UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

Transcription

1 Case:-cv-00-JST Document Filed0// Page of 0 of All Other Persons Similarly Situated, MAGNACHIP SEMICONDUCTOR CORP., SANG PARK, TAE YOUNG HWANG, and MARGARET SAKAI, v. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA Plaintiff, Defendants. ) ) ) ) ) ) ) ) ) Case No.: CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS JURY TRIAL DEMANDED

2 Case:-cv-00-JST Document Filed0// Page of Plaintiff situated, by his undersigned attorneys, for his complaint against defendants, alleges the following based upon personal knowledge as to himself and his own acts, and information and belief as to all other matters, based upon, inter alia, the investigation conducted by and through his attorneys, which included, among other things, a review of the defendants public documents, conference calls and announcements made by defendants, United States Securities and Exchange Commission ( SEC ) filings, wire and press releases published by and regarding MagnaChip Semiconductor Corporation, ( MagnaChip or the Company ), analysts reports and advisories about the Company, and 0 information readily obtainable on the Internet. NATURE OF THE ACTION. This is a federal securities class action on behalf of a class consisting of all persons other than defendants who purchased or otherwise acquired MagnaChip securities between January 0, and March,, both dates inclusive (the Class Period ), seeking to recover damages caused by defendants violations of the federal securities laws and to pursue remedies under 0(b) and (a) of the Securities Exchange Act of (the Exchange Act ) and Rule 0b- promulgated thereunder against the Company and certain of its top officials.. MagnaChip Semiconductor Corporation designs and manufactures analog and mixed- signal semiconductor products for high-volume consumer applications. MagnaChip Semiconductor Corporation provides its products and services to consumer electronics OEMs, subsystem designers, and contract manufacturers through a direct sales force, as well as through a network of authorized agents and distributors in the United States, Korea, Taiwan, China, Japan, Hong Kong, and Macau.. Throughout the Class Period, defendants made materially false and misleading statements regarding the Company s business, operational and compliance policies. Specifically, defendants made false and/or misleading statements and/or failed to disclose that: (i) the Company

3 Case:-cv-00-JST Document Filed0// Page of 0 lacked adequate controls over financial reporting; (ii) the Company was improperly recognizing revenues; (iii) the Company s prior financial statements required restatement; and (iv) as a result of the above, the Company s financial statements were materially false and misleading at all relevant times.. On Jan.,, after the close of trading, the Company announced that it would postpone its fourth quarter earnings release and investor conference call, previously scheduled for Tuesday, January,, to provide additional time for the Company to complete its review of its financial results for the fourth quarter and full year.. On this news, MagnaChip securities declined $. per share, or over %, to close at $. per share on January,.. On March,, the Company issued a press release announcing the need to restate its prior financial statements, as well as identifying material weaknesses in its internal controls. The Company stated in relevant part: [T]he Audit Committee of the Company's Board of Directors has determined that the Company incorrectly recognized revenue on certain transactions and as a result will restate its financial statements. This conclusion is based upon preliminary findings of an ongoing internal review into practices and procedures by management, conducted at the Audit Committee's request by outside professional advisors and after consultation with management and the Company's independent auditors. Revenue on these transactions was recognized when products were shipped to a distributor but should have been recognized when the distributor shipped the product to the customer. As a result, revenue on these transactions will be reversed and recognized in the period when the products were shipped by the distributor. The correction of the Company's revenue recognition methodology will be applied retroactively, which the Company currently expects will require the restatement of its financial statements for each of the first, second and third quarters of and and for the years ending and. Accordingly, the Audit Committee has determined that the Company's financial statements for each of the fiscal years ended December, and December, and the quarters ended March st, June 0th, and September 0th in and included in the Company's Annual Reports on Form 0-K and Quarterly Reports on Form 0-Q for such periods and together with all three, six and nine month financial information contained therein, should no longer

4 Case:-cv-00-JST Document Filed0// Page of 0 be relied upon. Therefore, all earnings press releases and similar prior communications issued by the Company as well as other prior statements made by or on behalf of the Company relating to those periods should not be relied upon. In addition, as a result of this correction and associated ongoing internal review and its expected impact on the Company's fourth quarter financial statements, the Company is withdrawing all prior financial guidance for fourth quarter. *** As a result of the preliminary findings of the ongoing internal review and restatement, management is continuing to assess the Company's disclosure controls and procedures and internal controls over financial reporting. Nevertheless, management has concluded that one or more material weaknesses exist in the Company's internal controls over financial reporting and that, as a result, internal controls over financial reporting and disclosure controls and procedures were not effective. As part of the ongoing internal review and restatement, new Chief Accounting Officer Jonathan W. Kim will work with the Company's outside professionals to review and make those changes to the control environment necessary to improve the procedures related to revenue recognition under US GAAP.. On this news, the Company s shares fell as much as $., or almost %, to as low as $.0 in intraday trading.. As a result of defendants' wrongful acts and omissions, and the precipitous decline in the market value of the Company's securities, Plaintiff and other Class members have suffered significant losses and damages. JURISDICTION AND VENUE. The claims asserted herein arise under and pursuant to Sections 0(b) and (a) of the Exchange Act ( U.S.C. j(b) and t(a)) and Rule 0b- promulgated thereunder ( C.F.R. 0.0b-). 0. This Court has jurisdiction over the subject matter of this action pursuant to of the Exchange Act ( U.S.C. aa) and U.S.C... Venue is proper in this District pursuant to of the Exchange Act, U.S.C. aa and U.S.C. (b), as the Company maintains corporate offices in this District.

5 Case:-cv-00-JST Document Filed0// Page of. In connection with the acts, conduct and other wrongs alleged in this Complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including but not limited to, the United States mail, interstate telephone communications and the facilities of the national securities exchange. PARTIES. Plaintiff, as set forth in the attached Certification, acquired MagnaChip securities at artificially inflated prices during the Class Period and was damaged upon the revelation of the alleged corrective disclosures. 0. Defendant MagnaChip is a Delaware corporation with its principal executive offices located at, Hyangjeong-Dong, Heungdeok-Gu, Seoul,. MagnaChip s common stock trades on the New York Stock Exchange ( NYSE ) under the ticker symbol MX. The Company also maintains corporate offices in this District.. Defendant Sang Park ( Park ) was, at all relevant times, the Company s Chairman of the Board of Directors and Chief Executive Officer.. Defendant Margaret Sakai ( Sakai ) was, at all relevant times, the Company s Executive Vice President and Chief Financial Officer.. Defendant Tae Young Hwang ( Hwang ) was, at all relevant times, the Company s President and Chief Operating Officer.. The defendants referenced above in - are sometimes referred to herein as the Individual Defendants. SUBSTANTIVE ALLEGATIONS Background. MagnaChip Semiconductor Corporation designs and manufactures analog and mixed- signal semiconductor products for high-volume consumer applications. It operates in three segments: Display Solutions, Power Solutions, and Semiconductor Manufacturing Services.

6 Case:-cv-00-JST Document Filed0// Page of. The Display Solutions segment offers source and gate drivers, and timing controllers that cover a range of flat panel displays used in liquid crystal displays (LCDs), light emitting diodes (LEDs), D and organic light emitting diode televisions and displays, notebooks, and mobile communications and entertainment devices.. The Power Solutions segment develops, manufactures, and markets power management solutions, including metal oxide semiconductor field effect transistors, power modules, analog switches, LED drivers, DC-DC converters, voice coil motor drivers, and linear regulators. This segment offers its products for a range of devices, including LCD, LED, D televisions, smartphones, mobile phones, 0 desktop PCs, notebooks, tablet PCs, and other consumer electronics, as well as for industrial applications, such as power suppliers, LED lighting, and home appliances.. The Semiconductor Manufacturing Services segment manufactures various products comprising display drivers, LED drivers, audio encoding and decoding devices, microcontrollers, touch screen controllers, RF switches, park distance control sensors for automotives, electronic tag memories, and power management semiconductors. This segment offers semiconductor manufacturing services to fabless analog and mixed-signal semiconductor companies.. MagnaChip Semiconductor Corporation provides its products and services to consumer electronics OEMs, subsystem designers, and contract manufacturers through a direct sales force, as well as through a network of authorized agents and distributors in the United States, Korea, Taiwan, China, Japan, Hong Kong, and Macau. The company is headquartered in Seoul, South Korea. Materially False and Misleading Statements Issued During the Class Period. On January 0,, MagnaChip issued a press release announcing its financial and operating results for the quarter and year ended December,. Revenue for the fourth quarter of was $. million, a.% decrease compared to $. million for the third quarter of, and a.% increase compared to $0. million for the fourth quarter of. For the full year,

7 Case:-cv-00-JST Document Filed0// Page of revenue was $. million, compared to $. million for, a.% increase. Net income, on a GAAP basis, for the fourth quarter of totaled $. million or $. per diluted share. This compares to net income of $. million or $.0 per diluted share for the third quarter of, and net income of $. million or $0. per diluted share for the fourth quarter of. For the full year, net income was $. million or $. per diluted share compared to $. million or $0. per diluted share for.. On February,, the Company filed an annual report for the year ended December, on a Form 0-K with the SEC, which was signed by Defendants Park and Sakai, and reiterated 0 the Company s previously announced quarterly financial results and financial position. In addition, the Form 0-K contained signed certifications pursuant to the Sarbanes-Oxley Act of 0 ( SOX ) by Defendants Park and Sakai, stating that the financial information contained in the Form 0-K was accurate and disclosed any material changes to the Company s internal control over financial reporting.. On February,, MagnaChip announced that certain of its stockholders priced an underwritten registered public offering of,000,000 shares of MagnaChip s common stock at a price per share of $.0 and granted the underwriters an option to purchase an additional 0,000 shares of common stock. The common stock offering was expected to close on February,. MagnaChip would not receive any proceeds from the sale of its common stock by the selling stockholders.. On February,, MagnaChip filed a preliminary prospectus supplement with the SEC relating to these securities, which was a supplement to the registration statement that was declared effective by the Securities and Exchange Commission ( SEC ) on April,.. On April 0,, MagnaChip announced financial results for the first quarter ended March,. Revenue for the first quarter of was $. million, a.% decrease compared to $. million for the fourth quarter of, and a.0% increase compared to $.0 million for the first quarter of. The Company reported a net loss, on a GAAP basis, for the first quarter of

8 Case:-cv-00-JST Document Filed0// Page of of $. million or $0. per diluted share, compared to net income of $. million or $. per diluted share for the fourth quarter of and net income of $. million or $0.0 per diluted share for the first quarter of.. On May,, the Company filed a quarterly report for the quarter ended March, on a Form 0-Q with the SEC, which was signed by Defendants Park and Sakai, and reiterated the Company s previously announced quarterly financial results and financial position. In addition, the Form 0-Q contained signed certifications pursuant to the Sarbanes-Oxley Act of 0 ( SOX ), by Defendants Park and Sakai, stating that the financial information contained in the Form 0-Q was 0 accurate and disclosed any material changes to the Company s internal control over financial reporting. 0. On July 0,, MagnaChip announced financial results for the second quarter ended June 0,. Revenue for the second quarter of was $. million, a.% increase compared to $. million for the first quarter of and a.% increase compared to $. million for the second quarter of. Net income, on a GAAP basis, for the second quarter of totaled $. million or $0. per diluted share. This compares to a net loss of $. million or $0. per diluted share for the first quarter of and net income of $. million or $0. per diluted share for the second quarter of.. On August,, the Company filed a quarterly report for the quarter ended June 0, on a Form 0-Q with the SEC, which was signed by Defendants Park and Sakai, and reiterated the Company s previously announced quarterly financial results and financial position. In addition, the Form 0-Q contained signed certifications pursuant to the Sarbanes-Oxley Act of 0 ( SOX ) by Defendants Park and Sakai, stating that the financial information contained in the Form 0-Q was accurate and disclosed any material changes to the Company s internal control over financial reporting.. On September,, MagnaChip announced that certain of its stockholders affiliated with Avenue Capital Management II, L.P., priced an underwritten registered public offering of

9 Case:-cv-00-JST Document Filed0// Page of,00,000 shares of MagnaChip s common stock at a price per share of $.. The common stock offering was expected to close on September,. MagnaChip would not receive any proceeds from the sale of its common stock by the selling stockholders.. On September,, MagnaChip filed a preliminary prospectus supplement with the SEC relating to these securities, which was a supplement to the registration statement that was declared effective by the Securities and Exchange Commission ( SEC ) on April,.. On October,, MagnaChip announced financial results for the third quarter ended September 0,. Revenue for the third quarter of was $. million, a.% increase 0 compared to $. million for the second quarter of and a.% decrease compared to $. million for the third quarter of. Net income, on a GAAP basis, for the third quarter of totaled $. million or $. per diluted share. This compares to net income of $. million or $0. per diluted share for the second quarter of and net income of $. million or $.0 per diluted share for the third quarter of.. On November,, the Company filed a quarterly report for the quarter ended September 0, on a Form 0-Q with the SEC, which was signed by Defendants Park and Sakai, and reiterated the Company s previously announced quarterly financial results and financial position. In addition, the Form 0-Q contained signed certifications pursuant to the Sarbanes-Oxley Act of 0 ( SOX ) by Defendants Park and Sakai, stating that the financial information contained in the Form 0- Q was accurate and disclosed any material changes to the Company s internal control over financial reporting.. The statements referenced in - above were materially false and/or misleading because they misrepresented and failed to disclose the following adverse facts, which were known to defendants or recklessly disregarded by them, including that: (i) the Company lacked adequate controls over financial reporting; (ii) the Company was improperly recognizing revenues; (iii) the Company s

10 Case:-cv-00-JST Document Filed0// Page0 of 0 financial statements required restatement; and (iv) as a result of the above, the Company s financial statements were materially false and misleading at all relevant times. The Truth Begins to Emerge. On December,, after the close of trading, the Company filed a Form -K with the SEC stating that MagnaChip: has learned that the Seoul Central District Prosecutor s Office has indicted Heung Kyu Kim ( Kim ), Executive Vice President and General Manager, Power Solutions Division, of the Company s Korean subsidiary, MagnaChip Semiconductor, Ltd., who also serves as an executive officer of the Company, alleging the breach of fiduciary duties to his former employer in Korea, whose employment he left more than six years ago.. On this news, MagnaChip shares declined $0. per share, or nearly.%, to close at $.0 per share on December,.. On January,, after the market closed, the Company announced in a press release and in a Form -K filing with the SEC that it is postponing its fourth quarter earnings release and investor conference call, previously scheduled for Tuesday, January,, to provide additional time for the Company to complete its review of its financial results for the fourth quarter and fiscal year. 0. On this news, MagnaChip securities declined $. per share or over %, to close at $. per share on January,.. On March,, the Company issued a press release announcing the need to restate its prior financial statements, as well as identifying material weaknesses in its internal controls. The Company stated in relevant part: [T]he Audit Committee of the Company's Board of Directors has determined that the Company incorrectly recognized revenue on certain transactions and as a result will restate its financial statements. This conclusion is based upon preliminary findings of an ongoing internal review into practices and procedures by management, conducted at the Audit Committee's request by outside professional advisors and after

11 Case:-cv-00-JST Document Filed0// Page of 0 consultation with management and the Company's independent auditors. Revenue on these transactions was recognized when products were shipped to a distributor but should have been recognized when the distributor shipped the product to the customer. As a result, revenue on these transactions will be reversed and recognized in the period when the products were shipped by the distributor. The correction of the Company's revenue recognition methodology will be applied retroactively, which the Company currently expects will require the restatement of its financial statements for each of the first, second and third quarters of and and for the years ending and. Accordingly, the Audit Committee has determined that the Company's financial statements for each of the fiscal years ended December, and December, and the quarters ended March st, June 0th, and September 0th in and included in the Company's Annual Reports on Form 0-K and Quarterly Reports on Form 0-Q for such periods and together with all three, six and nine month financial information contained therein, should no longer be relied upon. Therefore, all earnings press releases and similar prior communications issued by the Company as well as other prior statements made by or on behalf of the Company relating to those periods should not be relied upon. In addition, as a result of this correction and associated ongoing internal review and its expected impact on the Company's fourth quarter financial statements, the Company is withdrawing all prior financial guidance for fourth quarter.. On this news, the Company s shares fell as much as $., or almost %, to as low as $.0 in intraday trading. PLAINTIFF S CLASS ACTION ALLEGATIONS. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure (a) and (b)() on behalf of a Class, consisting of all those who purchased or otherwise acquired MagnaChip securities during the Class Period (the Class ); and were damaged upon the revelation of the alleged corrective disclosures. Excluded from the Class are defendants herein, the officers and directors of the Company, at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest. 0

12 Case:-cv-00-JST Document Filed0// Page of 0. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, MagnaChip securities were actively traded on the NYSE. While the exact number of Class members is unknown to Plaintiff at this time and can be ascertained only through appropriate discovery, Plaintiff believes that there are hundreds or thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by MagnaChip or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions.. Plaintiff s claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by defendants wrongful conduct in violation of federal law that is complained of herein.. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation. Plaintiff has no interests antagonistic to or in conflict with those of the Class.. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: whether the federal securities laws were violated by defendants acts as alleged herein; whether statements made by defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of MagnaChip; whether the Individual Defendants caused MagnaChip to issue false and misleading financial statements during the Class Period; whether defendants acted knowingly or recklessly in issuing false and misleading financial statements; whether the prices of MagnaChip securities during the Class Period were artificially inflated because of the defendants conduct complained of herein; and

13 Case:-cv-00-JST Document Filed0// Page of 0 I. whether the members of the Class have sustained damages and, if so, what is the proper measure of damages. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action.. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on- the-market doctrine in that: defendants made public misrepresentations or failed to disclose material facts during the Class Period; the omissions and misrepresentations were material; MagnaChip securities are traded in an efficient market; the Company s shares were liquid and traded with moderate to heavy volume during the Class Period; the Company traded on the NYSE and was covered by multiple analysts; the misrepresentations and omissions alleged would tend to induce a reasonable investor to misjudge the value of the Company s securities; and Plaintiff and members of the Class purchased, acquired and/or sold MagnaChip securities between the time the defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts. 0. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market.. Alternatively, Plaintiff and the members of the Class are entitled to the presumption of reliance established by the Supreme Court in Affiliated Ute Citizens of the State of Utah v. United States, 0 U.S., S. Ct. 0 (), as Defendants omitted material information in their Class Period statements in violation of a duty to disclose such information, as detailed above.

14 Case:-cv-00-JST Document Filed0// Page of COUNT I (Against All Defendants For Violations of Section 0(b) And Rule 0b- Promulgated Thereunder). Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein.. This Count is asserted against defendants and is based upon Section 0(b) of the Exchange Act, U.S.C. j(b), and Rule 0b- promulgated thereunder by the SEC.. During the Class Period, defendants engaged in a plan, scheme, conspiracy and course of 0 conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit upon Plaintiff and the other members of the Class; made various untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and employed devices, schemes and artifices to defraud in connection with the purchase and sale of securities. Such scheme was intended to, and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and other Class members, as alleged herein; (ii) artificially inflate and maintain the market price of MagnaChip securities; and (iii) cause Plaintiff and other members of the Class to purchase or otherwise acquire MagnaChip securities and options at artificially inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them, took the actions set forth herein.. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of the I defendants participated directly or indirectly in the preparation and/or issuance of the quarterly and annual reports, SEC filings, press releases and other statements and documents described above, including statements made to securities analysts and the media that were designed to influence the market for MagnaChip securities. Such reports, filings, releases and statements were materially false

15 Case:-cv-00-JST Document Filed0// Page of and misleading in that they failed to disclose material adverse information and misrepresented the truth about MagnaChip s finances and business prospects.. By virtue of their positions at MagnaChip, defendants had actual knowledge of the materially false and misleading statements and material omissions alleged herein and intended thereby to deceive Plaintiff and the other members of the Class, or, in the alternative, defendants acted with reckless disregard for the truth in that they failed or refused to ascertain and disclose such facts as would reveal the materially false and misleading nature of the statements made, although such facts were readily available to defendants. Said acts and omissions of defendants were committed willfully 0 or with reckless disregard for the truth. In addition, each defendant knew or recklessly disregarded that material facts were being misrepresented or omitted as described above.. Defendants were personally motivated to make false statements and omit material information necessary to make the statements not misleading in order to personally benefit from the sale of MagnaChip securities from their personal portfolios.. Information showing that defendants acted knowingly or with reckless disregard for the truth is peculiarly within defendants knowledge and control. As the senior managers and/or directors of MagnaChip, the Individual Defendants had knowledge of the details of MagnaChip s internal affairs.. The Individual Defendants are liable both directly and indirectly for the wrongs complained of herein. Because of their positions of control and authority, the Individual Defendants were able to and did, directly or indirectly, control the content of the statements of MagnaChip. As officers and/or directors of a publicly-held company, the Individual Defendants had a duty to disseminate timely, accurate, and truthful information with respect to MagnaChip s businesses, operations, future financial condition and future prospects. As a result of the dissemination of the aforementioned false and misleading reports, releases and public statements, the market price of MagnaChip securities was artificially inflated throughout the Class Period. In ignorance of the adverse

16 Case:-cv-00-JST Document Filed0// Page of facts concerning MagnaChip s business and financial condition which were concealed by defendants, Plaintiff and the other members of the Class purchased or otherwise acquired MagnaChip securities at artificially inflated prices and relied upon the price of the securities, the integrity of the market for the securities and/or upon statements disseminated by defendants, and were damaged thereby. 0. During the Class Period, MagnaChip securities were traded on an active and efficient market. Plaintiff and the other members of the Class, relying on the materially false and misleading statements described herein, which the defendants made, issued or caused to be disseminated, or relying upon the integrity of the market, purchased or otherwise acquired shares of MagnaChip securities at 0 prices artificially inflated by defendants wrongful conduct. Had Plaintiff and the other members of the Class known the truth, they would not have purchased or otherwise acquired said securities, or would not have purchased or otherwise acquired them at the inflated prices that were paid. At the time of the purchases and/or acquisitions by Plaintiff and the Class, the true value of MagnaChip securities was substantially lower than the prices paid by Plaintiff and the other members of the Class. The market price of MagnaChip securities declined sharply upon public disclosure of the facts alleged herein to the injury of Plaintiff and Class members.. By reason of the conduct alleged herein, defendants knowingly or recklessly, directly or indirectly, have violated Section 0(b) of the Exchange Act and Rule 0b- promulgated thereunder.. As a direct and proximate result of defendants wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with their respective purchases, acquisitions and sales of the Company s securities during the Class Period, upon the disclosure that the Company had been disseminating misrepresented financial statements to the investing public.

17 Case:-cv-00-JST Document Filed0// Page of 0 COUNT II (Violations of Section (a) of the Exchange Act Against The Individual Defendants). Plaintiff repeats and realleges each and every allegation contained in the foregoing paragraphs as if fully set forth herein.. During the Class Period, the Individual Defendants participated in the operation and management of MagnaChip, and conducted and participated, directly and indirectly, in the conduct of MagnaChip s business affairs. Because of their senior positions, they knew the adverse non-public information about MagnaChip s misstatement of income and expenses and false financial statements.. As officers and/or directors of a publicly owned company, the Individual Defendants had a duty to disseminate accurate and truthful information with respect to MagnaChip s financial condition and results of operations, and to correct promptly any public statements issued by MagnaChip which had become materially false or misleading.. Because of their positions of control and authority as senior officers, the Individual Defendants were able to, and did, control the contents of the various reports, press releases and public filings which MagnaChip disseminated in the marketplace during the Class Period concerning MagnaChip s results of operations. Throughout the Class Period, the Individual Defendants exercised their power and authority to cause MagnaChip to engage in the wrongful acts complained of herein. The Individual Defendants therefore, were controlling persons of MagnaChip within the meaning of Section (a) of the Exchange Act. In this capacity, they participated in the unlawful conduct alleged which artificially inflated the market price of MagnaChip securities.. Each of the Individual Defendants, therefore, acted as a controlling person of MagnaChip. By reason of their senior management positions and/or being directors of MagnaChip, each of the Individual Defendants had the power to direct the actions of, and exercised the same to cause, MagnaChip to engage in the unlawful acts and conduct complained of herein. Each of the

18 Case:-cv-00-JST Document Filed0// Page of 0 Individual Defendants exercised control over the general operations of MagnaChip and possessed the power to control the specific activities which comprise the primary violations about which Plaintiff and the other members of the Class complain.. By reason of the above conduct, the Individual Defendants are liable pursuant to Section (a) of the Exchange Act for the violations committed by MagnaChip. PRAYER FOR RELIEF WHEREFORE, Plaintiff demand judgment against defendants as follows: A. Determining that the instant action may be maintained as a class action under Rule of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class representative; B. Requiring defendants to pay damages sustained by Plaintiff and the Class by reason of the acts and transactions alleged herein; C. Awarding Plaintiff and the other members of the Class prejudgment and post-judgment interest, as well as his reasonable attorneys fees, expert fees and other costs; and D. Awarding such other and further relief as this Court may deem just and proper. DEMAND FOR TRIAL BY JURY Plaintiff hereby demands a trial by jury. Dated: March,