you you watch your time but i will try to help you what could be more misleading in order to boost international revenues defense pay bribes to foreign officials in cash sealed envelopes essentially putting the money in paper bags and telling investors that the growth in international operations w you know you've used the bribes and we look and we look at the facts and we see what we see and what we see here is how much money changing hands does that make a difference now i don't think it makes a difference or on whether you want to call them sure whatever way do we look at how much and what percentage that is of the of the return well i think the method of payment is important because it shows that they were in you look at for example the allegations from c w two confidential witness number two i think it it's clear from those allegations of the defendants were doing something wrong that they accounted for the commissions or the bribes or however you want to call them as marketing expenses that was an intentional violation of generally accepted accounting principles and violated section thirteen is of the exchange that when you're looking at the amount the fact that you know whether it's four hundred thousand dollars or payment is ten to twenty percent of its sales i don't think that if you want to say always only a small amount i don't think that that matters i think what matters is what they were telling the investment community what they were not telling the investment community and the the impact that the payments had on the on the foreign operations seven different tests for determining whether the statements were false or misleading i said the worth in controlling one circuit or other well settled case law and if i could i could just list the seven and if you want to discuss them we can or information and that's a test laid out in grain fed right kone and oracle for example we lay it out as the test of we need specific problems undermining defendants optimistic  claims we need to test set out in doubt that there are specific allegations of direct involvement in intentional manipulation of accounting principles we even give you hornbook law that says revenue generated by illegal means is by definition material and misleading  fraud but sort of getting back to the question you're asking is well if the payments and sells do not have to be illegal for the statements to be misleading they don't have to be fra misleading now in terms of sigint are we also give you seven types of evidence that some standing alone are enough but certainly in combination meet the required state of mind  bolstered by the insider trading which was unusual in suspicious and motive an opportunity allegations now i think the you know one of the meaning issues here was the interpretation of brody versus transitional hospitals and i think that the district court got it wrong misinterpreted that case and and i think that could be illustrated by an example in glen stead when fed laid out the landfill example where the the seller of the house assured the by the buyer of the house the house was in perfect shape when in fact the house was built on landfill and when fed ninth circuit using that example said that's misleading the seller of the house did not have to say to the buyer the house is not built on landfill for the statement to be misleading and that's essentially what the district court required us to do and let me give you a similar kind of example of where it's more like what was involved in the case in brody there was a press release that said we have a stock repurchase program and the press release was truth place that did not allege that that statement was false or misleading plaintiffs said well but you didn't give us other information that you had received a potential interest in companies coming in and buying the company then the in brody the court the company issued a second press release where they did an ounce that there is interest in the company but plated still complained saying well there's other details that you can provide us with that we would have wanted to know and basically what the brody court said  no this is not misleading because the statements were true and the statements are merely incomplete the way they didn't have a duty to tell you that information and this and the statements not received any bids for the company that might have been misleading and that's the sentence i think that the district court takes out of context  it's not even apples and oranges i can't even think of an analogy that's a different it's like apples and baseball the to track the grounds that it is example what brody is is like a buyer is selling the house i'm sorry the sell herself in the house and the seller tells them the buyer that the house is in perfect shape and it is the house is in perfect shape and the the house gets sold to somebody else and the buyer comes in and says well we did second you know you didn't tell me that there are other bits i think i wanted the house or you can tell me about the number of other bit that's the type of situation that brody is dealing with you're dealing with in a mission where the statement itself the representation about the house in perfect shape this is true but there's other information that may be the buyer would have wanted to know and you could conceivably say see the court saying in that example well maybe if the seller said there are no other beds or i'm not accepting any other beds or all whole the process open for you then that the buyer of that referring to and the district court erred by applying the grody type of situation of where the statement is not false for listening and applying it to a case where we are alleg g that the statements are misleading and materially misleading and in fact we give you several different standards to show how the statements are misleading that was in that contained in that confidential witnesses statement would be sufficient you have somebody supposedly trying to read that as a response to a question or a statement there's no direct statements of anything further investigation done and there were some concerns raised the special committee was formed at which point i think believe the company wanted to resolve the problems went to the government and negotiated out a saddle that is not i did anyway create an inference that at the time that events were going on they'll intentionally knowingly and willfully well not the issue is not that you have to know that you're violating the law in this instance that that happened here where the payments are being made to doctors both the private and public hospitals the issue was whether or they pleaded guilty to something and they said that they knowingly willfully and intentionally violated the law not that they are understood at the time that they were making the payments they violated the law and it's not knowingly well ceiling for all i care you're not going to get that part through but let me let me then address i will if i can i'll make the argument on the on the aspect of why i believe there's a lot of securities fraud claim regardless of whether or not somebody believes that maybe there was illegal conduct ok this is not a case of financial fraud a sense that there's no allegations that there misrepresentations of revenues or profits in which case if you missed sight materially the amount of profits or revenues that you having made the subject securities fraud the issue was whether or not they had a duty to disclose those payments that were later determined potentially by the company to violate the at c p a and which were later resolved with the government now the plaintiff's theory of fraud is back that this was all created back in one nine hundred ninety eight as a scheme to drive stock price and executive compensation and that it was not disclosed as a reason for the financial results so the basis for the for the duty to disc explanations you know the reporting of the results and the explanations given for the results were false because they didn't include these commission things so any of that leads you to the question of well why do i have to disclose scheme to increase revenue during a period when the revenue was increasing but yet the commission payments were bouncing up and down how could that be the basis but the amounts in answer ninety four thousand and two thousand seventy four thousand and two was two thousand and one of the same time the overall revenues were increasing and this is because it's a scheme to drive the stock price but it's got to be the entire company has got it has to be material in light of the overall performance of the company but let's look at so if you if you translate those amounts the seventy four in the ninety four into revenue based on the allegations in the complaint we're talking somewhere between three hundred seventy and nine hundred forty seven hundred forty thousand dollars in the year two years involved in course overall revenue was six hundred  twenty nine million in two thousand and seven hundred seventy five million in two thousand and one so if you just do the simple math of the numbers in the complaint it's incredibly modest and then overall you know so it was not by accident that plaintiff's counsel came up here and suddenly started talking about the international business but that's not a separate it's part of the overall entity the overall international business was limited to sixty seven percent of the overall revenue  regarding the financial results i believe central to that is a finding that the in fact they played sufficient facts to show that those payments were a material part of the result such that the failure to disclose that would be false and misleading somebody who is in any way responsible for the status of the company he worked in sink or taiwan so one thing that the court noted is that there was no allegations in our particular area that anybody else understood the way the payments were being made specifically in cash just doesn't paint there's no connection between the two the issue that they've take they've presented is whether or not there was a scheme to drive the stock price by virtue of these are payments which presumably the theory is that well if you're if you're generating revenue with something that creates legal risk you ought to disclose it but if that's not it's not if that's not what you're doing when you know there are there are all sorts of potentially illegal conduct that occurs with corporations if it's not tied to the financial performance or some made about a company that was generating seven hundred fifty million dollars in revenue was was somehow rendered false or misleading because of seventy four thousand dollars in commission payments that the company itself self accorded later to the government understand it's not commission payments qua commission payments where the amounts it's i'm sure the stockholder in a company which is doing something crooked they're going to get caught and my stock is go fall is not the normal reaction of a person who hears about this my stock is going to tan and that we all looked over somebody turned red there was a state in the elevator we need to talk about this there was no discussion about it whether or not that raises any inference at all i don't know but it certainly doesn't raise a strong inf business none of which are implicated by the payments so what you have to suggest is that again that statement is not a statement of guarantee or specific sure it's that the company is never going to be found or will not be kind of in violation of any law during that time frame that record it represents a statement that overall the company is not aware at that time of some material issue relating to its compliance with the law and there isn't evidence that there's no specific pleading company itself had to have had a moment had a period where it actually looked at this you know for his special committee later it wasn't you know it was not consistent with somebody who is acting in knowing that it's acting subjectively hold the belief that the time and there is really nothing other than the plea which under the read right decision and i believe under the euro's decision are insufficient as a matter of law because they do not knew what they were doing they were conclusory statements in that regard but they have to be supported by particular lifespans and so they don't have anything that suggests that anybody said anything at the time that i thought they were acting illegally i really i for the outside director defender defendants mr spoke a wagon or and this twenty year honest i don't have a great deal of time but i think the time i have this commensurate with the amount of time that the plan to spend those on their argument and on their brief with respect to my clients and i want to answer a couple of questions that the court posed one in a different argument all the work she did here and then a specific question here what is the narrow question that the court has to decide in order to up hold the district court's ruling with respect to my client the answer that question is whether or not the second amended complaint which was the only operative complaint with respect to my client's pleats particular realized facts showing a strong inference of cmdr with respect to the outside directors and the circuit of course that again the same error that they made in their briefs before this court and in the lower court it is not by accident that they keep referring to quote  wrongdoing model that is impermissible it was implemented for the format and it's even more in principle after the reform act where is there any explanation special committee they investigated the matter they found a total hole of approximately six hundred thousand dollars of payments over a six year period with respect to certain of the company's foreign operations now the court asked another question that i think was an outstanding question does the size matter and with respect to my clients the answer is absolutely because if you want to put it in language that is more typical revenues for foreign operations which were labeled as my expenses that's an ordinary and typical business expense less than one percent for two thousand and two on revenues for two thousand and two that was less than six percent there's not a single allegation within the complaint that says my clients were present at those meetings were ever told of those meetings that the ever received the budgets or even if they hadn't received the budgets that they would have recognized that marketing expenses of a small magnitude should be read to the improper payments under the foreign corrupt practices act so there is absolutely no evidence not no allegations rather that would suggest that my clients were aware or that they even should have been aware and i want to make this point i'm sure the court understands that these allegations  but let me start with the outside directors america west decision that there is more here alleged against the directors and what was found than what was alleged in america west and that was tell us one two three four five what did the outside directors do what should they have known and when ok first i think that they're asleep the switch the fact that cardinal health will come in and in their due diligence and they're not even in the company discovered these payments and blew the important and then you have lewinsky and will linsky is on the audit committee and that's directly related because of the functions of the army committee and the fact that cardinal uncovered the payments and that they were  fact i also think that as a matter of policy when you have a very very specific complaint like we have here and we we have detailed allegations from confidential witnesses you have the f c c the particular allegations as to some defendants the company is going to go into the discovery of those defendants are going to go into discovery and if the outside directors are going to go into discovery as well whether it's parties or rules and you know and that that was enough they just found it incredible that the directors wouldn't know of of those pervasive problems and i think that we have that here as well  director should be held in under control personal liability defense counsel was making this argument about the the amounts of commissions went up and down and that the revenue did not exactly track the amount of commission first of all if you figure out the commission payments as ten to twenty percent of sales as we do alleged alternatively in the complaint then you're going to have that direct relation between the amount of the bribes to the man of the commissions and the sales secondly when you look at paragraph fifteen of the complaint it's really the overall trend of the payments and there's no doubt that if you maybe have some time delay or some small fluctuation that they're pointing out i don't think that that really matters the overall trend and we have a detailed allegations from the that the scheme excel aerated after the meeting in thailand in one thousand nine hundred eight and the international business went up accordingly and w that the business was mature it didn't matter that international was a small percent the fact that mattered was that that's where the business was growing and it was material in the court found as much as evidence when the stock dropped when the s