strong inference of santer arising as to chief executive officer kenny and chief financial officer robinson in connection with general cables admittedly false financial statements over several years and second the collective or corporate  to general cable itself through the actions in the state of mind of executive vice president mathias sandoval now i would also like to note before i get into those facts that another panel of this court in the frank v dana  decision a few years ago noted that these facts these allegations must be considered collectively must be considered holistically in line with the supreme court's teachings in the matrix decision and tell abs years prior than that prior to that mr kenny had to sign as c c filings telling investors that general cables internal controls were materially ineffective we know we know that the two executives knew that general cable an r o w rest of the world are o w systems were not integrated best giving executives at general cable little access to our underlying financial information we know that the two men knew that general cables global controller and his financial group had sought additional financial information from our o w and i'm paraphrasing here but when the numbers came up from our o w that's fine gentleman but let us see some of the numbers behind those numbers where do you where you getting those numbers and they were stymied they were stonewalled at every turn we know that the two men know that the r o w c e o sandoval's refusal to hand over the information was vehement he threw quote a tantrum he would he went okayed every bill in the whole transaction happening down in brazil over the course of a certain year of two thousand and eleven and those bill in whole transactions comprised fully eighteen percent of the operating income of that r o w said in comprised fully twelve percent of the net income for general cable overall those bill and whole transactions are very important the f c c looks and looks at them with great suspicion you have to meet twelve specific criteria in order just to even be allowed to carry them on your books and as we've alleged and as general cable later admitted at least four of those criteria criteria were not followed so when told ma this reckless willful disregard works fine but because we're here in the securities fraud context i prefer recklessness and judge siler earlier in another argument you mentioned you were talking about a little something negligent or does require absolute knowledge here i think it's very important to note that in the ten to five fraud case we don't have negligence you're right that doesn't get us there at actual knowledge certainly gets us there but of course recklessness gets us there as just going on through a few of the final facts the magnitude of the accounting restatements now these are the overstate the overstated net income and earnings per share are just staggering in this case over the course of three years general cable because of these errors that took place underneath the reckless watch of kenny and robinson they overstated net income in two thousand and nine through two thousand and eleven fully fifty one percent twenty three percent and fifty three percent same three years overstated earnings per share which is a metric that investors the world over care very much about how is your company doing how are the earnings again overstated fifty percent twenty three percent and fifty nine percent and this court in the bolt case said common sense and logic tell us that the greater the magnitude of a restatement the more likely that it was made consciously or recklessly finally i want to talk a little bit about the two gentlemen's incentive to act as they did both of these gentlemen had an overwhelming majority of their compensation tied to incentives in just two thousand and eleven and two thousand and twelve both men their compensation range from eighty to eighty five percent i'm sorry their incentive compensation range from eighty to eighty five percent they had a huge amount of their annual revenue their annual salaries and incentive compensation tied to how the company was doing tied to earnings et c earnings per share and as you as the court knows we were able to submit some supplemental materials when we submitted the proposed a medical plan and at that point we were able to talk about how these two gentlemen also face the specter of clawbacks from two directions they could have that incentive compensation clawed back under either the federal government sarbanes oxley regulations or general cable's own clawback regime which was very  it could go back three years and take three years of their incentive compensation now turning to mr mathias ended up his c n n can be imputed to general cable he was an executive vice president of general cable he was also the c e o of r o w and and phelps dodge down in south america but more importantly he was a vice executive vice president of general cable and this court in omni care said that we are we can allow the c n tower of an individual or corporation to be imputed to that corporation under three circumstances and two of them are relevant here to the corporation or the individuals and no to the corporation i'm not trying to get at mr kenyon mr ro that was mr cent of all job he gathered the information from his subordinates down in south america he sent those numbers up and i say up he was actually station in my miami but he sent those numbers up to general cable to be folded into their overall financial statements he sent his subordinates certifications there sarbanes oxley certification as well his own up to general cable and as we know now in retrospect those were all false the second way that this court said on the care that you can get the c enter of an individual imputed to a corporation is if any high level executive board executive or board member recklessly disregarded or tolerated the misrepresentation after its issuance what we know here all new quote in this is general cable's own words not mine no later than january of two thousand and twelve knew what was happening down in brazil knew about the inventory discrepanc that couldn't be reconciled knew about the theft from the brazilian facility and yet he sat on that from ation for nine more months until september two thousand and twelve now we know general cable is part of  competent so that they know what's going to i don't is that i don't know if there's anything in the record that shows he's part of the fraud but i disagree completely that he was merely incompetent he was reckless in fact he's this individual more than anybody else involved in this case i think the needle certainly pushes right up against actual knowledge he was told in a phone call pardon me in a conference call in january two thousand and twelve this is what's going on we have a confidential witness c w three who was on that conference call with him and this is no run of the mill confidential witness and this is no gentleman down on the loading dock this is not a person working in the back office this is a person that was the senior vice president of latin america for r o w n even though he didn't exactly management overrode the control so inventory accounting issues were not timely reported that he quote discouraged brazilian personnel from disclosing the matters in their own certifications and most seriously r o w executive management did not report these accounting executive pardon me these accounting inventory issues to general cable even though he was quote aware of the issues no later than january two thousand and twelve and we know what happened afterwards general cable afterward looked at mr of all and said you know what we're going to exercise that claw back provision that we put into place in two thousand and twelve and we're going to take back your compensation from to your incentive compensation for two thousand and eleven his incentive compensation that year was built one million out of  overall salary of one point five million so they clawed back two thirds of his incentive compensation and i want to use that just to circle back briefly to what was going through perhaps mr robinson's and mr  head at the time were allowed to make this inference he had sixty five sixty six percent of his incentive compensation taken clawed back they were looking at perhaps having eighty percent of their annual i don't  want to use the word salary because salary i think doesn't separate from incentive but they had eighty percent of their annual compensation at risk for those years and so that leaves a strong industry of center for those two gentlemen and i think sound of all the c n tower with this gentleman the facts show not just recklessness but actual actual knowledge which we don't need but we're happy to take it i do have a minute left i can either reserve it or i can take some questions thank you arising out of general cables two thousand and twelve and two thousand and thirteen announcements of restatements arising out of accounting errors occurring primarily in its brazilian subsidiary which it acquired from phelps is i'm glad you asked that question because it is going to the key issues in this case is the issue of corporate cyanuric the issue of arises when the officer of a company not the maker of the alleged false statement that is not kenny or robinson as in this situation but someone else allegedly has knowledge can that be imputed to the corporation to establish the energy of the corporation and this court has addressed that very issue on three really did two things that were important one is that identified three categories of people whose knowledge can be imputed to the company and then the other which is very important is the court set up a two step analysis on the care you first can look at the state of mind of people who furnished information that that was used will know what they say but tell us how that talk about your case ok and what they're saying what what the argument here is is that sand al furnished information although he was not a maker of the false statements that he furnished information knowing that it was wrong that's the argument we say and i think the analysis the judge very concerned as well about creating strike suits and that's the word that was used by the panel where the state of mind of someone not making the statement somewhere else in the company is a credit to the company and judge bertelsmann went through the nine is less than the you know it's a very small percentage off it's only when you start to roll down and get to the revenue it gets to a higher number so there would have been nothing to alerted talk about the magnitude of errors yes  they they've offered they've offered a good bit here in just saying we know this but i want to ask them more about the timing they are not able to give us timing on a lot of this sort of broad brush in who said what and the tantrum and when and to those sort of things i agree with that your honor and i would say the plaintiffs do have a lot here because general cable is a public company there is a lot in the public domain and that's quoted in the called confidential witnesses i would submit that there is an extrapolation between what is attributed to the confidential witnesses in the complaint and the arguments that are made in the briefs there really are three key paragraphs in the original complaint for the court to keep in mind their paragraphs want to one hundred twenty five and one twenty six where the plaintiffs make their confidential witness allegations and i would submit that in those paragraphs in response judge cook's questions there isn't a particular ty there isn't a particulary that would survive the significant elven sized hurdle of the of the p s l r a we don't get the context we don't get what was what was really held back and i think the plaintiffs take liberties with with their argument and how they characterize what the attribute in paragraphs one twenty five and one twenty six to two see w one is they call and you also have to look in the court  consultant working for it it was a successful operation there's every reason to believe it would be continue to be sick at successful and well run and certainly there it's not an unreasonable inference to draw that if you have a successful operation you don't want to interfere with it and the failure to have integrated acquire a public company fully into the new parent company does not support an inference of recklessness as has been suggested by the planets there is a competing and suggested there isn't a particularity there of what was discussed what was the extent of the problem what did you know what did send a valid no and i think that when my friend says the company admitted san develop in january that really isn't what was in the public file and was the management the romance knew something about inventory discrepancies in january two thousand and twelve sandels knowledge was nobbles addressed in the in the and her plaintiffs counsel was hard pressed to respond those are judge burnham's words but in paragraph seventy seven of the amended complaint there is now this allegation attributed to two c w three valve on a phone call in january of two thousand and twelve when the tories shortages were discussed again no context nothing about the magnitude and there are certainly competing inferences that all can be drawn from  the stock price then the exercise price is higher does no benefit to them and what is very significant here and judge bertelsmann noted this in his complaint and it's one of the nine hellwig factors there are no allegations of insider trading market price of the stock it's illogical it has it has no it has no benefit for them and we've made that point in our brief and as far as the claw back the company's claw back policy didn't go into effect until it wasn't adopted until the end of two thousand and eleven that's played in the complaint and didn't go into effect until the beginning of two thousand and twelve so that that really wasn't even and issue to that point so there was no the absence of controls it was simply that the that there wasn't an integration of this recently acquired public company into the overall thing and there were expenses and courts for doing that and there are reasons not to as judge bertelsmann noted decision that i think addresses that his record versus where these things really have to be in your face the claims point to these assume for red flags but these have to be in your face type allegations not ones that merely would give negligence which is not adequate to as a root to see enter but don't stablish recklessness and here there was a sachs compliance officer in the subsidiary there were ordered no doubt about it it's a public company with ordered financials  my time is up i can keep talking but i think my time is up thank you three and a half quick points your honour's and i promise one of the three and a half is judge cook's question about the timing i'll save that for last the half point my friend talked about there being a sox director of compliance down there will guess what our c w number one  r witness number one was the sox director of compliance for all of general cable so i think he knows what he's talking about when he says that these two gentlemen acted recklessly and shirk their duties in reining in the second  point my opponent says has the complaint pleaded knowledge as to sand they admitted it they admitted sandoval's knowledge they admitted it in a ten k amendment and they admitted it again in a proxy when they sucked back sixty six percent of his incentive compensation for the year two thousand and eleven third point the district court let stand up and is incentive compensation one million of his one point five million that he was paid that year they announced that they were going to take it back from it whether or not they were successful in doing that i don't know but they announced it in a public finding for their share of the point about the district court letting sand of all go  on two false and erroneous premises number one the district court said well i don't think mr stan of all intended to defraud we don't care he doesn't have to have been shown to have intended mere recklessness is enough and as i said they themselves concede his recklessness with their party admission in their s e c filings and the second point the district court said is well but you know what general cable came in afterwards and they punished him so therefore there's no santa for general cable there is no where this court will search whose santer is being imputed to the corporation now as to the timing yes i sure wish that c w three said i was sitting in a coffee shop in little havana on a conference call on this date in january two thousand and twelve and i heard  this the allegations are what they are but the allegations although some of them may not be as granular as we would have liked they have to be taken as true and i but i believe that this court is allowed to draw some very logical inferences from the fact that we knew coming after two thousand and seven we know that our o w and general cables systems are not integrated either for their financial systems nor their nor their i t systems nor even their e mail systems all right completely separate you would expect that mr kenyon mr robinson would look with more scrutiny upon that division down there in south america but instead and we are told by the by the c w unfortunately without a date without a specific date that there were conversations that were held where people were told what was going on in brazil the fact that we don't know the date that we don't know the people we do know the people the complaint alleges that the people  teleconference were the brazilian controller there was a woman and i'm sorry her name escapes me you don't have to recite her name for me but yes mr sound of all have the names and and the positions and their position yes and we in the content of the conversation we have the general content yes that's in brazil in inventory issues and what we have what what corroborates all that what brings all this big ball of wax together the fact that later on that year two thousand and twelve october thousand and twelve general cable has to announce to its shareholders to the world guess what you can't rely on twenty two of our last quarterly and annual periods you can't rely on those numbers and that we are going to have to restate at least three years of those that is strong corroboration from what we've just alleged and i mean i pressed council so i mean i know i'm missing something but that the incentive was counsel i thought and i probably asked the question wrongly but i thought that i was told the only benefit to these insiders for for what they were doing was stock and therefore we could kind of write that off that they were that there that they were personally profiting because the stock is the stock well that's what he says but just because of never been granted a stock option in my life but i do know this about them when you're granted stock options it's compensation they can be granted all sorts of different strike prices if you will and i'm aware of anything unaware of anything that wasn't cash incentives to i mean dollars it was all stock that's still true i mean when you say there's still a big benefit to it i get that of course i mean larry ellison tashkin one hundred million dollars of his stock in the oracle case so i'll change to him yes we shall be so fortunate thank you helpful thanks for the argument and we will look at your case carefully you will receive an