MARIANNE 0. BA1TAJq

Transcription

1 p AHNA CAPRI, Individually And on Behalf of All Others Similarly Situated, V. UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN Plaintiff, RALPH W. BABB, JR. and COMERICA, INC., Defendants. Case No MARIANNE 0. BA1TAJq CLASS ACTION COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS MAGTSTRATE JUDGE SCEER JURY TRIAL DEMANDED Plaintiff has alleged the following based upon personal knowledge as to hawidop own acts, and upon information and belief based upon the investigation of Plaintiffs ttt3rnesas t1 all other matters. Such investigation included a thorough review and analysi fth doqmebir publicly filed on behalf of Comerica, Inc. ("Comerica" or "the Company"), th61iiijàial BlJtnc ("Imperial") merger-related Registration Statement by Comerica, public statemnts, pre, co releases, news articles and analyst reports. Plaintiff believes that substantial additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. IJI!!tI) kjlvsi i(']i 1. This securities class action is brought on behalf of investors in Imperial ("Imperial Investors") who received shares of Comerica as a result of Comerica's acquisition of Imperial (the "Imperial Merger") on or about January 30, 2001, pursuant to Comerica's Form S-4 Registration Statement filed with the Securities and Exchange Commission on December 1, 2000 (the "Registration Statement"), and who sold the shares received at a loss or who retained or added to their holdings in Comerica through October 1, 2002, inclusive (the "Class Period") and who seek remedies under the Securities Act of 1933 (the "Securities Act Class"). 2. During the Class Period, defendant Babb caused Comerica to report in the Registration Statement and other public statements favorable financial results by, among other things, artificially inflating the Company's revenue and earnings by overstating the value of its

2 'I. Munder Capital Management subsidiary ("Munder") and under accruing Comerica's loan loss reserves. 3. Revelations about the defendants' material misrepresentations came to light on October 2, 2002, when the Company disclosed that, following a recent regulatory examination, Comerica would reduce its second- and third-quarter 2002 earnings as a result of a $213 million after-tax charge to set aside more money for loan losses and to reflect a decline in the value of its Munder subsidiary. 10 a611 01[si WI'] *tujij 4. This action arises under 11, 12(2) and 15 of the Securities Act. The Court has jurisdiction over the subject matter of this action pursuant to 22(a) of the Securities Act of 1933 (15 U.S.C. 77v(a)) (the "Securities Act"), and 14(a) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 14a-9 promulgated thereunder. 5. Venue is proper in this district pursuant to 22 of the Securities Act. Comerica is headquartered in Detroit, Michigan, conducts significant business in this District, maintains offices in this District, and the acts charged herein had a substantial effect in this District. 6. In connection with the wrongs alleged herein, defendants directly or indirectly used the instrumentalities of interstate commerce, including but not limited to the United States mails, interstate wire and telephone facilities, and the facilities of the national securities markets. PARTIES 7. Plaintiff Ahna Capri, obtained Comerica stock during the Class Period as listed on the Sworn Certification, attached hereto, and has been damaged thereby. 8. Defendants are Comerica and Chairman, President and Chief Executive Officer of Comerica, Ralph W. Babb, Jr. ("Babb "). 9. Defendant Comerica is a Delaware corporation headquartered in Detroit, Michigan. Comerica is the holding company for business, individual and investment banks with operations in the United States, Mexico and Canada. The Company's subsidiaries provide 2

3 services such as corporate banking, international finance, treasury management, community banking, private banking, small business and individual lending, investment services and institutional trust. 10. During the Class Period, defendant Babb was in a position to know about Comerica's accounting misstatements and omissions and had the ability to control the content of Comerica's Registration Statement, press releases and public statements. Moreover, defendant Babb signed the Registration Statement containing the material misstatements and omissions. 11. Plaintiff brings this action as a class action pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure, individually and on behalf of all other persons or entities who purchased or exchanged Comerica stock during the Class Period and were damaged thereby, excluding the defendants herein, their affiliates and any officers or directors of Comerica or its affiliates, and any members of immediate families and their heirs, successors and assigns (the "Class"). The foregoing class of investors are collectively referred to herein as the "Class," unless otherwise noted. 12. The Class is so numerous that joinder of all the members of the Class is impracticable. Plaintiffbelieves there are hundreds of record holders of the Company's stock located throughout the United States who were Imperial Investors and received Comerica stock as a consequence of the Imperial Merger. 13. Plaintiff's claim is typical of the claims of absent Class members. Members of the Class have sustained damages arising out of defendants' wrongful conduct in violation of the federal securities laws in the same way as Plaintiff sustained damages from the unlawful conduct. 14. Plaintiff will fairly and adequately protect the interests of the Class. Plaintiff has retained counsel competent and experienced in class and securities litigation. 15. A class action is superior to other available methods for the fair and efficient adjudication of the controversy. The Class is numerous and geographically dispersed. It would be 3

4 impracticable for each member of the Class to bring a separate action. The individual damages of any member of the Class may be relatively small when measured against the potential costs of bringing this action, and thus make the expense and burden of this litigation unjustifiable for individual actions. In this class action, the Court can determine the rights of all members of the Class with judicial economy. Plaintiff does not anticipate any difficulty in managing this suit as a class action. 16. Common questions of law and fact exist as to all members of the Class and predominate over any questions affecting solely individual members of the Class. These questions include, but are not limited to, the following: a. whether defendants' conduct as alleged herein violated the federal securities laws; b. whether the SEC filings, Registration Statement, press releases and statements disseminated to the investing public and in particular the Imperial investors related to the Imperial Merger and during the Class Period misrepresented Comerica's financial condition and results; C. whether the market price ofcomerica common stock as of the date ofthe Registration Statement and during the Class Period was artificially inflated; and d. Whether members of the Class have been damaged and, if so, the proper measure thereof. 21. On December 1, 2000, Comerica issued a Form 54 Registration Statement in conjunction with its acquisition of Imperial Bancorp which stated in part as follows: a. That "the books and records of the Company and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements." b. That "[alt September 30, 2000, Comerica's total assets on a consolidated basis were $40.9 billion, its consolidated total deposits were $25.5 billion and its consolidated total stockholders' equity was $3.8 billion. Based on total assets at September 30 f 2000, Comerica was 4

5 the 23rd largest bank holding company in the United States." 22. In fact as outlined in the following disclosures the defendants overstated the above revenue by failing to accrue sufficient loan loss reserves and by overstating the value of the Company's Munder subsidiary. 23. The Imperial Investors received approximately 21 million shares of Comerica stock as a consequence of the merger. The value of the Comerica stock was artificially inflated as a consequence of the material misstatements described herein causing loss to the Plaintiff and the Class. 24. The above-noted statements and claims were materially misleading either specifically or by omission for reasons highlighted in an October 2, 2002, Company press release. 11Lb lali i[si ad!i p ':1 25. On October 2,2002, defendants finally revealed the truth in a publicly disseminated press release that disclosed the $213 million charge, the decline in the value of the Munder subsidiary and the under accrual of loan loss reserves. The press release states, in pertinent part, as follows: Comerica to Record a $213 Million After-Tax Charge Related To Incremental Provision for Credit Losses, Goodwill Impairment Wednesday October 2, 7:30 am ET DETROIT, Oct. 2 IPRNewswire-FirstCalt/ - Comerica Incorporated (NYSE: CMA - News) today announced that it will record a $328 million charge ($213 million after-tax, or $1.21 per diluted share) related to an incremental provision for credit losses and goodwill impairment for the company's Munder Capital Management subsidiary. The incremental provision for credit losses totals approximately $247 million, of which $40 million ($26 million after-tax, or $0.15 per diluted share) has been determined to relate to the second quarter of The allowance for credit losses as a percent of period-end loans at September 30, 2002, is estimated to be 1.90 percent, compared with 1.81 percent previously reported at June 30, 2002 and 1.85 percent as restated. Incremental net charge-offs will be approximately $212 million, of which $22 million will be reflected in the second quarter. Second quarter earnings will be reduced to $161 million, or $0.90 per diluted share, compared to previously reported earnings of$ 184 million, or $1.03 per diluted share, 5

6 including the related effect of lower incentive compensation of $5 million ($3 million after-tax, or $0.02 per diluted share). The additional provision and charge-offs related to the second quarter were determined during a recent subsidiary regulatory examination. The third quarter goodwill impairment of $86 million ($56 million after- tax, $0.31 per diluted share) results from the continued decline in equity markets and its related impact on Munder's valuation. "The lagging economy and ongoing volatility in the equity markets affect many companies, including our own customers," said Ralph W. Babb Jr., chairman, president and chiefexecutive officer. "Given the uncertainties surrounding the timing of an economic recovery, the strengthening of our allowance for credit losses and coverage ratios recognizes the challenges of the current operating environments. And, we identified additional credits, particularly in the retail, automotive and manufacturing sectors, where a write-down, accelerated work-out plan or sale is the most prudent course of action." Outlook for 2002 Comerica expects the charge to reduce projected full year 2002 earnings from its previous Estimate by $1.21 per diluted share. Including this charge and the previously announced impact ($0.06 per diluted share) of adoption of the fair value method of accounting for stock options, Comerica expects earnings to range from $3.40 to $3.50 per diluted share for the full year On the same day, October 2, 2002, the Dow Jones News Service published an article titled "Comerica to Restate 20-Quarter Results, Take $213 Million Charge." The article quotes Christopher Marinac, an analyst with SunTnist Robinson Humphrey, who stated "[w]ere not surprised that Comerica is boosting reserves. They failed to have sufficient reserves and capital relative to nonperforming assets." 27. Securities and Exchange Commission Staff Accounting Bulletin: No. 99 Materiality ("SAB 99") provides guidance in applying materiality thresholds to the preparation of financial statements filed with the SEC. SAB 99 notes that in the context of a misstatement of a financial statement item, the SEC and other authoritative bodies have issued quantitative materiality guidelines ranging from as little one percent (1 0/6) for a variety of disclosures. Defendants failed to comply with the application of SAB 99, by failing to ensure that the information contained in their financial statements was accurate.

7 [IWKi VIOLATION OF 11 OF THE SECURITIES ACT AGAINST ALL DEFENDANTS 28. Plaintiff incorporates by reference and realleges the allegations as set forth above. 29. This claim is brought by Plaintiff who obtained Comerica stock pursuant to the Registration Statement on behalf of herself and other members of the Class. Each Class member acquired their shares pursuant to or traceable to, and in reliance on, the Registration Statement. 30. Defendant Babb, as a signatory of the Registration Statement, as a director and/or officer of Comerica and controlling person of the issuer, owed to the holders of the stock obtained through the Registration Statement the duty to make a reasonable and diligent investigation of the statements contained in the Registration Statement at the time they became effective to ensure that such statements were true and correct and that there was no omission of material facts required to be stated in order to make the statements contained therein not misleading. Defendants knew, or in the exercise of reasonable care should have known, of the material misstatements and omissions contained in or omitted from the Registration Statement as set forth herein. As such, defendants are liable to the Class. 31. None of the defendants made a reasonable investigation or possessed reasonable grounds for the belief that the statements contained in the Registration Statement were true or that there was no omission of material facts necessary to make the statements made therein not misleading. 32. Defendants issued and disseminated, caused to be issued and disseminated, and participated in the issuance and dissemination of, material misstatements to the investing public which were contained in the Registration Statement, which misrepresented or failed to disclose, in the facts set forth above. By reason of the conduct herein alleged, each defendant violated and/or controlled a person who violated 11 of the Securities Act. 33. As a direct and proximate result of defendants' acts and omissions in violation of 7

8 the Securities Act, the market price of Comerica stock was artificially inflated and Plaintiffs and the Class suffered substantial damage in connection with their ownership of Comerica stock pursuant to the Registration Statement. 34. Comerica is the issuer of the stock sold via the Registration Statement. As issuer of the stock, the Company is strictly liable to Plaintiff and the Class for the material misstatements and omissions therein. 35. At the times they obtained their shares of Comerica, the Plaintiff and members of the Class did so without knowledge of the facts concerning the misstatements or omissions alleged herein. 36. At the times they obtained their shares of Comerica, the Plaintiff and members of the Class did so without knowledge of the facts concerning the misstatements or omissions alleged herein. 37. Less than one year has elapsed from the time that Plaintiff discovered or reasonably could have discovered the facts upon which this action is based, to the time that Plaintiff filed his complaint. Less than three years have elapsed from the time that the securities upon which this claim is brought were offered to the public to the time Plaintiff filed this action. VIOLATION OF 12(2) OF THE SECURITIES ACT MAINST ALL DEFENDANTS 38. Plaintiff incorporates by reference and realleges the allegations as set forth above. 39. This claim is brought by Plaintiff who obtained stock of Comerica as part of the Registration Statement on behalf of herself and other members of the Class who also obtained stock in connection with, and traceable to, the Registration Statement. 40. The defendants named in this claim were sellers, offerors and/or solicitors of sales of the shares offered and sold in connection with the Registration Statement. The acts of solicitation taken by defendants named in this claim included participation in the preparation and 8

9 dissemination of the materially misleading Registration Statement. The written and oral communications made in connection with the Registration Statement contained misstatements of material facts, omitted other facts necessary to make the statements made not misleading and failed to disclose material facts. 41. Each defendant offered for sale and sold the stock obtained by Plaintiff and the Class through the Registration Statement. Each defendant solicited and/or was a substantial factor in the acquisition by each Class member of stock via the Registration Statement. But for the participation by defendants, or somebody controlled by defendants, including the solicitation pled herein, the transactions could not and would not have been accomplished. Defendants participated in these wrongful acts as follows: a. Defendants actively and jointly drafted, revised and approved the Registration Statement and other written selling materials by which the transaction was offered to the investing public. These written materials were "selling documents," calculated by defendants to create interest in Comerica stock and were widely distributed by defendants for that purpose; b. Defendants finalized the Registration Statement and caused them to become effective. But for defendants having drafted, filed and/or signed the Registration Statement, the offerings would not have been made; and C. Defendants conceived and planned the offerings and together jointly orchestrated all activities necessary to effect the Secondary Offering by issuing the stock, promoting the stock and supervising their distribution and ultimate sale to the investing public. 41. Defendants were obligated to make a reasonable and diligent investigation of the written and oral statements made in connection with the Registration Statement to insure that such statements were true and that there was no omission to state a material fact required to be stated in order to make the statements contained therein not misleading. Plaintiff and Class members who purchased or otherwise acquired their stock pursuant to the Registration Statement did so based on the defective Registration Statement. They did not know, or in the exercise of 9

10 reasonable diligence could not have known, of the misstatements and omissions contained in the Registration Statement and other statements by defendants in connection with the offerings. 42. Plaintiff and other Class members who acquired their Comerica stock pursuant to the Registration Statement hereby tender to defendants all such securities still held, in return for the consideration paid for those securities together with interest thereon. Plaintiff and Class members who acquired their stock pursuant to the Registration Statement, but have sold their shares, are entitled to rescission damages. 43. Less than one year has elapsed from the time that Plaintiff discovered or reasonably could have discovered the facts upon which this action is based, to the time that Plaintiff filed his complaint. Less than three years have elapsed from the time that the securities upon which this claim is brought were offered to the public to the time Plaintiff filed this action. I1IiJ1T VIOLATION OF 15 OF THE SECURITIES ACT AGAINST DEFENDANT BABB 44. Plaintiff repeats and realleges each and every allegation contained in the foregoing paragraphs as if fully set forth herein. Securities Act. 45. This count is asserted against defendant Babb and is based upon Section 15 of the 46. Defendant Babb, by virtue of his offices, directorship and specific acts was, at the time of the wrongs alleged herein and as set forth herein, a controlling person of Comerica within the meaning of Section 15 of the Securities Act. Defendant Babb had the power and influence and exercised the same to cause Comerica to engage in the overstatement of revenues, understatement of liabilities and the overstatement of the pre-merger shareholders equity described herein. 47. Defendant Babb's position made him privy to and provided him with actual knowledge of the material facts concealed from plaintiffs and the Class. 10

11 48. By virtue of the conduct alleged herein, defendant Babb is liable for the aforesaid wrongful conduct and are liable to plaintiffs and the Class for damages suffered. VIOLATION OF 14(a) OF THE EXCHANGE ACT AND RULE 14a-9 PROMULGATED THEREUNDER AGA1NSTJEFENDANT BABU 49. Plaintiff repeats and realleges each and every allegation contained above as if set forth herein, except insofar as such might be deemed to invoke a claim for or element of fraud. This claim is asserted against the defendant Babb. 50. This Count is brought pursuant to 14 of the Exchange Act, 15 U.S.C. 78(n), on behalf of Plaintiffs and those Plaintiffs and Class members who exchanged imperial stock in connection with the Imperial Merger. 51. The Comerica Registration Statement recites that "Comerica has supplied all information contained or incorporated by reference in this proxy statement-prospectus relating to Comerica, as well as all pro forms financial information...." Defendant Babb contributed to and/or approved the solicitations contained in the Registration Statement. 52. The Registration Statement contains justifications for and solicitation of approval for the Imperial Merger. Accordingly, the Registration Statement presented and made reference to financial statements and data of Comerica, and each of them, which contained falsely overstated revenues and earnings figures, and, as such, were materially misstated and omitted to state material facts regarding the actual benefits of the proposed merger to Plaintiffs and the affected Class members. 53. As a result of the foregoing, defendant Babb violated 14(a) of the 1934 Act, 15 U.S.C. 78(n), and Rule 14a-9 promulgated thereunder, 17 C.F.R a As a result of the Registration Statement, the Imperial shareholders approved the Imperial Merger on or about January, 18, The terms of the merger provided for a specified 11

12 ' S exchange ratio of Imperial stock for the stock of Comerica. The material misstatements and omissions regarding the true financial condition of Comerica, as contained in the Registration Statement, enabled the overvaluation of the Comerica shares which, in turn, diluted the value of the Imperial shares to the financial detriment of Plaintiffs, The Imperial shareholders would not have approved the Imperial Merger had they been aware of the materially misleading nature of the Registration Statement. As a direct and proximate result of these material misrepresentations and omissions, Plaintiffs suffered damages. VIOLATION OF 20(a) OF THE EXCHANGE ACT AGAINSTI)EFENDANT BAWl 55. Plaintiff repeats and realleges each and every allegation contained in the above paragraphs, as if fully set forth herein. This claim is asserted against defendant Babb. 56. Defendant Babb acted as a controlling person of Comerica within the meaning of 20(a) of the Exchange Act, as alleged herein. By virtue of his executive position, defendant Babb had the power to influence and control and did influence and control, directly or indirectly, the decision-making of the Company, including the content and dissemination of the various statements which Plaintiffs contend are materially misleading. Defendant Babb was provided with or had unlimited access to copies of the Company's internal reports, press releases, public filings, and other statements alleged by Plaintiffs to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected. 57. In particular, defendant Babb had direct involvement in the day-to-day operations of the Company and therefore, is presumed to have had the power to control or influence the particular transactions giving rise to the securities violations as alleged herein, especially by virtue of their senior positions, and exercised the same. 58. As set forth above, defendant Babb violated 10(b) and Rule lob-5 by its acts 12

13 and omissions as alleged herein. By virtue of his position as a controlling person of Comerica, defendant Babb is liable pursuant to 20(a) of the Exchange Act. As a direct and proximate result of defendant Babb's wrongful conduct, Plaintiffs and the Class suffered damages. WHEREFORE, Plaintiff prays for judgment as follows: 1. Determining that the instant action is a proper class action maintainable under Rule 23 of the Federal Rules of Civil Procedure; 2. Awarding compensatory damages together with interest thereon, in favor of Plaintiff and all members of the Class for damages sustained as a result of defendants' wrongdoing; 3. Awarding Plaintiff and the Class the costs and disbursements of this suit, including reasonable attorneys', accountants' and experts' fees; and 4. Awarding such other and further relief as the Court may deem just and proper. WILA Plaintiff demands a trial by jury. MANTESE MILLER AND SHEA, P.LL.C. By: (P*.4'0,eZ1 <n %.0 E. Powell Miller (P39487) 1301 W. Long Lake Road, Suite 135 Troy, Michigan Telephone (248) Facsimile (248) GLANCY & BINKOW, LLP Lionel Z. Glancy, Esq Avenue of the Stars, Suite 311 Los Angeles, California Telephone (310) Facsimile (310) Attorneys for Plaintiff 13

14 START CR7I11CAT1O GLANCY DMOW LLP SWORN CERTIFICATION OF PLMNU7 AilNA CAPRI COMERICA, INC. SECURiTIES LITIGATION Is Abu Caprl certify that 1. I have reviewed the Complaint and authorized Its filing. 2. I did not purchase Comerica, Icc., the security that Is the subject of this 'cdoa, at the direction of piaintiwu counsel or in order to participate In any private action arising under this title,. I am willing to serve as a representative party on behalf of a class and will teslify it deposition and trial, if 1160U*7. 4 My transactions in Coinenca, Inc., during the Class Period set forth In the Complaint are as follows: I received 245 shares of Conierka, Inc., In aching. for Imperial Bancorp stock are result of the January 30,2001 acquisition of Imperial Bancorp by Comerica Inc.' S. I bsve ot served is a representiitiv. party on bebauofs class under this title daring the last three years, 6..1 will not accept any payment for serving 3 C rcprcseatathe party, except to receive my pro rate share of say recovery or as ordered or approved by the court Including the award to it representative plaintiff of reasonable cotta and expenses (Including lost wages) directly relating to the representation of the class. I declare under peuilty of perju foregoin sand 'correct statements. Dated JO 3 Q- END CERTIFICATION Abu* Q1PrI FAX THIS DOCTThffNT BACK TO (310) AND BY US MAIL d ELOIO98 ON/I:O1 USAMI zo t cn (1) WOU