmacy. Rebates are also referred to as ‘after market’ arrangements because they do not affect

the prices paid at the time of service, but are implemented later, ultimately reducing the payer’s

expenditures or program costs.” 

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this cycle more than once, Amerisource is claimed to have fraudulently obtained millions of dollars

of unearned rebates.1

7. In 1999, federal prosecutors in Las Vegas began targeting Amerisource as part of

a broad investigation of illegal drug diversion in the Southwest. The FBI set up an undercover

business in Las Vegas. In seven months, the undercover business bought $31.2 million worth of

deeply discounted drugs meant for hospices and nursing homes from the Sacramento division of

Amerisource. The drugs were quickly diverted to other smaller wholesalers, earning nearly

$1 million in profit. In July 2003, the U.S. Attorney in Sacramento charged Robert Strusz

(“Strusz”), a former sales manager at Amerisource’s distribution center in Sacramento, with mail

fraud. Strusz pleaded guilty in September 2003 to one federal criminal count of mail fraud in

exchange for his promise to assist with the investigation and prosecution of Amerisource. Strusz

has admitted that in addition to the kickbacks he received, he received bonuses from Amerisource

as a result of the illegal sales. Thereafter, the Company’s Chairman and Chief Executive Officer

acknowledged that defendants were contacted by federal officials concerning the sting operation

in 2001, but, despite the tremendous potential liability Amerisource faces, concealed the

investigation for a two-and-a-half-year period between February 2001 and September 18, 2003,

when Strusz’s conviction became public knowledge. 

8. As a result of Amerisource’s misconduct at defendants’ hands, on December 31,

2003, the VA shocked the investment community by announcing that it was stripping Amerisource

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of its $25 billion, eight-year VA contract for primary distribution of pharmaceutical products. The

VA instead awarded the contract to competitor McKesson, even though switching vendors will cost

the VA substantial extra-transactional costs because the VA currently uses Amerisource’s

proprietary vending software to place and track orders. The VA contract contributed more that $3.3

billion, or about 7%, to Amerisource’s fiscal 2003 revenue and the VA was Amerisource’s largest

customer, which had made Amerisource the largest pharmaceuticals wholesaler. 

9. The VA contract came up for renewal in the Fall of 2003, at the same time the news

of Amerisource’s involvement in the counterfeit drug operations and complicity in the moneylaundering schemes broke. Up until the fateful December 31st announcement that the Company

had lost the contract, defendants repeatedly attempted to dispel fears in the investment community

about the Company’s ability to retain the VA contract. For example, in a December 4, 2003 press

conference, defendant R. David Yost stated that “we continue to be very optimistic that our

experience with the VA, which now goes back almost two decades, and our service level, will serve

us well within the award of that contract.” In their press conference on December 31, 2003,

defendants conceded that the VA contract loss would have a disproportionately large impact on the

Company’s earnings and that Amerisource would cut its fiscal 2004 earnings forecast by

approximately 10%. The situation is made worse by the fact that the VA account still needs to be

serviced through March 31, 2004, and related costs cannot be immediately eliminated. As a result,

several analysts lowered their ratings on Amerisource immediately following the announcements.

10. Between February 2001 and September 18, 2003, while defendants kept their

involvement with the misconduct and the related investigation secret, the Company’s stock traded

up from between $48 and $55 per share in February 2001 to over $82 a share in mid-2002. When

the news of the Company’s former sales manager’s conviction was revealed on September 19,

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2003, and defendants admitted their knowledge of the underlying allegations all the way back to

2001, the Company’s stock price fell to below $54 per share on extremely heavy trading volume.

Meanwhile, several Company insiders, including the Company’s two founders who currently serve

as its Chief Executive Officer and as Chairman took advantage of the Company’s inflated stock

price and obtained over $35.5 million in proceeds on the sale of stock while in possession of

material, non-public proprietary information. As a result, Amerisource has been exposed to

potential liability for violations of state and federal securities laws and the Company’s reputation

for candor in the business community has been tarnished, contributing to the loss of the VA

contract. 

JURISDICTION AND VENUE

11. This Court has jurisdiction over all claims asserted herein pursuant to 28 U.S.C.

§1332, because complete diversity exists between plaintiff and each defendant, and the amount in

controversy exceeds the jurisdictional minimum of this Court.

12. Venue is proper in this District because Amerisource has its principal place of

business in this District. Plaintiff’s cause of action arose in this District and Amerisource has

suffered and will continue to suffer harm in this District. Moreover, each defendant has extensive

contact with Pennsylvania, including defendants Yost and Wilson, who reside in this District.

THE PARTIES

13. Plaintiff is and has been at all relevant times the owner of Amerisource common

stock. Plaintiff is a citizen of New York.

14. Nominal Defendant Amerisource is a wholesale distributor of pharmaceutical

products and related healthcare services and solutions. Amerisource is organized under the laws

of Delaware. Amerisource’s executive offices are located at 1300 Morris Drive, Suite 100,

Chesterbrook, Pennsylvania.

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15. Defendant Robert E. Martini (“Martini”) is, and was during the Relevant Period, the

Chairman of the Board of Directors of Amerisource and a member of its Executive Committee.

Martini founded the Bergen Brunswig Corporation (“Bergen”) and served as its Chairman and CEO

prior to its merger with Amerisource Healthcare Corporation (“AHC”) in 2001 which formed

Amerisource. Martini is a citizen of Nevada. Martini has repeatedly caused corporations under

his control to violate applicable laws and regulations resulting in Martini being named as a

defendant in securities fraud class actions and shareholder derivative suits brought against Bergen

in 1999 and 2000 in connection with Bergen’s failure to release information concerning an

investigation by the Department of Health and Human Services against one of the Company’s

subsidiaries and as such was subject to a heightened sense of duty not to violate the federal

securities laws or any of his fiduciary duties to the Company. Nonetheless, between February 2001

and September 2003, Martini sold 124,395 shares of Amerisource stock at inflated prices for almost

$9.5 million in proceeds while in possession of material, non-public information. While serving

as CEO of Bergen prior to the merger, Martini and his son Brent Martini received substantial loans

which were forgiven in connection with the 2001 Amerisource merger. Between 2000 and 2002,

Martini’s son, Brent Martini, also received the following salaries and incentive compensation based

on Amerisource’s financial results, obtained in part by purchasing counterfeit drugs in the grey

market:

Year Base Salary Bonus Forgiven Loan

Interest

Stock Options

2002 $400,000 $300,000 ! 35,000

2001 $375,000 $230,000 $63,261 42,647

2000 $325,000 $124,400 ! 64,749

By virtue of his current and past positions with the Company, his insider trading, his other personal

participation in the wrongful conduct alleged in this complaint, and his and his son’s extensive

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business ties with other Amerisource directors, Martini is not independent and is not disinterested

and could not have appropriately considered a shareholder demand. 

16. Defendant R. David Yost (“Yost”) is, and was during the Relevant Period, a director

of Amerisource, its Chief Executive Officer (“CEO”) and a member of its Executive Committee.

Prior to the merger, Yost served as a director, the chairman of the board, CEO and president of

AHC. Yost is a citizen of Pennsylvania. As a director of Amerisource, Yost owed a duty to the

Company and its shareholders to be reasonably informed about the business and operations of the

Company. Rather than fulfill these important fiduciary duties Yost owed to Amerisource and its

shareholders, he, upon information and belief, actively participated in or knowingly encouraged,

sponsored or approved many of the wrongful acts or omissions complained of herein, and/or

breached his fiduciary duties to the shareholders of Amerisource by purposefully, recklessly and/or

negligently disregarding these wrongful acts and wrongfully abrogating his oversight duties.

Between February 2001 and September 2003, Yost sold 28,000 shares of Amerisource stock for

over $1.8 million in proceeds while in possession of material, non-public information. Between

2000 and 2003, Yost also received the following salaries and incentive compensation based on

Amerisource’s financial results, obtained in part by purchasing counterfeit drugs in the grey

market:

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Year Base Salary Bonus Stock Options

2003 $960,350 $995,000 100,000

2002 $666,473 $694,700 100,000

2001 $563,942 $642,250 180,000

2000 $525,000 $592,250 75,000

By virtue of his current and past positions with the Company, his insider trading, his other personal

participation in the wrongful conduct alleged in this complaint, and his extensive business ties with

other Amerisource directors, Yost is not independent and is not disinterested and could not have

appropriately considered a shareholder demand. 

17. Defendant Rodney H. Brady (“Brady”) is, and was during the Relevant Period, a

director of Amerisource. Brady served as a director of Bergen from 1973 until its merger with

AHC to form Amerisource in 2001. Brady is a citizen of Utah. As a director of Amerisource,

Brady owed a duty to the Company and its shareholders to be reasonably informed about the

business and operations of the Company. Rather than fulfill these important fiduciary duties Brady

owed to Amerisource and its shareholders, he, upon information and belief, actively participated

in or knowingly encouraged, sponsored or approved many of the wrongful acts or omissions

complained of herein, and/or breached his fiduciary duties to the shareholders of Amerisource by

purposefully, recklessly and/or negligently disregarding these wrongful acts and wrongfully

abrogating his oversight duties. In 1972, Brady originally joined Bergen (Amerisource’s

predecessor) as an Executive Vice President of Pharmaceuticals where he served under Martini.

Brady was named as a defendant in securities fraud class actions and shareholder derivative suits

brought against Bergen in 1999 and 2000 concerning its non-disclosure of a Health and Human

Services investigation of one of its subsidiaries and as such was subject to a heightened sense of

duty not to violate the federal securities laws or any of his fiduciary duties to the Company.

Nonetheless, between February 2001 and September 2003, Brady sold 11,942 shares of

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Amerisource stock at inflated prices while in possession of material, non-public information,

receiving over $881,000 in proceeds. By virtue of his current and past executive positions with the

Company, his insider trading, his personal participation in the wrongful conduct alleged in this

complaint, including his failure to oversee the Company’s operations, and his extensive and longterm personal, financial and professional relationships with the Amerisource Board and

management, Brady is not independent and is not disinterested and could not have appropriately

considered a shareholder demand. 

18. Defendant Charles H. Cotros (“Cotros”) is, and was during the Relevant Period, a

director of Amerisource. Cotros was appointed to the Amerisource Board by Yost and Martini after

the merger and serves at their behest. Cotros is a citizen of Texas. As a director of Amerisource,

Cotros owed a duty to the Company and its shareholders to be reasonably informed about the

business and operations of the Company. Rather than fulfill these important fiduciary duties Cotros

owed to Amerisource and its shareholders, he, upon information and belief, actively participated

in or knowingly encouraged, sponsored or approved many of the wrongful acts or omissions

complained of herein, and/or breached his fiduciary duties to the shareholders of Amerisource by

purposefully, recklessly and/or negligently disregarding these wrongful acts and wrongfully

abrogating his oversight duties. As a member of the Company’s Audit and Corporate

Responsibility Committee, according to the Company’s annual proxy statement, Cotros was

charged with assuring the “quality, not just the acceptability” of the Company’s financial

statements which did not disclose the Company’s exposure to the investigation into its alleged fraud

and money laundering in connection with the drug sales rebates. Cotros also signed the potentially

false and misleading fiscal 2002 10-K. By virtue of his position with the Company, his personal

participation in the wrongful conduct alleged in this complaint, including his failure to oversee the

Company’s operations, and his relationships with the Amerisource Board, Cotros is not

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independent and is not disinterested and could not have appropriately considered a shareholder

demand.

19. Defendant Richard C. Gozon (“Gozon”) is, and was during the Relevant Period, a

director of Amerisource. Gozon served as a director of AHC from 1994 through the 2001

Amerisource merger. Gozon is a citizen of Florida. As a director of Amerisource, Gozon owed

a duty to the Company and its shareholders to be reasonably informed about the business and

operations of the Company. Rather than fulfill these important fiduciary duties Gozon owed to

Amerisource and its shareholders, he, upon information and belief, actively participated in or

knowingly encouraged, sponsored or approved many of the wrongful acts or omissions complained

of herein, and/or breached his fiduciary duties to the shareholders of Amerisource by purposefully,

recklessly and/or negligently disregarding these wrongful acts and wrongfully abrogating his

oversight duties. AHC was founded in 1977 as Alco Health Services, a division of the Alco

Standard Corporation. AHC was spun-off from Alco Standard in 1988. Gozon served as president,

chief operating officer and a director of Alco Standard from 1972 to 1994. Gozon then served from

1994 through the 2001 Amerisource merger as a director of AHC. Gozon has also continued to

serve as a director of the Triumph Group since it was spun off from Alco Standard in 1993 and

Triumph’s offices are still located right next to Amerisource’s in Chesterbrook, PA. As a member

of the Company’s Audit and Corporate Responsibility Committee, according to the Company’s

annual proxy statement, Gozon was charged with assuring the “quality, not just the acceptability”

of the Company’s financial statements which for over two years did not disclose the Company’s

exposure to the investigation into its alleged fraud and money laundering in connection with the

drug sales rebates. Gozon also signed the potentially false and misleading fiscal 2001 and 2002

10-Ks. By virtue of his current and past executive positions with the Company, his personal

participation in the wrongful conduct alleged in this complaint, including his failure to oversee the

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Company’s operations, and his extensive and long-term personal, financial and professional

relationships with the Amerisource Board and management, Gozon is not independent and is not

disinterested and could not have appropriately considered a shareholder demand. 

20. Defendant Edward E. Hagenlocker (“Hagenlocker”) is, and was during the Relevant

Period, a director of Amerisource. Hagenlocker previously served as a director of AHC from 1999

until the 2001 Amerisource merger. Hagenlocker is a citizen of Michigan. As a director of

Amerisource, Hagenlocker owed a duty to the Company and its shareholders to be reasonably

informed about the business and operations of the Company. Rather than fulfill these important

fiduciary duties Hagenlocker owed to Amerisource and its shareholders, he, upon information and

belief, actively participated in or knowingly encouraged, sponsored or approved many of the

wrongful acts or omissions complained of herein, and/or breached his fiduciary duties to the

shareholders of Amerisource by purposefully, recklessly and/or negligently disregarding these

wrongful acts and wrongfully abrogating his oversight duties. Hagenlocker sold 8,000 shares of

Amerisource stock at inflated prices between February 2001 and September 2003 while in

possession of material, non-public information for proceeds of $606,400. Hagenlocker serves on

the Air Products & Chemicals board of directors along with Ursula F. Fairbairn who held several

marketing and human resources positions at IBM where defendant Francis G. Rodgers served as

vice president of marketing. As the Chairman of the Company’s Audit and Corporate

Responsibility Committee, according to the Company’s annual proxy statement, Hagenlocker was

charged with assuring the “quality, not just the acceptability” of the Company’s financial

statements which for over two years did not disclose the Company’s exposure to the investigation

into its alleged fraud and money laundering in connection with the drug sales rebates. Hagenlocker

also signed the potentially false and misleading fiscal 2001 and 2002 10-Ks. By virtue of his

position with the Company, his insider trading, his personal participation in the wrongful conduct

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alleged in this complaint, including his failure to oversee the Company’s operations, and his

relationships with the Amerisource Board, Hagenlocker is not independent and is not disinterested

and could not have appropriately considered a shareholder demand. 

21. Defendant James R. Mellor (“Mellor”) is, and was during the Relevant Period, a

director of Amerisource. Mellor is a citizen of California. Mellor served as a director of Bergen

from 1979 until its 2001 merger with AHC to form Amerisource. As a director of Amerisource,

Mellor owed a duty to the Company and its shareholders to be reasonably informed about the

business and operations of the Company. Rather than fulfill these important fiduciary duties Mellor

owed to Amerisource and its shareholders, he, upon information and belief, actively participated

in or knowingly encouraged, sponsored or approved many of the wrongful acts or omissions

complained of herein, and/or breached his fiduciary duties to the shareholders of Amerisource by

purposefully, recklessly and/or negligently disregarding these wrongful acts and wrongfully

abrogating his oversight duties. Mellor was named as a defendant in securities fraud class actions

and shareholder derivative suits brought against Bergen in 1999 and 2000 concerning its nondisclosure of an investigation by the Department of Health and Human Services concerning one

of its subsidiaries and as such was subject to a heightened sense of duty not to violate the federal

securities laws or any of his fiduciary duties to the Company. By virtue of his position with the

Company, his personal participation in the wrongful conduct alleged in this complaint, including

his failure to oversee the Company’s operations, and his relationships with the Amerisource Board,

Mellor is not independent and is not disinterested and could not have appropriately considered a

shareholder demand. 

22. DefendantFrancis(“Buck”)G. Rodgers (“Rodgers”) is, and was during the Relevant

Period, a director of Amerisource. Rodgers is a citizen of Connecticut. Rodgers served as a

director of Bergen from 1982 until its 2001 merger with AHC to form Amerisource. As a director

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of Amerisource, Rodgers owed a duty to the Company and its shareholders to be reasonably

informed about the business and operations of the Company. Rather than fulfill these important

fiduciary duties Rodgers owed to Amerisource and its shareholders, he, upon information and

belief, actively participated in or knowingly encouraged, sponsored or approved many of the

wrongful acts or omissions complained of herein, and/or breached his fiduciary duties to the

shareholders of Amerisource by purposefully, recklessly and/or negligently disregarding these

wrongful acts and wrongfully abrogating his oversight duties. Rodgers was named as a defendant

in securities fraud class actions and shareholder derivative suits brought against Bergen in 1999 and

2000 concerning its non-disclosure of a pending Health and Human Services Department

investigation and as such was subject to a heightened sense of duty not to violate the federal

securities laws or any of his fiduciary duties to the Company. Nonetheless, between February 2001

and September 2003, Rodgers sold 1,942 shares of Amerisource stock at inflated prices while in

possession of material non-public information, receiving over $114,000 in proceeds. Rodgers

served as vice president of sales at IBM for 34 years. David M. Senior, Amerisource’s Vice

President of Business Development, was a manager of the Wilkerson Group, a leading healthcare

consulting firm, which is now a division of IBM. In 1997, IBM partnered with Amerisource to

develop and implement a turnkey warehouse management system with wireless communications

which allows Amerisource’s computers to transfer order data to employees on the warehouse floor.

Additionally, Ursula F. Fairbairn formerly held several marketing and human resources positions

at IBM and currently sits on the Air Products & Chemicals board of directors with defendant

Hagenlocker. As a member of the Company’s Audit and Corporate Responsibility Committee,

according to the Company’s annual proxy statement, Rodgers was charged with assuring the

“quality, not just the acceptability” of the Company’s financial statements which for over two years

did not disclose the Company’s exposure to the investigation into its alleged fraud and money

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laundering in connection with the drug sales rebates. Rodgers also signed the potentially false and

misleading fiscal 2001 and 2002 10-Ks. By virtue of his position with the Company, his insider

trading, his personal participation in the wrongful conduct alleged in this complaint, including his

failure to oversee the Company’s operations, and his relationships with the Amerisource Board,

Rodgers is not independent and is not disinterested and could not have appropriately considered

a shareholder demand. 

23. Defendant J. Lawrence Wilson (“Wilson”) is, and was during the Relevant Period,

a director of Amerisource. Wilson served as a director of AHC from 2000 through its 2001

Amerisource merger. Wilson is a citizen of Pennsylvania. As a director of Amerisource, Wilson

owed a duty to the Company and its shareholders to be reasonably informed about the business and

operations of the Company. Rather than fulfill these important fiduciary duties Wilson owed to

Amerisource and its shareholders, he, upon information and belief, actively participated in or

knowingly encouraged, sponsored or approved many of the wrongful acts or omissions complained

of herein, and/or breached his fiduciary duties to the shareholders of Amerisource by purposefully,

recklessly and/or negligently disregarding these wrongful acts and wrongfully abrogating his

oversight duties. By virtue of his position with the Company, his personal participation in the

wrongful conduct alleged in this complaint, including his failure to oversee the Company’s

operations, and his relationships with the Amerisource Board, Wilson is not independent and is not

disinterested and could not have appropriately considered a shareholder demand.

24. Defendant Jane E. Henney (“Henney”) is, and was during the Relevant Period, a

director of Amerisource. Henney is a citizen of Ohio. Henney was appointed to the Amerisource

Board by Yost and Martini after the merger and serves at their behest. As a director of

Amerisource, Henney owed a duty to the Company and its shareholders to be reasonably informed

about the business and operations of the Company. Rather than fulfill these important fiduciary

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duties Henney owed to Amerisource and its shareholders, she, upon information and belief, actively

participated in or knowingly encouraged, sponsored or approved many of the wrongful acts or

omissions complained of herein, and/or breached her fiduciary duties to the shareholders of

Amerisource by purposefully, recklessly and/or negligently disregarding these wrongful acts and

wrongfully abrogating her oversight duties. By virtue of her position with the Company, her

personal participation in the wrongful conduct alleged in this complaint, including her failure to

oversee the Company’s operations, and her relationships with the Amerisource Board, Henney is

not independent and is not disinterested and could not have appropriately considered a shareholder

demand. 

25. Defendant Steven H. Collis (“Collis”) has served as a Senior Vice President of the

Company and President of AmerisourceBergen Specialty Group since the 2001 Amerisource

Merger. Prior to the merger, Collis served as Senior Executive Vice President of Bergen from

February 2000 until the merger. Between February 2001 and September 2003, Collis sold in excess

of $3.3 million worth of Amerisource stock while in possession of material, non-public internal

information.

26. Defendant Charles J. Carpenter (“Carpenter”) served as a Senior Vice President of

the Company and President of PharMerica, Inc. from the 2001 Amerisource merger until he

suddenly resigned at the end of 2002. Previously, Carpenter served as President of PharMerica,

Inc., from April 1999 until the merger, as Senior Executive Vice President of Bergen from 1996

until the Merger, and as Chief Procurement Officer of Bergen from 1996 to April 1999. Between

February 2001 and September 2003, Carpenter sold in excess of $11.6 million worth of

Amerisource stock while in possession of material, non-public internal information.

27. Defendant Neil F. Dimick (“Dimick”) served as Executive Vice President and Chief

Financial Officer of the Company from the 2001 Amerisource merger until he suddenly resigned

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in March 2002. Previously, Dimick served as Senior Executive Vice President and Chief Financial

Officer of Bergen from 1992 to the merger and was formerly Bergen's Vice President, Finance from

1991 to 1992. Dimick was also President of Bergen Brunswig Specialty Company from September

1996 to August 2000. During the Relevant Period, Dimick sold $7.7 million worth of Amerisource

stock while in possession of material, non-public internal information.

28. The defendants named above in ¶¶15-24 comprise the members of the Amerisource

Board of Directors at the time of the filing of this complaint and are hereinafter referred to as the

“Director Defendants.” The defendants named above in ¶¶16-17, 20, 22 and 25-27 sold stock while

in possession of material, non-public proprietary information and are referred to herein as the

“Selling Defendants.” As officers and/or directors of the Company, the defendants named herein

at ¶¶15-27 (referred to collectively as the “Individual Defendants”), owed the highest fiduciary

duties of good faith, loyalty, fair dealing, due care and candor to Amerisource.

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DEFENDANTS’ FIDUCIARY DUTIES

29. Each officer and director of Amerisource owed the Company and its public

shareholders the duty to exercise a high degree of due care, loyalty, and diligence in the

management and administration of the affairs of the Company, as well as in the use and

preservation of its property and assets. The conduct of Amerisource’s directors complained of

herein involves a knowing and culpable violation of their obligations as directors of Amerisource,

a blatant breach of the duty of loyalty, the absence of good faith on their part, and a reckless

disregard for their duties to the Company and its shareholders, which the directors were aware or

should have been aware posed a risk of serious injury to the Company. The conduct of

Amerisource’s directors and officers who caused Amerisource to pay them undue remuneration,

to subvert Amerisource’s interests and to expose the Company to millions of dollars in damages,

fines and criminal sanctions has been ratified by Amerisource’s Board, which has failed to take any

action on behalf of the Company against them.

30. In contrast to the actions taken by defendants and certain Company insiders, as

alleged herein, by reason of their positions as officers, directors and/or fiduciaries of Amerisource

and because of their ability to control the business and corporate affairs of Amerisource, the

Director Defendants owed Amerisource and its shareholders fiduciary obligations of fidelity, trust,

loyalty and due care, and were and are required to use their utmost ability to control and manage

Amerisource in a fair, just, honest and equitable manner, and were and are required to act in

furtherance of the best interests of Amerisource and its shareholders so as to benefit all

shareholders equally and not in furtherance of their personal interest or benefit.

31. Each director and officer of the Company owes to Amerisource the fiduciary duty

to exercise due care and diligence in the administration of the affairs of the Company and in the use

and preservation of its property and assets, and the highest obligations of good faith and fair

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dealing. To discharge their duties, the officers and directors of Amerisource were required to

exercise reasonable and prudent supervision over the management, policies, practices and controls

of the financial affairs of Amerisource. By virtue of such duties, the officers and directors of

Amerisource were required, among other things, to:

(a) Manage, conduct, supervise and direct the business affairs of Amerisource

in accordance with state and federal law, state and federal rules and regulations and the charter and

bylaws of Amerisource;

(b) Neither violate nor knowingly permit any officer, director or employee of

Amerisource to violate applicable federal laws, rules and regulations and state law;

(c) Remain informed as to the status of Amerisource’s operations, and upon

receipt of notice or information of imprudent or unsound practices, to make a reasonable inquiry in

connection therewith, and to take steps to correct such conditions or practices;

(d) Establish and maintain systematic and accurate records and reports of the

business and affairs of Amerisource and procedures for the reporting of the business and affairs to

the Board of Directors and to periodically investigate, or cause independent investigation to be made

of, said reports and records;

(e) Maintain and implement an adequate and functioning systemofinternallegal,

financial and accounting controls, such that Amerisource’s financial statements and information

would be accurate and the actions of its directors would be in accordance with all applicable laws;

and

(f) Cause Amerisource to comply with all applicable federal and state property

laws and to preserve and protect Amerisource’s assets.

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BACKGROUND

32. Amerisource was created in August of 2001 following the merger of AHC and

Bergen, then the country’s fourth and third largest pharmaceutical services companies.

33. AHC was founded in 1977 and beginning with the purchase of The Drug House in

1977 embarked upon a series of acquisitions to build its wholesaling presence. By the early 1980s,

AHC (then known as Alco Health Services), was the third largest wholesale drug distributor in the

United States. Through strategic acquisitions and expanded product lines, AHC grew and

conducted an initial public stock offering in 1995. In 1998 the Federal Trade Commission blocked

the acquisition of AHC by McKesson Corporation, then the largest U.S. drug company. By 2000,

AHC, with 22 distribution centers and nearly $14 billion in operating revenue, was the fourth

largest U.S. distributor of pharmaceuticals and related healthcare products and solutions.

34. Bergen was also built on mergers and acquisitions. Founded by Lucien Napoleon

Brunswig in 1907, the Brunswig Drug Company merged with Bergen Drug in 1969, a firm founded

by Emil Martini in 1947. Bergen, which had grown through acquisitions from sales of $200,000

per sales person to $1.6 million per sales person between 1975 and 1989, conducted its initial

public stock offering in 1989. Bergen continued to increase its holdings by acquiring businesses

in the healthcare distribution sector, such as pharmacy giant PharMerica. By 2000, Bergen was the

third largest U.S. distributor of pharmaceuticals and related healthcare products and solutions. 

35. The merger of AHC and Bergen on August 19, 2001 was billed as a “merger of

equals” and created Amerisource with approximately $40 billion in annualized operating revenue,

making it the nation’s largest wholesale distributor of pharmaceutical products and related

healthcare services. The Company operates in two segments: Pharmaceutical Distribution, which

is primarily its wholesale and specialty drug distribution segment (including pharmaceuticals,

proprietary medicines, cosmetics, toiletries, personal health products, sundries and home healthcare

Case 2:04-cv-00972-WY Document 1 Filed 03/05/04 Page 20 of 48
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supplies and equipment); and PharMerica, its institutional pharmacy business (providing pharmacy

services to acute care hospitals and health systems, independent retail pharmacies, alternate site

customers and national and regional retail pharmacy chains). 

36. Until quite recently Amerisource was the largest drug wholesaler, followed closely

by McKesson and Cardinal Health. However, Amerisource just lost its largest customer, the U.S.

Veteran’s Administration, which would have provided a $25 million contract defendants were

counting on maintaining. Now McKesson, which already had the Department of Defense contract,

is likely to move into the first place slot.

THE COMPANY’S ENTRENCHED BOARD OF DIRECTORS

37. Amerisource’s Board is heavily entrenched with the result that its members have

consistently abrogated their duties to oversee the conduct of the Company’s management, causing

disastrous results. Compared to the typical U.S. company director who is 59 years old and has

served on a company’s board for an average of 8.5 years (according an October 27, 2003 article

in The Wall Street Journal), the eight members of the ten-member Amerisource Board who came

over from AHC’s and Bergen’s pre-merger boards are an average of 68 years old, have been with

Amerisource on average over 20 years and have collectively served over 164 years:

(a) Defendant Yost, age 56, Amerisource’s President and CEO, has served as a

director of AHC since 1997 and held a variety of executive positions with AHC since 1974,

including serving as its Chairman, President, CEO, and Executive Vice President of Operations. As

such, Yost has been with Amerisource 30 years.

(b) Defendant Martini, age 71, who was a co-founder of and served as a director

of Bergen since 1962, and as its Chairman, President and CEO, has now served as a director for 41

years.

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(c) Defendant Brady, age 70, who served as a director of Bergen since 1973, has

now served as a director for 30 years. 

(d) Defendant Gozon, age 65, who served as a director of AHC since 1994, has

now served as a director for 9 years.

(e) Defendant Mellor, age 73, who served as a director of Bergen since 1979, has

now served as a director for 24 years.

(f) Defendant Wilson, age 67, has served as a director of Amerisource since

2000.

(g) Defendant Hagenlocker, age 64, has served as a director of AHC since 1999.

(h) Defendant Rodgers, age 77, who has served as a director of Bergen since

1982, has now served as a director for 21 years.

38. In fact, the Company’s 2001 merger was contingent upon these eight directors being

permitted to retain their lucrative positions as directors of this publicly traded company. The only

two new Board members who joined Amerisource after the merger were 66 year-old defendant

Cotros, the retired Chairman and Chief Executive Officer of Sysco, and 56 year-old defendant

Henney, a Senior Scholar in Residence at the Association of Academic Health Centers, both of

whom were appointed to the Board in January 2002 in connection with the Amerisource merger.

Because Amerisource, unlike almost every U.S. corporation, had no nominating committee, both

Cotros and Henney were hand-selected and appointed by Yost and Martini who have dominated

and controlled them and to whose views Cotros and Henney have continued to defer to.

39. This entrenchment of Amerisource’s Board has permitted all of the Company’s

directors to abrogate their authority and oversight to Yost, Martini and their cronies. Defendants

Yost, Martini, Mellor and Wilson comprised the Board’s Executive Committee which had all of

the powers and exercised all of the authority of Amerisource’s Board in between board meetings

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during the Relevant Period. The Amerisource Board met only 5 times in 2002 and 2003, so Yost

and Martini effectively had no Board oversight the other 359 days of those years.

40. As a result of the board’s entrenchment, Yost and Martini were permitted to use

their domination and control over Amerisource to plunder Amerisource’s assets, despite the

Company’s public ownership. Yost has received compensation well in excess of $1 million for

each of the past four years and each non-employee director received an unheard of stipend of

$50,000 per year, plus several thousand dollars for each Board or Board committee meeting

actually attended and over 5,000 stock options per year. Additionally, prior to the merger, the

Bergen board adopted, purportedly to incentivize its executives to stay with Bergen, (i) an

“employee loan program” through which Bergen officers received substantial loans which were

then forgiven, (ii) another executive loan program through which several Bergen officers who

reported to Martini could borrow – interest free – up to 50% of their annual salary, and (iii) a socalled “management stock accumulation” plan, through which Bergen’s officers could borrow up

to three times their annual salary which could then be forgiven via credits awarded by the Bergen

Compensation Committee based on “specified performance goals” they and Martini established.

Defendant Martini and his son Brent Martini received substantial loans under these programs and

at least $1.4 million of defendant Martini’s loans were subsequently forgiven. Moreover, Martini’s

son, Brent Martini, who served as President of Amerisource until he suddenly “resigned” on

September 30, 2002, received over $7 million dollars under a change-in-control provision pursuant

to July 27, 2001 letter agreements his father negotiated in connection with the Amerisource merger.

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DEFENDANTS’ ONGOING PRACTICES OF CAUSING AMERISOURCE

TO BE A RECIDIVIST VIOLATOR

41. Under the domination and control of Yost and Martini, Amerisource, its

predecessors and its subsidiaries have a long history of operating with reckless abandon regarding

state and federal laws and the Company and its predecessors have been cited repeatedly for

violations of state and federal laws concerning drug packaging, recycling, billing and sales

practices that put the Board on notice of the risk occasioned by their perilous course of conduct.

A. Drug Packaging Safety Violations

42. Amerisource has been cited on numerous occasions for improper handling of drugs

for sale. For instance, on November 6, 1996, AHC’s President and CEO received a “Warning

Letter” from the Federal Drug Administration indicating that during an inspection of its drug

repackaging operation at the Company’s Columbus, Ohio facility, the FDA “investigator

documented serious deviations from the Current Good Manufacturing Practices Regulations (Title

21 Code of Federal Regulations, Part 211).” Specifically, the letter stated that the “deviations”:

(a) caused the Company’s “drug products to be adulterated within the meaning

of section 501(a)(2)(B) of the Federal Food, Drug and Cosmetic Act”;

(b) caused the Company to fail “to establish adequate procedures for control of

labels and labeling to assure no label mix-ups occur. For example: labels and inserts are not

maintained under controlled access; inserts are not stored physically separated; approved

inserts/outserts are not identified in the master production records; master production records

included two different labels as the approved labels; there are no written procedures nor

documentation to assure proper inserts/outserts are used and discarded overpack labeling is not

rendered unusable before discarding.”

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(c) caused the Company to fail to “adequately perform or document training of

personnel as required by written standard operating procedures. For example: no training

documentation exists for three production personnel or any of the second shift QA personnel and

QA training was provided by an employee who had just received the training.” 

(d) caused the Company to fail to “adequately clean, document, and verify the

adequacy of cleaning of packaging rooms and equipment between production runs. For example:

no documentation exists for cleaning or inspection of rooms and equipment for at least nine batches

of product and observation of cleanup procedures, on 9/11/96, revealed inappropriate cleanup

procedures were being employed.”

(e) caused the Company to fail to “establish written master production and

control records for the (overpack-blister pack) packaging lines.”

43. The Company was specifically warned that “Federal agencies are advised of the

issuance of all warning letters about drugs and devices so that they may take this information into

account when considering the award of contracts,” and threatened further regulatory action,

including “seizure and/or injunction” if the “deviations” were not promptly corrected. 

B. Medicare Fraud

44. In an action filed by the U.S. Government in June 2000, auditors at the United States

Department of Health and Human Services alleged that between 1997 and 1998, certain nursing

homes operated by the Company’s PharMerica subsidiary in Texas improperly billed Medicare for

intravenous pharmaceuticals and related services. The suit named Sensitive Care, a former chain

of thirteen Texas nursing homes, alleging that Sensitive Care filed false claims for Medicare

reimbursement. Sensitive Care has since been shut down, filed for bankruptcy and brought a thirdparty complaint alleging that PharMerica is liable for any false claims liabilities that may be

imposed against Sensitive Care under an indemnification clause contained in the pharmacy services

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contracts between PharMerica and the nursing homes Sensitive Care formerly operated. In early

2003 the Company settled these charges with the government for an undisclosed sum. 

C. Medicaid Fraud and Prescription Drug Recycling Liability

45. On February 16, 2000, Hawaiian regulators began investigating PharMerica, a

Bergen subsidiary, for Medicaid fraud at a pharmacy operated by PharMerica. A whistle-blower

action was brought by two former employees of the former Bergen subsidiary who said they were

instructed to recycle medicines dispensed at nursing homes meant for disposal into bulk-sales

bottles. Criminal investigations ensued. 

46. On January 12, 2001, Bergen settled for $4 million in fines and penalties allegations

involving wrongful recycling of prescription drugs and overbilling by PharMerica. Hawaiian

officials said the settlement was the largest ever in the state for medical fraud. The allegations

charged Bergen with overbilling patients in nursing homes for prescriptions that were paid for by

the state’s Medicaid program. By splitting a doctor’s monthly prescription into three or four

different ones, the Company had charged Medicaid multiple dispensing fees of as much as $5 a

transaction. 

47. The Hawaiian action also alleged that Bergen retrieved unused pills – those meant

for disposal – from nursing homes and illegally and dangerously recycled them into bulk-sales

bottles which were again sold by the Company as new pharmaceutical products. Not only did the

practice violate Hawaiian law, which makes it illegal to repackage previously dispensed drugs, but

it was extremely dangerous because patients and doctors had no way of knowing the expiration

dates of medications that were recycled and repackaged by the Company and the repackaged

medicines were not identifiable in the event of a recall by a drug maker or the Food and Drug

Administration. 

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48. In January 2001, the Hawaii Attorney General’s Medicaid-investigations division

reached a $4 million settlement with Bergen’s PharMerica, which then became part of

Amerisource. Two employees pleaded guilty to felony, theft and false-claim charges. Three other

employees pleaded guilty to misdemeanor charges that involved deceptive practices. Further, in

June 2003, the Company agreed to pay $30,000 in a settlement with the Hawaii Board of Pharmacy

for violating the drug-disposal laws. 

49. In November 2002, two men filed a civil lawsuit in Hawaii against Amerisource on

behalf of their relatives for injuries sustained as a result of PharMerica’s resale of previously

dispensed pharmaceuticals. One plaintiff, Francis Markham, who’s sister lived in a Honolulu

nursing home until she died in 1999, complained that he was “horrified when [he] found out about

the drug company reselling drugs that had been returned from other patients,” because his “sister

spent her last days getting medication that may have been sold many times.” On September 17,

2003, Judge Eden Hifo of Hawaii’s First Circuit Court ruled that his case could proceed as a classaction suit on behalf of 4,000 injured patients or the families of deceased patients. 

50. The impact of each of these actions, whether criminal, civil or regulatory, was

known by the Amerisource Board which was charged with overseeing the Company’s operations

and had to acquiesce to the final resolution of each action. Each time one of these actions was

resolved, the Board was aware of the underlying misconduct and had a duty to effect and

implement programs and policies to guard against future violations of the law but did not do so.

As a result, Amerisource has continued to operate in a lawless fashion and has been exposed to

further civil, criminal and regulatory actions and damage to its reputation and standing in the

business and financial communities it operates in. This was particularly important to Amerisource

because the U.S. Veteran’s Administration was the Company’s largest customer and, as outlined

supra, required good corporate citizenship to continue this relationship. 

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FRAUDULENT BILLING PRACTICES AND DRUG MISHANDLING

DURING THE RELEVANT PERIOD

A. Distribution of Dangerous Counterfeit Prescription Drugs

51. Amerisource does not conduct drug research and manufacturing itself but instead

purchases and redistributes drugs from manufacturers to doctors, hospitals and pharmacies.

Amerisource is the nation’s largest drug distributor, followed by McKesson and Cardinal Health.

52. A recent Florida Grand Jury report showed that an estimated 46% of prescription

drugs sold are distributed directly from manufacturers to hospitals and large pharmacy chains,

while 54% are distributed through drug wholesalers such as Amerisource. Of those drugs that are

distributed through drug wholesalers, 90% go to the three largest distributors, Amerisource,

Cardinal Health, and McKesson, which together distribute more than $100 billion worth of drugs

each year, supplying the nation’s hospitals, drugstore chains and mail-order pharmacies. The other

10% go from manufacturers to smaller wholesalers, known as “secondary wholesalers,” in the

“grey market,” which then sell to pharmacies, clinics, physicians and each other. Smaller

wholesalers also sell to major wholesalers like Amerisource, which buy some of their drugs from

the secondary market where medications may be cheaper than buying directly from the

manufacturer. 

53. The recent Florida grand jury investigation report also showed that certainsecondary

wholesalers obtain medications illicitly, buying drugs at a discount from pharmacies or on the black

market from Medicaid patients. These wholesalers sometimes purchase drugs that have been

stolen, illegally imported or adulterated. Often times a version of the drug with a drastically lower

level of the active ingredient costs less and these secondary wholesalers, some of whom are

convicted criminals, repackage and resell them as the real thing. Some secondary wholesalers

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operate out of homes, strip malls, even storage sheds. As a result, sensitive drugs, such as those

requiring refrigeration, are often mishandled by secondary wholesalers.

54. Purchases from the secondary market have again enmeshed Amerisource in civil

lawsuits and a criminal investigation and likely cost the Company its $25 million Veterans

Administration contract. In 2000, it is alleged that Amerisource bought 52 bottles of counterfeit

Retrovir, an HIV medication, from a small Ohio secondary wholesaler. The bottles were found

during a routine inspection in 2001 at Amerisource’s Orlando distribution center. By turning to the

smaller wholesaler rather than buying directly from the drug’s manufacturer, Amerisource saved

about $8 per bottle on a product that costs nearly $300 a bottle, sales records showed. The

Company paid a $50,000 fine in the Orlando case. In a letter to Florida authorities in connection

with paying the fine, defendants cause the Company to state that “due to the volume of product

received daily,” the Company “is not able to inspect each piece of product that is received.”

55. In November 2001, the FDA reported that Amerisource had distributed counterfeit

Neupogen (Filgrastim) which was being recalled. The Neupogen was labeled as containing “300

mcg/1.0 ml,” but was actually packaged with “10/1.0 ml” single use vials per box. The FDA recall

notice stated that the counterfeit Neupogen was distributed in Indiana, Kentucky, Arkansas,

Louisiana, Tennessee, Mississippi, Alabama and Missouri but that the “[q]uantity of counterfeit

units distributed can not be determined.”

56. Thereafter, it was revealed that half of an $8.5 million purchase of Epogen, an antianemia drug identical to Procrit, Amerisource made in the secondary market between April 2001

and May 2002 was actually one-twentieth of its labeled strength. Amerisource bought and

distributed nearly one-third of the 2,082 boxes of Epogen it purchased on the grey market, with a

street value of $4,090 each, before investigators discovered the problem and stopped the Company

from continuing to sell the counterfeit Epogen. Those who purchased an used the defective Epogen

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suffered pain and injury. In August 2003, Timothy Fagan, whose 16-year-old son was receiving

Epogen following an emergency liver transplant, filed a lawsuit against Amerisource. The FDA

is currently investigating Fagan’s allegations. 

57. Florida state inspectors also allege that Amerisource was selling altered Procit,

another anti-anemia drug. One of the secondary wholesalers Amerisource has a contract to

purchase from is a company called Breckenridge, owned and operated by Laurence Runsdorf.

Adam Runsdorf, the son of Laurence Runsdorf, runs another secondary wholesaler named the Stone

Group. Adam Runsdorf got into the wholesale drug trade by opening the Stone Group in the same

building as Breckenridge, his father’s operation. The Stone Group is alleged to have routinely

purchased drugs with false paperwork from unlicensed sellers. Adam Runsdorf is alleged to have

then resold the drugs to his father’s company, Breckenridge, and the father’s firm would then resell

the shipments to Amerisource. While searching another alleged counterfeit drug seller’s operation,

37 invoices for Procrit sales from 2001 and 2002 demonstrated that the Stone Group sold $3.8

million worth of Procit to Breckenridge through the Stone Group. At least one of the shipments

had a lot number identified as being 5% strength, but the drug labels had been relabeled as fullstrength. Amerisource subsidiaries in Alabama, Texas and Kentucky that handle cancer drugs

allegedly received the shipments. The shipment’s paperwork proved phony, concealing the true

source of the drugs, but by the time investigators tracked the sales, the drugs had already gone to

and been consumed by patients.

58. Robert Penezic, who recently left a job as a Florida state prosecutor pursuing

counterfeit drug cases, has stated that major distributors like Amerisource might be conned into

buying fake drugs once or even twice, but that “‘if I’m conned three times, that opens up whether

I’m conned, or complicit and looking to save money for my bottom line.’”

B. Fraud and Money Laundering Charges in Connection with Drug Rebates

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59. In September 2003, it was revealed that the Federal Bureau of Investigation (“FBI”)

and the U.S. Food and Drug Administration (“FDA”) are investigating whether the Company used

a scheme to collect illegal rebates from drug manufacturers more than once on the same sale and

illegally diverted drugs into a secondary market to boost its profits. According to a September

2003 report in The Wall Street Journal, the FDA and FBI are looking at allegations that the

Company faked sales of drugs to institutional pharmacies, otherwise known as “closed-door

pharmacies,” in order to collect rebates from the manufacturers – with full knowledge that these

institutional pharmacies were then reselling the pharmaceuticals to secondary wholesalers.

Amerisource is then alleged to have bought the same drugs back from the secondary wholesalers

and resold them again, often again to closed-door pharmacies. Each time such a sale to a closeddoor pharmacy is made, a rebate (which is actually a charge-back) is received from the drug

manufacturer. Through this process it is suspected that Amerisource obtained double and triple

rebates from drug manufacturers who offer deep discounts on sales to institutional pharmacies

which pay set prices based on Medicare and Medicaid schedules. 

60. As typified in the following chart created by the FDA in its “Profile of the

Prescription Drug Wholesaling Industry - Examination of Entities Defining Supply and Demand

in Drug Distribution - Final Report,” published in 2001, the prices paid for drugs are specific to the

purchaser. By gaming the drug distribution system, defendants exposed Amerisource to millions

of dollars in potential criminal, civil and regulatory fines and penalties and damage to its reputation

and goodwill.

Table 2-2

An Illustrative Example of Pricing for a Brand Name Prescription Drug

Data Element

Cash Customers

(No 3rd Party

Payment at Point of

Sale)

Insurers

and PBMs

HMOs

Medicaid

Federal

Supply

Schedule

List Price (AWP) $50 $50 $50 $50 $50 

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Manufacturer’s price

(Manufacturer to wholesaler

other entity)

$40 

(AWP - 20%) 

$40

(AWP -

20%) 

$34 

(AWP

- 33%) 

$40 $24 

(AWP -

52%) 

Acquisition price (Wholesaler to

pharmacy)

$41 $41 NA $41 NA

Retail price at pharmacy (Total

of amounts paid by customer

and reimbursed by 3rd party

payer)

$52 

(AWP + 4%) 

$46 [b] 

(AWP -

13% +

$2.50) 

NA $43.50 

($41 + $2.50)

NA

Retail price, less typical

manufacturer rebate

NA $30 to $44

(5% to 35%

rebate)

NA $30 to $37

(15.1% to

30% rebate)

NA

Ultimate (net) amount paid by

final purchaser and/or consumer

$52 $30 to $44 $30 to

$37

$30 to $37 $24 

(Footnotes omitted.)

61. The Wall Street Journal article stated drug manufacturers are aware of the illegal

practice, but are so dependent on the big three distributors that they cannot do anything about it.

The House Energy and Commerce Committee said in June 2003 that it sent Amerisource (and

Cardinal Health and McKesson) requests for information on their pricing and billing as it probes

possible Medicare fraud.

62. In 1999, federal prosecutors in Las Vegas targeted Amerisource as part of a broad

investigation of illegal drug diversion in the Southwest. Working with Fred Evans, a two-time

felon, the FBI set up an undercover business known as V.N. Chicago Inc. (“V.N.”) in Las Vegas.

In seven months, V.N. bought $ 31.2 million worth of deeply discounted drugs meant for hospices

and nursing homes from the Sacramento division of Amerisource. V.N. quickly diverted the drugs

to other smaller wholesalers, earning nearly $ 1 million in profit. In July 2003, the U.S. Attorney

in Sacramento charged Robert Strusz (“Strusz”), a sales manager at Amerisource’s Sacramento

distribution center, with a single federal criminal count of mail fraud. Strusz pleaded guilty in

September 2003 and is cooperating with investigators. Strusz had worked closely with Evans to

arrange the sale of the discounted drugs to V.N. while employed by Amerisource. 

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63. Strusz pled guilty to receiving kickbacks in a scheme in which Amerisource sold

drugs to institutional pharmacies in excess of their needs, with the drugs then being diverted

illegally to the secondary wholesale market. According to the Criminal Information filed by the

Government, drug manufacturers are allowed sell pharmaceuticals to institutional pharmacies at

substantially discounted prices. To protect the sales markets for the manufacturers, all sales

contracts with institutional pharmacies include “own and use” clauses which require the

institutional pharmacy to represent that all of the drugs being purchased at the deep discounts are

only going to be provided to patients in institutional settings at penalty of being banned from the

preferential pricing structure. 

64. The government’s Information reveals that in order to obtain “bonuses and

promotions based on his ability to increase sales for Amerisource,” Strusz often sold drugs from

Amerisource “to individuals who he knew were going to divert the drugs from ‘own use’

pharmacies to the regular commercial market.” The Information also reveals that “[b]ecause of an

increase in orders received by Amerisource as a result of [the Amerisource sales manager’s]

actions, he was promised additional bonuses and promotions from Amerisource.”

65. Under the terms of his plea agreement, Strusz agreed to “cooperate fully and

completely” with the government in any future grand jury or trial proceeding against Amerisource

or any of its executives which exposes Amerisource to a threat of prosecution and liability. The

threat against Amerisource is real. In 2000, Bindley Western (acquired by Cardinal Health in 2001)

pleaded guilty to one count of conspiracy and paid a $20 million fine in a federal fraud case

involving allegations nearly identical to those now being made against Amerisource. Two former

Bindley Western vice presidents knowingly sold pharmaceuticals to institutional pharmacy

customers who planned on reselling the product at a profit in the secondary market. Bindley

Western ultimately paid $20 million. 

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66. On November 19, 2003, the Company announced that the U.S. Attorney’s Office

in Sacramento, California, was requesting more information on the transactions underlying the

Strusz conviction, including background into the Company’s Sacramento operations during the late

1990s. Defendants have acknowledged that the Amerisource customer in question was under

contract with Amerisource to buy medication at a lower price from the manufacturer.

DEFENDANTS’ MISAPPROPRIATION OF PROPRIETARY INFORMATION

67. Applicable securities laws and SEC regulations require that insiders in possession

of material non-public corporate information either disclose such information or abstain from

trading, even where they otherwise have no other legal obligation to disclose the information.

Between February 2001 (when defendants acknowledge the FBI notified them that it was

investigating Amerisource’s drug sales and rebate activity as far back as 1999 in conjunction with

the FBI sting operation), and September 19, 2003 (when Strusz plead guilty to mail fraud and

Amerisource’s stock plummeted to below $55 per share), defendants Martini, Yost, Brady,

Hagenlocker, Rodgers, Collis, Carpenter and Dimick usurped adverse internal Amerisource data

to dispose of significant amounts of stock without disclosing the Company’s material, non-public

proprietary information. During that time period, Amerisource’s stock traded up from between $48

and $56 per share in February 2001, to above $80 in 2002 and above $70 in 2003, before

plummeting to below $54 per share on the September 19, 2003 news of Strusz’ guilty plea in

exchange for his promise to assist in the prosecution of Amerisource. While the price of

Amerisource’s stock was artificially inflated, defendants disposed of the following shares of

Company stock in breach of their fiduciary duties to Amerisource:

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NAME DATE OF

SALE

NUMBER OF

SHARES SOLD

PRICE TOTAL

PROCEEDS

Yost 09/5/01 28,000 $65 $1,811,600

Dimick 10/1/01 34,732 $71 $2,446,866

Brady 11/14/01 971 $56 $54,395

Rodgers 12/6/01 971 $60 $58,377

Dimick 02/1/02-

02/21/02

81,952 $65 $5,301,081

Collis 04/30/02 14,000 $77 $1,084,580

Brady 05/1/02 10,000 $76 $761,153

Hagenlocker 05/6/02 8,000 $76 $606,400

Martini 05/8/02-

05/13/02

114,395 $76 $8,737,812

Collis 06/28/02 5,903 $77 $454,531

Carpenter 09/6/02 42,769 $73 $3,112,865

Brady 11/8/02 971 $68 $65,853

Rodgers 11/21/02 971 $58 $56,561

Carpenter 03/13/03 122,797 $69 $8,494,138

Collis 05/27/03 13,000 $59 $766,533

Collis 06/6/03 14,734 $70 $1,029,391

Martini 06/20/03 10,000 $71 $705,000

Total 504,166 $35,547,135

68. By engaging in, or permitting others to sell stock while in possession of material,

non-public information and misappropriation of corporate information, all defendants breached

their fiduciary duties to Amerisource and wasted millions of dollars of valuable Company assets,

by, inter alia, knowingly, willfully, and/or intentionally:

(a) failing to supervise adequately the employees and officers of Amerisource

and failing to ensure that they act with honesty and integrity in order to preserve and enhance

Amerisource’s reputation in the business community;

(b) failing to institute legal action against those responsible for engaging in the

deceptive practices in violation of state and federal securities laws and thereby exposing

Amerisource to potential liability and other financial injury resulting therefrom; and

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(c) causing Amerisource to present information to the investment community

which was materially false and misleading and failing to disclose adverse information about, inter

alia, the Company’s true operational conditions and business prospects.

69. Defendants, as a result of the substantial financial benefits they received and

continue to receive as a result of their positions at Amerisource, engaged in and/or aided and

abetted and/or acquiesced in the wrongful actions complained of herein and resolved all conflicts

of interest in favor of themselves in order to protect and preserve their positions with Amerisource

and the financial benefits that flow therefrom.

70. Defendants have made no effort to seek recovery of these illegal insider trading

proceeds. Nor have they put in place policies to prevent future recurrences of insider trading.

Besides having usurped corporate opportunities that rightfully belonged to Amerisource and its

shareholders and not to its faithless fiduciaries, these Amerisource officers and directors have

permanently damaged Amerisource’s goodwill and standing in the business community by these

acts and contributed to Amerisource’s loss of the VA contract.

DEFENDANTS’ MISCONDUCT COST THE COMPANY’S ITS LUCRATIVE

VETERANS ADMINISTRATION CONTRACT

71. Until December 31, 2003, Amerisource’s largest customer was the VA, but that $25

million contract came up for renewal in the Fall of 2003 at the same time the news of

Amerisource’s complicity in the counterfeit drug distribution and money laundering schemes was

coming out. During the Summer of 2003, the VA solicited proposals for this $3 billion annual

eight-year pharmaceutical prime vendor program starting in April 2004. Pursuant to Subpart

803.70 of the VA’s Acquisition Regulation, to receive a VA contract renewal, defendants knew

contractors doing business with the VA had to “avoid improper business practices” which

Amerisource, under their hands, clearly did not do:

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803.7000 Policy.

It is the Department of Veterans Affairs’ (VA) policy to contract with

companies that conduct business with the highest degree of integrity and honesty.

To demonstrate this commitment to integrity and honesty, contractors should have

standards of conduct and internal control systems that are designed to promote such

standards, to facilitate the timely discovery and disclosure of improper conduct in

connection with Government contracts, and to assure that corrective measures are

promptly instituted and carried out. For example, a contractors system of

management controls should provide for-- 

(a) A written code of business ethics and standards of conduct and an

ethics training program for all employees; 

(b) A mechanism, such as a hotline, by which employees may report

suspected instances of improper conduct, and instructions that encourage

employees to make such reports; 

(c) Disciplinary action for improper conduct; 

(d) Periodic reviews of company business practices, procedures, policies,

and internal controls for compliance with standards of conduct and the

special requirements of Government contracting; 

(e) Internal and/or external audits as appropriate; 

(f) Timely reporting to appropriate Government officials of any

suspected or possible violations of law in connection with Government

contracts or any other irregularities in connection with such contracts; and 

(g) Full cooperation with anyGovernment agencies responsible for either

investigation or corrective actions. 

72. Because Amerisource’s largest customer was the VA, defendants were under an

increased duty to avoid even the appearance of an impropriety. Instead of providing better

oversight and policies concerning Amerisource’s transactions with the secondary market,

defendants kept the fact that they were being investigated by the FBI and FDA for possible fraud

allegations hidden from the public and from investors until Strusz’s plea agreement was announced

on September 19, 2003. Defendants’ characterization of the ongoing FBI investigation as “old

news” in connection with the September 19, 2003 announcement was especially troubling since this

news had been concealed from the investing public for two-and-a-half years. Moreover,

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defendants’ aspersions that the Company’s transactions with the secondary wholesale market were

minimal were substantially undercut by the fact that as recently as May 2002 the Company was

purchasing and distributing to highly sensitive patients prescription Epogen with a dangerously low

efficacy levels. Due to defendants’ misconduct, the Company’s credibility and reputation in the

medical community have been greatly damaged and Amerisource has lost the $25 million VA

contract, its single largest customer, and will likely lose its standing as the largest U.S. drug

wholesaler. Defendants have also cut the Company’s fiscal 2003 earnings estimates by $0.40 due

to the loss of the VA contract. 

AIDING AND ABETTING AND CONCERTED ACTION

73. In committing the wrongful acts alleged herein, the defendants have pursued, or

joined in the pursuit of, a common course of conduct, and have acted in concert with one another

in furtherance of their common plan or design. In addition to the wrongful conduct herein alleged

as giving rise to primary liability, the defendants further aided and abetted and/or assisted each

other in breach of their respective duties as alleged herein.

74. During all times relevant hereto, the defendants collectively and individually

initiated a course of conduct which was designed to and did maintain the Director Defendants’

executive and directorial positions at Amerisource and the profits, power and prestige which the

Director Defendants enjoyed as a result of these positions. In furtherance of this plan, conspiracy

and course of conduct, the defendants collectively and individually took the actions set forth herein.

75. The purpose and effectofthe defendants’ common enterprise and/or common course

of conduct was, among other things, to disguise the defendants’ violations of law, breaches of

fiduciary duty, waste of corporate assets, abuse of control and gross mismanagement so they could

protect and enhance their executive and directorial positions and the substantial compensation and

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prestige they obtained thereby and to permit the Selling Defendants to sell over $35 million worth

of Amerisource stock while in possession of material, non-public information.

76. The defendants accomplished their common enterprise and/or common course of

conduct by abusing their control over Amerisource. Each of the defendants was a direct, necessary,

and substantial participant in the common enterprise, and/or common course of conduct complained

of herein.

77. Each of the defendants aided and abetted and rendered substantial assistance in the

wrongs complained of herein. In taking such actions to substantially assist the commission of the

wrongdoing complained of herein, each of the defendants acted with knowledge of the primary

wrongdoing, substantially assisted the accomplishment of that wrongdoing, and was aware of his

overall contribution to and furtherance of the wrongdoing.

DERIVATIVE AND DEMAND FUTILITY ALLEGATIONS

78. Plaintiff brings this action derivatively in the right and for the benefit of

Amerisource to redress injuries suffered and to be suffered by Amerisource as a direct result of the

breaches of fiduciary duty, violations of law, abuse of control and gross mismanagement, as well

as the aiding and abetting thereof, by the defendants. This is not a collusive action to confer

jurisdiction on this Court which it would not otherwise have.

79. Plaintiff will adequately and fairly represent the interests of Amerisource and its

shareholders in enforcing and prosecuting its rights.

80. Plaintiff is an owner of Amerisource stock and was an owner of Amerisource stock

at the times relevant to the defendants’ illegal and wrongful course of conduct alleged herein.

81. As a result of the facts set forth throughout this complaint, and additionally pursuant

to Delaware law, which governs Amerisource’s internal affairs, demand on the Amerisource Board

of Directors to institute this action against the officers and the members of the Amerisource Board

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of Directors is not necessary because such a demand would be a futile and useless act, particularly

for the following reasons:

(a) The directors of Amerisource participated in, approved and permitted the

wrongs alleged herein to have occurred and participated in efforts to conceal or disguise those

wrongs from Amerisource’s stockholders and are therefore not disinterested parties;

(b) Amerisource’s Board has been dominated and controlled byYost andMartini.

Eight of the ten Amerisource directors have served together for decades as directors and/or officers

of Amerisource.

(c) Until recently, Amerisource had no nominating committee. As a result, all

Board nominations and committee assignments, and thus Board composition and governance issues,

were controlled directly or indirectly by Yost and Martini.

(d) By refusing to turn important corporate governance issues over to an

independent board committee, Amerisource’s Board has continued to cause the Company to confer

benefits on themselves that damage Amerisource and its shareholders.

(e) The Board’s Executive Committee, which exercises the Board’s power when

it is not sitting, has been dominated by Yost and Martini.

(f) In order to bring this suit, all of the directors of Amerisource would be forced

to sue themselves and persons with whom they have extensive business and personal entanglements,

which they will not do, thereby excusing demand.

(g) The acts complained of constitute violations of applicable law and the

fiduciary duties owed by Amerisource’s officers and directors and these acts are incapable of

ratification.

(h) Any suit by the directors of Amerisource to remedy these wrongs would

expose the Director Defendants and Amerisource to further actions for breach of fiduciary duty

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which could result in civil actions being filed against one or more of the Director Defendants – or

criminal sanctions as several state and federal criminal investigations are currently underway --

thus, the Board is hopelessly conflicted in making any supposedly independent determination

whether to sue themselves.

(i) Each Director Defendant is the recipient of significant remuneration paid by

the Company, the continuation of which is dependent upon their continued cooperation with the

other members of the Board of Directors, and their participation and acquiescence in the wrongdoing

set forth herein.

(j) Amerisource’s current and past officers and directors are protected against

personal liability for their acts of mismanagement, waste and breach of fiduciary duty alleged in this

Complaint by directors’ and officers’ liability insurance policies which they caused the Company

to purchase for their protection with corporate funds, i.e., monies belonging to the stockholders of

Amerisource. However, due to certain changes in the language of directors’ and officers’ liability

insurance policies in the past few years, the directors’ and officers’ liability insurance policies

covering the defendants in this case contain provisions which eliminate coverage for any action

brought directly by Amerisource against these defendants, known as, inter alia, the “insured versus

insured exclusion.” As a result, if these directors were to sue themselves or certain of the officers

of Amerisource, there would be no directors’ and officers’ insurance protection and thus, this is a

further reason why they will not bring such a suit. On the other hand, if the suit is brought

derivatively, as this action is brought, such insurance coverage exists and will provide a basis for

the Company to effectuate a recovery.

(k) Due to their longstanding association as directors of the Company, their

positions as present or former employees, and their extensive, long-standing personal, professional,

and familial relationships, as alleged herein at ¶¶15-24, the Director Defendants are so dominated

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and controlled so as not to be capable of exercising independent objective judgment of the

allegations contained herein.

82. Plaintiff has not made any demand on shareholders of Amerisource to institute this

action since such demand would be a futile and useless act for the following reasons:

(a) Amerisource is a publicly traded company with approximately 112 million

shares outstanding, and thousands of shareholders;

(b) Making demand on such a number of shareholders would be impossible for

plaintiff who has no way of finding out the names, addresses or phone numbers of shareholders; and

(c) Making demand on all shareholders would force plaintiff to incur huge

expenses, assuming all shareholders could be individually identified.

FIRST CLAIM FOR RELIEF

Derivative Claim for Breach of Fiduciary Duty

Against All Defendants

83. Plaintiff incorporates by reference and realleges each and every allegation contained

in this complaint as though fully set forth herein.

84. Each defendant knowingly, willfully, and/or intentionally violated and/or caused

Amerisource to violate state and federal laws and regulations. As officers and/or directors of a

publicly held company, defendants had a duty to put the interests of Amerisource above their own

interests.

85. As a result of defendants’ malfeasance, Amerisource has had its reputation in the

sensitive drug distribution industry and the business community tarnished and has been severely

damaged. Amerisource has suffered and will continue to suffer damages for violating state and

federal laws and endangering the health of millions of Americans. Amerisource’s reputation and

goodwill have been harmed and it has lost the VA contract and its earnings have been slashed. 

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86. By reason of the foregoing, Amerisource has been damaged and has sustained, and

will continue to sustain, irreparable injury for which it has no adequate remedy at law.

SECOND CLAIM FOR RELIEF

Derivative Claim for Abuse of Control

Against All Defendants

87. Plaintiff incorporates by reference and realleges each and every allegation contained

in this complaint as though fully set forth herein.

88. As directors and/or officers of Amerisource, defendants controlled Amerisource.

The defendants have used the control over the operations and finances of Amerisource for their

own benefit and/or in disregard of their obligations of good faith, due care and loyalty for which

they are legally responsible to Amerisource.

89. By reason of the foregoing, Amerisource has been damaged and has sustained, and

will continue to sustain, irreparable injury for which it has no adequate remedy at law.

THIRD CLAIM FOR RELIEF

Derivative Claim for Gross Mismanagement

Against All Defendants

90. Plaintiff incorporates by reference and realleges each and every allegation contained

in this complaint as though fully set forth herein.

91. By their actions alleged herein defendants, either directly or through aiding and

abetting, abandoned and abdicated their responsibilities and fiduciary duties with regard to

prudently managing the assets and business of Amerisource in a manner consistent with the

operations of a publicly held corporation.

92. As a direct and proximate result of defendants’ gross mismanagement and breaches

of duty alleged herein, Amerisource has sustained significant damages in excess of hundreds of

millions of dollars.

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93. By reason of the foregoing, Amerisource has been damaged and has sustained, and

will continue to sustain, irreparable injury for which it has no adequate remedy at law.

FOURTH CLAIM FOR RELIEF

Derivative Claim for Waste of Corporate Assets

Against the Director Defendants

94. Plaintiff incorporates by reference and realleges each and every allegation contained

in this complaint as though fully set forth herein.

95. By failing to properly consider the interests of the Company and its public

shareholders by failing to conduct proper supervision, the Director Defendants have caused

Amerisource to waste valuable corporate assets by incurring potentially millions of dollars of legal

liability and/or legal costs to defend defendants’ unlawful actions.

96. By reason of the foregoing, Amerisource has been damaged and has sustained, and

will continue to sustain, irreparable injury for which it has no adequate remedy at law.

FIFTH CLAIM FOR RELIEF

Derivative Claim for Unjust Enrichment Against Defendants

Martini, Yost, Hagenlocker, Rodgers, Collis, Carpenter and Dimick

97. Plaintiff incorporates by reference and realleges each and every allegation contained

in this complaint as though fully set forth herein.

98. By receiving excessive compensation and selling stock while in possession of

material, non-public information in breach of their fiduciary duties and usurping Amerisource’s

corporate assets, the defendants who received excessive compensation as alleged herein and the

Selling Defendants were unjustly enriched at the expense of Amerisource and/or have aided and

abetted the unjust enrichment of the remaining Individual Defendants.

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99. Defendants should be required to disgorge the gains which they will obtain or have

unjustly obtained at the expense of Amerisource. A constructive trust for the benefit of

Amerisource and its shareholders should be imposed thereon.

100. As a direct result of the defendants' misconduct and failure to oversee, and

Amerisource's defective disclosure procedures, Amerisource has suffered and will continue to

suffer damage to its reputation and goodwill.

SIXTH CLAIM FOR RELIEF

Usurpation of Corporate Opportunity Against the Selling Defendants

101. Plaintiff incorporates by reference and realleges each and every allegation contained

in this Complaint as though fully set forth herein. 

102. Each of the Selling Defendants, defined herein at ¶28, controlled Amerisource and

was provided with the Company’s proprietary, non-public information concerning the FBI

investigation into the Company’s drug sales and related rebate transactions. The Selling

Defendants engaged in conduct which breached their fiduciary duties to Amerisource by

deliberately usurping corporate opportunities from Amerisource via the use of confidential

Amerisource information for their own personal benefit.

103. By reason of the foregoing conduct, the Selling Defendants usurped Amerisource’s

opportunities and have damaged Amerisource.

104. Plaintiff, as a shareholder representative of Amerisource, seeks damages for

Amerisource.

PRAYER FOR RELIEF

WHEREFORE, plaintiff prays for relief and judgment, including preliminary and permanent

injunctive relief, as follows:

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A. Awarding restitution, compensatory and punitive damages on behalf of Amerisource

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;

B. Extraordinary equitable and/or injunctive relief as permitted by law, equity and state

statutory provisions sued hereunder, including attaching, impounding, imposing a constructive trust

on or otherwise restricting the proceeds of any benefits accruing to defendants by virtue of their

illegal acts or their other assets, so as to assure that plaintiff and Amerisource have an effective

remedy;

C. Disgorgement of defendants’ illicit compensation and insider trading proceeds and

immediate repayment of defendants’ illicit loans with interest;

D. Awarding plaintiffits reasonable costs and expenses incurred in this action, including

counsel fees and expert fees; and

E. Such other and further relief as the Court may deem just and proper.

JURY DEMAND

Plaintiff hereby demands a trial by jury.

DATED: March 5, 2004 LAW OFFICES

BERNARD M. GROSS, P.C.

BY:

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DEBORAH R. GROSS

1515 Locust Street, 2nd Floor

Philadelphia, PA 19102

Telephone: 215/561-3600

215/561-3000 (fax)

MILBERG WEISS BERSHAD

HYNES & LERACH LLP

WILLIAM S. LERACH

DARREN J. ROBBINSMARY K. BLASY

401 B Street, Suite 1700

San Diego, CA 92101-4297

Telephone: 619/231-1058

619/231-7423 (fax)

Attorneys for Plaintiff

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VERIFICATION

I, Deborah R. Gross. by declare as follows:

105. I am a member of the law firm of Law Offices Bernard M. Gross, P.C., one of the

counsel for plaintiffs in the above-entitled action. I have read the foregoing complaint and know

the contents thereof. I am informed and believe the matters therein are true and on that ground

allege that the matters stated therein are true.

106. I make this Verification because plaintiffs are absent from the County of

Philadelphia where I maintain my office.

Executed this 5th day of March, 2004, at Philadelphia, Pennsylvania. 

______________________________

DEBORAH R. GROSS

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