appeal the district court's dismissal of their securities fraud complaint against oracle corp and its principal executives i'd like to reserve five minutes of my time for a bottle of it i'm going to watch and clock twenty straight cases adverse to the plaintiffs nice journeys cases and we have the firm to key to that trend and develop a new more focused investigational approach and pleading approach to these cases and this case was the first of those new cases to come before this court if you recall the silicon graphics we had what the court described as a boilerplate complaint saying that the council did a lot of investigation talk to a lot of what this is and reviewed a lot of documents and here's what we found we we were criticized for not pleading with the sources we were criticized for not pleading the defendant's statements carefully enough we were the climbing economy was not hurting or they said that there was no weakness in their application sales in europe asia or the united states and that the pipelines for the quarter look the standing they said that their application suite eleven i was pretty integrated you could literally literally plug and play them like lego sets that the games we my kids used to play now they're too grown to do that they said they said as a result of all of this they would enjoy seventy five percent growth in application sales and that they would earn twelve cents in the quarter we pled forty nine witnesses sources including three former vice presidents five customers twelve directors all over the united states managers all of the united states consultants all of the united states financial analysts who said that in the middle of two thousand on the eve of the third quarter during the second quarter the economy was affecting oracle sales were going down secondly they said that the product that they were touting that didn't come on the market in mid two thousand  was not integrated it did not communicate well it did not have the interface capability and they felt that further that this resulted in revenue losses specific lost sales the witnesses identified twenty when you come in and tell us they only sold twenty out of twenty five has a court supposed to know whether that's a good thing or a bad thing maybe losing a third of them because it was a remarkably good year well that it may it may but they are so they are saying at the beginning this quarter that sales look astounding and they're going to have seventy five percent growth in sales of these products and less than three months later they step up to the plate and say  the economy did hurt us we didn't sell seventy five percent growth we sell we sold twenty five percent that's sixty seven percent mists but we didn't make twelve percent earnings only ten percent they missed by seventeen percent their earnings prediction that means they made one hundred twelve million dollars less than they forecast they expected about five hundred eighty that's almost a twenty percent drop in gro now growth is important yes that well they still grew of course they still grew their a big company big companies are not immune from engaging in improper activities enron world com we know that the unfortunate history of corporate in  irresponsibility in the last few years but those are significant misses that is to say what happened is the witness this front sight what they said and what they saw was what happened and how could that the fans say they didn't see what the witnesses saw they agree that they look at the same database and monitored it and it was up to the minute about what sales were against forecast and if they lost two hundred thirty three million dollars or they say they missed their predictions by two hundred thirty three million dollars and they suffered hundred eighty of that in the first month of the quarter doesn't that tell them that maybe they should be a little more cautious about continuing to predict seventy five percent growth in january and february it may be that  well we're better than the economy yes they were saying that but it wasn't true it wasn't true just for example i mean tell the truth that's what should have happened the economy was witnesses one of whom worked in the finance department witness number forty nine said he worked for the vice president of revenue recognition he said he saw it happen he said he went through the vice president of revenue recognition and said this is improper you're revenue to clean it up forty six who represented customers outside the company did an amazing investigation she he or she got seven hundred sixty internal oral dark oracle documents compare that to what our customers had paid found that the exact same amounts of money were being credited as revenue on these debit memos that were being had that had been paid earlier that was an amazing investigation and so when you when you  thousand and two telling his people we need to provide what impact this process has had on revenue in each of the last eight quarters well if they're talking about maybe this had rep revenue impact in the in the last  suspect that they hired forty six to find that out forty six was hired by eli lilly by general electric general motors by major companies because that there was some suspicion that maybe they had overpaid and  being converted and the different memos say credit revenue and they can they can say anything till the cows come home that credit revenue doesn't mean that they recognize the revenue but if you look at i'm not an account but i looked at the dictionary of thought that insider trading was two months before the revelation of the truth in the bad news it was for weeks alison traded between january twenty second and january thirty first shortly after the false statements pumped the stoc to its highest level at thirty and thirty two dollars he sold at thirty and thirty two dollars stock that he acquired for twenty three cents a share ok and then four weeks later the scot craters to sixteen and we have this amazing statement from from coun would letterman was counting that on the ten ten most incorrect statements by a federal judge that would be number one no way that tell us who lost a penny that was the twenty three cents he had maybe on paper or something but he didn't move a penny the plaintiffs who bought up thirty and now are at sixteen lost the difference between them alison at the high point and never having sold for five years the timing of his false get the idea that there was a conversion rate at issue here that there was some difference between the number of deals contemplated the number closed and the place you got that idea was finest first implant which is in the supplemental excerpts of record page thirty three paragraph thirty two where they plead exactly that that one in three about one in three deals closed it's common sense but it's also something that's in the record now i am the problem with this complaint is not that there are no details that there's no background there's lots of background there's lots and lots of background that the problem is that when you get up to the point that plaintiffs try to plead something that might indicate that something was wrong that's when either the details disappear altogether or conclusions are plated through people without any pleated basis to know what they're talking about start with the the documents that they provide talk about data cleanup they have offsetting entries to one account yes there's a credit revenue line there but what does that mean they have someone with no knowledge of oracle's accounting practices reading a software user man on man you want saying oh it says for debit and imo that it generates a line that says credit revenue well what does that mean does that mean that revenue is credited well they don't tell us how it was credit that was accredited just in some big pile somewhere anybody in the tally of the pleadings here it does not speak to a vice president of finance who you would think they claim that everybody in the finance department has complete insight into everything you would think that this this witness might have had something to say about revenue in the second quarter of two thousand school two thousand and one and he does he does have something to say about revenues historical made their numbers in two thousand and one he doesn't say because of some accounting  before what when you look at the totality of the pleading again it doesn't add enough to create raise a strong inference of process wrongdoing why well let's see what they're pleading here their theory is that these customer over payments they need to find some real money somewhere so that the customer overpayments which they plead we're amounted to about one hundred thirty million that's resulted in two hundred thirty million dollars of revenue based on because we have nothing to hide about that at that memo run but it's not you don't have to take our word about it for it because their theory doesn't their theory doesn't add up how do you get their theory is that one hundred thirty million dollars i cashed became two hundred thirty million dollars of revenue to six hundred  to start looking at differences from patterns in the reported public documents we submitted all the other relevant was that within a four or five you period and every year every year there is a similar drop from one quarter to the next and there's an explanation for it which is that the last quarter of the fourth quarter is when oracle does it just proportionate amount of its business consulting deals are paid prepaid but they're not earned so it's advances once that once that once the consulting is performed then it is around the revenues recognize it's no longer an advance that's applied against an invoice you've got this pattern going year after year after year yet their theory is for this year only for this year only you're supposed to draw an inference that revenue was something about revenue being recognized but he pleads only the conclusion he wished the witness forty nine had been told the revenue was recognized but he doesn't say that he wishes that witness forty nine had been had been present at some point where cycle but more importantly they had that you know when they amended their complaint the last time i think it's just remarkable that they're coming in now having received the e mail as you can see on the docket sheet as they acknowledge that they got the e mail to all nine you see the they do plead statements that talk about the current condition about current conditions the entire crux of the complaint however the only thing that they ever say affected anybody was the fact that they they claim that that and the fact is true that that oracle didn't make its numbers at the end of the quarter that's that's where the stock drop happens and they claim oracle should have known it earlier and yet some of these i'm  just agreeing with your honor there are statements that are statements of current conditions but whether they're current conditions or future conditions they never lead anything  what about the current conditions made anything that oracle listing untrue were sales up at a particular time where they down what the pipelines look like we never hear from them we hear from a few witnesses scattered a few dozen witnesses much smaller amount actually talking about the third quarter that say that i didn't have anything nobody i knew had anything as a disastrous fall off zero in the  sales no big deals nothing going on people were twenty percent of the quote and this is the first quarter second quarter third quarter the one thing we do know is that those people were not representative of what the company was doing as a whole where they thought what the context is we never know but we know that earnings one up in the first quarter they went up in the second quarter and they went up in the third quarter oracle had a record breaking quarter but just didn't break it as much as they thought they would so whatever these people were experiencing yes of course there were people general statements about winds and expectations were false again they have people who could have said well the company was really using different figures the typical production case they didn't really think that there is nothing like that so they chose to plead this claim based on statements of overall conditions overall expectations company wide applications licensing company wide and they never give us a s time they never talk about the assumptions that are being made they don't talk about anything they just say these guys are having a tough time therefore you can infer that what are overall even though it was completely different at the end as it was at the beginning from what these people say was happening you can infer from the fact that some people were having a tough time that oracle was lying about what was going on and you can infer that that's not that's not what the pleading standard means what this is that this is pure speculation dressed has not been discussed because based on this plea and we don't find that there is anything to the stuff we find we find again there's lots of details but when you get when you get to the point when you get to the point was revenue recognized it falls apart on scrutiny there just isn't anything there there's lots of numbers that don't add up if they have a theory about fraud this is intentional fraud they're  the predictions were false and the evidence isn't there or they don't have it they're not going to find it they can look cold till the sun comes up and down another thousand times they're not going to find it so they have to make it sound like well maybe things were worse  before and what do they do that they go to their vice president of finance who said that oracle made a second quarter numbers now if they go to people outside the company and then find a collections manager to say please conclusions without leaving any basis for a no for knowledge and that that that that at the end of the day they didn't do as well as they thought they would they claim you can't possibly think that things went wrong in the last few days of the quarter when an oracle has been warning about that in its public securities filings for years because that's how the that's how the business works you know they asked all kinds of inference us and they need inferences to make up for their facts they feel that they failed to plead a coherent theory of how revenue was recognized and they failed to plead anything that undercuts one thing i do want to address directly in my remaining time is the is the product allegations the product allegations on eleven i basically basically say that the defendants didn't disclose that there were bugs  this new complex software product in fact they make a big deal over larry ellison some time later saying you know make up us a complex software product it has bugs they all do what they don't say is the defendants never said it didn't have bugs there is they they say that there are people who said the product and if they also plead you know and yet i believe it's five twenty eight of the extractor record big question coming in and saying how well it did work and what's most important and what's most interesting again looking at the totality of the pleading as this court must is that in the very midst of saying eleven i didn't work at all and the worst part was to go around the part that the warnings focused on that there might be bugs the worst part was t r m and then you turn around out the other side of our mouth and i say how do we know what is our basis for science or on all these allegations work the fatality the pleading just doesn't again it just doesn't add up more important they can't connect eleven nights to the problems that they claim that oracle had much less the problems the particular time they talked about a bunch of deals they only try three of them to eleven nine and the third quarter and as we point out in our brief two of them they don't even say one of those deals went better they have one deal that went bad they have one deal that went bad because because heard about the problems that bell south which suggest that the information was well within the market as court not only can but should take judicial notice of the documents that were submitted in the in the trial court that showed that by the end of october this was on everybody's lips that there were buzz bugs in eleven  surprise the question was whether people were buying it they don't take issue with the numbers played on that the reports of how many people were buying at a particular time more generally on the last year also again there is that they show that there are exhaustively over over those in our in our recent i'm not i'm not going to repeat it here but once again there's much less much less than they claim they believe it has actually been pleaded and at the end of my time and thank you very much  yet let's put this back in the procedural context of this case this is the twelve it's motion so when mr hall says there's an explanation for that things this is the way things operate sickly or that we have nothing hide or that this is water cooler gossip you know that's that's wonderful for a jury argument that they have countervailing facts and explanations for all of this but this is still a twelve six motion and what the p s l already did was try to set up a mechanism for blocking sham suits with no evidence not meritorious suit with a plausible factual basis and when forty nine witnesses including three former vice presidents of this company say sales go north well if you don't provide a snapshot of any date in which the sales were going south we can't i mean that's that's the classic internal stuff that we can't get at it if that's what we have to plead then then then you should throw us out but look it's not what we don't it's what we do plead that you have to evaluate what we do believe is that we have witnesses who say this was going on over a period of time they identified twenty lost sales for in december and january the first two months of the quarter nearly one hundred eighty six million dollars the customers come in and confirm that product isn't working the witnesses inside oracle say the product isn't working vice president c w forty five says the product isn't working now and when mr for kind of says i'm lying i get upset because he knew no that we didn't have the quinn e mail in full we have the second page but the smoking gun is on page one and he gave it to us during the pleadings in fact if you look at ou says that a complete copy of the e mails attached here to as exhibit a and they jumped on us during that motion to preserve the evidence for not providing the first page and i'm delighted to go over it with you again we need to provide what impact this process had on revenue in each of the last eight quarters that tells you a lot about those documents that judge ferguson if they speak for themselves private revenue we didn't play content us the content and we played it credit revenue credit revenue in forty thirty six thousand eight hundred eleven documents all on one day november seventeenth two thousand two weeks before the end of the period he said they had a good quarter in the second quarter only by cooking the books only by cooking the books and remember these are allegations there's a trial to be had is discovery to be had a summary judgment they may have their explanation of revenue account that you're improperly taking customer money if you didn't see it among the credit revenue documents supporting the investigation that was done by steve forty six supports the become six hundred ninety million the witness said there was one hundred thirty million in one corner we now know that they they at mit six hundred ninety two million was converted they say there was an indication that this occurred over eight quarters so this cyclical business that he's talking about may be accounted for by the fact that they've been talking about a lot longer than we we know all we know is our witnesses tell us that happened in the second quarter but