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UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF FLORIDA
Case No. 07-61333-CIV-HUCK/SIMONTON
DENRA MAY, PHILIP MAY STEPHANIEMAY, MICHAEL NEWMAN, SCOTT JAMES,LEONARD GREEN, WENDY GREEN, BRETTFRIEDMAN, LANDON AGOADO, BRIANNOONAN, TRENTON MARTIN, KATHRYNMARTIN, KRISTEN MARTIN, and DONNAAIKMAN, on behalf of themselves and all otherssimilarly situated,
x
Plaintiffs,
-v-
DAVID C. LEVY, LES GARLAND,GREGORY R. CATINELLA, JOHN W. POLING,D. PATRICK LAPLATNEY, CELESTINE F.SPODEN, JOHN P. GRANDINETTI, andTHE TUBE MEDIA CORP..
Defendants.x
AMENDED CLASS ACTION COMPLAINT
Lead Plaintiffs, by their attorneys, on behalf of themselves and all others similarly
situated, for their amended complaint, allege the following upon personal knowledge as to
themselves and their acts and as to all other matters based upon, among other things, the
investigation conducted by their attorneys, which investigation included the following: review of
public filings of The Tube Media Corp. ("Tube Media or the "Company") with the United States
Securities and Exchange Commission ("SEC"), review of published reports on the Company and
its press releases, interviews with confidential witnesses, internet research, consultation with a
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forensic accountant, and review of various federal and state court records, filings and pleadings.
INTRODUCTION
This is a class action brought on behalf of all purchasers of the common stock of
Tube Media between August 19, 2005 and November 21, 2006, inclusive (the "Class Period"),
seeking to pursue remedies under the Securities Exchange Act of 1934 (the "Exchange Act").
2. Tube Media dates its inception back to 2003. (Form 10-KSB/A, filed 12/7/06).
The Company had two segments: The Tube Media Network and AGU Music, Inc. The Tube
Media Network, a wholly-owned subsidiary of the Company, aired traditional music videos and
live concerts of contemporary music material derived from archived video and music collection
libraries. (2005 Form 10-KSB/A, at 60).
The Company planned to generate revenues by selling advertising time on the
Tube Music Network and through direct sales of music related to the content broadcasted on the
network. (Id.). The Company stated in SEC filings that throughout most of 2005, it was in the
development stage. By early 2006, the Company was in desperate need of cash for salaries and
operations.
4. The Company disclosed that in March 2006, it had signed distribution contracts
with Tribune Broadcasting Company and Sinclair Broadcasting Group. According to Tube
Media, these contracts would allow the music videos of The Tube Music Network to be aired
over the cable channels owned by these companies. Within a few months, however, by the fall
of 2006, the Company had generated minuscule revenues, had little cash for operations, and had
suffered millions in losses. The Tube Music Network stopped all broadcasting by October 1,
2007. (Form 8-K, filed 10/2/07).
2
sales of Tube Media stock to potential investors. At the time, Syrop was on probation for a
federal felony conviction for conspiring to commit wire and mail fraud in conjunction with a
securities brokerage scam he orchestrated in Florida in 2001. Grandinetti, a substantial Tube
Media investor, was actually operating the Company day-to-day, with management authority, but
without disclosing his control status in the Company's SEC filings. Grandinetti was also
responsible for bringing Defendant Les Garland ("Garland") to Tube Media.
6. The Company' s counsel, Blank Rome LLP , represented Syrop in his criminal
case; knew he was selling Tube Media stock to plaintiffs and other class members in violation of
a condition of his probation; assisted Syrop in making these stock sales; and acted as escrow
agent for the investor money Syrop and Grandinetti raised in March 2006. Blank Rome LLP was
regular SEC counsel for Tube Media during the Class Period, giving rise to a compelling
inference that Defendants - as officers and directors of Tube Media -- either knew of the stock
sales by Syrop and Grandinetti, or recklessly ignored them.
7. The Company also failed to disclose that its President and a Director, Defendant
David C. Levy ("Levy") and his wife Donna M. Levy, had been sued by the Federal Trade
Commission ("FTC") in 1996 for fraud. The FTC obtained a $6.087 million judgment against
the Levys for defrauding college students and their parents, using their telemarketing company
known as Career Assistance Planning Inc. to do so. The $6.087 million judgment remains
unpaid. The Company regularly featured a professional biography of Levy in its proxy
statements, annual reports, and other SEC filings, but never disclosed either the FTC fraud action
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or the Levys' unpaid judgment . Levy and the Company hid these facts to avoid warning
investors of past deficiencies and alerting the SEC and other regulatory agencies.
In 2004 and 2005, the Company collected and withheld employee payroll taxes for
its 20 or more employees, but never remitted them to the government taxing authorities. On May
11, 2006, Tube Media admitted that it had simply kept the money it had withheld from its
employees. The Company disclosed in its 2005 Form 10-KSB, filed May 11, 2006, that it owed
an estimated $353,472 in unpaid payroll taxes, interest and penalties - nearly as much as its
entire 2005 revenues. The Company disclosed that it failed to remit these funds because of
"liquidity issues," essentially admitting that it kept the money to pay for regular corporate
operations.
9. Thereafter, the Company revealed the need for one restatement of its financials
after another. It conceded a lack of internal corporate controls and lack of skilled personnel to
assure the accuracy of its financial reporting. (2005 Form 10-KSB/A, filed 12/7/06).
10. The final blow for the Company came on November 21, 2006, when the Company
announced that it would have to restate its financials for the year ended December 31, 2005 and
the quarterly periods ended March 31, 2006 and June 30, 2006 based on the Company's review
of its accounting for derivatives and other issues. The Company's stock dropped 14% on the
news. The Company has never filed the restated condensed financial statements with the SEC as
promised, and after December 20, 2006, stopped filing any Quarterly Reports or its Annual
Report for 2006.
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15 U.S.C. § 78aa. Plaintiffs ' claims arise under Sections 10(b) and 20(a) of the Exchange Act, 15
U.S.C. §§ 78j(b) and 78t(a), and SEC Rule lOb-5, 17 C.F.R. Section 240.1Ob-5.
12. Venue is proper in this Judicial District under Section 27 of the Exchange Act and
28 U.S.C. § 1391(b). Tube Media lists principal address in its SEC filings as 1451 West
Cypress Creek Road, Fort Lauderdale, Florida 33309. Several individual defendants also reside
in this District , including Defendants David C. Levy and Celeste Spoden.
13. In connection with the acts, conduct and other wrongs alleged in this amended
complaint, the Defendants, directly or indirectly, used the means and instrumentalities of
interstate commerce, including the mails, telephone communications and the facilities of national
securities exchanges.
THE PARTIES
14. Lead Plaintiffs Brett Friedman, Trent and Kathy Martin, Wendy Rhodes Frisone
and Philip May were appointed by the Court on December 10, 2007. [DE#18]. The Lead
Plaintiffs purchased shares of the common stock of Tube Media during the Class Period and
were damaged thereby, as set forth in the certifications attached to their motion for appointment
as lead plaintiffs [DE#12, Ex. A] and incorporated by reference herein.
15. During the Class Period, Defendant Tube Media provided music television
entertainment to viewers in the U.S. The Company also offered an e-commerce storefront for the
purchase of music and entertainment related consumer goods. The Company, formerly known as
AGU Entertainment Corp., was incorporated in 2003 and changed its name to The Tube Media
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Corporation in March 2006. In its SEC filings, Tube Media states that its principal executive
offices are located in Fort Lauderdale, Florida. Since approximately mid-2007, however, the
Company has had no personnel or operations at its listed address: 1451 West Cypress Creek
Road, Fort Lauderdale, Florida. This has been verified by process servers for plaintiffs' counsel
who have visited the address and have been unable to serve process. Phone calls to the Company
have never been answered: all phone calls are forwarded to a voice message box; a recording is
then played saying that no messages may be left because the voice mailbox is full. The office
space at this address is only 700 square feet, according the Company's SEC filings. The lease on
the space expired on May 31, 2006 and it has been rented since then on a month-to-month basis.
(Form SB-2/A, filed 8/4/06, at page 24).
16. Defendant Levy served as Director since 2003 and President of the Company until
his retirement on October 13, 2006. Levy continued thereafter as a Director of the Company.
(Form 8-K, filed 10/13/06). Levy signed and certified under Sarbanes-Oxley, the Form 10-QSB
on June 30, 2005.
17. Defendant Garland served as Director, and Senior Vice President of the Company
and President of Tube Media since 2004. Garland signed and certified under Sarbanes-Oxley,
Form 8-K filed March 10, 2006, and Form 10-KSB filed May 11, 2006.
18. Defendant Gregory R. Catinella ("Catinella") served as Director since April 2003.
Catinella signed and certified under Sarbanes-Oxley, Form 10-KSB filed May 11, 2006 and the
Registration Statement on Form SB-2 for the sale of 18,161,372 shares of Tube Media common
stock.
19. Defendant John W. Poling ("Poling") served as Director since 2004, Executive
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Vice President of the Company and Chief Financial Officer from 2002 through July 2006. Poling
signed and certified under Sarbanes-Oxley, Form 10-QSB filed June 30, 2005.
20. Defendant D. Patrick LaPlatney ("LaPlatney") served as a Director of the
Company and as its Chief Executive Officer from July 31, 2006 until his resignation in March
2007. LaPlatney signed the Statement on Form SB-2 for the sale of 18,161,372 shares of Tube
Media common stock.
21. Defendant Celestine F. Spoden ("Spoden") served as the Company's Chief
Executive Officer of the Company since June 2006. Spoden signed the Registration Statement on
Form SB-2 for the sale of 18,161,372 shares of Tube Media common stock.
22. Defendant Grandinetti was a substantial shareholder of Tube Media since at least
2004, owning at least 750,000 shares of the Company. (Form SB-2/A, filed 8/6/06). Grandinetti
was an undisclosed principal and control person of Tube Media. Grandinetti promoted and sold
the stock of Tube Media, as discussed below. Confidential Witness No. 1 ("CW-1"), who
worked closely with Grandinetti and Syrop at Broadvision Group, Inc. and learned the
information alleged herein directly from both of these individuals, provided the following
information: During the entire relevant period, Grandinetti handled many of the Company's
financing decisions and its day-to-day management, dealt with the Company's bank (Compass
Bank), attended board meetings, recruited Defendant Garland to Tube Media, and oversaw the
build-out of the Company's production complex in Lauderdale Lakes, Florida (referred to in the
Company's SEC filings as the "Lauderdale Property"). In addition, SEC records show that
Grandinetti's name is listed on written settlement agreements between employees and Tube
Media regarding employee disputes over compensation as the person from Tube Media to whom
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all notices under the settlement agreement should be sent. (See Settlement Agreement for George
Naful v. Tube Media Corp ., signed June 20 , 2006 ; Settlement Agreement for Ralph Tashjian v.
Tube Media Corp., signed June 19, 2006 , annexed as exhibits to Form SB-2/A, filed 8/4/06).
23. The individual defendants, as the senior officers and spokespersons of Tube
Media, were the controlling person(s) of the Company within the meaning of Section 20(a) of the
Exchange Act and had the power and influence, and exercised the same, to cause the Company to
engage in the unlawful conduct complained of herein.
CLASS ACTION ALLEGATIONS
24. Plaintiffs bring this action as a class action pursuant to Federal Rules of Civil
Procedure 23(a) and 23(b)(3) on behalf of a Class, consisting of all persons who purchased or
otherwise acquired Tube Media common stock between August 19, 2005 and November 21,
2006 inclusive, and who were damaged thereby. Excluded from the Class are defendants,
members of the immediate family of defendants and any subsidiary or affiliate of Tube Media
and the directors, officers and employees of Tube Media or its subsidiaries or affiliates, or any
entity in which any excluded person has a controlling interest, and the legal representatives, heirs,
successors and assigns of any excluded person.
25. The members of the Class are so numerous that joinder of all members is
impracticable. While the exact number of Class members is unknown to plaintiffs at this time
and can only be ascertained through appropriate discovery, plaintiffs believe that there are
hundreds of members of the Class located throughout the United States. As ofNovember 8,
2006, there were approximately 35,123,518 shares of Tube Media outstanding. In addition, Tube
Media reports that as of March 31, 2006 there were 170 stockholders of record, a figure that
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"does not include beneficial owners of common stock whose shares are held in the names of
various dealers, clearing agencies, banks, brokers and other fiduciaries." (2005 Form 10-K, filed
5/11/06, at 21). Throughout the Class Period, Tube Media common stock was actively traded on
the Over the Counter Bulletin Board ("OTC") (an open and efficient market) under the symbols
"AGUE," and after a corporate name change in March 2006, under "TUBM ." Record owners
and other members of the Class may be identified from records maintained by Tube Media
and/or its transfer agents and may be notified of the pendency of this action by mail, using a form
of notice similar to that customarily used in securities class actions.
26. Plaintiffs' claims are typical of the claims of the other members of the Class
because all members of the Class were similarly affected by defendants' wrongful conduct in
violation of the federal law that is complained of herein.
27. Plaintiffs will fairly and adequately protect the interests of the members of the
Class and have retained counsel competent and experienced in class and securities litigation.
28. Common questions of law and fact exist as to all members of the Class and
predominate over any question 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 and
omissions as alleged herein;
b. whether defendants participated in and pursued the scheme to defraud and
the common course of conduct complained of herein;
c. whether documents, press releases, and other statements disseminated to
the investing public and the Company's shareholders during the Class Period misrepresented
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material facts about the business, finances, financial condition and prospects of Tube Media;
d. whether statements made by defendants to the investing public during the
Class Period misrepresented and/or omitted to disclose material facts about the business,
finances, value, performance and prospects of Tube Media;
e. whether the market price of Tube Media common stock during the Class
Period was artificially inflated due to the material misrepresentations and failures to correct the
material misrepresentations complained of herein; and
f. the extent to which the members of the Class have sustained damages and
the proper measure of damages.
29. 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 suit as a
class action.
SUBSTANTIVE ALLEGATIONS
1. Background of the Fraud
A. David C. Levy
30. The Company's 2005 Form 10-KSB, filed on May 11, 2006, provides the
following biography at page 70 for defendant David C. Levy:
David C. Levy has served as President of the Company
since May 2003. Prior to joining the Company, Mr. Levy was the
Vice President of Business Development of Northwestern Bell
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Phones, a manufacturing and marketing company of consumer
electronics from 1995 to 2003. Mr. Levy became the president and
a director of the Company upon the consummation of the share
exchange with Pyramid Music Corp. in April 2004. In the late
1970's, Mr. Levy managed hit dance music group "Foxy," who had
a #1 record titled "Get Off' and a gold album.
31. The biography is sketchy concerning Levy's employment between "the late
1970's" and 1995, and for good reason.
32. In 1996, Defendant Levy and his wife Donna M. Levy were sued by the FTC in
the Northern District of Georgia for fraud in connection with their operation of a scam college
scholarship search service called Career Assistance Planning, Inc. ("Career Assistance"). See
FTC v. David Chaim Levy and Donna M. Levy, et al., 96-CV-2187-MHS (N.D. Ga.).
33. The FTC charged that from the early 1990's through 1996, the Levys had run
Career Assistance "through which they [the Levys] duped thousands of students and their parents
into paying for services CAP [Career Assistance] failed to provide ." FTC v. Career Assistance
Planning Inc., No. 1:96-cv-2187-MHS 1996 WL 929696 at *1 (N.D. Ga. September 19, 1996).
The Levys committed fraud on college students by offering, for a fee of $299, to help them
identify scholarship opportunities tailored to the students' needs. In a two-year period, 1994 to
1996, Career Assistance customers lodged over 2,500 complaints against the company. Students
complained that the company did nothing for them.
34. Judge Shoob granted the FTC's motion for summary judgment against the
Levys, and entered a final judgment against them for $6,087,036.96. 96-CV-2187-MHS (N.D.
Ga.) [D.E.#50]. The Order also permanently enjoins David and Donna M. Levy from, among
other things, engaging in any telemarketing activities unless they obtain a $6 million performance
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bond. (Sources: Id.; FTC press release, dated 9/30/07, "FTC Wins Permanent Injunction Against
`$cholarship $cam' Defendants ," www. tc. ovlopa/1997I09llevy. shtrn. ).
35. Judge Shoob observed that David C. Levy had a prior Florida state arrest for
illegal telemarketing (1996 WL 929696 at *4 n.9), and concluded that David and Donna Levy
had a "proven propensity to engage in fraud and to refuse cooperation with law enforcement
authorities." Id. Broward County court records confirm that David Levy entered a nolo
contendere plea in 1997 arising from a 1994 arrest for unlicensed telemarketing. According to
court records, Levy served a one-year probation term as a result of this conviction.
36. An Order granting the FTC summary judgment describes how the Levys
orchestrated the scam:
Each week, CAP mailed out thousands of postcards indicating thatrecipients who called a toll-free number printed on the cards wouldreceive information on free college scholarships. In response toconsumers who called, CAP telemarketers explained that, for a feeof up to $299 per student, CAP would provide scholarshipinformation tailored to each student's individual qualifications andinterest. CAP further represented that past CAP customers had a60% to 80% success rate and promised that CAP would refund itsfull fee to any consumer who canceled within 72 hours of placingan order or who did not obtain at least $1,000 or $2,000 inscholarships within one or two years, as a result of CAP's services.[FTC v. Career Assistance Planning Inc., 1996 WL 929696 at * 1 ]
37. Lead counsel contacted an attorney for the FTC who handled the Career
Assistance action against the Levys. The FTC attorney confirmed that the $6.087 million
judgment against the Levys for consumer redress remains unpaid. Nevertheless, according to
Tube Media filings, during 2005, Tube Media received loans from Defendant Levy and DML
Marketing (Donna M. Levy's company) totaling $1.5 million. (2005 Form 10-KSB/A at 64).
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Defendant Levy, his wife and his daughter, collectively owned over 2.7 million shares of Tube
Media or 10.6% of the Company. (Id. at 80, footnotes 2 & 4).
38. A convincing trail of evidence demonstrates that Defendant Levy in this case is
the same David C. Levy against whom Judge Shoob entered summary judgment in the FTC
action. This evidence is as follows:
a. A Stipulated Preliminary Injunction in Federal Trade Commission v.
David Chaim Levy is on file with the Broward County Clerk. An attorney
who represented the FTC in that case informed counsel that the document
was filed in Broward County because the Levys had resided in Broward
County, and were believed to have property there. The signature of David
C. Levy on the Stipulated Preliminary Injunction from the FTC
enforcement action bears a striking resemblance to the signature
Defendant Levy affixed to his letter to the Court [DE#13] objecting to the
method of service of the complaint, and to David Levy's signature on
property records for the residence at which service was effected: 3109 NE
23rd Court, Fort Lauderdale, Florida. [DE#10] (Return of Service).
b. The same attorney who represented the FTC in Federal Trade Commission
v. David Chaim Levy informed counsel that the defendants in the FTC
enforcement action, Donna M. Levy and David C. Levy, were husband and
wife. Tube Media's October 6, 2004 Forml3D reflects that Defendant
David C. Levy is married to Donna M. Levy.
c. An attorney who represented the FTC in Federal Trade Commission v.
David Chaim Levy informed counsel that a daughter of David Levy was
also involved in the Career Assistance scam. Filings Career Assistance
made with the Florida Department of State list as its Officers Donna Levy
and Victoria Levy. According to Tube Media's October 6, 2004 Form
13D, Defendant Levy has a daughter named Victoria Levy.
d. Counsel's search of several reliable "people finding" databases has failed
to identify any family unit in the United States other than the Defendant
Levy's composed of David C., Donna M. and Victoria Levy.
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e. The biographies of Defendant Levy contained in Tube Media's SEC
filings fail to provide any information describing his employment between
the 1970's and 1995.
B. Randy Scott Syrop
39. Syrop is a resident of South Florida, where he has worked for the past several
years essentially as a stock promoter. He helped to market and sell Tube Media common stock to
shareholders in private placements together with Defendant Grandinetti, as discussed below.
40. In 2002, Syrop was arrested for wire and mail fraud and for conspiracy to commit
these crimes. He pleaded guilty in Tampa federal court to a felony information charging him
with conspiracy to commit wire and mail fraud. The one-count information charged Syrop with
filing false documents with the SEC concerning the true ownership of Hamilton-Shea Company,
Inc., a brokerage firm Syrop and others opened in Pompano Beach, Florida. (2:04-TP-14003-
DMM, (DE#l, at ¶10). The Government charged that Syrop had failed to list the names of his
co-conspirators in documents filed with the SEC because they "were facing lawsuits, regulatory
actions, and significant debts." (Id) The information charged this was a material omission
because "the omission does not alert regulatory agencies, nor warn potential investors of
deficiencies ." (Id.)
41. Syrop cooperated with the government and was sentenced by Judge James D.
Whittemore to a five-year probation term, a $7,500 fine, and six months home detention with
electronic monitoring . United States v. Syrop, 01-CR-287-T27-MSS (M.D. Fla.) [DE#29]. As a
condition of probation, Syrop was not permitted to, among other things, sell securities to the
public. Jurisdiction over Syrop's criminal case was transferred to his district of residence, the
Southern District of Florida, on April 1, 2004. United States v. Syrop, 04-TP-14003-
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Middlebrooks (S.D. Fla.) [DE#1].
42. On December 7, 2007, Syrop was arrested on a charge that he had violated his
probation for, among other things, engaging in employment related directly or indirectly to
investments or securities business opportunities, including selling the securities of Tube Media to
investors. Magistrate Judge Frank Lynch held a Preliminary Hearing on the violation on
December 14, 2007; Kevin Mason, an attorney with Blank Rome LLP, Boca Raton, Florida,
testified at the hearing on Mr. Syrop 's behalf. U.S. v. Syrop, 04-TP-14003 -Middlebrooks, Report
& Recommendation at 5 (S.D. Fla. Dec. 17, 2007) [DE#18].
43. Magistrate Judge Lynch's Report and Recommendation found that there was
probable cause to believe that Syrop had violated his probation because, among other things, he
sold the stock of Tube Media to investors in 2006. (Id. at 6-7). Syrop had also been represented
by Attorney Mason of Blank Rome LLP in connection with an unsuccessful motion in 2006
seeking early termination of Syrop's probation . U.S. v. Syrop , 04-TP-14003 -Middlebrooks (S.D.
Fla.) [DE#7] (filed 11/29/06) (Motion for Early Termination of Supervised Release).
C. Syrop and Grandinetti
44. In 2003, Syrop began working with Defendant Grandinetti at a company known as
Broadvision Group, Inc. ("Broadvision"),1239 East Newport Center Drive, Suite 113, Deerfield
Beach, Florida 33442. Grandinetti is listed as a director and registered agent for Broadvision in
records on file with the Florida Department of State, Division of Corporations. Florida
corporate records show that Grandinetti also runs or ran several other Florida corporations,
including two listing Defendant Catinella as an Officer or Director: MLM Group, Inc. (9/22/00
filing) and The Quorum Group, Inc. (9/24/99 filing). Broadvision is owned by Grandinetti, and it
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provided "various computer and internet services" to Tube Media from 2003 to December 2005."
(2005 Form 10-KSB/A at 63).
D. Grandinetti and Defendant Garland
45. Tube Media evolved from several predecessor companies. In 2000, it was
incorporated in Colorado as Lexington Barron Technologies, Inc. On April 1, 2004, this
company executed a reverse merger with Pyramid Music Corp., a Florida corporation. The
Company acquired 100% of Pyramid Music Corp. in exchange for 16,922,464 shares of
Company stock. (2005 Form 10-KSB/A at 5). The Company changed its name to AGU
Entertainment Corp. upon the share exchange, and then again to Tube Media on February 26,
2006. (Id.).
46. In 2004, Grandinetti invested money in Tube Media and loaned the Company
money in exchange for promissory notes. (2005 Form 10-KSB/A at 53).
47. According to CW-l, Grandinetti was involved in all aspects of financing and the
day-to-day management of Tube Media, including the build-out in 2005 of its Lauderdale Lakes
Property. The property, which the Company referred to as the "Lauderdale Property," served as a
studio and office. (Form SB-2/A, filed 8/4/06, at 13). The Company sold the Lauderdale
Property at the end of 2005. (Id.). In 2006, Grandinetti worked with Syrop to raise money for
Tube Media in a private placements in March 2006, as discussed below. Syrop and Grandinetti
used Blank Rome LLP to do the corporate work for Tube Media on the private placement,
including acting as escrow agent for money received from investors. (See discussion below and
Exhibits A, B & C annexed hereto). Blank Rome LLP also acted as regular corporate counsel for
Tube Media, representing the Company in connection with the attempt by Levy and Grandinetti
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to sell their stock in a public offering proposed in June and August 2006. (Form SB-2, filed
6/21/06 & Form SB-2/A, filed 8/4/06).
48. According to CW-l, Grandinetti recruited Garland in 2003 to become CEO of
Tube Media. Garland is a "seasonal" resident of Florida, where he owns a house on Miami
Beach at which service of process was attempted in this action. (Source: Letter of Defendant
Garland to the Clerk of Court, contesting service and dated 10/10/07, DE# 3). Garland also
faxed a copy of this letter to Attorney Bruce Rosetto at Blank Rome LLP. (Garland was later
personally served with process in Missouri [DE#7]). Garland is credited with being an early
architect of MTV and VHl. (See Broadcasting & Cable, 4/25/05). Garland initially received a
salary of $350,000 per year under an employment agreement dated July 2003, an amount the
Company increased, effective July 1, 2005, to $450,000 per year. (Form SB-2/A, filed 8/4/06, at
65). Effective January 1, 2007, Garland was to receive $550,000 per year and $650,000 per year
effective January 1, 2008. (Id.).
49. According to CW- l, in 2003, Garland, Grandinetti and others traveled to Las
Vegas to drum up interest in Tube Media. (Additional Source: The Tube Rocks ..., by Lisa Grant
Smith, ValueRich Magazine , Winter 2006, at page 67) ("After developing the basics of the
channel in late 2003, Garland and his team went to Las Vegas for the National Association of
Television Program Executives (NATPE) conference .... The team booked private meetings with
a select group of television broadcast executives and gave a relaxed hour-and-a-half
presentation.").
50. In early March 2006, Garland gave a presentation about Tube Media at the
ValueRich Small Cap Financial Expo held in Miami. (Sources: 3/8/06 Tube Media Press
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Release ; ValueRich Powerpoint presentation , www.vrexpo.net).
51. In March 2006, Syrop and Grandinetti solicited individuals to invest in Tube
Media. In March 2006, they sold Tube Media common stock in a private placement at $2.25 per
share. The Company raised $2.45 million from that sale. Syrop and Grandinetti met with
investors in person at the offices of Blank Rome LLP , Boca Raton, Florida . (Source : U.S. v.
Syrop, Case No. 2:04-TB-14003-DMM, DE# 16 (S.D . Fla. 12/17/07)(Government Ex. 1)
(Affidavit of Brett Friedman [lead plaintiff in this action], dated 11/19/07) (annexed hereto as
Exhibit A). According to this Affidavit, Syrop and Grandinetti were present in the Blank Rome
LLP law offices following a meeting of the board of directors of Tube Media, which Syrop and
Grandinetti had also attended . (See Ex. A hereto).
52. Blank Rome LLP also held, as escrow agent, investor money raised in this March
2006 Tube Media private placement. (Sources: 3/10/06 email entitled "Wire Instructions" from
Bruce C. Rosetto, Blank Rome LLP, Boca Raton, Florida to Randy Syrop and forwarded by
Randy Syrop to Trent Martin [a lead plaintiff in this action]) (copy annexed hereto as Ex. B).
One investor in the Tube Media private placement wrote to Attorney Rosetto of Blank Rome
LLP, telling him to speak to Randy Syrop or John Grandinetti on how to use the $75,000 wire
transfer she had made in the Tube Media stock. (See 3/20/06 Letter of Karolyn Tincher to Bruce
Rosetto and PSLRA certification of Karolyn Tincher showing purchases of Tube Media
securities) (copy annexed hereto as Ex. C).
53. Blank Rome LLP knew unequivocally that Syrop was selling Tube Media stock to
investors. On March 14, 2006, Attorney Rosetto of Blank Rome LLP sent the following email to
Randy Syrop:
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Case 0-07-cv-61333-PCH Document 25-1 E ntered on FLSD Docket 01/14/2008 Page 19 of 45
From : Rosetto, Bruce C. [mailto: Rosetto(BlankRome.com ]
Sent : Tuesday, March 14, 2006 11:22 AM
To: Randy S.
Subject : RE: Tube
With the below being stated we can facilitate in 2 ways the stock can be directly
issued from seller to buyer in which case stock will be restricted by rule 144 and
buyer will submit to remove
Or since we contracted to purchase we can purchase submit for restriction
removal via rule 144 then reissue into seller name
What is the offer amount? Shares? Dollars? No offer amount private sale cost is
$2.25
What class of stock is being offered? Common
What is the settlement date? Private sale so our settlement date is today
Is there an offering memorandum? no. private sale
How long has the seller owned the stock being sold? over 2 years
Does the seller hold any other positions in the Company? yes, he is maintaining
ownership
Bruce C. Rosetto Partner Blank Rome LLP
1200 N. Federal Highway, Suite 417 Boca Raton FL 33432
Phone: (561) 417-8145 Fax: (561) 417-8186 Email: [email protected]
54. Syrop forwarded the above email five minutes later (11:27 AM) that day to Trent
Martin, a Tube Media investor and a lead plaintiff in this action. Syrop's email address on the e-
mail he sent to Trent Martin was "[email protected]." "The BVG" stands for The
Broadvision Group, the company at which Syrop and Grandinetti both work.
55. According to CW-l, by the end of 2006, Tube Media's prospects were failing. As
the Company conceded, it was suffering from weak internal controls "over financial reporting,
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mainly its financial closing, review and analysis process." (Form 10-KSB/A, filed 12/6/06, at
73). The Company's expenses far exceeded the money it had or could raise. Syrop and
Grandinetti had less to do with the Company and were attempting to sell their stock. In June
2006, Defendants Levy (through DML Marketing Corp .), Grandinetti and others sought to sell
their shares in a secondary offering of 17,339,478 shares by selling security holders at a proposed
sale price of $1.56 per share. (Tube Media Form SB-2, filed 6/21/06, at 11-12). Levy sought to
sell 1,200,000 shares, and Grandinetti 750,000 shares. (Id. at 11; Form SB-2/A, Amendment No.
1, filed 8/4/06, at 13).
56. On April 13, 2007, Tube Media filed an SEC Form 8-K stating that the Company
did not conduct an audit of its year ended December 31, 2006 financial statements and did not
file a Form 10-KSB as required by SEC Rules. The Company stated that it had been advised by
the NASD that it would be delisted from the Bulletin Board effective April 13, 2007, and as a
result, the Company's common stock would thereafter be traded on the Pink Sheets under the
symbol "TUBM.PK".
57. By mid-2007 no one was ever present at the offices listed on the SEC filings.
E. Unpaid Payroll Taxes at Defendant Grandinetti's
Related Company: Demand X
58. Grandinetti and Syrop also own a company called Demand X, a broadband video
player. In 2007, he and Syrop negotiated with Chris Churchill ("Churchill"), CEO and founder of
AAMP Media Corp., a San Francisco media advertising company, to merge the two companies.
Grandinetti and Syrop issued a press release jointly with Chris Churchill of AAMP Media Corp.
announcing that AAMP Media Corp. had acquired DemandX. (Source: 4/24/07 Press Release:
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AAMPMedia Corp. Acquires Broadband Video Company DemandX). Syrop stated: "Joining with
AAMP means we can now offer complete online video and rich media solutions, says Randy Syrop,
founder of DemandX." (Id) The press release stated that the "Executive Committee of AAMP
Media Networks" includes "Randy Syrop, founder of Demand X" and "Chief Rain Maker: John
Grandinetti, private investor, Tube (tv) Media Corp." (Id) The acquisition, however, does not
appear to have been consummated.
59. On September21, 2007, Churchill ofAAMP Media Corp. e-mailed another employee
who was in close contact with Syrop and Grandinetti at Demand X. Churchill was discussing his
continued discussions with Grandinetti and Syrop to close the sale of DemandX to AAMP Media
Corp. Churchill warned about DemandX's failure to pay its employee payroll taxes:
I am trying to re-work the Florida deal and those guys are going crazy on me - just
like I thought they wood [sic]. They are not rational business men. You will
probably start getting calls from them and we need to hand [sic] tough through this.
This has always been the worst part ofbeing a CEO - it's difficult to lose friends owe
[sic] money, but if I go with their (john and Randy's) plan I lose you and will
probably default on my promise to the rest of the SF Staff to have paychecks by the
end of the month.
They are of course going to hurl every insult in the book at me and try to split us up.
We have to stay united on this. When they come to you need to site [sic] the
following:
Untruthful - they said they were going to send up the money for the payroll.
They stiffed us. They said they never said that, which is insane. I presented them
with the whole 2H2007 plan and got buy off from them on that. John loved the idea
of saving 30% this month on payroll, now he says he never said that. He also told
randy to fire the whole team. Anyways, as we have discusses [sic] - NO LIERS !
Illegal Activity - no employee taxes. They are going to get into huge trouble
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with this and we don't want to be associated with them. They are felons and VC's
[venture capitalists] will not allow them on the BOD. The Aruba deal is scary are
[sic] we am [sic] not going to jail over that.
I have a counter offer for them, 5% ofAAMP and 8% in options and we chapter 11
their company . We take 3 employees and maybe them, but that is all.
F. No Safe Harbor
60. Because the Company issued Penny Stock (see penny stock warnings in various SEC
filings, including 2005 Form 10-KSB, filed May 11, 2006 at 19), there is no safe harbor exclusion
for forward-looking statements under Section 21 E(b)(1)(A) & (C) ofthe Exchange Act, as discussed
below.
II. Defendants' False and Misleading Statements
A. Tube Media's Unpaid Payroll Taxes
61. The Class Period begins on August 19, 2005. On that date, Tube Media filed its Form
10-QSB for the quarterly period ended June 30, 2005. Defendants Levy and Poling signed and
certified the filing under Sarbanes-Oxley.
62. The June 30, 2005 Form 10-QSB was materially false and misleading. As of
December 31, 2004, and as of December 31, 2005, the Company employed twenty-nine full time
employees and twenty-three full time employees respectively, for which payroll taxes were withheld
during the 2004 and 2005 tax period. (2004 and 2005 Forms 10-KSB). The Company failed to remit
these fiduciary funds to the taxing authorities. Defendants knew that they had collected but failed
to remit these taxes, as the Company later admitted to investors on May 11, 2006. Tube Media
admitted in its May 11, 2006 Form 10-KSB that it had not remitted these payroll taxes because of
"liquidity issues," meaning that it needed the withheld employee taxes to operate the Company. (See
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Case 0-07-cv-61333-PCH Document 25- 1 E ntered on FLSD Docket 01/14/2008 Page 23 of 45
¶¶69 & 70 below).
63. On December 9, 2005, the Company filed its Form 10-QSB for the quarterly period
ended September 30, 2005. Defendants Levy and Poling signed and certified the September 30,
2005 Form 10-QSB under Sarbanes-Oxley. The September 30, 2005 Form 10-QSB failed to
disclose that the Company had withheld payroll taxes for its employees but failed to remit these
funds to the taxing authorities.
64. The September 20, 2005 Form 10-QSB was materially false and misleading for the
reasons set forth above in ¶62 and ¶¶69 & 70 below.
65. The Company experienced liquidity problems from its inception : "We have
experienced liquidity issues since our inception due primarily to our limited ability, to date, to raise
adequate capital on acceptable terms. We have historically relied upon the issuance ofpromissory
notes that are convertible into shares of our common stock to fund our operations and currently
anticipate that we will need to continue to issue promissory Notes to fund our operations and repay
our outstanding debt for the foreseeable future." (2005 Form 10-KSB, filed May 11, 2006 at 33).
As a result of liquidity issues, the Company was sued by two of its vendors for non-payment,
including by Federal Express. (Id. at 12, 20).
66. On March 1, 2006, Tube Media executed an employment agreement with Defendant
Garland which stated in relevant part : "The Company agrees to use its best efforts to obtain and
maintain directors and officers liability insurance coverage during and throughout the term of
Employee's employment ... [and] to bring all accounts payable for The Tube current immediately."
Defendant Garland signed and certified the Form 8-K under Sarbanes-Oxley. (Form 8-K, filed
3/10/06, Exhibit 10.1).
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67. The Company's March 10, 2006 Form 8-K was false and misleading for the reasons
set forth above in ¶61 and ¶¶70 & 71 below.
68. On April 26, 2006, two weeks before the May 11, 2006 disclosure, the Company filed
a Form 8-K, signed and certified by Defendant Poling under Sarbanes-Oxley. The Form 8-K
contained a "Purchase Agreement" dated April 21, 2006 between Tube Media and certain investors,
stating:
The Company hereby represents and warrants to the Investors that,except as set forth in the schedules delivered herewith (collectively,the "Disclosure Schedules") ... The Company and each Subsidiaryhas timely prepared and filed all tax returns required to have beenfiled by the Company or such Subsidiary with all appropriategovernmental agencies and timely paid all taxes shown thereon orotherwise owed by it. The charges, accruals and reserves on thebooks of the Company in respect of taxes for all fiscal periods areadequate in all material respects, and there are no material unpaidassessments against the Company or any Subsidiary nor, to theCompany's knowledge, any basis for the assessment ofany additionaltaxes, penalties or interest for any fiscal period or audits by anyfederal, state or local taxing authority except for any assessmentwhich is not material to the Company and its Subsidiaries, taken asa whole. All taxes and other assessments and levies that theCompany or any Subsidiary is required to withhold or to collectfor payment have been duly withheld and collected and paid tothe proper governmental entity or third party when due. Thereare no tax liens or claims pending or, to the Company's knowledge,threatened against the Company or any Subsidiary or any of theirrespective assets or property. Except as described on Schedule 4.11,the are no outstanding tax sharing agreements or other sucharrangements between the Company and any Subsidiary or othercorporation or entity. [Emphasis added].
69. The foregoing statement in bold that the Company had paid all taxes and other
assessments to the proper governmental authority was false and misleading for the reasons stated
above in ¶62 and ¶¶70 & 71 below. In addition, Tube Media filed the Form 8-K on April 26, 2006
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Case 0-07-cv-61333-PCH Document 25- 1 E ntered on FLSD Docket 01/14/2008 Page 25 of 45
and Purchase Agreement without including any "Disclosure Schedules."
70. On May 11, 2006, after the market closed, the Company filed with the SEC its
Form 10-KSB for the year ended December 31, 2005, signed and certified under Sarbanes-Oxley
by defendants Levy, Poling, Garland and Catinella. The Company disclosed in that filing that it
had failed to remit its payroll taxes for 2004 and 2005 "due to liquidity issues." The Company
essentially conceded that it intentionally failed to remit to the taxing authorities money it had
withheld from its employees, so that it could continue to fund operations.
71. The May 11, 2006 filing disclosed that the unpaid taxes, including the estimated
interest and penalties , were a total of $353,472 - an amount nearly equal to the $360,503 in
revenue generated by the Company for the entire 2005 calendar year (2005 Form 10-KSB, filed
5/11/06 at 31):
During 2004 and 2005, the Company did not remit its payroll taxes timely
due to liquidity issues. The Company has recorded a liability for the 2004 unpaid
payroll taxes in the amount of $45,147 and the expected interest and penalties for
2004 in the amount of $24,920. In 2005 all of the payroll taxes have been paid
with the exception of $157,936. The Company has recorded this amount as a
liability in 2005, and an estimate of the expected interest and penalties in respect
of late taxes for 2005, in the amount of $123,469. The Company believes the
amounts reserved are adequate in all material respects. [2005 Form 10-KSB, filed
5/11/06 at 53].'
72. When the Company disclosed this information, its stock dropped five percent,
' The Company nevertheless continued to hide its failure to timely pay its payroll taxesfor the first quarter of 2006 - even though the 2005 Form 10-KSB was filed almost 45 days afterthe end of the first quarter of 2005. Six months later, the Company disclosed that it "paid itspayroll taxes for the first quarter of 2006 late, and will similarly record an estimate of theexpected interest and penalties of the late taxes for 2006." (Form 10-KSB/A filed 12/7/06)(restating 2005 financial results and amending 2005 Form 10-KSB in various ways).
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from $2.16 to $2.05, and continued to decline as a result of this disclosure. Within a two-week
period the Company's stock dropped to $1.75 per share.
B. The Company Restates its Second and ThirdQuarter 2005 Financial Statements
73. The Company's financial statements contained within the Company's June 30,
2005 Form 10-QSB, filed August 19, 2005, and September 30, 2005 Form 10-QSB, filed
December 9, 2005, were materially false and misleading.
(1) The Falsity of Tube Media's Second Quarter 2005 Financials
74. The Company restated its financial results for the three and six months ended June
30, 2005 on July 20, 2006, when it filed its Form 10-QSB/A, signed by defendant Spoden. The
Company stated that it was taking the restatement "to reflect discontinued operations and the
issuance of stock to a former director in connection with an employment agreement and the
issuance of stock in connection with the settlement of a dispute ." (Form 10-QSB/A, filed
7/20/06(Explanatory Note)).
75. The Company's restatement of its June 30, 2005 quarterly financial statements
showed that the Company was in even worse shape than management had originally reported.
The important differences between originally reported results and the Company's restated results
for the three and six-month period ended June 30, 2005, may be summarized as follows:
26
Revenue
Cost of Sales
Gross Profit
Total Operating ExpensesLoss from OperationsLoss from Discontinued
OperationsInterest ExpenseNet Loss
Revenue
Cost of Sales
Gross Profit
Total Operating ExpensesLoss from OperationsLoss from Discontinued
OperationsInterest ExpensesNet Loss
107,479 (37,325) 70,15413,338 (6 ,702) 6,63694,141 (30,623) 63,518
2,756,519 1,123,447 3,879,966(2,662,378) 1,154,070 (3,816,448)
-- 139,680 (139,680)1,647,158 ( 113 , 750) 1,533,408
(4 , 309 ,536) 1,180,000 5 489 536
Statement of Operations for theSix Months Ended June 30, 2005
Previously IncreaseReported (Decrease) Restated
257,982 (81,901) 176,08150,083 (20 , 708 ) 29,375
207,899 (61,193) 146,7064,617,422 2,119,161 6,736,583(4,409,523) 2,180,354 (6,589,877)
-- 323,318 (323,318)3,096,925 (275 , 832) (2,821,093)7 506 448 2,227,840 9 734 288
76. The financial information originally reported by Tube Media for the period ended
June 30, 2005 was materially false and misleading; in fact, if it were not so, the Company would
not have restated results. The Company had weak and ineffective internal controls, as it noted in
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the Form 10-QSB/A:
ITEM 3. CONTROLS AND PROCEDURES
Subsequent to the original evaluation [ofthe effectiveness and designand operation of the Company's disclosure controls and procedures]and in connection with the preparation of the Company's Form 10-KSB for the year ended December 31, 2005, the Company recognizedan error in the accounting treatment for the issuance of stock to adirector pursuant to an employment agreement and the issuance ofstock in settlement of a dispute and that the Company should havereported the operations ofAGU Studios as discontinued operations.At that time, the Company determined that it should restate thefinancial results to correct the accounting treatment ofthe issuance ofstock, the issuance of stock in settlement of a dispute and also reflectdiscontinued operations. The Company 's disclosure controls andprocedures did not detect on a timely basis the additional expensein connection with the issuance of common stock or that theoperations of AGU Studios should have been reported asdiscontinued operations. The methodology for accounting for theissuance of such stock and the reporting of the operations of AGUStudios as discontinued operations were corrected subsequent to theinitial filing of the Form 10-QSB for the period covered by thisreport. As a result of this restatement as discussed further in Note 1and Note 9 to the condensed consolidated financial statements, theCompany, under the supervision and with the participation of itsmanagement, including its principal executive officer and principalfinancial officer, re-evaluated the effectiveness of the design andoperation ofits disclosure controls and procedures as ofthe end oftheperiod covered by this report. Based upon this re-evaluation, theprincipal executive officer and principal financial officer concludedthat, as of the end of the period covered by this report, theCompany's disclosure controls andprocedures were not effective inreaching a reasonable level ofassurance that management is timelyalerted to material information related to and during the periodwhen our periodic reports are being prepared. [Emphasis added].
77. Months later, the Company explained the reasons for these material weaknesses.
The Company eventually restated its full-year results for 2005 on December 7, 2006, when it filed
its 2005 Form 10-KSB/A. In that filing, Tube Media conceded that during 2005 it lacked internal
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control over financial reporting, mainly its financial closing, review and analysis process, and that
the Company lacked "qualified staff with SEC experience in the financial reporting and analysis
area." (Form 10-KSB/A, filed 12/7/06 at 74). The Company only hired additional qualified staff
during its quarter ended December 31 , 2006. (Id.) Thus, Defendants knew or recklessly disregarded
that Tube Media's financial statements were materially false and misleading. The restatements
alleged above injured management integrity and created a mistrust of the Company's reported
financial data.
(2) The Falsity of Tube Media's ThirdQuarter 2005 Financials
78. The Company restated its financial results for the three and nine months ended
September 30, 2005 on September 1, 2006, when it filed its Form 10-QSB/A, signed by Defendant
Spoden. The Company stated that it was restating these quarterly financials for the same reason
previously reported: discontinued operations and issuance ofstock to a former director. (Form 10-
QSB/A, filed 9/1/06 (Explanatory Note)).
79. The important differences between originally reported results and the Company's
restated results for the three and nine month period ended September 30, 2005, may be summarized
as follows:
Statement of Operations for theThree Months Ended September 30, 2005
Previously IncreaseReported (Decrease) Restated
Revenue 94,080 (17,410) 76,670Cost of Sales 7,223 -- 7,223Gross Profit 86,857 (17,410) 69,447
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Total Operating Expenses 1,895,755 (54 , 783 ) 1,840,972Loss from Operations (1,808,898) (37,373) (1,771,525)Loss from Discontinued
Operations -- 189,682 (189,682)Interest Expenses 2,344,779 152,309 2,192,470Net Loss 4 153 677 -- (4 , 153 ,677)
Statement of Operations for theNine Months Ended September 30, 2005
Previously IncreaseReported (Decrease) Restated
Revenue 352,062 (99,311) 252,751Cost of Sales 57,306 (20 , 708 ) 36,598Gross Profit 294,756 (78,603) 216,153Total Operating Expenses 6,513,178 2,064,378 8,577,556Loss from Operations (6,218,422) (2,142,981) (8,361,403)Loss from Discontinued
Operations -- (513,000) (513,000)Interest Expenses 5,441,703 (428,141) 5,013,562Net Loss (11,660,125) (2,227,840) (13,887,965)
80. The financial information originally reported by Tube Media for the period ended
September 30, 2005 was false and misleading, as shown by the restatements themselves which, by
definition, are not needed or taken unless the discrepancies between the originally reported and
restated financial information are material. The Company made the same disclosure quoted above
about the reasons for the restatement, noting that "the Company's disclosure controls and procedures
were not effective in reaching a reasonable level of assurance that management is timely alerted to
material information related to and during the period when our periodic reports are being prepared."
(Form 10-QSB/A, filed 9/1/06, at 28).
30
defendants Poling and Levy. It stated in relevant part: "The Company has restated its previously
issued March 31, 2005 condensed consolidated financial statements for ... the issuance of stock to
a former director in connection with an employment agreement." The adjustment resulted in a
$1,047,840 adjustment to reflect additional "compensation expense." Upon dissemination of this
amended Form 10-QSB, the price of the Company's stock dropped almost 9%, falling to a closing
price of $1.46 on June 21, 2006, from a closing price of $1.60 on June 20, 2006. This restatement
corrected the previously reported results for the six and nine month periods of 2005, as alleged
above.
82. On August 4, 2006, the Company filed Amendment No. 1 to its Form SB-2 that
included the Prospectus for a sale of 18,161,732 shares of common stock, and warrants to purchase
up to 6,140,533 shares of common stock. The Registration Statement incorporated the December
31, 2005 financial statements that the Company later restated in Form 10-KSB/A, filed 12/7/06. The
August 4, 2006 Amendment No. 1 to Form SB-2 was signed by, among others, Defendants Poling,
Catinella, Garland, LaPlatney and Spoden. The inclusion of the 2005 financial statements in the
August 2, 2006 Amendment No. 1 to Form SB-2 was a false statement. As discussed below, the
Company later restated its financial results for 2005, and admitted that the Company lacked effective
disclosure controls and procedures "due to a material weakness in the Company' s internal control
over financial reporting, mainly its financial closing, review and analysis process," when the 2005
Annual Report on Form 10-KSB was prepared and filed with the SEC. (Form 10-KSB/A, filed
31
with the SEC, signed and certified under Sarbanes-Oxley by Defendant Spoden. According to the
filing:
The Tube Media Corp. (the "Company') is unable to file its quarterlyreport on Form 10-QSB for the fiscal quarter ended September 30,2006 (the "Form 10-QSB") within the prescribed period. Thecompilation, dissemination and review ofthe information required tobe presented in the Form 10-QSB has imposed time constraints on theCompany's employees. The timeliness of the Company's Form 10-QSB was adversely impacted by amultitude offactors, including, butnot limited to, continuing liquidity issues and a significant financingagreement entered into in the third quarter of2006, which was criticalto the Company's ability to continue as a going concern. As a resultof these factors, the timely filing of the Form 10-QSB wasimpracticable without due hardship and expense to the Company. Atthis time, the Company expects to file the Form 10-QSB no laterthan the fifth calendar day following the prescribed due date, aspermitted by Rule 12b-25.
84. The above statement was materially false and misleading. Tube Media lacked the
skilled staff required to prepare the Form 10-QSB, that is, employees able to identify and address
the issues regarding the material internal control deficiencies over financial closing, and to perform
the review and analysis required for the proper filing of the Form 10-QSB. As the Company itself
acknowledged in its restated results for 2005 on Form 10-KSB/A, the Company lacked internal
control over financial reporting, mainly its financial closing, review and analysis process, and lacked
"qualified staffwith SEC experience in the financial reporting and analysis area." (Form 10-KSB/A,
filed 12/7/06 at 74). According to the Company, additional qualified staffwere only added "during
the Company's most recent fiscal quarter" (Id.), which was the quarter ending December 31, 2006.
As shown below, Defendant Spoden and the Company had no basis for stating that the Company was
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in a position to file its quarterly report for the period ending September 30, 2006.
THE FULL TRUTH IS REVEALED
85. On November 21, 2006, after the market closed, Tube Media filed a Form 8-K, signed
and certified under Sarbanes-Oxley by defendant Spoden. The Company announced that it would
have to restate its financials for the year ended December 31, 2005 and for the quarterly periods
ended March 31, 2006, and June 30, 2006. The restatement was required as a result of "the
Company's review of its accounting for derivatives and based on recent interpretations of the
accounting for certain financial instruments under SFAS 133 `Accounting for Derivative Instruments
and Hedging Activities' ("SFAS 133") and the Emerging Issues Task Force No. 00-19 `Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock'
("EITF No. 00-19")."]
86. Tube Media's stock dropped from a closing price of $0.67 on November 22, 2006 to
a closing price of $0.58 on November 24, 2006, a drop of 14%.
RELEVANT POST-CLASS PERIOD EVENTS
87. On November 30, 2006, Tube Media sent a letter to the SEC signed by Defendant
Spoden, stating that the Company expected to file its Form 10-QSB for the quarterly period ended
September 30, 2006 in eight days, or by December 8, 2006.
88. This statement was materially false and misleading. The Company was then unable
to overcome the material internal control deficiencies over the financial closing, review and analysis
process required for filing the Form 10-QSB.
89. On December 20, 2006, Tube Media filed its Form 10-QSB for the period ended
September 30, 2006 that was signed and certified under Sarbanes-Oxley by Defendant Spoden.
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According to the filing, "The Company will restate its previously issued March 31, 2006 and June
30, 2006 condensed financial statements to adjust the embedded derivatives to fair value and to
record liquidated damages in connection with embedded derivatives. The restatement of the
previously issued condensed financial statements for March 31, 2006 and June 30, 2006 will be filed
with the Securities and Exchange Commission in the nearfuture." (Emphasis added).
90. The above statement was materially false and misleading. Tube Medianever filed the
restated condensed financial statements with the SEC, as stated above. After December 20, 2006,
the Company stopped filing any Quarterly Reports with the SEC. The Company has never filed its
Annual Report for 2006.
NO SAFE HARBOR
91. The statutory safe harbor protecting forward-looking statements under certain
circumstances does not apply to any of the allegedly false and misleading statements pleaded in
this Complaint.
92. Section 21E of the Exchange Act expressly excludes the application of the Safe
Harbor to forward-looking statements made with respect to the business or operations of the
issuer, if the issuer, during the 3-year period preceding the date on which the statement was first
made, issues penny stock. Section 21E(b)(1)(A) & (C), 15 U.S.C. § 78u-5(b)(1)(A) & (C).
93. During the three-year period preceding the false statements alleged in this
amended complaint, the Company issued penny stock. According to the Company's 2004 Form
10-KSB filed March 31, 2005, during 2004, the Company issued 195,958 shares of common
stock to consultants and contractors in exchange for $329,866 of services performed and issued
2,311,640 shares of common stock to officers and employees. In 2004, the Company also issued
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337,500 shares of common stock to acquire the Lauderdale Property, 500,000 shares of common
stock in connection with the issuance of a secured convertible promissory note, 1,173,540 shares
of common stock in connection with the conversion of debt and accrued interest and 15,000
shares of common stock to two accredited investors in exchange for $60,000 in cash. (2004
Form 10-KSB at 15).
94. In addition, in 2005, according to the Company, it issued a total of 2,144,055
shares of common stock to third-party vendors and others. (2005 Form 10-K, filed 5/11/06, at
35). The Company also issued an aggregate of millions of shares of common stock to various
"accredited investors," employees and directors. (Id. at 22 to 26). In addition, the Company
states that it issued $4.8 million in promissory notes, convertible notes or debentures during
2003, 2004 and 2005, that were subsequently converted - apparently in 2004 according to the
2004 Form 10-K cited above - into 1,173,540 shares of common stock of the Company. (Id. at
31.) ("Since May 10, 2003, our inception, we have financed our operations through numerous
debt and equity issuances."). A copy of the common stock share certificates that Tube Media
issued is annexed as Exhibit 3.4.2 to its 2005 Form 10-K, filed 5/11/06.
95. Tube Media's stock was a penny stock at all relevant times. Tube Media stated:
"Currently our common stock is a `low-priced' security under the `penny stock' rules
promulgated under the Securities Exchange Act of 1934." (2005 Form 10-KSB, filed May 11,
2006 at 19). See Section 3a(51 ) of the Exchange Act (15 U.S.C. §78c(51 )) and SEC Rule 3a51-1
promulgated thereunder (17 C.F.R. § 240.3a51-1).
96. In addition, none of the allegedly false and misleading statements pleaded in this
amended complaint is a forward-looking statement, nor were any statements identified as
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Case 0-07-cv-61333-PCH Document 25- 1 E ntered on FLSD Docket 01/14/2008 Page 36 of 45
"forward-looking statements" when made. To the extent that there were any forward-looking
statements, there were no meaningful cautionary statements identifying important factors that
could cause actual results to differ materially from those in the purportedly forward-looking
statements. Alternatively, to the extent that the statutory safe harbor does apply to any forward-
looking statements because at the time, each of those forward-looking statements was false or
misleading and/or the forward-looking statement was authorized or approved by an Tube Media
executive officer who knew that these statements were false or misleading when made.
APPLICABILITY OF PRESUMPTION OF RELIANCE:FRAUD ON THE MARKET DOCTRINE
97. At all relevant times , the market for Tube Media common stock was an efficient
market for the following reasons, among others:
a. Tube Media common stock met the requirements for listing, and was listed
and actively traded, on the OTC Bulletin Board, a highly efficient market;
b. Tube Media common stock was heavily traded during the Class Period.
c. As a result, the market for Tube Media's securities promptly digested
current information with respect to Tube Media from all publicly-available sources and reflected
such information in Tube Media stock price. Under these circumstances, all purchasers of Tube
Media common stock during the Class Period suffered similar injury through their purchase of
stock at artificially inflated prices and a presumption of reliance applies.
SCIENTER ALLEGATIONS
98. As alleged herein, defendants acted with scienter in that defendants knew that the
public documents and statements , issued or disseminated by or in the name of the Company were
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Case 0-07-cv-61333-PCH Document 25- 1 E ntered on FLSD Docket 01/14/2008 Page 37 of 45
materially false and misleading; knew or recklessly disregarded 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 violators 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
Tube Media and its business practices, their control over and/or receipt of Tube Media allegedly
materially misleading misstatements and/or their associations with the Company which made
them privy to confidential proprietary information concerning Tube Media were active and
culpable participants in the fraudulent scheme alleged herein. Defendants knew and /or
recklessly disregarded the falsity and misleading nature of the information which they caused to
be disseminated to the investing public. This case does not involve allegations of false forward-
looking statements or projections but instead involves false statements concerning the
Company's business, finances and operations. The ongoing fraudulent scheme described in this
Complaint could not have been perpetrated over a substantial period of time, as has occurred,
without the knowledge and complicity of the personnel at the highest level of the Company,
including the Defendants Levy, Garland, Catinella, Poling, LaPlatney, Spoden, and Grandinetti.
99. Defendants failed to disclose that Grandinetti was operating effectively as an
unnamed executive officer of the Company and a control person of the Company, and was acting
with Syrop to sell the stock of the Company in private placements.
100. Defendants knew or recklessly ignored that Syrop was selling Company stock
illegally - that is, in violation of the conditions of his probation, and that the Company made no
disclosure of that fact. This was highly material to investors because it bore directly on the
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Case 0-07-cv-61333-PCH Document 25- 1 E ntered on FLSD Docket 01/14/2008 Page 38 of 45
integrity of management.
101. The Company's regular counsel, Blank Rome LLP (Boca Raton office), knew that
Syrop was selling securities of Tube Media and knew that in so doing he was violating his
probation. No disclosure was ever made to the public at the time or thereafter. Blank Rome LLP
(Boca Raton office) represented Syrop in his criminal case, and allowed its Boca Raton office to
be used for Company board meetings and meetings with potential investors, and acted as escrow
agent for investor funds collected for Tube Media's March to April 2006 private placement, and
advised Syrop in connection with the March 2006 private placement . (See Exhibits A, B & C
hereto). There is a compelling inference that counsel informed Tube Media and its executives
that Syrop could not lawfully sell Tube Media securities while he was still on probation, if indeed
these executives did not already know that fact.
102. Defendant Levy disclosed favorable aspects of his biography in the Company's
SEC filings, but failed to disclose the material fact of the prior FTC action and $6.087 million
unpaid judgment against him and his wife for carrying out the Career Assistance scam. The
Levys also had sufficient funds to satisfy the FTC's judgment - the proceeds of which would be
paid to the defrauded students according to the FTC ("FTC Wins Permanent Injunction Against
`$cholarship $cam' Defendants ,"www. ftc.gov/okra/l 997I091levy. shtin. ) -- as shown by the at least
$1.5 million in cash the Levys loaned to Tube Media and their 10% stock holdings, which were
valuable during most of the Class Period. In addition, according to CW-l, Garland was
responsible for bringing Levy into the Company. Garland either knew of the Levys' unpaid FTC
judgment for fraud or recklessly ignored it.
103. Defendant Grandinetti knew he was operating as an undisclosed executive officer
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Case 0-07-cv-61333-PCH Document 25- 1 E ntered on FLSD Docket 01/14/2008 Page 39 of 45
and control person at Tube Media and chose to remain so undisclosed for his own purposes.
According to the Government, Grandinetti "has a prior State RICO conviction for fraud ....
(Case 2:04-TP-14003-DMM, Report and Recommendation, [DE#18], filed 12/17/07), although
counsel has not been able to independently verify this statement. The other defendants,
particularly Garland, who was friendly with Grandinetti and was brought into the Company by
him, either knew of Grandinetti's true status or recklessly ignored it. In addition, there is a
compelling inference that Blank Rome LLP, Company counsel, knew that Grandinetti was
operating as an undisclosed executive officer or control person, and informed the Tube Media
board - Defendants in this action - of this fact. Defendant Catinella, the sole Audit Committee
member, was also an officer or director in two other companies of Grandinetti's prior to the
Class Period. There is a compelling inference that given Catinella's prior business relationship
with Grandinetti, Tube Media's small size, and Catinella's sole membership on the Audit
Committee, that he either knew of Grandinetti's executive or control position, or recklessly
ignored it.
104. Defendants Levy and Grandinetti had a strong motive to commit the fraud. Levy
sought to sell 1.2 million shares of his stock and that of his wife in a planned secondary offering
of stock. (SB-2/A, filed 6/21/06 and 8/4/06 (Amendment No. 1)). Grandinetti sought to sell
750,000 shares in this secondary offering. (Id.). The shares were to be sold to the public at $1.56
per share.
105. The Company repeatedly restated its financials and admitted to a lack of internal
controls and skilled staff.
106. Defendant Spoden repeatedly signed off on SEC filings near the end of the Class
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Case 0-07-cv-61333-PCH Document 25- 1 E ntered on FLSD Docket 01/14/2008 Page 40 of 45
Period promising to file restated financials which the Company has never done. Neither
Defendant Spoden nor the Company has ever explained why the promised SEC filings were not
made.
LOSS CAUSATION ALLEGATIONS
107. Defendants' false statements artificially inflated the price of Tube Media stock.
When the adverse news was announced as alleged above, the artificial inflation was dispelled.
108. Throughout the Class Period, Defendants made false statements to the
marketplace and omitted material information about Tube Media's: (a) unpaid payroll taxes for
2004 and 2005, and exposure to interest and penalties; (b) its failure to properly account for
discontinued operations and the issuance of stock to a former director; and (c) its lack of
disclosure controls and lack of skilled staff to prepare the Company's SEC filings.
109. Tube Media made a series of partial disclosures, ending in the full revelation of
the truth on November 21, 2006, as follows:
110. May 11, 2006 : In connection with its filing of its Annual Report on Form 10-KSB
for the year ending December 31, 2005 (after the close of trading), the Company admitted that it
did not remit payroll taxes that it had withheld from its employees during 2004 and 2005.
Reacting to this news, shares in Tube Media declined from $2.16 on May 11, 2006 to a low of
$1.85 on May 12, 2006, finally closing on May 12, 2006 at $2.05. On the following day, May 15,
2006, the stock dropped to close at $1.97 on volume of 560,300 shares, then went to $1.90 on
Mayl6, 2006 and steadily down in the next two weeks.
111. September 1, 2006 : The Company restated its financial statements for the period
ending September 30, 2005 and filed a Form 10-QSB/A, Amendment No. 1 on September 1,
40
Case 0-07-cv-61333-PCH Document 25- 1 E ntered on FLSD Docket 01/14/2008 Page 41 of 45
2006 after the close of trading. The Company's disclosure compounded and reinforced the news
set forth in the amendment to its June 30, 2005 Form 10-QSB, discussed above. The stock
dropped on the filing, from $1.23 on September 1, 2006 to $1.21 on September 5, 2006, the next
trading day, and further thereafter, falling from $1.20 on September 6, 2006 to $0.91 on
September 13, 2006.
112. November 21, 2006 : On November 21, 2006, after the market closed, the
Company filed its Form 8-K with the SEC announcing that its financial statements for the year
ended December 31, 2005 and for the quarterly periods ended March 31 and June 30, 2006,
would have to be restated. This adverse news revealed the full truth about the Company's lack of
reliability and truthfulness in its financial reporting and materially impugned management's
integrity. This adverse news was disseminated the day before Thanksgiving Day and thus the
market did not react. On November 24, 2006, the first trading day following the Thanksgiving
holiday, the stock dropped 14%, from a closing price of $0.67 on November 22, 2006 to a
closing price of $0.58 on November 24, 2006. The stock price steadily declined thereafter and
did not rebound.
COUNT ONE
Against All Defendants (Except Grandinetti) for Violation of Section 10(b)of the Exchange Act and Rule 10b-5(b) Promulgated Thereunder
113. Plaintiffs repeat and reallege each and every allegation contained above.
114. This count is asserted against Defendants Levy, Garland, Catinella, Poling,
LaPlatney, Spoden and Tube Media.
115. Each of the defendants: (a) knew or recklessly disregarded material adverse non-
41
Case 0-07-cv-61333-PCH Document 25- 1 E ntered on FLSD Docket 01/14/2008 Page 42 of 45
public information about Tube Media's financial results and then existing business conditions,
which was not disclosed; and (b) participated in drafting, reviewing and/or approving the
misleading statements, releases, reports and other public representation of and about Tube Media.
116. Plaintiffs' losses on their purchase of the common stock of Tube Media were
caused by the false and misleading statements of material fact alleged herein.
117. During the Class Period, defendants, with knowledge of or reckless disregard for
the truth, disseminated or approved the false statements specified above, which were misleading
in that they contained misrepresentations and failed to disclose material facts necessary in order
to make the statements made, in light of the circumstances under which they were made, not
misleading.
118. Defendants have violated § 10(b) of the Exchange Act Rule I Ob-5(b) promulgated
thereunder in that during the Class Period they made untrue statements of material facts or
omitted facts necessary in order to make statements made, not misleading.
119. Plaintiffs and the Class have suffered damage in reliance on the integrity of the
market. Plaintiffs and the Class would not have purchased Tube Media stock had they been
aware of Defendants' false and misleading statements.
COUNT TWO
Violation of Section 20(a) of the Exchange Act Against All Individual Defendants
120. Plaintiffs repeat and reallege each and every allegation contained above.
121. This count is asserted against Defendants Levy, Garland, Catinella, Poling,
LaPlatney, Spoden and Grandinetti.
122. Defendants Levy, Garland, Catinella, Poling, LaPlatney, Spoden and Grandinetti
42
Case 0-07-cv-61333-PCH Document 25- 1 E ntered on FLSD Docket 01/14/2008 Page 43 of 45
acted as controlling persons of Tube Media within the meaning of Section 20(a) of the Exchange
Act. By reason of their senior executive and/or Board positions, and having the power and
authority to cause Tube Media to engage in the wrongful conduct complained of herein, these
defendants are controlling persons under Section 20(a). Tube Media disclosed that "Our
management, through its significant ownership of our common stock, has substantial control over
our operations." (2005 Form 10-KSB, filed 5/11/06).
123. In addition, defendant Grandinetti acted in all respects with the authority of an
executive officer of the Company and was a controlling person under Section 20(a) of the
Exchange Act. Grandinetti was a substantial stockholder (at least 1.5% of the shares based on
Company disclosures). He promoted and sold the stock of Tube Media in private placements,
recruited Defendant Garland to act as CEO, handled many of the Company's financing and
banking decisions and its day-to-day management, attended board meetings, oversaw the build-
out of the Company's Lauderdale Property", and is listed on written settlement as the person to
whom all notices under the settlement agreement should be sent.
124. By reason of such wrongful conduct, defendants are liable pursuant to §20(a) of
the Exchange Act. As a direct and proximate result of these defendants ' wrongful conduct,
plaintiffs and other members of the Class suffered damages in connection with their purchases of
Tube Media stock during the Class Period.
WHEREFORE , plaintiffs pray for relief and judgment as follows:
A. Determining that this action is a proper class action and certifying plaintiffs as class
representative under Rule 23 of the Federal Rules of Civil Procedure:
B. Awarding compensatory damages in favor of plaintiffs and the other Class members
43
Case 0-07-cv-61333-PCH Document 25- 1 E ntered on FLSD Docket 01/14/2008 Page 44 of 45
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;
C. Awarding plaintiffs 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.
JURY TRIAL DEMANDED
Plaintiffs hereby demand a trial by jury.
Dated: January 14, 2008
VIANALE & VIANALE LLP
By: s/Kenneth J. Vianale
Kenneth J. VianaleFla. Bar No. 01696682499 Glades Road, Suite 112Boca Raton, Florida 33431Tel: 561-392-4750Fax: 561-392-4775
Attorneys for Lead Plaintiffs
44
Joseph O. Click click{blankrome.com
Jeffrey Scott Grubman jeff(d jeffgrubman.com; [email protected]
Steven Alan Lessne [email protected]; [email protected]; [email protected]
I FURTHER CERTIFY that I mailed the foregoing document and the notice of electronicfiling by first-class mail to the following non-CM/ECF participants:
N/A
s/ Julie Prag Vianale
Fla. Bar No. 0184977
Vianale & Vianale LLP
2499 Glades Road, Suite 112
Boca Raton, FL 33431
Tel: 561-392-4750
Fax: 561-392-4775
45
Case 0-07-cv-61333-PCH Document 25-2 Entered on FLSD Docket 01/14/2008 Page 1 of 2
EXHIBIT A
Case 0-07-cv-61333-PCH Document 25-2 Entered on FLS D Docket 01/14/2008 Page 2 of 2
Case 2:04-tp-14003-DMM Document 16 Entered on FLSD Docket 12117/2007 Page 2 of 21
November 19, 207
Brett Friedman5660 West Atlantic Ave., Apt 2DIDelray Bch, FL 33484
In the time frarne between March 2M6-April 2007, I had met with Randy Syrop onapproximately 5occasions regarding investing in the Tube tv dia corporation(Tubcn. pk)
I was introduced to Randy by an acquaintance/customer of mine Ron Pearl, who workedunder Randy for one of his businesses.
One of the first meetings took place at the Law offices of Blank Rome, in Boca RatonThis meeting took place in a room after the director/shareholder meeting for the companyin which Randy and his ° partner" ..bhn Grandinetti were present Randy was promotingthe stock and enticing 2 others & I to buy stock in the company.On the following meetings Randy had again talked about where the stock was headed and'buyout" prospects . Randy thought I would bring " clients/friends " also into the stockOn all meetings purchase of stock in Tube Ndia was discussed.
My personal losses are approximately $160000 and are part of the class action lawsuitwith Vianale & Vianale.
Brett MFriedman
No tary
MY? Camrr ppOS69743 = GOY F NOENT
E)+res712mio = EXHIBIT
Fbr;daNMryAw,, ]no............................................. CASE 1' th.• f4 r
MlarrNO, •1-
n -/f 17
Case 0-07-cv-61333-PCH Document 25-3 Entered on FLSD Docket 01/14/2008 Page 1 of 2
EXHIBIT B
Case 0-07-cv-61333-PCH Document 25-3 Entered on FLSD Docket 01/14/2008 Page 2 of 2
Trent Martin
From : Randy Syrop [[email protected]
Sent: Friday, March 10, 2006 3.33 AM
To: 'Trent Martin'
Subject : FW- Wire iristructions
From; Roselo, Bruce C. [mai[to:[email protected]]Sent: Friday, March 10, 2006 10-.28 AMTo: Randy SyropSubject : Wire instructions
To. Pan American Bank
Hollywood , Florida
Routing & Transit #067013124
For Credit To: Blank Rome LLP Trust Account
# 414/70801
Bruce C. Rosetto I Partner I Blank Rome LLP1200 N. Federal Highway, Suite 417 1 Boca Raton , FL 33432Phone: (501)417-6145 [ Fax: (561)417-6166 I Email: [email protected]
This message and any attachments may contain confidential or privileged information and are only for the use of theintended recipient of this message. If you are net the intended recipient, please notify the sender by return email, anddelete or destroy this and all copies of this message and all attachments. Any unauthorized disclosure, use, distribution,or reproduction o[fhis message or any attachments is prohibited and may be anlawfut.
Any Federal tax advice contained herein is not intended or written to be used, and cannot beused by you or any other person, for the purpose of avoiding any penalties that may be imposedby the Internal Revenue Code. This disclosure is made in accordance with the rules of TreasuryDepartment Circular 230 governing standards of practice before the Internal Revenue Service.Any written statement contained herein relating to any Federal tax transaction or matter may notbe used by any person without the express prior written permission in each instance of a partnerof this firm to support the promotion or marketing of or to recommend any Federal tax transaction(s) or matter(s) addressed herein.
8/6/2007
Case 0-07-cv-61333-PCH Document 25-4 Entered on FLSD Docket 01/14/2008 Page 1 of 4
EXHIBIT C
Case 0-07-cv-61333-PCH Document 25-4 Entered on FLSD Docket 01/14/2008 Page 2 of 4
To Bruce Rosetto,
March 20, 2006
This letter is to inform you that either Randy Syrop or John Grandinetti can direct you as
to how to use the monies I wired into your escrow account. My wire was for $75,000.00
which you el on March 1101, 21011016, Please contact me with any additional questions.
Tha k u;'
aroly Ti erktinche reBisourcef ata.co
847-639-2140
Case 0-07-cv-61333-PCH Document 25-4 Entered on FLSD Docket 01/14/2008 Page 3 of 4
Vianale & Vianale LLP2499 Glades Road, Suite 112Boca Raton, FL 33431Tel: 561-392-47501 Fag: 561-392-4775
CERTIFICATION OF PLAINTIFFPURSUANT TO FEDERAL SECURITIES LAWS
Re: TUBE MEDIA CORP. (Ticker: "TUBM.PK")
I, Karolyn Tincher, hereby declare:
I. I have reviewed the complaint and authorized its filing. I retain the law firm ofVianale& Vianale LLP, Blum & Silver, LLP and such co-counsel it deems appropriate to associate with topursue such action on a contingent fee basis.
H. I did not purchase the security that is the subject of this action at the direction ofcounsel or in order to participate in this private action or any other litigation under the federalsecurities laws.
III. I am willing to serve as a representative party on behalfof the class, including providingtestimony at deposition and trial, if necessary.
IV. I have made no transaction(s) during the Class Period in the debt or equity securitiesthat are the subject of this action except those set forth below: (use a separate sheet if necessary)
Date TransactionType
4 of Shares Price
02/01/2006 Dirrect Purchase 1,800 $1.85
02/0612006 Direct Purchase 1,100 $1.65
02/23/2006 Direct Purchase 1,700 $1.15
03/10/2006 Private Placement 60,000 $1.50
V. During the three years prior to the date of this Certificate, I have sought to serve orserved as a representative party for a class in the following actions tiled under the federal securitieslaws:
VI. I will not accept any payment for serving as a representative party on behalfofthe classbeyond a pro rata share of any recovery, except such reasonable costs and expenses (including lostwages) directly relating to the representation of the class as ordered or approved by the court.
I declare under penalty of perjury t e eggin is true and correct. Executed this 31day of July 20D7.
Case 0-07-cv-61333-PCH Document 25-4 Entered on FLSD Docket 01/14/2008 Page 4 of 4
Date TransactionType
# of Shares Price
11/2312005 Gift 5,000 nia
-1-