Wednesday, June 07, 2006

What's the Difference?

Defendants cried foul in the Veritas securities class action, claiming that “plaintiffs have not pled fraud with adequate specificity because no ‘dates, transactions, customer names and amounts by which revenue was allegedly misstated’ were disclosed. Did it work you smartly ask? Well, not one bit actually, as Chief Judge Sue L. Robinson (D. Del.) quickly schooled them that “the requirement for particularity in pleading fraud does not demand an exhaustive cataloging of facts, but only specificity sufficient to provide assurance that plaintiffs have investigated the alleged fraud and reasonably believe that a wrong has occurred.”

You see, “the court concludes that plaintiffs have adequately pled facts regarding improper revenue recognition” because “the complaint, based in part on former Veritas employees with personal knowledge of the wrongdoings, alleges a scheme by defendants to inflate the company's revenue numbers by including ‘sales’ from contracts that had not been signed by the customer or that were missing essential terms such as price.”

Also, “the complaint alleges that these fraudulent activities were ‘standard practice’ at the company, that they happened ‘all the time,’ and that incomplete or unsigned contracts were personally approved by defendant Brigden who, when confronted about this practice, stated, ‘What's the difference? We already know what the numbers for the quarter are.’ So, “under the circumstances, the court finds the pleading is adequate to withstand a motion to dismiss.”

You can read In re Veritas, issued May 23, 2006, at 2006 U.S. Dist. LEXIS 32619.

Nugget: “No manner of cautionary language can cure false statements knowingly made.”

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