1622 LOCUST STREET ?H ILADELPHIA, PA 19103-630 5

Berger .:, Montague,P.C.

phone 215/875-3000 fax 215/875-4604 www.bergermontague .co m

WRITER ' S DIRECT DIAL

WRITER'S(2 DIRE CCTSAX S

(215) 875-4604WRITER ' S DI EC E-MAIL

cbroderi ck (cJ,bm . n et

David Berger*§

Harold BergerH . Laddie Montague, Jr §

August 29 , 2003Merrill G . Davidoff*Sherrie Raiken Save ttDaniel Berge rTodd S. Collins #Carole A . Broderick

Russell D. Henkin**

Stephen A . Whinsto n

VIA HAND DELIVERY Gary E . Cantor

Barbara A. PodellRuthanne GordonMa rtin 1. TwerskyClerkPeter R. Kahana

United States District Court Susan Schneider Thoma sJeanne A . Markey ##Eastern District of Pennsylvania Ga ry L .Azorsky#$

Room 2609, United States Courthouse Lawrence Deutsch-t#Jonathan D. Berge r601 Market StreetPeter Nordberg

Philadelphia, PA 19106- 1749 Robin Switzenbaum**## +Jerome M. Marcus

Lawrence J. Lederer§

RE : In re The Loewen Group , Inc . Securities Litigation Robert A . Kauffman**Ba rt D. Cohen

Master File No . 98 - CV-6740 ( O'Neill, Jr ., J . ) Michael T. Fantini §

David F Sorensen

A rthur Stock

Jonathan Auerbach#$Edward W Millstein t

Dear Sir: Bret P Flaherty

Charles Pearsall Goodwin# #

Enclosed for filing in the above action is an original Eric 1. Cramer*

and two copies of Plaintiffs' Corrected Consolidated AmendedElizabeth W Fo xClass Action Complaint, with attached Exhibit "A" and Sheryl S . Levy

Certificate of Service . KendallS. ZylstraNeil F. Mara-

Peter Russell Kohn

Kindly time-stamp the copies and return them to me in Ellen T.Noteware

Phyllis M . Parke rthe enclosed self-addressed stamped envelope . Thank you . Glen L. Abramson

Douglas M . Risen##

Very truly yours ,

Lane L. Vines# $

Darin R. Morgan##

Michael Cl Dell'Angelo##Neill W ClarkJoy P Clairmon t

David A. Langer

Carol e A . BroderickKeino R. Robinson##§ §Shanon J. Carson

Casey M . Presto n

CAB / n s mDaniel Simons#$

Jennifer MacNaughton-Wong

Encl .OF CO UNSE L

Stanley R Wolfe

Jay Robe rt Stiefe lCarey R. DAvino***

cc : David H . Marion, Esq . (w/encl .)(via hand delivery )John W W . Edwards f II, Esq . (w/encl ) (via Federal a

as admittedlSoadmitted in

NY

Ex ress ) $ also admitted in DEp$# also admitted in NJ

Brian A . Troyer, Esq . (w/encl .) (via Federal Express ) tt also admitted in M D§ also admi tted in DC§§ also admi tted in I L

370429 . wpd also admi tted in C T+ also admitted in C A*** only admitted in NY

UNITED STATES DISTRICT COURTEASTERN DISTRICT OF PENNSYLVANIA

In re THE LOEWEN GROUP INC .SECURITIES LITIGATIO N

This Document Relates To :

ALL ACTIONS

Master File No .98-CV-6740 (O'Neill, Jr., J. )

JURY TRIAL DEMANDE D

CORRECTED CONSOLIDATED AMENDED CLASS ACTION COMPLAIN T

Jeffrey W. GolanBarrack, Rodos & Bacine

3300 Two Commerce Squar e2001 Market Street

Philadelphia, PA 1910 3

Plaintiffs' Liaison Counsel

Sherrie R . SavettCarole A . BroderickPhyllis M. Parker

Berger & Montague, P.C.1622 Locust Stree t

Philadelphia, PA 19103

Robert M. KornreichChet B . Waldman

Wolf Popper LLP845 Third Avenue

New York, New York 10022

Karin E. Fisch

Abbey Gardy LLP212 East 39th Street

New York, New York 1001 6

Plaintiffs ' Co-Lead Counsel

CORRECTED CONSOLIDATED AMENDED CLASS ACTION COMPLAIN T

Lead Plaintiffs -- the City of Philadelphia, through its Board of Pensions and Retirement ,

Phil Schwartz, James McGlathery, Terry Roberts, Harley Puff and Morton Silas (collectively

hereinafter the "Lead Plaintiffs" or "Plaintiffs") -- individually and on behalf of all other person s

similarly situated, by their undersigned attorneys, allege the following upon personal knowledg e

as to themselves and their own acts, and based upon the investigation made by and through thei r

attorneys as to all other matters . That investigation included: (a) consulting with a certified

public accountant and an industry specialist familiar with The Loewen Group, Inc . ("Loewen

Group" or the "Company") and its business practices ; (b) reviewing and analyzing filings made

by Loewen Group with the Securities and Exchange Commission ("SEC") ; (c) reviewing and

analyzing press releases disseminated by Loewen Group and certain of the defendants, including

those press releases specified herein ; (d) reviewing and analyzing reports of financial analyst s

who followed the Company; (e) reviewing and analyzing numerous art icles and periodicals

concerning Loewen Group and/or the defendants; (f) reviewing and analyzing publicly availabl e

information concerning the trading of Loewen Group securities ; (g) reviewing and analyzin g

publications and other sources of information concerning the funeral home and cemeter y

industry ; (h) interviewing ex-Loewen Group employees and former business associates of th e

Company; ( i) reviewing the Immediate Final Order to Cease and Desist ; Suspension of

Certificates of Authority and Cemetery Licenses ; and (j) reviewing and analyzing documents

filed with the United States Bankruptcy Court for the District of Delaware concerning the

Loewen Group bankruptcy and related proceedings, including the Motion of Debtors and Debtor s

in Possessions for an Order Approving the Consent Agreement with State of Florida, Departmen t

2

of Banking and Finance, Division of Finance Pursuant to Federal Rule of Bankruptcy Procedure

9019 and Stipulation and Consent Agreement between the State of Florida, Department o f

Banking And Finance, Division of Finance and Charlotte Memorial Gardens Acquisition, Inc .

d/b/a Charlotte Memorial Gardens and Cemetery and Funeral Home ("Charlotte Memorial" )

dated July 14, 1999, and the Affidavit of Bradley D . Stam , Esq ., the Senior Vice President, Legal

and Asset Management of Loewen Group, sworn May 31, 1999, and filed in support of Loewen

Group' s reorganization .

NATURE OF ACTION

Lead Plaintiffs bring this action as a class action on behalf of themselves and all

other persons who purchased or otherwise acquired Loewen Group common stock, preferre d

stock, call options or Monthly Insured Preferred Securities (MIPS) during the period March 5 ,

1997 through January 14, 1999, inclusive (the "Class Period"). They seek to recover damages

caused by defendants' violations of the federal securities laws with regard to the preparation an d

dissemination to the investing public of materially false and misleading information . As a result

of defendants' false and misleading statements, the market prices of the Company's commo n

stock and other publicly traded securities were artificially inflated during the Class Period .

JURISDICTION AND VENUE

2 . Plaintiffs' claims arise under Sections 10(b) and 20 (a) of the Securities Exchange

Act of 1934 (the "Exchange Act"), 15 U .S .C . §§78(b) and 78t, and SEC Rule lOb-5, 17 C.F.R . §

240.10b-5, promulgated thereunder .

The jurisdiction of this Court is based on Section 27 of the Exchange Act, 1 5

U .S.C. §78aa, and federal question jurisdiction , 28 U.S.C. §1331 .

4. Many of the acts alleged in this action, including the dissemination to the

investing public of the misleading statements at issue, occurred in substantial part in this district .

During the Class Period, Loewen Group's United States corporate office was located at 3190

Tremont Avenue, Trevose, Pennsylvania , which is in this District .

In connection with the acts, transactions and conduct alleged herein, defendant s

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

interstate telephone communications, the Internet, and the facilities of national and internationa l

securities exchanges and markets .

THE PARTIE S

6. Lead Plaintiffs, the City of Philadelphia , through its Board of Pensions and

Retirement, Phil Schwartz, James McGlathery, Terry Roberts, Harley Puff, and Morton Sila s

purchased or otherwise acquired Loewen Group common stock, preferred stock, or call option s

during the Class Period as described in their respective Certifications, attached to their initia l

complaints and/or filed with the Court in connection with their Lead Plaintiffmotion, an d

suffered damages for the reasons set forth in this Complaint .

Defendant Loewen Grou p

Loewen Group is named herein as a defendant in accordance with the United

States District Court for the Eastern District of Pennsylvania's December 27, 2001 Orde r

Removing the Consolidated Action from the Civil Suspense Docket (the "December 27 Order") ,

which permits Lead Plaintiffs to pursue (but not collect upon ) a judgment against Loewen Group ,

which filed for bankruptcy protection in the United States Bankruptcy Court for the District of

Delaware on June 1, 1999 . The December 27 Order provides, inter alia, that "in the event thi s

4

Court may allow Lead Plaintiffs to seek a judgment against Loewen Group for the purpose of

availing themselves of certain enhanced recovery provisions of the Private Securities Litigatio n

Reform Act of 1995, Lead Plaintiffs will not be able to collect upon any judgment from Loewe n

Group, in accordance with the Order of the U .S . Bankruptcy Court entered November 30, 2001 . "

Specifically, the Order of the United States Bankruptcy Court entered November 30, 2001 ,

provides, inter alia, that :

The automatic stay is MODIFIED solely for the purpose of allowing LeadPlaintiffs to file their Consolidated Class Action Complaint against the Debtor inthe District Court and allowing the parties in the Securities Class Action to brief,and obtain a decision on, any subsequently filed motions to dismiss the LeadPlaintiffs' claims, recognizing that no such action may be undertaken until theDistrict Court removes the Securities Class Action from the Court's civil suspensefile .

At the beginning of the Class Period, Loewen Group was the second-largest

operator of funeral homes and cemeteries in North America and the largest operator of funeral

homes in Canada . In addition to providing services at the time of death ("at-need" services), the

Company also sells funeral, cemetery and cremation services on a pre-arranged basis ("pre-need"

services) . As of March 14 , 1997, the Company operated 984 funeral homes throughout No rth

America. This included 862 funeral homes in the United States (including locations in Puert o

Rico) and 122 funeral homes in Canada . In addition, the Company operated 350 cemeteries in

the United States and six cemeteries in Canada . As of the close of business on March 14, 1997 ,

the Company had negotiated agreements for the acquisition of an additional 50 funeral home s

and 78 cemeteries in the United States and one funeral home in Canada. At that time, th e

Company also operated four insurance subsidiaries which sold a variety of life insuranc e

products, primarily to fund funeral services purchased through pre-need arrangements .

9. Loewen Group served as the holding company for all operations of the Company ,

which are contained in subsidiary and associated entities . The principal executive offices of th e

Company are located at 4126 Norland Avenue, Burnaby, British Columbia V5G 3S8 . During the

Class Period , the Company also maintained corporate offices at 50 East RiverCenter Boulevard ,

Suite 800, Covington, Kentucky 41011 and at 3190 Tremont Avenue, Trevose, Pennsylvani a

19053 . More than 90% of the Company's revenue is derived from its operations in the Unite d

States .

10. Loewen Group met the requirements for listing, and Loewen Group commo n

stock was listed on the New York Stock Exchange ("NYSE") and the Toronto Stock Exchange at

all times during the Class Period. As a regulated issuer , Loewen Group filed periodic public

reports with the SEC and the NYSE . The trading volume of Loewen Group's common an d

preferred stock, as well as call options, was substantial during the Class Period . Loewen Group

was followed by various analysts employed by major brokerage firms, including Salomon Smith

Barney Holdings Inc . ("Smith Barney") ; BT Alex . Brown Incorporated ("Alex . Brown") ; AA

Chicago Corp . ; ABN AMRO ; TD Securities ; CitiCorp Securities , Inc . ("CitiCorp") ; Raymond

James & Associates, Inc ("Raymond James") ; Midlawn Wayland Capital ; Josepthal & Co . ;

Merrill Lynch & Co ., Inc . ("Merrill Lynch") ; and Gerard Klauer Mattison & Co . ("Gerard

Klauer"), who wrote reports which were distributed to the sales force and ce rtain customers o f

their respective brokerage firms and which were available to the investing public on va rious

automated data retrieval services .

11 . On March 3, 2000, Loewen Group' s stock was delisted from the NYSE. It

thereafter landed on the OTC bulletin board beginning March 16 , 2000 until it was delisted from

6

that market on January 3, 2002 .

12 . On December 4, 2001, the United States Bankruptcy Court for the District of

Delaware confirmed Loewen Group's Fourth Amended Joint Plan of Reorganization, clearing th e

way for Loewen Group to emerge from bankruptcy on January 2, 2002 , under a new name :

"Alderwoods Group Inc .". On December 7, 2001, the Ontario Superior Court of Justic e

approved the Fourth Amended Joint Plan of Reorganization in Loewen Group's paralle l

bankruptcy proceeding . Neither Lead Plaintiffs nor the other Class members (as defined below )

have recovered, or will recover, any monies or other relief from the Company's bankruptc y

proceeding in connection with any of their claims asserted herein . See December 27 Order an d

Order of the United States Bankruptcy Court for the District of Delaware entered November 30 ,

2001 .

The Individual Defendants

13 . Defendant Ray Loewen was the founder of Loewen Group and had bee n

Chairman of the Board and the CEO of the Company from before the Class Period until his

October 9, 1998 resignation . Post-October 9, 1998, he remained with the Company as a non-

executive, co-Chairman of the Board, until January 1999 when he was replaced as a member of

the Board. Defendant Ray Loewen signed the Company's annual reports on Form 10-K ,

including the Formsl0-K for 1996 and 1997 .

14. Defendant Paul Wagler ("Wagler") had been the Chief Financial Officer, a

member of the Executive Committee, and a director of the Company from before the Clas s

Period until December 17, 1998, when he was requested to retire from the Board . On July 31 ,

1998, Wagler was promoted to the position of Executive Vice President, Finance, in which

7

capacity he oversaw the Company's domestic corporate development , new construction and pre-

need cemetery and funeral sales and marketing activities . On November 20, 1998, Wagler wa s

appointed Executive Vice President , Operations and Chief Operating Officer of the Company .

As stated in the Executive Committee Report of the Company's 1997 Annual Report, Wagler ,

"has 25 years of experience in corporate and international finances . . . Wagler's responsibilitie s

at Loewen Group include banking and capital markets, trust funds, insurance and internationa l

operations ." Prior to March 20, 1995, Wagler was a Senior Vice-President at ABN AMRO Bank

Canada ("ABN AMRO") . Defendant Wagler signed the Company's Forms 10-K and 10- Q

during the Class Period .

15 . Ray Loewen and Wagler (hereinafter, collectively the "Individual Defendants"), a s

officers and/or directors of a publicly held company, had a duty to promptly disseminate truthfu l

and accurate information with respect to the Company and to promptly correct any publi c

statements issued by or on behalf of the Company which had become false or misleading .

16. The Individual Defend ants made, reviewed and/or were aware of the false and/or

misleading press releases and other statements complained of herein, knew or recklessly

disregarded their false and/or misleading nature, and were in a position to control or influenc e

their contents or otherwise cause corrective and accurate disclosures to have been made . The

Individual Defendants engaged in this misconduct for the purpose of artificially inflating the

market price of Loewen Group securities through the issuance of false and misleading statements

to the public, as particularized below .

17 . In accordance with the Private Securities Litigation Reform Act of 1995, Pub. L .

No. 104-67, 109 Stat . 737, any judgment obtained against any individual Defendant maybe

8

augmented to account for shortfalls for any uncollectible judgment against Loewen Group .

CLASS ALLEGATION S

18 . Lead Plaintiffs bring this action as a class action pursuant to Federal Rules o f

Civil Procedure 23(a) and (b)(3) on behalf of a class consisting of all persons who purchased or

otherwise acquired the Company's common stock, preferred stock, call options and Monthly

Insured Preferred Securities (MIPS) during the Class Period and who suffered damages thereb y

(the "Class") . Excluded from the Class are Loewen Group, the Individual Defendants, their

immediate families, any entity in which any defendant has a controlling interest or is a parent o r

subsidiary of or is controlled by the Company, and the officers, directors, affiliates, lega l

representatives, heirs, predecessors and assigns of any defendant .

19. The members of the Class are located in geographically diverse areas and are so

numerous that joinder of all members is impracticable . There were almost 74 million shares o f

the Company's common stock outstanding as of July 31, 1998 . The exact number of Clas s

members is unknown to Lead Plaintiffs at this time and can only be ascertained through

appropriate discovery, but Lead Plaintiffs believe there are , at minimum, thousands of members

of the Class who purchased the common stock, preferred stock, call options or MIPS of Loewen

Group during the Class Period .

20. During the Class Period, the Company' s common stock was traded on the NYSE

and the Toronto Stock Exchange under the symbol "LWN ." During the Class Period, Loewen

Group was followed by securities analysts and its securities were traded in efficient, open and

well-informed markets which assimilated the information disseminated publicly by and on behal f

of the Company .

9

21 . Common questions of law and fact exist as to all members of the Class an d

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

questions of law and fact common to the Class are :

(a) Whether defendants engaged in acts or conduct in violation of th e

federal securities laws as alleged herein ;

(b) Whether defendants participated in and pursued the commo n

course of conduct complained of herein ;

(c) Whether the challenged public statements disseminated to th e

investing public and to the members of the Class omitted or misrepresented material facts abou t

the Company's financial condition, or became materially false and misleading during the Clas s

Period;

(d) Whether defendants had a duty to correct such statements when

they learned they had become false and misleading ;

(e) Whether defendants acted knowingly or recklessly in making th e

materially false and misleading statements or in failing to correct such statements upon learnin g

that they were false and misleading;

(f) Whether the Individual Defendants were "control" persons of the

Company and its employees ;

(g) Whether the market prices of Loewen Group securities were

artificially inflated during the Class Period because of defendants' conduct complained of herein;

and

(h) Whether members of the Class have sustained damages and, if so ,

10

what is the proper measure of such damages .

22 . Lead Plaintiffs' claims are typical of the claims of the other members of the Clas s

as Lead Plaintiffs and the other members of the Class sustained damages arising out of

defendants' wrongful conduct in violation of federal law, as complained of herein .

23 . Lead Plaintiffs will fairly and adequately protect the interests of the members of

the Class and have retained counsel competent and expe rienced in class and secu rities litigation .

24. A class action is supe rior to other available methods for the fair and efficient

adjudication of this controversy since joinder of all members of the Class is impracticable .

Further, because the damages suffered by individual Class members may be small, the expens e

and burden of individual litigation make it impossible for Class members individually to redres s

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

action .

PLAINTIFFS' RELIANCE ON FRAUD-ON-THE-MARKET DOCTRIN E

25. Plaintiffs can rely, in part, upon the presumption of reliance established by th e

fraud-on-the-market doctrine, because, among other facts :

1) Loewen Group' s common stock met the requirements for listing, and w as

listed on the New York Stock Exchange, a highly efficient market ;

2) as a regulated issuer, the Company filed periodic public reports with th e

SEC;

3) the trading volume of the Company' s stock was substantial, reflectin g

numerous trades each day ;

4) Loewen Group was followed by securities analysts employed by severa l

11

major brokerage firms who wrote reports that were distributed to the sales force and certai n

customers of such firms and that were available to various automated data retrieval services ;

5) the misrepresentations and omissions alleged in this Complaint were

material and would tend to induce a reasonable investor to misjudge the value of Loewen

Group's publicly traded securities ; and

6) Plaintiffs and the members of the Class purchased their securities du ring

the Class Period without knowledge of the omitted or misrepresented facts .

Based upon the foregoing, Plaintiffs and the other members of the Clas s

are entitled to a presumption of reliance upon the integrity of the market for the purpose of clas s

certification, as well as for ultimate proof of their claims on the merits . Plaintiffs will also rely,

in part, upon the presumption of reliance established by material omissions and/or upon the

actual reliance of the Class members .

26 . As a consequence of stock trading on an efficient market :

(a) materiality is shown by the increases in trading volumes ;

(b) the effect that an announcement by defendants has on the Company' s

stock's price may, and often does, occur over several days . This principle is illustrated by th e

following example : Analyst David Brodie of CIBC Wood Gundy Securities downgraded Loewen

Group from a `buy' to a `sell ' after the Company announced the unexpected news on Septembe r

15, 1997, that the Company planned a major restructuring , including layoffs and writing down

certain assets . Analyst Brodie said that he thought the stock a "good value" at $27 .50 per share,

but thought it could fall as much as $5 .00 per share on the bad news . The analyst said he follow s

the rule that unexpected news can affect a stock for three trading days .

12

(c) the effect of an announcement on the Company's stock's price must b e

determined by considering the market indices and comparables, as well as other

contemporaneous announcements that also affect the price of the stock;

(d) that market observers attribute a price change to an announcement is

evidence of the materiality of the announcement ;

(e) materiality is determined by a comparison of the price of the stock

immediately before the announcement and in the ensuing days after the announcement, rathe r

than by a comparison of the post -announcement prices to prices weeks or months earlier.

FACTUAL BACKGROUN D

27 . Beginning well before 1996, the "death care industry" in the U .S. was

experiencing rapid growth and was dominated by three multinational funeral home and cemetery

operators : Loewen Group, Service Corporation International ("SCI"), and Stewart Enterprises .

These three companies purported to maintain their rapid growth by acquiring other establishe d

funeral and cemetery businesses. Growth through acquisitions was an attractive strategy fo r

several reasons . Traditional family-owned funeral facilities and cemeteries have establishe d

reputations with local clientele that create high barriers to entry in their respective markets . In

addition, as the U .S . population ages, it migrates, making the location of a funeral home or

cemetery, such as in the "maturity belt," an important business factor . Thus, the large-scale death

care providers found it easier to acquire existing funeral and cemetery businesses in desired

locations than to compete with them . Further, the competition among the largest death car e

providers, particularly between Loewen Group and SCI, to corner market share added extra fue l

to the growth through acquisition strategy .

13

A. Loewen Group Loses $200 Million in Litigation Settlements and Suffers DireConsequence s

28. Trouble struck Loewen Group in 1995, when the Company was sued by a smal l

Mississippi funeral home owner for breach of contract after it was accused of failing t o

consummate a deal with him. After the deal failed to close, the funeral home owner alleged tha t

Loewen Group ruined him financially by reneging on the signed agreement . Ray Loewen could

have settled the case for a few million dollars, but he refused to settle . Instead, the case went t o

trial . The plaintiff's lawyer laid out a tale of how Loewen Group tried to monopolize local

markets, drive out competitors and then raise prices, sometimes marking up coffins to triple their

wholesale cost . In May 1995, the Mississippi jury, outraged at what was described as Loewe n

Group's campaign to drive a fifth-generation undertaker out of business , delivered a $500 million

judgment against the Company, including more than $400 million in punitive damages . The

foreman described Ray Loewen as "a rich, dumb Canadian politician who thought he could come

down and pull the wool over the eyes of a good of Mississippi boy."

29. On January 24, 1996, the trial court entered an order which provided that in orde r

to appeal, Loewen Group would be required to post a bond of $625 million . Loewen Group

thereupon warned that it might have to seek bankruptcy protection as a result of that order .

30. On January 29, 1996, Loewen Group reached a settlement of $175 million wit h

the Mississippi plaintiff, of which $50 million was immediately payable in cash . In addition, th e

Company transferred 1 .5 million shares of common stock to the plaintiff, together with an $8 0

million promissory note payable over a term of years .

31 . Approximately two weeks later , on February 12, 1996, Loewen Group settled

14

claims, asserted in another action, for breach of contract and related torts, for one million share s

of Loewen Group common stock and $3 million in cash . The total loss to the Company from

these settlements was approximately $200 million .

32 . The consequences of these January-February 1996 settlements were swift an d

severe, both for the market price of Loewen Group stock, and the credit ratings of the Company' s

debt. The market price of Loewen Group common stock fell by approximately 50%, and th e

ratings agencies reduced their ratings of Loewen Group debt to below investment grade . The

Company even took action to cause its employees, many, if not most of whom made $25,000 per

year or less, to pay part of the cost of the settlement by working one day per month without pay .

As a result of the two lawsuit settlements, Loewen Group reported a pre-tax loss of $123.8

million for 1995 . The sharp decline in the market p rice of Loewen Group stock made Loewe n

Group a tempting acquisition target for its larger , hated competitor , SCI, because it cut the p rice

of acquisition of the Company by 50 % . At the same time , the reduction in the ratings of Loewen

Group debt to below investment grade materially increased the cost of the Company' s

borrowings, making the acquisitions on which the Company's revenue and income growt h

depended more expensive .

33 . Regarding the ratings of the Company's debt, as reported by Death Care Business

Advisor on April 10, 1997, defendant Wagler commented on the loss of investment grade

ratings, stating that Loewen Group hoped to regain investment grade ratings within the next year .

For that to happen, Loewen Group would require improvement in the factors that determine d

debt ratings by rating agencies, including earnings as a multiple of interest costs, debt to equit y

ratios, ratios of current assets to current liabilities, tangible net worth (tangible assets minus

15

debt), and the like . Because, as discussed herein, the performance of Loewen Group's existing

funeral homes and cemeteries were flat or declining, this, in turn, meant that any suc h

improvement would necessarily be dependent on acquisitions .

B. SCI'S Attempt To Take Over Loewen Group And its Consequences

34. On September 17, 1996, the Chairman of SCI sent a letter to defend ant Raymond

Loewen proposing a "combination of our two companies ." That letter, which was released

publicly, included a $43 per share offer for the Company. This offer represented a substantial

premium over the $32 .188 per share market price of Loewen Group stock on the previous trading

date. Defendant Ray Loewen declined the offer, stating publicly that he would keep th e

Company independent and that it was in the best interests of Loewen Group shareholders that h e

do so. Approximately one week later, on September 25, 1996, SCI announced that it woul d

"consider all options" regarding the acquisition of Loewen Group .

35 . Shortly after the September 25 announcement , on October 2, 1996, SCI propose d

a stock exchange offer of SCI common stock for Loewen Group common stock, with an

exchange value of $45 for each Loewen Group share . In addition, SCI sought a court order

precluding Loewen Group from blocking the exchange proposal . Loewen Group again stated

that it intended to remain independent, and spent $18 .7 million implementing takeover defenses

against SCI .

36. In their efforts to defeat the SCI takeover attempt, Loewen Group employed th e

entire arsenal of typical takeover defenses , and at least one unique one . The Company brough t

litigation against SCI, made what are known as "poison acquisitions," shifting its principa l

acquisition focus from funeral homes to cemeteries , and acquiring smaller properties . Loewen

16

Group also urged the Federal Trade Commission to prevent the takeover, and entered into

contracts with employees which provided for large payments in the event of a change in contro l

of the Company, familiarly known as "golden parachutes ." Most importantly, defendant Ray

Loewen enlisted the support of institutional investors with large holdings of Loewen Group in his

efforts to thwart the takeover, assuring them that the value of their Loewen Group stock would b e

greater if Loewen Group remained independent than the $45 per share offered by SCI . With the

support of institutions holding large amounts of Loewen Group stock, defendant Ray Loewen

assembled a large enough block of Loewen Group stock opposed to the takeover by SCI to bloc k

a merger of the two companies, as applicable corporate law precluded an involuntary merger i f

holders of 25% or more of the Company's common stock were opposed . While the inability to

compel a merger between the two companies would not preclude SCI from acquiring a majority

interest in the Company and assuming control of it, the inability to effectuate a merger woul d

have adverse accounting consequences for SCI, because assuming control of the Company an d

acquiring its assets would require SCI to record huge amounts of goodwill in SCI's financia l

statements, which would make SCI's financial condition appear much less favorable .

37 . On January 7, 1997, SCI announced that it would abandon its attempts to acquir e

the Company, stating that disclosures concerning certain of the Company's transactions ha d

adversely impacted SCI's view of the Company's value . That announcement caused the market

price of Loewen stock to immediately fall to approximately $5 per share less than the SCI offer.

38 . The takeover threat from SCI, however, did not end with SCI's January 7, 199 7

announcement, and defendant Ray Loewen continued to be concerned about a prospectiv e

takeover, and to take actions to discourage or thwart any such effort . Indeed, in an interview

17

with Death Care Business Advisor, which was reported in that publication on October 23, 1997 ,

defendant Ray Loewen was asked : "Is Loewen Group in another vulnerable position in light o f

where its stock is trading now?" At that time, the market price of Loewen Group stock was les s

than $25 per share, which was dramatically lower than the $45 per share price offered by SCI .

Defendant Ray Loewen responded :

I think the appropriate answer is that we believe the officialhostile attempt was very poorly planned and thought out . Weknow that since they pulled the bid there has been a hugeattempt to impact our company negatively, and our ability toraise equity. There has also been much contact with ourshareholders . Just because the official hostile attempt becameunofficial, it has been just as intense and intensive . [Emphasisadded . ]

39 . In fact, as reported in the same October 23, 1997 edition of Death Care Business

Advisor, in the summer of 1997, six months or more after the announcement by SCI that it would

abandon its attempts to acquire Loewen Group, Loewen Group management launched lobbying

efforts in an effort to secure a change in the applicable corporate law to increase the percentage

of shareholders (from 75% to 90%) who must accept a bid to compel a merger.

40. Defendant Ray Loewen was able to stave off SCI's hostile takeover attempts in

the September 1996-January 1997 time period with the support of institutional investors wh o

held large amounts of Loewen Group stock. However, after the Company revealed, in a

September 15, 1997 press release, that the Company "expects to repo rt significantly lower th an

expected earnings from operations for the remainder of the year," and that, as a result of certain

charges, including "reserve and asset adjustments ," the Company expected to report a loss for the

third quarter for 1997, institutional investors began to push the Company to negotiate a merger

18

with SCI . When a group of "disgruntled" institutional investors met to discuss ways to pressur e

the Company into selling itself to SCI, defendant Ray Loewen emphatically rejected those

requests. In fact, in a conference call in early November 1997, defendant Ray Loewen refused t o

discuss selling the Company, instead touting his plans to turn the Company around .

41 . A few weeks after SCI announced its abandonment of its effo rts to take over the

Company, The Calgary Herald reported on February 15, 1997 that :

Loewen Group said his Company will never let its guard downbecause SCI could reappear in the future . He said Loewen Group'stactics in fighting SCI amounted to a "big league, classic,showpiece defense ."

At the same time, defendant Ray Loewen said that the Company would continue its "aggressive"

U.S . acquisition program in 1997, with a target of $600 - $750 million worth of U .S . acquisitions

in 1997.

42 . Defendants also sought to prop up the market price of Loewen Group stock b y

announcing a plan to repurchase 5% of the Company's outstanding common and preferred stock

in the very same September 15, 1997 press release in which the Company announced that it

would report a loss for the third quarter of 1997 and "significantly lower than expected earning s

from operations for the remainder of the year ." The announcement of the repurchase served t o

support the market price of Loewen Group stock, and reduce the substantial decline in that pric e

as a result of the highly negative news about the Company' s earn ings . Nevertheless , the marke t

price of Loewen Group stock fell from a closing p rice of $30 per share on September 12, 1997, to

a closing price of $25 .25 per share on September 16, 1997, the day after the negative earn ings

announcement coupled with the announcement of the repurchase plan . However, the reported

19

repurchase plan was a mirage . Not a single share of Loewen Group stock was repurchase d

by the Company in 1997 or 1998, and by 1999 it was utterly impossible for the Company t o

do so.

43 . Having lost the support of institutional investors by November 1997, defendan t

Ray Loewen proceeded to purchase additional shares of the Company's stock, to increase the

percentage of Loewen Group stock owned by him so that he could ward off a hostile takeove r

attempt without support from those institutional investors . In addition, the Company assured the

investing public that it had more than enough financing for its ambitious acquisition plans, a s

well as to fund its huge and growing negative cash flows. As reported by The Vancouver Sun on

October 3, 1997, defendant Wagler, commenting on an increase in its bank line of credit from

$750 million to $1 billion stated : "It's our policy to keep large amounts of unused credit on hand

because it's the prudent thing to do . If capital markets tank, this could take us through for a yea r

to a year and a half. "

44. Following the revolt of Loewen Group institutional investors , a group of the

Company's five top managers, including defendant Wagler, but notably excluding defendant Ra y

Loewen, held a road show with institutional investors in New York, Boston and Toronto to talk

up the Company's prospects . As reported by the Death Care Business Advisor on February 5 ,

1998: "The company's stock price did rebound slightly after the initial round of [these] meetings .

C. Loewen Group 's Shift in Focus from the Funeral Home Business to theCemetery Business and From At-Need Services to Pre-Need Services

45 . As the income from Loewen' s funeral homes was stagnant or declining, th e

20

Company, which traditionally was in the funeral home business, began to acquire cemetery

businesses. For example, in 1995, Loewen acquired Osiris, a company based in Philadelphia,

comprised of 22 cemeteries , one funeral home, and four funeral home/cemetery combination s

located in 11 states . The Company's cemetery business grew dramatically, from 179 cemete ries

at the end of 1995 to 427 cemeteries at the end of 1998 . Moreover, the revenues from cemetery

business as a percentage of the company's total business increased during that time from 24% in

1995 to 36% at the end of 1998 .

46. In 1996, Loewen Group initiated a program focused on the sale of pre-need

cemetery plots and products . A pre-need funeral or cemetery contract offers customers either a

future funeral service or burial, respectively, at a guaranteed price in exchange for a low initia l

down payment . Ideally, the customer's initial down payment will be invested in a mortuary trus t

or other financial instrument by the funeral home or cemetery to generate a rate of return equal t o

or exceeding the guaranteed price for performing the funeral service or burial at some future date .

Often state laws require that a certain percentage of pre-need funds be invested in mortuar y

trusts .

47 . The dramatic difference in Loewen Group' s accounting for cemetery sales versu s

funeral sales provided great incentive for defendants to focus on pre-need cemetery sales :

Loewen Group recorded revenue from cemetery sales at contract signing, while it did not recor d

revenue from funeral sales until the funeral was performed . Loewen Group's pre-need cemetery

sales were typically structured with low initial cash payments by the customers which did no t

offset the cash costs of establishing and support ing the growing pre-need sales program ,

including the payment of certain sales commissions . These terms and conditions of the pre-nee d

21

cemetery contracts were such that cash flow from cemetery operations would be negative in th e

near-term even assuming most customers eventually paid the full contract amount .

48 . The prices on the pre-need cemetery contracts from conglomerates like Loewe n

Group were typically expensive in comparison to contracts from independent providers . In

addition, since the down-payment, if any, was nominal (averaging $300 and approximately 5% o f

the full contract price), the customer lost little by walking away from the contract . Additionally,

because Loewen Group paid sales commissions of between 10% to 18% of the full contract pric e

up front, the business generated huge negative cash flows . '

49. Sales of pre-need cemetery services represented most of Loewen Group's reporte d

cemetery revenues , comp ri sing 70% of the Company 's cemetery revenues . Of these, 85% bore

no interest, with the result that under generally accepted accounting principles the Company wa s

required to deduct imputed interest from the contract price to determine the amount of reporte d

revenues .

50. Under state statutes , a payment-default of cemetery plots by a purchaser operate s

as a cancellation of the sale . As a consequence, if a purchaser stopped making payments, th e

unpaid balance was not collectible .

In the October 20, 1999 edition of The Atlanta Journal and Constitution, JimFowler, the executive director of the Georgia Funeral Directors Association, confirmed thatcemeteries funnel most of the cash they receive from pre-need sales into commissions for salespersonnel .

22

D. Prime Succession and Rose Hills Investment s

51 . In 1996, Loewen Group entered into two significant transactions that had th e

purpose and effect of creating income where none existed and failing to account for almost $20 0

million of probable losses on those investments . Loewen Group' s accounting for the two

transactions was improper and its disclosure concerning those transactions during the Class

Period was materially false and misleading .

52. In August 1996, Loewen Group acquired an interest in P rime Succession, Inc . ,

which was the largest privately-held funeral services company in North America, with 14 6

funeral homes and 16 cemeteries in 20 states. In November 1996, Loewen Group acquired a n

interest in Rose Hills Memorial Park, the largest cemetery in North America and a mortuary tha t

served more families annually than any other single mortuary location in the United States .

53 . Loewen Group acquired its interests in those prope rties through comple x

structured finance transactions that were designed to keep the debt associated with acquiring th e

properties off its balance sheet and to allow it to improperly record dividend revenue. The

transactions were made with an affiliate of the Blackstone Group, which assisted Loewen Group

by parking Loewen Group' s acquisitions on its bal ance sheet for a very large parking fee that

Loewen Group did not include in its financial results .

54. The misleading construct of the transactions was described in an April 13, 1998

edition of Business Week concern ing the Blackstone Group , entitled , Blackstone : Nice Is For

Suckers :

[The founders of the Blackstone Group] created a strong niche : doing LBOs withcompanies that temporarily warehouse an acquisition with Blackstone . In 1996,for example, Loewen Group, a Canadian funeral home consolidator, faced a cash

23

crunch and couldn't issue debt to buy funeral home Prime Succession Inc . Thetwo created a new vehicle to buy Prime Succession that was 24% owned byLoewen Group and 76% owned by Blackstone . This let Loewen Group make a$300 million purchase off-balance sheet, since minority stakes don't have to beconsolidated in its financials .

A complicated agreement stipulates that before Loewen Group can buy back all of PrimeSuccession in 2001, Loewen Group must first pay Blackstone at least a 25% annual returnon the $52 million Blackstone invested . This built-in exit strategy and pre-carve-up ofreturns greatly reduces Blackstone's risk . . . . [Emphasis added.]

1 . Acquisition of an Interest in Prime Succession, Inc .

55 . In August 1996, Loewen Group International Inc. ("LGII"), a subsidiary o f

Loewen Group, and Blackstone Capital Partners II Merchant Banking Fund L .P. and certain

affiliates (together, "Blackstone") formed Prime Succession Holdings, Inc . ("Prime Succession

Holdings") to acquire all of the outstanding shares of Prime Succession Inc . $190 million of the

$320 million purchase price was funded with debt from banks and other institutional investors .

This debt appeared on the balance sheet of Prime Succession Holdings but did not appear on the

balance sheet of Loewen Group.

56. Of the remaining $130 million portion of the purchase price, LGII and Blackston e

contributed approximately $78 million and $52 million, respectively, to Prime Successio n

Holdings . For its contribution, LGII received 21 .8% of the outstanding common stock of Prim e

Succession Holdings and 100% of its preferred stock . The preferred stock carried a 10%

cumulative annual payment-in-kind dividend. For its contribution, Blackstone received 78 .2% of

the outstanding common stock of Prime Succession Holdings .

57 . Under a put/call agreement entered into with Blackstone, the Company had the

option to acquire ("call") Blackstone's common share interest in Prime Succession Holdings

24

commencing on the fourth anniversary of the acquisition, and for a period of two years thereafter ,

at a price determined pursuant to the put/call agreement . Blackstone had the option to sel l

("put") its common share interest to the Company commencing on the sixth anniversary of th e

acquisition, and for a period of two years thereafter, at a price determined pursuant to the put/cal l

agreement .

2 . Acquisition of an Interest in Rose Hills

58 . In November 1996, Rose Hills Holding Corp . ("RH Holdings" or "Rose Hills"), a

company formed by Blackstone and LGII, acquired the cemetery and mortuary operations an d

assets of The Rose Hills Memorial Park Association and Roses, Inc . of Los Angeles (together ,

"Rose Hills"). $155 million of the $285 million purchase price was funded with debt from banks

and other institutional investors. This debt appeared on the balance sheet of RH Holdings but di d

not appear on the balance sheet of Loewen Group .

59. Of the remaining $ 130 million port ion of the purchase p rice, LGH and Blackston e

contributed $72 million and $35 million, respectively, to RH Holdings, and an affiliate of LGII

contributed 14 funeral homes and two combination funeral home/ cemetery operations located i n

Los Angeles and Orange counties that were valued at $23 million . For their contributions, LGII

and its affiliate received approximately 20 .5% of the outstanding common stock of RH Holdings

and 100% of its preferred stock . The preferred stock carried a cumulative annual

payment-in-kind dividend of 10%. For its contribution, Blackstone received approximately

79 .5% of the outstanding common stock of RH Holding s

60 . As with Prime Succession Holdings , under a put/call agreement entered into with

Blackstone, the Company had the option to call Blackstone's common share interest in R H

25

Holdings commencing on the fourth anniversary of the acquisition, and for a period of two years

thereafter, at a price determined pursuant to the Put/Call Agreement . Blackstone had the option

to put its common share interest to the Company commencing on the sixth anniversary of the

acquisition, and for a period of two years thereafter, at a price determined pursuant to th e

Put/Call Agreement . '

61 . As Blackstone stated publicly, there was not the slightest doubt that Loewen

Group would become the sole owner of those properties, either by exercise of the Put or the Cal l

options, and that Loewen Group would be required to pay Blackstone at least almost $200

million when that occurred .

E . Overstatements of the Company's Properties and Receivables

62 . A person who is actively engaged in purchases and sales of cemetery and funera l

home properties at all relevant times, who had personal knowledge of the facts as a result of tha t

participation, has advised plaintiffs that Loewen regularly paid 15% more than other acquirers o f

cemetery properties were willing to pay and a somewhat lesser premium for funeral homes. That

source further advised plaintiffs, based on his personal knowledge, that defendant Ray Loewe n

participated personally in the Company' s acquisitions of all cemeteries , and of all large funera l

homes and, therefore, was aware of these facts . The Company based its willingness to pay more

than other acquirers would on assumptions that the profitability of the acquired properties would

increase dramatically after acquisition . However, that did not occur . Rather, the business

2 The calculation of the prices of the put/call for RH Holdings was similar to thatwith respect to Prime Succession Holdings, except upon a call, Blackstone was to receive, at aminimum, its original investment and a 22 .5% compound return per annum thereon regardless ofthe calculated equity value .

26

volumes that funeral homes acquired by the Company regularly fell sharply after acquisition ,

while the cemeteries acquired by the Company expe rienced enormous negative cash flows .

63 . Therefore, the book values of the Company's cemeteries and funeral homes were

at all times materially overstated due to this combination of factors . Indeed, the combined losse s

on the properties sold in March 1999 and thereafter totaled more than $788 million , while the

remaining properties that were owned by the successor company after emergence fro m

bankruptcy were written down to their fair value, resulting in a writedown of approximately $66 0

million . The losses on the sales totaled almost 70% of the book value of the properties, while th e

writedown to fair value of the remaining properties represented approximately 50% of their boo k

value. The total of writedowns and losses on cemeteries and funeral homes was almost 1 .5

billion . In addition to the foregoing, the Company recorded a loss on its investments in Prim e

and Rose Hills in the amount of $315 million, for a grand total of losses and write downs of

$1 .86 billion . That amount dramatically exceeded reported shareholders' equity in the Company

during the Class Period .

64. The Company' s financial statements also mate rially overstated the Company' s

accounts receivable during the Class Period, and materially understated the reserve for accounts

receivable . In 1996, the Company sold cemetery receivables to an affiliate for approximately

13% less than their book value, while by the first quarter of 1998, 40% of the Company's

cemetery receivables were delinquent, as was evident from information provided by the

Company to Duff & Phelps in the summer of 1998 . 3

3 This information was provided by a source who was personally present at Duff &Phelps and received that information from them .

27

F. Loewen Group Materially Overstated Net Income in 1997 and 1996 withRespect to the Payment-In-Kind Dividends

65 . In yet another manipulation of its financial statements , Loewen Group improperly

recorded as revenue $15 .3 million and $3 .2 million in 1997 and 1996, respectively, in dividend s

received relative to its 100% ownership of the preferred stock of Prime Succession Holdings and

RH Holdings. The dividends were not received in cash but rather were "payment-in-kind", i .e . ,

additional shares of the preferred stock of Prime Succession Holdings and RH Holdings .

66. Loewen Group' s recording of the payment- in-kind dividends as revenue in 199 7

and 1996 was improper because, at the date the revenue was recorded, it was not "measurable . "

To record revenue , Canadian GAAP requires that "the revenue is measurable and that ultimat e

collection is reasonably assured . "

67 . Importantly, Defendants knew that Loewen Group was unable to measure the

value of the payment-in-kind dividends . In Loewen Group's 1997 and 1996 10-K filings,

Defendants stated "[t]he investments for which it is not practicable to estimate fair value

comprise primarily the preferred share investments in Prime and RH Holdings . "

68 . Incredibly, the payment-in-kind dividends represented approximately 36% and 5 %

of Loewen Group's reported net income in 1997 and 1996, respectively . The 1996 payment-in-

kind dividends represented 31 % of Loewen Group's reported fourth quarter 1996 net income .

G. Defendants Made Materially False and Misleading Statements Concerningthe Put/Call Options

69. Defendant' s made mate rially false and misleading statement in Loewen Group' s

1997 and 1996 10-K filings concern ing the likelihood that the put/call options would b e

exercised. In Loewen Group's 1997 and 1996 Forms 10-K, filed, respectively, on March 30,

28

1998 and March 31, 1997, Defendants misleadingly stated the following :

Any payment to Blackstone is subject to Blackstone or the Company exercisingtheir respective rights under the Put or the Call . It is not currently possible todetermine whether Blackstone or the Company will exercise such ri ts .Furthermore, any amount to be paid pursuant to the Put is dependent on calculatedequity value which is based on EBITDA of future periods . Accordingly, it is notpossible at this date to estimate the future amount that may be payable toBlackstone on the exercise of the Put or the Call ." [Emphasis added . ]

70. These statements were materially false and misleading for, inter alia, the

following reasons :

Defendants knew that the Prime Succession and Rose Hills wer e

structured with the very purpose that the two entities would become subsidiaries of Loewe n

Group by virtue of the exercise of the put/call options . In fact, it was acknowledged in numerou s

SEC filings made throughout the Class Period, that it was likely that the options would b e

exercised. Beginning on October 22, 1996 and continuing throughout the Class Period, Prim e

Succession disclosed that "[b]y virtue of the Put/Call Agreement, it is likely that the Company

will eventually become a wholly owned subsidiary of Loewen Group ."' [Emphasis added.] And

beginning on February 7, 1997 and continuing through the Class Period, Rose Hills made the

exact same disclosure : "By virtue of the Put/Call Agreement, it is likely that the Company wil l

eventually become a wholly-owned subsidiary of Loewen Group ." [Emphasis added . ]

b. Defendants were, in fact, able to estimate Loewen Group' s contingent

liability to Blackstone on the exercise of the put . This is evidenced by the fact that, in the fourth

quarter of 1998, Defendants estimated that the aggregate contingent liability to Blackstone wit h

a Prime Succession and Rose Hills were required to file periodic reports with theSEC because they had outstanding public debt .

29

respect to put options equaled $128 million . Loewen Group recorded this estimate as a liabilit y

on its balance sheet for the first time at December 31, 1998 . At the same time, Loewen Group

wrote off its approximately $182 million investment in Prime Succession and Rose Hills . The

total fourth quarter 1998 charge against net income related to these properties equaled a n

astonishing $315 million .

H. Loewen Group's Accounts Receivable Reserves

71 . Where a Company has large numbers of small accounts receivable , as was the

case with Loewen Group's pre-need cemetery business , the amount of the required reserve for

those accounts receivable is determined by the experience of the receivables portfolio as a whole ,

and does not include the evaluation of individual receivables . The reserve is not for

individual receivables . It is for the receivables portfolio as a whole . Indeed, Loewen Group' s

financial statements stated that the Company's reserve was based on portfolio experience, rather

than on evaluation of individual receivables . Therefore, Loewen Group did not include

identification of particular uncollectible accounts, and proof that the reserve was understate d

would not entail identification of particular uncollectible accounts . In fact, Duff & Phelps based

its determination that 40% of the Company's cemetery receivables were uncollectible on

receivables aging data, which do not identify particular accounts . These delinquencies date d

back to at least the first quarter of 1999, if not earlier .

DEFENDANTS' GAAP VIOLATIONS DURING THE CLASS PERIO D

72 . GAAP are those p rinciples recognized by the accounting profession and the SEC

as the conventions, rules and procedures necessary to define accepted accounting practice at a

part icular time . SEC Regulation S-X (17 C .F .R. §210.4-01(a)(1)) states that financial statement s

30

filed with the SEC which are not prepared in conformity with GAAP are presumed to b e

misleading or inaccurate, despite footnotes or other disclosures, unless the SEC has otherwis e

provided .

73 . Defendants, in contravention of Canadian GAAP, as discussed in the following

paragraph, failed to review adequately Loewen Group's funeral homes, cemetery properties,

covenants not to compete and names and reputations for impairment, and to write down these

assets when they were impaired during the Class Period . Instead, defendants maintained these

assets at amounts in excess of their recoverability for most of the Class Period . In the fourth

quarter of 1998, Loewen Group recorded a pre-tax impairment charge of approximately $33 4

million. The charge included approximately $302 million with respect to a contract to sell 12 4

cemeteries and 4 funeral homes that had been carried at approximately $495 million, for a pre-

tax loss of approximately 61 % of the assets' book value . Thereafter, the Company sold large

numbers of additional cemeteries and funeral homes at a small fraction of their book value, and

wrote down the remaining properties to their fair value, which was approximately 50% of thei r

book value . The total of the losses on these sales and w ritedowns was a staggering $ 1 .4 billions

In addition, the Company recorded a $315 million loss on its Prime and Rose Hills investments ,

for a grand total of $1 .86 billion of losses and writedowns .

74. Defendants' failure to account properly for Loewen Group' s funeral homes,

cemetery properties, covenants not to compete and names and reputations violated, inter alia, the

5 Exhibit A hereto lists many of these properties . However, virtually all of the

Company's properties were sold at large losses or written down by half their book value, thebook values of virtually all the Company's properties were grossly overstated during the ClassPeriod .

31

following provisions of Canadian GAAP as detailed in the CICA Handbook:

a. ¶1000.29 which defines assets as "economic resources controlled by an

entity as a result of past transactions or events and from which future economic benefits may b y

obtained ;"

b. ¶3060.42, by analogy, which states "when the net carrying amount of a

capital asset, less related accumulated provision for future removal and site restoration costs an d

deferred income taxes, exceeds the net recoverable amount, the excess should be charged t o

income;" and

¶1580.62 which states that "where there has been a permanent impairment

in value of the unamortized portion of goodwill, its should be written down . The write-down

should be treated as a charge against income . "

75 . Similarly, defendants , in contravention of Canadian GAAP, as discussed herein,

failed to establish a reasonable allowance for Loewen Group's cemetery receivables during th e

Class Period. As discussed herein, defendants caused the Company to record significant

increases in its allowance for cemetery receivables in the second and third quarters of 1998 .

Significantly, the allowance as a percentage of gross long -term receivables as of December 31 ,

1998 was double that as of December 31, 1997 . The 1998 increases in the allowance were

belated, however .

76 . Defendants and the Company' s failure to account properly for its cemetery

receivables violated, inter alia, the following provisions of Canadian GAAP as detailed in the

32

CICA Handbook :6

¶1000 .50 which states "[e]xpenses and losses are generally recognize d

when an expenditure or previously recognized asset does not have future economic benefit" ;

¶3020 . 10 which states "[a]n account or note receivable should be w ri tten

off as soon as it is known to be uncollectible or should be written down to its estimated realizabl e

value as soon as it is known that it is not collectible in full" ;

¶3020 .12 which states "[ i]f, after w riting off all known uncollectible

accounts, it is expected that some further losses will be incurred in collecting the accounts an d

notes receivable outstanding, including notes receivable under discount, an allowance fo r

6 According to an article in the May 1, 2000 edition of The Wall Street Journal

entitled SEC, Funeral Companies Are in Talks on Recording Advance Cemetery Sales, the SECwas concerned that recording the value of pre-need cemetery contracts at the date of sale could be"falsely inflating revenue." The article further stated that "in recent years the SEC has paidcloser attention to how companies book sales that are paid over time and that can be cancelled."The SEC's concern with the funeral companies' revenue recognition policies stemmed from thefact that under U .S . GAAP revenue may not be recognized until it is earned and collectibility isreasonably assured . See, , Statement of Financial Accounting Concepts No . 5, Recognitionand Measurement in Financial Statements of Business Enterprises, para. 83 . (Canadian GAAPhas virtually an identical requirement that revenue should be required only when performance ofthe transaction is achieved and ultimate collection of the consideration is reasonably assured .

See CICA Handbook 3400.) A small deposit can be deemed insufficient to reasonably assurecollectibility of the revenue and thus preclude the immediate recognition of such revenue . See,

e .g_, Statement of Financial Accounting Standards No . 66, Accounting for Sales of Real Estate,

para. 11, which stated that "the buyer's initial investment shall be adequate to demonstrate thebuyers commitment to pay for the property and shall indicate a reasonable likelihood that thebuyers commitment to pay for the property and shall indicate a reasonable likelihood that theseller will collect the receivable ." In 2001, Loewen Group changed its U .S . GAAP revenuerecognition policy for cemetery sales such that revenue is no longer recognized on the date ofsale but rather is recorded at a later date . This change is consistent with a change in policy made

by the Company's competitors, Service Corporation International ("SCI") and StewartEnterprises . The issue is raised to highlight the importance of the issue of collectibility ofrevenues on pre-need cemetery contracts in preparing financial statements in conformity withboth U.S. and Canadian GAAP .

33

doubtful accounts should be provided . The accounts and notes receivable, net of the allowanc e

should be the best possible estimate of the amount for which reasonable assurance of collection

exists, in the light of current conditions and assuming the continuation of the business as a `going

concern "' ; and

¶3020 . 13 which states "the amount of the allow ance for doubtful account s

at the end of a financial period should be calculated by reference to th e

accounts outstanding at the end of the financial period after taking int o

consideration all circumstances known at the date of review."

77. Defendants violated ¶3290 .12 - .13 of the CICA by failing to accrue for the

minimum liability of the Company to Blackstone pursuant to the Rose Hills and Prime

transactions detailed below, in particular the Put/Call arrangements . Those sections of Canadian

GAAP provide as follows :

The amount of a contingent loss should be accrued in the financialstatements by a charge to income when both of the followingconditions are met :

it is likely that a future event will confirm that an asset hadbeen impaired or a liability incurred at the date of thefinancial statements ; and

b. the amount of the loss can be reasonably estimated .

78 . The estimation of the amount of a contingent loss to be accrued in the financia l

statements may be based on information that provides a range of the amount of loss . When a

particular amount within such a range appears to be a better estimate than any other, that amoun t

would be accrued; however, when no amount within the range is indicated as a better estimat e

than any other, the minimum amount in the range would be accrued . Disclosure of any exposure

34

to loss in excess of the amount accrued would be made by way of notes to the financial

statements .

79. Defendants knew that it was likely, indeed certain , that Blackstone would exercise

its put options if Loewen Group did not exercise its call options , because Blackstone never

intended to retain an interest in the properties . As Blackstone later stated publicly, its role in th e

Rose Hills and Prime transactions was simply to provide a very expensive parking lot fo r

Loewen Group' s acquisitions . Clearly the Company could estimate the amount of the losses or

liabilities to Blackstone, as is evident from the fact that the Company belatedly did in its 199 8

financial statements, after defendant Ray Loewen was unseated from his position as Chie f

Executive Officer of the Company .

80. Defendants failure to account properly for Loewen Group's receipt of th e

payment-in-kind preferred stock dividends of Prime Succession Holdings and RH Holding s

violated, inter alia, the following provisions of Canadian GAAP :

¶3400.01, which states, "This Section deals with the timing of recognition

of revenue in the financial statements of enterprises . . . . It does not deal with the measuremen t

of revenue, which is usually determined by agreement between the parties involved . However ,

when uncertainties exist regarding the determination of the amount of revenue, thes e

uncertainties may influence the timing of revenue reco inf. "

b. ¶340.09, which states that "[r]evenue arising from the use by others o f

enterprise resources yielding interest, royalties and dividends should be recognized when

reasonable assurance exists regarding measurement and collectibility . . . ;" and

¶3400.16, which states that " [r]ecognition of revenue requires that the

35

revenue is measurable and that ultimate collection is reasonably assured. . . . When there is

uncertainty as to ultimate collection, it may be appropriate to recognize revenue only as cash is

received ." [Emphasis added.]

DEFENDANTS ' MISREPRESENTATIONSAND OMISSIONS DURING THE CLASS PERIOD

81 . Loewen Group issued a press release on March 5, 1997 extolling the Company's

reported financial results for 1996 and the fourth quarter of that year, which were precisely in line

with the latest consensus earn ings estimate by securities analysts . The March 5, 1997 press

release reported $10.3 million net income for the fourth quarter of 1996 . This announcement

caused the market price of the Company's stock to increase $0 .75 per share. That representation

was false and misleading in the following respects : $3 .2 million of the reported $10 .2 million

net income, amounting to approximately 30% of reported income , consisted of the purported

value of dividends in the form of additional preferred stock "paid" to the Company by Prime and

Rose Hills, which violated Canadian GAAP because it was not possible to determine the value o f

those dividends paid in preferred stock . Thus, without the inclusion of an amount constituting

the purported value of the Rose Hills and Prime preferred stock received as a dividend on the

100% of the preferred stock of those companies that was owned by Loewen Group, Loewen

Group's reported income would have significantly missed consensus earnings estimates .

82. As set forth herein, the inclusion in income of an amount purportedly attributable

to dividends on preferred stock paid in additional preferred stock where it was not practicable to

estimate the fair value of the dividends violates Canadian GAAP, as it was clearly not practicable

to estimate the fair value of the preferred stock dividend for which there was no market .

36

83 . In addition, the March 5, 1997 press release described the Prime Rose and Hill s

transactions as "joint ventures ." That representation was materially misleading because, as se t

forth herein, those transactions were simply devices to "park" the Company's acquisitions o n

Blackstone's balance sheet, Blackstone never intended to retain its stock interest in Prime Ros e

Hills, and fully expected to collect the amount it provided for the acquisition of those properties ,

together with compound annual interest of 22 .5% in the case of Rose Hills and 24 .1% in the case

of Prime, within 4 to 8 years after acquisition .

84. On March 31, 1997 , the Company filed its Annual Report on Form 10-K for the

year ended December 31, 1996 (the "1996 Form 10-K"), which was signed by defendants Ray

Loewen and Wagler. The financial statements included in the 1996 10-K, like the March 5, 1997

press release, included $3 .2 million of purported income from the Rose Hills and Prime

preferred stock received as dividends on the Company's preferred stock, which violate d

Canadian GAAP for the reasons set forth above .

85 . In addition, the 1996 Form 10-K also included materially misleading statement s

about the Prime and Rose Hills transactions . With respect to both transactions, the 1996 Form

10-K stated :

Any payment to Blackstone is subject to Blackstone or theCompany exercising their respective rights under the Put or theCall . It is not currently possible to determine whetherBlackstone or the Company will exercise such rights .

In addition, the Form 10-K represented that " it is not possible at this date to estimate the future

amount that may be payable to Blackstone on the exercise of the Put or the Call ."

86. The representations in the preceding paragraph were false and misleading in that :

37

(a) as defendants knew, Blackstone would exercise the Put in the event that the Company faile d

to exercise the Call, because Blackstone never intended to retain its interest in the properties .

Instead, as Blackstone stated publicly, the transactions were simply a device to "park" Loewe n

Group's acquisitions on Blackstone's balance sheet, for which service Blackstone would receiv e

at least compound interest of 24 . 1% in the case of P rime, and 22 .5% in the case of Rose Hills for

doing so; and (b) the representation that it was not possible to determine the future amount tha t

may be payable to Blackstone on the exercise of the Put or the Call was materially misleading i n

that if the Call was exercised, Blackstone would receive, at a minimum, approximately $20 0

million plus an additional amount if the equity value of Blackstone's interest in the propertie s

appreciated, and would receive a much larger amount if, instead, Blackstone exercised the Put, i n

return for the transfer to Loewen Group of Blackstone's equity interest in the properties .

87. Indeed, it is clear that defendants were, in fact, able to estimate the Company' s

contingent liability to Blackstone on the exercise of the Put, inasmuch as, in the fourth quarter o f

1998, defendants belatedly estimated that it had a contingent liability to Blackstone of $12 8

million with respect to the Put options and calculated as the difference between the amount that

the Company would have to pay Blackstone and the value of Blackstone's equity interes t

transferred to the Company . The amount of this charge should have been included in Loewe n

Group's 1996 income statement and balance sheet which would have transformed Loewe n

Group's reported pretax income of $89 .4 million into a loss of tens of millions of dollars with

catastrophic consequences for the Company .

88. In addition to causing the Company's purported income to be grossly misleading,

in that, under GAAP the Company in fact experienced a huge loss, the failure to record this

38

charge caused the Company's assets and shareholders ' equity to be overstated by the same

amount . Further, the failure to record that charge caused the Company's ratio of earnings to fixe d

charges, which was reported in the 1996 Form 10-K as 2 .9x, to be utterly false, as was the

Company's long-term debt/equity ratio, which was reported in 1996 Form 10-K to be 1 .4 :1 .

89. In addition, the Company's assets and shareholders' equity were overstated in th e

financial statements in the Company's 1996 Annual Report on Form 10-K due to th e

overstatement of the book value of cemetery and funeral home properties acquired from Osiris i n

1995 for approximately $122 million . As was disclosed after the Class Period, an importan t

purpose of that acquisition was to obtain the services of Osiris's principals, Lawrence Miller an d

William R. Shane, to run the Company's cemetery operation, with the result that part of th e

consideration had nothing to do with the value of the properties, but represented a species o f

"signing bonus" for Miller and Shane, who became Loewen senior executives . That "signing

bonus," should, under generally accepted accounting principles, have been included in th e

Company's expenses in 1995, rather than in the book value of the properties . As a result of that

fact, in addition to the fact that Loewen paid materially more for the Osiris properties than woul d

have been paid by any other acquirer, the book value of the Osiris properties was overstated in

the Company's 1996 financial statements by more than $25 million . Indeed, the Company paid

approximately twenty times earnings before interest, taxes, depreciation and amortization for th e

Osiris properties, at a time when SCI was paying only ten times that measure, suggesting that th e

overstatement of the book value of the Osiris properties may have been much larger . Ultimately ,

the Osiris properties were sold for eight times earnings before interest, taxes, depreciation ,

amortization, at a loss of approximately 70% of the properties' book value .

39

90 . The Company next issued false financial information in a May 5, 1997 press

release, which boasted that the Company's net income had increased $23 .7 million for the first

quarter of 1997, as compared with net income of $17 .2 million reported for the first quarter of

1996, a 38% increase . That reported income was fictitious due to violation of generally accepte d

accounting principles in several respects . First, the Company's revenues and income were

overstated by reason of the failure to deduct approximately $6 .5 million of imputed interest from

those amounts, as required by GAAP . This fact was later admitted by the defendants, and

"corrected" by charges totaling $13 million in the third and fourth quarters of 1997 . As stated in

a report issued by Griffiths McBurney Partners on March 15, 1998 : "the company implemented a

zero interest incentive program on its pre-need cemetery sales in 1997 . Like any other financing

incentive, there is an imputed cost to the company providing this financing ." That report points

out that the Company failed to record this cost in the first half of 1997, "and had to take a $10

million charge in Q4197 (in addition to the $3 million taken in Q3/97) to account for the short

fall ." Next, the income for the first quarter of 1997 reported in the May 5, 1997 press release was

also overstated due to the inclusion therein of preferred stock received as dividends on the

Company's preferred stock holdings in Rose Hills and Prime in the amount of $3 .2 million. For

the reasons set forth herein, inclusion of that amount in the Company's reported income violated

Generally Accepted Accounting Principles .

91 . In addition, the reported revenues and income for the first quarter of 1997 set forth

in the May 5, 1997 press release were materially misleading and violated Generally Accepted

Accounting Principles in that they reflected an understatement of the Company's reserve for

cemetery receivables of approximately $3 .9 million, representing the difference between th e

40

Company's 13% losses on the sales of cemetery receivables to an affiliate and the 8% account s

receivable reserve reflected in the Company' s financial statements .

92. On May 14, 1997, the Company filed with the SEC its quarterly report on Form

10-Q for the quarter ending March 31, 1997 ("First Quarter 1997 Form 10-Q") . The Firs t

Quarter 1997 Form 10-Q included the same false representations about the Company's incom e

for the first quarter of 1997 as did the May 5, 1997 press release . In addition, the failure t o

deduct required amounts for imputed interest and the understatement of the Company's reserve

for accounts receivable plus the representations regarding the Company's consolidated gros s

margin and cemetery gross margin caused the Company's financial statements to be overstated .

The First Quarter 1997 Form 10- Q represented that "[c]emetery gross margin increased to 34.2%

in 1997 from 29.4% in 1996, principally as a result of a shift to increased sales of pre-need

interments services for newly acquired , as well as, existing locations ." In fact, the impute d

interest should have been, but was not deducted from the Company's reported cemetery

revenues . This imputed interest represented approximately 6% of the Company's reported $97 . 4

million of cemetery revenues . The failure to deduct this imputed interest caused the Company' s

cemetery gross margin to be overstated by approximately 6%. Therefore, instead of the increase

of cemetery gross margin reported in the First Quarter 1997 Form 10-Q, in fact, cemetery gros s

margin declined . The understatement of the Company' s accounts receivable reserve caused a

similar overstatement of the performance of the Company's cemetery business in the Firs t

Quarter 1997 Form 10-Q, and caused the Company's description of the reason for the repo rted

increase in cemetery gross margin to be materially misleading .

93. The 1997 First Quarter Form 10- Q was also materially misleading in that assets

41

and shareholders' equity therein were overstated due to the overstatements of income in the

fourth quarter of 1996 and the first quarter of 1997, as well as the failure to record the liabilitie s

in connection with Rose Hills and Prime described above and the overstatement of value of th e

Osiris properties . For the same reasons , the Company's reported long-term debt/equity ratio ,

which the first quarter 1997 Form 10-Q stated was 1 .6 :1, was similarly overstated .

94. In an August 11, 1997 press release , the Company reported its purported financial

results for the second quarter of 1997 . The August 11 press release reported that the Company' s

net income for the second quarter of 1997 increased to $26 .3 million from $19 .5 million in the

second quarter of 1997. The August 11, 1997 press release was false and misleading for th e

same reason and in the same amounts as the May 5, 1997 press release . The income reported in

the August 11, 1997 press release, like the income reported in the May 5, 1997 press release ,

failed to include the same amount of imputed interest , as required by GAAP, improperly included

the same amount of preferred stock received as dividends on its Prime and Rose Hills preferre d

stock, as in the first quarter, and reflected the same amount of understatement of the Company' s

accounts receivable reserved .

95 . On August 14, 1997, the Company filed with the SEC its quarterly report on For m

10-Q for the quarter ending June 30, 1997 . The income statement included in the financial

statements in that Form 10-Q reported the same income as the August 11, 1997 press release, and

was false and misleading for the same reasons . The balance sheets included in the Form 10- Q

for the Second Quarter of 1997 were misleading for the same reasons and in the same amounts a s

the First Quarter 1997 Form 10-Q, except that the overstatement of assets and shareholders '

equity in the Form 10-Q for the Second Quarter of 1997 increased, due to the amounts of income

42

improperly included in the Company's income statement for that Quarter .

96 . In addition, the Form 10-Q for the second quarter of 1997 reported that cemeter y

gross margins increase to 33 .6% in the second quarter of 1997, from 31 .2% in the Secon d

Quarter of 1996 "principally as a result of a shift to increased sales of pre-need interment se rv ices

for newly acquired as well as Established Locations ." In fact, had the Company deducted

imputed interest as required by GAAP, and provided a reserve for the Company's cemete ry

accounts receivable that reflected the value thereof, instead of growing, Loewen Group's

cemetery gross margin actually declined to approximately 23 .5%, from 31 . 2% in the second

quarter of 1996 .

97 . The foregoing misrepresentations of the Company's assets and shareholders '

equity also caused the Company's reported long-term debt/equity ratio, which the Form 10-Q of

the Second Quarter of 1997 stated was 0 .96 :1, to be materially misrepresented .

98 . By mid-September 1997, defendants were aware that the profit margins of th e

Company's funeral and cemetery businesses were declining, as were the number of funera l

services performed at locations in operation for a year . This would result in decreased profits ,

and a decline in the market price of Loewen Group stock -- which was of greatest concern t o

defendant Ray Loewen because that would make the Company more vulnerable to a take-over .

Thereupon, defendants took steps to prop up the price of the Company's stock when the news o f

declining profits was made public .

99. In a press release dated September 15, 1997, the Company issued a press release

announcing "a series of strategic initiatives designed to streamline operations, reduce costs and

build a stronger foundation for future growth." These "strategic initiatives," the September 1 5

43

press release stated, should provide cost savings of at least $25 - $30 million or $0 .30 per share

annually, to "favorably impact gross margins in the Company 's funeral and cemetery divisions ,

(and) produce savings in general and administrative expenses and interest costs ." The September

15, 1997 press release fu rther advised investors that the benefits of these strategic initiative s

should be reflected in results for the fourth quarter of 1997 and beyond .

100. In addition, the September 15, 1997 press release also announced that the

Company had authorized a plan to repurchase 5% of the Company's outstanding common and

preferred stock , and that such repurchases may commence on the New York Stock Exchange on

September 22, 1997 . Announcements that a company is repurchasing its shares tend to have a

favorable effect on the price of the company's stock, because such repurchases reduce the

number of outstanding shares, and, therefore, increase earnings per share . Defendants '

announcement, however, was materially misleading in light of the Company' s announced inten t

to spend many hundreds of millions of dollars on acquisitions and its ever increasing negative

cash flows, which as set forth herein, it would make it highly improbable, if not impossible, tha t

the Company could obtain the necessary financing to both pursue its ambitious acquisitio n

program and spend more than $100 million repurchasing its stock . Moreover, the Company' s

bank agreements restricted the Company's use of funds for that purpose .

101 . The September 15, 1997 press release also announced , however, that, despite tens

of millions of dollars of gain on assets sales , charges associated with these "strategic initiatives ,

as well as "reserve and asset adjustments," would result in pre-tax charges of approximately $8 0

million in the quarter ending September 30, 1997, and a loss for the third quarter. Also, the

September 15, 1997 press release revealed that the Company expected lower funeral and

44

cemetery volumes , resulting in "significantly lower than expected earn ings from operations for

the remainder of the year ." As the Company later revealed, the "reserve" and "other

adjustments" recorded in the third quarter of 1997 included a po rtion of the imputed interest

which should have been counted but was not repo rted in prior quarters of the year, and accounts

receivable rese rve additions and writedowns totaling approximately $6 million in addition to a

variety of other miscellaneous items were needed.

102. Despite the "good news" of the anticipated cost reductions and repurchases of th e

Company's stock, the market price of the Company's stock fell sharply, from a closing price of

$30 per share on volume of 129,500 shares on September 12, 1997, the last trading day before

the September 15, 1997 press release, to a closing price of $25 .25 per share on September 17,

1997, two trading days after the announcement . Trading volumes of the Company's stock on

September 16 and 17, 1997, totaled approximately 1 .8 million shares for an average trading

volume of 900,000 shares, which was almost eight times the trading volume of the Company's

stock on the day before the announcement . These dramatically increased trading volumes and

decline of almost 16% in the market price of the Company's stock demonstrate the materiality of

the announcement that the Company expected to report reserve and other adjustments . Indeed,

so important were those announcements that they more than offset the positive effect of the

announcement of the stock repurchase plan and anticipated expense reductions .

103. Even the representation of defendant Wagler, reported in The Financial Post on

September 16, 1997, that the Company still expected to deliver "very attractive" earnings per

share growth of more than 20% after taking writedowns, did not help, as the market price of the

Company's stock continued to fall .

45

104. As expected, on November 6, 1997, the Company issued a press release recording

a $66.6 million loss for the third quarter of 1997, as well as reduced funeral home and cemetery

margins . However, even these reported results were also misleading, in that, once again, the

Company's reported income included $3 .6 million of preferred stock received as dividends on

the Company's Rose Hills and Prime stock as well as the same amount of understatement of the

Company's accounts receivable reserve as in the first and second quarters of the year .

105 . Despite the bad news in the November 6, 1997 press release, the market price of

the Company's stock rose, instead of falling, due to reports that some institutional shareholders

of the Company were "pushing the company" to negotiate a merger with SCI . As reported in The

Canadian Press , "struggling funeral home giant Loewen Group posted a big third-quarter loss

Thursday, but watched its stock rise after reports some institutional shareholders are pushing the

Company to negotiate a merger with a larger U .S . rival ." The Canadian Press further reported

that on the Toronto stock market, Loewen Group shares were the most actively traded Thursday

after a Financial Post report that "a group of institutional shareholders are pushing Loewen

Group to negotiate a merger with Service Corp ."

106. On November 14, 1997, the Company filed its quarterly report on Form 10-Q for

the third quarter of 1997 with the SEC . The third quarter 1997 Form 10-Q contained the same

information about the Company's income as the November 6, 1997 press release, and was

materially misleading for the same reasons . In addition, the Company's assets and shareholders'

equity were overstated in the balance sheets included in that Form 10-Q in the same amounts and

for the same reasons as the Forms 10-Q for the two preceding quarters of 1997, increased by the

overstatements of third quarter 1997 income .

46

107 . The Company's Form 10-Q for the third quarter of 1997 disclosed charges o f

approximately $6 million for a write-down and reserve increase for the Company 's accounts

receivable, as well as the belated reporting of $3 .1 of imputed interest on non-interest bearin g

cemetery installment contract sales . However, the third quarter 1997 Form 10-Q reporte d

cemetery gross margin of 31 .3%, which was inflated due to the understatement of the Company' s

accounts receivable reserve . The Company's quarterly report on Form 10-Q for the third quarte r

of 1997 also misrepresented the Company' s long-term debt/equity ratio , which was repo rted to

be 1 .1 :1 at September 30, 1997, due to the overstatement of the Company ' s shareholders ' equity

described herein .

108 . By the fourth quarter of 1997, the book values of the Company 's funeral homes

and cemeteries were materially overstated due to the fact that the Company had paid more than

anyone else was willing to pay for most of the funeral homes and essentially all of the cemeteries

acquired in earlier years, and the post-acquisition deterioration of the Company's funeral homes

(which had declining business volumes although the numbers of deaths were increasing) while

the acquired cemeteries were experiencing negative cash flows and a high rate of delinquencies

of the Company's accounts receivable . '

109. As set forth herein, the factors desc ribed in the preceding paragraph caused th e

Company's funeral homes and cemeteries acquired by the end of 1996 to have a value of at leas t

15% less than their book value . Accordingly, by December 31, 1997, the book value of Loewen

According to the Company's 1997 Annual Report on Form 10-K, the number offuneral services performed at locations owned for a year or more declined by 3 .2% from the

previous year . Profit margins of the Company's funeral home business similarly declined . This

was a continuing trend . In 1998, the number of services performed at funeral homes owned a

year or more declined at an additional 5 .2% .

47

Group' s cemeteries and funeral homes exceeded their realizable value by at least $260 million ,

and the Company should have recorded a charge of hundreds of millions of dollars in its 199 7

financial statements !

110. Further, Loewen Group' s balance sheet included in the Company's 1997 financial

statements included asset values of approximately $70 million for covenants not to compete ,

which no longer had any value to the Company. That fact is evidenced by filings in the

Company's bankruptcy almost immediately after the filing of the bankruptcy petition, in which

the Company sought to be released from 208 of such covenants not to compete on the ground

they had no value to the Company . Accordingly, the approximately $70 million book value fo r

these 208 covenants not to compete was similarly impaired at December 31, 1997 . Therefore ,

the book value of those covenants should have been written off in full, and a charge of

approximately $70 million included in the Company's 1997 financial statements reflecting that

write-off.

111 . On March 2, 1998 Loewen Group issued a press release reporting on the

Company's financial performance for 1997 and the fourth quarter of that year . The income

reported for 1997 and the fourth quarter of that year were materially overstated due to the failur e

to include the approximately $330 million of charges for impairment of the Company's funera l

homes, cemeteries and covenants not to compete discussed in the preceding paragraphs . In

addition, the Company's income for the full year 1996 was also overstated due to the inclusio n

therein of $15 .25 million of additional Prime Rose and Hills preferred stock received as

8 A listing of Loewen Group properties with overstated book values is attached

hereto as Exhibit A .

48

dividends on the Company's existing preferred stock in those companies, in violation of GAAP,

as discussed herein . Further, the Company's reported 1997 income was overstated by at least an

additional $15 million, due to the understatement of the Company's accounts receivable reserves,

as set forth above . For these reasons, instead of reporting pre-tax income of almost $40 million,

the Company should have reported a loss of approximately $320 million .

112. In addition to the false representations in the March 2, 1998 press release detailed

above, that press release also represented that cemetery gross profit margins in the fourth quarter

of 1997 were 28 .5%, a decline of almost 5% from gross cemetery margins of 33 .3% in the fourth

quarter of 1996 . The March 2, 1998 press release attributed this decline to "[t]he large number of

cemetery acquisitions during 1997, combined with their integration and the build-up of the sales

force ." That representation was false and misleading in the following respects :

a. the decline in cemetery margins was due to the belated reporting of $10

million of imputed interest, which should have been, but was not reported earlier in the year;

b. cemetery gross margins for the fourth quarter of 1997 were overstated by

approximately 3% due to the understatement of the accounts receivable reserve discussed above .

113 . On March 31, 1998, the Company filed with the SEC its 1997 Annual Report o n

Form 10-K, which was signed by defendants Ray Loewen and Wagler . The 1998 Form 10-K

included the same report of income for 1998 as did the March 2, 1998 press release, and was

materially misleading for the same reasons . The balance sheets included in the Company's 1997

Form 10-K were materially misleading for the same reasons as the Company's income statement

including the failure to record impairment charges of more than $330 million, and by reason of

the failure to record the liability to Blackstone in connection with the Prime Rose Hills Put/Cal l

49

Agreement . The failure to record these amounts caused reported assets and shareholders' equity

to be overstated by these amounts . Similarly, these financial misrepresentations caused the

Company's reported ratio of earnings to fixed charges to be grossly incorrect . In fact, had the

Company financial statements been reported in accordance with GAAP, there would have been

no earnings available for fixed charges . (The 1997 Form 10-K reported a 1 .3x ratio of earnings

to fixed charges .) In addition, these misrepresentations caused the Company's reported long-

term debt/equity ratio, to be materially misrepresented, in that had Loewen Group's financial

statements been reported in accordance with GAAP, the Company's long-term debt/equity ratio

would have been far worse than reported .

114. The Company's 1997 Annual Report on Form 10-K was also materially

misleading in its discussion of the Company's Prime and Rose Hills investments . In the

discussion of those investments, the 1997 Form 10-K stated, as to each of them that : "it is not

currently possible to determine whether Blackstone or the Company will exercise [the Put or

Call] rights," and that "it is not possible at this date to estimate the future amount that may be

payable to Blackstone on the exercise of the Put or the Call" . These representations were

materially false and misleading for the same reasons as were the same representations in the

Company's 1996 Annual Report on Form 10-K . This fact was of particular importance, as the

Company was already in violation of debt covenants regarding interest coverage ratios, as

disclosed in the 1997 Form 10-K, but had secured waivers from its lenders to remedy such

violations .

115 . Having violated the interest rate coverage ratios of its debt agreements, and being

required to obtain a waiver of those requirements, by early 1998 the Company's bank credit was

50

reduced from $1 billion to $600 million . Consequently, the Company determined to secure

private placements of long-term debt to replace the reduction in the bank credit . At that time, the

Company was due to make its announcement of earnings for the first quarter of 1998 in the firs t

week of May. The Company had stated, in its 1997 Annual Report on Form 10-K that i t

expected to spend $500 million for acquisitions in 1998 . In addition to the funds necessary to

make those acquisitions, the Company also had to fund its immense and increasing negative cash

flows - - which increased from negative $173 million in 1997 to negative $376 million in 1998 .

Therefore, it was critical that the Company report financial results for the first quarter of 1998

that were consistent with market expectations . Defendants did so by employing their tried an d

true method of inflating repo rted income by violations of GAAP -- failing to account for imputed

interest costs, and material understatement of the Company's accounts receivable reserve .

Indeed, defendants failed to record required amounts for imputed interest in the Company's first

quarter of 1998 financial statements although the Company 's management had assured Griffiths

McBurney Partners, a brokerage firm, only a few weeks earlier that the Company would no t

repeat this violation of GAAP in 1998 , having manipulated its repo rted income by use of this

device in the first half of 1997 .

116 . On May 7, 1998, as scheduled, the Company issued a press release report ing it s

financial results for the first quarter of 1998 . That press release repo rted net income of $2 8

million for the quarter and $0.38 earnings per share .

117. The May 7, 1998 press release reported statements of defendant Wagler that

Loewen Group exceeded the analysts' consensus estimate of $0 .35 for the first quarter, and that

"We are pleased with both the strength and quality of these earnings ." In fact, the Company' s

51

income for the quarter was overstated by at least $22 million, which was approximately 2/3 o f

the Company's reported pre-tax income . First , the Company once again failed to record impute d

interest in its financial statements, causing the Company's reported income to be overstated by

approximately $3 .5 million . Next, the Company again reported income from dividends paid i n

preferred stock on its preferred stock investments in Rose Hills and Prime - - this time in the

amount of $4.1 million for the quarter , in violation of GAAP . Finally, at the time the Company

issued its first quarter 1998 financial statements , as set forth herein, a staggering 40% of its

cemetery accounts receivable were delinquent and it was probable that they would not be

collected. Nevertheless, the Company's accounts receivable reserve was approximatel y

one-half of the amount required . Demonstrating the fact that more than 40% of th e

Company's receivables were uncollectible, by the end of 1998 the Company's reserve fo r

accounts receivable due within one year was increased to 42%, and its entire accounts receivabl e

reserve was more than doubled, increasing from $57 . 9 million at the end of 1997 to $124 million

at the end of 1998 . Thus, defendant Wagler's representation about the "strength and quality of

[the Company's first quarter in 1998] earnings" was patently false .

118 . The May 7, 1998 press release was also false and misleading in that cemetery

gross margins were grossly overstated therein . The May 7 press release reported that cemetery

gross margins in the first quarter of 1998 were 33 .3%, compared with 34.2% in the first quarter

of 1997 . Had the Company provided the required reserve for cemetery accounts receivable and

recorded the required $3 .5 million of imputed interest , reported cemetery gross margins would

have been approximately 11 .3%, rather than the purported 33.3% . That would have

revealed the severe deterioration in the profitability of the Company's cemetery business ,

52

and would have made it well nigh impossible to raise the $400 million of debt necessary t o

replace the reduced bank credit .

119. Defendants continued their false representations about the Company's financia l

performance in a May 7, 1998 conference call with investors and securities analysts following th e

press release announcing the Company' s first quarter 1998 financial perform ance . In that

conference call, defendant Wagler again stated that, not only were the reported first quarter 199 8

earnings "strong," but "they are also very high quality earn ings ." When asked what he meant by

"quality" Wagler replied : "This is entirely clean, high quality operating earnings with nothing i n

it that is not straight forward ." In fact, as defendants knew, the reported first quarter 199 8

earn ings were anything but "high quality." Those reported earn ings failed to include impute d

interest , the Company' s accounts receivable reserve was mate rially understated, and the

Company's reported earnings improperly included preferred stock dividends on the Company' s

Prime and Rose Hills preferred stock, which had no discernible value, perpetrating the very same

violation of GAAP that the Company had used to prop up repo rted earnings in the first two

quarters of 1997 .

120 . On May 12, 1998, the Company filed with the SEC its quarterly report on Form

10-Q for the first quarter of 1998 . That Form 10-Q reported the same income as the May 7, 199 8

press release, and was materially false and misleading for the same reasons . The balance sheet

included in the first quarter 1998 Form 10-Q was misleading due to the effect of the inclusion o f

the overstated first quarter 1998 income therein, as well as due to the failure to reflect the charge s

for the Company's liability to Blackstone pursuant to the Rose Hills and Prime Put/Cal l

agreements and the failure to record reductions in the value of overstated properties an d

53

covenants not to compete which should have been, but were not, recorded in the Company's

1997 balance sheet . This caused the Company's assets and shareholders' equity to be materially

overstated in those balance sheets, as well as the Company's reported long-term debt/equity ratio,

which the first quarter 1998 Form 10-K stated was 1 .2 :1 . In fact, the true long-term debt/equity

ratio was by far worse . The Company's reported interest coverage ratio was also false and

misleading due to the aforementioned overstatements of income .

121 . In addition to the other misrepresentations, the first quarter 1998 Form 10-Q also

repeated the same misrepresentation about the Company's cemetery gross margins as the May 7,

1998 press release, and was materially misleading for the same reason .

122. Continuing their deception in preparation for the private placements of hundreds

of millions of dollars of debt securities, defendant Ray Loewen made comments after the

Company's annual meeting held on or about May 15, 1998, and to reporters in a conference call

on the same day, which were reported by Death Care Business Advisor on May 21, 1998 . As

that article stated : "Ray Loewen emphatically stated that his company is finally returning to the

sustained and predictable earnings growth it once enjoyed ." According to the report in the Death

Care Business Advisor , the Company planned to privately place about $400 million in notes with

institutional buyers, the proceeds of which would be used to pay existing debt .

123. The defendants' false representations regarding the Company's first quarter 199 8

income and earnings achieved their goal . As the Company announced in a press release dated

May 28, 1998, the Company announced the sale of $450 million of its notes to institutional

buyers. Interestingly, although the Company had stated that the purpose of issuing new debt was

to reduce interest expense, the interest rates on the two sets of notes issued on May 28 wer e

54

7.20% and 7 .60%, respectively, as compared with the 7 .2% interest for the Company's bank

credit . Thus, the note issuances increased, rather than decreased interest cost .

124 . Less than two months after the Company induced institutional investors to buy

$450 million of the Company's debt securities, Loewen Group announced in a July 22, 199 8

press release that its second quarter 1998 earnings "will be significantly below First Cal l

consensus earnings estimates of $0 .31 per share ." According to the July 22, 1998 press release ,

"[t]he short-fall primarily relates to lower pre-need cemetery sales, lower volumes in funera l

homes, adjustments to cemetery accounts receivable" and certain other costs . This bombshell ,

only weeks after defendant Ray Loewen assured investors that the Company was "return ing to

the sustained and predictable earnings growth it once enjoyed," caused an immediate sharp

decline in the market price of Loewen Group's stock, on extremely high volumes . The market

price of Loewen Group common stock fell to $20 per share on July 22, on volume of more than

three million shares, down more than 16% from the $24 .125 closing price of the Company' s

stock on July 21, 1998, when 286,600 shares were traded, which was less than 10% of the tradin g

volumes on July 22, the day of the highly negative announcement .

125. The day after the July 22 warning about the Company's financial results for th e

second quarter of 1998, an article in The Financial Post reported that : "Nervous investors bailed

out of Loewen Group, Inc . yesterday after the . . . funeral services giant said its second -quarter

profit would be significantly below analysts' estimates of U .S. 31 cents a share ." The Financia l

Post further reported that Standard & Poor' s issued a statement late yesterday saying it was

placing Loewen Group's [debt] ratings on credit watch "with negative implications . "

126 . The July 23,1998 article in The Financial Post further reported that :

55

Analysts say management at Loewen Group is at considerablepressure after fighting off a takeover bid worth U .S . $45 a sharefrom Service Corp., north America' s largest funeral servicesprovider .

One said there will be "no second chances" for currentmanagement if it continues to produce lower than expected profit .[Emphasis added. ]

127 . Also on July 23, 1998, Canada NewsWire reported that St andard & Poor's had

placed the Company's debt ratings on credit watch with negative implications reporting that :

"ratings may be downgraded should the issues that caused Loewen Group's weak earning s

persist ." Lower debt ratings would, of course, increase Loewen Group's borrowing costs, further

depressing Loewen Group's financial performance .

128 . Standard & Poor's was not the only rating agency to take action with respect t o

ratings of Loewen Group debt on July 29 . On that date, Duff & Phelps Credit Rating Co . also

placed Loewen Group debt on ratings watch .

129. On August 6, 1998, the Company issued a press release repo rt ing its financial

results for the second quarter of 1998 . That press release stated that, despite a 10% increase in

revenues in the second quarter of 1998, compared to the second quarter of 1997, net income fel l

more than 50% in the same period, to $11 .6 million for the second quarter of 1998, compared t o

$26.3 million for the second quarter of 1997 . Reported earnings per share were almost two-

thirds lower than in the second quarter of 1997, $0 .13 per share, as compared to $0 .38 per share

for the second quarter of 1997 . Funeral home gross profit margins for the second quarter of 1998

were reported to have declined 2 .5% from the same quarter of the previous year while reported

cemetery gross profit margins, which remained highly inflated fell approximately 20% to 27.4%

56

for the second quarter of 1998, compared with reported cemetery gross profit margins of 33 .6%

for the second quarter of 1997. This decline in cemetery gross profit margins was att ributed to

"an increase in the allowance for pre-need cemetery accounts receivable . "

130. In truth, the Company' s financial results for the second quarter of 1998 were far

worse than those reported in the August 6, 1998 press release . Once again, the Company' s

financial results failed to include $3 .5 million of imputed interest on cemetery accounts

receivable, and the cemetery accounts receivable reserve remained understated by tens o f

millions of dollars . Further, the Company's reported financial results for the second quarter of

1998 once again included income of $4 .1 million attributed to the Company's receipt o f

additional preferred stock as a dividend on its preferred stock investments in Prime and Ros e

Hills, which had no ascertainable value and, therefore, could not be included in income under

generally accepted accounting principles . Had the Company accounted properly for these items ,

the Company's reported financial results for the quarter would have been a substantial loss .

131 . Because the Company's reserve for cemetery accounts receivable remaine d

grossly understated even after the second quarter of 1998 addition to that reserve, it wa s

inevitable that the Company 's reported income would fall dramatically when defend an ts finally

made the reserve additions which they knew were required by the first quarter of 1998 .

132. On the same day as the August 6, 1998 press release a Bloomberg wire ,

commenting on the reported results stated :

The latest results are in contrast to comments made by Ray Loewenin a conference call with reporters in May when he said thecompany he founded was returning to sustained and predictableearnings growth. That helped the stock rise to as high as 28 7/8 inNew York on May 8, the day after the company reported its first-

57

quarter results amid optimism its turn-around plans were takingeffect .

133. The August 6 Bloomberg wire also repo rted the statement of defendant Wagler

that the Company intended to "slow" acquisitions through the rest of 1998 and 1999, and

expected to spend 30% less this year than the $507 million spent in 1997 . Because the

Company's financial performance depended heavily on acquisitions, this was extremely ba d

news for investors .

134. On August 18, 1998, the Company filed with the SEC its quarterly report on Form

10-Q for the quarter ending June 30, 1998. The income statements included in the financial

statements in the second quarter of 1998 were materially misleading for the same reasons as th e

income representations in the August 6, 1998 press release . The June 30, 1998 balance sheet in

the second quarter 1998 Form 10-Q was materially misleading for the same reasons as the firs t

quarter of 1998 Form 10-Q, and for the further reason that the Company's reported assets and

shareholders ' equity included the overstatements of second qua rter 1998 income . In addition, the

second quarter 1998 Form 10-Q reported cemetery gross profit margins of 27 .4% which were

materially overstated due to the understatement of the Company' s accounts receivable reserve

discussed above, and the overstatements of revenues due to the failure to deduct imputed interes t

therefrom. Further, the second quarter 1998 Form 10-Q reported that the Company's long-term

debt/equity ratio at June 30, 1998 was 1 .3 :1 . That representation was materially misleading due

to the overstatements of shareholders' equity detailed herein .

135 . On August 26, 1998, as reported in The Vancouver Sun, Dominion Bond Ratin g

Service downgraded the company's debt to junk bond status . The August 26, 1998 Vancouver

58

Sun article also reported that the Company's largest institutional shareholder had called for the

Company to be sold .

136. On October 6, 1998, the Company issued a press release announcing the

formation of a "Special Committee of independent, outside directors to supervise the Company' s

previously announced process for maximizing shareholder value." According to the October 6 ,

press release that Special Committee would be chaired by the former Prime Minister of Canada.

Buried in that press release was the statement that :

Loewen Group reported, based on preliminary information, thatthird quarter earnings are expected to be significantly belowconsensus analysts' forecasts for the Company .

137. Despite the favorable news of the appointment of a "Special Committee," heade d

by a former Prime Minister, to "maximize shareholder value," the disastrous news that the

Company's third quarter 1998 earnings would again be significantly below expectations again

caused a substantial drop in the market price of the Company's stock . The price of Loewen

Group stock, which closed at $12 .50 per share the day before the October 6 press release, on

volume of 76,400 shares, fell to a closing price of $7 .875 on October 8, 1998, with more than 3 . 4

million shares of Loewen Group stock traded on October 7 and October 8 .

138. Following the bombshell in the Company' s press release , Standard & Poor' s

lowered its ratings of Loewen Group debt . On the same day, Duff & Phelps also lowered its

ratings of the Company's debt . This gravely impaired the Company's ability to borrow . In fact ,

the Company never again issued debt to the public .

139. Lower debt ratings were not the only consequence of the October 6

announcement . On October 8, 1998, the Company issued a press release announcing that "base d

59

upon the recommendation of its Special Committee, [the Company] has accepted the resignatio n

of Ray Loewen as Chief Executive Officer of the Company . "

140. In a November 5, 1998 press release , the Company reported that its third quarte r

1998 financial results were not only weaker than securities analysts had expected, but that, i n

fact, the Company repo rted a net loss of tens ofmillions of dollars . That net loss, of $32 .4

million was attributed to "a number of adjustments and writeoffs ." One of those "adjustments"

was due to the reporting of imputed interest which should have been reported in the first and

second quarters of the year . Another was "an increase in the allowance for preneed cemetery

receivables," again representing amounts which should have been reported in prior quarters .

These items caused cemetery revenues for the quarter to decrease to $89 .9 million, from $109 . 6

million reported for the third quarter of 1997 .

141 . Even the substantial loss reported for the third quarter of 1998 was understated

because, once again, the Company included in its reported income $4 .1 million purportedly

representing the value of preferred stock of Rose Hills and Prime, received as dividends on the

Company's preferred stock holdings in those Companies .

Misrepresentations Regarding Liquidity

142. The Company's 1997 Annual Report on Form 10-K which was filed with the SE C

on March 31, 1998, and signed by defendants Ray Loewen and Wagler, stated :

The Company intends to fund its on-going expansion programsthrough a combination of debt and equity offerings and borrowingsunder its credit facilities . . . . The Company plans to financeprincipal repayments on debt primarily by the issuance ofadditional debt or equity or borrowings under revolving creditfacilities and plans to ensure financing is available well in advanceof scheduled principal repayment dates, thereby protecting the

60

Company's liquidity and maintaining it financial flexibility .

143 . The 1997 Form 10-K also disclosed that the Company planned to spend $50 0

million on acquisitions in 1998, as well as the fact that the Company had been in default on debt

covenants, and had been compelled to seek waivers of both acts of default from its lenders .

Further, the Company had negative operating cash flow of $173 million in 1997 . In addition, the

Company's long-term debt had increased dramatically since the beginning of 1997 , to almost $2

billion at the time the 1997 Form 10-K was issued from less than $1 .5 billion at the

beginning of 1997 . Further, the Company's quarterly expense for interest on its long-term debt

had increased to $33 million and was ever increasing, and, unless the Company's incom e

improved materially it would again be in violation of its debt covenants, its debt ratings woul d

decline, and it would find itself unable to borrow the vast sums necessary to even fund its huge

negative cash flows, which swelled to $376 million in 1998 . Indeed, as stated herein, when the

Company reported disappointing earnings for the second quarter of 1998, and rating agencies

placed the Company's debt on credit watch with negative implications, followed by ratin g

downgrades in the wake of the Company' s announcement of a third quarter loss , the Company

acknowledged that to continue its operations it would be necessary to sell assets , because its

financial performance had foreclosed its ability to access the public debt market . For the

foregoing reasons, the quoted representations regarding the Company's liquidity in the 199 7

Form 10-K were materially misleading .

144. The same representation about the Company' s liquidity also repeated in the

Company's quarterly reports on Form 10-Q for the first and second quarters of 1998, and wer e

materially misleading for the same reasons . It was not until the Company filed its quarterl y

61

report on Form 10-Q for the third quarter of 1998, in mid-November 1998, that the defendants

admitted that the Company would have to resort to "asset dispositions" to fund its workin g

capital requirements, having earlier announced that it had stopped making the acquisitions which

had been the sole source of the Company's revenue and income growth for years . The

representations regarding liquidity in the Company's quarterly reports on Form 10-Q for the firs t

and second quarters of 1998 were materially misleading for the same reasons as were th e

representations in the Company's 1997 Form 10-K .

Misrepresentations Regarding Securitization of Cemetery Receivables

145 . At a meeting with institutional investors in Toronto on or about Janua ry 22, 1998 ,

five of the Company's principal managers, including defendant Wagler, made a presentation i n

which they stated, among other things , that Loewen Group is exploring the possibility of

securitizing its receivables, which would have the effect of lowering its borrowing costs and

improving some of its balance sheet numbers . The Death Care Business Advisor, reporting o n

the meeting in an article on February 5, 1998, noted that the Company's stock price "di d

rebound" both on the Canadian and New York stock exchanges after the meeting .

146. In July 1998, Loewen Group management told Duff and Phelps that the Compan y

planned to securitize its cemetery receivables . On July 29, 1998, PR Newswire reported that

Duff & Phelps Credit Rating Agency ("DCR") "met with management of Loewen Group in a

follow-up to the Company's announcement last month that it expected significantly lower second

quarter earnings ." The lowered earnings and the company's reduced financial flexibility led Duff

& Phelps to place the ratings of Loewen and its subsidiaries on Rating Watch-Down on July 29,

1998 . "DCR expects liquidity will remain adequate over the next 12 months given manageabl e

62

debt maturities, the reduction in acquisition spending, asset dispositions and the company's

intention to securitize at least a portion of its cemetery installment contracts . DCR anticipates

meeting with Loewen's management again in late September for a further update ." [Emphasi s

added .]

147 . The Financial Post of Canada reported on August 27, 1998 that Loewen "may

securitize installment payments on cemetery plots in a move to pump some life into the ailing

company's finances" as part of an overall strategy to maintain liquidity . The Financial Post

quoted Jennifer Casalvieri, an analyst with Duff & Phelps, who said that "company officials have

told her a burial plot securitization scheme ` is their intention . It's something that they're

working on."' The article explained that "[t]he cemetery plan would involve securitizin g

cemetery installment contracts on the asset-backed securities market . Bonds would be backed b y

the revenue stream from monthly payments on the sale of pre-need cemetery plots ."

148. On August 24, 1998, PR Newswire reported that S&P was keeping Loewen o n

CreditWatch with negative implications , where it had been placed a month earlier . However ,

S&P noted that Loewen's "immediate liquidity remains adequate, reflecting availability under its

US $600 million bank facility and the opportunity to securitize cemetery installment contracts ."

S&P noted that it planned to "meet with management again in the near future to re-examine both

the operating and strategic issues facing the company ."

149. The statements that Loewen intended to "securitize receivables" were false an d

misleading due to the facts that 40% of the Company's's receivables were seriously delinquent

and uncollectible and most bore no interest . Under those circumstances, there was no realisti c

prospect that the Company could securitize those receivables, and it did not. Moreover, th e

63

misrepresentations about the securitization plans were material because the statements le d

analysts to report to investors that the securitization plan would contribute to the Company's

" immediate liquidity" needs .

Information Disclosed Following The Class Perio d

150 . On January 14, 1999, the Company's cash flow and liquidity problems wer e

underscored when Loewen Group issued a press release which "confirmed" that the Company

was considering selling a portion of its funeral home and cemetery assets and that "[c]ertai n

parties who have expressed an interest in acquiring Loewen Group properties have been visiting

the Company' s data room . "

151 . The announcement on January 14, 1999 , that the Florida Department of Banking

and Finance regulators had suspended the licences of 16 of the Company's Florida cemetery and

funeral properties for accounting irregularities and was restricting them from making any

advance sales in the future had a material impact on the Company's stock . Shares of Loewen

plunged to a 10-year low after the announcement of the license suspension . The shares fell 1 5/8

or 24%, to 5 1/8 in New York trading . The 16 Loewen businesses whose licenses were

suspended were in Miami, Crestview, Dade City, Fort Walton Beach, Niceville , and Pensacola ,

Florida . '

152. The reason the suspension was material to investors was because Loewen was in

the midst of a desperate attempt to sell properties to avert insolvency, and had recently bee n

downgraded by a succession of credit rating agencies, most recently by S&P only days earlier .

9 Plaintiffs incorporate herein the allegations regarding the Company's regulatoryviolations in Florida, to preserve those claims in the event of an appeal .

64

The announcement that the Florida Department of Banking and Finance suspended the licence s

of 16 of the company's Florida Properties for serious violations could not have come at a wors e

time, because it would have a negative impact at least on the large number of properties that

Loewen hoped to sell in Florida. Moreover, the Florida suspensions were announced at the same

time as S&P announced a downgrade on the rating of Loewen's debt below investment grad e

because of growing concern about Loewen's liquidity position in light of the Company's poo r

operating performance, and its slow progress to date in implementing its strategic review, whic h

included the company's intention to sell off assets . Coming on the heels of the S&P downgrade ,

which put pressure on Loewen to sell assets to reduce its debt, the fact that the license suspensio n

diminished the value and marketability of at least the Florida propert ies was of mate rial interest

to investors .

153 . The material impact of the news of the Florida license suspensions i s

demonstrated by reports in numerous news articles which stated that the license suspension s

would seriously damage not only the revenues and market value of the Florida properties, bu t

would also deliver a serous "blow" to the Loewen's critical efforts to sell off its U .S. assets in

general, which the Company was under growing pressure to accomplish to stave off bankruptcy .

154. For example, on January 14, 1999, the Canadian Press reported that Loewen' s

shares plunged to a ten-year low after the Florida regulators suspended the license of 16 of it s

Florida funeral properties. The article noted that news of the Florida suspensions is only the

"latest blow for Loewen" which, only days earlier, had its debt cut by S&P, the third company i n

successive days to lower its credit rating on Loewen .

While the prope rties named in the Florida order are a fraction of the comp any' s

65

1,100 funeral homes and 500 cemeteries, investors reacted by sending Loewenshares tumbling $2 .65 to a 10-year low of $7 .80 on the Toronto stock Exchange .Analysts said the license suspension comes as Loewen is trying to stave off aliquidity crunch by rasing $400 million US from the sale of its U .S . cemeteries ina bid to pay down $2 .1 billion of debt .

"It's just one bit of bad news after another ." said Nick Majendie of C anaccordCapital Corp . in Vancouver .

"It caught me by surprise," said Leon Cooperman the New York hedge fundmanager whose Omega Advisers Inc . group owns about nine per cent of Loewen'sstock .

155. According to the article, the suspension order, together with the ratings

downgrades would have a major adverse impact on Loewen' s investors :

Major investors face the prospect that attempts to resolve the company's problemswill be a long, slow process . `Investors have very little confidence in what thiscompany is doing,' analyst Majendie said . Among the concerns is that in spite ofefforts to boost revenues through its pre-need cemetery sales program, theCompany may remain in a cash flow negative position for another several months .

. . . Majendie says that it likely cost Loewen $155 million last year just to payinterest on its debt . Analysts worry that Loewen's financial problems will put it ata disadvantage in trying to find buyers form the cemeteries . (Emphasis added).

156. Similarly, The National Post Canada reported on January 15, 1999 that the license

suspension was material to investors because it reduced the expected revenues from and marke t

value of the assets at a critical time when the Company was under pressure to sell those and other

assets :

Shares in Loewen Group, Inc . . . . were hammered yesterday after regulators inFlorida suspended the licenses of 16 Loewen-owned funeral homes in the stateand restricted them from making any advance sales in the future . . . . "

One analyst said the Florida action will deliver a blow to the company's efforts to

sell off some of its U.S. assets along regional lines , a plan which was first reported

earlier this week in the Financial Post . The Company has more than 80 locationsin Florida, which is one of the regional bundles up for grabs.

66

"The price will have to reflect the shoddy bookkeeping," the analyst said.

The other problem is that Loewen will now lose future revenue from prepaid salesat the suspended locations . The analyst estimated Loewen could lose as much as$20 million a year because of the suspension.

"You buy a cemetery based on pro-forma revenues ," the analyst said . "If youcan't pre-sell , then what are they really wo rth?"

With its huge population of retired people, Florida is a big market for Loewen's"pre-need" funeral sales . . . .

With the Florida suspensions and the debt rating downgrade, "Loewen will beunder pressure to speed up the selling of those properties," said Nick Majendie, ananalyst with C .M. Oliver & Co . in Vancouver . "And the stock will be underpressure as well . "

157 . The January 15, 1999 CTV television program Canada AM reported that the stock

was "hammered" by the suspension, causing "[m]ore bad news for Loewen Group ." The reporter

noted that the "timing"was "especially bad because Loewen's attempting to sell its U .S .

cemeteries to pay down some of the $2 .1 billion debt . Standard & Poor's also lowered its credit

rating for Loewen yesterday . "

158. The January 15, 1999 issue of The Record (Kitchener-Waterloo. Ontario) reported

that although the license suspensions only affect Loewen's Florida properties, the sharp reaction

by investors that sent the share price tumbling confirms the analysts' opinions that "the license

suspension comes as Loewen is trying to stave off a liquidity crunch by raising $400 million US

from the sale of its U .S. cemeteries to pay down $2 .1 billion of debt ." The article added : "Major

investors face the prospect that attempts to resolve the company's problems will be a long, slo w

process .

159. On January 18, 1999, defendant Wagler admitted in an interview with a

67

Bloomberg reporter that the Company's cemetery accounting was "not up to speed ." As set forth

above, Loewen Group's reported net income was improperly inflated , inter alia, by the failure to

make provision for contract cancellations and defaults associated with pre-need cemetery sale s

and other factors set forth above .

160. On March 1, 1999, the Company announced that it had entered into an agreement

to sell 124 cemeteries and 3 funeral homes, including the Osiris properties, for $193 million to a n

investment group led by McCown De Leeuw & Co . ("McCown"), which included former

Loewen senior executives Shane and Miller who had originally sold the Osiris properties to

Loewen. Loewen Group also announced that its year-end results, to be released later in th e

month, would include "substantial charges" related to the asset sales .

161 . On March 8, 1999, the Company announced that its Board of Directors ha d

deferred payment of the quarterly cash dividend of Cdn $0 .375 per share on the Company's 6 %

Cumulative Redeemable Convertible First Preferred Shares, Series C which would have been

payable on April 1, 1999 . The Board had also deferred payment of dividends on the Company' s

Cumulative Monthly Income Preferred Securities, Series "A" .

162. The Company's cash flow problems were further underscored when the Compan y

was forced to enter into revised lending agreements in order to get breathing room in advance o f

a multi-million dollar debt payment due in early April 1999 . On March 30, 1999, the Company

announced that it had negotiated revised lending agreements with lenders under its bank

revolving credit agreement, MEIP bank term credit agreement and certain other notes . The

revised lending agreements called for, inter alia, waivers of financial covenants at December 31,

1998, the suspension of all common, preferred and MIPS dividends, and a requirement to

68

refinance the PATS senior notes on satisfactory terms to the lenders by September 15, 1999 . The

revised lending agreements, expected to become effective March 31, 1999 upon completion o f

the previously announced sale to an investor group led by McCown of 124 cemeteries and thre e

funeral homes, also required a permanent paydown under those agreements of $103 million from

the resulting proceeds .

163. On April 1, 1999, the Company issued a press release reporting a net loss of $59 9

million for 1998, on revenues of $1 .14 billion. For the fourth quarter of 1998, the April 1, 1999

press release reported a loss of $ 609 million . That press release reported that cemetery revenue s

fell almost 25% in the fourth quarter of 1998 from the fourth quarter of 1997, which the April 1

press release attributed to "an increase in the cancellation allowance for preneed cemetery

accounts receivable." Indeed, the April 1, 1999 press release reported that cemetery expenses

of more than $107 million in the fourth quarter of 1998 exceeded the Company's $78.8

million cemetery revenues . Thus, in the fourth quarter of 1998 the Company's cemeter y

business lost $28 .5 million, due to expenses which should have been reported in the earlie r

quarters of the year .

164. On March 31, 1999, the Company issued a press release announcing 1998 results

and providing additional information about the losses incurred in connection with the sale of 124

cemeteries and 3 funeral homes to McCown and the extent to which the Company had reported

inflated values for its cemetery properties during the Class Period . The 1998 Form 10- K

disclosed that the Company would incur a pre-tax loss of $302 million in connection with th e

sale ; i .e ., that the sales price of $193 million was only 39% of the assets' carrying amount o f

approximately $495 million .

69

165. The 1998 Form 10-K further disclosed the following :

Due to severe liquidity constraints and the need to generate cash inlate 1998, the Company identified certain properties which itwould consider selling at their fair value .

On March 31 , 1999 one group of prope rties consisting of 124cemete ries and three funeral homes was sold for gross proceeds of$193,000,000 (see Notes 1 and 24) . Two smaller groups ofpropert ies are considered as probable for sale .

The Company has recorded a pre-tax impairment loss of$333,900,000 in 1998 on individual properties contained in theabove groups. In calculating the impairment loss, the Companyhas used estimated cash flow from operations and estimated cashproceeds on the sale of these properties . The impairment loss hasreduced cemetery property by $319,300,000, property andequipment by $4,000,000 and names and reputations by$10,600,000. The impairment loss is based on managementestimates and as a result, actual results could differ significantlyfrom these estimates . [Emphasis added . ]

166. Thus the Company admitted that, after a competitive bidding process, th e

cemetery properties had been sold at "fair value", which value was only 39% of the amount at

which the assets had been carried on the Company's balance sheet . In fact, an article in the May

15, 1999 edition of Mergers and Acquisition Report, reported that McCown paid 8 .3 times

EBITDA and quoted Standard & Poor's analyst Cathryn Cronin as stating "that is still a pretty

good multiple ." An article in the March 23, 1999 edition of the Death Care Business Advisor,

on March 23, 1999, reported the following :

The main problem facing the company continues to be its

tremendous debt load, built up as the result of a rapid expansion

where the company overpaid for properties in bidding wars with

other consolidators . [Emphasis added . ]

167. In its 1998 financial statements , the Company took a $315 . 2 million charge to its

70

Rose Hills and Prime succession holdings, reflecting amounts that should have been recorded i n

the Company's 1996 financial statements .

168. As announced on June 1, 1999, burdened by $2 .3 billion of debt, Loewen Group

filed for bankruptcy-court protection in the U .S . and Canada. As stated in The Wall Street

Journal on that date, "[t]he planned restructuring is expected to wipe out much of the value of

Loewen Group's existing shareholders and hand over majority ownership of the company' s

equity to its bondholders ." The following day, Thomas Taylor, Loewen' s large institutional

investor, announced his resignation as a Board member .

169. As reported in the June 2, 1999 edition of The Wall Street Journal , John Lacey,

Loewen Group's present Chairman of the Board, "faulted company founder Mr . Loewen for

driving the Company into ever more acquisitions , despite rising purchase p rices . Eventually

Loewen Group's debt-serving costs became so high that it began losing customers to competin g

funeral homes that could afford to charge less . . . "

170. On October 24, 1999, The Los Angeles Times reported that a combination of

factors, but primarily unbridled spending, brought about Loewen Group's filing for bankruptcy ,

stating that "In 1996, Service Corp attempted a hostile takeover of Loewen Group . In response,

Loewen Group's founder went on a buying spree partly intended to run up enough debt to mak e

his company less appetizing . He succeeded a bit too well ." Analysts quoted in this article agreed .

For instance , Fran Blechman Bernstein, an analyst with Merrill Lynch Global Securities , stated

that "They paid too much for acquisitions ," and Jon Kyle Cartwright , an analyst with Raymond

James & Associates, stated, "Ray Loewen bought up every cemetery, funeral home and

crematory he could . . . . All too often, they paid more than they were worth." Analysts indicated

71

that Loewen Group paid 20% to 100% more for properties than they were worth. "We

acknowledge that, clearly ." said Loewen Group spokeswoman Jennifer Mercer. "It didn't work . "

FACTS AND CIRCUMSTANCES THAT DEMONSTRATETHAT DEFENDANTS ACTED WITH SCIENTE R

A. Defendants Possessed Actual Knowledge of or Recklessly Disregarded theFraud Alleged Herei n

1 . Defendants Knew That Loewen Group's Cemetery Properties CouldNot Produce Revenues to Justify the Purchase Prices and Resulted inDeteriorating Liquidity

171 . At all times during the Class Period, Defendants knew the ratio between th e

profitability of each of the cemetery properties they were purchasing compared to its purchase

price . Defendants also knew the price their industry competitors were paying for cemeter y

properties as multiples of EBITDA. Thus, defendants knew that it was paying exorbitant

multiples for acquisitions .

172. Facts demonstrating that defendants knowingly misrepresented the value o f

cemetery assets during the Class Period include the following :

a. the company recorded a pre-tax asset impairment provision of hundreds o f

millions of dollars on the sale of its 124 East Coast cemeteries and three funeral homes in March

1999, and on sales of assets in the course of its asset disposition program during restructuring

under Chapter 11 . For example, Debtor Loewen Group took a $139 .4 million charge to earnings

in the second quarter of 2001 related to the sale of 29 cemeteries in Michigan, and noted that its

effective tax rate on operating earnings would likely increase in 1999 and 2000 as a result o f

asset sales and cessation of new acquisitions ;

b . Loewen Group paid too much for prope rties, including the investments i t

72

made with the Blackstone Group in the acquisitions of Prime Succession and Rose Hills in 1996 ,

when they paid a 24-times EBITDA multiple for Rose Hills cemeteries, according to th e

investment bank which brokered the deal, and similar overpayment for Prime ;

the Company admitted in March 2001 that the prices obtained in its asset

disposition program and the write downs to fair value show that the many of its properties were

overvalued in the Company' s annual earn ings reports ;

d. at the time of the sale of Loewen Group' s 124 east coast cemete ries and

three funeral homes to private investment firm McCown De Leeuw & Co ., whose principals

were former Loewen Group senior executives Lawrence Miller and William R . Shane, the

Canadian National Post noted that those two executives had been recruited by Loewen Group i n

1995, through Loewen Group's's purchase of Osiris Holding Corp .'s 27 cemeteries, and that

"[alt the time, Loewen Group was buying Osiris more to acquire experienced cemeter y

management than for its assets" ;

e. debtor Loewen Group sought bankruptcy court approval to void existin g

purchase agreements with individuals who had sold their cemetery properties to Loewen Group .

Loewen Group sought to void the agreements on the basis of their history of unprofitably an d

negative cash flow, stating that "the Cemeteries have not produced cash flow returns consistent

with the level of investment by the Debtors," and that the "Debtors believe that the Cemeteries '

value is substantially less than the respective purchase prices" specified in the purchase

agreements ;

debtor Loewen Group sought approval from the bankruptcy court to cance l

208 contracts that had it previously entered into with sellers of cemetery properties, under whic h

73

Loewen Group paid a small lump sum in cash for the properties with a promise to make quarterly

payments for ten or more years, under which the seller signed a non-competition agreement

ensuring that the seller would not set up a rival funeral home .

2 . Defendants Knew the Extent of the Uncollectibility of the Company'sReceivables

173 . At all times du ring the Class Pe riod defendants knew the extent to which

receivables were actually being collected, and had complete information regarding delinquencies .

Thus, defendants knew that their reserves for uncollectible receivables were understated, and tha t

the chances they could "securitize" receivables as a means of sustaining liquidity as they assure d

analysts and investors, were poor to nil . Cash management and inflow was a critical part of th e

Company's business . Thus, Defendants knew the actual amount of cash coming into the

company, how much cash was available to pay bills for the Company's operating costs and shor t

term debt, and how much the Company needed to borrow to pay bills for those operating costs

and short term debt . Facts demonstrating defendants' knowledge include :

the Company stated in its Annual Reports on Form 10-K for the years

ended 1996 and 1997 stated that the Company' s regional and corporate management

"monitored" the "monthly and annual financial performance" of each of the Company' s

cemeteries and funeral homes, reports which were sent to corporate headquarters in Burnaby ,

Canada ;

b. Duff & Phelps, which had discussed secu ritization of receivables with th e

Company, had informed Loewen Group in July 1998 that 40% of the Company 's receivables

were uncollectible, based on data provided by the Company in the course of Duff & Phelps '

74

meetings with Loewen Group defendants . Thus defendants knew that the percentage of

uncollectible receivables exceeded the amount of reserves set aside for such receivables ;

On May 31, 1999, Bradley D. Starr, the Senior Vice President, Legal an d

Asset Management of Loewen Group, submitted a sworn affidavit (the "Stam Affidavit"), filed

in support of the Loewen Group reorganization, which, among other things, confirmed that

Loewen Group's "recent years' rapid growth in cemetery operations has been accompanied by

significant and intensive capital requirements ." Starr Affidavit at ¶ 8(d) ; "the Company has

experienced difficulties fully integrating newly acquired properties ." Id. at ¶ 8(e) and "the very

high debt-load incurred by the Company, primarily to finance its aggressive acquisitions policy,

necessitates corporate restructuring ." Id. at ¶ 8(a) ;

d. The Starr Affidavit confirmed that "centralized cash management plays a

crucial role for TLGI and its subsidiaries ." The principal components of the Loewen Group's

centralized cash management system included the following : (i) All cash receipts from funeral

home and cemetery operations are concentrated into principal operating accounts at the Royal

Bank of Canada (the "Royal Bank"); (ii) With exceptions for groupings of two or more locations

which may share administrative services, each funeral home and cemetery operation has its own

depository account at a local financial institution (in Canada, this was typically the Royal Bank of

Canada) . After making a deposit, the local administrator communicates the fact that a deposit

has been made and the amount of the deposit to a central number which in turn sends the

information to the concentration bank . This information is then used by the concentration bank

to debit each of the local depository accounts for the reported deposit and credit the funds to the

Company's main concentration account ; (iii) credit card receipts are received directly into the

75

main cash management account from credit collection services that the Company employs ; (iv )

most cemetery accounts receivable are collected by individual locations while they are curren t

but accounts receivable of more than sixty days past due become the responsibility of a

centralized credit and collections function; (v) cemeteries are required to send all of their

invoices to Burnaby for central processing ; and (vi) funeral home trust m anagement is primarily

centralized in Canada into one nationwide trust . Stam Affidavit at ¶ 22 ;

e. In a conference call with analysts on May 7, 1998, in connection with th e

Company's release of its press release announcing results for the first quarter of 1998, Ra y

Loewen stated that he was deeply involved in the day to day operations of the Company "[f]ro m

about seven in the morning until about 12 at night . "

3 . Defendants Knew That They Had No Available Funds to Buy BackLoewen Group Shares or To Acquire New Propertie s

174. At the time they announced, in September 1997, that the Company woul d

repurchase 5% the company's common and preferred stock, and that they planned both to

continue their rapid pace of acquisitions, defendants knew that they lacked available financing to

do so. Moreover, in September 1998, the Company's lending banks instructed defendants that

they could not continue to make acquisitions . Indeed, defendants admitted belatedly admitted

they would no longer continue to make acquisitions .

B . Defendants Possessed Substantial Motives and Had the Opportunity toCommit the Fraudulent Acts Alleged Herein

1 . Defendant Ray Loewen' s Insider Sale of Stock to CIBC

175 . As collateral for a loan from Canadian Imperial Bank of Commerce ("CIBC")

defendant Ray Loewen pledged his shares of Loewen Group stock to CIBC . He later sold all his

76

pledged shares to CIBC for $91 million, thereby reducing his then-outstanding $145 million deb t

to the bank by that amount .

176. Specifically, prior to November 2, 1998, defendant Ray Loewen had pledged a

total of 10,062,125 common shares to CIBC as collateral against his $190 million personal loa n

pursuant to a October 23, 1997 credit agreement with CIBC . Defendant Ray Loewen used mos t

of the $190 million loan to finance the purchase of Loewen common stock . From November 10,

1997 through January 6, 1998 , Ray Loewen purchased a total of of 3,279,325 common share s

for $83 million, in a series of transactions on the Canadian and New York Stock Exchange .' o

177. On November 2, 1998, Ray Loewen sold the pledged shares to CIBC, through a

"Sale Agreement" pursuant to which all of Ray Loewen 's pledged shares were sold to CIBC .

CIBC paid Ray Loewen $ 91,188 ,008 as "initial consideration " in addition to additional

consideration stemming from its arrangement with Ray Loewen, under which, if the bank sol d

the pledged shares before November 1, 2000 and if the net proceeds from such sale exceed th e

initial consideration, than a portion of such excess proceeds would be credited to Ray Loewen .

2 . Defendant Ray Loewen's Actions Were Motivated by His Desire toThwart the Threat of Takeover of Loewen Group by SCI WhichContinued During the Class Period

178. Throughout the Class Period, Ray Loewen was aware that the threat of a takeover

by SCI existed . Although the Company ' s acquisition program had defeated SCI's of a takeove r

bid in January 1997 (although at a cost of several billion dollars ), the Company's financial

10 According to Ray Loewen's SEC filing on Schedule 13D reporting hisacquisitions of Loewen Group stock, he made these purchases through his wholly owned andcontrolled investment vehicle, the Loewen Group Financial Limited Partnership (of which RayLoewen was the sole general partner) .

77

difficulties in the following quarters made the Company vulnerable to competitors as a takeover

target. In response to this ongoing threat, Ray Loewen continued to purchase shares of hi s

Company as he had previously done in response to the 1996 SCI threat . From June, 199 7

through January 1998, Ray Loewen increased his ownership of Loewen Group stock to almos t

20% of the total number of outst anding shares , using personal and multi-millions of dollars o f

borrowed funds to finance his ongoing purchases . Furthermore, since the time SCI withdrew its

bid for the Company in January 1997, Ray Loewen also took an important step to thwart a

takeover, by successfully lobbying for a legislative amendment , quietly put forward in the

summer of 1997, which would raise to 90% from 75% the percentage of shareholders who must

accept a bid where a minority of shareholders opposes a merger . Because Ray Loewen owned

more than 15% of the company's's stock, he by himself could effectively block any merge r

pursuant to the amendment. As described below, despite the fact that the Company's anti-

takeover tactics induced SCI to withdraw its takeover bid in January 1997, the Company

continued to be vulnerable to takeover by an industry rival, particularly as the price of its stoc k

declined .

179 . The Death Care Business Advisor, dated October 23, 1997, quoted Ray Loewen ' s

as confirming that the Company was in "another vulnerable position" to be taken over in light o f

its depressed stock price . Ray Loewen answered :

I think the appropriate answer is that we believe the official hostileattempt was very poorly planned and thought out . We know thatsince they pulled the bid there has been a huge attempt to impactour company negatively, and our ability to raise equity . There has

also been much contact with our shareholders . Just because theofficial hostile attempt became unofficial, it has been just asintense and intensive . [Emphasis added . ]

78

180. On November 6, 1997, The Financial Post of Canada reported that, that a group of

"disgruntled" institutional shareholders was pressuring Loewen Group to sell to U .S. rival

Service Corporation as Loewen Group's share price continued to fall . The article reported that

the investors had met privately in Toronto two days earlier to discuss ways to pressure Ray

Loewen to sell out to one of its rivals . The article stated that although the institutional investors

would like to see the company sold to Service Corp ., Stewart Enterprises might be interested in

buying the company as well . The institutional investors reportedly discussed ways to persuade

Ray Loewen and his board that a friendly stock-for-stock merger would be in the shareholders '

best interest and that the participants aimed to organize a coordinated effort to put pressure o n

Loewen Group in a "serious way."

181 . The Death Care Business Advisor on November 20, 1997 also reported that even

industry rival Stewart Enterprises might be interested in buying the Company. The article noted

that Ray Loewen 's purchase of another 1 .5 million common shares the previous week added

"even more fuel to the speculation" that Ray Loewen feared that a takeover threat was real an d

imminent . "Many industry analysts believe that Ray Loewen is merely positioning himself t o

fend off another takeover attempt by increasing his family's purchase of ownership in th e

company, which now stands about between 16 and 18 percent ."

182 . On September 15, 1998, The Financial Post, Vancouver, B .C., reported a "sign "

that Ray Loewen might have to ease his opposition to the sale of his funeral home empire ,

namely, his pledge of an additional 400,000 shares as collateral against his $190 million persona l

loan that he used to buy more shares in his company . "Records indicate he has pledged mor e

than 85% of his stake [in Loewen Group], valued at $151 million , as collateral ." The articl e

79

noted that the banks had also put pressure on Ray Loewen by altering the terms of his loan,

demanding that he repay by June 30, 1999 instead of October 24, 2000. The article quoted

analyst Nick Majendie of C .M. Oliver & Co. in Vancouver who stated that Ray Loewen's

personal debt problems could force him to agree to the sale of the company. "It doesn't

guarantee that the company would be sold, but previously there was some adamancy they

wouldn't sell and now there's a chink in that armor," said Majendie . (Emphasis added) .

183 . Canadian Business, on September 25, 1998, reported that there were potential

buyers for Loewen Group, most likely Stewart Enterprises, given that Stewart had recently

announced plans to raise $500 million for "future acquisitions ." The article also reported that

two powerful Loewen Group investors had been pressuring Ray Loewen to sell the company.

The investors were the New York hedge-fund manager Leon Cooperman, who owned 9 .2% of

Loewen Group's stock and Fort Worth Texas institutional investor Tommy Taylor, who buys

into troubled Canadian companies on behalf of the Bass family of Texas and the Ontario

Teacher's Pension Plan Board, and owned 6 .3% of Loewen Group's stock . Taylor reportedly

was after a management shake-up, while Cooperman wanted "much more," i .e ., the sale of the

Company, and had reportedly sent Ray Loewen a letter calling for the company to be sold .

According to the Canadian Business article, Cooperman's letter to Loewen Group, dated July 23,

1998 warned Ray Loewen that the current management team had had more than sufficient time to

refocus the business and "now is an appropriate time to sell the company ." Cooperman also

underscored some of the serious issues confronting Loewen Group, including the Company's

$2.6 billion debt which had "dramatically increased" the company ;'s cost of equity capital, and

Standard & Poor's possible ratings downgrade which put Loewen Group at a "competitiv e

80

disadvantage" in the acquisition market . These factors made Loewen Group far more valuable t o

a third party than as a stand-alone entity . Finally, the article quoted portfolio manager Jeff

Cardon at Wasatch Advisors , Inc. in Salt Lake City, whose fund owned a small block of Loewe n

Group shares, as stating that Ray Loewen may have a "fiduciary duty" to accept less than what he

thinks the company is worth, even as low as $25 a share, and that Cardon doubted that Ray

Loewen could reject another bid from his arch-rival SCI if he opened the door publicly to a sale .

184. On October 27, 1998, the Death Care Business Advisor discussed variou s

"suitors" who might "come forward" to buy either all or parts of the company, naming Stewar t

Enterprises as the most likely candidate, and noting the pressure being placed on Ray Loewen t o

sell the Company by institutional investor Thomas Taylor . The article also mentioned a group of

twelve independent Canadian Funeral homes which planned to meet in Toronto to review th e

books of the Canadian assets of Loewen Group .

3 . Defendants Were Motivated to Report In flated Earnings andOvervalued Assets, and Lower Debt to Equity Ratios in Order toComply with Debt Covenants Under Which They Borrowed Fundsfor Their Acquisitions

185 . Defendants were also motivated to overstate income and assets in order to deceive

the Company 's lenders and potential lenders , due to the Company' s desperate need to fund it s

immense negative cash flow and its hundreds of millions of dollars of acquisitions annually, an d

the fact that the ability to borrow significantly depends on the Company' s financial condition,

particularly its debt/equity ratio and ratio of earn ings to interest charges . Also, the Company's

existing debt agreements included covenants that the Company maintain certain interest coverag e

ratios, the violation of which would cause a default, as it did in 1997 . This could and did caus e

81

the Company's lending banks to refuse to advance additional funds and to require repayment o f

existing indebtedness .

COUNT I

AGAINST ALL DEFENDANTS FOR VIOLATIONSOF §10(b) OF THE EXCHANGE ACT AN D

RULE IQb -5 PROMULGATED THEREUNDE R

186 . Lead Plaintiffs repeat and reallege each of the allegations set forth in the foregoing

paragraphs .

187. This Count is asse rted against all defend ants herein and is based upon § 10(b) o f

the Exchange Act, 15 U.S.C. § 78j(b) and SEC Rule lOb-5 , 17 C.F.R . § 240.10b -5 promulgate d

thereunder .

188 . Throughout the Class Period, defendants individually and in concert, directly and

indirectly, and using the means or instrumentalities of interstate commerce or mails , engaged in a

continuous course of conduct to inflate the revenues, net income, and net income per share o f

Loewen Group , and to under repo rt certain reserves and bad debt expenses arising from

uncollectible or canceled accounts . Defendants employed devices, schemes and artifices t o

defraud, and engaged in acts, practices, and a course of conduct designed to assure investors that

the Company's financial statements were true and accurate . Such actions included the making of

untrue statements of materials facts and omitting to state material facts necessary in order t o

make the statements made, in light of the circumstances under which they were made, not

misleading, and engaged in transactions, practices, and courses of business which operated as a

fraud and deceit upon the purchasers of Loewen Group securities during the Class Period .

82

189. Specifically, the statements made by defendants as set forth above were materiall y

false and misleading, and/or failed to disclose facts necessary to render what was said true an d

accurate .

190. Defendants are liable for each of the fraudulently misleading statements set forth

above in that they directly or indirectly issued such statements .

191 . The Individual Defendants , as officers and/or directors of Loewen Group during

the Class Period, are liable as direct participants in the wrongs complained of herein . As officers

and/or directors of a publicly traded corporation, the Individual Defendants had a duty t o

disseminate accurate and truthful information promptly with respect to the operations and

financial results of Loewen Group, and to correct any previously issued statements that ha d

become materially misleading or untrue, so that the market price of Loewen Group's securitie s

would be based on truthful and accurate information . Through their positions of control an d

authority as officers and/or directors of Loewen Group, the Individual Defendants were able t o

and did control, directly or indirectly, the content of the financial statements and public

statements disseminated by and through Loewen Group . With knowledge of the falsity and/or

misleading nature of the statements contained herein, and in reckless disregard of the true

financial condition and prospects of the Company, defendants caused these public statements t o

contain material misstatements and omissions of material facts as alleged above, in violation o f

the federal securities laws .

192 . As a result of the dissemination of the false and misleading statements set forth

above, the market price of Loewen Group securities was artificially inflated during the Clas s

Period . In ignorance of the false and misleading nature of the statements described above, Lea d

83

Plaintiffs and the other members of the Class relied, to their detriment, directly on thes e

statements and/or on the integrity of the market price of the securities in purchasing Loewe n

Group securities . Had Lead Plaintiffs and the other members of the Class known the truth, they

would not have purchased their Loewen Group securities or would not have purchased them a t

the inflated prices that were paid .

193 . Lead Plaintiffs and the other members of the Class have suffered substantial

damages as a result of the wrongs alleged herein in an amount to be proven at trial .

194 . By reason of the foregoing, defendants have violated section 10(b) of th e

Exchange Act and SEC Rule lOb-5 promulgated thereunder .

COUNT II

AGAINST THE INDIVIDUAL DEFENDANTS FORVIOLATIONS OF §20(a) OF THE EXCHANGE AC T

WITH RESPECT TO THE §10(b) VIOLATION S

195 . Lead Plaintiffs repeat and reallege each of the allegations set forth in the foregoin g

paragraphs .

196. This Count is asserted against the Individual Defendants and is based upon §20(a)

of the Exchange Act, 15 U .S .C . §78t(a) .

197. The Individual Defendants each had the power and influence and exercised the

same to cause each other and the Company' s employees to engage in the illegal and improper

conduct complained of herein . Because of their executive, managerial, and/or directorial

positions at Loewen Group, as well as their substantial shareholdings of, and ownership interes t

in, the Company, the Individual Defendants had access to non-public information as allege d

herein, acted to conceal and/or omitted to disclose such information from Lead Plaintiffs and th e

84

investing public, and caused the price of Loewen Group securities to become artificially inflate d

as fully described herein .

198 . By reason of the conduct alleged in Count I, the defendants are liable for th e

wrongful conduct as alleged herein, and are liable to Lead Plaintiffs and to the other members o f

the Class for the substantial damages they suffered in connection with their purchase of Loewen

Group securities during the Class Period .

WHEREFORE, Lead Plaintiffs, on behalf of themselves and the Class, pray for

judgment as follows :

A. Declaring this action to be a proper class action maintainable pursuant to

Rule 23 of the Federal Rules of Civil Procedure and Lead Plaintiffs to be proper clas s

representatives ;

B. Awarding Lead Plaintiffs and the Class compensatory damages, togethe r

with appropriate prejudgment interest at the maximum rate allowable by law ;

C . Awarding Lead Plaintiffs and the Class their costs and expenses for thi s

litigation including reasonable attorneys' fees and other disbursements ; and

D. Granting such other and further relief as this Court deems to be just an d

proper .

JURY TRIAL DEMANDE D

Lead Plaintiffs demand a jury trial of all triable issues .

85

Dated: August 29, 2003BARRACK, RODOS & BACINE

By: (J--~ l7Oe ey W olan

3300 Two Commerce Street2001 Market StreetPhiladelphia, PA 19103215/963-0600Liaison Counsel for Plaintiffs

WOLF POPPER LLPRobert M. KornreichChet B. Waldman845 Third AvenueNew York, NY 10022212/759-4600

BERGER & MONTAGUE, P .C.Sherrie R. SavettCarole A. Broderick

Phyllis M. Parker

1622 Locust Street

Philadelphia, PA 19103

215/875-300 0

ABBEY GARDY, LLPKarin E . Fisch212 East 39`h StreetNew York, NY 10016212/889-3700

Co-Lead Counselfor Plaintiffs

COHEN, MILSTEIN, HAUSFELD& TOLL, P.L.L.C.Andrew N. Friedman1100 New York Avenue, NWSuite 500 - West TowerWashington, DC 20005202/408-4600

86

LAW OFFICES OFJEFFREY S . ABRAHAM60 East 42°d StreetNew York, NY 10165212/692-0555

LAW OFFICES OFJAMES V. BASHIAN, P .C.500 Fifth AvenueNew York, NY 10110212/921-411 0

BERNSTEIN, LIEBHARD & LIFSHITZ400 Kelly StreetFort Lee, NJ 07024201/779-141 4

LAW OFFICES OFSTEVEN E . CAULEY, P.A.Cypress Plaza , Suite 2182200 Rodney Parham RoadLittle Rock, AR 72212-4155501/312-8500

DONOVAN MILLER LLC1608 Walnut StreetPhiladelphia, PA 19103215/732-6020

FARUQI & FARUQI415 Madison AvenueNew York, NY 10017212/986-1074

BRIAN FELGOISE, ESQ.1494 Old York RoadSuite 200Abington, PA 19001215/517-7088

87

LAW OFFICE OFBERNARD M. GROSS, P.C .1500 Walnut StreetPhiladelphia, PA 19102215/561-3600

KAPLAN, KILSHEIMER & FOX685 Third AvenueNew York, NY 10017212/687-198 0

MILBERG WEISS BERSHAD HYNES& LERACH LL POne Pennsylvania PlazaNew York, NY 10119212/594-5300

BRUCE G. MURPHY, ESQ .265 Llwyds LaneVero Beach, FL 32962-3252561/231-4202

POMERANTZ HAUDEK BLOCKGROSSMAN & GROSS, LLP100 Park AvenueNew York, NY 10017212/661-1100

ROBERT C. SUSSER, ESQ .6 East 43rd StreetSuite 190 0New York, NY 10017-4609212/808-0298

SAVETT FRUTKIN PODELL& RYAN, P.C.325 Chestnut StreetPhiladelphia, PA 19106215/923-5400

SCHIFFRIN & BARROWAY, LTD .Three Bala Plaza EastSuite 400Bala Cynwyd, PA 19004610/667-7706

88

SHEPARD & GELLER, LLC7200 West Camino RealBoca Raton , FL 33433561/750-3000

SQUITIERI & FEARON, LLP521 Fifth Avenue, 26th FloorNew York, NY 10175646/487-3049

STULL STULL & BRODYSix East 45`h StreetNew York, NY 10017212/687-723 0

WECHSLER HARWOOD HALEBIAN& FEFFER LL P488 Madison AvenueNew York, NY 10022212/935-7400

WEINSTEIN KITCHENOFFSCARLATO & GOLDMAN, LTD.1608 Walnut Stree tPhiladelphia, PA 19103215/545-7200

WEISS & YOURMAN551 Fifth AvenueNew York, NY 10176212/682-3025

WOLF HALDENSTEIN ADLERFREEMAN & HERZ LLP270 Madison AvenueNew York, NY 10016212/545-4600

Attorneysfor Plaintiffs

370310_00.wpd 89

EXHIBIT "A"TO

CORRECTED CONSOLIDATED AMENDE DCLASS ACTION COMPLAINT

EXHIBITA

UNITED STATES DISTRICT COURTEASTERN DISTRICT OF PENNSYLVANIA

In re THE LOEWEN GROUP INC .SECURITIES LITIGATION

This Document Relates To :

ALL ACTIONS

Master File No .98-CV-6740 (O'Neill , Jr., J .)

JURY TRIAL DEMANDED

EXHIBIT "A"

1 . Sales in Bankruptcy - Funeral Propertie s

1 CA (Northern)

Brentwood Funeral Home Brentwood CA

Guerrero Mortua ry Chapel San Le andro CA

Higgins Chapel Antioch CA

Johnson Funeral Home Morgan Hill CA

Nicoletti Funeral Home Sacramento CA

Stephens & Bean Funeral Home Fresno C A

Wallace - Martin Funeral Home Stockton C A

Whitehurst/McNamara Hanford CA

2 CA (Southern)Beardsley-Mitchell Funeral Home San Diego CA

3 CO, ID, MT,

ND, SD, WY

Alsip Funeral Chapel Nampa ID

Boelter Funeral Home Bismarck ND

Buck-Heggie Funeral Home Laramie WY

Chapel of Chimes Great Falls MT

Dakota Memorial Chapel Bismarck ND

Eastgate Funeral Service Bismarck ND

Gorder Funeral Home Choteau MT

Jofineister Funeral Chapels Inc Pierre SD

Hudson' s Funeral Home Lander WY

Livingston - Malle tta - Geraghty Missoula MT

Mischel-Olson Chapel Dickinson ND

O'connor Funeral Home Great Falls MT

Osthus Funeral Home Aberdeen SD

4 KY

5 IL

Retz Funeral Home Helena MTReynolds Funeral Chapel Twin Falls IDShort's Funeral Chapel Moscow IDSquire-Simmons-Carr Funeral Home Missoula MTSunset Memorial Funeral Home Missoula MTThompson Funeral Home Inc Garrison NDWeigel Funeral Home Mandan ND

Blalock-Coleman Funeral Home Murray KYBreathitt Funeral Home Jackson KYCarman Funeral Home Russell KYCook-Webb Funeral Home Guthrie KYDuell-Clark Funeral Chapel Versilles KYDunn-Kelley-Prater & Dunn Salyersville KYDurham Funeral Home Pineville KY

Dwayne Walker Funeral Home Hyden KYEllis-Mayes Funeral Home Inc Leitchfield KY

Engle Funeral Home Hazard KYFilbeck-Cann Funeral Home Benton KYFuneral Directors Association of Kentucky Frankfort KY

Greenwell-Jenkins Funeral Home Inc Taylorsville KYJenkins Funeral Home Brandenburg KYJohnson-Vaughn Funeral Home Bowling Green KYLewis Funeral Home Irvine KY

Lindsey Funeral Home Inc Paducah KYLone Oak Funeral Home Paducah KY

McCreary County Funeral Home Whitley City KY

Miller Funeral Home Murray KYMorris & Hislope Funeral Home Science Hill KY

Perry County Funeral Home Hazard KY

Pulaski Funeral Home Somerset KY

Robertson Funeral Home South Shore KY

Rogers Funeral Home Leitchfield KYRoth Funeral Chapel Paducah KY

Sanders Funeral Home Inc Russellville KY

Schoppenhorst & Underwood Funeral Home Louisville KY

Smith Funeral Home Morgantown KY

Sunset Funeral Home Frankfort KY

Watkins Funeral Home Leitchfield KY

Wilder Funeral Home Inc Perryville KY

Allen-Braun Funeral Homes Sterling IL

Brown Funeral Home Chicago IL

Community-Opyt Funeral Home Ltd Riverdale IL

Furman Funeral Home Chicago IL

Grennan Funeral Home Ltd Sterling IL

Lauterburg & Oehler Funeral Home Ltd Arlington IL

McCracken Funeral Home Inc Pana I L

2

6 IN

7 OH

8 PA,

Oehler Funeral Home Ltd Des Plaines ILOpyt-Brown Funeral Home Ltd Dolton IL

Robert A Weinstein Funeral Directors Ltd Buffalo Grove ILWeinstein Brothers Inc Wilmette IL

Zefran Funeral Home Lt d. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. . . ... .. . .. . ... .. .. . .. . . .. .. . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chicago .. . . . .. . . .. . . .. . . . . . . . . . . . . ._ . . . . . . . . . . . . . IL

Alexander Funeral Home Sullivan IN

Berhalter-Hutchins Funeral Home Inc Kendallville INBrosmer-Drabing Funeral Home Inc French Lick IN

Chapel Lawn Funeral Home Schererville IN

Denbo Funeral Home English IN

Elzey & Haggard Funeral Home Fort Wayne IN

Gordon E Utt Funeral Home Inc Oaktown IN

Harry W Moore Funeral Chapels Indianapolis IN

Kemple-Dillman-Ellis Funeral Home Paoli IN

McClure Funeral Service Bicknell IN

McKee-Miles Funeral Home Garrett IN

Noffze Funeral Home Alexandria IN

Ruzich Funeral Home Whiting IN

Titus Funeral Home Inc Warsaw IN

Titzer Funeral Home. . . . . . . . . . . . . . .. . .. . .. . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . ... . .... .. .. .. .. . . . .. . . .. . . . Loogoote e.. .. .. ... .. .. ._ . . ... .. . IN. . . .. . ... .

Bennett-Emmert Fuenral Home Toledo OH

Blessing Funeral Home Mentor OH

Burcham Funeral Home Fairborn OH

Busch Corrigan Benny Fairview Park OH

Corrigan Funeral Home Inc Cleveland OH

Craciun Funeral Home Cleveland OH

Ellis-Beam Funeral Home West Union O H

Finefrock's Services Mansfield O H

H H Birkenkamp Funeral Home Toledo O H

Hogenkamp-Bonham Funeral Home Lima O H

Kollmeyer Helmkamp Siferd Delphos OHLong & Folk Funeral Homes Inc Saint Marys OH

N J Hogenkamp Sons Inc Minster OH

Reed-Nichols Funeral Home Chagrin Falls OH

Schmidt-Dhonau Funeral Home Reading OH

Siferd Funeral Homes Tiffin OH

Spiker-Foster-Shriver Funeral Home Canton OH

Acklam Funeral Home Racine WI

Alleva Funeral Home, Inc Paoli PA

Burton L Hirsch Funeral Home Pittsburgh PA

Goodman-Bensman Funeral Home Inc Whitefish Bay W I

H P Brandt Funeral Home Inc Pittsburgh PA

Kohls Community Funeral Home Waupun WI

Laemmrich Funeral Home Menasha WI

Lendman-Mischler Inc Kenosha WI

3

9 TN

10 VA

Murray Community Funeral Home

Murray Community Funeral HomeMurray Community Funeral Home

Neill Funeral Home Inc

Overton Funeral HomePort-Axtell Funeral Home

Reese Funeral Home IncSchauer & Schumacher Funeral Home

Skubal-Slattery-Jelenc Funeral Home. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. . .. .. .. .. . . ... .. .. . .. . . .. .. . . . . . . . . .

Alexander Funeral Home

Alexander Undertaking CoAustin & Bell Funeral HomeAustin & Bell Funeral Home

Booth Funeral Home IncBrown Funeral Home

Buckner's ChapelBurns Funeral HomeCan & Erwin Funeral Home

Colbock-Price Funeral HomeDaves-Culbertson Inc

Franklin Memorial Chapel Inc

Jones & Son Funeral HomeLuff-Brown Funeral Home Inc

Martin Oak Ridge Funeral HomeMcCarty' s Woodhaven ChapelMcMinnville Funeral Home Inc

McNeil Funeral Home

Newby Funeral Home In cPettus -Owen & Wood Funeral Directors

Rawlings Funeral Home

Robertson County Funeral Home

Smith Funeral Home

Stockdale - Malin Funeral Home

Stubblefield Funeral HomeWeaver's Cumberland Memorial Chapel. . . . . . . . . . . . . . . .. .. . . .. . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . .

Hill Funeral HomeHonaker Funeral Home IncHowell Funeral Home

Lindsey Funeral HomeLynch Funeral Home

Riverside Funeral HomeSidney F Harrell Funeral Home

Williamsburg Funeral Home

Beaver Dam W I

Horicon WI

Reeseville W IHarrisburg P A

Janesville W IPortage W I

Harri sburg PAGreen Bay W IWest Allis WI

Gallatin TNGallatin TN

Springfield TN

White House TNRockwood TNNewport TN

Dickson TN

Crossville TNPulaski TN

Rogersville TN

Tullahoma TNFranklin TN

Oneida TN

Waverly TN

Oak Ridge TNPowell TN

McMinnville TN

Sneedville TN

Gallatin TNNashville TN

Sevierville TNSpringfield TN

Rutledge TN

Camden TN

Morristown TN

Knoxville TN

Suffolk VA

Honaker VA

Stuart VA

Harrisonburg VA

Rocky Mount VA

Newport News VA

Suffolk VAWilliamsbur . . . . . . .. . .VA_ .

11 WVDavis Funeral Home Inc Clarksburg WV

Spurgeon Funeral Home Inc West Union WV

4

Tankersley Funeral Home Inc Mullens WV12 FL (Miami)

Coral Ridge Funeral Home Cape Coral FLCoral Springs Funeral Home Coral Springs FLDean-Lopez Funeral Home Key West FLEternal Light Funeral Directors North Miami FLFairchild Funeral Services Fort Lauderdale FLFred Hunter's Miramar Funeral Home Hollywood FLJennings Funeral Homes Fort Lauderdale FLKraeer Funeral Home Pompano Beach FLKraeer Funeral Home Pompano Beach FLKraeer Funeral Home Pompano Beach FLLevitt-Weinstein Funeral Home West Palm Beach FLLevitt-Weinstein Memorial North Miami FLLevitt-Weinstein Memorial Chapel Hollywood FLMargate Funeral Home Margate FLPritchard Funeral Home Key West FLRoyal Palm Funeral Chapel . . . . . . . . . . . Fort Lauderdale. . . . . . . . . . . . . . . . . . .. . . . . .. ... ... . ... .. . .. . ... . . . .. . . . . . . .. FL

13 FL (North). . .. .. . . . . . . .

Biggs Funeral Home Lake City FLBiggs Horry St . Chapel Madison FLBiggs Funeral Home Ft. White FLBrandenton Funeral Home Brandenton FLCardwell Funeral Home Port Orange FLCocoa Funeral Home Cocoa FLDale Maloney Funeral Home Port Orange FLEvans Funeral Home High Springs FLFraser Funeral Home Macclenny FLGooding Funeral Home Cross City FLHarris Funeral Home Live Oak FLHelm Funeral Home Green Cove FLJoe P Burns Funeral Home Perry FLKnauff Funeral Home Cheifland FLKnauff Funeral Home Williston FLT.J . Beggs Jr . & Sons Funeral Home Madison FLWylie-Baxley Funeral Home Inc Cocoa FLWylie-Baxley Funeral Home Inc Merritt Island FL

Wylie Baxley Funeral Home Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . ..... . ... .. ... .. Rockledge. .. ... .... .. ... . ... .. . .. . . . . . . . . . . . . . . FL. . . . . . .. ...14 FL (Tampa)

C. E. Prevatt Funeral Home Tampa FLColeman & Ferguson Company Dade City FL

Coleman & Ferguson Company Zephyrhills FL

Covell Funeral Homes Inc Holmes Beach FL

Curry-Raley Funeral Home Wauchula FL

Garden Sanctuary Funeral Home Seminole FL

Moody Funeral Home Fort Meade FL

Oakley Funeral Home Zephyrhills FL

Oakley Funeral Home & Cemetary Dade City FL

5

Phil Kiser Funeral Home Inc Fort Meyers F L

Rhodes Funeral Directors Inc Clearwater FL

Scott Funeral Home.. .. . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lake Placid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FL. . . . . . . . . . . . . .

15 AL,

(Pensacola), LA, MSBaldwin-Lee Funeral Directors Jackson MS

Bayview Funeral Home Foley A L

Bayview Funeral Home Daphne A L

Bayview Funeral Home-Fairhope Chapel Fairhope A L

Browning Funeral Home Pontotoc MS

Browning Funeral Home Water Valley MS

Browning Funeral Home Ecru MS

Cockrell Funeral Home Macon MS

Evangeline Funeral Home Inc Delcambre LA

Evangeline Funeral Home Inc Jeanerette LA

Evangeline Funeral Home Inc New Iberia LA

Evangeline Funeral Home Inc St . Martinville LA

Fisher-Riles Funeral Directors Vicksburg MS

Fuqua-Bankston Funeral Home Ozark AL

Holder-Wells Funeral Home Moss Point MS

Leitz-Eagan Funeral Home Metairie LA

Little Chapel Funeral Home Fort Walton FL

Planned Funeral Services, Inc . New Orleans LA

Riemann Funeral Home Gulfport MS

Schoen Funeral Home Covington LA

Tharp-Sontheimer-Tharp Funeral Home New Orleans LA

Searcy Funeral Home Enterprise A L

Stephens Funeral Home Meridian MS

Stringer Funeral Home Crystal Springs MS

Thweatt-King Funeral Home Cleveland MS

Wri t & Fer son Funeral Home. . .. .. . . ... .. . . . . . . . . . .. . . . . . . . .. . ... .. . .. .. . . . . . . . . . . . . . . . . . . . . . . . . Jackson. . . . . . . . . . . . . . . .- . . . . . . ... . ... ..... . ... ... .. . ... .. MS.._. .. .. . . . . . .

16 HIWilliams Funeral Service Honolulu HI

17 IAAlexander-Johnson Funeral Chapel Ottumwa IA

Lange Funeral Home Centerville I A

18 OR, WAAmerican Burial & Cremation Olympia WA

Bateman Carroll Funeral Chapel Gresham OR

Bauer Funeral Chapel Snohomish WA

Bishop Funeral Chapel Pendleton OR

Bronleewe-Bass Funeral Home Hillsboro OR

Dahl's Ditlevsen-Moore Funeral Home Kelso WA

Howell-Edwards-Doerksen Salem OR

Jerns Funeral Home Bellingham WA

Jems Funeral Home Blaine WA

Jones & Jones Funeral Directors Inc Wenatchee WA

6

20 GA

Keizer Funeral Chapel Keizer ORKimball Funeral Home Pullman WALienkaemper Chapel Ontario ORMerritt Funeral Home Inc Wapato WAMills & Mills Funeral Directors Olympia WAMountain View Funeral Chapel Walla Walla WAPegg-Paxson & Springer Chapel Beaverton ORPower's Funeral Home Puyallup WA

Power's Orting Funeral Home Ortig WAPower's Sumner-Voiles Funeral Home Sumner WAPrice-Helton Funeral Chapel Auburn WA

Schaefer-Shipman Funeral Home Marysville WA

Shaw & Sons Funeral Directors Yakima WASticklin Funeral Chapel Centralia WA

Vancouver Funeral Chapel Inc Vancouver WA

Ward's Funeral Chapel Leavenworth WAWaterville Funeral Home Wenatchee WA

Miscellaneous Washington State Proiertie s. . . . .. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . ...

A C Hemperley & Sons Inc East Point GA

Alpharetta Funeral Home Alpharetta GA

Bowen-NeSmith Funeral Home Vienna GA

E K May Funeral Home Tennille GA

Edo Miller & Sons Funeral Home Brunswick GA

Edo Miller -Dekle-Wainwright Funeral Home Kingsland GAFrazier & Son Funeral Home Rochelle GA

Harrell-Faircloth Funeral home Moultrie GA

Harvey Funeral Home Inc Dawson GA

Harvey's Reese Park Chapel Americus GA

Hodges-Turner Funeral Home Statesboro GA

Howard L Carmichael & Sons East Point GA

Hubert C Baker Funeral Home Savannah G A

Kennedy-Morgan Funeral Home Inc Metter GA

Lang's Chapel Sandersville G A

Lester L Hayman Funeral Home Savannah G A

Lowe's Funeral Home Helena G A

Mann & Waldon Funeral Home Conyers G A

Morrison Funeral Home Pembroke G A

Muchison Funeral Home Vidalia GA

NeSmith Funeral Home Claxton GA

Owen Funeral Home Inc Cartersville GA

Parkway Garden Chapel Forest Park GA

Poteet Funeral Home Augusta GA

Roswell Funeral Home Roswell GA

Roundtree Funeral Home Homerville GA

Sandy Springs Chapel Inc Altanta GA

Stone Mountain Chapel Stone Mountain GA

Tara Garden Chapel Jonesboro GA

7

Thomas L . King Funeral HomeThompson-Strickland-Waters Funeral Home

Winkenhofer Flint Hill Funeral Home

Winkenhofer Funeral HomeWinkenhofer Pine Ridge Funeral Home

Woodstock Funeral Home Inc. . . . . . . . .. . .. . .. . .. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . ... .. ... . ..21 NC

22 SC

23

24

Biggs Funeral Home

Bowman Funeral HomeBunch-Johnson Funeral HomeCapps Funeral HomeCarothers Funeral Homes Inc

Carothers Funeral Homes IncCarothers Funeral Homes Inc

Carothers Funeral Homes IncCarpenters Funeral Home

Carter Funeral Home

Dallas Funeral HomeHanes-Lineberry Funeral ServiceHankins-Whittington Funeral Service

Loflin Funeral HomeMackie-High Funeral Home

Marks Funeral HomeMitchell Funeral Home & CreamtoryMitchell Funeral Home

Padgett Funeral HomePierce Funeral ServiceReeves Funeral Home

Reynolds Funeral HomeSandling Funeral Home

Sisk-Butler Funeral HomeWestmoreland Funeral Home IncWilliams-Dearborn Funeral Service

Wilson Funeral Servic e. . . . . . . . . . . . . . . . . . . . . . . . . .. . .. ... .. ..... . . .. . . . .. . . .. . . . .. . ... .. .. . .. ... . .. . .

Bass Funeral Home

Caughman Harman Funeral HomeMahaffey Funeral Home Inc

York Funeral Home. . . . . ... . . . .. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .TX (Houston)

Earthman Funeral HomesOak Park Funeral Home Inc

Palms Funeral Home. . .. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .TX (South)

Angelus Funeral HomeColonial Funeral HomeDarling-Mouser Funeral Home Inc

Galloway & Sons Inc

Martinez

SylvaniaAustell

SmyrnaKennesawWoodstock

WilliamstonMarshallStatesville

Mars HillBelmont

GastoniaMt. Holly

Stanley

CherryvilleGarlandDallas

GreensboroCharlotte

LibertyGranite FallsRockinghamRaleigh

RaleighWallaceKernersville

Hope MillesEdenFranklinton

Bessemer Ci tyMarion

MatthewsCharlo tte. . .. ... ... . ... .. .... ... ......

Rock Hill

LexingtonLancasterYork.. ... . . . .. . . . . . . . . . .

HoustonAlvinAngleton

Beeville

Universal CityBrownsvilleBeeville

GA

GA

GA

GA

GA

GA.. . ... .. ... . .

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

NC

.... .. C. . . . . . . . . . . . . .

SCSCSCSC

TXTX

. . . .T. . . . . .X. . . . . . . ... .. ...

TX

TX

TX

TX

8

Memorial Funeral Home Marfa T XTrevino Funeral Home Inc Brownsville T X

25 AL, AR, FL,

GA, LA, TXBrooks-Cargile Funeral Home Montgomery ALCurtis & Son Funeral Home Sylacauga ALEdo Miller-Dekle-Wainwright Funeral Home Kingland GAHarper-Talasek Funeral Home Killeen TXKilgroe Funeral Home Leeds ALKilgroe Funeral Home Pell City ALLimestone Chapel Athens ALMoss-Terry Funeral Services Cullman ALRoselawn Funeral Home Decatur ALWalker Chapel Funeral Home. . .. . . . . . . .. . ... .. ... ... . .. ... . .. . . . . .. . .. . . . . . . . Fultondale.. . . . ... . ..._.. ... .. . .. . ... . . . .. . . . . . . . . . . . . . . . . . . . AL._ ... ......

26 NY,A A Mariani & Son, Inc Providence RIBuckler Johnston Funeral Home Westerly RICarpenter's Funeral Homes Inc Corning NYColoni Funeral Home New Windsor NYCorbett-Quirk-Pontarelli Funeral Home Providence R IEdward F Carter Inc Croton on NYEdward F Carter Inc Montrose NYFerguson Funeral Home Washingtonville NYJames Funeral Home Massapequa NYJohn J Healey Funeral Home, Inc Brooklyn NYLang-Tobia-Dipalma Funeral Home Babylon NY

Prata Funeral Home Providence RIR Stutzmann & Son Inc Queens Village NY

Ridge Chapels Inc Brooklyn NYRomano Funeral Home Providence RIT . J . Mcgowan & Sons Funeral Home Congers NY

T. J . Mcgowan & Sons Funeral Home Garnerville NYT. J . Mcgowan & Sons Funeral Home Haverstraw NYVay-Schleich & Meeson Funeral Home Inc Rochester NY

Vay-Schleich & Meeson Funeral Home Inc Rochester NY

Vernon C Wagner Funeral Homes Inc Hicksville NYWanamaker & Carlough Funeral Home Suffern NY

Wanamaker & Carlough Funeral Home Sloatsburg NY

Wattengel Funeral Home Inc North NYWeeks Funeral Home Inc Warsaw NYWilbur Romano Funeral Home Warren RI

27 AR, KS, MO,

NE, OK, TXAllen-Korzenewski Funeral Home Abiline TX

Bailey Funeral Home Clyde TX

Bath Funeral Home Altamont KS

Bill Eisenhour Funeral Homes Del City OK

9

Carlson Funeral Home Emporia KS

Chaney's Funeral Home Norman OK

Chism-Smith Funeral Home Inc Irving TX

Comstock Funeral Home Unionville MO

Cooper-Althouse Funeral Home Miami OK

Davis-Moms Funeral Home Brownwood TX

Drake-Jones Funeral Home Talihina OK

Ed C Smith & Bros Funeral Directors Dallas TX

Elliott-Hamil Funeral Home, Inc Abiline TX

Frederick Funeral Home Frederick OK

Gaskill-Owens Funeral Chapel Shawnee OK

Geo C Price Funeral Directors Levelland TX

Grace Memorial Chapel Ponca City OK

Gray Funeral Home Grandfield OK

Gray-Gish Funeral Home Frederick OK

Greer Funeral Home Granite OK

Greer Funeral Home Mangum OK

Guardian Midtown Funeral Home Oklahoma City OK

Guardian Northside Funeral Home Oklahoma City OK

Guardian Westside FH/Westside Chapel Oklahoma City OK

Guilford & Thomas Funeral Home Miami OK

Harding-Orr & McDaniel Funeral Home Inc El Paso TX

Harding-Orr & McDaniel (Mount Franklin) Funeral El Paso TX

Harkey Funeral Home Monahans TX

Hawks Funeral Home Wellington KS

Hawks Funeral Home Arkansas City KS

Hillside Funeral Home Wichita K S

Hubbard-Kelly Funeral Home Odessa TX

Hudson-Phillips Funeral Home Holdenville O K

Huff-Slay Funeral Home Pilot Point T X

Hughes Funeral Home-Jefferson Chapel Dallas TX

Hughes Funeral Home-Cedar Hill Chapel Dallas TX

Hughes Funeral Home-North Chapel Dallas TX

Hunsaker-Wooten Funeral Home Fairfax OK

Johnson's Funeral Home San Angelo TX

Kern-Schneider Kiesau Funeral Home Inc Clinton OK

Kiker-Seale Funeral Home Inc Colorado City TX

Lawton-Ritter-Gray Funeral Lawton OK

Lemons Funeral Home Plainview T X

Lowell-Tims Funeral Home Altus OK

McClure Funeral Home Cordell OK

McClure Funeral Home Sentinel OK

McMahans Funeral Home Norman OK

Morehead-Goetz Funeral Home inc Comanche OK

Nation Funeral Home Broken Bow O K

Patterson-Greer Funeral Home Hollis OK

Potts Chapel Independence K S

Reed-Culver Funeral Home Tahlequah OK

Roger Pool Funeral Home Inc Seminole TX

10

Seeger Funeral HomeSeeger Funeral Home

Smith Funeral Home

Buffalo OKLaverne OK

Ada OK

Miscellaneous Arkansas, Kansas & Oklahoma Propertie s

28 LA (North)Wellman Funeral Home Shreveport LA

11

CEMETERIES

I CA (Northern )

2 CA (Southern)

Fred Young & Co . Mortuaries Healdsburg CA

Fred Young & Co . Mortuaries Cloverdale CA

Keaton's Mortuary San Rafael CA

Conrad Lemon Grove Mortuary Lemon Grove CA

Conrad Lemon Grove Mortuary Lemon Grove CA

Delano Mortuary Lake Isabella CA

Humphrey Chula Vista Mortuary Chula Vista CA

Jensen Carpenter Mortuary Needles CA

Merkley-Mitchell Mortuary San Diego CA

Oceanside Mortuary Oceanside CA

Pinkham-Mitchell Mortuary Imperial Beach CA

Rose Hills Mortuary. . . . . . . . . . . . .. .. .. . . .. . . . . .. . . . . . . . . . . . . . . . . . . . . . Whittier. . . CA

3 CO, ID, MT ,

ND, SD, WY

Behrens Mortuary Inc Rapid City SD

White Mortuary Inc Twin Falls. . . . . . . . . . . . . . ID. ._ . . . .. .. ..

4 KYMurray Memorial Gardens

Maple Lawn Park CemeteryWoodlawn Memorial Gardens

Murray KY

Paducah KYPaducah. . . . .. . ... ... .. . ... . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 IL

6 IN

9 TN

Zefran Funeral Home Ltd Chicago IL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapel Lawn Memorial Gardens

Day Mortuary

Deremiah-Frye Mortuary

Moster & Cox Mortuary

Schererville IN

Bloominton INBloominton IN

Rushville I N

12

Coffey Mortuary Inc Tazewell TNMayes Mortuary Inc Morristown TN

McCarty Mortuary Knoxville TN

12 FL (Miami)

Key West Mortuary Key West FL

15 AL,

(Pensacola), LA, M S

Beau Pre Cemetery Jeanerette LAHollabaugh-Spindle Mortuary Baton Rouge LAMcLaughlin Mortuary Fort Walton FL

16 HI

Diamond Head Mortuary Honolulu HI

Nuuanu Memorial Park Mortuary Honolulu HIOrdenstein's Hawaiian Memorial Park Kaneohe HI

Valley of the Temples Mortuaries Kaneohe HIWindword Mortuary Kaneoh e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . H I. . . . _ . . . . . . . . . . . . . . . . . . . ... .

18 OR, WA

Donelson-Sewell & Mathews Mortuary HillsboroHaakinson-Groulx Mortuary Inc Clatskanie

20 GA

Peebles-Curry Durden Mortuary Swainsboro

21 NC

22 SC

OR

OR

GA

Greene

13

24 TX (South)

Oak Bluff Cemetery

Virgil Wilson MortuaryVirgil Wilson Mortuary Inc

25 AL, AR, FL,GA, LA, T X

Adkins-Sheppard Mortuary

27 AR, KS, MO,

NE, OF, TX

Port Noches TX

Mission TXMcAllen TX

Folkston GA

Sunset Memorial Gardens Cemetery Lawton OK

14

The following were the combination propert ies offered for sale :

18 OR,

Evergreen Funeral Home (& Everett WAOlympic Funeral Home & Cemetery Olympia W A

b. The groups that were sold had the following published sale prices :

LOWEN SALE S

Property Location State Brayer

Huff Cook FH, Inc. & Castlewood, VA Robert D. BennettHER, Inc. Honaker/Lebanon, VA

Oak Park FH,Palms FH

Sears Middleton-Jones FH

Virgil Wilson FHGarza-Elizondo FH

Cresthaven FHCresthaven FH & CemeteryNew Crown Cemetery

Alvin, TXAngleton, TX

N. Sycracuse, NY

McAllen, TXHarlingen, TX

Michael A Jones,

Gropo Deco Texas

Bedford, IN

Bedford, INIndianapolis, IN

Dall/McVfcker FH Longview, WA

Longview Memorial Park Longview, WA

Dabl/McVicker FH Toledo, WA

Dahl/McVicker FH Cathlamet, WA

Dabl/McVickcr FH Castle Rock, WANorthwood Park Cemetery Ridgefield, WA

Lower Valley Memorial Gardens Sunnyside, WA

Dahl/McVkkrr FH Kelso, WALitwiller FH Ashland, OR

Bishop Funeral Chapel Pendleton, OR

Monument Memorial Park Woodland, CA

Futara Group, LLC

The Pierce Group,

The Ce tin a

PurchasePrice

$1,800,000

$1,318,000

$625,000

$300,000

$1,100,000

$3,000,000

$475,000

15

Oak Park FH Alvin, TX United Cemetery $1,318,000Palms FH Angleton, TX

Sears-Middleton-Jones FH North Syracuse, Michael A. Jones, $625,000

Dunn & Kelley/Prater & Dunn FH Salyersville, KY Central Kentucky $ 16,154,000Engle FH , Inc Hazard , KY FuneralJohnson Vaughn FH , Inc . Bowling Green, KY

Lewis FH IrvineRoberson FH South Shore, KYEngle's-Per ry County Chapel Hazard, KYMcCrea ry County FH Whitley City, KYDwayne Walker FH Hyden, KYetc .

Behrens Mortuary Inc Rapid City, SD Vertin Acquisition $9,000,000Boelter Funeral Home Bismarck, ND

Buck-Heggie Funeral Home Laramie, WYDakota Memorial Chapel Bismarck, ND

Eastgate Funeral Service BismarckHofineister Funeral Chapels Inc Pierre, SDHudson's Funeral Home Lander, WY

Livingston-Malletta-Geraghty Missoula, MTMischel-Olson Chapel Dickinson, N D

Osthus Funeral Home Aberdeen, SD

Squire-Simmons-Carr Funeral Home Missoula, MTSunset Memorial Funeral Home Missoula, MT

Thompson Funeral Home Inc Garrison, NDWeigel Funeral Home Mandan, ND

Storage Unlimited Rapid City, S D

Myers Funeral Home Linton, NDChampion Funeral Home Sheridan, WYCoal Creek Memorial Cemetery Louisville, C OMountain Vale Memorial Park Canon City, COSunset Memorial Cemetery Missoula, M T

Glacier Memorial Gardens Kalispell, MTSunset Memorial Gardens of Billings, M TRestlawn Memory Gardens Huron, S D

Wyoming Memorial Gardens Casper, WY

Restlawn Cemetery, Inc . Pocatello, I D

Carlson Funeral Home Emporia KS Charter Funerals, $6,850,000Chaney's Funeral Home Norman OK

Chism-Smith Funeral Home Inc Irving TX

Drake-Jones Funeral Home Talihina OK

16

Ed C Smith & Bros Funeral Dallas TX

Frederick Funeral Home Frederick O K

Gray-Gish Funeral Home Frederick O K

Greer Funeral Home Granite O K

Greer Funeral Home Mangum O KHillside Funeral Home Wichita KS

Hudson-Phillips Funeral Home Holdenville OKHughes Funeral Home-Jefferson Dallas TX

Hughes Funeral Home-Southland Dallas TX

Hughes Funeral Home-North Chapel Dallas TX

Hughes Funerals Dallas TX

Lowell-Tims Funeral Home Altus O K

Lowell-Tims Funeral Home Eldorado O K

McClure Funeral Home Cordell O K

McClure Funeral Home Sentinel OK

Morehead-Goetz Funeral Home inc Comanche OK

Morehead-Goetz Funeral Home inc Terral OK

Morehead-Goetz Funeral Home inc Ryan OK

Patterson-Greer Funeral Home Hollis OK

Seeger Funeral Home Buffalo OK

Seeger Funeral Home Laverne OK

Smith Funeral Home Ada OK

Stout Funeral Home Wewoka OK

Tipton Funeral Home Tipton OK

Dudley M . Hughes FH-Cedar Hill Cedar Hill OKDudley M. Hughes FH-Buckner Dallas TX

Batesville Funeral Services Batesville AR

Nashville Funeral Home Nashville AR

Fryberger Mortuary Great Bend KS

Hawks Funeral Home Wellington, K S

Janousek Funeral Home LaCrosse, KS

Boyd E . Braman Mortuary Omaha KS

Denver Jones Funeral Home Wilburton OK

Kiesau Funeral Home Clinton OK

McCafferty-Bolick Funeral Home Tonkawa OK

Benton County Memorial Park Rogers AR

Mapelwood & Memorial Lawn Parsons KS

Memorial Lawn Cemetery Parsons KS

Garden of Memories Pittsburgh KS

Sunset Memory Gardens Leavenworth KS

Mound Grove Cemetery Independence MO

Park Cemetery Carthage MO

West Lawn Memorial Park Grand Island NE

Ada Memorial Park Ada OK

Crown Hill Memorial Park Dallas TX

Swan Hill Cemetery Ada O K

17

Gregg L . Mason Funeral Home

Hollabaugh- Spindle Funeral Home

Gethsemane Cemetery, Inc .

Gethsemane North

Paradise Gardens

Meiwood Cemetery & Gardens

Southern Memorial GardensCrescent Hill Memorial Gardens

Cedar Hill Memorial Park

Miami

Baton RougeMobile

Eight MileEdmondsonStone Mountain

Baton Rouge

ColumbiaMansfield

Comstock Funeral Home Unionvill e

Roundtree-Dixon-Bowen Funeral Blackshear

FL WE MemorialLA

AL

AL

AR

GA

LA

SC

TX

MO Newman Funera l

GA Seven Pines

Desert CremationHadley Funeral Chapels, Inc . Visalia CA

Hadley Funeral Chapels, Inc . Farmersville CAOceanside Mortuary (Coge Oceanside CA

Mountain Valley Mortuary Joshua Tree CAMountain Valley Memo rial Park Joshua Tree CA

Lake Havasu Memorial Gardens Lake Havasu City CA

Ceredo Mortuary Ceredo

Ferrell Mortuary Huntingto n

Harbert Funeral Chapel SalemStanely N. Vaughn Funeral Home Parkersburg

Spurgeon Funeral Home West Union

Tankersley Funeral Home Mullen sWilcoxen Funeral Home Point Pleasan t

Behrens Mortuary, Inc . Rapid City

KY Cemeteries (16)

Macer-Hall Funeral Home New Castle, I N

Main & Frame Funeral Home New Castle, IN

Main & Frame Blue River Chapel New Castle, IN

JD Stripe, Inc .

Carpenter's FH Cherryville, NC Citadel

Gaskins FH-Red Springs Rowland NC

Mackie-Gentry FH Yadkinville NC

18

WV West Virginia

WV Services, LLC

WV

WVWVWVWV

SD Vertin Acquisition

Rock of Ages Corp

Samuel W. Hall, Inc .

$3,300,00 0

$140,00 0

$300,00 0

$1,000,00 0

$2,050,00 0

$600,000

6,800,000

$550,000

335,000

$5,250,000

Sisk-Butler FH Bessemer City, N CWilliams-Dearborn Funeral Matthews, N C

Carter FH Garland N C

Reynolds Funeral Service Eden N C

Padgett FH Wallace NC

Sandling FH Franklinton NC

Charlotte Memorial Gardens Charlotte NCChatham Memorial Park Siler City NCDevotional Gardens Warsaw N C

Grandview Memorial Park Clinton N C

Hillcrest Memorial Park Clinton N C

Edgecombe Memorial Pak Tarboro N C

Gardens of Gethsemane Rocky Mount NC

Evergreen Memorial Estates Grifton N C

Evergreen Memorial Cemetery, Princeton N C

Fairview Memorial Park Albermarle NC

Gardens of Faith Cemetery Lumberton NC

Devotional Gardens Cemetery & Dunn NCHighland Memorial Gardens Ashoskie NC

Bladen Memorial Gardens Bladenboro NC

Lumbee Memorial Gardens Lumberton NC

Oak Ridge Memorial Park Pink Hill NC

Pamlico Memorial Gardens Washington NC

Rockfish Memorial Cemetery Wallace NC

Rose Hill Memorial Park, Inc . Fallston NC

Roselawn Memorial Gardens Reidsville NC

Rutherford County Memorial Forest City NC

Stanly Gardens of Memory Albermarle NC

West Lawn Cemetery Elizabeth City NC

Ruzich Funeral Home Chicago IL Devonshire

Ruzich Funeral Home Whiting, I L

Chapel Hill Funeral Home Dixon I L

Mittendorf-Calvert Funeral Home Champaign I L

Eden Memorial Park Schiller Park I L

Chapel Hill Memorial Park Dixon I L

Kankakee Memorial Gardens Kankakee I L

Resthaven Memorial Gardens Mattoon I L

Mount Hope Cemetery Champaign I LRoselawn Cemetery Champaign I L

Woodlawn Cemetery Urbana I L

Lincoln Memorial Gardens Urbana I L

Pine View Memorial Park Waukegan I L

Bishop Funeral Chapel Pendleton OR New Bishop Funeral

$15,200,000

$335,000

19

Gorton Funeral Home Coventry RI ALA Holdings , LLC $850,000Rushlow-Iacoi & Associate Westerly RI

Homelani Memorial Park Hilo HI RightStar $35,000,000Kona Memorial Park Holualoa H I

Diamond Head Mortua ry Honolulu H I

Kukui Mortuary Honolulu H I

Nuuanu Mortua ry Kaneohe H IWindward Mortua ry Kaneohe H I

Ordestein 's Hawaiian Memorial Kaneohe H IOrdenstein ' s Williams Funeral Kaneohe H I

Maui Memorial Park Wailuku H I

Nakamura Mortua ry Wailuku H I

Valley of the Temples Memorial Kaneohe H I

Windward Mortua ry Kaneohe H I

Graceland Memorial Park North Miami FL Cemex , Inc. $800,000

Gracleand Memorial Park South Miami F L

Crawford County Memorial Crestline OH Ascend , Inc. $2,200,000

East Lawn Memorial Park Marietta O H

Evergreen Memorial Gardens Belpre O HFort Steuben Burial Estates Wintersville O H

Meigs Memory Gardens Pomeroy O H

Pineview Memorial Park Warren O H

Oak Grove Memorial Park Lexington OHAthens Memo ry Gardens Athens OHGreenlawn Memo ry Gardens Athens OH

Seneca Memory Gardens Chapel Tiffin OHRiverview Memory Gardens Defiance OH

Memorial Gardens Association Canton IL Sedgwick Holdings, $140,000

d/b/a White Chape l

Bicknell Memorial Cemete ry Bicknell IN Futura Group , LLC $750,000

Park View Cemetery Alexandria I N

Rest Haven Memorial Park Lafayette I N

Sugarland Memorial Gardens Washington I N

Long & Folk Funeral Home Saint Ma rys OH Bayliff & Eley $700,000

Long & Folk Funeral Home Wapakoneta OH

20

Burris Funeral Home, Inc . Crossville TN Denco Holdings ,

Family Funeral Service Group, Oak Ridge TNJohnson FH of Church Hill Church Hill TNWeaver FH dba Jones & Son FH Oneida T NWeaver FH dba West-Murley FH Onieda T N

DMA Corp dba Dandridge Dandridge TN

DMA Corp dba McMinn Memory Athens TN

Family Funeral Service Group Clinton TN

Kingston Memorial Gardens dba Kingston T NRoane Memorial Gardens dba Rockwood T N

Sweetwater Valley Memorial Sweetwater T N

Bowen-NeSmith FH (BN Inc .) Unadilla GA Brannen-NeSmith ,

Bowen-NeSmith FH (BN Inc .) Vienna G A

Forest Park Cemetery of Shreveport LA Letum, Inc .

Forest Park Cemetery West of Shreveport LA

Wellman Funeral Home Shreveport LA

Wellman Funeral Home Shreveport LA

Kennedy-Morgan FH Metter GA Kennedy Funera lKennedy-Morgan FH Cobbtown GAKennedy Monument Company of Metter GA

East Shadowlawn Memorial Lawrenceville GA East Shadowlawn

Wattengel Funeral Home, Inc . North Tonawanda NY

Curry Raley Funeral Home Wauchula F L

Rhodes Funeral Directors, Belcher Clearwater F L

Rhodes Funeral Directors, Druid Clearwater FL

Bradenton Funeral Home (Memorial Bradenton FL

Moody Funeral Home Fort Meade FL

Royal Palm FH & Cemetery North St . Petersburg FL

Royal Palm Cemetery St . Petersburg FL

Sarasota Memorial Park Cemetery Sarasota FL

Knee Funeral Home of Wilkinsburg Wilkinsburg

Halverson Chapel, Inc . Three Rivers

Lawton-Ritter-Gray FH LaNvto n

Gray Funeral Home Grandfiel d

Sunset Memorial Gardens Laww'to n

Shrine of Memories . Inc. Ottumwa

Mass-Hinitt-Alexander Funeral OttumwaShrine of Memories d/b/a Memorial Ottunnaa

Burlington Cemetery Management Iona City

PA

MI

OK

OK

OK

IA

IA

IA

IA

21

Frederick W. Hamp

Work & Son, Inc .

Evan P. Baker, Jr .

Daniel & Robyn

Kara Gray Ludlum ,

Charter Financials,

$2,250,00 0

$425,00 0

$1,850,00 0

$488,00 0

$200,000

$175,000

$2,350,000

$135,000

$166,00 0

$2,584,11 1

$275,000

Burlington Cemetery Management Burlington IA

Burlington Cemetery Management Keokuk IA

Burlington Cemetery Management Fort Madison IA

Mount Auburn Cemetery St . Joseph MO

Blackhawk Garden of Memories Waterloo I A

Blackhawk Garden of Memories Waterloo IA

Memorial Gardens Assoc . d/b/a Macomb ILGlendale Memorial Gardens d/b/a Galesburg IL

Evergreen Memorial Gardens d/b/a Kewanee IL

North Lawn Cemetery Fort Dodge IA

Macedonia Memorial Park Canton GA

Broadlawn Memorial Gardens Buford G A

Walker Chapel FH Fultondale AL

Helm Funeral Home Green Cove Springs FL

Sasser-morgan-McClellan FH Quincy FL

Gordon E . Utt Funeral Homes Oaktown IN

Gordon E . Utt Funeral Homes Carlisle IN

Gordon E . Utt Funeral Homes Freelandville IN

McClure Funeral Service Bicknell IN

McClure Funeral Service Bruceville IN

Burningtree Memorial Gardens Decatur AL

Eastwood Memorial Gardens Montgomery AL

Limestone Memorial Gardens Athens AL

Livingston Memorial Gardens Livingston AL

Montgomery Memorial Cemetery Montgomery A L

Sumter County Memorial Gardens York A L

Walker Chapel Memorial Gardens Fultondale A L

Greenhills Memory Gardens Summerville G A

Lafayette Memory Gardens LaFayette GA

Mozlev Memorial Gardens Lithia Springs G A

Beverly Memorial Company Hattiesburg MS

Hillcrest Cemetery Petal MS

Roseland Park Hattiesburg MS

Hilcrest Memorial Gardens Cleveland TN

Sunset Memorial Gardens Cleveland TN

Wilson County Memorial Park Lebanon TN

Donald Nadeau

Denco Holdings ,

2 . Overvalued Pennsylvania Cemeteries Sold to Cornerstone in March 1999

Allegheny County Memorial Park McCandless PA

Mount Royal Meorail Park Shaler PA

Tri-State Cemetery Shaler P A

Mt. Lebanon Cemeten Carnegie P A

Chart iers Cemetery Carnegie P A

Voegtly Cemete ry Troy Hill P A

South Side Cemetery Natrona Heights PA

$450,00 0

$1,150,00 0

22

Caraopolis Cemetery Natrona Heights PA

Mt . Airv Cemetery Natrona Heights PA

Lakewood Memorial Park Ches« ick PA

Sunset Hill Memorial Gardens Cranberry PA

Woodlawn Cemetery Aliquippa PA

Greenlawn Burial Estates Butler PA

Castle View Memorial Park New Castle PA

Crestview Memorial Park Grove City PA

Pinewood Memorial Park Evans City PA

Roselawn Memorial Gardens Meadv ille PA

Greene County Memorial Park Waynesburg PA

370056.wpd 23

CERTIFICATE OF SERVICE

1, Carole A. Broderick, hereby certify that copies of the foregoing Plaintiffs' Consolidate d

Amended Class Action Complaint with attached Exhibit "A", was served this 21St day of August ,

2003, upon counsel for defendants, as follows :

VIA HAND DELIVERY VIA FEDERAL EXPRES S

David H. Marion, EsquireCraig E . Ziegler, EsquireMichael K . Twersky, EsquireMONTGOMERY McCRACKENWALKER & RHOADS, LL P123 South Broad StreetPhiladelphia, PA 19109

John W. Edwards, II , EsquireJONES DAY REAVIS & POGUE2882 Sand Hill RoadSuite 240Menlo Park, CA 94025

Brian A. Troyer, EsquireJONES DAY REAVIS & POGUENorth Point901 Lakeside AvenueCleveland, OH 4411 4

z & - P a~ ^►Carole A . Broderick

370430 .wpd