STEC Complaint FILED 10 25 12.pdf


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STEC’s year-end financial statements were not prepared in accordance with

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Generally Accepted Accounting Principles (“GAAP”), it rendered its opinions

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otherwise. Indeed, its audits of such statements were not conducted in accordance

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with GAAS as it had represented. At all times relevant, the Securities Fraud

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Defendants knew or should have known the material facts that STEC’s financial

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statements were not prepared in conformity with GAAP and that PWC’s audits of

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them were not prepared in conformity with GAAS.4

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I.

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NATURE AND SUMMARY OF THE ACTION
As detailed below, this case arises principally from the conduct of two

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brothers, Defendants Manouchehr and Mark Moshayedi who, as co-founders of the

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Company with a third brother, Mike, and key officers of the Company, using and

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appropriating to themselves STEC’s proprietary information not available to the

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public, sold half of their stock in the Company for $267.8 million in a secondary

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offering (the “Offering”) after they and one of the other senior officers, Defendant

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Cook, had made a series of knowing misstatements and misleading omissions,

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including artificially manipulating the Company’s reported revenues and earnings,

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that artificially doubled the price of STEC stock and/or otherwise kept it at

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artificially high prices which were unjustified given STEC’s true financial and

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operating condition.
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Subsequent to the Moshayedi brothers’ sale of their stock in the

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Offering in August 2009 and otherwise during 2009, as the falsity of their

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statements and omissions ultimately became known, the price of the Company’s

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stock collapsed causing Plaintiff significant damages.
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On July 19, 2012, after the SEC commenced a formal investigation, it

commenced suit against Defendant Manouchehr based upon, inter alia, his

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The Securities Fraud Defendants typically spoke through Defendant Manouchehr
and all of them were controlling persons with respect to the Company’s filings
with the SEC, press releases and other disseminations to the public.
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