Jabil circuit sec investigation backdating
Jabil circuit sec investigation backdating
Before DUBINA, Chief Judge, BIRCH and BLACK, Circuit Judges. Under Generally Accepted Accounting Principles (“GAAP”) Board Opinion No. The accounting experience of some of the Jabil executives, however, fails to provide the critical distinction here because the shareholders do not plead any facts that indicate that any individual Appellee knew about the accounting irregularities during the class period. Appellants Laborers Pension Trust Fund for Northern California and Pension Trust Fund for Operating Engineers (“the shareholders”) appeal the district court's order dismissing their class action securities law claims against Jabil Circuit, Inc. 25 (“APB 25”), however, backdated options must be recorded as a compensation expense to the corporation because they effectively give recipients immediate compensation in the form of options redeemable in the marketplace for profit. As a result, the allegations of misrepresentations, responsibility for granting misdated options, and personal profiteering fail to raise a strong enough inference of scienter here, just as they failed to do so in Rosenberg.
We affirm the district court order dismissing the complaint and all of the claims included because its allegations fail to meet the heightened pleading standards imposed by the Private Securities Litigation Reform Act (“PSLRA”), 15 U. Backdating options is not itself illegal under the securities laws, nor is it improper under accounting principles. To provide a strong inference of scienter, the plaintiff alleged that (1) the defendant had responsibility to make decisions about stock option grants; (2) the mismeasurement of stock option grants resulted in substantial additional compensation expenses; (3) the defendant himself was granted allegedly misdated stock options; (4) the defendant made materially false statements; (5) the defendant sold approximately 39 percent of his shares during the class period; and (6) the defendant resigned from the corporation after the discrepancies came to light. The shareholders contend that the accounting expertise of several of the Appellees in this case distinguishes the two cases, because some Jabil executives should have known about the proper accounting practices. At no point does the complaint identify any particular transaction or scheme of backdating or specific recipients of such a scheme. As with any fraud claim, a plaintiff must plead the circumstances of the conduct with particularity. They effectively concede that no single allegation, standing alone, is sufficient to meet the Tellabs standard, see 551 U. There, the plaintiff alleged that the defendant fraudulently issued backdated stock options, signed false securities filings, and overstated earnings during the plaintiff's stock ownership. We held that all of these allegations failed to create an inference of scienter that exceeded other inferences of nonfraudulent intent. We reasoned that it was most plausible that the defendant did not realize that the backdated options would affect later financial statements because he had no accounting experience. We also concluded that the restatement, as a percentage of total revenue during the class period, was de minimis and would not have alerted the defendant to the false statements. Finally, we rejected the assertion that backdating stock options is inherently an intentional fraud that demonstrates scienter. The allegations in this case are strikingly similar to those we encountered in Rosenberg. The specific allegations of backdating in the complaint rely almost exclusively on circumstantial evidence (analyst commentary and comparative graphs) to show that stock option grants to executives were backdated. Scientific-Atlanta, Inc., 374 F.3d 1015, 1017 (11th Cir.2004). Jabil responds that all of the allegations here, even after aggregation, fail to raise a cogent and compelling inference of scienter. Gould, 554 F.3d 962 (11th Cir.2009), we recently confronted the specific question of whether similar allegations in a complaint that alleged a backdating scheme satisfied the standard for pleading scienter. The complaint must allege some information about the insider's trading history for us to determine whether “the level of trading is dramatically out of line with prior trading practices at times calculated to maximize the personal benefit from undisclosed inside information.” See id. As a result, there is no way to determine from the complaint that the sales of large numbers of shares is suspicious enough to add to an inference of scienter. Courts should not examine the state of mind of the person making the statement.” H. We give the conclusory allegations of insider trading no weight in considering the inference of scienter raised by the complaint. Though the complaint contains numerous allegations of trades made by individual Appellees during the class period, it fails to make any particularized allegation that any individual Appellee knew about the accounting errors at the time of trading. 730, 742 (noting that the statute creates “a bifurcated safe harbor”). Our review of the complaint leads us to depart from the district court's narrow construction of the complaint.
We agree with the shareholders and conclude that the complaint adequately presents a claim of falsity.
BACKGROUNDThe shareholders represent a class of investors who purchased publicly traded Jabil stock from September 19, 2001, to December 21, 2007 (the “class period”). Though we concur with the district court's initial conclusion that the shareholders failed to plead any particularized facts about the alleged backdating scheme, their failure to show a backdating scheme only limits the actionable conduct hereit does not foreclose all potential claims.
During the class period, Jabil represented in several financial reports that it had followed APB 25 in constructing its periodic accounting statements. In their complaint, they detail the restated amounts during the class period as a percentage of net income during each fiscal year, reaching nearly 50% in one year.
The district court held that the shareholders failed to adequately plead that Jabil's statements about its stock-option practices during the class period were fraudulent under section 10(b) and Rule 10b-5. As a result, the district court concluded that the speculative allegations in the complaint “fail[ ] to adequately allege backdating” because they detail “neither any particular defendant's role in the backdating scheme nor when or how any particular stock option was backdated.” Goodman, 595 F. The shareholders respond that the falsity they allege is not false option grants, but rather false statements about the dating of those grants contained in financial and policy statements. They contend that they relied on these false statements in approving corporate compensation and stock option policies and that the nondisclosure prevented them from removing the offending corporate directors. To sustain a private claim under section 14(a), a plaintiff must show “that the proxy solicitation itself, rather than the particular defect in the solicitation materials, was an essential link in the accomplishment of the transaction.” Mills v.
Specifically, the district court held that the shareholders failed to adequately plead falsity of the allegedly fraudulent statements, failed to raise a sufficient inference of scienter on the part of the Appellees, and failed to plead enough facts to show loss causation. Falsity The district court viewed the complaint as an attempt to construct a narrative based on a scheme of backdating options and granting them to corporate officers. Specifically, they claim that throughout the class period, the Jabil insiders represented that the stock option compensation policy was to grant all options at fair market value, and that this practice had been followed in the past. Because the complaint fails to allege a link between the proxy solicitation and the shareholders' loss, we affirm the dismissal of the proxy solicitation claims. Section 20A Insider Trading Claims Section 20A of the Securities Exchange Act grants a private right of action to shareholders who contemporaneously trade with “[a]ny person who violates any provision [of the act] or the rules or regulations thereunder by purchasing or selling a security while in possession of material, nonpublic information.” 15 U.
Of the restated amount, .9 million actually resulted from increased compensation expense for non-executive employees. Here, the shareholders contend that the gross amount of the error was itself a “red flag” that should have pointed Jabil insiders to the accounting error. A plaintiff wishing to preclude a defendant from statutory safe harbor “must prove that ‘forward-looking’ statements were made with ‘actual knowledge’ that they were false or misleading.” In re Daou Sys., Inc., 411 F.3d 1006, 1021 (9th Cir.2005); see also 15 U.