Kin Shing Wong, et al. v. New Oriental Education &...

Case 2 :12-cv-06316-MMM-JEM Document 1 Filed 07/23/12 of 40 Page ID #:5

1 GLANCY BINKOW & GOLDBERG LLP Lionel Z. Glancy (9134180) Michael Goldberg (#188669) Robert V. Prongay (#270796) Casey B. Sadler (#27424 1) N)

1925 Century Park East, Suite 2100 Los Angeles, California 90067 Telephone: (310) 201-9150

N)

Facsimile: (310) 201 -9160

I [Additional counsel on signature page]

Attorneys for PlaintiffKin Shing Wong

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

y°ia w~~- [Gw x) CLASS ACTION

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS

I,,

NEW ORIENTAL EDUCATION & JURY TRIAL DEMANDED TECHNOLOGY GROUP INC., MICHAEL MINHONG YU, and LOUIS T. HSIEH,

Defendants.

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KIN SHING WONG, Individually on Behalf of All Others Similarly Situated,

Plaintiff,

Case 2: 12-cv-06316-MMM-JEM Document 1 Filed 07/23/12 of 40 Page ID #:6

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Plaintiff Kin Shing Wong ("Plaintiff'), by and through his attorneys, alleges

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3 the following upon information and belief, except as to those allegations concerning

4 Plaintiff, which are alleged upon personal knowledge. Plaintiffs information and

5 belief is based upon, among other things, his counsel's investigation, which includes 6

7 without limitation: (a) review and analysis of regulatory filings made by NEW

8 ORIENTAL EDUCATION & TECHNOLOGY GROUP INC. ("EDU" or the

9 "Company"), with the United States Securities and Exchange Commission ("SEC");

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11 (b) review and analysis of press releases and media reports issued by and

12 disseminated by EDU; and (c) review of other publicly available information 13

14 concerning EDU.

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NATURE OF THE ACTION AND OVERVIEW

16 1. This is a class action on behalf of purchasers of EDU's American

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18 depositary shares ("ADSs") between July 21, 2009 and July 11, 2012, inclusive (the

"Class Period"), seeking to pursue remedies under the Securities Exchange Act of

1934 (the "Exchange Act") 21

22 2. EDU provides private educational services primarily in China. The

23 I Company offers a range of educational programs, services and products consisting 24

25 I primarily of English and other foreign language training, test preparation courses for

26 major admissions and assessment tests in the United States, the PRC and

27 Commonwealth countries, primary and secondary school education, development and

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distribution of educational content, software and other technology, and online

education.

3. On July 17, 2012, EDU disclosed that on July 13, 2012, the Company

was informed that the SEC had issued a formal order of investigation captioned, "In

the Matter of New Oriental Education & Technology Group Inc." According to EDU,

the Company believes that the investigation concerns whether there is a sufficient

basis for the consolidation ofB eij ing New Oriental Education & Technology (Group)

Co., Ltd., a variable interest entity of the Company, and its wholly-owned

subsidiaries, into EDU's consolidated financial statements.

4. On this news, shares of the Company declined $7.64 per share, or

34.32%, to close on July 17, 2012, at $14.62 per share, on unusually heavy volume.

5. On July 18, 2012, a report was published by the research firm Muddy

Waters Research, entitled, "Initiating Coverage on EDU - Strong Sell." The firm

rated EDU a "Strong Sell because it is probable that EDU will have a significant

restatement" and possible that its auditor will resign. The firm, in relevant part,

highlighted that:

• EDU has reported 392% revenue growth since going public. The revenue growth has been built on store growth of 338% during this time. EDU tells investors that its entire store network is company-owned, but this is a lie. As recently as last month, EDU president and CFO Louis Hsieh adamantly denied that EDU has any franchisees. This report shows Hsieh's statements are patently false - EDU has numerous franchisees. However, these franchisees are not a hidden bonus for investors. Rather, they are

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:12-cv-06316-MMM-JEM Document 1 Filed 07/23/12 of 40 Page ID #:8 Case 2

1 part of a substantial fraud in EDU's accounts.

• It is virtually certain that EDU uses the upfront franchise and other fees to inflate its cash balances inorder t receive unqualified audit opinions from its auditor.

• EDU's Beijing operation (which is approximately 35% of EDU's reported revenue) has prepared financial statements for 2009 - 2011 are fraudulent. EDU has submitted these financial statements to its domestic regulator, the Civil Affairs Bureau ("CAB"). It is probable that EDU used these same financials in the preparation of its U.S. filings.

• EDU's corporate structure is far more problematic than just a weak VIE. The schools that conduct its operations are ultimately state property. We question how EDU can consolidate them.

• We believe that as a result of our exposure of these problems with EDU's reporting, EDU will restate historical results - likely significantly; and, that its auditor will resign.



7. Throughout the Class Period, Defendants made false and/or misleading

statements, as well as failed to disclose material adverse facts about the Company's

business, operations, and prospects. Specifically, Defendants made false and/or

misleading statements and/or failed to disclose: (1) that the company lacked a

sufficient basis for the consolidation of Beijing New Oriental Education &

Technology (Group) Co., Ltd., a variable interest entity of the Company, and its

wholly-owned subsidiaries, into EDU's consolidated financial statements; (2) that,

as a result, the Company was improperly consolidating Beijing New Oriental

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Case 2 :12-cv-06316-MMM-JEM Document 1 Filed 07/23/12 of 40 Page ID #:9

1 1 Education & Technology (Group) Co., Ltd., into EDU's consolidated financial

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3 statements; (3) that, contrary to the Company's representations, EDU's entire store

4 network is not company-owned because EDU has numerous franchisees; (4) that

5 1 upfront franchise and other fees had inflated EDU's cash balances; (5) that the 6

7 I schools that conduct EDU's operations were ultimately state property; (6) that, as a

8 result of the foregoing, the Company's financial results were misstated during the

9 I Class Period; (7) that the Company lacked internal and financial controls; and (8)

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11 II that, as a result, the Company's financial statements and financial results were

12 materially false and misleading at all relevant times.

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14 8. As a result of Defendants' wrongful acts and omissions, and the

15 precipitous decline in the market value of the Company's securities, Plaintiff and

16 I other Class members have suffered significant losses and damages.

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18 JURISDICTION AND VENUE

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9. The claims asserted herein arise under Sections 10(b) and 20(a) of the

20 1 Exchange Act (15 U. S .C. § § 78j (b) and 7 8t(a)) and Rule 1 Ob-5 promulgated thereunder

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22 1 by the SEC (17 C.F.R. § 240.1Ob-5).

23 10. This Court has jurisdiction over the subject matter of this action pursuant 24

25 Ito 28 U.S.C. §1331 and Section 27 of the Exchange Act (15 U.S.C. §78aa).

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11. Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b)

27 II and Section 27 of the Exchange Act (15 U.S.C. §78aa(c)). Substantial acts in

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1 furtherance of the alleged fraud or the effects of the fraud have occurred in this

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3 Judicial District. Many of the acts charged herein, including the preparation and

4 dissemination of materially false and/or misleading information, occurred in

5 substantial part in this Judicial District. 6

7 12. In connection with the acts, transactions, and conduct alleged herein,

8 Defendahts directly and indirectly used the means and instrumentalities of interstate

9 commerce, including the United States mail, interstate telephone communications,

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11 I and the facilities of a national securities exchange.

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PARTIES 13

14 13. Plaintiff Kin Shing Wong, as set forth in the accompanying certification,

15 I incorporated by reference herein, purchased EDU ADSs during the Class Period, and

16 I suffered damages as a result of the federal securities law violations and false and/or 17

18 I misleading statements and/or material omissions: alleged herein.

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14. Defendant EDU is a Cayman Islands corporation with its principal

20 I executive offices located at No. 6 Hai Dian Zhong Street, Haidian District, Beijing,

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22 I People's Republic of China 100080.

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15. Defendant Michael Minhong Yu ("Yu") was, at all relevant times, 24

25 I Chairman of the Company's Board of Directors and ChiefExecutive Officer ("CEO")

26 I of the Company.

27 16. Defendant Louis T. Hsieh ("Hsieh") was, at all relevant times, President

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1 and Chief Financial Officer ("CFO") of EDU.

2 17. Defendants Yu and Hsieh are collectively referred to hereinafter as the

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4 "Individual Defendants." The Individual Defendants, because of their positions with

5 the Company, possessed the power and authority to control the contents of EDU's 6

7 reports to the SEC, press releases and presentations to securities analysts, money and

8 portfolio managers and institutional investors, i.e., the market. Each defendant was

9 provided with copies of the Company's reports and press releases alleged herein to

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11 be misleading prior to, or shortly after, their issuance and had the ability and

12 opportunity to prevent their issuance or cause them to be corrected. Because of their

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14 positions and access to material non-public information available to them, each of

15 these defendants knew that the adverse facts specified herein had not been disclosed

16 to, and were being concealed from, the public, and that the positive representations 17

18 which were being made were then materially false and/or misleading. The Individual

19 Defendants are liable for the false statements pleaded herein, as those statements were

20 each "group-published" information, the result of the collective actions of the

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22 I Individual Defendants.

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SUBSTANTIVE ALLEGATIONS 24

25 Background

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18. EDU provides private educational services primarily in China. The

27 Company offers a range of educational programs, services and products consisting

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Case 2:12-cv-06316-MMM-JEM Document 1 Filed 07/23/12 of 40 Page ID #:12

primarily of English and other foreign language training, test preparation courses for

major admissions and assessment tests in the United States, the - PRC :and

Commonwealth countries, primary and secondary school education, development and

distribution of educational content, software and other technology, and online

education.

Materially False and Misleading Statements Issued During the Class Period

19. The Class Period begins on July 21, 2009. On this day, the Company

issued a press release entitled, "New Oriental Announces Results for the Fourth

Quarter and Fiscal Year Ended May 31, 2009 and Adoption of Share Repurchase

Program." Therein, the Company, in relevant part, stated:

Highlights for the Fourth Fiscal Quarter Ended May 31, 2009

• Total net revenues increased by 47.9% year-over-year to US$59.4 million from US$40.2 million in the same period of the prior fiscal year.

• Non-GAAP net income, which excludes share-based compensation expenses, increased by 58.0% year-over-year to US$7.1 million from US$4.5 million in the same period of the prior fiscal year. GAAP net income increased by 49.8% year-over-year to US$2.6 million from US$1.8 million in the same period of the prior fiscal year.

• Non-GAAP income from operations, which excludes share-based compensation expenses, increased by 175.1% year-over-year to US$7.0 million from US$2.5 million in the same period of the prior fiscal year. GAAP income from operations increased to US$2.5 million from a loss of US$0.2 million in the same period

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1 of the prior fiscal year.

• Non-GAAP basic and diluted earnings per ADS, which excludes share-based compensation expenses, were US $0.19 andtJS$0. 19; respectively. GAAP basic and diluted earnings per ADS were US$0.07 and US$0.07, respectively. Each ADS represents four common shares of the Company.

• Total student enrollments in language training and test preparation courses increased by 8.2% year-over-year to approximately 330,200 from approximately 305,200 in the same period of the prior fiscal year.

Highlights for the Fiscal Year Ended May 31, 2009

• Total net revenues for the fiscal year increased by 45.6% year-over-year to US$292.6 million from US$201.0 million.

• Non-GAAP net income for the fiscal year increased by 34.6% year-over-year to US$77.8 million from US$57.8 million. GAAP net income increased by 24.5% year-over-year to US$61.0 million from US$49.0 million.

• Non-GAAP income fromoperations for the fiscal year increased by 43.6% year-over-year to US$77.7 million: from US$54.1 million. GAAP income from operations increased by 34.4% year-over-year to US$60.9 million from US$45.3 million.

• Non-GAAP basic and diluted earnings per ADS for the fiscal year were US$2.09 and US$2.03, respectively. GAAP basic and diluted earnings per ADS were US$1.64 and US$1.59, respectively. Each ADS represents four common shares of the Company.

• Total student enrollments in language training and test preparation courses increased by 19.5% year-over-year to approximately 1,519,500 from approximately 1,271,700 in the prior fiscal year.

• The total number of schools and learning centers increased to 270

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2-cv-06316-MMM-JEM Document 1 Filed 07/23/12 of 40 Page ID #:14 Case 2:1

as of May 31, 2009, up from 207 as of May 31, 2008. One new school was opened in the fourth quarter, bringing the total number of schools to 48 as of May 31, 2009, up from 47 as of February 28, 2009. The number of learning centers increased by: 12in the quarter to 222 as of May 31, 2009, up from 210 as of February 28, 2009.

20. On October 19, 2009, EDU filed its Annual Report on Form 20-F with

the SEC for the 2009 fiscal year. The Company's Form 20-F was signed by

Defendant Yu and reaffirmed the Company's financial results announced on July 21,

2009. The Company's Form 20-F also contained Sarbanes-Oxley required

certifications, signed by Defendants Yu and Hsieh, who certified:

1. I have reviewed this annual report on Form 20-F of New Oriental Education & Technology Group Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;

4. Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 1 5(e) and 15 d- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15 (f) and 15 d- 15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be

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designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly dufing the perIod iii which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financing reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

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16-MMM-JEM Document 1 Filed 07/23/12 of 40 Page ID #:16 Case 2:1

b) Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant's internal control over financial reporting.

21. On July 19, 2010, the Company issued a press release entitled, "New

Oriental Announces Results for the Fourth Quarter and Fiscal Year Ended May 31,

2010." Therein, the Company, in relevant part, stated:


• Total net revenues increased by 45.7% year-over-year to US$86.6 million from US$59.4 million in the same period of the prior fiscal year.

• Net income attributable to New Oriental increased by 118.7% year-over-year to US$5.8 million from US$2.6 million in the same period of the prior fiscal year.

• Non-GAAP net income attributable to New Oriental, which excludes share-based compensation expenses, increased by 26.9% year-over-year to US$9.0 million from US$7.1 million in the same period of the prior fiscal year.

• Income from operations increased by 46.3% year-over-year to US$3.7 million from US$2.5 million in the same period of the prior fiscal year. Non-GAAP income from operations, which excludes share-based compensation expenses, decreased 0.9% year-over-year to US$6.9 million from US$7.0 million in the same period of the prior fiscal year.

• Basic and diluted net income attributable to New Oriental per ADS were US$0.15 and US$0.15, respectively. Non-GAAP basic and diluted net income per ADS attributable to New Oriental, which excludes share-based compensation expenses, were US$0.24 and US$0.23, respectively. Each ADS represents four common shares of the Company.

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16-MMM-JEM Document 1 Filed 07/23/12 of 40 Page ID #:17

• Total student enrollments in language training and test preparation courses increased by 32.4% year-over-year to approximately 437,200 from approximately 330,200 in the same period of the prior fiscal year.

Highlights for the Fiscal Year Ended May 31, 2010

.

Total net revenues increased by 32.0% year-over-year to US$386.3 million from US$292.6 million.

Net income attributable to New Oriental increased by 27.5% year-over-year to US $77.8 million from US$61.0 million.

.

Non-GAAP net income attributable to New Oriental increased by 20.8% year-over-year to US$94.0 million from US$77.8 million.

• Income from operations increased by 26.9% year-over-year to US$77.3 million from US$60.9 million. Non-GAAP income from operations increased by 20.4% year-over-year to US$93.5 million from US$77.7 million.

• Basic and diluted net income attributable to New Oriental per ADS were US$2.06 and US$2.01, respectively. Non-GAAP basic and diluted earnings per ADS attributable to New Oriental were US$2.49 and US$2.43, respectively.

• Total student enrollments in language training and test preparation courses increased by 19.0% year-over-year to approximately 1,807,700 from approximately 1,519,500 in the prior fiscal year.

• The total number of schools and learning centers increased to 367 as of May 31, 2010, up from 270 as of May 31, 2009. The number of schools remained at 48, located in 40 cities as of May 31, 2010. The number of learning centers increased by 43 in the quarter to 319 as of May 31, 2010, up from 276 as of February 28, 2010.


1 the SEC for the 2010 fiscal year. The Company's Form 20-F was signed by

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Case 2:1


1 I Defendant Yu and reaffirmed the Company's financial results announced on July 19,

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3 2010. The Company's Form 20-F also contained Sarbanes-Oxley required

4 I certifications, signed by Defendants Yu and Hsieh, substantially similar to the

5 certifications contained in ¶20, supra. 6

7 23. On July 18, 2011, the Company issued a press release entitled, "New

8 I Oriental Announces Results for Fourth Quarter and Fiscal Year Ended May 31,2011;

9 Also Announces Four-for-One ADS Ratio Change Effective August 18, 2011."

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Therein, the Company, in relevant part, stated:


• Total net revenues increased by 58.7% year-over-year to US$137.4 million, from US$86.6 million in the same period of the prior fiscal year.

• Net income attributable to New Oriental increased by 147.8% year-over-year to US$143 million, from US$5.8 million in the same period of the prior fiscal year; excluding the approximately US$1.54 million loss from the disposal of two subsidiaries, Mingshitang School and Tomorrow Oriental (described below) in the quarter ("Disposal Loss"), net income attributable to New Oriental would have increased by 174.4% year-over-year to US$15.8 million, from US$5.8 million in the same period of the prior fiscal year.

• Non-GAAP net income attributable to New Oriental, which excludes share-based compensation expenses and Disposal Loss, increased by 113.0% year-over-year to US$19.2 million, from US$9.0 million in the same period of the prior fiscal year.

• Income from operations increased by 185.3% year-over-year to US$10.4 million, from US$3.7 million in the same period of the prior fiscal year; excluding the Disposal Loss, income from

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operations would have increased by 227.3% year-over-year to US$12.0 million, from US$3.7 million in the same period of the prior fiscal year.

• Non-GAAP income from operations, which excludes share-based compensation expenses and the Disposal Loss, increased by 122.1% year-over-year to US$15.4 million, from US$6.9 million in the same period of the prior fiscal year.

• Basic and diluted net income attributable to New Oriental per ADS were US$0.37 and US$0.37, respectively. Non-GAAP basic and diluted net income per ADS, which excludes share-based compensation expenses and the Disposal Loss, were US$0.50 and US$0.49, respectively. Each ADS currently represents four common shares of the Company. Effective on August 18, 2011, New Oriental will adjust the ratio of its ADS representing common shares from one ADS for four common shares to one ADSs for one common share.

• Total student enrollments in academic subjects tutoring and test preparation courses increased by 11.9% year-over-year to approximately 489,100, from approximately 437,200 in the same period of the prior fiscal year.

Highlights for the Fiscal Year Ended May 31, 2011:

• Total net revenues for the fiscal year increased by 44.4% year-over-year to US$557.9 million, from US$386.3 million.

• Net income attributable to New Oriental increased by 30.8% year-over-year to US$101.8 million, from US$77.8 million.

• Non-GAAP net income attributable to New Oriental for the fiscal year, which excludes share-based compensation expenses and the Disposal Loss, increased by 25.9% year-over-year to US$118.4 million, from US$94.0 million.

• Income from operations increased by 23.5% year-over-year to US$95.5 million, from US$77.3 million. Non-GAAP income from operations for the fiscal year, which excludes share-based

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compensation expenses and the Disposal Loss, increased by 19.9% year-over-year to US$112.1 million, from US$93.5 million.

• Basic and diluted net income attributable to New Oriental per ADS were US$2.66 and US$2.61 9 respectively. Non-GAAP basic and diluted earnings per ADS for the fiscal year, which exclude share-based compensation expenses and the Disposal Loss, were US$3.09 and US$3.03, respectively.

• Total student enrollments in academic subjects tutoring and test preparation courses increased by 15.6% year-over-year to approximately 2,089,600, from approximately 1,807,700 in the prior fiscal year.

• The total number of schools and learning centers increased to 487 as of May 31, 2011, up from 367 as of May 31, 2010. A net of 2 new schools were opened in the fourth quarter, bringing the total number of schools to 54 as of May 31, 2011, up from 52 as of February 28, 2011. The number of learning centers increased by 29 in the quarter to 433 as of May 31, 2011, up from 404 as of February 28, 2011.


the SEC for the 2011 fiscal year. The Company's Form 20-F was signed by

Defendant Yu and reaffirmed the Company's financial results announced on July 18,

112011. The Company's Form 20-F also contained Sarbanes-Oxley required

certifications, signed by Defendants Yu and Hsieh, substantially similar to the

certifications contained in ¶20, supra.

25. The statements contained in ¶19-24, were materially false and/or

misleading when made because defendants failed to disclose or indicate the

following: (1) that the company lacked a sufficient basis for the consolidation of

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Case 2 16-MMM-JEM Document 1 Filed 07/23/12 of 40 Page ID #:21

Beijing New Oriental Education & Technology (Group) Co., Ltd., a variable interest

entity of the Company, and its wholly-owned subsidiaries, into EDU'sconsolidated

financial statements; (2) that, as a result, the Company was improperly consolidating

Beijing New Oriental Education & Technology (Group) Co., Ltd., into EDU's

consolidated financial statements; (3) that, contrary to the Company's representations,

EDU's entire, store network is not company-owned because EDU has numerous

franchisees; (4) that upfront franchise and other fees had inflated EDU's cash

balances; (5) that the schools that conduct EDU's operations were ultimately state

property; (6) that, as a result of the foregoing, the Company's financial results were

misstated during the Class Period; (7) that the Company lacked internal and financial

controls; and (8) that, as a result, the Company's financial statements and financial

results were materially false and misleading at all relevant times.

Disclosures at the End of the Class Period

26. On July 17, 2012, the Company issued a press release entitled, "New

Oriental Announces Unaudited Financial Results for the Fiscal Quarter and Fiscal

Year Ended May 31, 2012." Therein, the Company, in relevant part, disclosed:

SEC Investigation

On July 13, 2012, the Company was informed that the U.S. Securities & Exchange Commission (the "SEC") had issued a formal order of investigation captioned "In the Matter of New Oriental Education & Technology Group Inc." The Company believes that the investigation concerns whether there is a sufficient basis for the consolidation of

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Case 2

2-cv-06316-MMM-JEM Document 1 Filed 07/23/12 of 40 Page ID #:22

Beijing New Oriental Education & Technology (Group) Co., Ltd., a variable interest entity of the Company, and its wholly-owned subsidiaries, into the Company's consolidated financial statements. The Company intends to fully cooperate with the SEC iii its investigation.



28. On July 18, 2012, a report was published by the research firm Muddy

Waters Research, entitled, "Initiating Coverage on EDU - Strong Sell." The firm

rated EDU a "Strong Sell because it is probable that EDU will have a significant

restatement" and possible that its auditor will resign. The firm, in relevant part,

highlighted that:

• EDU has reported 392% revenue growth since going public. The revenue growth has been built on store growth of 338% during this time. EDU tells investors that its entire store network is company-owned, but this is a lie. As recently as last month, EDU president and CFO Louis.Hsieh adamantly denied that EDU has any franchisees. This report shows Hsieh's statements are patently false - EDU has numerous franchisees. However, these franchisees are not a hidden bonus for investors. Rather, they are part of a substantial fraud in EDU's accounts.

• It is virtually certain that EDU uses the upfront franchise and other fees to inflate its cash balances in order to receive unqualified audit opinions from its auditor.

• EDU's Beijing operation (which is approximately 35% of EDU's reported revenue) has prepared financial statements for 2009 - 2011 are fraudulent. EDU has submitted these financial statements to its domestic regulator, the Civil Affairs Bureau ("CAB"). It is probable that EDU used these same financials in the preparation of its U.S. filings.

-17-

Case 2 16-MMM-JEM Document 1 Filed 07/23/12 of 40 Page ID #:23

• EDU's corporate structure is far more problematic than just a weak VIE. The schools that conduct its operations are ultimately state property. We question how EDU can consolidate them.

• We believe that as a result of our exposure of these problems with EDU's reporting, EDU will restate historical results - likely significantly; and, that its auditor will resign.



CLASS ACTION ALLEGATIONS

30. Plaintiff brings this action as a class action pursuant to Federal Rule of

Civil Procedure 23(a) and (b)(3) on behalf of a class, consisting of all those who

purchased EDU ADSs between July 21, 2009 and July 17,2012, inclusive (the "Class

Period") and who were damaged thereby (the "Class"). Excluded from the Class are

Defendants, the officers and directors of the Company, at all relevant times, members

oftheir immediate families and their legal representatives, heirs, successors or assigns

and any entity in which Defendants have or had a controlling interest.

31. The members of the Class are so numerous that joinder of all members

is impracticable. Throughout the Class Period, EDU' s securities were actively traded

on the New York Stock Exchange (the "NYSE"). While the exact number of Class

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

appropriate discovery, Plaintiff believes that there are hundreds or thousands of

members in the proposed Class. Millions of EDU shares were traded publicly during

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1 the Class Period on the NYSE. As of May 31, 2011. the Company had 158,379,387 I 2

shares outstanding. Record owners and other members of the Class maybe identified 3

4 from records maintained by EDU or its transfer agent and may be notified of the

5 pendency of this action by mail, using the form of notice similar to that customarily 6

7 used in securities class actions.

8

32. Plaintiff's claims are typical of the claims of the members of the Class

9 as all members of the Class are similarly affected by Defendants' wrongful conduct

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11 in violation of federal law that is complained of herein.

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33. Plaintiff will fairly and adequately protect the interests of the members

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14 I of the Class and has retained counsel competent and experienced in class and

15 I securities litigation.

16 34. Common questions of law and fact exist as to all members of the Class 17

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

19 I Among the questions of law and fact common to the Class are:

20 (a) Whether the federal securities laws were violated by Defendants'

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22 I acts as alleged herein;

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(b) Whether statements made by Defendants to the investing public

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25 I during the Class Period omitted and/or misrepresented material facts about the

26 business, operations, and prospects of EDU; and

27 (c) To what extent the members of the Class have sustained damages 28

-19-


1 and the proper measure of damages.

2 35. A class action is superior to all other available methods for the fair 4nd

3

4 efficient adjudication of this controversy since joinder of all members is

5 impracticable. Furthermore, as the damages suffered by individual Class members 6

7 may be relatively small, the expense and burden of individual litigation makes it

8 impossible for members of the Class to individually redress the wrongs done to them.

9 There will be no difficulty in the management of this action as a class action.

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11 UNDISCLOSED ADVERSE FACTS

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36. The market for EDU's securities was open, well-developed and efficient

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14 I at all relevant times. As a result of these materially false and/or misleading

15 I statements, and/or failures to disclose, EDU's securities traded at artificially inflated

16 I prices during the Class Period. Plaintiff and other members of the Class purchased

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18 or otherwise acquired EDU' s securities relying upon the integrity of the market price

19 I of the Company's securities and market information relating to EDU, and have been

20 I damaged thereby.

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22 37. During the Class Period, Defendants materially misled the investing

23 1 public, thereby inflating the price of EDU's securities, by publicly issuing false 24

25 I and/or misleading statements and/or omitting to disclose material facts necessary to

26 1 make Defendants' statements, as set forth herein, not false and/or misleading. Said

27 statements and omissions were materially false and/or misleading in that they failed 28

-20-


1 to disclose material adverse, information and/or misrepresented the truth about EDU's

2

3 business, operations, and prospects as alleged herein. -

4 38. At all relevant times, the material misrepresentations and omissions

5 particularized in this Complaint directly or proximately caused or were a substantial 6

7 contributing cause of the damages sustained by Plaintiff and other members of the

8 Class. As described herein, during the Class Period, Defendants made or caused to

9 I be made a series of materially false and/or misleading statements about EDU's

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11 I financial well-being and prospects. These material misstatements and/or omissions

12 I had the cause and effect of creating in the market an unrealistically positive

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14 assessment of the Company and its financial well-being and prospects, thus causing

15 I the Company's securities to be overvalued and artificially inflated at all relevant

16 I times. Defendants' materially false and/or misleading statements during the Class 17

18 I Period resulted in Plaintiff and other members of the Class purchasing the Company's

19 I securities at artificially inflated prices, thus causing the damages complained of

20 I herein.

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22 LOSS CAUSATION

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39. Defendants' wrongful conduct, as alleged herein, directly and 24

25 1 proximately caused the economic loss suffered by Plaintiff and the Class.

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40. During the Class Period, Plaintiff and the Class purchased EDUs

27 1 securities at artificially inflated prices and were damaged thereby. The price of the

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Case 2


1 I Company's securities significantly declined when the misrepresentations made to the

2

3 market, and/or the information alleged herein to have been concealed from the

4 I market, and/or the effects thereof, were revealed, causing investors's losses.

5 SCIENTER ALLEGATIONS 6

7 41. As alleged herein, Defendants acted with scienter in that Defendants

8 I knew that the public documents and statements issued or disseminated in the name

9 of the Company were materially false and/or misleading; knew that such statements

10

11 or documents would be issued or disseminated to the investing public; and knowingly

12 and substantially participated or acquiesced in the issuance or dissemination of such 13

14 statements or documents as primary violations of the federal securities laws. As set

15 forth elsewhere herein in detail, Defendants, by virtue of their receipt of information

16 reflecting the true facts regarding EDU, his/her control over, and/or receipt and/or 17

18 modification of EDU's allegedly materially misleading misstatements and/or their

19 associations with the Company which made them privy to confidential proprietary

20 information concerning EDU, participated in the fraudulent scheme alleged herein.

21

22 APPLICABILITY OF PRESUMPTION OF RELIANCE

(FRAUD-ON-THE-MARKET DOCTRINE) 23

24 42. The market for EDU's securities was open, well-developed and efficient

25 at all relevant times. As a result of the materially false and/or misleading statements 26

27 and/or failures to disclose, EDU's securities traded at artificially inflated prices

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Case 2


ii during the Class Period. On September 14, 2011, the Company's ADSs closed at a

2 Class Period high of $33.70 per share.' Plaintiff and other members:- of the Class

purchased or otherwise acquired the Company's securities relying upon the integrity

of the market price of EDU' s securities and market information relating to EDU, and

have been damaged thereby.

43. During the Class Period, the artificial inflation of EDU's securities was

caused by the material misrepresentations and/or omissions particularized in this

Complaint causing the damages sustained by Plaintiff and other members of the

Class. As described herein, during the Class Period, Defendants made or caused to

be made a series of materially false and/or misleading statements about EDU' s

business, prospects, and operations. These material misstatements and/or omissions

created an unrealistically positive assessment of EDU and its business, operations,

and prospects, thus causing the price of the Company's securities to be artificially

inflated at all relevant times, and when disclosed, negatively affected the value of the

Company securities. Defendants' materially false and/or misleading statements

during the Class Period resulted in Plaintiff and other members of the Class

purchasing the Company's securities at such artificially inflated prices, and each of

1 On August 18, 2011, EDU adjusted the ratio of its ADSs representing common shares from one ADS representing four common shares to one ADS representing one common share. All prices of ADSs herein have been adjusted to reflect this ADS-to-share ratio change.

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1 them has been damaged as a result.

2 44. At all relevant times, the market for EDU's securities was an efficient

3

4 market for the following reasons, among others:

5 (a) EDU securities met the requirements for listing, and was listed and 6

7 actively traded on the NYSE, a highly efficient and automated market;

8

(b) As a regulated issuer, EDU filed periodic public reports with the

9 SEC and/or the NYSE;

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11 (c) EDU regularly communicated with public investors via established

12 market communication mechanisms, including through regular dissemination ofpress

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14 I releases on the national circuits of major newswire services and through other wide-

15 I ranging public disclosures, such as communications with the financial press and other

16 I similar reporting services; and/or 17

18 (d) EDU was followed by securities analysts employed by brokerage

19 I firms who wrote reports about the Company, and these reports were distributed to the

20 I sales force and certain customers of their respective brokerage firms. Each of these

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22 I reports was publicly available and entered the public marketplace.

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45. As a result of the foregoing, the market for EDU's securities promptly

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25 1 digested current information regarding EDU from all publicly available sources and

26 reflected such information in EDU's ADSs share price. Under these circumstances,

27 all purchasers of EDU's securities during the Class Period suffered similar injury 28

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Case 2:1


1 through their purchase of EDU's securities at artificially inflated prices and a

2

3 presumption of reliance applies.

4

NO SAFE HARBOR

5 46. The statutory safe harbor provided for forward-looking statements under 6

7 certain circumstances does not apply to any of the allegedly false statements pleaded

8 in this Complaint. The statements alleged to be false and misleading herein all relate

9 to then-existing facts and conditions. In addition, to the extent certain of the

10

11 statements alleged to be false may be characterized as forward looking, they were not

12 I identified as "forward-looking statements" when made and there were no meaningful 13

14 I cautionary statements identifying important factors that could cause actual results to

15 I differ materially from those in the purportedly forward-looking statements. In the

16 I alternative, to the extent that the statutory safe harbor is determined to apply to any 17

18 I forward-looking statements pleaded herein, Defendants are. liable for those false

19 I forward-looking statements because at the time each of those forward-looking

20 I statements was made, the speaker had actual knowledge that the forward-looking

21

22 statement was materially false or misleading, and/or the forward-looking statement

23 was authorized or approved by an executive officer of EDU who knew that the 24

I statement was false when made. 25

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Case 2:1


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FIRST CLAIM Violation of Section 10(b) of

The Exchange Act and Rule 10-5 Promulgated Thereunder Against All Dëfeñdants -

47. Plaintiff repeats and realleges each and every allegation contained above

as if fully set forth herein.

48. During the Class Period, Defendants carried out a plan, scheme and

course of conduct which was intended to and, throughout the Class Period, did: (i)

deceive the investing public, including Plaintiff and other Class members, as alleged

herein; and (ii) cause Plaintiff and other members of the Class to purchase EDU' s

securities at artificially inflated prices. In furtherance of this unlawful scheme, plan

and course of conduct, defendants, and each of them, took the actions set forth herein.

49. Defendants (i) employed devices, schemes, and artifices to defraud; (ii)

made untrue statements of material fact and/or omitted to state material facts

necessary to make the statements not misleading; and (iii) engaged in acts, practices,

and a course of business which operated as a fraud and deceit upon the purchasers of

the Company's securities in an effort to maintain artificially high market prices for

EDU' s securities in violation of Section 10(b) of the Exchange Act and Rule 1 Ob-5.

All Defendants are sued either as primary participants in the wrongful and illegal

conduct charged herein or as controlling persons as alleged below.

50. Defendants, individually and in concert, directly and indirectly, by the

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Case 2:1


1 use, means or instrumentalities of interstate commerce and/or of the mails, engaged

2

3 and participated in a continuous course of conduct to conceal adverse matria1

4 I information about EDU's financial well-being and prospects, as specified herein.

5 51. These defendants employed devices, schemes and artifices to defraud, 6

7 while in possession of material adverse non-public information and engaged in acts,

8 practices, and a course of conduct as alleged herein in an effort to assure investors of

9 EDU's value and performance and continued substantial growth, which included the

10

11 making of, or the participation in the making of, untrue statements of material facts

12 and/or omitting to state material facts necessary in order to make the statements made

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14 about EDU and its business operations and future prospects in light of the

15 circumstances under which they were made, not misleading, as set forth more

16 particularly herein, and engaged in transactions, practices and a course of business 17

18 which operated as a fraud and deceit upon the purchasers of the Company's securities

19 during the Class Period.

20 52. Each of the Individual Defendants' primary liability, and controlling

21

22 person liability, arises from the following facts: (i) the Individual Defendants were

23 high-level executives and/or directors at the Company during the Class Period and 24

25 members of the Company's management team or had control thereof; (ii) each of

oil these defendants, by virtue of their responsibilities and activities as a senior officer

27 and/or director of the Company, was privy to and participated in the creation, 28

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Case 2


1 development and reporting of the Company's internal budgets, plans, projections

2 and/or reports; (iii) each of these defendants enjoyed significant personal contact and

4 familiarity with the other defendants and was advised of, and had access to, other

5 members of the Company's management team, internal reports and other data and 6

7 information about the Company's finances, operations, and sales at all relevant times;

8 and (iv) each of these defendants was aware of the Company's dissemination of

9 information to the investing public which they knew and/or recklessly disregarded

10

11 was materially false and misleading.

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53. The defendants had actual knowledge of the misrepresentations and/or

13 omissions of material facts set forth herein, or acted with reckless disregard for the

14

15 truth in that they failed to ascertain and to disclose such facts, even though such facts

16 were available to them. Such defendants' material misrepresentations and/or 17

18 omissions were done knowingly or recklessly and for the purpose and effect of

19 concealing EDU's financial well-being and prospects from the investing public and

20 supporting the artificially inflated price of its securities. As demonstrated by

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22 Defendants' overstatements and/or misstatements of the Company's business,

23 operations, financial well-being, and prospects throughout the Class Period, 24

25 Defendants, if they did not have actual knowledge of the misrepresentations and/or

26 omissions alleged, were reckless in failing to obtain such knowledge by deliberately

27 refraining from taking those steps necessary to discover whether those statements 28

-28-


1 were false or misleading.

2

3 54. As aresult of the dissemination of the materially false and/or misleading

4 information and/or failure to disclose material facts, as set forth above, the market

5 price of EDU's securities was artificially inflated during the Class Period. In 6

7 ignorance of the fact that market prices of the Company's securities were artificially

8 inflated, and relying directly or indirectly on the false and misleading statements

9 made by Defendants, or upon the integrity of the market in which the securities

10

11 trades, and/or in the absence of material adverse information that was known to or

12 recklessly disregarded by Defendants, but not disclosed in public statements by

13

14 Defendants during the Class Period, Plaintiff and the other members of the Class

15 acquired EDU' s securities during the Class Period at artificially high prices and were

16 damaged thereby. 17

18 55. At the time of said misrepresentations and/or omissions, Plaintiff and

19 I other members of the Class were ignorant of their falsity, and believed them to be

20 I true. Had Plaintiff and the other members of the Class and the marketplace known

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22 I the truth regarding the problems that EDU was experiencing, which were not

23 disclosed by Defendants, Plaintiff and other members of the Class would not have 24

25 purchased or otherwise acquired their EDU securities, or, if they had acquired such

26 securities during the Class Period, they would not have done so at the artificially,

27 inflated prices which they paid. 28

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Case 2:1


1

56. By virtue of the foregoing, Defendants have violated Section 10(b) of

2

3 the Exchange Act and Rule 10b-5 promulgated thereunder.

4

57. As a direct and proximate result of Defendants' wrongful conduct,

5 Plaintiff and the other members of the Class suffered damages in connection with 6

7 their respective purchases and sales of the Company's securities during the Class

8

10

11

12

I Period.

SECOND CLAIM Violation of Section 20(a) of

The Exchange Act Against the Individual Defendants

58. Plaintiff repeats and realleges each and every allegation contained above 13

14 as if fully set forth herein.

15

59. The Individual Defendants acted as controlling persons of EDU within

16 the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of 17

18 I their high-level positions, and their ownership and contractual rights, participation

19 in and/or awareness of the Company's operations and/or intimate knowledge of the

20 false financial statements filed by the Company with the SEC and disseminated to the

21

22 I investing public, the Individual Defendants had the power to influence and control

23 I and did influence and control, directly or indirectly, the decision-making of the 24

25 I Company, including the content and dissemination of the various statements which

26 Plaintiff contends are false and misleading. The Individual Defendants were providd

27 with or had unlimited access to copies of the Company's reports, press releases,

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Case 2:1


1 public filings and other statements alleged by Plaintiff to be misleading prior to

2

3 and/or shortly after these statements were issued and had the ability to prevent the

4 issuance of the statements or cause the statements to be corrected.

5 60. In particular, each of these Defendants had direct and supervisory I 6

7 involvement in the day-to-day operations of the Company and, therefore, is presumed I

8 to have had the power to control or influence the particular transactions giving rise

9 to the securities violations as alleged herein, and exercised the same.

10

11 61. As set forth above, EDU and the Individual Defendants each violated

12 Section 10(b) and Rule 1 Ob-5 by their acts and/or omissions as alleged in this

13

14 Complaint. By virtue of their positions as controlling persons, the Individual

15 Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and

16 proximate result ofDefendants' wrongful conduct, Plaintiff and other members ofthe 17

18 Class suffered damages in connection with their purchases of the Company's

19 securities during the Class Period.

20 PRAYER FOR RELIEF

21

22 WHEREFORE, Plaintiff prays for relief and judgment, as follows:

23 (a) Determining that this action is a proper class action under Rule 23 of the

24

25 I Federal Rules of Civil Procedure;

26

(b) Awarding compensatory damages in favor of Plaintiff and the othçr

27 I Class members against all defendants, j ointly and severally, for all damages sustained

28

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Case 2:1


1 as a result of Defendants' wrongdoing, in an amount to be proven at trial, including

2 interest thereon;

3

4

(c) Awarding Plaintiff and the Class their reasonable costs and expenses

5 incurred in this action, including counsel fees and expert fees; and 6

7 (d) Such other and further relief as the Court may deem just and proper.

8

JURY TRIAL DEMANDED

9 Plaintiff hereby demands a trial by jury.

10

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18

19

LAW OFFICES OF HOWARD G. SMITH

20 Howard G. Smith

3070 Bristol Pike, Suite 112 21

Bensalem, PA 19020

22 Telephone: (215) 638-4847

23 Facsimile: (215) 638-4867

24 Attorneys for Plaint iff Kin Shing Wong

25

26

27

28

I DATED: July 23, 2012 GLANCY BINKOW &OLDBERG LLP

Lionel Z. Glancy Michael Goldberg Robert V. Prongay Casey E. Sadler 1925 Century Park East, Suite 2100 Los Angeles, California 90067 Telephone: (310) 201-9150 Facsimile (310) 201-9160

-32-

_Case 2:12-cv-06316-MMM-JEM Document 1 Filed 07/23/12

SWORN CERTIFICATION OF PLAINTIFF

New Oriental Education & Technology Chimp, Inc., SECURItIES LITIGATION

I kin Shing Wong, certify that.

1. I have reviewed the complaint and authorized its filing.

2. I did not purchase New OrientalEducation & Technology Group, Inc., the security that is the subject of this action at 4h direction of plarntiff's counsel or in. order to participate in any private action arising under this title

.3.. 1 am willing to serve as a representative patty on behalf of a class and will testify at deposition and trial,, if necessary.

4 My transactions New Oriental Education & Technology Group, Jni. during the class period. set forth flheCothplaint are as follows:

See attached.

5 I have not served as a representative party on behalf of a class under this title during the fast three years except as stated:

6. .1 will not accept any payment for serving as axe presentative party, except to receive,, n.y pro ráta share of any recovery or as ordered or approved by the court including the award to a representatl%e plaintiff of reasonable costs and expenses (includmg lost wages) directly relating to the representation of the class.

Check.hcre if you are a current employee or former: employee of the défe ant Company.

I declare under penalty of perjury that the foregoing are true and correct statèin.ents.

s' Your Name Above).

Case 2:12-cv-06316-MMM-JEM Document 1 Filed 07/23/12 of 40 Page ID #:39 Trade Confirmations Page 1 of 1

1E_ 4merir.e DIVISION OF TO AMERITRADE INC P0 BOX 2209

OMAHA, NE 68103-2209

Confirmation Notice

Number YOU BOUGHT 688 647581107 2910

As of Trade Settlement Trade Data Date Date Interest

10/27/2011 11/01/2011 Symbol Trade Description

NEW ORIENTAL EDU & TECH EDU COM

Amount 2043360

Commission

9.99

• Fee 000

Net Amount

20443.59



NOTICE OF ASSIGNMENT TO UNITED STATES MAGISTRATE .JUDGE FOR DISCOVERY

This case has been assigned to District Judge Ronald S. W. Lew and the assigned discovery Magistrate Judge is John E. McDermott.

The case number on all documents filed with the Court should read as follows:

CV12- 6316 RSWL (JEMx)

Pursuant to General Order 05-07 of the United States District Court for the Central District of California, the Magistrate Judge has been designated to hear discovery related motions.

All discovery related motions should be noticed on the calendar of the Magistrate Judge

NOTICE TO COUNSEL

A copy of this notice must be served with the summons and complaint on all defendants (if a removal action is filed, a copy of this notice must be served on all plaintiffs).

Subsequent documents must be filed at the following location:

[X] Western Division U Southern Division u Eastern Division 312 N. Spring St., Rm. G-8 411 West Fourth St., Rm. 1-053 3470 Twelfth St., Rm. 134 Los Angeles, CA 90012 Santa Ana, CA 92701-4516 Riverside, CA 92501

Failure to file at the proper location will result in your documents being returned to you.

CV-18 (03/06) NOTICE OF ASSIGNMENT TO UNITED STATES MAGISTRATE JUDGE FOR DISCOVERY


Name & Address: Lionel Z. Glancy (#134180) Glancy Binkow & Goldberg LLP 1925 Century Park East, Suite 2100 Los Angeles, CA 90067 Telephone: (310) 201-9150


KIN SH1NG WONG, Individually and On Behalf of CASE NUMBER All Others Similarly Situated,

V. PLAINTIFF(S) CV12

NEW ORIENTAL EDUCATION & TECHNOLOGY

/

GROUP INC., MICHAEL MINHONG YU, and LOUIS T. HSIEH, SUMMONS

DEFENDANT(S).

TO: DEFENDANT(S):

A lawsuit has been filed against you.

Within 21 days after service of this summons on you (not counting the day you received it), you must serve on the plaintiff an answer to the attached E"complaint U amended complaint LI counterclaim U cross-claim or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff's attorney, Lionel Z. Glancy , whose address is 1925 Century Park East, Suite 2100, Los Angeles, CA 90067 . If you fail to do so,

judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court.

J U L 23 2012

Clerk, U.S. District Court

JULIE PRADO Dated:

Deputy Clerk

(Seal of the Court)

[Use 60 days if the defendant is the United States or a United States agency, or is an officer or employee of the United States. Allowed 60 days by Rule 12('a)(3)j.

CV-01A(10/11 SUMMONS


Name & Address: Lionel Z. Glancy (#134180) Glancy Binkow & Goldberg LLP 1925 Century Park East, Suite 2100 Los Angeles, CA 90067 Telephone: (310) 201-9150


KIN SHING WONG, Individually and On Behalf of I CASE NUMBER

All Others Similarly Situated,

PLAINTIFF(S) U

Vv L 21~q V.

NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC., MICHAEL MINHONG YU, and LOUIS T. HSIEH,

DEFENDANT(S).

SUMMONS

TO: DEFENDANT(S):

A lawsuit has been filed against you.

Within 21 days after service of this summons on you (not counting the day you received it), you must serve on the plaintiff an answer to the attached !(complaint LII amended complaint LI counterclaim LI cross-claim or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff's attorney, Lionel Z. Glancy , whose address is 1925 Century Park East, Suite 2100, Los Angeles, CA 90067

. If you fail to do so, judgment by default will be entered against you for the relief demanded in the complaint.

..You also must file

your answer or motion with the court.

J U L 23 2012 Clei

Dated:

[Use 60 days if the defendant is the United States or a United States agency, or is an officer or employee of the United States. Allowed 60 days by Rule 12(a)(3)].

CV-0IA(10/11

SUMMONS


UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA CIVIL COVER SHEET

I (a) PLAINTIFFS (Check box if you are representing yourself 0)

KEN SHING WONG, Individually And On Behalf of All Others Similarly Situated,

DEFENDANTS

NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC., MICHAEL MINHONG YU, and LOUIS T. HSIEH,

(b) Attorneys (Firm Name, Address and Telephone Number. If you are representing yourself, provide same.)

Lionel Z. Glancy (#134180), Glancy Binkow & Goldberg LLP 1925 Century Park East, Suite 2100, Los Angeles, CA 90067 Telephone: (310) 201-9150

Attorneys (If Known)

II. BASIS OF JURISDICTION (Place an X in one box only.)

o 1 U.S. Government Plaintiff Id3 Federal Question (U.S. Government Not a Party)

o 2 U.S. Government Defendant 04 Diversity (Indicate Citizenship of Parties in Item III)

Ill. CITIZENSHIP OF PRINCIPAL PARTIES - For Diversity Cases Only (Place an X in one box for plaintiff and one for defendant.)

PTF DEF PTF DEF Citizen of This State 01 01 Incorporated or Principal Place 04 04 of Business in this State

Citizen of Another State 02 02 Incorporated and Principal Place 05 05 of Business in Another State

Citizen or Subject of a Foreign Country 03 03 Foreign Nation 06 06 IV. ORIGIN (Place an X in one box only.)

Ill Original 02 Removed from 03 Remanded from 04 Reinstated or 05 Transferred from another district (specify): 06 Multi- 0 7 Appeal to District Proceeding State Court Appellate Court Reopened District Judge from

Litigation Magistrate Judge V. REQUESTED IN COMPLAINT: JURY DEMAND: 'Yes 0 No (Check 'Yes' only if demanded in complaint.)

CLASS ACTION under F.R.C.P. 23: lIYes 0 No 0 MONEY DEMANDED IN COMPLAINT: $ to be proved VI.

CAUSE OF ACTION (Cite the U.S. Civil Statute under which you are filing and write a brief statement of cause. Do not cite jurisdictional statutes unless diversity.) Violation of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule lOb-5

VII. NATURE OF SUIT (Place an X in one box only.)

OTHER STATUTES CONTRACT O 400 State Reapportionment 0 110 Insurance 0410 Antitrust 0 120 Marine 0430 Banks and Banking 0 130 Miller Act 0450 Commerce/ICC 0 140 Negotiable Instrument

Rates/etc. 0 150 Recovery of 0460 Deportation Overpayment & 0470 Racketeer Influenced Enforcement of

and Corrupt Judgment Organizations 0 151 Medicare Act

0480 Consumer Credit 0 152 Recovery of Defaulted 0490 Cable/Sat TV Student Loan (ExcI.

V 10 Selective Service Veterans) 50 Securities/Commodities/ 0 153 Recovery of

Exchange Overpayment of o 875 Customer Challenge 12 Veteran's Benefits

USC 3410 11160 Stockholders' Suits 0890 Other Statutory Actions 0 190 Other Contract 11891 Agricultural Act 0 195 Contract Product O 892 Economic Stabilization Liability

Act 0 196 Franchise 0893 Environmental Matters

JI 0894 Energy Allocation Act 0 210 Land Condemnation 11895 Freedom of Info. Act 0 220 Foreclosure 0900 Appeal of Fee Determi- 0 230 Rent Lease & Ejectment

nation Under Equal 11240 Torts to Land Access to Justice 0 245 Tort Product Liability

0950 Constitutionality of 0 290 All Other Real Property State Statutes

TORTS TORTS PRISONER 'LABOR PERSONAL INJURY PERSONAL PETITIONS 0710 FairLaborStandarda 0310 Airplane PROPERTY 0510 Motions to Act El 315 Airplane Product o 370 Other Fraud Vacate Sentence 0 720 Labor/Mgmt. Liability 0371 Truth in Lending Habeas Corpus Relations 0320 Assault, Libel & 0380 Other Personal 0 530 General 0 730 Labor/Mgmt. Slander

Property Damage 0 535 Death Penalty Reporting & 0330 Fed. Employers' 0385 Property Damage 0 540 Mandamus/ Disclosure Act Liability

0340 Marine Product Liability Other 0740 Railway Labor Act El 345 Marine Product 0 550 Civil Rights 0 790 Other Labor

Liability 0422 Appeal 28 USC 0 555 Prison Condition Litigation M% l 350 Motor Vehicle 158 FOlTIJRE/ 0791 EmpI. Ret. Inc.

0355 Motor Vehicle 0423 Withdrawal 28 - NALTY Security Act - Product Liability USC157 0610 Agriculture

:1360 Other Personal tiLQHS 0 620 Other Food & 0 820 Copyrights Injury 0441 Voting Drug 0 830 Patent

:1362 Personal Injury- 0442 Employment 0 625 Drug Related 0840 Trademark Med Malpractice 0443 Housing/Acco- Seizure of CJAE7Sc[JRJTY

:1365 Personal Injury- mmodatjons Property 21 USC 0861 HIA (1395ff) Product Liability 0444 Welfare 881 0862 Black Lung (923)

:1368 Asbestos Personal 0445 American with 0 630 Liquor Laws 11863 DIWCIDIWW Injury Product Disabilities - 0 640 R.R. & Truck (405(g)) Liability Employment 0650 Airline Regs 0864 SSID Title XVI

7.- yIQRA.TION, 0446 American with 11660 Occupational 0,865 RSI (405(g)) 3462 Naturalization Disabilities Safety /Health - FEI)ERAL TAX tJ1TS Application Other 0 690 Other 11870 Taxes (U.S. Plaintiff 3463 Habeas Corpus- 0440 Other Civil or Defendant) Alien Detainee Rights 1:1871 IRS-Third Party 26 3465 Other Immigration USC 7609 Actions

a

FOR OFFICE USE ONLY: Case Number:

AFTER COMPLETING THE FRONT SIDE OF FORM CV-71, COMPLETE THE INFORMATION REQUESTED BELOW.

CV-71 (05108) - CIVIL COVER SHEET Page 1 of2


UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA CIVIL COVER SHEET

VIlI(a). IDENTICAL CASES: Has this action been previously filed in this court and dismissed, remanded or closed? lINo D Yes

If yes, list case number(s):

VK1t(b). RELATED CASES: Have any cases been previously filed in this court that are related to the present case? "No D Yes If yes, list case number(s):

Civil cases are deemed related if a previously filed case and the present case:

(Check all boxes that apply) 0A. Arise from the same or closely related transactions, happenings, or events; or

El B. Call for determination of the same or substantially related or similar questions of law and fact; or

O C. For other reasons would entail substantial duplication of labor if heard by different judges; or o

D. Involve the same patent, trademark or copyright, and one of the factors identified above in a, b ore also is present.

IX. VENUE: (When completing the following information, use an additional sheet if necessary.)

(a) List the County in this District; California County outside of this District; State if other than California; or Foreign Country, in which EACH named plaintiff resides.

0 Check here if the government, its agencies or employees is a named plaintiff. If this box is checked, go to item (hi.

County in this District:* California County outside of this District; Slate, if other than California; or Foreign Country

Plaintiff KIN SHING WONG - Bergen County, NJ

(b) List the County in this District; California County outside of this District; State if other than California; or Foreign Country, in which EACH named defendant resides.

0 Check here if the government, its agencies or employees is a named defendant. If this box is checked, go to item (c.

County in this District:* California County outside of this District; State, if other than California; or Foreign Country

Defendants NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC

MICHAEL MINHONG YU, and LOUIS T. HSIEH - Beijing, China

(c) List the County in this District; California County outside of this District; State if other than California; or Foreign Country, in which EACH claim arose. Note: In land condemnation cases, use the location of the tract of land involved.

County in this District:*

os Angeles County California County outside of lb is District; State, if other than California; or Foreign Country

* Los Angeles, Orange, San Bernardino, Riverside, Ventura, Santa Barbara, or San Luis Obispo Counties Note: In land condmn,,i.nn ..,. 'I...

X. SIGNATURE SIGNATURE OF ATTORNEY (OR PRO PER): Date July 23, 2012

Notice to Counsel/parties: The CV-71 (JS-44) Civil Cover Sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required bylaw. This form, approved by the Judicial Conference of the United States in September 1974, is required pursuant to Local Rule 3-I is not filed but is used by the Clerk of the Court for the purpose of statistics, venue and initiating the civil docket sheet. (For more detailed instructions, see separate instructions sheet.)

Key to Statistical codes relating to Social Security Cases:

Nature of Suit Code Abbreviation Substantive Statement of Cause of Action

861

862

863

863

864

865

All claims for health insurance benefits (Medicare) under Title 18, Part A, of the Social Security Act, as amended. Also, include claims by hospitals, skilled nursing facilities, etc., for certification as providers of services under the Program. (42 U.S.C. 1935FF(b))

All claims for "Black Lung" benefits under Title 4, Part B, of the Federal Coal Mine Health and Safety Act of 1969. (30 U.S.C. 923)

DIWC All claims filed by insured workers for disability insurance benefits under Title 2 of the Social Security Act, as amended; plus all claims filed for child's insurance benefits based on disability. (42 U.S.C. 405(g))

DIWW All claims filed for widows or widowers insurance benefits based on disability under Title 2 of the Social Security Act, as amended. (42 U.S.C. 405(g))

All claims for supplemental security income payments based upon disability filed under Title 16 of the Social Security Act, as amended.

All claims for retirement (old age) and survivors benefits under Title 2 of the Social Security Act, as amended. (42 U.S.C. (g))

WA

BL

SSID

RSI

CIVIL COVER SHEET Page of2

CV-71 (05/08)

Kin Shing Wong, et al. v. New Oriental Education &...

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