and misleading information" and did so to enrich themselves
through either the sale of their stock or employment benefits
(¶ 122); and (8) Kairey and others "set policy for Crazy Eddie,
made important decisions for the Company, signed filings made
by the Company with the SEC and reviewed and approved reports
to shareholders and Company press releases" (¶ 124).
The Complaint further alleges that Eddy Antar, formerly
Secretary and Treasurer of the Company, was a director from
May 1984 to November 1987 (¶ 20). Solomon E. Antar,
Pasquariello, Levy, and Kairey were all members of the
Company's Board of Directors from December 1986 until November
1987. These five defendants were thus directors during a period
in which at least five alleged misstatements (one annual report
and two quarterly statements and two press releases) were
issued to the public.
Their position as directors, coupled with the Complaint's
allegations of misconduct against Eddy Antar, Pasquariello,
Levy, and Kairey, is sufficient to raise an inference that
these four defendants knew of and participated in at least
those misstatements made during their tenure as directors.
Because no specific allegations of misconduct are made against
Solomon E. Antar, there is no basis for a similar inference as
to him. The Complaint does not plead a RICO claim against him.
The individual defendants challenge the constitutionality of
RICO, arguing that the "pattern" requirement is
unconstitutionally vague. Those courts that have considered
the issue have found the statute constitutional, see, e.g.,
United States v. Robinson, 1990 WL 77780 (N.D.Ill. May 17,
1990); Norstar Bank v. Pepitone, 742 F. Supp. 1209 (E.D.N Y
1990); United States v. Thevis, 474 F. Supp. 134, 139 (N.D.Ga.
1979), aff'd, 665 F.2d 616 (5th Cir. 1982); United States v.
Stofsky, 409 F. Supp. 609, 613-614 (S.D.N.Y. 1973); United
States v. Field, 432 F. Supp. 55, 58 (S.D.N.Y. 1977),
aff'd, 578 F.2d 1371 (2d Cir. 1978), and this court agrees.
Defendants cite no authority to the contrary.
Plaintiffs § 1962(c) claim is proper against Eddy Antar,
Pasquariello, Levy and Kairey, but dismissed against Solomon E.
The court does not determine whether plaintiffs' allegations
are sufficient to state predicate acts of wire or mail fraud
against Eddy Antar, Pasquariello, Levy and Kairey.
Defendants further contend that plaintiffs fail to state a
claim under § 1962(d) because they do not allege with
particularity an "agreement" by each defendant to commit acts
constituting a violation of § 1962(c). However, the sufficiency
of the pleading of this RICO conspiracy claim is not subject to
the higher pleading standard of Rule 9(b), Fed.Rule Civ.P. See
Andreo v. Friedlander, Gaines, Cohen, Rosenthal, and Rosenberg,
651 F. Supp. 877, 883 (D.Conn. 1986).
The court can draw the inference that Eddy Antar,
Pasquariello, Levy, and Kairey agreed with each other or other
defendants to participate in the predicate acts of securities
fraud. Plaintiffs' § 1962(d) claims are proper as against these
The plaintiffs' claim is dismissed against Solomon E. Antar,
as the plaintiffs' § 1962(c) claim against him has been
VI. Pendent State Claims
Having dismissed plaintiffs' federal claim against Penn &
Horowitz with the leave to replead, the court dismisses
plaintiffs' state law claims against that defendant with leave
to replead if plaintiffs replead the federal claim.
VII. "Scandalous" Allegations Against Antar
Pursuant to Rule 12(f), Fed.Rule Civ.P., Wertheim, Bear
Stearns, Salomon and Oppenheimer move to strike certain
allegations made in paragraphs 138(a), (b), and (e) of the
Complaint as they are "scandalous" and "irrelevant" to the
issue of whether the underwriters properly conducted "due
diligence" before making the various offerings. Those
(a) Antar was a high school dropout and lacked
the education to manage a large public company.
He associated with known organized crime figures,
including Charlie Morris, a convicted felon and
former bodyguard for Mafia boss "Crazy Joey"
Gallo. Antar employed, in a trusted capacity as a
senior manager, at least one member of Morris's
immediate family. Both Gallo and Morris were
subsequently shot and killed in separate
mob-style assassinations. Antar himself was
stabbed in an unsolved incident prior to the
(b) Antar behaved erratically, frequently and
without any explanation disappearing for days or
even weeks at a time, and refusing upon his
return to explain his disappearances. When
present at the Company's offices, Antar was
usually unshaven, unkempt, dressed in a sweat
suit, and accompanied by his dog, frequently
exploded into rages in which he screamed
obscenities and threatened others with physical
(e) The Prospectus failed to disclose that
Antar's first foray into the retail electronic
business, with a store known as Sights & Sounds
ERS, located in Brooklyn, New York, failed and
closed within one year of the store's opening and
that Sam Antar was forced to pay the debts which
Antar had incurred in the limited time Antar
operated Sights & Sounds.
Rule 12(f) provides, in pertinent part, that "the court may
order stricken from any pleading any insufficient defense or
any redundant, immaterial, impertinent, or scandalous matter."
Plaintiffs cannot seriously contend that the underwriters
should have disclosed speculations of Antar's association with
allegedly "known" organized crime figures more than eleven
years prior to the first public offering. As there is no
allegation that Morris's family member did anything illegal,
there is no reason to include Antar's relationship with that
person. Nor do plaintiffs offer any explanation why it would
be surprising or informative to investors that a New York
businessman, a victim of a stabbing, might wish to go to work
dressed in a sweat suit accompanied by his faithful dog.
The court finds no need for plaintiff to make allegations as
to Eddie Antar's educational background, work and personal
habits and ability to run a business. They may be relevant but
are hardly appropriate for a pleading. Defendants' motion to
strike these allegations is granted.
Defendants motions to dismiss are granted in the following
i) The Complaint
The Securities Act claims against Oppenheimer based on the
Oppenheimer Sales are time barred. The Securities Act claims
against Eddy Antar, Zimel, Wertheim, Bear Stearns, Salomon,
and Peat Marwick based on the 1986 debenture offering are time
barred. The Exchange Act claims against Penn & Horowitz are
dismissed for failure to plead fraud with particularity with
leave to replead. The control person claims under the
Securities and the Exchange Acts against Kairey, Eddy Antar,
Solomon Antar, Pasquariello, Levy and Zimel are dismissed with
prejudice. The RICO claims against Solomon E. Antar are
dismissed with prejudice. Paragraphs 138(a), (b) and (e) of
the Complaint are stricken. The court dismisses the state law
claims against Penn & Horowitz with leave to replead if
plaintiffs replead the federal claim.
ii) The Schwebel Complaint
The Security Act claims against Peat Marwick, Wertheim, Bear
Stearns, Salomon, Eddy Antar, and Zimel are dismissed for
failure to (1) plead "discovery" adequately and (2) allege
facts tracing the purchase of the debentures to the 1986
offering, with leave to replead. The claims for control person
liability are dismissed as to all defendants, except Antar,
with leave to replead. The motions are otherwise denied.
© 1992-2003 VersusLaw Inc.