IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION

COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF

The Securities and Exchange Commission ("Commission") files this Complaint for Injunctive and Other Relief and alleges as follows:

INTRODUCTION

1. In the spring of 1999, Just for Feet, Inc. ("Just for Feet"), a former national retailer of athletic and outdoor footwear and apparel, overstated its income through the use of bogus receivables from its outside vendors.

2. Defendant Jonathan G. Epstein ("Epstein"), as the President and Chief Executive Officer ("CEO") of Fila U.S.A. ("Fila"), one of Just for Feet's vendors, aided and abetted Just for Feet's efforts to artificially inflate its income.

3. Epstein has engaged in, and unless restrained and enjoined by this Court, will continue to engage in, acts and practices that aid and abet violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77q(a)] and Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78j(b) and 78m(a)] and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder [17 C.F.R. §§ 240.10b-5, 240.12b-20, 240.13a-1 and 240.13a-13].

JURISDICTION AND VENUE

4. This Court has jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 and 1337 and Sections 20(b) and 22(a) of the Securities Act [15 U.S.C. §§ 77t(b) and 77v] and Sections 21(d), 21(e), and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e) and 78aa].

5. Venue is proper in this district pursuant to 28 U.S.C. § 1391(b)(1) and (2); Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)]; and Section 27 of the Exchange Act [15 U.S.C. § 78aa]. Certain of the actions set forth herein, including the offer and sale of Just for Feet's securities during the relevant period, occurred within this district.

6. Epstein, directly and indirectly, has made use of the mails, the means and instruments of transportation and communication in interstate commerce, and the means and instrumentalities of interstate commerce, in connection with the transactions, acts, practices and courses of business alleged in this Complaint.

THE DEFENDANT

7. Jonathan G. Epstein, 48, of St. Louis, Missouri, was the President and CEO of Fila at the time of the events described herein. Epstein resigned from Fila in December 2003.

ISSUER INVOLVED

8. Just for Feet, Inc., a Delaware corporation based during the relevant period in Birmingham, Alabama, was a national retailer of athletic and outdoor footwear and apparel. Just for Feet went public in 1994. Its securities were registered with the Commission pursuant to Section 12 of the Securities Act of 1933 [15 U.S.C. § 78l] or and traded on the National Association of Securities Dealers Automated Quotation System under the symbol "FEET." Despite presenting a favorable financial picture in its fiscal 1998 Form 10-K filed on April 30, 1999, Just for Feet filed for protection in November of 1999 under Chapter 11 of the Bankruptcy Code. This was converted to a Chapter 7 liquidation proceeding in 2000.

9. Just for Feet's fiscal year ran from February 1 through January 31. In January 1999, however, Just for Feet changed the ending date for fiscal 1998 to January 30.

THE OVERSTATEMENT OF INCOME

10. Just for Feet incurred large amounts of advertising expenses. Most of its vendors offered financial assistance through unwritten agreements to Just for Feet to help pay for these advertising expenses. This assistance was termed "advertising co-op" or "vendor allowances." If Just for Feet promoted a particular vendor's products in one of its advertisements, that vendor might agree to offer advertising co-op to the Company to share the costs of the advertisement. Just for Feet offset this revenue against advertising expense on its income statement.

11. Although every vendor agreement was somewhat different, Just for Feet's receipt of advertising co-op was not guaranteed. The Company always had to submit the advertisement to the vendor for approval after Just for Feet had already paid for it. If the vendor approved the advertisement, it would usually issue the co-op payment to Just for Feet in the form of a credit memo on Just for Feet's merchandise purchases. In addition, each vendor limited the amount of advertising co-op dollars it allowed to Just for Feet over a given period of time because co-op dollars were usually based on the amount of merchandise that Just for Feet purchased from that particular vendor. Even if Just for Feet had co-op dollars accrued or available to it, the Company would still have to pay for the advertisement, submit it to the vendor, and receive approval from the vendor before receiving any co-op payments.

12. Epstein, as President and CEO of Fila, signed an audit confirmation letter sent to him by Just for Feet in March 1999, confirming that his company owed approximately $1.38 million in advertising co-op receivables to Just for Feet, and then caused it to be sent to Just for Feet's auditors. The letter stated that the confirmation was in connection with the audit of Just for Feet's financial statements.

13. In fact, Epstein knew that Fila did not owe this amount in advertising co-op receivables to Just for Feet as of January 30, 1999.

14. The amount confirmed by Epstein materially increased the income reported in Just for Feet's fiscal 1998 Form 10-K, filed with the Commission on April 30, 1999, Forms 10-Q for the first and second quarters of fiscal 1999, filed on June 14, 1999, and September 27, 1999, respectively, a registration statement on Form S-8 filed on May 3, 1999 and a registration statement on Form S-4 filed on June 14, 1999. The amount confirmed by Epstein was a material part of the financial statements included in these filings and the recording of the receivable by Just for Feet was inconsistent with Generally Accepted Accounting Principles.

CLAIMS FOR RELIEF
COUNT I--FRAUD
Violations of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]

15. Paragraphs 1 through 14 are hereby realleged and are incorporated herein by reference.

16. Epstein, in connection with the offer or sale of securities described herein, by the use of the means and instrumentalities of interstate commerce and by use of the mails, directly and indirectly:

• employed devices, schemes, or artifices to defraud;
   
• obtained money or property by means of untrue statements of material facts or omissions of material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or
   
• engaged in transactions, practices, or courses of business which operated or would operate as a fraud or deceit upon the purchasers of securities, all as more particularly described in the paragraphs above.

17. Epstein knowingly, intentionally, and/or with severe recklessness engaged in the aforementioned devices, schemes and artifices to defraud. In engaging in such conduct, Epstein acted with scienter, that is, with an intent to deceive, manipulate or defraud or with a severe reckless disregard for the truth.

18. By reason of the foregoing, Epstein aided and abetted violations of, and, unless restrained and enjoined, will continue to violate, directly or indirectly, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].

COUNT II--FRAUD
Violations of Section 10(b) of the Exchange Act [15. U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]

19. Paragraphs 1 through 14 are hereby realleged and are incorporated herein by reference.

20. Epstein, in connection with the purchase or sale of securities described herein, by the use of the means and instrumentalities of interstate commerce and by use of the mails, directly and indirectly:

• employed devices, schemes, and artifices to defraud;
   
• made 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
   
• engaged in acts, practices, and courses of business which would and did operate as a fraud and deceit upon the purchasers of such securities, all as more particularly described in the paragraphs above.

21. Epstein knowingly, intentionally, and/or with severe recklessness engaged in the aforementioned devices, schemes and artifices to defraud, made untrue statements of material facts and omitted to state material facts, and engaged in fraudulent acts, practices and courses of business. In engaging in such conduct, Epstein acted with scienter, that is, with an intent to deceive, manipulate or defraud or with a severe reckless disregard for the truth.

22. By reason of the foregoing, Epstein aided and abetted violations of, and, unless enjoined, will continue to violate, directly or indirectly, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

COUNT III-AIDING AND ABETTING REPORTING PROVISIONS
Aiding and Abetting Just for Feet's Violations of Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1 and 13a-13 thereunder [17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13]

23. Paragraphs 1 through 14 are hereby realleged and are incorporated herein by reference.

24. Epstein aided and abetted Just for Feet's violations of Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1 and 13a-13 thereunder [17 C.F.R. §§ 240.12-20, 240.13a-1 and 240.13a-13], which occurred when Just for Feet filed annual and periodic reports that contained financial statements that were not prepared in conformity with GAAP and contained material misstatements. Through the conduct described in the above paragraphs, Epstein knowingly or with severe recklessness substantially assisted Just for Feet's violations of this section and rules.

25. By reason of the foregoing, Epstein aided and abetted violations of, and, unless enjoined, will continue to violate, directly or indirectly, Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1 and 13a-13 thereunder [17 C.F.R. §§ 240.12-20, 240.13a-1 and 240.13a-13].

PRAYER FOR RELIEF

WHEREFORE, Plaintiff Commission, respectfully prays that the Court:

I.

Make findings of fact and conclusions of law in accordance with Rule 52 of the Federal Rules of Civil Procedure.

II.

Issue a permanent injunction enjoining Epstein and his agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise, and each of them:

• from violating Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)];
   
• from violating Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]; and
   
• from aiding and abetting violations of Section 13(a) of the Exchange Act [15 U.S.C. §§ 78j(b) and 78m(a)] and Rules 12b-20, 13a-1 and 13a-13 thereunder [17 C.F.R. §§ 240.10b-5, 240.12b-20, 240.13a-1 and 240.13a-13].

III.

Issue an Order requiring Epstein, pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)], to pay civil monetary penalties.

IV.

Issue an Order that retains jurisdiction over this action in order to implement and carry out the terms of all orders and decrees that may have been entered or to entertain any suitable application or motion by the Commission for additional relief within the jurisdiction of this Court.

V.

Grant such other and further relief as may be necessary and appropriate.

Dated: _____________

COUNSEL FOR PLAINTIFF
U. S. SECURITIES AND EXCHANGE COMMISSION
3475 Lenox Road, N.E., Suite 1000
Atlanta, Georgia 30326-1234
(404) 842-7600
(404) 842-7679 fax

CERTIFICATE OF SERVICE

This is to certify that the foregoing document and attachments have been served upon the following by depositing a copy of same in the United States mail, first-class, postage prepaid, address as follows:

Dale Kelberman, Esq. (Attorney for Defendant Epstein)
Miles & Stockbridge P.C.
10 Light Street
Baltimore, Maryland 21202-1487

This _____ day of ________, 2004.

_____________________________
Debbie T. Hampton

http://www.sec.gov/litigation/complaints/comp18571.htm