for securities fraud against western union and its top executives claiming that they made false or misleading statements about the companies and alan anti fraud legal compliance the issue on appeal is limited to the district court's decision on santer the district court held that the complaints adequately alleged false or misleading statements of legal compliance but held that the complaint did not adequately argument as to what you're relying on for science well the supreme court has held that same answer is judge holistically so all of the different types of allegations that support santer have to be looked at in total and the court is required to each of the categories of evidence the support center but looking at and i'll get into that in a little more detail in a few moments but looking at the settlement that western union reached with the government primarily with d o j and  that by itself provides extremely strong evidence of science or there's also evidence in the company's board materials of the individual defendants being made aware of the types of issues that are raised in  the in the joint settlement with the government regulators so that's that's more than red flags that's actual knowledge or at least being given the information showing the evidence that their statements were false required steps reasonable steps i assume to prevent that sort of thing from happening that's right i mean so there there might be still bad apples in western unions system someone tired  corrupted but she's corrupted that's not a violation of their that's right allegations here go much further than that and the company even admitted to the d o j about it lacked entirely an adequate system of compliance not just that there were bad apples within the hundreds of thousands of agents that the company have so being advised that there was that incident where they had a really bad actor in the system that does not provide the if there systems are failing as long as they take probes steps to deal with it is that correct as long as they take adequate steps but evidence here shows that they did not take those adequate steps and that and that the good you're going to have to remember the fact i have never seen a complaint one hundred and seventy six pages consisting of five hundred and eighty paragraphs in my lot and i've been at this a long time so i'm not searching all of are one is that the district court applied the wrong standard for c enter to the district court did not actually engage with the facts and three the district court failed to address the issue answer the defendant's competing inference of poor business judgment was equally strong if that's what the district court found that actually compels a finding that the complaint adequately allege the answer because the supreme court held intel abse that if the inferences are equally strong that that suffices to show c enter but beyond the legal standard the district or also do not engage with the facts granted there's a lot of facts alleged but when the district court attempted to discuss what the facts according to enter were what it actually did was just reciting allegations of false or misleading statements that the not delve into the factual bases showing that the defendants had knowledge of the compliance problems so now to jump into those facts firstly the important issue here is the timing of how far into the class period western union's compliance problems went the defendants make a large point in their brief to try and argue that the compliance problems and did in two thousand and twelve because that's when the time period that the company was willing to admit to the d o j that it at did not have an adequate compliance reviewed factual information so for purposes of pleading in a complaint the fact that the f t c found based on its review of internal reports and hundreds of thousands of transactions and what the f t c called obvious signs of fraud that goes a long way specific materials where both the types of reports that are referenced in the in the government settlement and also the types of violations that are referenced in the settlement are discussed so for example it was the july two thousand and thirteen  board meeting where there was a presentation given to the board defendant the individual tendence attended that meeting and that july rd scene report discusses a fraud policy report where it was discussed how there was an agent in india that was engaging in obvious signs of fraud and even four months later when it was discussed at the board meeting it still hadn't been remedied the types of fraud that were a issue with that agent are exactly the types that are raised in the government settlement and the failure to remedy it or the types of lack of compliance procedures that are referenced in the settlement help me out here is  you as a corporate see answer as an independent basis for sensors of the materials that i'm referencing now actually show the individual defendants answer because they attended these board meetings and had received these materials at the board meetings that that's so that's not collective that's not collective center ok separately if there is a basis for corporate slander which is that the courts around the country hold that if an executive was high up enough in the company has knowledge that the company statements are false and misleading that knowledge can be attributed to the company as the circuit i don't think the th circuit has ruled either way and the defense is acknowledge that in the brief also but this is an extraordinarily strong case for the th circuit to rule on that because it's unusual for a company to admit that it get in gauge in knowing and willful violations of m l actually found corporate c enters i understand it we have the one hypothetical from the seven circuit that if general motors announces its old one hundred million of a type of vehicle and they had sold any then we can infer that some higher up knew that was false that's an extreme case nothing like this case if you have any other case there's a there's several cases that we cite in our brief for example on case it was found that because a high up the enough executive knew of what was going on that could be attributed to the company in that case today actually show that the higher  believe that there was evidence about that specific executive but if that's the circumstance that's not a problem i mean if one of the defendants if there was sufficient evidence of standard one of these defendants that would probably be attributed t corporation we're talking about a case where we don't have a dental file bill executive but you just know somebody most of all that the key in that case is is that it wasn't actually one of the defendants who knew that the person who makes the statement doesn't have to be the person enter and so there's also cases where because government vesta geisha ins are going on for long enough it becomes clearer that people in the company knew in the course of that investigation that the allegations that were issue in the investigation became apparent so for example in the i t t case that we say in our brief specifically holds that in the course of a year long investigation the plaintiffs don't need to point to the exact point in time at which the problematic behavior became known because of course at some point during those investigations it became known and that's exactly what happens here there was a years long investigation with the d o j and with the f t c that culminated in the company's admitting to knowing  in the f t c finding of knowing violations so it's really just a question of when in the course of that years long investigation that the company presented documents and presented witnesses to the government that it became know the one question about the f t c there is no secret about the f t c findings and their investigation that was being reported by the company was it not the fact of the investigation was being reported but what the  actually found was was not reported so for example the f t c is saying in its complaint that finally rick was revealed in january of two thousand and seventeen that there was hundreds of thousands of transactions and billions of dollars worth of transactions and internal fraud policy reports that wasn't known until later when you look at what the f t c revealed there was so widespread there were the list of countries where this occurred is there's a list of the twenty or so countries where the f found these problems so how would the individual defendants have know what the f t c was fighting while they would have been apprised in the course of the government's investigations  there's also an important allegation against an individual stewart stock though who is not an individual defendant but did actually make a statement of legal compliance and his say enter can also be attributed to the company because she is a in the d o j settlement to have committed one of the most egregious acts where he tried to cover up one of the china card or agents who was facilitating human trafficking she told the c e o in two thousand and ten that he's going to try and save that age and it please the court my name is helen shepard and i represent the defendants pelleas this case is about three individuals the c e o of western union mr earth sick and two successive chief financial officers mr shier men and mr agger wall and i'll note that mr brown belts at essentially nothing about what in the any of these three individuals knew at the times they made their statement expressing their belief in western union's current compliance judge judge baugh like you really did not point you to any allegations in the complaint whatsoever that give rise to a strong imprints that any of these three defendants knew at the times they made their statements that there were was ongoing illegal conduct occurring at western union by certain employees and really it's important to understand what is the conduct here judge harts it's not that fraud is happening at western union employees knowing that there are problems with certain agents did not take appropriate action to discipline those agents and there's simply no allegations in this complaint that give rise to a strong  these particular individuals had knowledge at the times they made their statements again expressing their belief in current legal compliance that they had knowledge that there were any ongoing violation and nothing had been done to correct this how do you respond to that that's one specific example you gave if i understood them and i believe that that's a really isolated and incident that is a one paragraph only one of the defendants says that as a member of the board your honor and it's not at all clear that the chief financial officer would have attended he's thinking or excuse me let's take the board member get fair enough it's a one paragraph snip in a bore material about an agent in india that had been asked a late hit to regional compliance there are no facts whatsoever that suggest what happened after regional compliance undertook it s trant transferred or or been involved in a certain number of situations where there's a complaint by a consumer that there was a fraudulent transaction that triggers a duty or  triggers an obligation of the company to take a look at what's going on with this agent it may simply be that the that there is a fraudster who's moved in nearby close to the agent it doesn't nests of the mere fact that there are complaints that there are fraudulent transactions not mean that there's anything wrong with the agent at all so in this situation this is actually a good example of western union's compliance mechanisms working well because what the board is told is that they've taken a look there they're looking at an age there's a regional compliance group that is going to be looking at this agent and me and i think another panel of those up that's court are and looked at these very same board materials in the city of cambridge case decided last april this is this sound like they like i don't agree with that your honor it's that it's been escalated to regional compliance but there are no facts at all maybe there would be a report later months down the road as to what happened with that review there's no facts here that suggest anything about what happened with that review it's simply alerting the bar or the board that there is an agent that they're going to be looking into doesn't tell us that there is any violations of law even at that agent let alone that western union employees are making a bad decision with regard to that compliance i also want to  address the question of the wrong standard which which mr grunfeld relied on the judge that the district court supposedly entered and are applied in and i think it's important to recognize at the outset that the while it may not be sufficient alone that that that is can be a strong inference of soft side or note as he's because you have the government investigating so that in itself while it may not be sufficient to make out a case can be considered gross right you can see that so i do read that the government investigations can be considered but the government that that western union had made improvements to our to its compliance it found afterwards that in certain instances there was a failure to discipline agents those certain instances are copied by the plaintiff into paragraph one hundred and sixty seven of the complaint but the f t c never suggests that any of these top executives knew about these certain instances and western union has not conceded that those were  violations of law there's there's simply no allegations here that give rise to a strong inference that any of these three individuals was apprised or believed that there was that there were ongoing violations of law i but is there anything that possibly could we that work in this record i really don't believe so your honor that would give rise to a strong in friends and that's because there's very few allegations here about what any of these three individuals knew and i'll point you to that the confidential witnesses which is interesting a lot of securities fraud cases are really hinged on confidential witnesses they have four confidential witnesses here one of whom claims to have talked to mr earth sic about compliance and it's  interesting to me that not one of them claims that that that he told any of these three individual defendants that there were ongoing my aleisha of law at the time they made their statements none of them claims that the defendants had reason to know that there were ongoing violations of law again as they made their comments about current compliance and most importantly none of them even claims that he or she himself or herself believed that there were any ongoing that in the tellabs case the supreme court is very clear that when there is an omission or any ambiguity and here i would say the fact that a confidential witness number four claims to have talked to mr erlich about requires but it at a minimum all of the circuits that have addressed this have held that the person who says i enter is being attributed to imputed to the corporation must have had something to do with the statements that are at issue because the securities laws are not about any underlying misconduct that may have occurred in the company the securities laws are about fault and misleading statements made with sigh and and there's really no question here that the pla have not they haven't alleged that anybody at the company had anything to do with the ten k statements that the that the individual defendants signed or that the investor calls other than the name defendants i don't identify anyone that the people that are alleged to have known about the compliance violations again mostly people who may have been involved in failures to discipline agents mostly overseas there's not no suggestion that any of grunfeld has pointed to regarding mr stockdale is an allegation that two years before the class period started he sent an e mail to the c e o saying we're trying to save an agent that just indicates that there's remediation going on potentially for that agent it doesn't indicate that there's a violation of law but mr stockdale is not alleged to have had anything whatsoever to do with the statements and i would say that there is no strong inf anything at all to do with disciplining agents or even about compliance more generally there's there's really nothing alleged in this complaint that suggests that they would have known and certainly not that would give rise to a strong inference that either of these two gentleman knew about ongoing compliance violations i think it's a particularly interesting for mr acker wall who is alleged to complaint going back to your question judge paul doc about what was known at that time at any of those times about the state of the company's compliance so i think that's important and just to go back to to to mr grunfeld reliance on the deferred prosecution agreement i mean again there is nothing in that document or in the up to see complaint that suggests that any of these defendants had any knowledge about the violations of law that were happening at that time or that they condoned any illegal conduct going on at that time  said that the d p a by itself gives rise to the strong inference it just simply does not as to these three individuals and i'll remind you all that the department of justice itself as part of the d p a really praised m for and just just to give a little bit more context i want to remind the court that this is a situation where the company has this is the largest money transfer company in the world it has operations in two hundred different countries and it has five hundred and fifty thousand agents worldwide so it's it just doesn't make sense that and certainly there's no particular arised allegation to suggest that any of these three defend about any violations that any of these agents around the world thank you thank you i want to address the point of the d o j noting that defendant or sec engaged in some remediation after two thousand and twelve but the fact that engage erm remediation doesn't mean that the company's compliance practices all of a sudden became totally in conformity with legal standards overnight it takes time to fix them even as of december two thousand and twelve spain's regulator found that the company entirely lacked adequate compliance so the fact that airsick was involved in trying to remedy the failures of anything just shows that he knew what the problems were it's important to realize what the misstatements here where he and the individual defendants attested to the company's legal compliance they didn't have to do that they could have remained silent they could have been open about what was going on they could have discussed how they were in the process of trying to remedy the failures but instead they affirm that the company was in legal compliance sometimes with statements of belief and sometimes with non opinion statement that's also why this court's recent decision in the city of cambridge case does not control the result here that case that with a different legal standard about whether the board totally ignored compliance not whether there was statements saying that the company was in legal