In Re: Accredo Health, Inc. Securities Litigation 03-CV...

Case 2:03-cv-02216-BBD-gbc Document 396-2 Filed 07/02/08 Page 1 of 31

PageID 9784

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF TENNESSEE

WESTERN DIVISION

Civil Action No. 03-2216-BBD

CLASS ACTION

DECLARATION OF TRIG R. SMITH IN SUPPORT OF PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

In re ACCREDO HEALTH, INC. )

SECURITIES LITIGATION

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This Document Relates To:

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ALL ACTIONS. )

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Case 2:03-cv-02216-BBD-gbc Document 396-2 Filed 07/02/08 Page 2 of 31 PageID 9785

I, Trig R. Smith, submit this declaration in support of Plaintiffs' Opposition to Defendants'

Motion for Summary Judgment.'

1. I am a partner with the law firm of Coughlin Stoia Geller Rudman & Robbins LLP

("Coughlin Stoia"), class counsel with Bernstein Litowitz Berger & Grossmann LLP (collectively,

"Class Counsel"). I am a member in good standing of the State Bars of California and Colorado, and

have been admitted to practice before this Court pro hoc vice.

2. My association with Coughlin Stoia began on July 14, 2004. Since that date, I have

been actively engaged in the day-to-day litigation of the above-captioned matter, including the

drafting of the Consolidated Complaint for Violation of the Federal Securities Laws ("the

Complaint"), and have first-hand knowledge of the information provided in this declaration.

3. Throughout this declaration, I reference various records maintained by Class Counsel

relating to its investigation of the alleged fraud in this case before filing the Complaint. These

materials are protected by the attorney work-product doctrine and attorney-client privilege. My

discussion of their existence and the general subject matter of those materials in this declaration is

not, and should not be interpreted to be, a waiver of the attorney work-product doctrine, attorney-

client privilege or any other applicable privilege. Should the Court desire to review any of the

materials referenced herein, Class Counsel has prepared an in camera submission for the Court's

convenience.

THE CONFIDENTIAL WITNESSES

4. There are seven confidential witnesses ("CWs") identified and pled in the Complaint.

See Complaint (Dkt. No. 99), ¶28(a)4g). The descriptions of each witness, and the allegations

attributed to each of those witnesses, were based on an investigation led by counsel for Accredo

For the Court's convenience, I have attached to my declaration all exhibits ("Ex. ") referenced herein.

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shareholders, including contemporaneous telephonic interviews of each witness by plaintiffs'

counsel's investigators. See Affidavits of Steven Aronica ("Aronica Aft'."), Terry Franklin

("Franklin Aff.") and Judith Canby ("Canby Aff").

5. In Defendants' Memorandum in Support of Their Motion for Summary Judgment

("Defs.' Brf.") and accompanying Statement of Undisputed Material Facts ("Defs.' Stmt."),

defendants accuse Class Counsel of "fabricating" and/or "grossly exaggerat[ing]" the allegations

attributed to three of the seven CWs - Michelle Graham, Shari Penticuff and Joseph Worrell. See

Defs.' Brf. at 1, 33 & n.23; Defs.' Stmt., 111133-51. Not only are defendants' accusations with

regard to those CWs incorrect, but all the information attributed to all the CWs and included in the

Complaint has been confirmed as accurate by the evidentiary record.

Michelle Graham

6. Michelle Graham is identified as CW4 in the Complaint. Complaint, ¶28(d). 2 Ms.

Graham was identified as an "Accounts Receivable Collections Specialist" who worked for Accredo

during the Class Period (June 16, 2002-April 7, 2003) and identified as a source of the allegations

that the Accredo due diligence team conducted meetings concerning Specialty Pharmaceutical

Services ("S PS"), during which serious accounts receivable collection issues were discussed. Id,

¶1128(d), 74. Defendants have now offered what appears to be an attorney-written affidavit attacking

the allegations attributed to this witness. Defs.' Stmt., 1133 .

2 While plaintiffs maintain that the specific linking of the allegations with the CWs identified in plaintiffs' initial disclosures is protected work product, the nature of defendants' ad hominum attacks require plaintiffs to specifically link the CWs and the information they provided. In doing so, neither plaintiffs nor their counsel waive any privilege or protection associated with their investigation of the Accredo fraud or preparation of trial.

Defendants originally noticed Ms. Graham's deposition for November 8, 2007. Rather than seek any admissible testimony from Ms. Graham, and subject her to cross-examination, defendants' counsel apparently agreed that Ms. Graham would not have to appear for deposition if she agreed to sign an affidavit which she signed on November 5, 2007. Three days prior to Ms. Graham executing

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7. Defendants' contention that "neither plaintiffs nor their counsel ever spoke to [Ms.

Graham]" (Defs.' Brf. at 33) is incorrect. Steven Aronica, one of plaintiffs' investigators in this

action, contacted Ms. Graham on July 9, 2003, identified himself as working for a law firm that

represented Accredo investors who believed they had been defrauded and spoke with Ms. Graham

for 25 minutes concerning her job positions at Gentiva and Accredo and the alleged fraud. See

Aronica Aff, ¶117,9. Since July 2003, Mr. Aronica has maintained contemporaneous records of his

July 9, 2003 interview of Ms. Graham. Id., 120. Class Counsel has prepared an in camera

submission of those materials and is willing to submit it to the Court upon request.

8. Defendants' contention that "[n]one of the job descriptions in the Complaint

accurately describes what [Ms. Graham's] job responsibilities were at Gentiva or Accredo" (Defs.'

Brfi at 33) is incorrect. The Complaint lists Ms. Graham as an "Accounts Receivable Collections

Specialist." Complaint, 128(d). Ms. Graham's Monster. com job resumé, through which plaintiffs'

investigator located Ms. Graham, specifically describes her job positions at Gentiva and Accredo

between September 2000 and July 2003 as a "Senior Reimbursement Specialist/Collections

Special[ist]." A copy of the Monster.com resumé is attached to the Aronica Afi as Ex. A. 4 Ms.

Graham's Monster. comjob resumé further states that her job responsibilities at Gentiva and Accredo

included "[h]igh impact collections on home infusion accounts." Id. During her July 9, 2003

interview, Ms. Graham confirmed that she handled collections up through May 2002. AronicaAff.,

her affidavit, plaintiffs requested that defendants produce copies of any documents Ms. Graham had provided to them. Ex. A. On the same day Ms. Graham executed her affidavit, defendants' counsel Scott Sherman informed plaintiffs that "Ms. Graham did not produce to us any documents." Id. At no time prior to the filing of their motion for summary judgment did defendants ever disclose that Ms. Graham had provided them with an affidavit.

An Accredo posting on Monster. com defines the job responsibilities of a "Reimbursement Spec[ialist]" (Ms. Graham's Class Period position) to include the pursuit of "collection activities to ensure that receivables (invoices) are reimbursed accurately and timely." Ex. B.

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¶11. Class Counsel has prepared an in camera submission of those materials and is willing to submit

it to the Court upon request.

9. Further, documents produced by defendants in this case confirm the accuracy of

plaintiffs' allegations regarding Ms. Graham's job position. For instance, a March 2002

organizational chart for the Warrendale, PA financial services unit ("FSU") where Ms. Graham

worked specifically identifies her as a "Collector" of Flolan accounts receivable. Ex. C at ACDO-

LP 002620. Another document produced by defendants, dated September 2002, lists Ms. Graham as

a "Collection Specialist." Ex. D at ACDO-LP 035073.

10. Defendants' contention that Ms. Graham "was not even aware of the existence of

[this] lawsuit" until October 2007 (Defs.' Brf. at 33) is incorrect. Not only do plaintiffs have

contemporaneous evidence establishing that their investigator interviewed Ms. Graham on July 9,

2003, but during the course of that interview Ms. Graham specifically referred to numerous

problems at Accredo, including the securities fraud lawsuits. See AronicaAff, IN 9, 12. In addition,

Mr. Aronica introduced himself to Ms. Graham as an investigator working on behalf of investors

who believed they had been misled by Accredo. Id., 17. Class Counsel has prepared an in camera

submission of those materials and is willing to submit it to the Court upon request.

11. Defendants' contention that none of the information attributable to Ms. Graham is

accurate because Ms. Graham never spoke with plaintiffs' investigators is also demonstrably

incorrect. As attested to above, plaintiffs' investigator interviewed Ms. Graham on July 9, 2003.

See Aronica Aff., ¶9. Ms. Graham's statements during her July 9, 2003 interview are the basis of the

information attributed to her. Again, Class Counsel has prepared an in camera submission of those

materials and is willing to submit it to the Court upon request.

12. Notably, the allegations attributed to Ms. Graham in the Complaint (Complaint,

¶f28(d), 74) are borne out by the record. For example:

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(a) According to defendants' public statements, as of January 3, 2002, the SPS

due diligence was complete. Ex. E at 15 ("we have already finished our due diligence");

(b) Further, defendant Kimbrough has admitted that he was intimately involved in

the SPS due diligence - particularly regarding the critical SPS billing and collection FSUs - and

visited the Warrendale, PA FSU where Ms. Graham was employed:

• "The CFO made site visits to all of the three Financial Services Units (FSU) of the SPS division. These FSU's were responsible for... billing [and] collection.. . ." Ex. F at ADCO 1252808.

• "Inquiries were made by the CFO during lengthy discussions at all of the [FSUs] to determine consistency of procedures, problem areas that existed . . and the adequacy and expertise of existing reimbursement personnel." Id.

During Kimbrough's due diligence visits to the FSUs, "the nature and character of the accounts receivable balances and collection issues... were discussed in detail. . . ." Id

During Kimbrough's due diligence visits to the FSUs, he personally conducted "interviews [which] included a complete breakdown of the billing and collection process. . the intake, payer clearance, invoice editing, invoice, billing,follow.-up, collection, cash posting and appeals process if necessary." Id (emphasis in original).

See also 124(a)(i)-(iv), infra;

(c) Before, during, and after the SPS due diligence, Ms. Graham was a collections

specialist working at the Warrendale, PA FSU. See ¶118,9, supra;

(d) During the due diligence period, and at the time of the SPS acquisition, tens of

millions of dollars of SPS receivables were impaired and uncollectible. 5 For example, Accredo

While plaintiffs did not attribute allegations regarding the collectibility of SPS accounts receivable that were aged 200 days and older to Ms. Graham as defendants claim (Defs.' Brf. at 33) - Joseph Worrell (CW2) and Dalia Genena (CW5) confirmed this - the evidentiary record establishes the veracity of the allegation. For instance, defendants have produced several Class Period "cash triangles" that show monthly collection rates ranging between 0% and 4% for SPS receivables aged 210 days and older. See Ex. G. As the receivables (which totaled more than $100 million throughout the Class Period) got older during the Class Period, the collection rates (i.e., 0%

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acquired significant amounts of aged United Healthcare and Aetna accounts receivable acquired

from Gentiva as part of the SPS acquisition, which were at high risk of being written off due to their

aging (Aetna/Prudential - total AIR = $5.0 million) (BCBS MI - total AR = $3.0 million) (United

Healthcare $12.5 million). Ex. I. During the Class Period, Accredo was forced to settle the Aetna

and United Healthcare accounts at deep discounts and write off the remaining receivables. See Ex. J

at ACDO-JK 002124, ACDO-LP 178699,178942; ACDO-JK 0001 99-201; ACDO-DW-R 002503-

04; and

(e) As more fully detailed below, the record is replete with evidence, including,

but not limited to, defendants' internal due diligence communications, defendants' lawsuit against its

former auditor, aged trial balance reports, days-sales-outstanding reports, and "cash collection

triangles," all of which serve to further substantiate Ms. Graham's observation that defendants knew

tens of millions of SPS receivables were impaired at the time of the acquisition.

Shari Penticuff

13. Shari Penticuff is identified as CW7 in the Complaint. See Complaint, ¶28(g). Ms.

Penticuff is identified as a Billing/Accounts Supervisor who worked for Accredo during the Class

Period and was identified as a source of the allegations that significant SPS Division accounts

receivable problems existed at Gentiva, including accounts dating back to 1999. Complaint,

to 4%) decreased even further. Certainly a 0% to 4% collection rate, which degraded as time went on, evidences that these receivables were "nearly impossible to collect." See Complaint, ¶5(a). Furthermore, defendants ignore the larger context of the allegation as provided by the CWs (see Complaint, ¶75): "reasons why SPS receivables were considered uncollectible after hitting the 200 day age marker included insurance companies considering SPS's account filings untimely and SPS failing to make timely billing appeals." Again, defendants' own document production establishes the accuracy of these allegations. In September 2000, for example, Gentiva wrote off over $27.0 million in SPS accounts receivable outstanding from 1999 and prior because they had not been billed to payors on a timely basis. Ex. H at SPS0347.


128(g), 84. On September 13, 2007, defendants conducted the deposition of Ms. Penticuff. Defs.'

Stmt., ¶11 138-47 .

14. Defendants argue that "Plaintiffs grossly exaggerated and misrepresented the

knowledge, j ob positionj] and statements" of Ms. Penticuff. Defs.' Brf. at 33 n.23. Ms. Penticuff's

deposition testimony and contemporaneous records of Ms. Penticuff's interview establish that

defendants' accusations are unsubstantiated and inaccurate. Plaintiffs identified Ms. Penticuff'sjob

responsibilities as a Billing/Accounts Supervisor. Complaint, 128(g). Ms. Penticuff testified that as

Director of Infusion Operations, she regularly interacted with and supervised billings and

collections personnel and had personal knowledge regarding Gentiva 's billing and collection

practices. Ex. K at 114:9-116:9. Ms. Penticuff also confirmed, as alleged in the Complaint, that she

performed these duties during the relevant time period and worked for Accredo during the Class

Period. Id at 96:4-16.

15. Defendants' contention that plaintiffs "grossly exaggerated and misrepresented" the

statements Ms. Penticuff provided to plaintiffs' investigators is also incorrect. Defs.' Brf at 33 n.23.

Buried in Defendants' Statement of Undisputed Facts, they concede that Ms. Penticuff "could have

made such a statement." Defs.' Stmt., ¶146. In fact, during her September 17, 2007 deposition, Ms.

Penticuff twice testified that the specific allegations attributed to her were accurate. Ex. K at

116:18-117:19.

16. Defendants also misrepresent Ms. Penticuff's testimony regarding her contact with

Class Counsel's investigator during 2004. While defendants suggest that plaintiffs' investigators

misrepresented themselves or that Ms. Penticuff did not know the nature of her interview (Defs.'

Stmt., 1149), Ms. Penticuff confirmed that she had been contacted by a representative of plaintiffs in

2004. Ex. K at 117:20-118:24. In addition, one of Class Counsel's investigators, Judith Canby, has

maintained contemporaneous records of her August 18, 2007 interview of Ms. Penticuff, which

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verifies the accuracy of plaintiffs' allegations. Canby Aff., 1117-8, 11-12. Likewise, Class Counsel

has prepared an in camera submission of those materials and is willing to submit it to the Court upon

request.

17. Given the seriousness (and infirmity) of the accusations defendants have leveled

against plaintiffs, defendants' counsels' own actions with regard to Ms. Penticuff are revealing.

During her deposition, Ms. Penticuff testified that during the summer of 2007, she was contacted by

defendants' counsel, Scott Sherman, who did not identify his affiliation and intimated that he was

contacting heron behalf of plaintiffs:

Q: [By plaintiffs' counsel] When [Mr. Sherman] first called you, were you under the impression that he was calling on behalf of the plaintiffs in this case?

A: I thought he was representing, yes, the same individuals that had contacted me back in 2004 so, yes, by further definition earlier, yes, the plaintiff.

Q: And when you were speaking with [Mr. Sherman], did you refer him to a conversation that you had with him or people representing him back in 2004?

A: Yes, I did.

Q: And when you made that reference, did [Mr. Sherman] do anything to correct you and say, [w]ell, I didn't contact you nor did someone on my behalf contact you in 2004, it was the plaintiffs?

A: No clarification of that nature. I had made the comment of, [t]hese questions are very similar to 2004, do you not have records of those? [Mr. Sherman's] comment was he could obtain records of those but wanted to see if I could continue to answer some questions.

Q: But [Mr. Sherman] did not say, [w]ell, I don't have those notes because I - I nor a party representing me was the one who called you in 2004?

A: No, I do not remember that statement.

Ex. K. at 117:25-118:24.

Joseph Worrell

18. Mr. Worrell is identified as CW2 in the Complaint. See Complaint, 128(b). Mr.

Worrell is identified as a "former Gentiva national director of credit and collections" and as a source

of the allegations concerning the difficulty in collecting accounts receivables after they reached the -8-

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200-day mark. Complaint, ¶1128(b), 84. On September 13, 2007, defendants conducted the

deposition of Mr. Worrell. Defs.' Stint., ¶11 138-47 .

19. As with Ms. Penticuff, defendants argue that "Plaintiffs grossly exaggerated and

misrepresented the knowledge, job positionijj and statements" of Mr. Worrell. Defs.' Brf. at 33 n.23;

Defs.' Stint, at ¶11148-51. Defendants' accusations are unsupported and incorrect. Notably, in their

Statement of Undisputed Facts, defendants do not assert that plaintiffs' description of Mr. Worrell's

job description (which included that he did not work at Accredo) was incorrect, let alone "grossly

exaggerated and misrepresented." Indeed, Mr. Worrell confirmed that the Complaint accurately

described his job position and that he had first-hand knowledge of, and was directly involved in, the

collection of high-risk SPS accounts receivable. Ex. L at 24:24-25:15, 36:11-15, 38:10-19.

Defendants also do not dispute that Class Counsel's investigators interviewed Mr. Worrell or that

Mr. Worrell provided the information attributed to him to Class Counsel's investigators. Class

Counsel's investigators have maintained contemporaneous records of their interviews of Mr.

Worrell, which verify the accuracy of plaintiffs' allegations. Class Counsel has prepared an in

camera submission of those materials and is willing to submit it to the Court upon request.

20. Despite accusing plaintiffs of grossly exaggerating Mr. Worrell's knowledge, during

his deposition, defendants' counsel failed to ask Mr. Worrell a single question regarding the

substantive allegations attributed to him in the Complaint - e.g., when receivables hit the 200-day

mark, they are considered virtually impossible to collect. See Ex. L. Defendants now do not use any

of Mr. Worrell's testimony to attack the allegations attributed to him, but instead merely state that

those allegations are contradicted by Ms. Graham's post-hoc, attorney-written affidavit. See ¶12(d)

n.5, supra. Mr. Worrell, however, testified that he was responsible for the collections of SPS

accounts receivable when the SPS financial service units had "exhausted their collection activity,"

adding that "[i]f we couldn't collect it, I'd send it to an outside collection agency or an attorney" and


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"I had a staff of hard-core collectors." Ex. L at 25:7-15. Mr. Worrell' s testimony is consistent with

the allegations attributed to him. See Complaint, 11128(b), 75.

21. With regard to the other four CWs, Shawn Hindsman, Carolyn Smith, Dalia Genena

and Virginia Tindell, defendants' argument that the witnesses "could not be identified or located at

all" suggests that plaintiffs intentionally provided incorrect contact information for these CWs.

Defs.' Brf. at 1; Defs.' Stmt., ¶1152-54. Plaintiffs served their Rule 26 initial disclosures on

defendants on June 15, 2005, more than two years before the discovery cut-off in this case. See Ex.

M. Each of the CWs was identified in plaintiffs' Rule 26 disclosures (Ex. M at 34) and plaintiffs

provided the same contact information that their investigators had used to contact the CWs. See

Aronica Affi, 1118, 9, 14; Franklin Aff., ¶114, 8; Canby Aff., ¶114-6. The initial disclosures were

revised with up-to-date contact information and provided to defendants on September 6, 2007. See

Ex. N. For a complete procedural history concerning defendants' purported difficulty in identifying

the CWs, see the Opposition to Defendants' Motion to Compel Responses to Defendants' Second

Set of Interrogatories (Dkt. No. 299). See also ¶1131-34, infra.

22. Indeed, defendants' accusations are surprising in light of prior briefing on this matter.

On September 27, 2007 - more than two years after plaintiffs served defendants with their initial

disclosures - defendants moved to compel plaintiffs to identify which seven of the 22 former

Accredo and/or Gentiva employees identified in plaintiffs' initial disclosures were the CWs. See

Dkt. No. 299. As defendants were aware then, they had the identities and contact information for

each of the CWs in June 2005. See Ex. M at 3-4. While defendants argued that they faced "undue

hardship" in trying to contact the CWs, they made no showing of what, if any, efforts had been

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undertaken since June 2005.6 See id. at 15-17. Notably, when plaintiffs offered to identify for

defendants which seven of the 22 former Accredo and/or Gentiva employees identified in the initial

disclosures were the CWs (without linking those individuals to the allegations attributed to them,

which plaintiffs maintain is protected work product), defendants' counsel accepted and promptly

withdrew their motion to compel. Until defendants filed their motion for summary judgment on

May 16, 2008, they have never informed plaintiffs of their belief that any of the CWs' contact

information was inaccurate.

ALLEGATIONS ATTRIBUTED TO CONFIDENTIAL WITNESSES IN COMPARISON TO THE RECORD

23. The accuracy of plaintiffs' allegations attributed to each of the CWs is demonstrated

by the factual record in this case.

24. The substantive allegations attributed to CW1 are: (a) Kimbrough's direct

involvement in the SPS due diligence; (b) defendants' access to SPS aged trial balance ("ATB")

reports prior to and during the Class Period; and (c) defendants' knowledge of days sales outstanding

("DSO") of 300 days. 7 Complaint, 11128(a), 73, 75, 78; see also Order Denying the Motion of

Defendants, in fact, had ample resources at their disposal to locate the CWs. Six of the seven CWs were former employees for whom Accredo's Human Resources department should have had contact information. Indeed, through just a cursory electronic search of the documents defendants provided in this case, Class Counsel was able to locate the Social Security numbers for each of the CWs defendants complain they could not locate. See Ex. 0 at ACDO-BJ 088409, 414-15, 419 (redacted to remove Social Security numbers and employee identification numbers).

/ An ATB of accounts receivable is a schedule which categorizes outstanding balances of accounts according to their age. It is widely understood in academia and practice that there is a negative correlation between the age of accounts receivable and the likelihood of collection. See Ex. P at 11 & n. 17. In other words, the older an account receivable is, the more likely it is that it will go uncollected. DSO also reflects the average age of the entire accounts receivable portfolio. See id. at 10. DSO is an important measure of collectibility. Id; Ex. Q, ¶17 ("DSO. . . is an analytical tool used by financial analysts and investors to track the age of a company's aggregate accounts receivable and to assess the quality of the company's receivables... ."). "In addition to DSO, we utilize other quantitative and qualitative factors to analyze the collectibility of our accounts receivable.... The primary qualitative factors used include analyzing DSO.... These and other

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Defendants to Dismiss the Consolidated Complaint (Dli No. 105) ("Order") at 20-21, 31-33. The

record contains evidence that is consistent with and supports these allegations. For instance:

(a) With regard to Plaintiffs' SPS due diligence allegations:

(i) According to Defendants' offering documents related to Accredo's S4

Joint Proxy/Registration Statement, the SPS due diligence was complete by January 2, 2002. During

Accredo's January 3, 2002 conference call announcing the acquisition of the SPS Division, Stevens

stated, "we have already finished our due diligence." Ex. Eat 15. During the same conference call,

Kimbrough stated, "clearly right now there is no due diligence contingency. . . we have done the

diligence." Id.;

According to Accredo's Form S-4/A Joint Proxy and Registration

Statement, filed with the SEC on May 10, 2002, on January 2, 2002, Accredo's senior management

(which included Kimbrough) reported to the Company's Board of Directors (which included

Stevens) the results of managements' due diligence efforts and, immediately thereafter, the Board of

Directors approved the SPS acquisition. See Ex. S at pp. 49-50, 52-53. This was after Kimbrough,

on January 2, 2002, personally reported the results of his due diligence to the Accredo Board of

Directors, including Stevens. See Ex. T;

(iii) According to memoranda submitted to Deloitte & Touche LLP, which

purport to explain defendants' accounting for the $58.5 million error in the SPS accounts receivable

loss reserve, Kimbrough acknowledged that he was intimately involved in the due diligence with

regard to the SPS FSUs and central accounting processes and procedures:

factors are reviewed monthly and are closely monitored for developing trends in the accounts receivable portfolio." Ex. R at 33. Indeed, defendants' document production in this case is replete with various types of ATB reports, of which the record establishes Stevens and Kimbrough receiving and having ready access to before and during the Class Period.

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• "The CFO made site visits to all of the three Financial Services Units (FSU) of the SPS division. These FSU's were responsible for all of the billing [and] collection. . . ." Ex. F at ADCO 125 2808.

"Inquiries were made by the CFO during lengthy discussions at all of the [FSUs] to determine consistency of procedures, problem areas that existed . . . and the adequacy and expertise of existing reimbursement personnel." Id.

During Kimbrough's due diligence visits to the FSUs, "the nature and character of the accounts receivable balances and collection issues... were discussed in detail." Id.

During Kimbrough's due diligence visits to the FSUs, he personally conducted "interviews [which] included a complete breakdown of the billing and collection process. . . the intake, payer clearance, invoice editing, invoice, billing, follow-up, collection, cash posting and appeals process if necessary." Id (emphasis in original).

During the due diligence visit to SPS's central accounting location, and in connection with determining "procedures for accounts receivable reserves and valuation methodologies," Kimbrough reviewed various ATB and DSO trend reports. See Ex. U at p. 2.

• During the SPS due diligence, the Accredo due diligence team, including Kimbrough, had a December 2000 Worksheet to Determine the SPS AIR Reserve Requirement ("December 2000 Worksheet" and later termed a "what-if analysis"), which showed that the SPS reserve was being calculated using old and stale data at the time, and that the due diligence team discussed the December 2000 Worksheet with Ernst & Young LLP ("E&Y") and PricewaterhouseCoopers LLP ("PwC"). See Ex. V; Ex. F atADCO 125 2810; Ex. U atADCO 064 0678.

(iv) On May 5, 2003, defendants fired and sued E&Y, filing a complaint

with the state court of Tennessee. Ex. W. Defendants blamed E&Y for $53.3 million of the SPS

reserve error because "E&Y had fail[ed] to discover that. . . stale data had been used regarding [the

SPS allowance for doubtful accounts] reserve percentages."' Id at EY004423-24, ¶58-60

(emphasis in original);

With regard to the veracity of and support for plaintiffs' allegations, three facts bear emphasis here again. First, Kimbrough has admitted that Accredo had the December 2000 AR

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(b) With regard to defendants' access to and knowledge of various relevant ATB

both prior to and during the Class Period (Complaint, ¶1J28(a), 77-78; Order at 25-26):

(i) Kimbrough has admitted that the due diligence team reviewed

numerous SPS accounts receivable aging reports, including, but not limited to, aged payment

analyses, accounts receivable aging by therapy (as of September 2001 and subsequent periods), and

aged accounts receivable by individual payors. See, e.g., Ex. F at ADCO 125 2809; Ex. Y at ACDO-

SD 083234;

(ii) Kimbrough admitted that he regularly received the ATh reports during

the SPS due diligence process. See Ex. Z at 293:15-294:1;

(iii) Kimbrough admitted during his deposition that he had ready access to

the monthly ATh reports on the Company's computer system and reviewed them throughout the

Class Period:

Q: And I'm wondering if you ever received documentation that showed all of the factors that went into the initial estimate of the percentages to be applied by your stall

A: As I've already stated, I had the triangulation that I would have looked at.... I would have seen those aging buckets and you know, clearly would have had access to and would have had the opportunity to review trial balances and aged trial balances and summary aged trial balances and the other things that go into play within calculating a reserve.

*

Worksheet during the SPS due diligence. Kimbrough has admitted that at that time, "[s]everal 'what if analyses of adjustments to reserves [i.e., including the December 2000 AR Worksheet] [were] used as discussion documents between [Aceredo] and Gentiva and their respective external auditors [i.e., E&Y and PWC]." Ex. F at ADCO 125 28 10. Second, on December 24,200 1, Kimbrough and Stevens were informed that the SPS reserve was being calculated as of September 2001 using old and stale percentages (i.e., "calculated [in] CYOO"). Ex. X at ACDO-SD-R 043521. Third, defendants later sued E&Y, alleging that its auditor had "fail[ed] to discover that. . . stale data had been used regarding reserve percentages" while Accredo was conducting its financial due diligence. Ex. W at EY004424 (emphasis in original).

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Q: Following. June 13th, 2002.. . did Accredo begin to generate its own reports off the Rxflome system?

A: We were generating the - our own reports off the RxHome system....

Q: Did that include the ATB reports?

A That would include the ATh reports. . . . Those are reports, you know, getting to the 0 drive, you could have access to those. . . those were clearly available....

Q: The reports that were on the 0 drive, did you personally have access to them?

A: I had access to them, yes.

* * *

Q: And then, during - following June 13th, 2002, with what frequency did you receive the ATh reports?

A: You know, I can't recall, Counselor. They were available and they were available each month....

Ex. Z at 42:6-21, 320:15-322:5;

(iv) On May 9, 2002, Stevens sent a list of Gentiva due diligence reports

he wanted to discuss with Kimbrough and Accredo' s controller, including ATBs "for acute accounts

receivable (aging buckets) for FY2000, FY200 1 and March quarter 2002." Ex. AA at ACDO-DS-R

003372-73;

(v) On May 28, 2002, Stevens received acute branch data reports, which

included ATBs for each branch. See Ex. BB at ACDO-DS-R 000836-37;

(vi) On June 15, 2002, Kimbrough received an acute therapy ATB report

showing over $33 million in acute accounts receivable aged over 365 days. See Ex. CC at ACDO-

SD 090416-417, 439;

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9800

(vii) On October 30, 2002, Kimbrough received a weekly ATh report from

Richard Jula. 9 See Ex. EE;

(viii) On December 6, 2002, Kimbrough and Stevens received an ATB

report reflecting long outstanding United FlealthCare receivables that the Company was attempting

to settle for 40 to 50 cents on the dollar. See Ex. J at ACDO-JK 000199, 942;

(ix) On February 11, 2003, Kimbrough received an ATB report showing

aging of acute receivables and collection percentages. See Ex. FF; and

(x) Defendants have produced numerous other ATB reports that were

available to Kimbrough and Stevens on the RxHome computer system, which identify that the SPS

receivables were impaired during the Class Period. ° See, e.g., Ex. GO at ADCO 122 1671 (October

2002 SPS ATh reflecting over $112 million in accounts receivable, or almost 50% of the total SPS

portfolio, aged 121 days and older); Ex. RH at ADCO 122 1664 (November 2002 SPS ATB

reflecting over $121 million in accounts receivable, or almost 50% of the total SPS portfolio, aged

121 days and older); Ex. II at ADCO 122 1658 (December 2002 SPS ATh reflecting over $116

million, over 50% of the total SPS portfolio, aged 121 days and older).

(c) With regard to defendants' knowledge of DSOs of 300 days:

(i) In January 2002, the December 2001 gross DSO for the SPS Division

was reported to be 225 days (see Ex. JJ (ADCO 036 0757)) - and Stevens' due diligence notes

indicate that he understood the acute segment DSO to be "more a problem" than the chronic DSO.

Ex. KK at ADCO 0012261;

On February 13, 2003, Kimbrough noted "Rich Jula runs a large number of reports each month out of RX Home. I have asked him to be available.. . to present the reports that are readily accessible. .. ." Ex. DD.

10 See Ex. QatlS-16.

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9801

(ii) Kimbrough has admitted to having access to various DSO analyses

during the due diligence. Ex. F at ADCO 125 2809. Among the reports made available to

Kimbrough and the Aceredo due diligence include a September 2001 gross acute DSO of 212 days.

See Ex. LL;

(iii) Prior to May 16,2002, defendants represented to Bank of America that

they expected an increase in the acute DSOs after acquiring SPS, but that the SPS reserve should be

sufficient to handle the increase in aging. See Ex. MM;

(iv) On May 17, 2002, Stevens received an email, which reported gross

DSOs at several large acute pharmacies located in Tampa, Florida (323 days), San Antonio, Texas

(312 days), Richmond, California (311 days), Albuquerque, New Mexico (3 10 days), and Las Vegas,

Nevada (288 days). See Ex. NN at ACDO-DS-R 003436, 587-88, 629-30, 637-40, 645-46;

(v) On May 20, 2002, Stevens sent the gross DSO information he received

on May 17, 2002 to John Eastburn of Kolhberg & Co. ("Kohlberg"), in connection with Kohlberg's

interest in acquiring the acute segment from Accredo. See id.;

(vi) After receiving that information and reviewing it, on July 10, 2002,

Kohlberg informed Stevens and Kimbrough that the "DSO performance. . . suggests that failure to

improve in this area is. . . a threat to the value of Accredo's primary asset." Ex. 00 at ACDO-TB

000848;

(vii) Between October 2002 and March 2003, the acute gross DSO

ballooned from 226 days to over 1400 days. See Ex. PP;

(viii) On March 18,2003, Kimbrough was informed that the SPS Division's

DSO numbers had been understated since Accredo had acquired the business because Gentiva had

been "inflat[ing] the cash collection[s]" by reclassifying old invoices as current. Ex. QQ;

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9802

(ix) On April 8, 2003, Larry Marsh, an equity analyst for Lehman

Brothers, confronted Stevens and Kimbrough with the fact that the SPS DSOs had been "running in

the 350 days range [and that it] seem[ed] illogical to have a reserve against. . only 25-30% of gross

receivables," and defendants did nothing to correct Mr. Marsh's conclusions. Ex. RR at 10; and

(x) Shari Penticuff, CW7, the Director of Infusion Operations in Indiana

confirmed in her deposition that her branch chronic therapy DSO was 300 days:

Q. Do you recall making a statement to the lady back in 2004 about DSOs being 300 days old?

A. Yes, I do.

Q. And that referred to your branch?.

A. My branch chronic DSOs.

See Ex. K at 102:3-8.

25. The substantive allegations attributed to CW2 are: (a) the difficulty in collecting SPS

accounts receivable once they hit the 200-day age marker; and (b) Gentiva' s practice of re-

classifying old receivables as current. Complaint, 11128(b), 75; Order at 31. The record contains

evidence that is consistent with these allegations. For instance:

(a) With regard to the difficulty in collecting SPS receivables 200 days and older:

(i) Defendants have produced several Class Period "cash triangles" that

show monthly collection rates ranging between 0% and 4% for SPS receivables aged 210 days and

older. See Ex. G. As the receivables (which totaled more than $100 million throughout the Class

Period) got older during the Class Period, the collection rates (i.e., 0% to 4%) decreased even

further. Id A 0% and 4% collection rate, growing worse over time, clearly evidences that those

receivables were "nearly impossible to collect." See Complaint, 15(a). Again, Kimbrough has

admitted, repeatedly, to having knowledge of these very reports:

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9803

Q: And I'm wondering if you ever received documentation that showed all of the factors that went into the initial estimate of the percentages to be applied by your staff?

A: As I've already stated, I had the triangulation....

Ex. Z at 42:6-12. Defendants also ignore the context of the "impossible to collect" allegation:

"reasons why SPS receivables were considered uncollectible after hitting the 200 day age marker

included insurance companies considering SPS's account filings untimely and SPS failing to make

timely billing appeals." Complaint, 175. Again, defendants' own document production establishes

the accuracy of these allegations. In September 2000, Gentiva wrote off over $27.0 million SPS

accounts receivable outstanding from 1999 and prior because they had not been billed to payors on a

timely basis. Ex. H at SPS0347. Accredo, during the Class Period, suffered the same experience.

See Ex. SS at ADCO 120 0726;

(ii) In addition, the Complaint alleges that an important factor rendering

these receivables impossible to collect and, ultimately requiring write-off, was the inability to timely

file claims with payors. See Complaint, 175. Aecredo was frequently forced to write off accounts

receivable for that reason:

While Joel [Kimbrough] had any number of AT! [i.e., SPS] Reimbursement Department operating issues/concerns when he brought me on board, his key strategic financial concerns were around lack of processes/controls on fundamental reimbursement operating processes. Key indicators ofthisfundamentoi dysfunction emphasized fincludedJ. . [tJimely filing: [MJuch of TI's bad debt write-offs were related to timely filing errors.

Ex. SS at ADCO 120 0726. Often the insurers' timely filing deadlines were markedly shorter than

200 days. For instance, Carecentrix had a 45-day timely filing deadline, which placed Aceredo at

"significant risk for timely filing write-offs." Ex. IT at ACDO-SF 020527. Empire Blue

Cross/Blue Shield had a 60-day timely filing deadline, causing the same significant risk and

rendering outstanding receivables not filed with the payor within 60 days virtually uncollectible. Id.;

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9804

(iii) The bank that financed Gentiva's $150,000,000 line of credit, prior to

Accredo's acquisition of the SPS business, considered all SPS receivables aged over 200 days

worthless. Ex. UU (assigning a value of $0 to $185.1 million in infusion receivables aged over 180

days);" and

(b) With regard to Gentiva' s reclassification of old accounts receivable as current:

In March 2003, Brian Johnson confirmed, in connection with his investigation into the SPS reserve

error, that he had discovered Gentiva had been "inflat[ing] the cash collection[s]" by reclassifying

old invoices as current. Ex. QQ.

26. The substantive allegations attributed to CW3 are: (a) the collectible value of the SPS

acute therapy segment's accounts receivable at the time of acquisition was approximately $10

million; and (b) defendants' receipt of ATB reports which indicated that the SPS accounts receivable

were significantly impaired. See Complaint, 128(c), 77-78; Order at 31-32. The record contains

evidence that is consistent with these allegations. For example:

(a) With regard to the acute segment receivables being worth approximately $10

million at the time of the SPS acquisition, the record reflects that they may have actually been

worthless:

(i) As of June 2002, there were $74.8 million in gross acute receivables

on Accredo's books that it had acquired from Gentiva. See Ex. WW. At the time of the SPS

acquisition, approximately 24% of the gross acute receivables were reserved for (see Ex. XX at

11 Gentiva's CFO, John Potapchuk, testified that had the Accredo due diligence team asked for this information, he had no reason to believe that Gentiva would not have made it available. Ex. VV.

-20-


9805

ADCO 044 0127).12 As of June 13, 2002, therefore, Accredo was carrying approximately $56.8

million (i.e., $74.8 million x (1 - .24)) of net acute receivables on its books that the Company had

acquired from Gentiva

(ii) On April 8, 2003, Kimbrough admitted during Accredo's conference

call that the range of the error in the SPS accounts receivable reserve was between $30 million and

$70 million and that most of the error was attributable to old acute receivables purchased from

Gentiva. See Ex. RR at 6, 9;

(iii) On April 9, 2003, a Lehman Bros. security analyst stated "ACDO...

say[s] it is not having much success working down that acute book very quick.. . This was the

public forum to pitch why [Accredo] should be allowed to say the initial reserve was too low." Ex.

YY at ACDO-DS-R 008633;

(iv) On April 10, 2003, Kimbrough received an email from Bank of

America asking whether Accredo, in emphasizing the accounts receivable error was related to

accounts acquired from SPS at the time of the acquisition, should indicate to the market that the

problem "relates primarily to acute receivables?" See Ex. ZZ at ACDO-JK 005057; and

(v) On May 5, 2003, Accredo took a current period charge of $58.5

million, $56.8 million of which was attributable to SPS accounts receivable acquired as of June 13,

2002 and identical to the amount of net acute receivables carried on Accredo's books at the same

date. Ex. AAA at2.

12 Because Accredo reserved for acute and chronic receivables using the same reserve percentages, this number is derived by dividing the June 13, 2002 SPS reserve ($69 million) by June 13, 2002 gross SPS receivables ($292 million) (i.e., 69/292 = 36).

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9806

(b) With regard to the ATB report allegations, see ¶1124(a)(iii), 24(b)(i)-(x), supra,

for evidence establishing the veracity of the allegations attributed to CWs and defendants'

knowledge of those reports.

27. The substantive allegations attributed to CW4 include: (a) meetings with the Accredo

due diligence team leading up to January 2, 2002; and (b) the Aceredo due diligence team's review

of the issue of millions of dollars of uncollectible accounts receivable at SPS. Complaint, ¶28(d),

73-74. As noted herein, the record contains evidence that is consistent with and establishes the

veracity of these allegations. See ¶111 2(a)-(b), 24(a)(iii) regarding the Accredo due diligence

meetings. See 11124(a)(iii), 24(b)(i)-(ii) regarding the review of uncollectible accounts receivable.

28. The substantive allegations attributed to CW5 are: (a) the capabilities of the Rxllome

computer system, which provided detailed accounts receivable aging reports; and (b) the difficulty in

collecting SPS receivables over the age of 200 days. Complaint, ¶28(e), 75-76; Order at 31-32.

The record contains evidence consistent with and establishing the veracity of these allegations. For

example:

(a) With regard to the RxHome computer system, defendants have produced

numerous detailed reports generated from that system, whose source was the ATB database (i.e.,

"Rxllome") at Aecredo. See, e.g., Exs. GG, FIH, II. See also Ex. BBB at ADCO 043 0865-66

(listing various ATh reports available on Accredo's computer system during the Class Period). On

February 4, 2003, a member of the SPS accounts receivable "task force" memorialized the

functionality of the RxHome system, specifically as it relates to the calculation the SPS reserve and

how the ATB reports generated off the system were the primary source of the information in

determining the reserve. See Ex. CCC. See also Kimbrough's deposition testimony regarding the

RxHome system at 124(b)(iii), supra; and

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9807

(b) With regard to evidence establishing the accuracy of allegations related to the

difficulty in collecting accounts receivable aged 200 days or greater, see ¶1124(b)(x), 25(a)(i), supra.

29. The substantive allegations attributed to CW6 are: (a) SPS acute DSOs exceeding 300

days at the time of due diligence; and (b) defendants' knowledge of the impairment of SPS accounts

receivable during the Class Period as indicated by ATB reports. Complaint, ¶J28(f), 77-78, 84-85;

Order at 31-32. The record contains evidence that is consistent with and establishes the veracity of

these allegations.

(a) With regard to the DSO numbers available to defendants, Kimbrough has

admitted that the SPS due diligence team reviewed several types of DSO reports, including

"Individual Branch. . . DSO Trends [and] DSO by Therapy." Ex. U at 2. Prior to and during the

due diligence conducted by Kimbrough, many of the large acute pharmacies suffered gross DSOs

either exceeding or approaching 300 days (Tampa, FL (323 days), Oklahoma City, OK (270 days),

Houston, TX (275 days), San Antonio, TX (291 days), Richmond, CA (3 51 days), Albuquerque, NM

(329 days), Las Vegas, NV (316 days)). 13 See Ex. NN. By the end of December 2001, and while the

Accredo due diligence team was conducting due diligence, these individual acute branch numbers

remained relatively unchanged. In addition, Stevens had knowledge of those numbers as he sent the

information to a potential purchaser of the SPS acute therapy segment in May 2002. See 124(c)(iv)-

(v), supra. In addition, around May 2002, the acute DSO was approximately 231 days according to

information obtained by Apria (potential acquiror of the acute segment) from Accredo. See Ex.

EEE. A few months prior to defendants commencing their SPS due diligence, Express Scripts, Inc.

("Express Scripts") decided not to purchase the SPS business because of its "industry worse" DSOs.

13 In September 2001, Gentiva management noted that but for Carecentrix acute accounts receivable, the acute segment gross DSO probably exceeded 300 days. Ex. DDD at SPS-E-00025629 ("Is anyone really paying us?"),

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9808

Ex. FFF. And on May 30, 2002, Kimbrough was informed that Express Scripts had decided not to

acquire the SPS business because of excessive receivables risk. Ex. GGG. On July 10, 2002,

defendants Stevens and Kimbrough were informed:

The second issue is the existing A/R, and the management of acute pharmacy AIR in general, which we believe deserves the highest prioritization of management's attention.. . . Our review of DSO performance and recent bad debt levels suggests that failure to improve in this area is . . . a threat to the value of Accredo's primary asset.

Ex. 00 at ACDO-TB 000848. By January 2003, the acute gross DSO had ballooned to over 500

days. See Ex. PP at ACDO 065 0257; and

(b) With regard to evidence establishing the veracity of allegations related to the

ATB allegations, and defendants' knowledge of those reports, see ¶1J24(a)(iii), 24(b)(i)-(x), supra.

30. The substantive allegation attributed to CW7 is the existence of significant receivable

problems that existed at Gentiva, including for accounts that dated back as far as 1999. Complaint,

¶J28(g), 84; Order at 32-34. The record contains evidence that is consistent with and establishes the

veracity of this allegation:

(a) For instance, in September 2000, Gentiva wrote off over $90 million of SPS

receivables, of which $27.9 million were for untimely filings on accounts receivable outstanding

from 1999 and prior years. Ex. H at SPS0347. Indeed, $75 million of the total write off in

September 2000 was attributed to a "[flack of follow-up [and] billing and IT problems caus[ing]

expected. . . increase[s]" in the SPS reserve percentage calculations. Ex. HI-If! at SPS-E-00735644

[Ex. 406]; and

(b) At the time of the SPS due diligence, Kimbrough and Stevens were aware of

the details of this massive write-off of aged SPS receivables. See Ex. III at ACDO-TB 004006.

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9809

CONFIDENTIAL WITNESSES CONTACT INFORMATION

31. With regard to CWs Carolyn Smith and Dalia Genena, defendants' contention that

plaintiffs intentionally provided incorrect contact information for these CWs during discovery

(Defs.' Stint., 1152) is incorrect.

(a) Mr. Aronica's July 14,2003 investigative memorandum contained the latest

known telephone information for each CW he interviewed during his investigation of the alleged

Accredo fraud. See AronicaAff, ¶118,9, 14, 15;

(b) Terry Franklin's investigative memorandums, dated August 2, 2004 and

August 16, 2004, each contained the latest known telephone information for each CW she

interviewed during her investigation of the alleged Accredo fraud. See Franklin Aff., ¶114, 6, 8, 10;

(c) Judith Canby's investigative memoranda, dated August 19, 2004 and

September 1, 2004, each contained the latest known telephone information for each CW she

interviewed during her investigation of the alleged Accredo fraud. See Canby Aff, 1114-6, 8 10, 11;

(d) Class Counsel is prepared to submit copies of the investigative memoranda

referenced in ¶1131 (a)-(c), supra, for in camera review upon request;

(e) On June 14, 2005, plaintiffs served the Rule 26 initial disclosures on

defendants. See Ex. M;

(f) In connection with plaintiffs' Rule 26 initial disclosures served on defendants

on June 14, 2005, Class Counsel relied upon the confidential witness contact information contained

in the investigative memoranda referenced at ¶113 1 (a)-(c), supra;

(g) Plaintiffs' June 14, 2005 Rule 26 initial disclosures contained only 22 current

or former Gentiva or Accredo employees. See Ex. M at 3-4;

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9810

(h) On September 6, 2007, Class Counsel specifically identified each CW and

provided defense counsel with the latest known telephone number information for all seven CWs.

See Ex. N; and

(i) At no time between June 15, 2005 and May 16, 2008, did defendants notify

plaintiffs' counsel that they believed any information contained in plaintiffs' Rule 26 disclosures was

inaccurate.

32. With regard to CWs Carolyn Smith and Dalia Genena, defendants' contention that

they conducted extensive and thorough attempts to determine their whereabouts (Defs.' Stmt., 1152)

is without any basis in the record.

(a) On June 7, 2008, I conducted a brief review of defendants' document

production in this case, which produced a single document containing the Social Security numbers,

job titles and job locations of CWs Sean Hindsman, Michelle Graham, Dalia Genena, Virginia

Tindell and Shari Penticuff. See Ex. 0. It took me approximately five minutes to find this

information in defendants' document production;

(b) Defs.' Stmt. contains no factual evidence supporting what defendants did

between June 15, 2005 (when plaintiffs served the Rule 26 initial disclosures) and September 28,

2007 (first attempted service of subpoena on Dalia Genena), to determine the whereabouts of Ms.

Genena (Defs.' Stmt., ¶152); and

(c) Defs.' Stint, contains no factual evidence supporting what defendants did

between June 15, 2005 (when plaintiffs served the Rule 26 initial disclosures) and October 2, 2007

(first attempted service of subpoena on Carolyn Smith) to determine the whereabouts of Ms. Smith

(Defs.' Stmt., ¶152).

33. With regard to CW Sean Hindsman, to the extent defendants contend that they

conducted a reasonable investigation into his whereabouts (Defs.' Stint., ¶153), or that plaintiffs

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9811

have attempted to keep his identity or whereabouts concealed, such contentions are without any basis

in the record.

(a) As mentioned above, a five-minute review of defendants' document

production in this case yielded a single document containing the Social Security number, job title

and job location for Mr. Hindsman. See Ex. 0; and

(b) It was not until August 2007, over two years after being served with plaintiffs'

Rule 26 initial disclosures that defendants first attempted to serve Mr. Hindsman with a subpoena.

See Defs.' Stmt., 1153.

34. With regard to CW Virginia Tindell, to the extent defendants contend that they

conducted a reasonable investigation into her whereabouts (Defs.' Stmt., ¶154), or that plaintiffs

have attempted to keep her identity or whereabouts concealed, such contentions are without any

basis in the record.

(a) As mentioned above, a five-minute review of defendants' document

production in this case yielded a single document containing the Social Security number, job title

and job location for Ms. Tindell. See Ex. 0; and

(b) It was not until August 2007, over two years after being served with plaintiffs'

Rule 26 initial disclosures that defendants first attempted to serve Ms. Tindell with a subpoena. See

Defs.' Stmt., 1154.

I declare under penalty of perjury under the laws of the United States of America that the

foregoing is true and correct. Executed this 2nd day of July, 2008, at San Diego, California.

V LI TRIG R. SMITR

S:\CasesSD'Accredo\DEC0005I720Smith.doc

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9812

DECLARATION OF SERVICE

I, the undersigned, declare:

1. That declarant is and was, at all times herein mentioned, a citizen of the United

States and a resident of the County of San Diego, over the age of 18 years, and not a party to or

interested in the within action; that declarant’s business address is 12481 High Bluff Drive, Suite

300, San Diego, California 92130.

2. That on July 2, 2008, declarant caused to be served the following document:

o DECLARATION OF TRIG R. SMITH IN SUPPORT OF LEAD PLAINTIFFS’ OPPOSITION TO DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

by placing a true copy(ies) thereof enclosed in sealed envelopes addressed as follows:

SEE ATTACHED SERVICE LIST

(BY U.S. MAIL) I am personally and readily familiar with the business practice of Bernstein Litowitz Berger & Grossmann LLP for collecting and processing of correspondence for mailing with the United States Postal Service, and I caused such envelope(s) with postage thereon fully prepaid to be placed in the United States Postal Service at San Diego, California.

(BY FACSIMILE) I am personally and readily familiar with the business practice of Bernstein Litowitz Berger & Grossmann LLP for collection and processing of document(s) to be transmitted by facsimile and I caused such document(s) on this date to be transmitted by facsimile to the offices of addressee(s) at the numbers listed below.

X (BY ELECTRONIC MAIL) Pursuant to F.R.C.P. 5(e) I am personally and readily familiar with the business practice of Bernstein Litowitz Berger & Grossmann LLP for collection and processing of document(s) to be transmitted electronically in Portable Document Format (PDF) and I certify that I caused such document(s) on this date to be filed electronically with the Clerk of the Court through ECF, and that ECF will send an e-notice of the electronic filing to the offices of the email addressee(s) listed below:

(BY OVERNIGHT MAIL) I am personally and readily familiar with the

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9813

business practice of Bernstein Litowitz Berger & Grossmann LLP for collection and processing of correspondence for overnight delivery, and I caused such document(s) described herein to be deposited for delivery to a facility regularly maintained by Federal Express for overnight delivery (as indicated by *).

X (FEDERAL) I declare that I am employed in the office of a member of the bar of this Court at whose direction the service was made.

That there is a regular communication by mail between the place of mailing and

the places so addressed.

Executed this 2nd day of July, 2008, at San Diego, California.

/s/ Brandy M. Roberts BRANDY M. ROBERTS

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9814

In re ACCREDO HEALTH INC. Service List 7/2/2008

ATTORNEYS FOR PLAINTIFF(S):

Mark Solomon Tor Gronborg Trig R. Smith David Mitchell Nathan W. Bear COUGHLIN STOIA GELLER

RUDMAN & ROBBINS, LLP 655 W. Broadway, Suite 1900 San Diego, CA 92101-4297 Tel: (619) 231-1058 Fax: (619) 231-7423 Co-Lead Counsel for the Class

B.J. Wade GLASSMAN EDWARDS WADE

& WYATT, P.C. 26 N. Second Street Memphis, TN 38103 Tel: (901) 527-4673 Fax: (901) 521-0940 Liaison Counsel

ATTORNEYS FOR DEFENDANTS:

Kelly Wilcove Jeffrey A. Kershaw Scott N. Sherman ALSTON & BIRD One Atlantic Center 1201 West Peachtree Street Atlanta, GA 30309-3424 Tel: (404) 881-7000 Fax: (404) 881-7777 Attorneys for Defendants Accredo Health, Inc.; David D. Stevens; Joel Kimbrough

Jef Feibelman Douglas F. Halijan BURCH PORTER & JOHNSON 130 North Court Avenue Memphis, TN 38103-2288 Tel: (901) 524-5000 Fax: (901) 524-5024 Attorneys for Defendants Accredo Health, Inc.

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