UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
Civil Action No. 98-6879 CIV-GOLD
Magistrate Bandstra
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)
STEVEN CHENEY at al., individually and )
on behalf of all others similarly situated, )
)
Plaintiff, ))
v. ))
CYBERGUARD CORPORATION, ROBERT )
L. CARBERRY and WILLIAM D. MURRAY, ) )
Defendants. )
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CONSOLIDATED AND AMENDED CLASS ACTION COMPLAINT
Lead plaintiffs Robert Govic, Michael Brown, Sudhir Mehta, Anthony Paolerieo, Dean
Eliot Meshulam, Jorin Daleanes, Thomas Schueck and Mary Lou Harvey ("Plaintiffs") make the
allegations set forth in this Amended Class Action Complaint upon information and belief, except
allegations specifically pertaining to Plaintiffs or their counsel, which allegations are based on
personal knowledge.
I.
NATURE OF THE ACTION
1. This is a securities fraud class action brought on behalf of a class (the
consisting of investors who acquired the common stock of defendant CyberGuard Corporation
("CyberGuard" or the "Company") between November 7, 1996 and August 24,
1998 (the "Class Period"), and who were damaged thereby. Plaintiffs seek remedies under the
Securities and Exchange Act of 1934 (the "Exchange Act").
SNIPPETS:
L. CARBERRY and WILLIAM D. MURRAY,))
CONSOLIDATED AND AMENDED CLASS ACTION COMPLAINT
allegations specifically pertaining to Plaintiffs or their counsel, which allegations are
consisting of investors who acquired the common stock of defendant CyberGuard Corporation
Securities and Exchange Act of 1934.
The defendants include: Robert Carberry, who was CyberGuard*s Chairman of the
Board and Chief Executive Officer from June 1996 until he was suspended by the Company on
CyberGuard*s auditor, KPMG Peat Marwick LLP ("KPMG" and, collectively with the
In particular, Defendants repeatedly and materially overstated the revenues, gross
CyberGuard was permitted to recognize revenue under GAAP only when goods were shipped and no
Nevertheless, in connection with the Company*s dealings with its international resellers,
Notably, international sales of security
current assets and total assets was materially misleading.
issued a "clean audit opinion" with respect to the Company*s 1997 fiscal year financial
common stock at prices between $6.01 and $15.08, thereby generating proceeds of over $2.5
reckless disregard for the falsity of their representations.
not have escaped the attention of the Individual Defendants or the Company*s professional
artificially inflated as a result of Defendants* material misrepresentations and omissions.
financial loss caused by Defendants* violations of the federal securities laws.
Class Period misrepresented or failed to disclose material facts about the business,
DEFENDANTS* MATERIALLY FALSE AND MISLEADING STATEMENTS AND THE MANNER IN WHICH THEY WERE
the Company*s gross profit for the quarter was $1,194,000, or 38.9% of
Company*s operating loss was only $2,206,000; and as of the end of the quarter, CyberGuard had
security products is the result of increased market penetration in Japan and the signing
CyberGuard also reported a significant sequential quarter gross margin improvement.
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