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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

__________________________________________ JAMES GRIFFIN, Individually and On Behalf of All Others Similarly Situated,

Plaintiff,

vs. THE ESTÉE LAUDER COMPANIES, INC., WILLIAM P. LAUDER, RONALD S. LAUDER, LEONARD A. LAUDER, AERIN LAUDER, DANIEL J. BRESTLE, PATRICK BOUSQUET-CHAVANNE, and RICHARD W. KUNES,

Defendants. __________________________________________

) ))))))))))) ) )

CIVIL ACTION NO. CLASS ACTION COMPLAINT JURY TRIAL DEMANDED

CLASS ACTION COMPLAINT

Plaintiff, James Griffin, (“Plaintiff”), alleges the following based upon the investigation

of Plaintiff’s counsel, 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 (the “SEC”) filings, wire and press releases published by and

regarding The Estée Lauder Companies, Inc. (“Estée Lauder” or the “Company”) securities

analysts’ reports and advisories about the Company, and information readily obtainable on the

Internet.

NATURE OF THE ACTION AND OVERVIEW

1. This is a federal class action brought by Plaintiff on behalf of purchasers of the

publicly traded securities of Estée Lauder between April 28, 2005 and October 25, 2005 (the

“Class Period”), seeking to pursue remedies under the Securities Exchange Act of 1934 (the

“Exchange Act”).

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2. Founded in 1946 by Joseph and Estée Lauder, today Estée Lauder is one of the

world's leading manufacturers and marketers of quality skin care, fragrance and hair care

products. The Company's products are sold in over 130 countries and territories under well-

recognized brand names, including Estée Lauder, Clinique, Aramis, Prescriptives, Origins,

MAC, Bobbi Brown, Tommy Hilfiger, La Mer, Donna Karan, Aveda, Jo Malone, Bumble and

bumble, Darphin, Michael Kors, Rodan + Fields, American Beauty, Flirt!, Good Skin(TM),

Donald Trump The Fragrance and Grassroots.

3. The complaint alleges that defendants’ Class Period representations regarding

Estée Lauder were materially false and misleading when made because defendants failed to

disclose or indicate the following: (1) that the demand for Estée Lauder’s cosmetic products had

sharply decreased due to consumers increasingly purchasing cosmetic products from alternate

sources; (2) that Estée Lauder lacked the ability to effectively analyze promotions, wherefrom

the Company derived a substantial amount of business, which resulted in increased marketing

costs; (3) that to mask the adverse effects of slowing sales, defendants flooded retailers with the

Company’s products, which defendants knew would cut into 2006 sales; (4) that the Company

lacked adequate internal controls; and (5) that, as a result of the foregoing, defendants’

statements concerning the Company’s future prospects were lacking in any reasonable basis

when made.

4. On September 19, 2005, after the market closed, defendants revised downward

their guidance for the first half of fiscal 2006, but reaffirmed defendants’ outlook for full-year

fiscal 2006. On this news, shares of the Company dropped $4, or 9.9 percent, to close at $36.48

per share on September 20, 2005. Shares of the Company continued to fall the next day, and

dropped an additional 50 cents, or 1.4 percent, to close at $35.98 per share on September 21,

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2005.

5. On October 26, 2005, before the market opened, defendants announced financial

and operational results well below analysts’ expectations, including a decline of as much as 33

percent in profits, and significantly lowered guidance for the 2006 fiscal year. The Company

reported net earnings from continuing operations for the quarter ended September 30, 2005, of

$61.8 million, a 38 percent drop compared with $95.7 million last year. Diluted earnings per

common share from continuing operations for the quarter were 28 cents compared with 41 cents

reported in the prior year. On this news, shares of Estée Lauder sank $2.55 per share, or 7.7

percent, to close on, October 26, 2005, at $30.71 per share.

JURISDICTION AND VENUE

6. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of

the Exchange Act, (15 U.S.C. §§ 78j(b) and 78t(a)), and Rule 10b-5 promulgated thereunder (17

C.F.R. § 240.10b-5).

7. This Court has jurisdiction over the subject matter of this action pursuant to §27

of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331.

8. Venue is proper in this Judicial District pursuant to §27 of the Exchange Act, 15

U.S.C. § 78aa and 28 U.S.C. § 1391(b). Many of the acts and transactions alleged herein

occurred in substantial part in this Judicial District. In addition, the Company maintains its

principal place of business in this District. Moreover, Estée Lauder trades its shares on the New

York Stock Exchange (the “NYSE”) which is located in the Southern District of New York.

9. 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 mails, interstate telephone communications and

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the facilities of the national securities exchange.

THE PARTIES

10. Plaintiff, James Griffin, as set forth in the accompanying certification,

incorporated by reference herein, purchased Estée Lauder securities at artificially inflated prices

during the Class Period and has been damaged thereby.

11. Defendant Estée Lauder is a Delaware corporation with its principal place of

business at 767 Fifth Avenue, New York, New York.

12. Defendant William P. Lauder (“W. Lauder”) was, at all relevant times, the

Company’s President and Chief Executive Officer.

13. Defendant Ronald S. Lauder (“R. Lauder”) was, at all relevant times, a Director

of the Company. Defendant R. Lauder also served as Chairman of Clinique Laboratories, LLC,

a subsidiary of the Company.

14. Defendant Leonard A. Lauder (“L. Lauder”) was, at all relevant times, the

Company’s Chairman of the Board of Directors.

15. Defendant Aerin Lauder (“A. Lauder”) was, at all relevant times, the Company’s

Senior Vice President of Global Creative Directions and a Director.

16. Defendant Daniel J. Brestle (“Brestle”) was, at all relevant times, the Company’s

Chief Operating Officer.

17. Defendant Patrick Bousquet-Chavanne (“Bousquet-Chavanne”) was, at all

relevant times, the Company’s Group President.

18. Defendant Richard W. Kunes (“Kunes”) was, at all relevant times, the Company’s

Chief Financial Officer.

19. Defendants W. Lauder, R. Lauder, L. Lauder, A. Lauder, Brestle, Bousquet-

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Chavanne, and Kunes are collectively referred to hereinafter as the Individual Defendants. The

Individual Defendants, because of their positions with the Company, possessed the power and

authority to control the contents of Estée Lauder’s quarterly reports, press releases and

presentations to securities analysts, money and portfolio managers and institutional investors,

i.e., the market. Each defendant was provided with copies of the Company’s reports and press

releases alleged herein to be misleading prior to or shortly after their issuance and had the ability

and opportunity to prevent their issuance or cause them to be corrected. Because of their

positions and access to material non-public information available to them, each of these

defendants knew that the adverse facts specified herein had not been disclosed to and were being

concealed from the public and that the positive representations which were being made were then

materially false and misleading. The Individual Defendants are liable for the false statements

pleaded herein, as those statements were each “group-published” information, the result of

the collective actions of the Individual Defendants.

SUBSTANTIVE ALLEGATIONS

Background

20. Founded in 1946 by Joseph and Estée Lauder, today Estée Lauder is one of the

world's leading manufacturers and marketers of quality skin care, fragrance and hair care

products. The Company's products are sold in over 130 countries and territories under well-

recognized brand names, including Estée Lauder, Clinique, Aramis, Prescriptives, Origins,

MAC, Bobbi Brown, Tommy Hilfiger, La Mer, Donna Karan, Aveda, Jo Malone, Bumble and

bumble, Darphin, Michael Kors, Rodan + Fields, American Beauty, Flirt!, Good Skin(TM),

Donald Trump The Fragrance and Grassroots.

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Materially False and Misleading Statements Issued During the Class Period

21. The Class Period commences on April 28, 2005. On that date, Estée Lauder

announced net earnings from continuing operations for the third fiscal quarter ended March 31,

2005 of $106.2 million, a 6 percent increase versus $100.1 million reported the previous year.

Diluted earnings per common share from continuing operations for the quarter increased 8

percent to 46 cents compared with 43 cents reported in the prior year. Net earnings and diluted

earnings per share for the quarter increased 8 percent and 9 percent, respectively, compared with

the prior year, including discontinued operations. For the Company's fiscal 2005 full-year

results, the Company announced that reported net sales were expected to grow between 8.5

percent and 9 percent in dollars, which reflected a benefit of approximately 2.5 percentage points

of foreign currency translation impact, versus fiscal 2004. Based on actual sales to date and

expected sales in the fourth fiscal quarter, the Company expected to achieve diluted earnings per

share of between $1.87 and $1.90 for the fiscal 2005 year.

22. With respect to the Company’s earnings, defendant W. Lauder stated:

Our Company turned in strong local currency sales growth this quarter despite pockets of economic weakness and soft sales of Estée Lauder brand fragrances. While sales growth was slightly lower than our expectations, most brands reported gains. Our business in the Americas led sales growth, while mixed results in Europe and Asia slightly tempered our overall performance. For the quarter, earnings per share growth reflected planned investment spending to support new launch activity for our fiscal second half.

As we said publicly, we expect the Company's second half profit improvement to be substantially weighted towards our fiscal fourth quarter. That said, with three-quarters of the fiscal year behind us, and the lower sales growth this quarter, we now expect full fiscal year local currency sales will grow between 6% and 6.5% and fiscal 2005 diluted earnings per share from continuing operations to be between $1.87 and $1.90.

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23. Also, on April 28, 2005, defendants hosted a conference call to discuss the

Company’s third quarter results. During the call, the following discussion occurred:

ANN GILLIN, ANALYST, LEHMAN BROTHERS: Thanks. I’m very confused about the inventory, I guess, and working capital in general. This is isn’t [sic] the first quarter, it’s actually the second sequential quarter where we’ve seen this rise. Given gross margins that you typically print, particularly on inventory levels, it just seems like those numbers are starting to get away, and, perhaps, suggest a less optimistic outlook than you’re giving us for topline, in particular, going forward.

RICK KUNES: Ann, I think in the last two quarters we’ve seen and we’ve taken down our sales growth guidance slightly. We went from – coming into the year at 7 to 8 percent, where the last call we said between 6 and around 7 percent, rather. In this call, we said between 6 and 6.5 percent. So our sales are slowing down. That’s – that is really what’s generating that blip in inventory. For us –

ANN GILLIN: But, Rick, my concern is actually that inventories are continuing to rise and that we’re actually – they, perhaps, are more of a leading indicator of what to expect for fiscal year 2006 in terms of sales growth for fiscal year 2005.

RICK KUNES: No, I think our – the inventory growth that you see now is a result of the sales not coming through this year as much as we had hoped they would be. But it takes us time. I mean, to your point, it takes us time. Because our supply chain is a little bit longer than other consumer products companies, it takes us longer to work those inventory levels down, so when the sales slow down, our inventory goes up, and it takes us a period of time to work that through.

***

LINDA BOLTON WEISER: Okay. And just one more question about the inventory issue. I recall when you had this problem kind of pre 9/11 and then post 9/11 a couple of years ago. When you were working down the inventory level for many quarters, it was really hurting your margin performance quite a bit. Are you figuring that effect into your guidance now? And also, can you comment on how your inventory levels are in the channel?

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WILLIAM LAUDER: Well, our inventory levels in the channel, we start with that one, are pretty close to where they were that last year. I mean, there’s very little change in that, and so we haven’t seen any change in that level of inventory. As far as working down our inventories, it takes us a little while to do that, but the magnitude of this issue is nothing like we faced after 9/11. So we’re not really anticipating any tremendous impact on our margins, per se, but it will take us – it will take us time to work through the supply chain. I think if you went back in time and looked at the inventory, you first saw a reduction in raw materials that worked its way through finished goods, it took us a couple of quarters – two to three quarters to get back to a normal level. But, it takes a little time, because our supply chain is longer than some other industries. But you have to remember, we produced in just a few locations, we distribute to 130 markets around the world. We generate tremendous gross margins as a result of that, but it also causes us to carry a little more inventory and have a little bit longer supply chain.

24. Further, during the conference call defendant Kunes added: “I think it’s safe to

assume that there is negative near-term and it will probably be marginal if you realize that the

universe of stores covered is approximately 132 out of a population of 2,200 in North America.”

25. On April 29, 2005, Estée Lauder filed its quarterly report with the SEC on Form

10-Q. The Company’s Form 10-Q was signed by defendant Kunes and reaffirmed the

Company’s previously announced financial results.

26. Additionally, and with respect to the presentation of its financial results, the

Company stated:

The consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X….

***

Critical Accounting Policies

As disclosed in our Annual Report on Form 10-K for the fiscal

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year ended June 30, 2004, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in those financial statements. These judgments can be subjective and complex, and consequently actual results could differ from those estimates and assumptions. Our most critical accounting policies relate to revenue recognition, concentration of credit risk, inventory, pension and other postretirement benefit costs, goodwill and other intangible assets, income taxes and derivatives. Since June 30, 2004, there have been no changes in our critical accounting policies and no significant changes to the assumptions and estimates related to them.

27. Additionally, and with respect to the effectiveness and sufficiency of the

Company’s controls and procedures, the Company stated:

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. The Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of March 31, 2005 and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.

28. Additionally, and with respect to the presentation of its financial results, the

Company stated:

In the opinion of management all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

29. Additionally, the Company’s Form 10-Q contained the following certification

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signed by defendants Kunes and W. Lauder:

1. I have reviewed this quarterly report on Form 10-Q of The Estee Lauder Companies Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit

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committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

30. On May 24, 2005, defendants announced that the Company had agreed to

purchase 1.872 million shares of Class A Common Stock directly from defendant R. Lauder.

The Company agreed to pay defendant R. Lauder $39.25 per share, for total gross proceeds of

more than $73.47 million. Estée Lauder’s directors approved this transaction. Following this

sale, defendant R. Lauder owned less than 57,553 shares of Estée Lauder Class A Common

Stock.

31. On August 16, 2005, Estée Lauder announced net sales for its fiscal year ended

June 30, 2005 of $6.34 billion, or net earnings of $1.90 per diluted share, a 9 percent increase

over the $5.79 billion reported in the prior year. Excluding the impact of foreign currency

translation, net sales rose 7 percent for the year. For the full fiscal year 2005, the Company

reported net earnings from continuing operations of $406.1 million, up 8 percent from $375.4

million last year. Diluted earnings per common share from continuing operations for the year

rose 10 percent to $1.78 from $1.62 reported in the prior year.

32. Commenting on these results, defendant W. Lauder stated:

This year we achieved yet another significant milestone by ending the year with sales well over the six billion dollar mark. The strong local currency sales growth we turned in translated into significant bottom line growth, demonstrating our ability to follow through on

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our commitment to create value for our stockholders. We will continue to manage our Company with that commitment foremost in our minds.

We are optimistic about the coming year, and we see opportunities to expand our global leadership in prestige beauty. Launches across product categories and regions augur well for us not only in the coming fiscal year but in future years as well, enabling us to optimize the strength of our brand portfolio and leverage our global distribution capabilities.

33. On August 16, 2005, the Company also announced a 10 percent increase in net

sales for the quarter ended June 30, 2005, to $1.54 billion, compared with $1.40 billion in the

fourth quarter of fiscal 2004. Excluding the impact of foreign currency translation, net sales

increased 8 percent in the fourth quarter. On a reported basis, net sales in the quarter in skin care

and makeup increased 10 percent and 11 percent, respectively. In constant currency, net sales

increased in each major product category and geographic region. The Company reported net

earnings from continuing operations for the fourth quarter of fiscal year 2005 of $66.6 million

versus $71.3 million in the same prior-year period. Diluted earnings per common share from

continuing operations for the three months ended June 30, 2005, including the special tax charge

related to the AJCA, were 30 cents compared with 31 cents reported in the same prior-year

period. Excluding the special tax charge in the three months ended June 30, 2005, net earnings

from continuing operations rose 32 percent to $94.1 million and diluted earnings per share from

continuing operations increased 36 percent to 42 cents.

34. With respect to the first half and full fiscal year 2006, the Company stated:

Effective July 1, 2005, the Company adopted the new accounting rule requiring the expensing of stock based compensation. In accordance with the rule, prior year results have not been restated. Net earnings guidance for the fiscal 2006 first half and full year includes a charge of 10 cents and slightly more than 14 cents per diluted common share, respectively, to reflect the costs associated

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with the expensing of stock options.

Full fiscal year 2006 guidance includes an estimated impact of potential store closures and or business disruptions related to the pending merger of Federated Department Stores, Inc. and The May Department Stores Company. The Company believes this action may begin late in fiscal 2006, resulting in an estimated impact to reported earnings per share of two to three cents.

Net sales for the first half of fiscal 2006 are expected to grow between 7 percent and 8 percent in dollars, including a benefit of approximately 50 basis points due to foreign currency exchange, versus the first half of fiscal 2005. Geographic region net sales growth in constant currency is expected to be led by Europe, the Middle East & Africa, followed by the Americas and Asia/Pacific. On a product category basis, in constant currency, hair care and makeup are expected to be the leading growth categories, followed by skin care, while fragrance is expected to decline slightly. The Company expects diluted earnings per share for the first half to be essentially flat, including the 10 cents impact from expensing stock options.

For fiscal 2006 the Company's reported net sales are expected to grow between 5.5 percent and 6.5 percent versus fiscal 2005, with essentially no foreign currency translation impact. At the same time the Company expects to achieve diluted earnings per share of between $1.95 and $2.00 for the fiscal 2006 year, which includes the above mentioned 17 cents per share impact from expensing stock options as well as the potential impact of the pending Federated Department Stores, Inc. and The May Department Stores Company merger….

35. Also on August 16, 2005, defendants hosted a conference call to discuss the

Company’s fourth quarter results. During the call, defendant W. Lauder stated: “During the

year, we took many actions that strengthened our Company, positioned us for future growth, and

increased stockholder value.” Commenting on the Company’s operational performance and

prospects, defendant W. Lauder stated:

Now, to get a closer look at our operational performance, first, foremost, and most importantly, we grew sales in each major product category and in each region. Fiscal 2005 sales growth in

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constant currency was led by strength in makeup, hair care and skin care, followed by less buoyant growth in fragrance. In our skin care category for the full year we reported sales of $2.35 billion, a 10 percent increase and grew 7 percent in constant dollars. We remain at the forefront of innovation and technology. For example, the Company developed poly peptide technology for the repair segment of skin care product leveraging its use across four brands. Additionally, our La Mer brand continued its strong growth in key products in the Estée Lauder Clinique and Origins brands helped drive the category also. Makeup sales of 2.42 billion rose 13 percent in dollars and an impressive 11 percent in local currency. Our makeup artist brands turned in very strong sales gains led again by M.A.C. and Bobbi Brown. We saw solid increases in certain foundation, eye, mascara, and lip gloss products from Clinique and Estée Lauder, and Flirt! and American Beauty, two of our newer brands, also provided incremental sales in this category.

*** Looking ahead, there are a few main questions we ask ourselves. First, how do we continue to create value for our stockholders? Second, what will it take to continue growing our Company at or above our targeted goal? And third, how will we maintain our leadership position or even better, enhance it? The fundamental strategies that have made us successful in the past will continue to drive us well into the future. But the focus and emphasis have shifted with the changes in the industry, the retailing environment, and of course, the consumer’s needs and desires. As such we have five strategic imperatives that we are confident will drive our growth and enhance our leadership in prestige beauty. They are – optimizing our brand portfolio, strengthening our product categories, strengthening and expanding geographic presence, diversifying distribution, and achieving operational and cost excellence.

*** Fourth, our strategic imperative is diversifying distribution. A critical distribution development is the Federated and May Department Store merger. We have experienced this situation previously with the absorption of Broadway on the West Coast by Macy’s, and the closing of Eden’s in Canada. Long-term, the impact on hour business should be positive, having a strong nationwide retailer operating with fewer name places as our largest customer will increase the efficiency of our training, sales, promotion and advertising, and logistical support. Most

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importantly, our experience bears out that our strong brands speak directly to consumers who will still have access to our brands at their favorite shopping venues.

36. On September 2, 2005, Estée Lauder filed its yearly report with the SEC on Form

10-K. The Company’s Form 10-K was signed by defendants Kunes and W. Lauder and

reaffirmed the Company’s previously announced financial results. Additionally, the Company’s

Form 10-K stated:

Information systems support business processes including product development, marketing, sales, order processing, production, distribution and finance. Of the many systems currently being utilized, the most significant to our business needs are: (i) a centralized data repository of essential attributes for each of the products we offer, or plan to offer, which enables us to globally manufacture and market products of consistent quality; (ii) a sales analysis system to track weekly sales at the stock keeping unit (SKU) level at most significant retail sales locations (i.e., sell-through data), increasing our understanding of consumer preferences and enabling us to coordinate more effectively our product development, manufacturing and marketing strategies; (iii) an automated replenishment system with many of our key domestic customers, allowing us to replenish inventories for individual points of sale automatically, with minimal paperwork; and (iv) an inventory management system to provide us with a global view of finished goods availability relative to actual requirements, facilitating inventory control and distribution for both existing product lines and new product launches.

The efficiencies provided by these systems have resulted in increased sales, fewer out-of-stocks and reduced retail inventories. We expect that these systems will continue to provide inventory and sales efficiencies in the short and medium terms. As part of our long-term effort to enhance these efficiencies, we are implementing enterprise-wide global programs that we expect will deliver a single set of integrated data, processes and technologies, which would be scalable and used to standardize business processes across brands, operating units and sales affiliates.

37. With respect to the effectiveness and sufficiency of the Company’s controls,

procedures and information systems, the Company stated:

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Our disclosure controls and procedures (as defined in Rules13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Our Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of June 30, 2005 and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.

*** Management of The Estée Lauder Companies Inc. (including its subsidiaries) (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules13a-15(f) of the Securities Exchange Act of 1934, as amended).

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

*** Under the supervision of and with the participation of the Chief Executive Officer and the Chief Financial Officer, the Company’s management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework and criteria established in Internal Control —

Integrated Framework, issued by the Committee of Sponsoring

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Organizations of the Treadway Commission. Based on this assessment, the Company’s management has concluded that, as of June 30, 2005, the Company’s internal control over financial reporting was effective.

38. Additionally, the Company’s Form 10-K contained the following certification

signed by defendants Kunes and W. Lauder:

1. I have reviewed this annual report on Form 10-K of The Estée Lauder Companies Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s

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disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

39. The statements set forth in ¶¶ 21-38 above were materially false and misleading

when made because defendants failed to disclose or indicate the following: (1) that the demand

for Estée Lauder’s cosmetic products had sharply decreased due to consumers increasingly

purchasing cosmetic products from alternate sources; (2) that Estée Lauder lacked the ability to

effectively analyze promotions, wherefrom the Company derived a substantial amount of

business, which resulted in increased marketing costs; (3) that to mask the adverse effects of

slowing sales, defendants flooded retailers with the Company’s products, which defendants knew

would cut into 2006 sales; (4) that the Company lacked adequate internal controls; and (5) that,

as a result of the foregoing, defendants’ statements concerning the Company’s future prospects

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were lacking in any reasonable basis when made.

The Truth Begins to Emerge

40. On September 19, 2005, after the close of the market, defendants revised

downward their guidance for the first half of fiscal 2006, but reaffirmed defendants’ outlook for

full-year fiscal 2006 stating:

For the 2006 full fiscal year, the Company continues to expect net sales in constant currency to grow between 5.5 percent and 6.5 percent versus fiscal 2005. The Company now expects foreign currency translation to negatively impact its reported results by approximately 1 percent. At the same time the Company also continues to expect to achieve diluted earnings per share of between $1.95 and $2.00 for the fiscal 2006 year. This full year earnings per share estimate includes a slightly more than 14 cents per share impact from expensing stock-based compensation, as well as a two to three cent per share estimated impact of potential store closures and or business disruptions related to the merger of Federated Department Stores, Inc. and The May Department Stores Company.

On its fiscal 2005 year end conference call on August 16, 2005, the Company stated that it runs its business on an annual basis and acknowledged that it does experience volatility in its quarterly results, due, in part, to the timing of product launches and investment spending. The Company does not provide quarterly guidance and continues to believe that its current policy of providing half-year and full-year guidance best tracks the seasonality of its business. However, the Company also believes it is in the best interest of both its current and potential stockholders to communicate, when appropriate, significant fluctuations in its expected fiscal quarterly results. With that in mind, net sales for the first quarter of fiscal 2006 are expected to grow in the low-single digits in constant currency. This expectation reflects soft sales primarily in the Americas, where the Company has recently been impacted by weakness at certain retailers, the general consumer response to higher oil and gas prices, softness in the Southeast region due to the effects of Hurricane Katrina and lower than expected sales from promotional programs. The combined impact of these business conditions, the Company's planned product launches and investment spending, as well as the timing of expensing of stock-based compensation, is expected to result in the

20

Company's fiscal 2006 first quarter net earnings being significantly below the same prior-year period.

Notwithstanding the expected first quarter decline, the Company's business plan reflects improvement in its fiscal second quarter. As a result of the abovementioned business conditions, net sales for the first half of fiscal 2006 are now expected to grow between 5 percent and 6 percent in constant currency compared with previous expectations of between 7 percent and 8 percent. Foreign currency translation is estimated to negatively impact first half sales by approximately 1 percent, versus the first half of fiscal 2005. The Company said that its estimate for earnings per share for the first half of fiscal 2006 is now expected to be between 87 cents and 92 cents, including a 10 cents impact from expensing stock based compensation.

The Company believes that with the product launches and programs in place for the fiscal second half it will be able to recoup the expected first half sales and earnings shortfall.

41. On this news, shares of the Company dropped $4, or 9.9 percent, to close at

$36.48 per share on September 20, 2005.

42. In a report published on September 20, 2005, Citigroup stated:

… We are left to believe that something has gone wrong within the company from an execution standpoint. Specifically, while the company cites as an additional rationale for the shortfall in earnings the lower-than-expected boost to sales from promotional programs, we also wonder if in fact perhaps certain new product launches have failed to live up to expectations. Further, given that the Company’s fourth quarter 2005 results were in fact a pleasant surprise at that time (sending the stock up 9 percent intraday in August), we now fear that perhaps the Company’s robust 9 percent sales growth in the Americas region specifically was overstated (implying that perhaps the company over-shipped inventory to retailers, and is now paying the price as that inventory is drawn down.)

43. On October 26, 2005, before the market opened, defendants stunned investors by

publishing a release that announced financial and operational results well below analysts’

expectations, including a decline of as much as 33 percent in profits, and significantly lowered

21

guidance for the 2006 fiscal year. The Company reported net earnings from continuing

operations for the quarter ended September 30, 2005, of $61.8 million, a 38 percent drop

compared with $95.7 million last year. Diluted earnings per common share from continuing

operations for the quarter were 28 cents compared with 41 cents reported in the prior year.

44. On this news, shares of Estée Lauder sank $2.55 per share, or 7.7 percent, to close

on, October 26, 2005, at $30.71 per share.

PLAINTIFF’S CLASS ACTION ALLEGATIONS

45. Plaintiff brings this action on his own behalf and as a Class Action pursuant to

Rule 23(a) and (b)(3) of the Federal Rules of Civil Procedure on behalf of a Class consisting of

all those who purchased the publicly traded securities of Estée Lauder between April 28, 2005

and October 25, 2005 and who were damaged thereby. Excluded from the Class are defendants,

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.

46. The members of the Class are so numerous and geographically diverse that

joinder of all of them is impracticable. Throughout the Class Period, Estée Lauder securities

were actively traded on the NYSE. While the exact number of Class members is unknown to

Plaintiff at this time and can only be ascertained 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 Estée Lauder 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.

47. Plaintiff’s claims are typical of the claims of the members of the Class as all

22

members of the Class are similarly affected by defendants’ wrongful conduct in violation of

federal law that is complained of herein.

48. 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.

49. 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:

i. whether the federal securities laws were violated by defendants’ acts as

alleged herein;

ii. whether statements made by defendants to the investing public during

the Class Period misrepresented material facts about the business,

operations and management of Estée Lauder; and

iii. to what extent the members of the Class have sustained damages and

the proper measure of damages.

50. 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.

UNDISCLOSED ADVERSE FACTS 51. The market for Estée Lauder’s securities was open, well-developed and efficient

at all relevant times. As a result of these materially false and misleading statements and failures

23

to disclose, Estée Lauder’s securities traded at artificially inflated prices during the Class Period.

Plaintiff and other members of the Class purchased or otherwise acquired Estée Lauder securities

relying upon the integrity of the market price of Estée Lauder’s securities and market

information relating to Estée Lauder, and have been damaged thereby.

52. During the Class Period, defendants materially misled the investing public,

thereby inflating the price of Estée Lauder’s securities, by publicly issuing false and misleading

statements and omitting to disclose material facts necessary to make defendants’ statements, as

set forth herein, not false and misleading. Said statements and omissions were materially false

and misleading in that they failed to disclose material adverse information and misrepresented

the truth about the Company, its business and operations, as alleged herein.

53. At all relevant times, the material misrepresentations and omissions particularized

in this Complaint directly or proximately caused or were a substantial contributing cause of the

damages sustained by Plaintiff and other members of the Class. As described herein, during the

Class Period, defendants made or caused to be made a series of materially false or misleading

statements about Estée Lauder’s business, prospects and operations. These material

misstatements and omissions had the cause and effect of creating in the market an unrealistically

positive assessment of Estée Lauder and its business, prospects and operations, thus causing the

Company’s securities to be overvalued and artificially inflated at all relevant times. Defendants’

materially false and misleading statements during the Class Period resulted in Plaintiff and other

members of the Class purchasing the Company’s securities at artificially inflated prices, thus

causing the damages complained of herein.

LOSS CAUSATION

54. Defendants’ wrongful conduct, as alleged herein, directly and proximately caused

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the economic loss suffered by Plaintiff and the Class.

55. During the Class Period, Plaintiff and the Class purchased securities of Estée

Lauder at artificially inflated prices and were damaged thereby. The price of Estée Lauder

common stock declined when the misrepresentations made to the market, and/or the information

alleged herein to have been concealed from the market, and/or the effects thereof, were revealed,

causing investors’ losses.

SCIENTER

56. As alleged herein, defendants acted with scienter in that defendants knew that the

public documents and statements issued or disseminated in the name of the Company were

materially false and misleading; knew that such statements or documents would be issued or

disseminated to the investing public; and knowingly and substantially participated or acquiesced

in the issuance or dissemination of such statements or documents as primary violations of the

federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their

receipt of information reflecting the true facts regarding Estée Lauder, their control over, and/or

receipt and/or modification of Estée Lauder’s allegedly materially misleading misstatements

and/or their associations with the Company which made them privy to confidential proprietary

information concerning Estée Lauder, participated in the fraudulent scheme alleged herein.

57. During the Class Period, and with the Company’s stock trading at artificially

inflated prices, Company insiders sold 2,285,332 shares for gross proceeds of $90,221,613.17, as

evidenced by the following chart:

NAME DATE SHARES SOLD

PRICE GROSS PROCEEDS

Ronald Lauder 5/24/2005 9/7/2005 9/7/2005

1,872,000 23,800 1,200

$39.25 $41.10 $41.11

$73,476,000.00 $978,180.00 $49,332.00

25

9/14/2005 9/14/2005 9/14/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005 9/15/2005

7,200 4,700 3,300 6,200 200 300 600 6,600 1,900 4,500 2,500 7,300 500 6,300 300 400 100 3,300 2,700 3,800 2,500 2,700 2,500 2,000 4,300 3,300 Total: 1,977,000

$40.00 $40.01 $40.02 $39.73 $39.74 $39.75 $39.76 $39.77 $39.77 $39.78 $39.79 $39.80 $39.81 $39.82 $39.88 $39.90 $39.91 $39.95 $39.95 $39.96 $39.98 $40.04 $40.04 $40.07 $40.08 $40.09

$288,000.00 $188,047.00 $132,066.00 $246,326.00 $7,948.00 $11,925.00 $23,856.00 $262,482.00 $75,563.00 $179,010.00 $99,475.00 $290,540.00 $19,905.00 $250,866.00 $11,964.00 $15,960.00 $3,991.00 $131,835.00 $107,865.00 $151,848.00 $99,950.00 $108,108.00 $100,100.00 $80,140.00 $172,344.00 $132,297.00 Total: $77,695,923.00

Trust FBO Aerin and Jane Lauder

8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005

2,300 900 11,400 11,200 3,700 5,400 300 6,200 10,500 14,700 18,800 4,300 2,300 2,000 9,600 1,400 10,000 13,200 11,200 1,200

$40.05 $40.09 $40.10 $40.11 $40.12 $40.13 $40.14 $40.15 $40.16 $40.17 $40.18 $40.19 $40.20 $40.21 $40.22 $40.23 $40.28 $40.30 $40.31 $40.32

$92,115.00 $36,081.00 $457,140.00 $449,232.00 $148,444.00 $216,702.00 $12,042.00 $248,930.00 $421,680.00 $590,499.00 $755,384.00 $172,817.00 $92,460.00 $80,420.00 $386,112.00 $56,322.00 $402,800.00 $531,960.00 $451,472.00 $48,384.00

26

8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005 8/24/2005

900 9,700 15,900 15,900 1,100 12,000 3,900 Total: 200,000

$40.33 $40.34 $40.35 $40.36 $40.37 $40.38 $40.40

$36,297.00 $391,298.00 $641,565.00 $641,724.00 $44,407.00 $484,560.00 $157,560.00 Total: $8,048,407.00

Daniel Brestle 8/19/2005 8/19/2005 8/19/2005 8/19/2005 8/19/2005 8/19/2005 8/19/2005 8/19/2005 8/19/2005 8/19/2005 8/19/2005 8/19/2005 8/19/2005

900 1,700 2,700 3,300 900 3,500 200 200 4,200 3,400 43,566 2,000 100 Total: 66,666

$41.60 $41.61 $41.62 $41.63 $41.64 $41.65 $41.56 $41.67 $41.68 $41.69 $41.70 $41.71 $41.72

$37,440.00 $70,737.00 $112,374.00 $137,379.00 $37,476.00 $145,775.00 $8,312.00 $8,334.00 $175,056.00 $141,746.00 $1,816,702.20 $83,420.00 $4,172.00 Total: $2,778,923.20

Malcolm Bond 8/23/2005 8/23/2005 8/23/2005 8/23/2005 8/23/2005 8/23/2005 8/23/2005 8/23/2005 8/23/2005 8/23/2005 8/23/2005 8/23/2005 8/23/2005 8/23/2005 8/23/2005 8/23/2005

3,000

800 2,700 1,500 8,100 1,700 1,100 700 2,300 200 1,999 900 15,300 867 400 100 Total: 41,666

$40.70 $40.71 $40.72 $40.73 $40.74 $40.75 $40.76 $40.77 $40.80 $40.88 $40.96 $40.97 $40.75 $40.79 $40.80 $40.81

$122,100.00 $32,568.00 $109,944.00 $61,095.00 $329,994.00 $69,275.00 $44,836.00 $28,539.00 $93,840.00 $8,176.00 $81,879.04 $36,873.00 $623,475.00 $35,364.93 $16,320.00 $4,081.00 Total: $1,698,359.97

Applicability of Presumption Of Reliance:

Fraud-On-The-Market Doctrine

58. At all relevant times, the market for Estée Lauder securities was an efficient

market for the following reasons, among others:

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(a) Estée Lauder stock met the requirements for listing, and was listed and

actively traded on the NYSE, a highly efficient and automated market;

(b) As a regulated issuer, Estée Lauder filed periodic public reports with the

SEC and the NYSE;

(c) Estée Lauder regularly communicated with public investors ia established

market communication mechanisms, including through the regular disseminations of press

releases on the national circuits of major newswire services and through other wide-ranging

public disclosures, such as communications with the financial press and other similar reporting

services; and

(d) Estée Lauder was followed by several securities analysts employed by

major brokerage firms who wrote reports which were distributed to the sales force and certain

customers of their respective brokerage firms. Each of these reports was publicly available and

entered the public marketplace.

59. As a result of the foregoing, the market for Estée Lauder securities promptly

digested current information regarding Estée Lauder from all publicly-available sources and

reflected such information in Estée Lauder stock price. Under these circumstances, all

purchasers of Estée Lauder securities during the Class Period suffered similar injury through

their purchase of Estée Lauder securities at artificially inflated prices and a presumption of

reliance applies.

NO SAFE HARBOR

60. 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 specific statements pleaded herein were not identified as “forward-looking

28

statements” when made. To the extent there were any forward-looking statements, there were no

meaningful cautionary statements identifying important factors that could 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, and/or the forward-looking statement was authorized

and/or approved by an executive officer of Estée Lauder who knew that those statements were

false when made.

FIRST CLAIM Violation of Section 10(b) of

The Exchange Act and Rule 10b-5 Promulgated Thereunder Against All Defendants

61. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

62. During the Class Period, defendants carried out a plan, scheme and course of

conduct which was intended to an, throughout the Class Period, did: (i) deceive the investing

public, including Plaintiff and other Class members, as alleged herein; (ii) cause Plaintiff and

other members of the Class to purchase Estée Lauder securities at artificially inflated prices; and

(iii) enable Estée Lauder insiders to sell shares of their privately held Estée Lauder stock while in

possession of material adverse non-public information about the Company. In furtherance of this

unlawful scheme, plan and course of conduct, defendants, and each of them, took the actions set

forth herein.

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

29

untrue statements of material fact and/or omitted to state material facts necessary to make the

statements not misleading; and (c) engaged in acts, practices, and a course of business which

operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to

maintain artificially high market prices for Estée Lauder securities in violation of Section 10(b)

of the Exchange Act and Rule 10b-5. All defendants are sued either as primary participants in

the wrongful and illegal conduct charged herein or as controlling persons as alleged below.

64. Defendants, individually and in concert, directly and indirectly, by the use, means

or 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 business,

operations and future prospects of Estée Lauder as specified herein.

65. These 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 Estée Lauder’s value and

performance and continued substantial growth, 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 Estée Lauder and its business

operations and future prospects 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 of Estée Lauder

securities during the Class Period.

66. Each of the Individual Defendants’ primary liability, and controlling person

liability, arises from the following facts: (i) the Individual Defendants were high-level executives

and/or directors at the Company during the Class Period and members of the Company’s

30

management team or had control thereof; (ii) each of these defendants, by virtue of his

responsibilities and activities as a senior officer and/or director of the Company was privy to and

participated in the creation, development and reporting of the Company’s internal budgets, plans,

projections and/or reports; (iii) each of these defendants enjoyed significant personal contact and

familiarity with the other defendants and was advised of and had access to other members of the

Company’s management team, internal reports and other data and information about the

Company’s finances, operations, and sales at all relevant times; and (iv) each of these defendants

was aware of the Company’s dissemination of information to the investing public which they

knew or recklessly disregarded was materially false and misleading.

67. The defendants 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. Such

defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and

for the purpose and effect of concealing Estée Lauder’s operating condition and future business

prospects from the investing public and supporting the artificially inflated price of its securities.

As demonstrated by defendants’ overstatements and misstatements of the Company’s business,

operations and earnings throughout the Class Period, defendants, if they did not have actual

knowledge of the misrepresentations and omissions alleged, 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.

68. As a result of the dissemination of the materially false and misleading information

and failure to disclose material facts, as set forth above, the market price of Estée Lauder

securities was artificially inflated during the Class Period. In ignorance of the fact that market

31

prices of Estée Lauder’s publicly-traded securities were artificially inflated, and relying directly

or indirectly on the false and misleading statements made by defendants, or upon the integrity of

the market in which the securities trades, 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 defendants during the Class Period, Plaintiff and the other members of the Class acquired

Estée Lauder securities during the Class Period at artificially high prices and were damaged

thereby.

69. At the time of said misrepresentations and omissions, Plaintiff and other members

of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff and the

other members of the Class and the marketplace known the truth regarding the problems that

Estée Lauder was experiencing, which were not disclosed by defendants, Plaintiff and other

members of the Class would not have purchased or otherwise acquired their Estée Lauder

securities, or, if they had acquired such securities during the Class Period, they would not have

done so at the artificially inflated prices which they paid.

70. By virtue of the foregoing, defendants have violated Section 10(b) of the

Exchange Act, and Rule 10b-5 promulgated thereunder.

71. 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

and sales of the Company’s securities during the Class Period.

SECOND CLAIM Violation of Section 20(a) of

The Exchange Act Against The Individual Defendants

72. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

32

73. The Individual Defendants acted as controlling persons of Estée Lauder within the

meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level

positions, and their ownership and contractual rights, participation in and/or awareness of the

Company’s operations and/or intimate knowledge of the false financial statements filed by the

Company with the SEC and disseminated to the investing public, the Individual Defendants 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 Plaintiff contends are false and misleading. The Individual Defendants were

provided with or had unlimited access to copies of the Company’s reports, press releases, public

filings and other statements alleged by Plaintiff to be misleading prior to and/or shortly after

these statements were issued and had the ability to prevent the issuance of the statements or

cause the statements to be corrected.

74. In particular, each of these defendants had direct and supervisory involvement in

the day-to-day operations of the Company and, therefore, is presumed to have had the power to

control or influence the particular transactions giving rise to the securities violations as alleged

herein, and exercised the same.

75. As set forth above, Estée Lauder and the Individual Defendants each violated

Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue

of their positions as controlling persons, the Individual Defendants are liable pursuant to Section

20(a) of the Exchange Act. As a direct and proximate result of defendants’ wrongful conduct,

Plaintiff and other members of the Class suffered damages in connection with their purchases of

the Company’s securities during the Class Period.

33

WHEREFORE, Plaintiff, on behalf of himself and the Class as defined herein,

respectfully prays for relief and judgment as follows:

(a) Determining that this action is a proper class action, designating Plaintiff as

Lead Plaintiff and certifying Plaintiff as a class representative under Rule 23 of the Federal Rules

of Civil Procedure and Plaintiff’s counsel as Lead Counsel;

(b) Awarding compensatory damages in favor of Plaintiff and the other Class

members against all defendants, jointly and severally, for all damages sustained as a result of

defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon;

(c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred

in this action, including counsel fees and expert fees; and

(d) Such other and further relief as the Court may deem just and proper.

DEMAND FOR JURY TRIAL

Plaintiff hereby demands a trial by jury.

Dated: Respectfully submitted, By:_______________________

BRODSKY & SMITH, LLC Evan J. Smith, Esquire Marc. L. Ackerman, Esquire 240 Mineola Boulevard Mineola, NY 11501 (516) 741-4977

SCHIFFRIN & BARROWAY, LLP Marc A. Topaz Richard A. Maniskas Tamara Skvirsky Alison K. Clark 280 King of Prussia Rd. Radnor, PA 19087 (610) 667-7706 Attorneys for Plaintiff