Post on 23-Jun-2020
Case 1:13-cv-07409-RA Document 1 Filed 10/21/13 Page 1 of 31
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
SATISH DOSHI, Individually and on Behalf of Civil Action No.:
All Other Persons Similarly Situated, )
Plaintiff,
V.
GENERAL CABLE CORPORATION, GREGORY R KENNY, and BRIAN J. ROB fNS ON,
Defendants
CLASS ACTION COMPLAINT
Plaintiff Satish Doshi ("Doshi"), individually and on behalf of all other persons similarly
situated, by his undersigned attorneys, for his complaint against defendants, alleges the following
based upon personal knowledge as to himself and his own acts, and information and belief as to
all other matters, based upon, inter alia, the investigation conducted by and through his
attorneys, which included, among other things, a review of the defendants' public documents,
conference calls and announcements made by defendants, United States Securities and Exchange
Commission ("SEC") filings, wire and press releases published by and regarding General Cable
Corporation ("General Cable" or the "Company"), analysts' reports and advisories about the
Company, and information readily obtainable on the Internet. Plaintiff believes that substantial
evidentiary support will exist for the allegations set forth herein after a reasonable opportunity
for discovery.
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NATURE OF THE ACTION
1. This is a federal securities class action on behalf of a class consisting of all
persons other than defendants who purchased General Cable securities between May 3, 2011 and
October 14, 2013, inclusive (the "Class Period"), seeking to recover damages caused by
defendants' violations of the federal securities laws and to pursue remedies under Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule lOb-S against
the Company and certain of its top officials.
2. General Cable designs, develops, manufactures, markets, and distributes copper,
aluminum, and fiber optic wire and cable products for the communications, electrical, and energy
markets.
3. On October 15, 2013, the Company disclosed that due to certain accounting errors
related to the Company's value added tax ("VAT") and revenue recognition in connection with
historical "bill and hold" transactions for aerial transmission projects in Brazil, the Company's
financial statements for fiscal years 2008 through 2012 and the interim periods during those
years and the financial statements for the three fiscal months ended March 29, 2013 should no
longer be relied upon.
4. On this news, General Cable securities declined $1.63 per share or nearly 5%, to
close at $32.24 per share on October 15, 2013.
5. Throughout the Class Period, Defendants made false and/or misleading
statements, as well as failed to disclose material adverse facts about the Company's business,
operations, and prospects. Specifically, Defendants made false and/or misleading statements
and/or failed to disclose that: (1) the Company understated cost of sales and overstated inventory
balances; (2) the Company's reconciliation process was deficient as it failed to detect finished
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goods inventory; (3) the Company overstated inventory in its allocation of the purchase price
among assets acquired, resulting in an understatement of goodwill; (4) the Company overstated
its value added tax credits by at least $18 million; (5) the Company improperly recognized
revenue of approximately $30 million and $7 million of gross margin in connection with "bill
and hold" transactions for aerial transmission projects in Brazil; (6) the Company lacked
adequate internal and financial controls; and (7) as a result of the foregoing, the Company's
statements were materially false and misleading at all relevant times.
6. As a result of Defendants wrongful acts and omissions, and the precipitous
decline in the market value of the Company's securities, Plaintiff and other Class members have
suffered significant losses and damages.
JURISDICTION AND VENUE
7. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of
the Exchange Act (15 U.S.C. §78j(b) and 78t(a)) and Rule lOb-S promulgated thereunder (17
C.F.R. §240.10b-5).
8. This Court has jurisdiction over the subject matter of this action pursuant to §27
of the Exchange Act (15 U.S.C. §78aa) and 28 U.S.C. §1331.
9. Venue is proper in this District pursuant to §27 of the Exchange Act, 15 U.S.C.
§78aa and 28 U.S.C. §1391(b) as the securities of General Cable were publicly traded in this
District.
10. In connection with the acts, conduct and other wrongs alleged in this Complaint,
defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,
including but not limited to, the United States mail, interstate telephone communications and the
facilities of the national securities exchange.
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PARTIES
11. Plaintiff, as set forth in the attached certification, purchased General Cable
securities at artificially inflated prices during the Class Period and has been damaged upon the
revelation of the alleged corrective disclosures.
12. Defendant General Cable is a Delaware corporation with its headquarters located
at 4 Tesseneer Drive, Highland Heights, KY 41076. The common stock is traded on the
NASDAQ Stock Market ("NASDAQ") under the ticker symbol "BGC."
13. Defendant Gregory B. Kenny ("Kenny") was, at all relevant times, the
Company's Chief Executive Officer and President.
14. Defendant Brian J. Robinson ("Robinson") was, at all relevant times, the
Company's Executive Vice President, Chief Financial Officer and Treasurer.
15. The defendants referenced above in ¶J 13 - 14 are sometimes referred to herein as
the "Individual Defendants."
SUBSTANTIVE ALLEGATIONS
Background
16. General Cable is a global leader in the development, design, manufacture,
marketing and distribution of copper, aluminum and fiber optic wire and cable products for use
in the energy, industrial, construction, specialty and communications markets. The Company
additionally engages in the design, integration, and installation on a turn-key basis for products
such as high and extra-high voltage terrestrial and submarine systems.
Materially False and Misleading Statements Issued During the Class Period
17. On May 2, 2011, after the market closed, the Company issued a press release
announcing its financial results for the first quarter ended April 1, 2011. For the quarter, the
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Company reported net income of $38.2 million, or $0.70 diluted earnings per share ("BPS") and
net sales of $1.4 billion, compared to a net loss of $7.8 million or ($0.15) diluted EPS and net
sales of $1.1 billion for the same period a year ago.
18. On May 6, 2011, the Company filed a quarterly report for the period ended April
1, 2011 on a Form 10..Q with the SEC signed by Defendant Robinson, which reiterated the
Company's previously reported financial results and financial position. In addition, the Form
10-Q contained signed certifications pursuant to the Sarbanes-Oxley Act of 2002 ("SOX") by
Defendants Kenny and Robinson stating that the financial information contained in the Form 10-
Q was accurate, and disclosed any material changes to the Company's internal control over
financial reporting.
19. On August 1, 2011, the Company issued a press release announcing its financial
results for the second quarter ended July 1, 2011. For the quarter, the Company reported net
income of $37.5 million, or $0.68 diluted EPS and net sales of $1.5 billion, compared to net
income of $23.8 million or $0.45 diluted BPS and net sales of $1.2 billion for the same period a
year ago.
20. On August 4, 2011, the Company filed a quarterly report for the period ended July
1, 2011 on a Form 10-Q with the SEC signed by Defendant Robinson, which reiterated the
Company's previously reported financial results and financial position. In addition, the Form
10-Q contained signed certifications pursuant to SOX by Defendants Kenny and Robinson
stating that the financial information contained in the Form l0-Q was accurate, and disclosed any
material changes to the Company's internal control over financial reporting.
21. On October 31, 2011, the Company issued a press release announcing its financial
results for the third quarter ended September 30, 2011. For the quarter, the Company reported
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net income of $3.6 million, or $0.07 diluted BPS and net sales of $1.5 billion, compared to net
income of $18.1 million or $0.34 diluted EPS and net sales of $1.2 billion for the same period a
year ago.
22. On November 3, 2011, the Company filed a quarterly report for the period ended
September 30, 2011 on a Form 10-Q with the SEC signed by Defendant Robinson, which
reiterated the Company's previously reported financial results and financial position. In
addition, the Form 10-Q contained signed certifications pursuant to SOX by Defendants Kenny
and Robinson stating that the financial information contained in the Form l0-Q was accurate,
and disclosed any material changes to the Company's internal control over financial reporting.
23. On February 8, 2012 the Company issued a press release announcing its financial
results for the fourth quarter and fiscal year ended December 31, 2011. For the quarter, the
Company reported net income of $4.4 million, or $0.09 diluted BPS and net sales of $1.4 billion,
compared to net income of $35 million or $0.66 diluted EPS and net sales of $1.4 billion for the
same period a year ago. For the year, the Company reported net income of $83.8 million, or
$1.57 diluted BPS and net sales of $5.9 billion, compared to net income of $69.2 million or $1.31
diluted EPS and net sales of $4.8 billion for the same period a year ago.
24. On February 23, 2012, the Company filed an annual report for the period ended
December 31, 2011 on a Form 10-K with the SEC signed by, among others, Defendants Kenny
and Robinson, which reiterated the Company's previously reported financial results and financial
position. In addition, the Form 10-K contained signed certifications pursuant to SOX by
Defendants Kenny and Robinson stating that the financial information contained in the Form 10-
K was accurate, and disclosed any material changes to the Company's internal control over
financial reporting.
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25. The Form 10-K stated the following in relevant part concerning the Company's
Rest of World ("ROW") segment and revenue recognition:
The ROW segment engages in the development, design, manufacture, marketing and distribution of copper, aluminum and fiber optic wire and cable products for use in the energy, industrial, construction, specialty and communications markets as well as manufacture and distribution of rod mill wire and cable products. The ROW segment consists of sales, distribution and manufacturing facilities in Latin America, Sub-Saharan Africa, the Middle East and Asia Pacific that resulted from the acquisition of Phelps Dodge International Corporation ("PDIC") in October 2007 and is managed in conjunction with the Company's historical operations and recent investments in Australia, China, India, Mexico, New Zealand, the Pacific Islands, Peru and South Africa. The ROW segment contributed approximately 34%, 32%, and 30% of the Company's consolidated revenues in 2011, 2010 and 2009, respectively.
The PDIC acquisition was completed as part of the Company's strategy to expand globally into developing energy and electrical infrastructure markets and brought the Company additional global trading and operating expertise. The ROW segment serves developing countries and customers in sectors that are expected to offer better growth opportunity over time than the developed world. The rod mill wire and cable operations provide a competitive advantage in these markets, Current ROW operations and equity investments are located in Australia, Brazil, Chile, China, Colombia, Costa Rica, Ecuador, El Salvador, Fiji, Honduras, India, Mexico, New Zealand, Oman, Pakistan, Panama, Peru, the Philippines, South Africa, Thailand, Venezuela and Zambia.
The ROW segment consists of 20 manufacturing facilities across the segment. Additionally, the ROW segment has regional centers of excellence and state-of-the-art laboratories for rod fabrication and drawing.
The majority of the Company's revenue is recognized when goods are shipped to the customer, title and risk of loss are transferred, pricing is fixed or determinable and collectability is reasonably assured. Most revenue transactions represent sales of inventory. A provision for payment discounts, product returns, warranty and customer rebates is estimated based upon historical experience and other relevant factors and is recorded within the same period that the revenue is recognized. The Company has a portion of long-term product installation contract revenue that is recognized based on the percentage-of-completion method generally based on the cost-to-cost method if there are reasonably reliable estimates of total revenue, total cost, and the extent of progress toward completion; and there is an enforceable agreement between parties who can fulfill their contractual obligations. Management reviews contract price and cost estimates periodically as the work progresses and reflects adjustments proportionate to the percentage-of-
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completion to income in the period when those estimates are revised. For these contracts, if a current estimate of total contract cost indicates a loss on a contract, the projected loss is recognized in full when determined.
26. On April 30, 2012, the Company issued a press release announcing its financial
results for the first quarter ended March 30, 2012, For the quarter, the Company reported net
income of $24.9 million, or $0.49 diluted EPS and net sales of $1.4 billion, compared to net
income of $38.2 million or $0.70 diluted EPS and net sales of $1.4 billion for the same period a
year ago.
27. On May 4, 2012, the Company filed a quarterly report for the period ended March
30, 2012 on a Form 10-Q with the SEC signed by Defendant Robinson, which reiterated the
Company's previously reported financial results and financial position. In addition, the Form
10-Q contained signed certifications pursuant to SOX by Defendants Kenny and Robinson
stating that the financial information contained in the Form 10-.Q was accurate, and disclosed any
material changes to the Company's internal control over financial reporting.
28. On July 30, 2012, the Company issued a press release announcing its financial
results for the second quarter ended June 29, 2012. For the quarter, the Company reported net
income of $21.8 million, or $0.43 diluted EPS and net sales of $1.5 billion, compared to net
income of $37.5 million or $0.68 diluted EPS and net sales of $1.5 billion for the same period a
year ago.
29. On August 3, 2012, the Company filed a quarterly report for the period ended
June 29, 2012 on a Form 10-Q with the SEC signed by Defendant Robinson, which reiterated the
Company's previously reported financial results and financial position. In addition, the Form
10-Q contained signed certifications pursuant to SOX by Defendants Kenny and Robinson
ro
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stating that the financial information contained in the Form 10-.Q was accurate, and disclosed any
material changes to the Company's internal control over financial reporting,
30. The statements referenced in ¶J 17 - 29 above were materially false and/or
misleading because they misrepresented and failed to disclose the following adverse facts, which
were known to defendants or recklessly disregarded by them that: (1) the Company understated
cost of sales and overstated inventory balances; (2) the Company's reconciliation process was
deficient as it failed to detect finished goods inventory; (3) the Company overstated inventory in
its allocation of the purchase price among assets acquired, resulting in an understatement of
goodwill; (4) the Company overstated VAT credits by at least $18 million; (5) the Company
improperly recognized revenue of approximately $30 million and $7 million of gross margin in
connection with "bill and hold" transactions for aerial transmission projects in Brazil; (6) the
Company lacked adequate internal and financial controls; and (7) as a result of the foregoing, the
Company's statements were materially false and misleading at all relevant times.
THE TRUTH SLOWLY EMERGES
31. On October 29, 2012, the Company issued a press release announcing its financial
results for the third quarter ended September 28, 2012. For the quarter, the Company reported
net income of $31.4 million, or $0.62 diluted EPS and net sales of $1.5 billion. The press release
stated the following in relevant part:
The Company has identified certain inventory related accounting errors in two facilities located in Brazil and a third facility located in South Africa within the Company's ROW segment that were erroneously computing cost of sales over the course of several years, resulting in an understatement of cost of goods sold and an overstatement of ending inventory. All three locations were utilizing the same system and related process, which, with respect to work-in-process and finished goods, incorrectly computed cost of sales. In addition, because the erroneous process was in place at one of the Brazilian facilities prior to the Company's acquisition of Phelps Dodge International Corporation ("PDIC") in 2007, the
Case 1:13-cv-07409-RA Document 1 Filed 10/21/13 Page 10 of 31
Company overstated inventory in its allocation of the purchase price among assets acquired, resulting in an understatement of goodwill.
On October 26, 2012, the Audit Committee of the Company's Board of Directors, upon the recommendation of the Company's executive officers, concluded that due to these inventory related accounting errors within the Company's ROW segment in two countries as described above, the Company's previously issued consolidated financial statements for fiscal years 2009 through 2011 and the related reports of its independent registered public accounting firm, the interim periods during those years, and the financial statements as of, and for the periods ended March 30, 2012 and June 29, 2012 should no longer be relied upon.
Based on preliminary information relating to these errors, the Company currently estimates that it understated cost of sales for the years ended December 31, 2011, 2010, 2009, and 2008, and for the three months ended March 30, 2012 and six months ended June 29, 2012, by $17.3 million, $5.7 million, $8.6 million, $6.2 million, $1.2 million, and $3.5 million, respectively. The Company currently estimates that it overstated inventory balances as of December 31, 2011, 2010, 2009 and 2008, March 30, 2012 and June 29, 2012, by $39.0 million, $26.6 million, $19.5 million, $8.0 million, $41.1 million and $39.8 million, respectively. The understated goodwill and overstated inventory associated with the acquisition of PDIC in the fourth quarter of 2007 are each currently estimated at $3.4 million. The Company continues to analyze the impact of these inventory accounting related errors on its prior financial statements. Management's foregoing estimates are based solely on current preliminary data and are subject to change upon completion of its internal review of the Company's prior financial statements. During the ongoing process of preparing restated financial statements, if it is determined that there are other adjustments for these periods, the Company will include such corrections in its restated financial statements.
The Company intends to correct the effect of the accounting errors described above on previously issued interim financial statements by restating the three and nine months ended September 30, 2011 that will be presented comparatively in its Quarterly Report on Form 10-Q for the period ended September 28, 2012 and amending previously filed Forms 10-Q for the periods ended June 29, 2012 and March 30, 2012. Contemporaneous with the filing of the above referenced Quarterly Reports, the Company also intends to file an Annual Report on Form 1 0-K/A to restate previously issued annual financial statements and related financial information contained therein as of December 31, 2011 and 2010 and the three year period then ended.
32. On this news, General Cable securities declined $1.07 per share or 3.6%, to close
at $28.22 per share on October 31, 2012.
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33. On November 7, 2012, the Company filed a Form NT 10-Q for the quarter ended
September 28, 2012. The Company Form NT 10-Q disclosed the following in relevant part:
As described in the Current Report on Form 8-K (the "Form 8-K") filed on October 29, 2012 by General Cable Corporation (the "Company"), the Audit Committee of the Company's Board of Directors, upon the recommendation of the Company's executive officers, concluded that due to certain inventory related accounting errors within the Company's Rest of World segment ("ROW") in two countries, the Company's previously issued consolidated financial statements for fiscal years 2009 through 2011 (and the related reports of its independent registered public accounting firm), the interim periods during those years, and the financial statements as of, and for the periods ended March 30, 2012 and June 29, 2012 should no longer be relied upon.
The Company intends to correct the effect of the accounting errors on previously issued interim financial statements by (i) restating the financial statements for the three and nine months ended September 30, 2011 that will be presented comparatively in its Quarterly Report on Form 10-Q for the period ended September 28, 2012 (the Form 10-Q") and (ii) restating financial statements for the other periods referenced in the preceding paragraph and including the restated financial statements in amended periodic reports.
The Company is engaged in an effort to restate the financial statements referenced above. Until this effort is completed, the Company will not be able to complete the financial statements to be included in the Form 10-Q, will not be in a position to enable its independent registered public accounting firm to complete their financial statement review, and will be unable to complete its management's discussion and analysis of financial condition and results of operations. Moreover, the Company's disclosures regarding disclosure controls and procedures and material changes in internal control over financial reporting are, to some extent, dependent upon assessments related to the restatement effort. Despite the extensive commitment of time and effort by the Company's management and financial staff, as well as ongoing communications with, and review of information by, the Company's independent registered public accounting firm, the Company is unable to complete the formidable tasks described above within 40 days subsequent to the end of its fiscal quarter ended September 28, 2012.
34. On this news, General Cable securities declined $1.40 per share or nearly 5%, to
close at $27.75 per share on November 7, 2012.
35. On November 13, 2012, the Company filed a Form NT 10-Q/A disclosing the
following in relevant part:
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As described in the Current Report on Form 8-K (the "Form 8-K") filed on October 29, 2012 by General Cable Corporation (the "Company"), the Audit Committee of the Company's Board of Directors, upon the recommendation of the Company's executive officers, concluded that due to certain inventory related accounting errors within the Company's Rest of World segment ("ROW") in two countries, the Company's previously issued consolidated financial statements for fiscal years 2009 through 2011 (and the related reports of its independent registered public accounting firm), the interim periods during those years, and the financial statements as of, and for the periods ended March 30, 2012 and June 29, 2012 should no longer be relied upon.
The Company intends to correct the effect of the accounting errors on previously issued interim financial statements by (i) restating the financial statements for the three and nine months ended September 30, 2011 that will be presented comparatively in its Quarterly Report on Form 10-Q for the period ended September 28, 2012 (the Form 10-Q") and (ii) restating financial statements for the other periods referenced in the preceding paragraph and including the restated financial statements in amended periodic reports.
The Company is engaged in an effort to restate the financial statements referenced above. Until this effort is completed, the Company will not be able to complete the financial statements to be included in the Form 10-Q, will not be in a position to enable its independent registered public accounting firm to complete their financial statement review, and will be unable to complete its management's discussion and analysis of financial condition and results of operations. Moreover, the Company's disclosures regarding disclosure controls and procedures and material changes in internal control over financial reporting are, to some extent, dependent upon assessments related to the restatement effort. Despite the extensive commitment of time and effort by the Company's management and financial staff, as well as ongoing communications with, and review of information by, the Company's independent registered public accounting firm, the Company is unable to complete the formidable tasks described above within 40 days subsequent to the end of its fiscal quarter ended September 28, 2012.
36. On this news, General Cable securities declined $0.57 per share or 2%, to close at
$26.87 per share on November 14, 2012,
37. On February 7, 2013, the Company issued a press release providing an update on
its fourth quarter 2012 financial results. The press release stated the following in relevant part:
General Cable Corporation (NYSE: BGC) expects to report that its North America and Rest of World (ROW) businesses finished the year with a positive operating performance in the fourth quarter, excluding the impact of certain items. The acquisitions of Alcan Cable North America, Prestolite and Procables
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(Colombia) are also expected to contribute meaningfully to the fourth quarter results. However, the Company now expects adjusted operating income for the fourth quarter in the range of $45 to $47 million, which includes the absorption of $12 million of expenses related to the revised estimated profitability of certain submarine turnkey projects. The Company expects reported operating income in the range of $2 to $4 million for the fourth quarter. The Company expects the following items will negatively affect its reported fourth quarter results:
An equipment failure at the Company's submarine power cable manufacturing facility in Germany as well as submarine turnkey project delays and deferrals are expected to result in one-time charges in the range of $16 million
• Other items consisting of year-end adjustments in ROW including financial restatement and forensic investigation costs, one-off restructuring-related tax charges, acquisition costs and severance-related charges in Spain, which are collectively expected to result in charges in the range of $37 million
Submarine Turnkey Projects - The Company is in the process of finalizing the impact of the equipment failure and continued project delays/deferrals and has initiated steps to potentially recover certain of these costs through legal action and insurance coverage.
Other Items - During the fourth quarter, the Company expects to record several year-end adjustments in ROW particularly as it relates to the collectability of certain customer accounts receivable, a portion of which are in dispute, as well as the net realizable value of certain other assets. The Company also restructured its legal entities to integrate the Alcan Cable Canada business, which will result in a more tax efficient structure going forward. The Company does not expect to experience this level of adjustments in ROW going forward nor does the Company expect to incur restructuring-related tax charges or financial restatement and forensic investigation costs on a regular basis as these items relate to specific events and transactions experienced in 2012.
38. On this news, General Cable securities declined $0.44 per share or 1.3%, to close
at $32.68 per share on February 8, 2013.
39. On February 25, 2013, the Company issued a press release announcing its
financial results for the fourth quarter ended December 31, 2012. For the quarter, the Company
reported a net loss of $17.3 million, or ($0.35) diluted BPS and net sales of $1.6 billion. The
press release also disclosed the following in relevant part:
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As described in the Forms 8-K dated October 29, 2012 and November 13, 2012, the Company intends to correct the effect of the accounting errors including the inventory theft in Brazil on previously issued interim financial statements by restating the three and nine months ended September 30, 2011 that will be presented comparatively in its Quarterly Report on Form 10-Q for the period ended September 28, 2012 and amending previously filed Forms 10-Q for the periods ended June 29, 2012 and March 30, 2012. Contemporaneous with the filing of the above referenced Quarterly Reports, the Company also intends to file an Annual Report on Form 1 0-KIA to restate previously issued annual financial statements and related financial information contained therein as of December 31, 2011 and 2010 and the three year period then ended.
The Company's restated financial statements for the periods described in the preceding paragraph are expected to be filed this week as the internal review conducted with the assistance of outside counsel and a forensic accounting firm-has concluded. Based on the findings of the review, the previously disclosed estimates of the amounts of understated cost of sales and overstated inventory will not change materially. The Company has determined that a substantial portion of what was previously believed to be system-related accounting errors in Brazil was actually due to the theft of inventory, a portion of which may be covered by insurance.
40. On this news, General Cable securities declined $2.19 per share or over 6%, to
close at $31.61 per share on February 25, 2013.
41. On March 1, 2013, the Company filed Form 10-K/A for year ended December 31,
2011 and Form 10-Q/As for fiscal quarters ended March 30, 2012 and June 29, 2012,
respectively. The Form 1 0-K/A was signed by Defendant Kenny and the Forms 1 0-Q/As were
signed by Defendant Robinson. The Forms 10-K/A and 1 0-Q/As contained signed certifications
pursuant to SOX by Defendants Kenny and Robinson stating that the financial information
contained in the Forms were accurate, and disclosed any material changes to the Company's
internal control over financial reporting.
42. The Forms 10-K/A and 10-Q/As disclosed the following concerning its
restatement:
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On October 29, 2012, the Company announced that it had identified historical accounting errors relating to inventory. The inventory accounting issues resulted in understated cost of sales and overstated inventory balances for the years ended December 31, 2011, 2010 and 2009. For the years ended December 31, 2011, 2010, 2009, and 2008, and for the three months ended March 30, 2012 and six months ended June 29, 2012, cost of sales was understated by $17.9 million, $8.3 million, $5.6 million, $7.1 million, $2.7 million and $6.2 million, respectively. As of December 31, 2011, 2010, 2009 and 2008, March 30, 2012 and June 29, 2012 inventory balances were overstated by $40.0 million, $27.0 million, $17.4 million, $8.7 million, $43.7 million, and $43.5 million, respectively.
The Company believes that the inventory accounting issues are, to a significant extent, attributable to a complex theft scheme in Brazil and, to a somewhat lesser extent, accounting errors, primarily in Brazil, affecting work in process and finished goods inventory that were not detected due to a deficient reconciliation process. In addition, due to accounting errors at one of the Brazilian facilities that occurred prior to the Company's acquisition of PDIC in 2007, the Company overstated inventory in its allocation of the purchase price among assets acquired, resulting in an understatement of goodwill. The understated goodwill and overstated inventory associated with the acquisition of PDIC in the fourth quarter of 2007 is each $3.4 million.
The Company is also restating cost of sales, inventory, property, plant and equipment, accumulated other comprehensive income and retained earnings to correct two additional accounting errors associated with foreign currency adjustments, described below.
The Company incorrectly recorded foreign currency adjustments related to certain intercompany transactions between the Company's U.S. and Canadian subsidiaries in other comprehensive income rather than in other income (expense) in the Consolidated Statements of Operations and Comprehensive Income (Loss). The Company has corrected this error in the accompanying restated financial statements. As of December 31, 2011 and 2010, accumulated other comprehensive income was overstated, and retained earnings were understated, by $6.5 million before consideration of the related income tax provision of $3.0 million, including foreign currency translation.
The Company also made erroneous foreign currency adjustments related to inventory and property, plant and equipment within the Company's Mexican subsidiary. The Company has corrected this error in the accompanying financial statements. As of December 31, 2011, 2010 and 2009, inventory was overstated by $3.1 million and property plant and equipment was overstated by $5.0 million, while retained earnings were understated by $8.1 million, prior to foreign currency translation. In addition, cost of sales is understated for the year ended December 31, 2009 by $8.1 million.
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43. On March 1, 2013, the Company filed a quarterly report for the period ended
September 28, 2012 on a Form 10-Q with the SEC signed by Defendant Robinson and reiterated
the Company's previously reported financial results and financial position. In addition, the Form
10-Q contained signed certifications pursuant to SOX by Defendants Kenny and Robinson
stating that the financial information contained in the Form 10-Q was accurate, and disclosed any
material changes to the Company's internal control over financial reporting.
44. On March 1, 2013, the Company filed an annual report for the period ended
December 31, 2012 on a Form 10-K with the SEC signed by, among others, Defendants Kenny
and Robinson, which reiterated the Company's previously reported financial results and financial
position. In addition, the Form 10-K contained signed certifications pursuant to SOX by
Defendants Kenny and Robinson stating that the financial information contained in the Form 10-
K was accurate, and disclosed any material changes to the Company's internal control over
financial reporting.
45. On this news, General Cable securities declined $0.58 per share or nearly 2%, to
close at $31.9971 per share on March 1, 2013.
46. On April 30, 2013, the Company issued a press release announcing its financial
results for the first quarter ended March 29, 2013. For the quarter, the Company reported a net
loss of $46.5 million, or ($0.94) diluted BPS and net sales of $1.5 billion, compared to net
income of $22.7 million, or $0.45 diluted EPS and net sales of $1.4 billion for the same period a
year ago.
47. On May 7, 2013, the Company filed a quarterly report for the period ended March
29, 2013 on a Form 10-Q with the SEC signed by Defendant Robinson and reiterated the
Company's previously reported financial results and financial position. In addition, the Form
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10-Q contained signed certifications pursuant to SOX by Defendants Kenny and Robinson
stating that the financial information contained in the Form 10-Q was accurate, and disclosed any
material changes to the Company's internal control over financial reporting.
48. On July 31, 2013, the Company issued a press release announcing its financial
results for the second quarter ended June 28, 2013. For the quarter, the Company reported net
income of 12.1 million, or $0.24 diluted EPS and net sales of $1.6 billion, compared to net loss
of $34.4 million, or ($0.69) diluted EPS and net sales of $3.2 billion for the same period a year
ago. Additionally, the press release disclosed the following in relevant part:
On October 29, 2012, the Company announced that it had identified historical accounting errors relating to inventory. The Company believes that the inventory accounting issues were, to a significant extent, attributable to a complex theft scheme in Brazil and, to a lesser extent, accounting errors, primarily in Brazil, affecting work in process and finished goods inventory that were not detected due to a deficient reconciliation process. As a result, on March 1, 2013, the Company filed amendments to its previously filed Forms 10-Q for the quarters ended March 30, 2012 and June 29, 2012 and to its Annual Report on Form 10-K for the fiscal year ended December 31, 2011 to restate the previously issued financial statements and related financial information contained therein. In addition, also on March 1, 2013, the Company filed its Form 10-Q for the quarter ended September 28, 2012.
The Company is in the process of responding to certain comments received from the Securities and Exchange Commission (SEC) with respect to its Annual Report on Form 10-K/A for the fiscal year ended December 31, 2011 (2011 Form 10- K/A), which was filed on March 1, 2013. The comments relate to (i) restatement related disclosures in the Quarterly Operating Results (Unaudited) and Supplemental Guarantor and Parent Company Condensed Financial Information, and (ii) the method used to calculate the quarterly amounts reported in the Quarterly Operating Results (Unaudited) to reflect the correction of the inventory accounting errors. Although the comments were made with respect to the Company's 2011 Form 10-K/A, they impact the presentation of the Company's financial statements for the fiscal quarters ended March 30, 2012, June 29, 2012, and September 28, 2012.
In addition, the Company is evaluating a potential adjustment related to value added tax (VAT) in Brazil that is associated with the theft of inventory. The Company requires additional time to fully evaluate and conclude on this VAT matter but believes preliminarily that this potential adjustment may result in
17
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additional expenses in the range of $7 to $14 million in total to be recorded in the applicable periods for the years ended December 31, 2012, 2011, 2010, 2009 and 2008, respectively.
At the present time, management does not believe that these items, either individually or in the aggregate, have a material impact on previously filed financial statements. Further, due to the impact of the above matters on the presentation of the Company's financial statements in its Form 10-Q for the quarter ended June 28, 2013, the Company will delay the filing of that Form 10-Q until the Company amends the Company's 2011 Form 10KIA and subsequent periodic filings above, The Company is endeavoring to bring these matters to conclusion as quickly as possible and then will initiate the amendment of prior filings.
49. On August 7, 2013, the Company filed a Form NT 10-Q for the quarter ended
June 28, 2013, disclosing the following in relevant part:
On October 29, 2012, the Company announced that it had identified historical accounting errors relating to inventory. The Company believes that the inventory accounting issues were, to a significant extent, attributable to a complex theft scheme in Brazil and, to a lesser extent, accounting errors, primarily in Brazil, affecting work in process and finished goods inventory that were not detected due to a deficient reconciliation process. As a result, on March 1, 2013, the Company filed amendments to its previously filed Forms 10-Q for the quarters ended March 30, 2012 and June 29, 2012 and to its Annual Report on Form 10-K for the fiscal year ended December 31, 2011 to restate the previously issued financial statements and related financial information contained therein. In addition, also on March 1, 2013, the Company filed its Form 10-Q for the quarter ended September 28, 2012.
As described in the Current Report on Form 8-K filed on July 31, 2013 by the Company, the Company is in the process of responding to certain comments received from the Securities and Exchange Commission ("SEC") with respect to its Annual Report on Form 1 0-K/A for the fiscal year ended December 31, 2011 (the "2011 Form 10-K/A"), which was filed on March 1, 2013. The comments relate to (i) restatement related disclosures in the Quarterly Operating Results (Unaudited) and Supplemental Guarantor and Parent Company Condensed Financial Information, and (ii) the method used to calculate the quarterly amounts reported in the Quarterly Operating Results (Unaudited) to reflect the correction of the inventory accounting errors. Although the comments were made with respect to the Company's 2011 Form 10-K/A, they impact the presentation of the Company's financial statements for the fiscal quarters ended March 30, 2012, June 29, 2012, and September 28, 2012.
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In addition, the Company is evaluating a potential adjustment related to value added tax ("VAT") in Brazil that is associated with the theft of inventory. The Company requires additional time to fully evaluate and conclude on this VAT matter.
Due to the impact of the above matters on the presentation of the Company's financial statements in its Form 10-Q for the quarter ended June 28, 2013, the Company is unable to file its Form 10-Q for the quarter ended June 28, 2013 until the Company amends the Company's 2011 Form 10K/A and subsequent periodic filings. The Company is endeavoring to bring these matters to conclusion as quickly as possible and then will initiate the amendment of prior filings and the filing of the Form 10-Q for the quarter ended June 28, 2013. At this time, the Company is unable to represent that the Form 10-Q for the quarter ended June 28, 2013 will be filed on or before the fifth calendar day following its prescribed due date.
50. On this news, General Cable securities declined $0.91 per share or nearly 3%, to
close at $30.5991 per share on August 7, 2013.
51. On October 15, 2013, the Company filed a Form 8-K with the SEC disclosing the
following in relevant part:
On October 10, 2013, the Audit Committee of the Company's Board of Directors, upon the recommendation of the Company's executive officers, concluded that due to certain accounting errors, in the aggregate, related to i) value added tax (VAT) and ii) revenue recognition in connection with historical "bill and hold" transactions for aerial transmission projects in Brazil as further described below, the Company's previously issued consolidated financial statements for the fiscal years 2008 through 2012 (and the related reports of its independent registered public accounting firm) and the interim periods during those years, and the financial statements as of, as well as for, the three fiscal months ended March 29, 2013 should no longer be relied upon.
As a result of the theft of inventory and inventory accounting errors in Brazil disclosed in Amendment No. 1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and in other previous filings, the Company undertook an extensive evaluation, with the assistance of external accounting consultants and external legal counsel, to determine whether an adjustment related to value added tax (VAT) in Brazil associated with the inventory theft and accounting errors was necessary. The Company previously disclosed its evaluation of a potential adjustment related to VAT in its Current Report on Form 8-K filed with the Securities and Exchange Commission (the "SEC") on July 31, 2013 (the "July 31 Form 8-K"). Based on its evaluation, the Company no longer expects to recover approximately $18 million of VAT credits
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that were previously recognized from 2008 to 2012. As a result, the estimated cost of sales expense to be recorded to correct the overstatement of VAT credits for the years ended December 31, 2012, 2011, 2010, 2009 and 2008 follows:
Understated! (Overstated) 2008 2009 2010 2011 2012 Total In millions
Gross
($3) ($3) ($4) ($6) ($2) ($18) Margin
In addition, as part of its efforts to remediate its previously disclosed deficiencies in internal control over financial reporting, the Company reviewed revenue recognition with regard to bill and hold sales in Brazil related to aerial transmission projects. "Bill and hold" sales generally are sales meeting specified criteria under U.S. generally accepted accounting principles ("GAAP") to recognize revenue at the time title to goods is transferred to the customer, even though the seller does not ship the goods until a later time. In typical sales transactions other than those accounted for as bill and hold, title to goods is transferred to the customer at the point of shipment or delivery. As a result of its review, conducted with the assistance of external counsel, the Company identified a number of instances where the requirements for revenue recognition under GAAP with respect to the bill and hold sales were not met. Moreover, the Company determined that the related control environment in Brazil, which as noted above is in the process of being remediated, was inadequate at the time to support revenue recognition for bill and hold sales. As a result, the Company concluded, with the assistance of external accounting consultants and based on the factual findings made with the assistance of external legal counsel, that revenue should have been recognized at the time of shipment. Beginning in the third quarter of 2013 the Company discontinued bill and hold revenue accounting in Brazil and will recognize revenue and the related profit for sales related to aerial transmission projects in Brazil at the time of shipment. The Company estimates that its revenues and gross margin were understated (overstated) for the years ended December 31, 2012, 2011, 2010 and 2009, and three months ended March 29, 2013 as follows:
For the three months For the twelve months ended December 31 ended March 29
Understated! (Overstated) 2009 2010 2011 2012 2013 In millions
Revenues ($8) ($10) ($64) $41 $10
Gross Margin $- ($5) ($19) $14 $3
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Note: There is approximately $30 million of revenue and $7 million of gross margin that were previously accounted for as bill and hold transactions, which now will be recognized in future periods at the time of shipment for aerial transmission projects in Brazil.
52. On this news, General Cable securities declined $1.63 per share or nearly 5%, to
close at $32.24 per share on October 15, 2013.
PLAINTIFF'S CLASS ACTION ALLEGATIONS
53. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or
otherwise acquired General Cable securities during the Class Period (the "Class"); and were
damaged thereby. Excluded from the Class are defendants herein, the officers and directors of
the Company, at all relevant times, members of their immediate families and their legal
representatives, heirs, successors or assigns and any entity in which defendants have or had a
controlling interest.
54. The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, General Cable securities were actively traded on
the NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time
and can be ascertained only through appropriate discovery, Plaintiff believes that there are
hundreds or thousands of members in the proposed Class. Record owners and other members of
the Class may be identified from records maintained by General Cable or its transfer agent and
may be notified of the pendency of this action by mail, using the form of notice similar to that
customarily used in securities class actions.
55. Plaintiff's claims are typical of the claims of the members of the Class as all
members of the Class are similarly affected by defendants' wrongful conduct in violation of
federal law that is complained of herein.
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56. Plaintiff will fairly and adequately protect the interests of the members of the
Class and has retained counsel competent and experienced in class and securities litigation.
Plaintiff has no interests antagonistic to or in conflict with those of the Class.
57. Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
• whether the federal securities laws were violated by defendants' acts as alleged herein;
• whether statements made by defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of General Cable;
• whether the Individual Defendants caused General Cable to issue false and misleading financial statements during the Class Period;
• whether defendants acted knowingly or recklessly in issuing false and misleading financial statements;
• whether the prices of General Cable securities during the Class Period were artificially inflated because of the defendants' conduct complained of herein; and
• whether the members of the Class have sustained damages and, if so, what is the proper measure of damages.
58. A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as
the damages suffered by individual Class members may be relatively small, the expense and
burden of individual litigation make it impossible for members of the Class to individually
redress the wrongs done to them. There will be no difficulty in the management of this action as
a class action.
59. Plaintiff will rely, in part, upon the presumption of reliance established by the
fraud-on-the-market doctrine in that:
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• defendants made public misrepresentations or failed to disclose material facts during the Class Period;
• the omissions and misrepresentations were material;
• General Cable securities are traded in efficient markets;
• the Company's shares were liquid and traded with moderate to heavy volume during the Class Period;
• the Company traded on the NASDAQ, and was covered by multiple analysts;
• the misrepresentations and omissions alleged would tend to induce a reasonable investor to misjudge the value of the Company's securities; and
• Plaintiff and members of the Class purchased and/or sold General Cable securities between the time the defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts.
60. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a
presumption of reliance upon the integrity of the market.
COUNT I
(Against All Defendants For Violations of Section 10(b) And Rule lOb-5 Promulgated Thereunder)
61. Plaintiff repeats and realleges each and every allegation contained above as if
fully set forth herein.
62. This Count is asserted against defendants and is based upon Section 10(b) of the
Exchange Act, 15 U.S.C. § 78j(b), and Rule lOb-S promulgated thereunder by the SEC.
63. During the Class Period, defendants engaged in a plan, scheme, conspiracy and
course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions,
practices and courses of business which operated as a fraud and deceit upon Plaintiff and the
other members of the Class; made various untrue statements of material facts and omitted to state
material facts necessary in order to make the statements made, in light of the circumstances
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Case 1:13-cv-07409-RA Document 1 Filed 10/21/13 Page 24 of 31
under which they were made, not misleading; and employed devices, schemes and artifices to
defraud in connection with the purchase and sale of securities. Such scheme was intended to,
and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and
other Class members, as alleged herein; (ii) artificially inflate and maintain the market price of
General Cable securities; and (iii) cause Plaintiff and other members of the Class to purchase
General Cable securities and options at artificially inflated prices. In furtherance of this unlawful
scheme, plan and course of conduct, defendants, and each of them, took the actions set forth
herein.
64. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of the
defendants participated directly or indirectly in the preparation and/or issuance of the quarterly
and annual reports, SEC filings, press releases and other statements and documents described
above, including statements made to securities analysts and the media that were designed to
influence the market for General Cable securities, Such reports, filings, releases and statements
were materially false and misleading in that they failed to disclose material adverse information
and misrepresented the truth about General Cable's finances and business prospects.
65. By virtue of their positions at General Cable, defendants had actual knowledge of
the materially false and misleading statements and material omissions alleged herein and
intended thereby to deceive Plaintiff and the other members of the Class, or, in the alternative,
defendants acted with reckless disregard for the truth in that they failed or refused to ascertain
and disclose such facts as would reveal the materially false and misleading nature of the
statements made, although such facts were readily available to defendants. Said acts and
omissions of defendants were committed willfully or with reckless disregard for the truth, In
Case 1:13-cv-07409-RA Document 1 Filed 10/21/13 Page 25 of 31
addition, each defendant knew or recklessly disregarded that material facts were being
misrepresented or omitted as described above.
66. Information showing that defendants acted knowingly or with reckless disregard
for the truth is peculiarly within defendants' knowledge and control. As the senior managers
and/or directors of General Cable, the Individual Defendants had knowledge of the details of
General Cable internal affairs.
67, The Individual Defendants are liable both directly and indirectly for the wrongs
complained of herein. Because of their positions of control and authority, the Individual
Defendants were able to and did, directly or indirectly, control the content of the statements of
General Cable. As officers and/or directors of a publicly-held company, the Individual
Defendants had a duty to disseminate timely, accurate, and truthful information with respect to
General Cable's businesses, operations, future financial condition and future prospects. As a
result of the dissemination of the aforementioned false and misleading reports, releases and
public statements, the market price of General Cable securities was artificially inflated
throughout the Class Period, In ignorance of the adverse facts concerning General Cable's
business and financial condition which were concealed by defendants, Plaintiff and the other
members of the Class purchased General Cable securities at artificially inflated prices and relied
upon the price of the securities, the integrity of the market for the securities and/or upon
statements disseminated by defendants, and were damaged thereby.
68. During the Class Period, General Cable securities were traded on an active and
efficient market. Plaintiff and the other members of the Class, relying on the materially false and
misleading statements described herein, which the defendants made, issued or caused to be
disseminated, or relying upon the integrity of the market, purchased shares of General Cable
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Case 1:13-cv-07409-RA Document 1 Filed 10/21/13 Page 26 of 31
securities at prices artificially inflated by defendants' wrongful conduct. Had Plaintiff and the
other members of the Class known the truth, they would not have purchased said securities, or
would not have purchased them at the inflated prices that were paid. At the time of the
purchases by Plaintiff and the Class, the true value of General Cable securities was substantially
lower than the prices paid by Plaintiff and the other members of the Class. The market price of
General Cable securities declined sharply upon public disclosure of the facts alleged herein to the
injury of Plaintiff and Class members.
69. By reason of the conduct alleged herein, defendants knowingly or recklessly,
directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule lOb-5
promulgated thereunder.
70. As a direct and proximate result of defendants' wrongful conduct, Plaintiff and
the other members of the Class suffered damages in connection with their respective purchases
and sales of the Company's securities during the Class Period, upon the disclosure that the
Company had been disseminating misrepresented financial statements to the investing public.
COUNT II
(Violations of Section 20(a) of the Exchange Act Against The Individual Defendants)
71. Plaintiff repeats and realleges each and every allegation contained in the
foregoing paragraphs as if fully set forth herein.
72. During the Class Period, the Individual Defendants participated in the operation
and management of General Cable, and conducted and participated, directly and indirectly, in the
conduct of General Cable's business affairs. Because of their senior positions, they knew the
adverse non-public information about General Cable's misstatement of income and expenses and
false financial statements.
IM
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73. As officers and/or directors of a publicly owned company, the Individual
Defendants had a duty to disseminate accurate and truthful information with respect to General
Cable's financial condition and results of operations, and to correct promptly any public
statements issued by General Cable which had become materially false or misleading.
74. Because of their positions of control and authority as senior officers, the
Individual Defendants were able to, and did, control the contents of the various reports, press
releases and public filings which General Cable disseminated in the marketplace during the Class
Period concerning General Cable's results of operations. Throughout the Class Period, the
Individual Defendants exercised their power and authority to cause General Cable to engage in
the wrongful acts complained of herein. The Individual Defendants therefore, were "controlling
persons" of General Cable within the meaning of Section 20(a) of the Exchange Act. In this
capacity, they participated in the unlawful conduct alleged which artificially inflated the market
price of General Cable securities.
75. Each of the Individual Defendants, therefore, acted as a controlling person of
General Cable. By reason of their senior management positions and/or being directors of
General Cable, each of the Individual Defendants had the power to direct the actions of, and
exercised the same to cause, General Cable to engage in the unlawful acts and conduct
complained of herein. Each of the Individual Defendants exercised control over the general
operations of General Cable and possessed the power to control the specific activities which
comprise the primary violations about which Plaintiff and the other members of the Class
complain.
76. By reason of the above conduct, the Individual Defendants are liable pursuant to
Section 20(a) of the Exchange Act for the violations committed by General Cable.
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PRAYER FOR RELIEF
WHEREFORE, Plaintiff demands judgment against defendants as follows:
A. Determining that the instant action may be maintained as a class action under
Rule 23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class
representative;
B. Requiring defendants to pay damages sustained by Plaintiff and the Class by
reason of the acts and transactions alleged herein;
C. Awarding Plaintiff and the other members of the Class prejudgment and post-
judgment interest, as well as their reasonable attorneys' fees, expert fees and other costs; and
D. Awarding such other and further relief as this Court may deem just and proper.
DEMAND FOR TRIAL BY JURY
Plaintiff hereby demands a trial by jury.
Dated: October 21, 2013
POMERANTZ GROSSMAN HUFFORD DAHLSTROM & GXOSSLLP
Lesley F. Poftnoy I\ / 600 Third A'venue,I0tlji Floor New York, New Ytk YOU 16 Telephone: (212) 1-1100 Facsimile: (212) 661-8665
POMERANTZ GROSSMAN HUFFORD DAHLSTROM & GROSS LLP Patrick V. Dahlstrom Ten South LaSalle Street, Suite 3505 Chicago, Illinois 60603 Telephone: (312) 377-1181 Facsimile: (312) 3 77-1 184
Attorneys for Plaintiff
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CERTIFICATION PURSUANT TO FEDERAL SECURITIES LAWS
1. 1, 6 c hi , make this declaration pursuant to Section
27(a)(2) of the Securities Act of 1933 ("Securities Act") and/or Section 21 l)(a)(2) of the Securities Exchange
Act of 1934 ("Exchange Act") as amended by the Private Securities Litigation Reform Act of 1995.
2. I have reviewed a Complaint against General Cable Corporation. ("General Cable" or the
"Company"), and authorize the filing of a comparable complaint on my behalf.
3. I did not purchase or acquire General Cable securities at the direction of plaintiffs counsel or in
order to participate in any private action, arising under the Securities Act or Exchange Act.
4. 1 am willing to serve as a representative party on behalf of a Class of investors who purchased or
acquired General Cable securities during the class period, including providing testimony at deposition and
trial, ifnecessary. I understand that the Courthas the authority to select the most adequate lead plaintiff in this
action.
5. To the best of my current knowledge, the attached sheet lists all of my transactions in General
Cable securities during the Class Period as specified in the Complaint.
6. During the threeyear period preceding the date on which this Certification is signed, I have not
sought to serve as a representative party on behalf of a class under the federal securities laws,
7. 1 agree not to accept any payment for serving as a representative party on behalf of the class asset
forth in the Complaint, beyond my pro rata share of any recovery, except such reasonable costs and expenses
directly relating to the representation of the class as ordered or approved by the Court.
Case 1:13-cv-07409-RA Document 1 Filed 10/21/13 Page 30 of 31
8. I declare under penalty of perjury that the foregoing is true and correct.
Executed ' I V 1e2_ 9
(Date)
(Signature)
(Type or Print Name)
Case 1:13-cv-07409-RA Document 1 Filed 10/21/13 Page 31 of 31
SUMMARY OF PURCHASES Al" SALES
DATE PURCHASE OR NUMBER OF PRICE PER SHARE SALE SHARES
37 aV