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IRA M. PRESS MARK A. STRAUSS _196471 KIRBY McINERNEY _ SQUIRE_ LLP

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IRA M. PRESS

MARK A. STRAUSS #196471

KIRBY McINERNEY & SQUIRE, LLP

830 Third Avenue

New York, New York         10022

Telephone:      (212) 371-6600

Facsimile:      (212) 751-2540



Lead Counsel for Plaintiffs



[Additional Plaintiffs= Counsel Listed on Signature Page]




                       UNITED STATES DISTRICT COURT


                     CENTRAL DISTRICT OF CALIFORNIA


IN RE SKECHERS U.S.A., INC.                 ) Master File No.
                                     ) CV-99-13559 MMM (JWJx)
This Document Relates to             ) CLASS ACTION
All Actions                          )
                                     ) CONSOLIDATED CLASS
ACTION COMPLAINT FOR
VIOLATIONS OF FEDERAL
SECURITIES LAW

JURY TRIAL DEMANDED




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               Lead        plaintiffs,           by      their        undersigned

attorneys,         respectfully          submit        this      Complaint         for

violation         of      the      federal        securities          laws       (the

"Complaint") against the defendants named herein.                                  All

allegations         made     in     this     Complaint        are     based      upon

information        and     belief,     except      those      allegations        that

pertain to the lead plaintiffs and their counsel, which

are    based     upon      personal       knowledge.          Lead    plaintiff=s
information and belief is based upon the investigation

made by and through their attorneys, including, but not

limited to, a review of press releases, announcements,

filings      with      the      Securities       and    Exchange        Commission

("SEC"), information publicly disseminated by defendants,

news articles, documents obtained from non-parties, and a

review of documents filed in other pending actions.




                                      NATURE OF THE ACTION


1.      This is a shareholder class action on behalf of all persons who purchased or otherwise acquired

the common stock of Skechers U.S.A., Inc. (ASkechers" or the "Company") in Skechers= June 9, 1999
initial public offering, or thereafter on the open market, prior to July 6, 1999 (Athe Class Period@).


2.      Skechers designs, manufacturers and markets branded Acontemporary life-style, casual, active

and rugged@ footwear for women, children and men. Product offerings include 900 styles of street and




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fashion sneakers; hikers, trail, runners and joggers; sandals, slides and other open-toe footwear; casual

and utility oxfords, loggers, boots and demi-boots; and dress casual shoes, substantially all of which are

marketed under the Skechers name. Skechers sells its products to department stores such as Dillards,

Nordstrom, Macy=s and JC Penney and specialty retailers such as The Foot Locker and Lady Foot

Locker chains. The Company also sells its products in over 110 countries and territories through

international distributors and directly to consumers through 38 of its own retail stores.


3.      On June 9, 1999, Skechers launched an initial public offering of its securities, selling 7 million

shares of common stock, priced at $11 per share, to the investing public (Athe IPO@ or Athe

Offering@). Net proceeds to the Company from the IPO, after all anticipated issuance costs, were
approximately $69.7 million.



4.       In the Registration Statement and Prospectus filed with the SEC and disseminated to the

investing public in connection with the IPO, defendants warned investors, as one of a number

enumerated Arisk factors,@ that there was Aintense competition@ in the footwear industry and that the

Company=s products competed with other footwear brands, such as the famous ADr. Martens@ brand.


5.      The Registration Statement and Prospectus also set forth a risk factor regarding the Company=s

intellectual property rights, warning that the Company Arelies@ on its Aability to protect [its]

intellectual property rights@ and that its Afuture success will depend in significant part on the

Company=s ability to maintain and protect@ those rights. The Registration Statement and Prospectus

further stated that there Acan be no assurance@ that third parties will not Aassert intellectual property

claims against the Company@ or seek to Ablock sales of the Company=s products as violating

intellectual property rights.@


6.      Nevertheless, the Registration Statement and Prospectus did not disclose that R. Griggs Group,

Limited (AGriggs@), maker of the Dr. Martens brand of footwear, was in fact asserting precisely such

an "intellectual property claim against the Company@ as was being described as a speculative Arisk.@




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7.       Specifically, defendants did not disclose that, prior to the IPO, Griggs had asserted a claim

against Skechers, charging Skechers with manufacturing and marketing boots, sandals and shoes that

were deliberate Aknock-offs@ of Dr. Martens, and threatening Skechers with a lawsuit. Defendants

also did not disclose that Skechers had negotiated a Astandstill agreement@ with Griggs calling for

Griggs to hold in abeyance the commencement of such threatened lawsuit while the parties attempted to

reach a settlement. Indeed, in neither the Prospectus, the Registration Statement, nor the Company=s

other SEC filings or public statements prior to the IPO, did the Company even allude to any such claim,

threatened litigation, or standstill agreement with Griggs.


8.       Nevertheless, on June 14, 1999, a mere five days after Skechers= IPO, Griggs commenced an
action against Skechers in the United States District Court for the Northern District of California,

asserting claims based on Skechers= alleged "deliberate" and "systematic copying@ of the

Adistinctive@ trade dress, designs and features of Griggs= Dr. Martens brand of footwear. Asserting

claims against Skechers under the Lanham Act, California Business & Professions Code Section 17200

et seq., and California common law, the complaint demands an accounting of Skechers= profits, an

injunction blocking sales of Skechers= products, actual and punitive damages, and the destruction of all

unsold infringing Skechers= footwear.


9.       In addition, Griggs= complaint alleges that Skechers, in response to Griggs= initial charges,

fraudulently induced Griggs to refrain from bringing its lawsuit against Skechers at an earlier date by

falsely representing to Griggs that Skechers was Aearnest in its desire@ to reach a negotiated settlement

and thereby persuading Griggs to enter into a Astandstill agreement.@ The complaint alleges, however,

that contrary to Skechers= representations, Sketchers had no intention of resolving Griggs= claims by

settlement, but, instead, merely wanted Ato lull Griggs into a false sense of security and to induce

Griggs to place in abeyance this infringement action against Defendant while Defendant issued a public

offering . . .@



10.      Upon news of Griggs= lawsuit against Skechers, the price of Skechers common stock, which

had reached a Class Period high of $11-13/16 per share on June 11, 1999, began markedly trending




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downward. Indeed, on June 14, 1999, the day Griggs filed its complaint, Skechers stock closed at $11-

1/8 per share. When, on June 16, 1999, Skechers belatedly acknowledged the existence of the Griggs

suit in an SEC filing supplementing the Prospectus previously filed in connection with the IPO,

Skechers common stock closed at $10-1/2 per share.


11.     In addition to failing to disclose the Griggs lawsuit, the Registration Statement and Prospectus

was materially false and misleading in that it reported revenues and earnings that were artificially

inflated as a result of Defendants= practice of Achannel stuffing,@ a scheme whereby customers are

induced to place inflated orders for Skechers= products that did not reflect their actual demand. Channel

stuffing has the effect of artificially inflating a company=s revenues and earnings in the short run B

usually at a time when company performance is critical (here, for Skechers= IPO) B at the expense of
future revenues (as sales from future quarters are in effect booked presently).



12.     The Registration Statement and Prospectus touted Skechers= substantial increase in revenues,

purportedly fueled by a growing demand for Skechers' products, while omitting any mention of

Skechers= channel stuffing and omitting financial information which would have alerted investors that

channel stuffing was occurring (and, therefore, that Skechers= impressive sales results were coming at

the expense of future quarters). Specifically, the Registration Statement and Prospective failed to

disclose a sharp, upward trend that Skechers was experiencing in it Days Sales Outstanding numbers

combined with a simultaneous decline in Skechers= order backlog. These factors are red flags of

channel-stuffing; certainly, combined, they raise a strong inference of channel-stuffing.


13.     As the result of an analyst report issued by Deutsche Banc Alex. Brown in early July 1999,

focusing on, inter alia, Skechers= shrinking backlog, investors began to suspect that the previously

reported financial results may have been illusory, i.e., a result of channel-stuffing. In response to the

report and the suspicions thus raised, the price of Skechers stock sank from $10-1/4 on July 2, 1999, to

$7-3/4 on July 6, 1999 (the following trading day), and continued on a downward trend. The suspicion

of channel-stuffing raised by the Deutsche Banc report was finally confirmed when, on October 4, 1999,

the Company reported a substantial decline in orders during the third quarter, as saturated distribution




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channels ceased to be able to absorb more Skechers product. In reaction, the price of Skechers= stock

continued to drop steadily, falling to a low of $3-7/16 on November 9, 1999.


14.         By the acts, transactions, and courses of conduct alleged herein, defendants violated the federal

securities laws as alleged herein.


                                        JURISDICTION AND VENUE



15.         This action arises under '' 11, 12, and 15 of the Securities Act of 1933 (the "1933 Act"), 15

U.S.C. '' 77k, 77l, and 77o; '' 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "1934 Act"),
15 U.S.C. '' 78j(b) and 78t(a), and; Rule 10b-5 promulgated under the 1934 Act by the Securities and

Exchange Commission (ASEC@), 17 C.F.R. 240.10b-5. This Court has jurisdiction over this action

pursuant to ' 27 of the 1933 Act, 15 U.S.C. ' 77v; ' 27 of the 1934 Act, 15 U.S.C. ' 78aa and 28 U.S.C. ''

1331 and 1337.


16.         Venue is proper in this District pursuant to ' 22 of the 1933 Act, 15 U.S.C. ' 77v, ' 27 of the 1934

Act, 15 U.S.C. ' 78aa, and 28 U.S.C. ' 1391(b). Defendant Skechers= principal place of business is in

this District. Many of the acts giving rise to the violations complained of herein occurred in this

District.


17.         In connection with the wrongs alleged herein, defendants used the instrumentalities of interstate

commerce, including the United States mails, interstate wire and telephone facilities, and the facilities of

the national securities markets.


                                             THE PARTIES


18.     Plaintiffs Mark DiMascio, Stephen Doherty, Robert Garber, Steven

Granat,          Mark     Guido,      Steven      Rubin     and     Jerry     Snyderman,        have     been

designated           co-lead       plaintiffs        pursuant        to    the    Private       Securities

Litigation Reform Act of 1995 by order of the Court dated April 17,




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2000.      All of the co-lead plaintiffs purchased or otherwise acquired

common stock of Skechers at artificially inflated prices, and have

been harmed thereby, during the Class Period, as is set forth in

detail in certifications they previously filed with the Court and

which     are    incorporated         by    reference       herein.       Several      such     co-lead

plaintiffs, including, inter alia, Steven Rubin, purchased at least

some shares of Skechers in Skechers= IPO, at the IPO price, and all

co-lead plaintiffs purchased shares traceable to Skechers= IPO.



19.     Defendant Skechers is, and was at all times relevant hereto, a corporation organized and existing

under the laws of the State of Delaware, with its principal offices in Manhattan Beach, California.

Skechers designs, manufacturers and markets branded Acontemporary life-style, casual, active and

rugged@ footwear for women, children and men. Product offerings include 900 styles of street and

fashion sneakers; hikers, trail, runners and joggers; sandals, slides and other open-toe footwear; casual

and utility oxfords, loggers, boots and demi-boots; and dress casual shoes, substantially all of which are

marketed under the Skechers name. Skechers sells its products to department stores such as Dillards,
Nordstrom, Macy=s and JC Penney and specialty retailers such as The Foot Locker and Lady Foot

Locker chains. The Company also sells its products in over 110 countries and territories through

international distributors and directly to consumers through 38 of its own retail stores. Skechers stock is

listed and traded on the New York Stock Exchange under the symbol ASKX.@


20.     Defendant Robert Greenberg ("Greenberg") was during the Class Period, and at all times

relevant hereto, the Chief Executive Officer and the Chairman of the Board of Directors of Skechers.

Defendant Greenberg signed the Registration and Prospectus referred to herein.


21.      Defendant David Weinberg ("Weinberg@) was during the Class Period, and at all times

relevant hereto, the Chief Financial Officer and a member of the Board of Directors of Skechers.

Defendant Weinberg signed the Registration and Prospectus referred to herein.




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22.      Defendants Greenberg and Weinberg, collectively, are referred to herein as the "Individual

Defendants."



23.     By virtue of their positions with the Company, the Individual Defendants had the authority and

ability to and, in fact, controlled the contents of the Company=s Registration Statement and Prospectus

and other documents filed with the SEC, and the Company=s press releases. Further, the actions of the

Individual Defendants during the Class Period caused the material misrepresentations and omissions

concerning the Company=s legal affairs and financial results as alleged herein. The Individual

Defendants were aware of the contents of the Company=s Registration Statement and Prospectus, other

SEC filings, publicly disseminated press releases and other statements alleged herein to be misleading

prior to their issuance and had the ability and opportunity to prevent their filing or issuance or cause

them to be corrected, but failed to do so.


24.     Defendant Deutsche Banc Alex Brown (ADeutsche Banc@) is a securities firm. Deutche
Banc served as co-representative of the underwriters of Skechers'

initial public offering (the "Offering" or the "IPO").                              Deutsche Banc
is being sued individually and as a representative of the Underwriter

Class ("the Underwriter Defendant Class"), as described below.


25.     Defendant Prudential Securities (APrudential@) is a securities firm. Prudential served as
co-representative of the underwriters of the Offering. Prudential is

being sued individually and as a representative of the Underwriter

Class ("the Underwriter Defendant Class"), as described below.


26.      Defendant Deutsche Banc and Prudential, collectively, are referred to herein as the

AUnderwriter Defendants.@



                            LEAD PLAINTIFFS CLASS ALLEGATIONS




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27.     Lead plaintiffs bring this action pursuant to Fed.R.Civ.P. 23(a) and 23(b)(3), individually and on

behalf of all other persons or entities who purchased or otherwise acquired Skechers' common stock

during the Class Period and were damaged thereby (the AClass@). Excluded from the Class, as defined

above, are the defendants herein, their affiliates and any of the Company's officers or directors or its

affiliates, and any members of their immediate families and their heirs, successors, and assigns.


28.     Members of the Class are so numerous that joinder of all members is impracticable. Lead

plaintiffs believe that hundreds, if not thousands, of investors purchased or otherwise acquired the

Company's stock during the Class Period, and are located throughout the United States and elsewhere.


29.     Lead plaintiff=s claims are typical of the claims of absent Class members. Members of the

Class sustained damages arising out of defendants' wrongful conduct in violation of the Federal

securities laws in the same way as the lead plaintiffs sustained damages from the unlawful conduct.


30.     Lead plaintiffs will fairly and adequately protect the interests of the Class. They have retained

counsel competent and experienced in class and securities litigation.



31.     A class action is superior to other available methods for the fair and efficient adjudication of the

controversy. Members of the Class are numerous and geographically dispersed, rendering it

impracticable for each member of the Class to bring separate actions. 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.


32.     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, whether:


(1)     Whether the federal securities laws were violated by defendants' acts as alleged herein;




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(2)     Defendants participated in and pursued a common course of conduct as alleged herein;


(3)      The Registration Statement and Prospectus issued by Skechers in connection with the IPO

contained one or more untrue statements of material facts or omitted to state one or more facts required

to be stated therein or necessary to make the statements therein not misleading;


(4)     The members of the Class have sustained damages and, if so, what is the proper measure of

such damages;


(5)     The market price of the Company's stock during the Class Period was artificially inflated due to

the non-disclosure and/or misrepresentations complained of herein;


(6)      Reports, press releases, and other documents and statements disseminated to the investing

public and/or filed with the SEC by defendants during the Class Period omitted and/or misrepresented

material facts concerning the legal affairs and business of Skechers;



(7)      Defendants are liable as the issuer, directors of the issuer or signers of the Registration

Statement and Prospectus or underwriters of the IPO; and


(8)     Defendants are liable as sellers of the offering of the Company=s securities as set forth in the

Registration Statement and Prospectus referred to herein.


33.     Lead plaintiffs knows of no difficulty which will be encountered in the management of this

litigation which would preclude its maintenance as a lead plaintiff=s class action.


                               DEFENDANT CLASS ALLEGATIONS


34.     Pursuant to Rule 23(a), (b)(1) and (b)(3), F.R.Civ.P., lead plaintiffs also seeks to have the

Underwriter Defendants certified as representatives of a defendant class consisting of all underwriters

who participated in the IPO ("the Defendant Underwriter Class")


35.      The Underwriter Defendants are sued herein both individually and on behalf of a class



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consisting of the Underwriter Defendant Class. The members of the Underwriter Defendant Class are

identified on Exhibit A annexed hereto.


36.      The Underwriter Defendant Class numbers over 20 members whose offices are located

throughout the world. Accordingly the class is so numerous that joinder of all members is

impracticable.



37.      There are questions of law or fact common to the Underwriter Defendant Class, which

predominate over questions affecting individual underwriters. These questions include:


(1)     whether the Registration Statement and/or Prospectus were materially false and misleading in

violation of the Securities Act of 1933;


(2)      whether the Registration Statement and/or Prospectus failed to disclose material facts or

misrepresented material facts;


(3)      whether the underwriters can prove affirmatively that they exercised "due diligence" in

investigating the statements made in the Registration Statement and Prospectus; and


(4)     the appropriate measure of damages.


38.     The defenses that the Underwriter Defendants will likely assert are typical of the defenses like

to be asserted by the other members of the Underwriter Defendant Class. These defenses will likely

include that the Registration Statement and Prospectus did not violate the 1933 Act and that adequate

due diligence was exercised by them. Such defenses are typical of, if not identical to, the defenses of the
other members of the underwriting syndicate,



39.     The Underwriter Defendants can be expected to fairly and adequately protect the interest of the

Underwriter Defendant Class because the Underwriter Defendants, and each of them, have a strong

incentive to establish their own defenses to lead plaintiffs' claims and because success by them in




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establishing their own defenses would vindicate and protect the interests of the other members of the

underwriting syndicate. It is typical in underwriting agreements that the lead underwriters have a duty

to indemnify the other members of the syndicate.


40.     The questions of law or fact common to the members of the Underwriter Defendant Class,

including the questions identified above, predominate over any questions effecting only individual

members of the Underwriter Defendant Class.


41.     An Underwriter Defendant Class action is superior to other available methods for the fair and

efficient adjudication of the controversy concerning the Underwriters' role in the IPO and the propriety
and lawfulness of the underwriters' conduct in connection with the preparation and filing of the

Registration Statement and Prospectus utilized in connection with the IPO.


42.     The certification of an Underwriter Defendant Class in connection with the wrongs alleged

herein will not present any unusual difficulties or burdens. Moreover, absent certification of an

Underwriter Defendant Class, there exists the possibility of a multiplicity of actions, the risk of

inconsistent determination, and the risk of inconsistent standards to which the individual members of the

Underwriter Defendant Class may be held.



             DEFENDANTS' MISREPRESENTATIONS PROXIMATELY CAUSED

          LEAD PLAINTIFF=S DAMAGES THROUGH A FRAUD ON THE MARKET


43.     At all relevant times, the market for Skechers= securities was an efficient market that promptly

digested current information with respect to the Company from all publicly-available sources and

reflected such information in Skechers' stock price.



44.     The common stock of Skechers met the requirements for listing, and was listed and actively

traded, on the New York Stock Exchange, a highly developed and efficient market. During the Class

Period, Skechers stock was heavily traded, with volume averaging several hundred thousand shares




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daily. Skechers filed periodic public reports with the SEC, and was followed by analysts from major

brokerages, including Deutsche Bank and Prudential Securities. The reports of these analysts were

redistributed to their customers and the public at large, and Skechers regularly issued press releases,

which were carried by national newswires. Thus, the analyst reports and Skechers= press releases

entered the public marketplace. As a result, the market for Skechers securities promptly digested current

information with respect to Skechers from all publicly-available sources, and reflected such information

in Skechers= stock price. Lead plaintiffs and other members of the Class relied on the integrity of the

market price of Skechers' common stock when they made open market purchasers of Skechers= stock.


45.     At the times they purchased or otherwise acquired the Company's securities on the open market,
lead plaintiffs and other members of the Class were without knowledge of the facts concerning the

wrongful conduct alleged herein and could not have reasonably discovered those facts.



46.     As would be expected where a security is traded in an efficient market, news of the Griggs

lawsuit against Skechers had an immediate effect on the market price of Skechers securities. Skechers=

stock, which had reached a Class Period high of $11-13/16 on June 11, 1999, began trending downward,

closing at $11-1/8 per share on June 14, 1999, the day Griggs filed its complaint against Skechers.

Upon Skechers finally supplementing its SEC filings to acknowledge the existence of the Griggs suit on

June 16, 1999, Skechers stock price closed at $10-1/2 per share. In subsequent weeks, as the market

more fully absorbed the news, the stock continued its downward trend.


47.     The Company=s disclosure of its second and third quarter financial results, revealing the sharp,

upward trend in the Company=s Days Sales Outstanding numbers, and the issuance by analysts of

reports confirming the simultaneous shrinkage of the Company=s backlog, thus raising suspicions

regarding and, finally, confirming Defendants= channel-stuffing scheme, similarly had an immediate

effect on the Skechers= stock price. In reaction, the price of Skechers= stock continued to drop steadily,

falling from $10-1/4 on July 2, 1999 to $7-3/4 on July 7, 1999, and to $3-7/16 on November 9, 1999.

       SUBSTANTIVE ALLEGATIONS




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48.     On July 29, 1999, Skechers filed a Form S-1 Registration Statement (Registration No. 333-

60065) (the ARegistration Statement@) with the SEC for an initial offering of its stock to the investing

public. The Registration Statement was thereafter amended various times, and incorporated a

prospectus dated June 9, 1999 (the AProspectus@). The Offering became effective on June 9, 1999,

with Skechers selling 7 million shares of common stock, priced at $11 per share, to the investing public.

Net proceeds to the Company from the IPO, after all anticipated issuance costs, were approximately

$69.7 million.


The Prospectus Did Not Disclose The

Threatened Litigation by R. Griggs Ltd.


49.     In the Registration Statement and Prospectus filed with the SEC and disseminated to the

investing public in connection with the IPO, Skechers warned, as one of a number of a number of

enumerated Arisk factors,@ that there was Aintense competition@ in the footwear industry and that the

Company=s products directly competed with the "Dr. Martens" brand of footwear. In particular, the

Registration Statement and Prospectus stated:

                 The Company=s products compete with other branded products within
                 their product category as well as with private label products sold by
                 retailers, including some of the Company=s customers. The Company=s
                 utility footwear and casual shoes compete with footwear offered by
                 companies such as . . . Dr. Martens . . . . In varying degrees, depending
                 on the product category involved, the Company competes on the basis of
                 style, price, quality, comfort and brand name prestige and recognition,
                 among other considerations.




50.     In addition, the Registration Statement and Prospectus included a "risk factor" regarding the

Company=s intellectual property rights, warning that the Company Arelies@ on its Aability to protect

[its] intellectual property rights@ and that its Afuture success will depend in significant part on the

Company=s ability to maintain and protect Skechers trademark.@ The Registration Statement and




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Prospectus further warned investors that there Acan be no assurance@ that third parties will not Aassert

intellectual property claims against the Company@ or seek to Ablock sales of the Company=s products

as violating intellectual property rights.@ In addition, the Registration Statement and Prospectus

warned that there could be "no assurance" that the Company=s trademarks and products Ado not or will

not violate the intellectual property rights of others.@


51.     A claim that the Company=s products did violate the intellectual property rights of others, the

Registration Statement and Prospectus acknowledged, Aif proved, could materially and adversely affect

the Company=s business, financial condition and results of operations.@ Indeed, even if such claim

ultimately proved Awithout merit,@ the Registration Statement and Prospectus stated, the necessary
Amanagement attention@ and Alegal costs@ associated with the resolution thereof nevertheless Acould

materially and adversely effect the Company=s business, operations, financial condition and results of

operations.@


52.     As the Registration Statement and Prospectus disclosed:


               The Company relies on trademark, copyright and trade secret protection,
               patents, non-disclosure agreements and licensing arrangements to
               establish, protect and enforce intellectual property rights in its products.
               In particular, The Company believes that its future success will depend in
               significant part on the Company=s ability to maintain and protect the
               Skechers trademark. The Company vigorously defends its trademark
               against infringement. Despite the Company=s efforts to safeguard and
               maintain its intellectual property rights, there can be no assurance that the
               Company will be successful in this regard. There can be no assurance
               that third parties will not assert intellectual property claims against the
               Company in the future. Furthermore, there can be no assurance that the
               Company=s trademarks, products and promotional materials do not or
               will not violate the intellectual property rights of others, that its
               intellectual property would be upheld if challenged, or that the Company
               would, in such an event, not be prevented from using its trademarks and
               other intellectual property. Such claims, if proved, could materially and
               adversely affect the Company=s business, financial condition and results
               of operations. In addition, although any such claims may ultimately prove
               to be without merit, the necessary management attention to and legal costs
               associated with litigation of other resolution of future claims concerning
               trademarks and other intellectual property rights, could materially and
               adversely affect the Company=s business, financial condition and results
               of operations.

                                             *    *    *




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               There can be no assurance that actions taken by the Company to establish
               and protect its intellectual property rights will be adequate to prevent
               imitation of its products by others or to prevent others from seeking to
               block sales of the Company=s products as violating intellectual property
               rights.




53.     Nevertheless, the Registration Statement and Prospectus did not disclose that Griggs, maker of

Dr. Martens footwear, was in fact asserting precisely such an "intellectual property claim against the

Company" as was being described as a speculative Arisk@ (whose materiality the company admitted).



54.     Specifically, defendants did not disclose that, prior to the IPO, Griggs had asserted a claim

against Skechers, charging Skechers with manufacturing and marketing boots, sandals and shoes that

were deliberate Aknock-offs@ of Dr. Martens, and threatening Skechers with a lawsuit. Defendants

also failed to disclose that, in response to Griggs= assertion of such claim, Skechers had negotiated a

Astandstill agreement@ with Griggs calling for Griggs to hold in abeyance the commencement of such

threatened lawsuit pending an attempt by the parties to reach a settlement. Indeed, in neither the

Prospectus, the Registration Statement, nor the Company=s other SEC filings or public statements

during the Class Period, did the Company even allude to the existence of any such claim, threatened

litigation, or standstill agreement with Griggs.


55.     On June 14, 1999, five days after the effectuation of Skechers' IPO, Business Wire reported an

announcement by Skechers that Skechers had filed a lawsuit against Griggs in the United States District
Court for the Central District of California, captioned Skechers U.S.A. Inc. v. R. Griggs Ltd., et al., No.

99-CV-6047 (filed June 14, 1999, United States District Court for the Central District of California),

alleging purported claims against Griggs for false advertising and unfair competition in connection with

the companies= competing lines of footwear. The Skechers announcement omitted any mention of the

claims previously asserted by Griggs against Skechers, and similarly omitted any mention of the

standstill agreement previously entered into by Griggs and Skechers.




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56.     Apparently later that same day, Griggs commenced its previously threatened lawsuit against

Skechers in the United States District Court for the Northern District of California, captioned R. Griggs

Limited v. Skechers U.S.A. Inc., No. 99-2862 (filed June 14, 1999, United States District Court for the

Northern District of California), asserting the claims against Skechers referred to above. In particular,

Griggs= complaint charges that Skechers= shoes, boots and sandals are deliberate Aknock-offs@ of the

footwear sold by Griggs under the Dr. Martens label. It asserts violations of the Lanham Act, California

Business & Professions Code Section 17200 et seq., and California common law, and demands, among

other things, an accounting of Skechers= profits, an injunction blocking sales of Skechers= infringing

products, actual and punitive damages, and the destruction of all unsold infringing Skechers= footwear.


57.     According to Griggs= complaint, Skechers:

               deliberately and systematically copied the Trade Dress Marks and
               Undersole Design Marks owned by GRIGGS as well as the style features
               of GRIGGS footwear, and has sold and continues to sell footwear
               products with a trade dress that is substantially identical to the overall
               configuration of GRIGGS= shoes, boots and sandals. Defendant has
               engaged in a course of conduct deliberately calculated to copy as closely
               as possible the various ranges of GRIGGS> footwear and systematically
               trade upon the distinctive appearance an design of GRIGGS= shoes, boots
               and sandals. Such copying is likely to lead and has lead to confusion
               between GRIGGS= footwear and [Skechers=] footwear.



58.     In addition, Griggs= complaint alleges that Skechers, in response to the assertion by Griggs of

its claim prior to the Skechers= IPO, fraudulently induced Griggs to enter into a Astandstill

agreement@ and thereby into refraining from bringing its lawsuit against Skechers at an earlier date. As

the complaint states, Griggs Aattempted amicably to resolve [its] dispute [with Skechers] by engaging in

extensive discussions and negotiations . . . in the past several months.@ During such time, A[Skechers]

represented to GRIGGS that [Skechers] was earnest in its desire to resolve this dispute, that it would not

file suit against GRIGGS while the parties negotiated settlement, and that [Skechers] would not violate

the parties= standstill agreement.@



59.      Nevertheless, the complaint states, after the completion of the IPO and Acontrary to its




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representations, [Skechers] filed an action in the Central District of California before the parties=

standstill agreement expired.@ Further, the complaint alleges, Skechers made such representations to

Griggs Awith no intention of performing,@ but, instead, Ato lull GRIGGS into a false sense of security

and to induce GRIGGS to place in abeyance this infringement action against [Skechers] while

[Skechers] issued a public offering on the New York Stock Exchange on or about June 9, 1999.@


60.     On June 15, 1999, Business Wire reported on the lawsuit that had been filed by Griggs against

Skechers, and quoted Marcy Bergman, an attorney with the law firm of Bullivant Houser Baily, in San

Francisco, counsel for Griggs, as remarking upon the suspicious timing (a mere five days after the

Company=s IPO) of the apparently preemptive lawsuit filed by Skechers against Griggs. AIt=s now
clear that Skechers had no real interest in reaching a settlement,@ Bergman told Business Wire. AThe

timing of the public offering last week was no coincidence.@


61.     On June 16, 1999, two days after the lawsuits referred to above were filed and a week after

Skechers= IPO became effective, Skechers filed a Form 424(b)(3) supplement to the Prospectus in

connection with the IPO, belatedly acknowledging the existence of Griggs= various claims against the

Company. The supplement stated that:


              On June 14, 1999, a complaint captioned R. Griggs Limited v. Skechers
              USA, Inc. was filed against the Company in the United States District
              Court, Northern District of California (San Francisco Division), Case No.
              99-2862. R. Griggs Limited manufactures and markets footwear including
              Dr. Martens. the complaint alleges various causes of action, including
              Federal, state and common law unfair competition and Federal state
              dilution, with respect to certain trade dress marks of certain styles of
              footwear, and fraud and deceit regarding the plaintiff=s alleged
              postponement of the filing of the action. The plaintiff is seeking a
              preliminary and permanent injunction, the delivery or destruction of
              certain materials, lost profits, treble damages, punitive damages, interest
              on the damages, reasonable attorney=s fees and costs and court costs.
              Damages are unspecified. The Company believes it has meritorious
              defenses to such claims and intends to defend these claims vigorously.
              Nevertheless, litigation is uncertain, and the Company may not prevail in
              this suit.



62.     As indicated above, the price of Skechers common stock, which had reached a Class Period high




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of $11-13/16 per share on June 11, 1999, began markedly trending downward, and closed at $11-1/8 per

share, on June 14, 1999, the day that Griggs filed its complaint against Skechers. On June 16, 1999, the

day Skechers filed the supplement to its Prospectus belatedly acknowledging the existence of the Griggs

claims, Skechers stock declined further, closing at $10-1/2 per share.


63.      Financial Accounting Standards Board Statement No. 5 (AFASB 5") sets forth Generally

Accepted Accounting Principles governing the identification and disclosure in corporate financial

statements of contingent liabilities or Aloss contingencies@ (Aan existing condition, situation or set of

circumstances involving uncertainty as to possible . . . loss . . . that will ultimately be resolved when one

or more future events occur.@). FASB 5 requires that Adisclosure of the contingency be made when
there is at least a reasonable possibility that a loss . . . may have been incurred.@



64.     Paragraph 4 of FASB 5 enumerates examples of Aloss contingencies@ required to be disclosed

in order for financial statements not to be misleading. Expressly included among such enumerated

examples are A[p]ending or threatened litigation@ and A[a]ctual or possible claims@ against the

reporting company.


65.     In addition, SEC Form S-1 directs companies registering securities with the SEC to comply with

a wide array of disclosure regulations, including Item 303 of SEC Regulation S-K, 17 C.F.R. ' 229.303

(1998). Item 303(3)(ii) requires registrants to A[d]escribe any known trends or uncertainties that have

had or that the registrant reasonably expects will have a material favorable or unfavorable impact on net

sales or revenues or income . . . .@


66.     The instructions to Item 303 make clear that:


               [t]he discussion and analysis shall focus specifically on material events

               and uncertainties known to management that would cause reported

               financial information not to be necessarily indicative of future operating

               results or of future financial condition. This would include descriptions . .




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               . of . . . matters that would have an impact on future operations and have

               not had an impact in the past.

The Prospectus Materially Misrepresented

Skechers= Financial Results and Condition




67.     In addition to failing to disclose the Griggs lawsuit on the known threat thereof, the Registration

Statement and Prospectus was materially false and misleading in that it reported revenues and earnings

that were artificially inflated as a result of Defendants= practice of Achannel stuffing,@ a scheme

whereby customers are induced to place inflated orders for Skechers= products that did not reflect their

actual demand. This is done by inducing customers to place orders before they would ordinarily do so,

thereby enabling the manufacturer to shift revenues and earnings into an earlier operating quarter.

Channel-stuffing has the effect of artificially inflating a company=s revenues and earnings in the short

run B usually at a time when company performance is critical (here, for Skechers= IPO) B at the

expense of future revenues (as sales from future quarters are in effect booked presently).


68.     The Registration Statement and Prospectus touted Skechers= substantial increase in revenues,

purportedly fueled by a growing demand for Skechers' products, while omitting any mention of

Skechers= channel stuffing and omitting financial information which would have alerted investors that

channel stuffing was occurring. Specifically, the Registration Statement and Prospective failed to
disclose the channel stuffing scheme. Ultimately, however, investors began to sense that the revenues

set forth in the prospectus were achieved through sale Aborrowed from future quotes@. This became

apparent after the class period when investors saw a sharp, upward trend that Skechers was experiencing

in it Days Sales Outstanding numbers. When combined with a simultaneous decline in Skechers=

backlog, the rising DSO numbers show that while sales were increasing, future orders were decreasing

and payment was taking longer on the past orders, which are red flags of channel-stuffing, as they

suggest that the customer sales are coming at the expense of future sales (in part, because the company

is offering the customers more favorable payment terms as an inducement to accelerate sales that would




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ordinarily have been completed in later quarters. Certainly, combined, the rising DSO, shrinking

backlog, subsequent decline in sales and the time of these events (relative to the IPO) raise a strong

inference of channel-stuffing.



69.     As the result of an analyst report issued by Deutsche Banc Alex. Brown in early July 1999,

focusing on, inter alia, Skechers= shrinking backlog, investors began to suspect that the previously

reported financial results may have been illusory, i.e., a result of channel-stuffing. In response to the

report and the suspicions thus raised, the price of Skechers stock sank from $10-1/4 on July 2, 1999, to

$7-3/4 on July 6, 1999, and continued on a downward trend. The suspicion of channel-stuffing raised by

the Deutsche Banc report was finally confirmed when, on October 4, 1999, the Company reported a

substantial decline in orders during the third quarter, as saturated distribution channels ceased to be able

to absorb more Skechers product. In reaction, the price of Skechers= stock continued to drop steadily,

falling to a low of $3-7/16 on November 9, 1999.


70.     Specifically, the Registration Statement and Prospectus stated that:

                       The Company has realized rapid growth since inception, increasing
                       net sales at a compound annual growth rate of 42.4% from $90.8
                       million in 1994 to $372.7 million in 1998. From 1997 to 1998, the
                       Company experienced a 102.7% and 117.4% increase in net sales
                       and earnings from operations, respectively. In addition, for the
                       three months ended March 31, 1999, the Company experienced a
                       59.9% and 90.8% increase in net sales and earnings from
                       operations, respectively, compared to the comparable period from
                       the prior year.



71.     This statement in the Registration Statement and Prospectus, and the financial results reported

and contained therein, were materially false and misleading in that:



(1)     The Prospectus failed to disclose that the mass marketing of Skechers' products had diluted the

fashion prestige of the Skechers' brand in a manner that was threatening to undermine future demand;


(2)     The Prospectus falsely implied that the financial results contained therein for 1998 and the first




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quarter of 1999 were attributable to high demand for Skechers' products when, in truth, defendants were

engaged in a practice known as Achannel stuffing.@ As part of this practice, defendants permitted

customers to extend payments on ordered goods in exchange for new orders. In addition, the amount due

would not have to be charged off as uncollectible or the merchandise could be returned. As indicated

above, this practice has the effect of artificially inflating a company=s revenues and earnings in the short

run, but the increases come at the expense of future revenues (as sales from future quarters are in effect

booked in the present quarter);



(3)     The Prospectus failed to disclose that as a result of Skechers' business practices, its accounts

receivable were taking more time to collect from customers, and that, in fact the Company was

experiencing a dramatic and alarming upward trend in its Days Sales Outstanding numbers. Days Sales

Outstanding (ADSO@) is a computation which determine the time it takes to collect accounts

receivables from customers, and thereby to test the quality of a company=s reported sales figures,

commonly used by stock analysts, bankers, credit analysts and accountants.[1] A sharp increase in a
company=s DSO numbers frequently is an indication of channel stuffing, since it indicates that the

company is booking sales and presumably shipping product with the understanding that the Company

will not press for and does not expect to receive payment. Indeed, Skechers customers confirm that

Skechers did change payment terms shortly before the IPO in order to encourage customers to make

their regular purchase orders at earlier times than usual (in effect making what would ordinarily be

second or third quarter purchases in the first quarter). This was done pursuant to a practice not disclosed

to the investing public whereby Skechers extended customers= payment time from __ days to __ days if

the costumers agreed to take delivery on their orders prior to the end of the first quarter. The obvious

effect of this program was to move many sales from the second and third quarters into the third quarter,

thus leading to the artificial inflation of the first quarter earnings. Thus, Skechers DSO figures

ballooned in the second and third quarters of 1999, because it was taking Skechers longer to get paid on

the sales it had booked in the first quarter. Skechers program to Aborrow@ sales from future quarters

was not disclosed to investors in the IPO.




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(1)       Use of DSO analysis to evaluate the financial data disclosed by Skechers regarding the first

quarter of 1999 in the Registration Statement and Prospectus, and regarding the second and third

quarters of 1999 disclosed in Skechers=s 10Qs, filed after the conclusion of the Class Period, makes

clear that Skechers was falsely attributing its sales results to high demand for Skechers= products, when,

in fact, those results were attributable to channel-stuffing.


(2)      Specifically, as set forth in the chart below, based on the financial information disclosed in the

Registration Statement and Prospectus, in the year 1998, Skechers' accounts receivable required 39 days

to be collected, i.e., DSO equaled 39 days. For the first quarter, ended March 31, 1999, the Company=s

DSO had increased 28% to 50 days. Nevertheless, the Registration Statement and Prospectus did not
state the DSO. Nor did the Prospectus indicate that such a computation, combined with the information

then available to Defendants regarding the first two months of the second quarter, ended June 30, 1999,

would have disclosed that the increase in DSO was part of an alarming, sharp upward trend in DSO.

Indeed, based on the financial information subsequently disclosed by the Company in its 10Q for the

second quarter, the DSO had increased to 64 days, nearly double the DSO for 1998. Based on the

financial information subsequently disclosed by the Company in its 10Q for the third quarter, by the end

of the third quarter, ending September 30, 1999, DSO further increased, to 73 days (an 87% increase

over 1998).




                            DAY SALES OUTSTANDING BY QUARTER



                               Year 1998          1st Q (Ending     2nd Q (Ending       3rd Q (Ending


                                                     3/31/99)          6/30/99)             9/30/99)


          Net Sales              372,680              95,736            104,582             124,177


      Trade Accountants




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        Receivable



       -Beginning              31,231              46,771              53,594              74,668


         -Ending               46,771              53,549              74,668              71,731


         -Average              39,001              50,160              64,131              73,200


      A/R Turnover               9.56               1.91                1.63                1.70


        Days A/R                  39                 50                  64                  73
       Outstanding




(3)     The information pertaining to the first quarter of 1999 and the first two months of the second

quarter of 1999 -- April and May of 1999 -- was available to Skechers' management on June 9 when the

Prospectus became effective. Nevertheless, the Prospectus omitted any mention of this alarming, sharp

upward trend in the Company=s DSO or of the underlying agreement with customers that prompted the

trend and produced the positive operating results reflected in the prospectus. Internal financial reports

containing such basic sales and accounts receivable information from which DSO is derived, together
with a computation of DSO and other measures of financial results, were available and in fact provided

to management. Indeed, in its IPO prospectus, the Company touted its Aadvanced computerized

management information system@ with a Alocal area network of terminals at the corporate offices@

which enabled management to monitor, among other things, Acomprehensive order processing, . . .

accounting and management information for the marketing, selling, manufacturing, retailing and

distribution functions of the company=s business.@ According to the Prospectus, the system provided

management with Aintegrated financial, sales, inventory and distribution related information.@

(4)     Defendants knew or were grossly reckless in not knowing that the increase in the time that
Skechers' accounts receivable remained outstanding was a result of the channel stuffing practices
described above.



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(4)      The Prospectus also failed to disclose that the Company=s decreasing backlog was a result of

Skechers= channel-stuffing practices, nor that, as a consequence, sales results for future quarters would

fall below expectations. Analysts reports confirmed the shrinking backlog.


(1)      On or about July 13, 1999, TheStreet.Com published an article (ASkechers Runs the Wrong

Way@) regarding the then-35% skid in the stock price of Skechers since its IPO. The article cited a

disclosure in the Prospectus indicating that the Company=s backlog, a measure of orders placed by

retailers for future delivery, had decreased 15% to $136.5 million year over year for the first quarter of

1999.


(2)      In or about early July 1999, Deutsche Banc Alex. Brown(one of the Underwriters of the IPO)

issued a research note authored by analyst Marcia Aaron. According to the article published by

TheStreet.com, the Deutsche Banc note predicted that the backlog would likely decline by similar or

greater rate when Skechers reported its second-quarter results. The Deutsche Banc note further

indicated that this decline stemmed from a practice by Skechers of moving product from factories to

stores at a quicker pace, according to TheStreet.com.



(3)      On or about July 29, 1999, Prudential Securities analyst Harry G. Katica, issued a research
report noting that the price of Skechers stock Amay be impacted in the short term by a negative third

quarter earnings comparison and investor concern over lower year-over-year backlogs . . . .@ The
report went on to indicate that Skechers A[i]nventory levels actually declined by $6.7 million from year

end . . . .@


(4)      On or about August 9, 1999, Deutsche Banc analyst Marcia Aaron issued a research report

reiterating her earlier analysis, reported by TheStreet.com, as indicated above, that ASkechers backlog

fell %16 percent at the end of1Q, and we expect the backlog to be down at that rate or somewhat greater

when 2Q is reported.@




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(5)     The information pertaining to the Company=s backlog for first quarter of 1999 and for the first

two months of the second quarter of 1999 (April and May of 1999) was available to Defendants on June

9 when the Registration Statement and Prospectus became effective. Indeed, the Company=s

Aadvanced computerized management information system,@ accessible in the Company=s corporate

offices, enabled Defendants to Atrack . . . orders, manufacturing schedules, inventory and sales of

Skechers products,@ according to the IPO Prospectus. Nevertheless, the Prospectus did not disclose

that the decreasing backlog was a result of channel-stuffing practices, nor that, as a consequence, sales

results for future quarters would fall below expectations. The Company=s practice of moving product

from factories to stores at a quicker pace, which the Prospectus failed to disclose, overstated the
Company's growth rate by drawing in sales from future quarters.


(6)     In reaction to the disclosures made and the suspicions of channel stuffing raised by the initial

Deutsche Banc report of July 1999, the price of Skechers' stock declined $2.50 from its previous closing

price of $10.25 per share to close at $7.75 per share on July 6, 1999. As other analyst reports further

confirming the details regarding the Company=s backlog were issued in the ensuing weeks and months,

the price of Skechers stock continued to decline, eventually falling as low as $3-7/16 on November 9,

1999.


72.     The positive sales results in the first and second quarters, combined with their sudden third

quarter decline, and the increase in DSO and decrease in backlog in the first and second quarters, give

rise to a strong inference that the first and second quarter revenues were achieved through channel

stuffing. Thus, customers were placing fewer orders than usual (because they already placed the orders

that would normally be placed in future quarters), and the customers were being given more time to pay

for the orders (because they were induced to order for future quarters). In light of the foregoing, it is not

surprising that Skechers= third quarter sales figures were disappointing (because many third quarter

sales had been booked in earlier quarters to give the impression of sales growth at the time of Skechers=

IPO).

The Impact Of Channel Stuffing Practices On Skechers'

Second and Third Quarter Financial Results



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73.     Having artificially inflated its financial results by means of channel-stuffing, it was only a

matter of time before the Company=s sales results would sharply decline as saturated distribution

channels ceased to be able to absorb more product. Indeed, as indicated above, channel-stuffing has the

effect of artificially inflating a company=s revenues and earnings in the short run B usually at a time

when company performance is critical (here, for Skechers= IPO) B at the expense of future revenues (as

sales from future quarters are in effect booked presently). The suspicion of channel-stuffing raised by

these combined red flags of rising DSO and shrinking backlog, as indicated above, was confirmed when,

on October 4, 1999, the Company reported a substantial decline in orders during the third quarter, as
saturated distribution channels ceased to be able to absorb more Skechers product.


74.     Revenues for the second quarter of 1999 continued to be supported by Skechers' channel

stuffing practices. Skechers announced, in a press release dated July 28, 1999, that sales and earnings

has increased over the previous year as follows:


               Net sales for the second quarter of fiscal 1999 increased 19.3% to $104.6
               million compared to $87.7 million for the second quarter of fiscal 1998.
               Pro forma net income for the quarter, assuming a 40% tax rate, was $6.2
               million versus $4.8 million in the second quarter of 1998, representing a
               31.3% increase. Diluted earnings per share increased 25.0% to $0.20 on
               31,462,000 diluted weighted average shares outstanding versus diluted
               earnings per share of $0.16 on 30,692,000 diluted weighted average shares
               outstanding in 1998. For the six month period ended June 30, 1999,
               revenues increased 35.8% to $200.3 million, compared to $147.6 million
               for the first six months of 1998. Pro forma net income for the first six
               months, assuming a 40% tax rate, was $8.4 million versus $5.4 million for
               the comparable period in 1998, representing a 54.4% increase. Diluted
               earnings per share increased 50.0% to $0.27 on 30,777,000 diluted
               weighted average shares outstanding versus diluted earnings per share of
               $0.18 on 30,606,000 diluted weighted average shares outstanding in 1998.



75.     In the third quarter of 1999, however, Skechers could not sustain revenue growth because the
market had been saturated with Skechers' products. On October 4, 1999, Skechers announced that sales

and earnings for the third quarter of 1999 were expected to decline substantially from the third quarter of




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1998 results. The Company announced that sales were expected to range between $120 million and

$125 million, as compared to $143 million in the third quarter of 1998. Earnings for the third quarter

were expected to range between $0.22-$0.27 per share, compared to fully diluted earnings of $0.44 per

share in the third quarter of 1998.


76.     The October 4, 1999 press release attributed Skechers' poor third quarter financial performance

to weak orders during the third quarter:

               Actual third quarter results are expected to be released during the week of
               November 1. SKECHERS attributed the results to lower than anticipated
               at once orders during the third quarter, resulting partially from a slowdown
               in overall back-to-school sales at major retail customers, and a shift in
               retail buying patterns relative to last year from the third quarter into the
               fourth quarter.



77.     In response to this announcement, Skechers= already battered stock price fell an additional 14%

on October 4, 1999 (from $4.8125 to $4.125).



78.     The Company=s third quarter financial results, announced on October 28, 1999, fell within the

expected range announced on October 4, 1999. As expected, Skechers suffered a substantial decline in

year-over-year financial performance as a result of the acts described herein:

               Net sales for the third quarter of fiscal 1999 were $124.2 million
               compared to $143.0 million for the third quarter of fiscal 1998. Pro forma
               net income for the quarter, assuming a 40% tax rate, was $8.5 million
               versus $13.6 million in the third quarter of 1998. Diluted earnings per
               share for the quarter were $0.24 on 35,594,000 diluted weighted average
               shares outstanding compared to $0.44 per diluted share on 30,692,000
               diluted weighted average shares outstanding in 1998. For the nine month
               period, net sales increased 11.7% to $324.5 million, compared to $290.6
               million for the first nine months of 1998. Pro forma net income for the
               period, assuming a 40% tax rate, was $16.9 million versus $19.0 million
               for the comparable period in 1998. Diluted earnings per share were $0.52
               on 32,430,000 diluted weighted average shares outstanding versus diluted
               earnings per share of $0.62 on 30,634,000 diluted weighted average shares
               outstanding for the comparable period in 1998.



Additional Scienter Allegations




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79.     Defendants were motivated to, and did, fraudulently and/or recklessly fail to disclose the

material facts concerning the Griggs claims against Skechers and the standstill agreement between

Griggs and Skechers in order artificially to inflate the value of Skechers common stock in the IPO and

thereafter during the Class Period. Defendants were under a duty to disclose those facts to the investing

public prior to the IPO pursuant to, inter alia, FASB 5 and Item 303, as indicated above.



80.     In addition, defendants were under a duty to disclose those facts in view of the risk factors

which defendants did disclose in the Registration Statement and Prospectus. Having made those

disclosures, defendants' failure to reveal the facts concerning the claim asserted by Griggs and the

standstill agreement rendered the Registration Statement and Prospectus materially false and

misleading.


81.     Furthermore, the express terms of the risk factors that were disclosed by Skechers (i.e., that any

intellectual property claims against the Company Aif proved, could materially and adversely effect the

Company=s business@), together with Skechers= June 16, 1999, supplementation of its Prospectus,

comprise an implicit admission by Skechers that the Griggs claims created a Areasonable possibility of

loss@ for the Company and/or were a Aknown uncertainty@ which Skechers could Areasonably expect

[would] have a material . . . unfavorable impact@ on the Company=s financial condition. As such,

defendants cannot dispute that their failure to disclose the existence of the Griggs claims prior to the

Company=s IPO constituted an omission of a material fact, namely, of a known "loss contingency," in

violation of GAAP and the securities laws.



82.     Defendants were also motivated to, and did, fraudulently and/or
recklessly inflate the revenues, earnings, and sales of the Company

in the Registration Statement and Prospectus                           through their channel-

stuffing scheme, as indicated above, in order artificially to inflate

the value of Skechers common stock in, and thereby ensure the success

of,    the    IPO,    and     to   inflate      the    value      of   Skechers       common      stock




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thereafter during the Class Period.                      For the same reasons, Defendants

were motivated to, and did, fail to disclose in the Registration

Statement and Prospectus that the financial results contained in the

Prospectus        for    1998      and   the    first      quarter      of    1999     were     falsely

ascribed to high demand for Skechers= products, when, in truth, those

financial results were a consequence of Defendants= channel-stuffing

scheme,      as    detailed        above.      Defendants=         failure      to     disclose       the

Company=s channel-stuffing scheme, that gave rise to the operating
results       reported        in     the     prospectus         rendered        the     Registration

Statement and Prospectus and materially false and misleading.




                        INAPPLICABILITY OF STATUTORY SAFE HARBOR


83.     The statutory safe harbor provided for forward-looking statements under certain circumstances

does not apply to any of the allegedly false statements pleaded in this complaint. Many of the

statements pleaded herein were not specifically identified as "forward-looking statements" when made.

To the extent there were any forward looking statements, there were no meaningful cautionary

statements identifying the important then-present factors that could and did cause actual results to differ

materially from those in the purportedly forward-looking statements. Alternatively, to the extent that the

statutory safe harbor does apply to any forward-looking statements pleaded herein, defendants are liable
for those false forward-looking statements because at the time each of those forward-looking statements

was made, the particular speaker knew that the particular forward-looking statement was false or

misleading, knew of and failed to disclose adverse information relating to the forward-looking

statements and/or the forward-looking statement was authorized and/or approved by an executive

officer of Skechers who knew that those statements were false when made.



84.     Any warnings contained in the press releases and the financial statements quoted herein were

generic statements of the kind of risks that affect any company of the type that manufacturers and




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markets footwear and misleadingly contained no specific factual disclosure of any of the specific legal

problems by Griggs, including the then-existing claims.


                                             COUNT I

                            VIOLATION OF ' 10(b) OF THE 1934 ACT

                    AND RULE 10b-5 PROMULGATED THEREUNDER

                AGAINST SKECHERS AND THE INDIVIDUAL DEFENDANTS



85.     Lead plaintiffs repeat and realleges each and every allegation contained in the above paragraphs,
as if fully set forth herein. This claim is asserted against Skechers and the Individual Defendants, and

each of them.


86.     During the Class Period, Skechers and the Individual Defendants, and each of them, 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 lead plaintiffs and the Class; (ii) artificially inflate and maintain

the market price of Skechers securities; and (iii) cause lead plaintiffs and the Class to purchase or

otherwise acquire Skechers securities at inflated prices. In furtherance of this unlawful scheme, plan

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



87.     Defendants (a) employed devices, schemes, and artifices to defraud; (b) made untrue statements

of material fact and/or omitted to state material facts necessary to make the statements made not

misleading; and/or (c) engaged in acts, practices, and a course of business which operated as a fraud and

deceit upon the purchasers and/or acquirers of the Company's securities in an effort to maintain

artificially high market prices for Skechers common stock in violation of ' 10(b) of the 1934 Act, 15

U.S.C. 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. 240.10b-5. Defendants are sued

either as primary participants in the wrongful and illegal conduct charged herein or as controlling

persons as alleged below.




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88.     In addition to the duties of full disclosure imposed on defendants as a result of their making of

affirmative statements and reports, or participation in the making of affirmative statements and reports

to the investing public, they had a duty to promptly disseminate truthful information that would be

material to investors, in compliance with the integrated disclosure provisions of the SEC as embodied in

SEC Regulations S-X (17 C.F.R. ' 210.01 et seq.) and S-K (17 C.F.R. ' 229.10 et seq.) and other SEC

regulations, including truthful, complete and accurate information with respect to the Company's legal

affairs so that the market prices of the Company's publicly traded securities would be based on truthful,

complete and accurate information.



89.     Skechers and the Individual Defendants, individually and in concert, directly and indirectly, by

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

participated in a continuous course of conduct to conceal adverse material information about the

Company's financial results, businesses, operations, and future outlook as specified herein. Defendants

employed devices, schemes, and artifices to defraud, while in possession of material adverse non-public

information, and engaged in acts, practices, and a course of conduct as alleged herein, in an effort to

assure investors of Skechers' management, value and performance, and legal affairs which included the

making of, or the participation in the making of, untrue statements of material facts and omitting to state

material facts necessary in order to make the statements made about legal affairs of the Company in the

light of the circumstances under which they were made, not misleading, as set forth more particularly

herein, and engaged in transactions, practices, and a course of business which operated as a fraud and

deceit upon the purchasers and/or acquirers of Skechers securities during the Class Period.


90.     The Individual Defendants' primary liability and controlling person liability arise from the

following facts: (i) they were high-level executives and directors of the Company during the Class

Period and were members of the Company's management team; (ii) by virtue of their responsibilities and

activities as senior officers of the Company, they were privy to and participated in the drafting,

reviewing, and/or approving the misleading statements, releases, reports, and other public

representations of and about Skechers, and/or signed the Company's public filings with the SEC, which




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public filings contained the allegedly materially misleading statements; (iii) they knew or had access to

the material adverse non-public information about the financial results, business, operations, and future

outlook, of Skechers and its legal affairs, which were not disclosed; and (iv) they were aware of the

Company's dissemination of information to the investing public which they knew or recklessly

disregarded was materially false and misleading.



91.     Each of the defendants named in this count had actual knowledge of the misrepresentations and

omissions of material facts set forth herein, or acted with reckless disregard for the truth in that they

failed to ascertain and to disclose such facts, even though such facts were available to them. Defendants'

material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose

and effect of concealing Skechers' legal affairs and true operating condition from the investing public

and supporting the artificially inflated price of its securities. As demonstrated by defendants' statements

throughout the Class Period, if they did not have actual knowledge of the misrepresentations and

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

from taking those steps necessary to discover whether those statements were false or misleading.


92.     As a result of the dissemination of the materially false and misleading information and failure to

disclose material facts, as set forth herein, the market price of Skechers securities was artificially

inflated during the Class Period. In ignorance of the fact that market prices of Skechers' publicly-traded

securities were artificially inflated, and relying directly or indirectly on the false and misleading

statements made by defendants, or, with respect to open market purchases, upon the integrity of the

market in which the securities trade, and the truth of any representations made to appropriate agencies as

to the investing public, at the times at which any statements were made, and/or on the absence of

material adverse information that was known to or recklessly disregarded by defendants but not

disclosed in public statements by such defendants during the Class Period, lead plaintiffs and the Class

purchased or otherwise acquired for value Skechers securities during the Class Period at artificially high

prices and were damaged thereby.




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93.     At the time of such misstatements and omissions, lead plaintiffs and the Class were ignorant of

their falsity, and believed them to be true. Had lead plaintiffs and the Class and the marketplace known

of the true legal challenges faced by the Company, which were not disclosed by defendants, lead

plaintiffs and the Class would not have purchased or otherwise acquired their Skechers securities during

the Class Period, or, if they had purchased or otherwise acquired such stock during the Class Period,

they would not have done so at the artificially inflated prices which they had paid.


94.     By virtue of the foregoing, defendants have violated ' 10(b) of the 1934 Act, and Rule 10b-5

promulgated thereunder.


95.     As a direct and proximate result of defendants' wrongful conduct, lead plaintiffs and the Class

suffered damages.



                                            COUNT II



                          VIOLATION OF ' 20(a) OF THE 1934 ACT

                        AGAINST THE INDIVIDUAL DEFENDANTS



96.     Lead plaintiff repeat and reallege each and every allegation contained in the above paragraphs,

as if fully set forth herein. This claim is asserted against the Individual Defendants, and each of them.



97.     The Individual Defendants and each of them acted as a controlling person of Skechers within

the meaning of ' 20(a) of the 1934 Act, as alleged herein. By virtue of their executive positions, each

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 lead

plaintiffs contends are false and misleading. The Individual Defendants were provided with or had

unlimited access to copies of the Company's internal reports, press releases, public filings, and other

statements alleged by lead plaintiffs to be misleading prior to and/or shortly after these statements were



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issued and had the ability to prevent the issuance of the statements or cause the statements to be

corrected.


98.      In particular, each of the Individual Defendants had direct involvement in the day-to-day

operations of the Company and therefore, are presumed to have had the power to control or influence the

particular transactions and statements giving rise to the securities violations as alleged herein, especially

by virtue of their senior positions, and exercised the same.


99.     As set forth above, the Individual Defendants violated ' 10(b) and Rule 10b-5 by their acts and

omissions as alleged herein. By virtue of their positions as controlling persons of Skechers, each of the
Individual Defendants is liable pursuant to ' 20(a) of the 1934 Act. As a direct and proximate result of

the Individual Defendants' wrongful conduct, lead plaintiffs and the Class suffered damages.



                                               COUNT III



                               VIOLATION OF ' 11 OF THE 1933 ACT

                                    AGAINST ALL DEFENDANTS




100.    Lead plaintiffs repeat and reallege each and every paragraph contained above as if set forth

herein, except insofar as such might invoke a claim or element of fraud. Allegations in the complaint of

knowing or reckless misrepresentations or omissions are not incorporated into this claim. This claim is

asserted against all defendants, and each of them.


101.    This Count is brought pursuant to ' 11 of the 1933 Act, 15 U.S.C. ' 77k, on behalf of lead

plaintiffs and the Class.


102.    The Registration Statement and Prospectus referenced herein were inaccurate and misleading,

contained untrue statements of material fact, omitted to state other facts necessary to make the




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statements made not misleading, and failed to adequately disclose material facts as described above.


103.    Skechers was the registrant of the Registration Statement and Prospectus.


104.     Skechers was the issuer of the stock sold or otherwise exchanged through the Registration

Statement and Prospectus. As issuer of the registered shares, Skechers is strictly liable to lead plaintiffs

and the Class for the misstatements and omissions contained in the filings.


105.     The Defendants, and each of them, were responsible for the content and dissemination of the

Registration Statement and Prospectus in connection with the offering, and caused such filing to be

made with the SEC. The Individual Defendants signed the Registration Statement, and the Underwriter

Defendants served as underwriters, with respect to the securities offered pursuant to the Registration

Statement.


106.    None of the Defendants made a reasonable investigation or possessed reasonable grounds for the

belief that the statements contained in the Registration Statement and Prospectus referenced herein were

true, did not omit any material fact and was not misleading.



107.     Defendants, and each of them, issued, caused to be issued and participated in the issuance of

materially false and misleading written statements to the investing public which were contained in the

Registration Statement and Prospectus referenced herein, which statements misrepresented or failed to

disclose, inter alia, the facts set forth above.


108.    As a direct and proximate result of Defendants' acts and omissions in violation of the 1933 Act,

lead plaintiffs and the members of the Class suffered substantial damage in connection with their

purchase and/or acquisition of Skechers stock in the offering made pursuant to the false and misleading

Registration Statement and/or purchases or acquisitions that are traceable to that offering. By reason of

the conduct herein alleged, defendants violated and/or controlled a person who violated, ' 11 of the 1933

Act.




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109.     At the times they purchased or otherwise acquired Skechers stock, lead plaintiffs and the

members of the Class were without knowledge of the facts concerning the false or misleading statements

or omissions alleged herein. Less than one year has elapsed from the time that lead plaintiffs and the

members of the Class discovered or reasonably could have discovered the facts upon which this

complaint is based to the time that this complaint is filed. Less than three years have elapsed from the

time that the securities upon which this Count is brought were bona fide offered to the public to the time

that lead plaintiffs have instituted this action.



                                              COUNT IV

                            VIOLATION OF ' 12(a)(2) OF THE 1933 ACT

                                  AGAINST ALL DEFENDANTS



110.    Lead plaintiffs repeat and reallege each and every paragraph contained above as set forth herein,

except insofar as such might invoke a claim or element of fraud. Allegations in the complaint of

knowing or reckless misrepresentations or omissions are not incorporated into this claim. This claim is

asserted against all defendants, and each of them.


111.    This Count is brought pursuant to ' 12(a)(2) of the 1933 Act, 15 U.S.C. ' 77l(2), on behalf of lead

plaintiffs and the Class.


112.    Defendants, and each of them, were sellers, offerors, and/or solicitors of sales of Skechers stock

in connection with the Registration Statement and Prospectus referenced herein.


113.     The actions taken by defendants in solicitation of such sales, included participation in the

preparation and dissemination of the false and misleading Registration Statement and Prospectus issued

in connection with the offering, which contained untrue statements of material facts, which omitted to

state other facts necessary to make the statements made not misleading and which failed to disclose

material facts.




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114.     Defendants, and each of them, solicited and/or played a substantial role in the offering of

Skechers= stock as referred to above. But for the participation by defendants, including the solicitation

as set forth herein, the offering could not, and would not, have been accomplished. Defendants were

motivated, at least in part, by a desire to serve their own financial interests. Defendants did the

following acts in furtherance of the sale of Skechers securities:


(1)      They actively and jointly drafted, revised, and approved the Registration Statement and

Prospectus referenced herein and other written selling materials by which the offering of Skechers stock

was made.


(2)      They finalized the Registration Statement and Prospectus relating to the offering of Skechers=

stock and caused it to become effective. But for the defendants having drafted, filed, signed and/or

authorized the signing of the Registration Statement and Prospectus, the offering could not have been

accomplished; and


(3)      They conceived and planned the offering of the Skechers= stock and jointly orchestrated all
activities necessary to effect the sale of these securities, by issuing the securities, promoting the

securities, supervising their distribution and ultimately selling the securities.



115.    The Individual Defendants, and each of them, were obligated to make a reasonable and diligent

investigation of the written and oral statements made in the Registration Statement and Prospectus and

roadshow presentations related to the transaction referenced herein, 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. The Individual Defendants knew of, or in the exercise of

reasonable care should have known of, the misstatements and omissions contained in the Registration

Statement and Prospectus and offering as set forth above.


116.     Lead plaintiffs and the Class members purchased or otherwise acquired Skechers securities

pursuant to the defective Registration Statement and Prospectus referenced herein. Lead plaintiffs and




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the Class members did not know, or in the exercise of reasonable diligence could not have known, of the

untruths and omissions contained in and in the Registration Statement and Prospectus referenced herein

or made in connection with the respective roadshow presentations. As a consequence, lead plaintiffs

and the class suffered damages.


117.     By reason of the conduct alleged herein, the defendants, and each of them, violated, and/or

controlled a person who violated, ' 12(a)(2) of the 1933 Act, 15 U.S.C. 77l(a)(2). As a direct and

proximate result of these violations, lead plaintiffs and the Class members sustained substantial damage

in connection with their purchase and/or acquisition of Skechers securities. Lead plaintiffs and Class

members who purchased or otherwise acquired their Skechers stock pursuant to the defective
Registration Statement and Prospectus referenced herein, but who still hold their Skechers securities,

have the right to rescind and to tender their Skechers shares to the defendants and hereby reserve that

right.



118.     Less than one year has elapsed from the time when lead plaintiffs and the Class members

discovered or reasonably could have discovered the facts upon which this Count is based to the time of

the filing of this class action. Less than three years has elapsed from the sale to the public of the

securities upon which this Count is brought to the time that lead plaintiffs has filed this complaint.

                                            COUNT V



                           VIOLATION OF ' 15 OF THE 1933 ACT

                        AGAINST THE INDIVIDUAL DEFENDANTS




119.     Lead plaintiffs repeat and reallege each and every paragraph contained above as if set forth

herein, except insofar as such might invoke a claim or element of fraud. Allegations in the complaint of

knowing or reckless misrepresentations or omissions are not incorporated into this claim.




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120.    This Count is brought pursuant to ' 15 of the 1933 Act, 15 U.S.C. ' 77o, against the Individual

Defendants, and each of them.


121.    Each of the Individual Defendants, by reason of his or her stock ownership, management

position and/or membership on the Company's Board of Directors, was a controlling person of the

Company and had the power and influence, and exercised the same, to cause Skechers to engage in the

violations of law complained of herein. The Individual Defendants, and each of them, are thus liable

under ' 15 of the 1933 Act to lead plaintiffs and the Class members who purchased or otherwise acquired

their shares of Skechers stock pursuant to the defective Registration Statement and Prospectus

referenced herein.


                                     PRAYER FOR RELIEF


               WHEREFORE, lead plaintiffs demands judgment:


               A.       determining that the instant action is a proper class action maintainable under

Rule 23 of the Federal Rules of Civil Procedure;



               B.        awarding compensatory damages and/or recission as appropriate against the

defendants and each of them, in favor of lead plaintiffs and all members of the Class for damages

sustained as a result of the defendants' wrongdoing;


               C.      awarding lead plaintiffs and all members of the Class the costs and disbursements

of this suit, including reasonable attorneys', accountants' and experts' fees; and

               D.      awarding such other and further relief as may be just and proper.




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                                                                      Page 41 of 45



                                     JURY DEMAND



             Lead plaintiffs hereby demand a trial by jury.



Dated: May 31, 2000




                                   KIRBY McINERNEY & SQUIRE, LLP




                                   By:

                                           IRA M. PRESS

                                           MARK A. STRAUSS (196471)

                                   830 Third Avenue

                                   New York, New York 10022

                                   Telephone: (212) 371-600



                                   Lead Counsel for Plaintiffs



                                   LAW OFFICES OF LIONEL Z. GLANCY




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                                  By:

                                          LIONEL Z. GLANCY #134180

                                    PETER A. BINKOW #173848

                                    TRACEY THROWER #145782

                                  1801 Avenue of the Stars

                                  Suite 311

                                  Los Angeles, California 90067

                                  Telephone: (310) 201-9150




                                  WEISS & YOURMAN

                                  KEVIN J. YOURMAN, ESQ.

                                  10940 Wilshire Boulevard

                                  24th Floor
                                  Los Angeles, California         90024

                                  Telephone: (310) 208-2800




                                  WOLF HALDENSTEIN ADLER FREEMAN & HERZ

                                    LLP

                                  FRANCIS M. GREGOREK, ESQ.

                                  FRANCIS A. BOTTINI, JR., ESQ.



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                                                                     Page 43 of 45



                                  Symphony Towers

                                  750 B Street, Suite 2770

                                  San Diego, California      92101

                                  Telephone:      (619) 239-4599



                                  WOLF HALDENSTEIN ADLER

                                    FREEMAN & HERZ LLP

                                  FRED T. ISQUITH, ESQ.

                                  270 Madison Avenue

                                  New York, New York      10016

                                  Telephone:      (212) 545-4600




                                  LAW OFFICES OF STEVEN E.

                                    CAULEY, P.A.

                                  STEVEN E. CAULEY, ESQ.

                                  BRIAN J. ROBBINS, ESQ.

                                  Suite 218, Cypress Plaza

                                  2200 North Rodney Parkham Road

                                  Little Rock, Arizona      72212

                                  Telephone:      (501) 312-8500



                                  LAW OFFICES OF MARC S. HENZEL

                                  MARC S. HENZEL, ESQ.

                                  210 West Washington Square

                                  Third Floor




http://www.whafh.com/cases/complaint/skecherscmplt.htm                 10/27/2004
Philadelphia, Pennsylvania 19106-3514

Telephone:   (215) 625-9999



SHEPHERD & GELLER, LLC

PAUL J. GELLER, ESQ.

7200 West Camino Real

Suite 203

Boca Raton, Florida     33433

Telephone:   (561) 750-3000
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