UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

MASSIMO GARIDDI, Individually and on

Behalf Of All Others Similarly Situated,

 Plaintiff,

 v.

JERRY L. MOSINGO, DAVID A.

STOCKMAN, J. MICHAEL STEPP and

BRYCE KOTH,

 Defendants.

No. 05CV5251 (MGC)

“ECF CASE”

CLASS ACTION COMPLAINT

FOR VIOLATIONS OF FEDERAL

SECURITIES LAWS

JURY TRIAL DEMANDED

Plaintiff, by his undersigned counsel, for plaintiff’s Class Action Complaint,

alleges the following upon personal knowledge as to plaintiff and plaintiff’s own acts, and upon

information and belief based upon the investigation of plaintiff’s attorneys as to all other matters. 

The investigation includes the thorough review and analysis of public statements, publicly filed

documents of Collins & Aikman Corporation (“Collins & Aikman” or the “Company”), press

releases, news articles, and the review and analysis of accounting rules and related literature.

Plaintiff believes that further substantial evidentiary support will exist for the allegations set

forth below after a reasonable opportunity for discovery.

SUMMARY OF ACTION

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

publicly traded securities of Collins & Aikman between May 15, 2003 and March 17, 2005,

inclusive (the “Class Period”), against certain executive officers and directors of Collins &

Aikman for violations of the Securities Exchange Act of 1934 (the “1934 Act” or the “Exchange

Act”).

2. Collins & Aikman is engaged primarily in the design, engineering and

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manufacture of automotive interior components, systems, and modules. The Company supplies

three primary product categories – plastic components and cockpits, soft trim and

convertible roof systems. Its products include instrument panels, fully assembled cockpit

modules, floor and acoustic systems, automotive fabric and interior trim, as well as exterior trim

and trim set, backlights, well slings, tonneau covers, and power actuating systems. Collins and

Aikman employs 24,000 individuals and has a network of more than 100 technical centers, sales

offices and manufacturing sites in 17 countries.

3. On March 17, 2005, Collins & Aikman announced that it was delaying its 2004

earnings report due to improper accounting practices related to supplier rebates, which

management believed would require a restatement of the results of the first three quarters of

2004. The Company further announced that its internal investigation was ongoing and that the

accounting improprieties could result in the Company restating its financial results for fiscal year

2003 as well. In particular, the Company disclosed that it conducted an internal review of vendor

rebates since 2002 and discovered that it had overstated revenues by approximately $12 million.

The market reacted swiftly and negatively to the news: Collins & Aikman’s common stock fell

nearly 24% from a closing price of $1.63 on March 16, 2005 to close at $1.24 on March 17,

2005, on heavy trading volume, six times the average daily volume.

4. The Company’s reported financial results were materially false and misleading, 

and violated Generally Accepted Accounting Principles (“GAAP”) and the Company’s stated

accounting policies. Moreover, Defendants represented to the public that Collins & Aikman was

a successful automotive supply company, with positive financial results, while concealing that

the Company’s financial expectations were the results of Defendants having artificially inflated

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the Company’s revenues by failing to properly account for supplier credits and rebates.

5. Investors who purchased stock in Collins & Aikman during the Class Period

purchased stock at prices inflated by the misstatements alleged in this Complaint and were

injured when the value of their investments fell due to the false and misleading statements

alleged herein.

JURISDICTION AND VENUE

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

the Exchange Act [15 U.S.C. §§ 78j(b) and 78t(a)] and Rule 10b-5 promulgated thereunder by

the SEC [17 C.F.R. § 240.10b-5].

7. This Court has jurisdiction over the subject matter of this action pursuant to 28

U.S.C. §§ 1331 and 1337 and Section 27 of the Exchange Act [15 U.S.C. § 78aa].

8. Venue is proper in this Judicial District pursuant to Section 27 of the Exchange

Act, and 28 U.S.C. § 1391(b).

9. In connection with acts, transactions and conduct alleged herein, Defendants used

the means and instrumentalities of interstate commerce, including the United States mails,

interstate telephone communications and the facilities of national securities exchanges and

markets.

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PARTIES

11. Plaintiff Massimo Giriddi purchased Collins & Aikman stock at artificially 

inflated prices during the Class Period and has suffered damages as shown in the attached

Certification. 

12. Non-party Collins & Aikman is incorporated under the laws of the State of

Delaware, with its principal executive offices located at 250 Stephenson Highway, Troy,

Michigan 48083. On May 17, 2005, Collins & Aikman announced that it and substantially all of

its domestic subsidiaries had filed voluntary petitions to reorganize under Chapter 11 of the

Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of Michigan. But for the

protection afforded to Collins & Aikman by the automatic stay provisions of the United States

Bankruptcy Code, Collins & Aikman would be a defendant in this action.

13. Defendant Jerry L. Mosingo served as Collins & Aikman’s President and Chief

Executive Officer until August 11, 2003. Defendant Mosingo approved Collins & Aikman’s

materially false and misleading press releases and signed the Company’s quarterly report on

Form 10-Q for the period ending March 31, 2003, which was filed with the SEC during the Class

Period.

14. Defendant David A. Stockman served as Collins & Aikman’s Chief Executive 

Officer from August 11, 2003 until he resigned on May 12, 2005. During the Class Period,

Stockman was Chairman of the Company’s Board of Directors. Defendant Stockman approved

Collins & Aikman’s materially false and misleading press releases and signed the Company’s

Fiscal Year 2003 fourth quarter and year-end report on Form 10-K, and the Company’s quarterly

reports on Form 10-Q for the periods ending June 30, 2003 and September 30, 2004,

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respectively, which were filed with the SEC during the Class Period.

15. Defendant J. Michael Stepp served as Collins & Aikman’s Vice President and

Chief Financial Officer (“CFO”) until October 13, 2004, when he stepped down as CFO. During

the Class Period, Stepp was Vice Chairman of the Company’s Board of Directors. Defendant

Stepp approved Collins & Aikman’s materially false and misleading press releases and signed

the Company’s Fiscal Year 2003 fourth quarter and year-end report on Form 10-K, and the

Company’s quarterly reports on Form 10-Q for the periods ending March 31, 2003, June 30,

2003, September 30, 2003, March 31, 2004, and June 30, 2004, respectively, which were filed

with the SEC during the Class Period.

16. Defendant Bryce Koth has served as Collins & Aikman’s CFO since October 13,

2004. Defendant Koth approved Collins & Aikman’s materially false and misleading press

releases and signed the Company’s quarterly report on Form 10-Q for the period ending

September 30, 2004, which was filed with the SEC during the Class Period.

17. Defendants Mosingo, Stockman, Stepp, and Koth are collectively referred to 

herein as the “Defendants.”

18. By reason of their positions with the Company, the Defendants had access to

internal documents, reports, and other information, including adverse non-public information

concerning the Company’s business and financial condition, and attended management and/or

board of director meetings. As a result of the foregoing, they were responsible for the

truthfulness and accuracy of the Company’s public reports and releases described herein.

19. Collins & Aikman and the Defendants, as officers and/or directors of a publicly 

traded Company, had a duty to disseminate truthful and accurate information with respect to, and

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to correct any public statements issued by or on behalf of, the Company that had become false

and misleading.

20. Each defendant knew or recklessly disregarded that the misleading statements 

and omissions complained of herein would adversely affect the integrity of the market for the

Company’s common stock and would cause the price of the Company’s common stock to

because artificially inflated. Each of the Defendants acted knowingly or in such a reckless

manner as to constitute a fraud and deceit upon plaintiff and the other members of the Class.

21. Defendants are liable, jointly and severally, as direct participants in the 

coconspirators of the wrongs complained of herein.

CLASS ACTION ALLEGATIONS

22. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of all those who purchased or otherwise acquired the

securities of Collins & Aikman during the Class Period and who suffered damages (the “Class”).

Throughout the Class Period, Collins & Aikman’s common stock actively traded on the NYSE

under the ticker symbol “CKC.” Excluded from the Class are Defendants, the officers and

directors of the Company, at all relevant times, members of their immediate families and their

legal representatives, heirs, successors, or assigns and any entity in which Defendants have or

had a controlling interest.

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

impracticable. According to the Company’s report filed on Form 10-Q with the SEC on

November 17, 2004, Collins & Aikman had approximately 83,630,087 shares of common stock

outstanding. While the exact number of Class members is unknown to plaintiff at this time and

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can only be ascertained through appropriate discovery, plaintiff believes that there are hundreds

or thousands of members in the proposed Class. Record owners and other members of the Class

may be identified from records maintained by Collins & Aikman or its transfer agent and may be

notified of the pendency of this action by mail, using the form of notice similar to that

customarily used in securities class actions.

24. Plaintiff’s claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by Defendants’ wrongful conduct in violation of

federal law that is complained of herein. 

25. Plaintiff will fairly and adequately protect the interests of the members of the

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

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

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

questions of law and fact common to the Class are:

(a) whether the federal securities laws were violated by Defendants’ acts as

alleged herein;

(b) whether statements made by Defendants to the investing public during the

Class Period misrepresented material facts about the business, operations, financial

condition and management of Collins & Aikman;

(c) whether Defendants acted knowingly or recklessly in making materially

false and misleading statements during the Class Period; and

(d) whether the market prices of the Company’s common stock were

artificially inflated or distorted during the Class Period because of Defendants’ conduct

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complained of herein; and

(e) whether the members of the Class have sustained damages and the proper

measure of such damages.

27. A class action is superior to all other available methods for the fair and efficient

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

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

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

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

a class action.

SUBSTANTIVE ALLEGATIONS

28. On March 17, 2005, Collins & Aikman issued a press release announcing a delay

in filing its Form 10-K and admitted that the Company had improperly accounted for $2 million

in vendor rebates in 2004, thereby requiring a restatement of its results for the first three quarters

of 2004 and perhaps of fiscal year 2003. Collins & Aikman further announced that the

Company’s audit committee had retained the law firm of Davis & Polk to assist with it ongoing

investigation.

False and Misleading Statements During the Class Period

29. The Class Period begins on May 15, 2003, the day that the Company issued a

press release announcing its financial results for first quarter 2003. The press release stated

in pertinent part as follows:

According to Jerry Mosingo, C&A President and CEO, “First quarter 2003 sales

of $1.035 billion represented an increase of $120 million or 13 percent over 2002

first quarter sales of $915 million.” This increase was attributable to new program

launches, increased content per vehicle, favorable foreign exchange translation

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and sales from 2003 acquisitions.

The company reported first quarter 2003 operating income of $17.4 million, a net

loss from continuing operations of $28.7 million or 34 cents per share and

EBITDA of $50.8 million. These results compared to operating income in the first

quarter of 2002 of $54.4 million, a net loss from continuing operations of $6.7

million or 10 cents per share, and EBITDA of $84.9 million. The first quarter

2003 results include $18.1 million in charges for the impairment of long-lived

assets and the first quarter 2002 results include $9.1 million of restructuring

charges.

EBITDA was $50.8 million for the first quarter of 2003. On a comparable basis,

EBITDA for the first quarter of 2002 was $84.9 million, The first quarter 2003

EBITDA calculations include $18.1 million in charges for the impairment of 

long-lived assets and the first quarter 2002 EBITDA calculations included $9.1

million of restructuring charges. A reconciliation of our EBITDA, a non- GAAP

financial measure, to U.S. GAAP operating income, our most comparable GAAP

figure, is set out in the attached EBITDA reconciliation schedule. The company

believes that EBITDA is a meaningful measure of performance as it is commonly

utilized in the industry to analyze operating performance, liquidity and entity

valuation. EBITDA should not be construed as income from operations, net

income (loss) or cash flow from operating activities as determined by generally

accepted accounting principles. Other companies may calculate EBITDA

differently.

30. Collins & Aikman’s financial results for the first quarter of 2003 were repeated

and reaffirmed in the Company’s Report on Form 10-Q filed with the SEC on or about May 15,

2003, which was signed by Defendants Mosingo and Stepp. That Form 10-Q also stated:

The condensed consolidated financial statements include the accounts of the

Company and its subsidiaries. In the opinion of management, the accompanying

condensed consolidated financial statements reflect all adjustments, including

adjustments of a normal and recurring nature necessary for a fair presentation of

financial position and results of operation. Certain prior year items have been

reclassified to conform to the 2003 presentation.

31. On August 11, 2003, the Company announced the appointment of Defendant

Stockman as Chief Executive Officer. Defendant Mosingo resigned as President, Chief

Executive Officer, and a Director of the Company.

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32. On August 15, 2003, the Company issued a press release entitled “Collins &

Aikman Announces Second Quarter EPS of 13 Cents Reduces Net Debt by $54 Million,”

announcing its financial results for the second quarter of 2003. The press release stated in

pertinent part:

Collins and Aikman Corporation today reported second quarter and year-to-date

results for the six months ended June 30, 2003. For the second quarter 2003, the

company reported earnings per share of 13 cents from continuing operations

versus a loss of 46 cents for the same period of 2002. The company reported

second quarter 2003 sales of $1.034 billion and operating income of $43.5

million, which includes restructuring and asset impairment charges of $5.7

million. On a comparable basis for the second quarter 2002, Collins and Aikman

reported sales of $1.085 billion and operating income of $81.5 million.

We estimate net sales for the year will be $3.9 billion to $4.0 billion and we

expect operating income to be in the $135 million to

$145 million range for 2003. EBITDA is expected to be in the $265 million to

$280 million range. In light of our second quarter earnings we now anticipate the

full year 2003 will result in a loss per common share of $.04 to $.05 range. These

estimates are after all impairment and restructuring charges. Capital spending is

expected to be in the $135 million to $145 million range for 2003.

33. Collins & Aikman’s second quarter 2003 financial results were repeated and

reaffirmed in the Company’s Report on Form 10-Q filed with the SEC on or about August 15,

2003, which was signed by Defendants Stockman and Stepp. That Form 10-Q also stated:

The condensed consolidated financial statements include the accounts of the

Company and its subsidiaries. In the opinion of management, the accompanying

condensed consolidated financial statements reflect all adjustments, including

adjustments of a normal and recurring nature, necessary for a fair presentation of

financial position and results of operation. Certain prior year items have been

reclassified to conform to the 2003 presentation.

34. On November 13, 2003, the Company issued a press release entitled “Collins &

Aikman Announces Improved Third Quarter Financial Results,” regarding its financial results

for

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the third quarter of 2003. The press release stated in pertinent part:

Collins and Aikman Corporation today reported third quarter and year-to-date

results for the nine months ended September 30, 2003. For the third quarter,

which is the company’s seasonally weakest quarter, the company reported net

sales of $902 million compared to $923 million in the third quarter of 2002, a 2%

decline which mainly reflected reduced North American customer build volumes.

The company also reported a loss of 38 cents per share from continuing

operations versus a loss of 54 cents per share in the same period in 2002. The

third quarter results included after-tax charges for restructuring and long-lived

asset impairments of $16.0 million (or 19 cents per share) and $21.4 million (or

26 cents per share) in 2003 and 2002, respectively.

EBITDA was $41.9 million for the third quarter of 2003 as compared to $21.8

million for the third quarter of 2002. The third quarter 2003 EBITDA was

reduced by charges of $21.9 million for restructuring and $2.2 million for the

impairment of long-lived assets. Results for the third quarter of 2002 included

pre-tax charges of $25.1 million for restructuring and $8.7 million for the

impairment of long-lived assets.

2003 Outlook

Effectively, there is no change to prior guidance for earnings excluding

restructuring and impairment charges. All estimates below are after the impact of

full-year pre-tax restructuring and impairment charges of $62 million, increased

from our prior estimate of $42 million. We estimate net sales for the full year will

be $3.9 billion to $4.0 billion and we expect operating income to be in the $115

million to $125 million range for 2003. EBITDA is expected to be in the $245

million to $260 million range. We not anticipate that full year 2003 will result in a

loss per common share of 60 cents to 70 cents range. Capital spending is expected

to be in the $155 million to $165 million range for 2003.

35. Collins & Aikman’s financial results for the third quarter of 2003 were repeated

and reaffirmed in the Company’s Report on Form 10-Q filed with the SEC on or about

November 14, 2003, which was signed by Defendant Stepp. That Form 10-Q also stated:

The condensed consolidated financial statements include the accounts of the

Company and its subsidiaries. In the opinion of management, the accompanying

condensed consolidated financial statements reflect all adjustments, including

adjustments of a normal and recurring nature, necessary for a fair presentation of

financial position and results of operation. Certain prior year items have been

reclassified to conform to the 2003 presentation.

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36. On February 17, 2004, the Company reported that it closed on a syndication of a

material financing facility:

Collins and Aikman Corporation announced today that the company on Friday,

February 13, 2004 closed on its syndication of a $100 million Supplemental

Revolving Credit Facility and a $185 million Tranche A-1 Term Loan. The

Supplemental Revolving Credit Facility will be available for revolving credit

loans and letters of credit. The proceeds of the Tranche A-1 Term Loan will be

used to further improve liquidity by voluntarily prepaying the existing two term

loans in forward order of maturity and will also reduce the applicable interest rate

margins. Other terms and conditions are substantially the same as the existing

facilities and term loans. These financings mature on December 31, 2005. J.P.

Morgan Securities, Inc. and Deutsche Bank Securities, Inc. served as Joint

Bookrunners and Lead Arrangers for these transactions.

37. On March 11, 2004, Collins & Aikman filed a press release entitled “Collins &

Aikman Announces Record Sales and Fourth Quarter Financial Results,” announcing record

financial results for the fourth quarter and year-end Fiscal Year 2003. Specifically, the Company

reported net sales of $1.013 billion in the fourth quarter of Fiscal Year 2003, as compared to

$963 million in the fourth quarter of 2002, a 5% increase. The Company further reported a loss

of $0.14 per share from operations in the fourth quarter of 2003, which included after-tax

charges for restructuring and long-lived asset impairments of $16.7 million (or 20 cents per

share), compared to a loss of $0.04 cents per share in the comparable period in 2002, which

included after-tax charges for restructuring and long-lived asset impairments of $13.0 million (or

16 cents per share). The press release elaborated on the Company’s financial results as follows:

The fourth quarter 2003 pre-tax restructuring charge of $13.8 million included

costs associated with the previously announced third quarter restructuring actions

that would reduce the Company’s salaried workforce by almost 800 or 15%. This

restructuring initiative and related actions are expected to reduce the company’s

fixed-cost structure by $80 million per year.

For the full-year 2003, the company reported sales of $3.98 billion compared to

$3.89 billion in the same period of 2002. The company also reported a net loss

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available to common shareholders from continuing operations of $59.1 million or

71 cents per share, which included $49.9 million (or 60 cents per share) of aftertax charges for restructuring and long-lived asset impairments. For the

comparable 2002 period, the net loss available to common shareholders from

continuing operations was $86.7 million of $1.15 per share, which included after

tax charges for restructuring and long-lived asset impairments of $40.9 million (or

53 cents per share).

C&A’s net debt, including outstandings under an off-balance sheet accounts

receivable facility, was $1.346 billion at December 31, 2003.

* * *

EBITDA was $69.4 million for the fourth quarter of 2003, which was reduce d by

charges of $13.8 million for restructuring and $7.3 million for the impairment of

long-lived assets. The fourth quarter 2003 EBITDA was $68.2 million, which was

reduced by charges of $4.8 million for restructuring and $9.3 million for the

impairment of long-lived assets.

38. On March 17, 2004, Collins & Aikman filed its Annual Report on

Form 10-K with the SEC for the fiscal year ended December 31, 2003, which was signed by

Defendants Stockman and Stepp. The 2003 10-K repeated and reaffirmed the materially false

and misleading financial information contained in the March 11, 2004 press release, and further

stated as follows:

The preparation of consolidated financial statements in conformity with

accounting principles generally accepted in the United States of America requires

management to make estimates and assumptions that affect the reported amounts

of assets and liabilities and disclosure of contingent assets and liabilities at the

date of the consolidated financial statements and the reporting period.

Considerable judgment is often involved in making these determinations, the use

of different assumptions could result in significantly different results.

Management believes its assumptions and estimates are reasonable and

appropriate, however actual results could differ from those estimates. Certain of

the Company’s more critical accounting estimates are described below.

* * *

As of the end of the period covered by this report, the Company’s Chief

Executive Officer and the Company’s Chief Financial Officer, the Certifying

Officers,” evaluated the effectiveness of the design and operation of the

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Company’s “disclosure controls and procedures” (as defined in the Securities

Exchange Act of 1934). Based on that evaluation, the Certifying Officers have

concluded that the Company’s disclosure controls and procedures are effective to

ensure that information required to be disclosed by the Company in the reports

that it files and submits under the Exchange Act is recorded, processed,

summarized and reported as and when required, and are effective to ensure that

such information is accumulated and communicated to the Company’s

management, including its Certifying Officers, as appropriate to allow timely

decisions regard required disclosure. In addition, the Certifying Officers also

disclosed to the Company’s auditors and the audit committee of the Board of

Directors all significant deficiencies in the design or operation of internal controls

that could adversely affect the Company’s ability to record, process, summarize

and report financial data. A summary of the key items disclosed and the changes

in internal controls resulting from corrective actions are discussed below.

b. Changes in internal controls:

An evaluation of internal controls was conducted for the year ended December

31, 2003. The following paragraphs detail management’s significant areas of

focus to further enhance internal controls: Other than the above, there were no

significant changes in the Company’s internal controls or in other factors that

could significantly affect internal controls. The Company also intends to refine its

internal control procedures on an ongoing basis as deemed appropriate with a

view towards making improvements.

39. On May 6, 2004, Collins & Aikman issued a press release entitled “Collins &

Aikman Announces First Quarter Financial Results And Record First Quarter Sales,”

announcing

its financial results for first quarter 2004, the period ended March 31, 2004. The Company

reported as follows:

The company reported record first quarter net sales in 2004 of $1.066 billion

compared to $1.035 billion in the first quarter of 2003, a 3% increase which

mainly reflects improved currency impact. The company reported a loss of $23.3

million or 28 cents per share in the first quarter of 2004, which included after-tax

charges for restructuring, long-lived asset impairments and costs related to early

extinguishment of debt of $10.6 million (or 13 cents per share).

In the comparable 2003 quarter, the company had a loss of $26.2 million or 31

cents per share, which included after-tax charges for restructuring and long-lived

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asset impairments of $13.2 million (or 15 cents per share).

Commenting on the company’s first quarter operating results, David A.

Stockman, C&A Chairman and CEO stated, “We are pleased with the significant

performance improvement in EBITDA before restructuring and impairment

charges. For the third consecutive quarter our EBITDA results were up double

digits from the prior year on a comparable basis. We are also seeing our previous

problem plants turning around their financial results from the 2003 levels.”

The first quarter 2004 pre-tax restructuring charge of $9.5 million included costs

associated with additional rightsizing efforts to reduce corporate overhead and

salaried headcount and to close additional manufacturing facilities. This

restructuring initiative is expected to further reduce the company’s fixed-cost

structure by approximately $13 million when fully implemented. C&A’s net debt,

including out standings under an off-balance sheet accounts receivable facility,

was $1.432 billion at March 31,2004. 

40. Collins & Aikman’s financial results for the first quarter ended March 31, 2004, 

were repeated and reaffirmed in the Company’s Report on Form 10-Q filed with the SEC on or

about May 7, 2004, which was signed by Defendant Stepp. The 10-Q also stated the following:

The condensed consolidated financial statement include the accounts of the

Company and its consolidated subsidiaries and in the opinion of management,

contain all adjustments, including adjustments of a normal and recurring nature

necessary for a fair presentation of financial position and results of operations.

41. On August 2, 2004, Collins & Aikman issued a press release announcing its

financial results for the second quarter of 2004, the period ending June 30, 2004. More

specifically, the Company, in its press release, stated:

The company reported record second quarter 2004 net sales of $1.036 billion. The

company reported a loss of 35 cents per share in the second quarter of 2004,

which included after-tax charges for restructuring and long-lived asset

impairments of $26.0 million (or 3 1 cents per share). In the comparable 2003

quarter, the company had income of 13 cents per share, which included after-tax

charges for restructuring and long-lived asset impairments of $4.4 million (or 5

cents per share).

Commenting on the company’s second quarter operating results, David A.

Stockman, C&A Chairman and CEO, stated, “For the fourth consecutive quarter

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our EBITDA performance, excluding restructuring and impairment charges was

up significantly from the prior year on a comparable basis. The savings from the

restructuring program that began in the third quarter of 2003 is resulting in

significant fixed cost savings as indicated by our yearover- year decline in selling,

general and administrative expenses.”

The second quarter 2004 pre-tax restructuring charge of $10.4 million included

costs associated with additional actions to right size its overhead structure, further

reduce salaried headcount and streamline the senior management team on a

worldwide basis. This restructuring initiative is expected to further reduce the

company’s cost structure by approximately $11 million when fully implemented.

During the second quarter 2004, the company recognized $27.4 million of

impairments of long-lived assets primarily related to $13.6 million of Intellimold

assets and $11.0 million of customer contracts as a result of changes in customer

sourcing.

For the six months ended June 30, 2004, the company reported sales of $2.103

billion compared to $2.069 billion for the comparable period of 2003. The

company also reported a net loss of $53.0 million or 63 cents per share, which

included $35.6 million (or 43 cents per share) of after-tax charges for

restructuring and long-lived asset impairments. For the comparable 2003 period,

the net loss was $15.5 million or 19 cents per share, which included after-tax

charges for restructuring and long-lived asset impairments of $17.2 million (or 21

cents per share).

C&A’s net debt, including outstandings under an off-balance sheet accounts

receivable facility, was $1.439 billion at June 30, 2004.

42. Collins & Aikman’s financial results for second quarter 2004 were repeated

and reaffirmed in the Company’s Form 10-Q filed with the SEC on or about August 3, 2004,

which was signed by Defendant Stepp. That Form 10-Q further stated that:

The condensed consolidated financial statement include the accounts of the

Company and its consolidated subsidiaries and in the opinion of management,

contain all adjustments, including adjustments of a normal and recurring nature

necessary for a fair presentation of financial position and results of operations.

43. On August 26, 2004, the Company issued a press release announcing the

completion of its offering of $415 aggregate principal amount of Senior Subordinated Notes:

Troy, Michigan – Collins & Aikman Corporation [NYSE: CKC], today

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announced that its wholly owned subsidiary, Collins & Aikman Products Co.

(“Products”), completed an offering of $415 million in aggregate principal

amount of its senior subordinated notes due 2012 for gross proceeds of

approximately $400 million. The notes bear interest at a rate of 12.%. The notes

are guaranteed by Collins & Aikman Corporation and each of Products’

domestic subsidiaries that is a guarantor under its senior credit facility. As

previously announced, the gross proceeds from the notes offering will be used to

redeem all $400 million in principal amount of Products’ 111⁄2% senior

subordinated notes due 2006.

44. On November 9, 2004, Collins & Aikman announced the Company’s financial

results for the third quarter of 2004, the period ending September 30, 2004. Specifically, the

Company reported third quarter 2004 net sales of $864.8 million, resulting in a loss of 67 cents

per share in the third quarter of 2004, which included after-tax charges for restructuring and

long-lived asset impairments and loss on early extinguishment of debt of $25.1 million (or 30

cents per share). The Company further stated that:

The third quarter 2004 pre-tax restructuring of $9.0 million included costs

associated with additional actions to right-size the company’s overhead structure,

further reduce salaried headcount and streamline the senior management team on

a worldwide basis. This restructuring initiative is expected to further reduce the

company’s cost structure by approximately $20 million when fully implemented.

During the third quarter of 2004, the company also recognized $10.3 million of

impairments of long-lived assets primarily related to plant closings.

For the nine months ended September 30, 2004, the company reported sales of

$2,968 million compared to $2,971 million for the comparable period of 2003.

The company also reported a net loss of $108.6 million or $1.30 per share, which

included $61.7 million (or 74 cents per share) of after-tax charges for

restructuring and long-lived asset impairments and loss on early extinguishment

of debt. For the comparable 2003 period, the net loss was $47.6 million or 57

cents per share, which included after-tax charges for restructuring and long-lived

asset impairments of $33.1 million (or 40 cents per share).

Collins & Aikman’s net debt, including outstandings under an offbalance sheet

accounts receivable facility, was $1,552 million at September 30, 2004. During

the third quarter of 2004, the company completed the refinancing of its senior

subordinated debt and senior credit facilities.

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EBITDA was $48.7 million for the third quarter of 2004, which was reduced by

charges of $9.0 million for restructuring and $10.3 million for the impairment of

long-lived assets. The third quarter 2003 EBITDA was $41.9 million, which was

reduced by charges of $21.9 million for restructuring and $2.2 million for the

impairment of long-lived assets. EBITDA was $178.2 million for the nine months

ended September 30, 2004, which was reduced by charges of $28.9 million for

restructuring and $40.7 million for impairment of long-lived assets. EBITDA for

the nine months ended September 30, 2003 was $172.8 million, which was

reduced by charges of $26.8 million for restructuring and $21.1 for the

impairment of long-lived assets.

45. Defendants Stockman touted the Company’s results, stating: “For the fifth

consecutive quarter our EBITDA performance, excluding restructuring and impairment charges,

was up from the prior year on a comparable basis. This was achieved despite the headwinds

from increased commodity costs and OEM production cuts. The savings from the restructuring

program that began in the third quarter of 2003 has generated significant fixed cost reductions.”

46. Collins & Aikman’s financial results for the third quarter of 2004, the period

ending September 30, 2004, were repeated and reaffirmed in the Company’s Report on Form 10-

Q filed with the SEC on or about November 17, 2004, which was signed by Defendants

Stockman and Koth. That Form 10-Q further stated that:

The consolidated financial statement include the accounts of the Company and its

consolidated subsidiaries and in the opinion of management, contain all

adjustments, including adjustments of a normal and recurring nature necessary for

a fair presentation of financial position and results of operations.

47. On December 13, 2004, the Company issued a press release announcing that

Collins & Aikman Products Co. (“Products”), a wholly owned subsidiary of Collins & Aikman,

and CARCORP, Inc., a wholly owned subsidiary of Products, amended their existing receivables

transfer agreement related to its off-balance sheet accounts receivable financing facility. The

amended terms included extending the term of the facility to March 10, 2006, and installing

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General Electric Capital Corporation (“GECC”) as the new Administrative Agent. Additionally,

Products and CARCORP entered into a commitment letter agreement with GECC whereby

GECC committed to provide a new 5 year, $300 million accounts receivable facility to replace

the existing receivables facility, subject to the terms and conditions described therein.

48. The statements referenced in ¶¶ 29-30, 32-35, 37-42, and 44-46 were each

materially false and misleading when made because they failed to disclose and/or misrepresented

the following adverse facts, among others: (1) that the Company improperly accounted for

certain supplier rebates; (2) that the Company’s financial statements required net adjustments of

approximately $10 - $12 million; (3) that the Company’s financial statements were not prepared

in accordance with GAAP; (4) that the Company lacked adequate internal controls and was

therefore unable to ascertain the true financial condition of the Company; and (5) that as a

consequence of the foregoing, the Company’s net income and financial results were materially

overstated.

Disclosures at the End of the Class Period

49. On March 17, 2005, Collins & Aikman issued a press release entitled “Collins &

Announces Delay in Form 10-K Filing, Restatement and Unaudited Summary Results for 2004,”

in which the Company disclosed that it would be delaying its financial results for Fiscal Year

2004. The Company stated it had initiated an internal review of how it was accounting for

supplier rebates, which revealed that the Company was prematurely or inappropriately

recognizing revenue. The Company stated that it expects to restate its results for the nine

months ended September 30, 2004 to reflect the correct accounting for these rebates and that it

was continuing to evaluate whether a restatement of its fiscal year 2003 results would be

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necessary. The Company stated that it expected to reduce its previously reported operating

income by $10 - $12 million for the nine months ended September 30, 2004. The press release

stated:

The Company did not file its Annual Report on Form 10-K containing fiscal 2004

audited financial statements by its due date yesterday since it requires additional

time to complete the review of the accounting issues referred to below, the

financial reporting process, and the Company’s assessment of controls over

financial reporting. As permitted by Rule 12b-25 under the Securities Exchange

Act of 1934, the Company today filed a notification providing that, among other

things, its Form 10-K filing will nonetheless be timely filed if it is filed no later

than 15 calendar days after its original due date. The audit, and other necessary

work required for the Form 10-K to be filed, may not be completed within that

extended time frame.

During the course of finalizing its financial statements for its fiscal year ended

December 31, 2004, the Company identified certain accounting for supplier

rebates that led to premature or inappropriate revenue recognition or that was

inconsistent with relevant accounting standards and the Company’s policies and

practices. The Company immediately initiated an internal review of these matters

and expects to restate its results for the nine months ended September 30, 2004 to

reflect the correct accounting for these rebates. The Company is continuing to

evaluate whether a restatement of its 2003 results will be necessary. The

Company presently expects to reduce its previously reported operating income by

$10 - $12 million for the nine months ended September 30, 2004. The Company’s

outside auditors have not reviewed these conclusions, and additional adjustments

may be required. 

* * * 

Internal Accounting Investigation and Related Matters

In the ordinary course, the Company has received and continues to receive rebates

as a result of anus length transactions with its vendors. Depending upon the terms

of the rebate agreement, these rebates are either recognizable in the quarter in

which the rebate agreement is reached or recognized over an appropriate future

period. In the course of finalizing the Company’s 2004 financial results, the

Company identified certain issues related to accounting for supplier rebates that

led to premature or inappropriate income recognition or that was inconsistent with

relevant accounting standards and the Company’s policies and practices. The

Company immediately initiated a review of all vendor rebates it received from

2002 through 2004 to ensure that it has properly recognized the rebates in the

appropriate quarterly period. The Company has completed its accounting review

of these rebates, but expects to undertake a thorough review of its controls,

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procedures and other circumstances that led to the premature or inappropriate

income recognition and that was inconsistent with relevant accounting standards

and the Company’s policies and practices. The nature and scope of that review is

under consideration. The Company’s Audit Committee and outside auditors have

been informed of these issues and are evaluating an appropriate course of action.

The Company’s internal review of vendor rebates covered an aggregate of

approximately $88 million of vendor transactions in fiscal years 2002 through

2004. Of such amount, the Company believes that net adjustments of

approximately $10 - $12 million, are required primarily occurring during fiscal

2004. The Company expects to restate its results for the nine months ended

September 30, 2004 to reflect these revisions. The Company is continuing to

evaluate whether a restatement of its 2003 results will be necessary. We have not

taken into account this impact in our preliminary report of 2004 results. These

preliminary results remain subject to material change and have not been reviewed

by our outside auditors.

The Company is working towards completion of its assessment of internal

controls over financial reporting required under Section 404 of the SarbanesOxley Act and has concluded that certain material weaknesses, in addition to the

matters leading to the restatement described above, existed at December 31, 2004,

but its assessment of the effectiveness of the Company’s control over financial

reporting is ongoing and the extent of those material weaknesses remains under

review. The Company’s outside auditor is in the process of completing its audit of

internal controls over financial reporting and has communicated the existence of

material weaknesses. The potential material weaknesses identified include the

following: (i) the adequacy of the Company’s resources with appropriate

accounting expertise to address accounting and reporting matters in certain areas,

including revenue recognition, vendor arrangements and post-retirement benefits,

and to supervise the Company’s decentralized and disparate accounting

environment and ensure an appropriate segregation of duties; (ii) the adequacy of

the Company’s internal audit function’s resources and ability to monitor

compliance with established policies and procedures; (iii) the effectiveness of

certain information technology controls and the sufficiency of documentation to

assess the effectiveness of such controls including embedded system application

controls; (iv) the adequacy of procedures to consistently identify and reconcile

fixed assets and periodically review assets for impairment; and (v) the

completeness and consistent adherence to Company policies and procedures.

These issues include a range of documentation- related issues and reconciliation

issues. Other material weaknesses may be identified as a result of further

investigation of the circumstances surrounding the expected restatement arising

from vendor rebates. Our review and the audit is ongoing.

While the Company has implemented remediation steps with respect to certain

significant deficiencies and material weaknesses, a number of issues still need to

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be addressed. The Company’s remediation plans include the assignment of

specific resources with given timelines for each finding. Measurement criteria

have also been established to monitor the progress of these remediation efforts.

To ensure that the Company addresses these issues thoroughly, effectively, and

timely, the internal audit department has been supplemented with the services of

several outside specialists. Further required remediation will be identified and

undertaken as a result of the internal accounting investigation.

Impact on Financing Arrangements

The Company intends to operate in the ordinary course, but it cannot presently

comment upon the timing for completion of, or the ultimate scope or outcome of,

the internal accounting investigation, the audit and the restatements. Until the

audit and any restatements are complete, it will be difficult to determine the full

scope of any financial restatement or prior period adjustments arising from these

irregularities. Consequently, the Company is still evaluating its financial covenant

compliance under its senior credit facility, as well as other compliance issues

under other financing arrangements. If necessary or desirable, the Company will

seek a waiver of relevant provisions.

The Company is obligated to provide audited financial statements under a number

of its debt, receivables facility, operating lease and other agreements within

prescribed periods. The Company relies upon its receivables facility with GE

Capital Corporation for its liquidity and the unavailability of funds thereunder

would be material and adverse. The Company has received waivers of various

provisions of its receivables financing facility and its Hermosillo, Mexico funding

arrangements, both of which are held by GE Capital Corporation, so that it will

continue to provide the Company with access to financing under those facilities in

the ordinary course of business until May 20, 2005, absent certain new adverse

developments. The Company also intends to seek waivers and amendments of its

bank credit facilities and of various lease agreements, as required or desirable.

There can be no assurance that any other required or desirable waivers will be

received on a timely basis and the failure to obtain waivers could be material and

adverse.

50. Upon this disclosure, shares of the Company’s stock fell $0.39 per share, or about

24% to close at $1.24 per share, on unusually heavy trading volume.

Post-Class Period Disclosures

51. On March 24, 2005, Collins & Aikman issued a press release entitled “Collins &

Aikman Audit Committee Retains Independent Counsel for Investigation of Previously-Reported

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Accounting Matters.” Therein the Company, stated:

Collins & Aikman Corporation (NYSE: CKC) announced today that its Audit

Committee has retained independent counsel to assist it in its investigation of the

Company’s accounting for certain supplier rebates. The company previously

reported that it had identified certain accounting for supplier rebates that led to

premature or inappropriate revenue recognition or that was inconsistent with

relevant accounting standards and the Company’s policies and practices. The

company’s management immediately initiated an internal review of these matters

while keeping the company’s Audit Committee and outside auditors, KPMG LLP,

informed of the status of its review. The Audit Committee has determined to

conduct an independent investigation into these matters. It has retained

independent counsel, Davis Polk & Wardwell, for that purpose, and they expect to

retain such other advisors, including an accounting expert, as they deem

appropriate. 

As previously announced, the company’s internal review of vendor rebates

covered an aggregate of approximately $88 million of vendor transactions in

fiscal years 2002 through 2004. Of such amount, the company’s management

believes that net adjustments of approximately $10-$12 million are required

primarily occurring during fiscal 2004. For further clarification, the company

announced that management’s preliminary analysis indicates that, of such

amounts, approximately $8-$10 million would impact the previously reported

nine months ended September 30, 2004 with the balance impacting 2003. The

company expects to restate its results for the nine months ended September 30,

2004 to reflect these revisions and is continuing to evaluate whether a restatement

of its 2003 results will be necessary. The company’s Audit Committee and the

Company’s outside auditors, KPMG LLP, have no commented upon

management’s current expectations. The company cannot presently comment

upon the timing for completion of, or the ultimate scope or outcome of, the Audit

Committee investigation, the audit or any necessary restatements. Nor can it

comment upon whether the outcome of the investigation will impact the foregoing

adjustments.

As previously disclosed, the company has not yet filed its annual report on Form

10-K for 2004 due to this accounting matter and the need for additional time for

completion of the 2004 audit and the review of internal controls over financial

reporting under Section 404 under Sarbanes-Oxley. The company further

announced that it initiated a process for obtaining waivers of the financial

statement delivery requirements for a period of time from its lenders under its

senior credit facility and for modifications of certain of its financial covenants.

There can be no assurance that any of the required or desirable waivers from our

senior lenders, lessors or others will be received on a timely basis, and the failure

to obtain waivers could materially and adversely affect the company and its

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liquidity. 

DEFENDANTS’ GAAP VIOLATIONS

52. Defendants were required to cause the Company to disclose, in its financial

statements and news releases, the existence of the material facts described herein and to

appropriately recognize and report revenues in conformity with GAAP. Defendants failed to

cause the Company to make such disclosures and to account for and to report revenues in

conformity with GAAP.

53. Due to the misrepresentations, omissions, and non-GAAP accounting, the above 

particularized documents which Defendants caused the Company to disseminate to the investing

public during the Class Period were materially false and misleading.

54. Defendants knew and ignored, or were reckless in not knowing, the facts which

indicated that the above particularized press releases, public statements, and filings with the

SEC,

which were disseminated to the investing public during the Class Period, were materially false

and misleading for the reasons set above.

55. SEC Regulation SX requires that financial statements filed with the SEC conform

with GAAP. Financial statements filed with the SEC which are not prepared in conformity with

GAAP are presumed to be misleading or inaccurate. [17 C.F.R. §210.401 (a)(1)]. The

Company’s financial statements which were disseminated to the investing public during the

Class Period, which represented that the Company’s financial position and results of operations

were in conformity with GAAP, were false and misleading for the reasons alleged herein and

because they will not be prepared in conformity with GAAP. Said financial statements violated

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the following GAAP concepts and principles, among others noted above:

a. The concept that financial reporting should provide information that is useful to

present and potential investors and creditors and other users in making rational

investment, credit and similar decisions (FASB Statement of Financial Accounting

Concepts No. 1).

b. The concept that financial reporting should provide information about an

enterprise’s financial performance during a period (FASB Statement of Financial

Accounting Concepts No. 1).

c. The concept that financial reporting should be reliable in that it represents what

it purports to represent (FASB Statement of Financial Accounting Concepts No. 2).

d. The concept of completeness, which means that nothing material is left out of

the information that may be necessary to ensure that it validly represents underlying

events and conditions (FASB Statement of Financial Accounting Concepts No. 2).

e. The concept that conservatism be used as a prudent reaction to uncertainty to

try to ensure that uncertainties and risks inherent in business situations are adequately

considered (FASB Statement of Financial Accounting Concepts No. 2).

f. The principle that the accounting method applied should be appropriate in the

circumstance (AU 411.04).

g. The principle that the financial statements, including the related notes, should

be informative of matters that affect their use, understanding, and interpretation (AU

411.04).

h. The principle that the financial statements should reflect the underlying events

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and transactions in a manner that present the financial position and the results of

operations within a range of acceptable limits that were reasonable and practicable to

attain accuracy in financial statements (AU 411.04).

i. The principle that disclosure of accounting policies should identify and describe

the accounting principles followed by the reporting entity and the methods of applying

those principles that materially affect the financial statements (APB Opinion No. 22).

56. The SEC has stated, in Securities Act Release No. 6349 (September 8, 1981), that

“it is the responsibility of management to identify and address those key variables and other

qualitative and quantitative factors which are peculiar to and necessary for an understanding and

evaluation of the individual company.”

57. In addition, as noted by the SEC in Accounting Series Release 173: “it is

important that the overall impression created by the financial statements be consistent with the

business realities of the company’s financial position and operations.”

58. The Company, in contravention of GAAP, failed to (i) provide those disclosures

which were required by GAAP, and (ii) identify and address those key variables and other

qualitative and quantitative factors which were peculiar to and necessary for an understanding

and evaluation of the Company. Consequently, the overall impression created by the financial

statements was not consistent with the business realities of the Company’s reported financial

position and operations.

59. The undisclosed adverse information concealed by Defendants during the Class

Period is the type of information which, because of SEC regulations, rules of the national stock

exchanges and customary business practice, is expected by investors and securities analysts to be

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disclosed to the investing public. This information is known by corporate officials and their

legal and financial advisors to be the type of information which is expected to be and must be

disclosed. For example, under Item 303 of Regulation S-K, promulgated by the SEC under the

Exchange Act, there is a duty to disclose in periodic reports filed with the SEC “known trends or

any known demands, commitments, events or uncertainties” that are reasonably likely to have a

material impact on a company’s sales revenues, income or liquidity, or cause previously reported

financial information not to be indicative of future operating results.

Undisclosed Adverse Information

60. The market for Collins & Aikman common stock was open, well-developed, and

efficient at all relevant times. As a result of these materially false and misleading statements and

failures to disclose, Collins & Aikman’s common stock traded at artificially inflated prices

during the Class Period. Plaintiff and other members of the Class purchased or otherwise

acquired Collins & Aikman common stock relying upon the integrity of the market price of

Collins & Aikman’s common stock and market information relating to Collins & Aikman, and

have been damaged thereby.

61. During the Class Period, Defendants materially misled the investing public, 

thereby inflating the price of Collins & Aikman’s common stock, by publicly issuing false and

misleading statements and omitting to disclose material facts necessary to make Defendants’

statements, as set forth herein, not false and misleading. Said statements and omissions were

materially false and misleading in that they failed to disclose material adverse information and

misrepresented the truth about the Company, its business and operations, as alleged herein.

62. At all relevant times, the material misrepresentations and omissions particularized

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in this Complaint directly or proximately caused or were a substantial contributing cause of the

damages sustained by plaintiff and other members of the Class. As described herein, during the

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

statements about Collins & Aikman’s business, prospects and operations. These material

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

positive assessment of Collins & Aikman and its business, prospects and operations, thus

causing the Company’s common stock to be overvalued and artificially inflated at all relevant

times.

63. Defendants’ materially false and misleading statements during the Class Period

resulted in plaintiff and other members of the Class purchasing the Company’s common stock at

artificially inflated prices, thus causing the damages complained of herein.

ADDITIONAL SCIENTER ALLEGATIONS

64. As alleged herein, Defendants acted with scienter in that Defendants knew that

the

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

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

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

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

federal securities laws. As set forth elsewhere herein in detail, Defendants, by virtue of their

receipt of information reflecting the true facts regarding Collins & Aikman, their control over,

and/or receipt and/or modification of Collins & Aikman’s allegedly materially misleading

misstatements and/or their associations with the Company which made them privy to

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confidential proprietary information concerning Collins & Aikman, participated in the fraudulent

scheme alleged herein.

65. Defendants were further motivated to engage in this course of conduct in order to

(i) complete an offering of $415 million in aggregate principal amount of its senior subordinated

notes; and (ii) enter into a new credit facility on more favorable terms.

FIRST CLAIM

Violation Of Section 10(b) Of The Exchange Act 

And Rule10b-5 Promulgated Thereunder 

Against All Defendants

69. Plaintiff repeats and realleges each and every allegation contained above as if

fully

set forth herein.

70. During the Class Period, Defendants carried out a plan, scheme and course of

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

public regarding Collins & Aikman’s business, operations, management, and the intrinsic value

of Collins & Aikman common stock; (ii) enable the Company to complete an offer of $415

million in aggregate principal amount of its senior subordinated notes; (iii) enable the Company

to enter into a new credit facility on more favorable terms than it would have had the truth been

known; and (iv) cause plaintiff and other members of the Class to purchase Collins & Aikman’s

common stock at artificially inflated prices. In furtherance of this unlawful scheme, plan and

course of conduct, Defendants, and each of them, took the actions set forth herein.

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

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

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

operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to

maintain artificially high market prices for Collins & Aikman’s securities in violation of Section

10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. Defendants are sued either

as a primary participant in the wrongful and illegal conduct charged herein or as a controlling

person as alleged below.

72. Defendants, directly and indirectly, by the use, means or instrumentalities of 

interstate commerce and/or of the mails, engaged and participated in a continuous course of

conduct to conceal adverse material information about the business, operations and future

prospects of Collins & Aikman as specified herein.

73. Defendants employed devices, schemes and artifices to defraud, while in

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

course of conduct as alleged herein in an effort to assure investors of Collins & Aikman’s value

and performance and continued substantial growth, which included the making of, or the

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

facts necessary in order to make the statements made about Collins & Aikman and its business

operations and future prospects in the light of the circumstances under which they were made,

not misleading, as set forth more particularly herein, and engaged in transactions, practices and a

course of business which operated as a fraud and deceit upon the purchasers of Collins &

Aikman securities during the Class Period.

74. The Defendants’ primary liability, and controlling person liability, arises from the

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following facts: (i) Defendants were high-level executives (Defendants Stockman and Stepp

were also Chairman and Vice Chairman, respectively, of the Company) at the Company during

the Class Period and members of the Company’s management team or had control thereof; (ii)

Defendants, by virtue of their responsibilities and activities as a senior officers and/or directors

of the Company were privy to and participated in the creation, development and reporting of the

Company’s internal budgets, plans, projections and/or reports; (iii) Defendants enjoyed

significant personal contact and familiarity with the other controlling persons of the Company

and were advised of and had access to other members of the Company’s management team,

internal reports and other data and information about the Company’s finances, operations, and

sales at all relevant times; and (iv) Defendants were aware of the Company’s dissemination of

information to the investing public which they knew or recklessly disregarded was materially

false and misleading.

75. The Defendants had actual knowledge of the misrepresentations and omissions of

material facts set forth herein, or acted with reckless disregard for the truth in that they failed to

ascertain and to disclose such facts, even though such facts were available to them. Defendants’

material misrepresentations and/or omissions were done knowingly or recklessly and for the

purpose and effect of concealing Collins & Aikman’s operating and reporting condition and

future business prospects from the investing public and to create and supporting the artificially

inflated price of its securities. As demonstrated by Defendants’ overstatements, misstatements

and omissions regarding the Company’s business, its business prospects and the financial health

of the Company, throughout the Class Period, Defendants, if they did not have actual knowledge

of the misrepresentations and omissions alleged, were reckless in failing to obtain such

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knowledge by deliberately refraining from taking those steps necessary to discover whether

those statements were false or misleading.

76. As a result of the dissemination of the materially false and misleading information

and failure to disclose material facts, as set forth above, the market price of Collins & Aikman’s

securities was artificially inflated during the Class Period. In ignorance of the fact that the

market prices of Collins & Aikman’s publicly-traded securities were artificially inflated, and

relying directly or indirectly on the false and misleading statements made by Defendants, or

upon the integrity of the market in which the securities trade, and/or on the absence of material

adverse information that was known to or recklessly disregarded by Defendants but not disclosed

in public statements by Defendants during the Class Period, plaintiff and the other members of

the Class acquired Collins & Aikman securities during the Class Period at artificially high prices

and were damaged thereby. When Collins & Aikman lost value due to the misrepresentations

alleged herein.

77. At the time of said misrepresentations and omissions, plaintiff and other 

members

of the Class were ignorant of their falsity, and believed them to be true. Had plaintiff and the

other members of the Class and the marketplace known the truth with regard to the distribution,

adoption, and integration of its products, which were not disclosed by defendant, plaintiff and

other members of the Class would not have purchased or otherwise acquired their Collins &

Aikman common stock, or, if they had acquired such securities during the Class Period, they

would not have done so at the artificially inflated prices which they paid.

78. By virtue of the foregoing, Defendants have violated Section 10(b) of the

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Exchange Act, and Rule 10b-5 promulgated thereunder.

79. As a direct and proximate result of Defendants’ wrongful conduct, plaintiff and

the other members of the Class suffered damages in connection with their respective purchases

and sales of the Company’s securities during the Class Period.

SECOND CLAIM

Violation Of Section 20(a) Of The

Exchange Act Against The Defendants

80. Plaintiff repeat and reallege each and every allegation contained above as if 

fully set forth herein.

81. The Defendants acted as controlling persons of Collins & Aikman within the 

meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level

positions, and ownership and contractual rights, participation in and/or awareness of the

Company’s operations and/or intimate knowledge of the false financial statements filed by the

Company with the SEC and disseminated to the investing public, Defendants had the power to

influence and control and did influence and control, directly or indirectly, the decision-making of

the Company, including the content and dissemination of the various statements which plaintiff

contend are false and misleading. Defendants were provided with or had unlimited access to

copies of the Company’s reports, press releases, public filings and other statements alleged by

plaintiff to be misleading prior to and/or shortly after these statements were issued and had the

ability to prevent the issuance of the statements or cause the statements to be corrected.

82. In particular, Defendants had direct and supervisory involvement in the day-today

operations of the Company and, therefore, is presumed to have had the power to control or

Case 1:05-cv-05251-MBM Document 1 Filed 06/02/2005 Page 33 of 36
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influence the particular transactions giving rise to the securities violations as alleged herein, and

exercised the same.

83. As set forth above, Collins & Aikman and Defendants violated Section 10(b) and

Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their position as

controlling persons, Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a

direct and proximate result of Defendants’ wrongful conduct, plaintiff and other members of the

Class suffered damages in connection with their purchases of the Company’s securities during

the Class Period.

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PRAYER FOR RELIEF

WHEREFORE, plaintiff pray for relief and judgment, as follows:

A. Determining that this action is a proper class action, designating plaintiff

as class representatives under Rule 23 of the Federal Rules of Civil

Procedure and plaintiff’s counsel as Lead Counsel;

B. Awarding compensatory damages in favor of plaintiff and the other Class

members against Defendants, for all damages sustained as a result of

Defendants’ wrongdoing, in an amount to be proven at trial, including

interest thereon;

C. Awarding plaintiff and the Class their reasonable costs and expenses

incurred in this action, including counsel fees and expert fees; and

D. Such other and further relief as the Court may deem just and proper.

Case 1:05-cv-05251-MBM Document 1 Filed 06/02/2005 Page 35 of 36
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JURY TRIAL DEMAND

Plaintiff hereby demand a trial by jury.

Dated: June 1, 2005

New York, New York

MURRAY FRANK & SAILER LLP

By: /s/ 

Brian P. Murray (BP-9954)

Eric J. Belfi (EB-8895)

275 Madison Avenue, Suite 801

New York, New York 10016

Telephone: (212) 682-1818

Facsimile: (212) 682-1892

GLANCY BINKOW & GOLDBERG LLP

Lionel Z. Glancy

Michael Goldberg

1801 Avenue of the Stars, Suite 311

Los Angeles, California 90067

Telephone: (310) 201-9150

Facsimile: (310) 201-9160

Attorneys for Plaintiff

Case 1:05-cv-05251-MBM Document 1 Filed 06/02/2005 Page 36 of 36