we'll hear the next case and i think that mr mclaughlin is actually not on that case you  an interesting thing artifice the corps created when when when you make a representation regarding your procedures at those deficient there's no category of quote unquote mismanagement if you're speaking about your k y procedures and they're severely deficient and management has reasons another severely deficient whether or not a fool's mismanagement is simply is not good but it is i understand the relevance statute it's not simply to provide a violation for deficiencies when you're really looking at or material misrepresentations that would mislead investors to think that the company's in a better position than it is and that it in the context of your complaint you've got to be fairly specific about what material ms representations  violations if you go to two thousand and two two thousand and seven two thousand and twelve two thousand and thirteen where can i find the phrase anti anti money laundering onboarding new clients yet that's k y c yet despite deutsche bank substantial history of regulatory violations place on and on firm notice that the schemes like murray trading might occur you have the regular saying you've been on notice for over a decade of these weaknesses the answer is the answer to my question that you do not find the the the words and say money wind violations in any of those reports  when it comes to it with respect to the internal controls of money and we can start with when you go you look at that same financial services report well well the consent order let me get to that between deutsche bank and the department of escalated out of moscow now in part because and i quote compliance topics generally were not discussed during right regular business calls or meetings between the the moscow and london offices so  scenario where they're being told by the the board of governors the federal reserve and you have actually the worst internal control processes of any bank we've seen of any of your peers and they're being told in and in that instant audit that you're rushing division is the worst of any other division in this bank and so they know that in russia they have actually the worst is not only the worst of all its peers which is the generally you've got the worst of these hard to vision that means it's the worst division in the entire world  spheres and all that and we should all that what i'm what i'm trying to struggle with is this question we've got these issues in terms internal controls and issues of money laundering but my understanding is it's got to be tied to the statements where you're tied to where these these statements i think some courts may have considered sort of operating a district court looked at it that way that they're saying oh no we've got x y and z in place and none of those statements sort of say we will have no corruption and we will have no money laundering all them seem to be sort of statements made regarding k y c m a m l and yet they're not disclosing that the federal reserve is raising issues about that very about the very topic and supposed to disclose that they have the worst russian bureau of any bank in the country i mean you know or what are the you know they're doing business they're not affirmatively misrepresenting what what is and what is happened they're giving their opinion it seems to me there there may be i think quite clearly there was mismanagement going on i mean they weren't meeting the standards that were being the regulators were insisting on it but what my question there is what were they you know what were the statements that other than just normal kind of talking about well we have standards in place now we have we have measures in place and there's nothing false about that they did have measures and standards in place they weren't working very well or as much as you would like they said they were effective they say over a decade we've repeatedly warned you about your procedures and better internal controls it's unacceptable you have an unmediated not only that where is the square there's no disclosure to investors so you're making your but you're giving the view that you have proper internal controls you're giving the view that practices you're being told repeatedly by regulators that your internal controls and your and your and your props and practices internal audit it's are telling that you've actually have faulty controls and you're not schools in it that's that's where the rubber trouble seeing where the sea answer is so see answer can be established by facts to show either that the fence had motive an opportunity to commit fraud or strong circumstantial evidence of conscious misbehavior cumin russia you actually would have any business that would that was that was a primary source of business do you do you need to assert how or show how the individual ben defendants personally benefited from making the alleged misrepresentation what ten billion transactions coming out of russian a money laundering scheme and why d f s saying that had they stopped that had they had proper new york know your customer controls they would have lost significant business that is the  defendant in individuals sort of knew about the reliance on the money laundering profits and then there were either certified financial statements or made statements that were contrary to information they knew about the money laundering and other activities so again we it's really the the mock ace that just came on the second circuit and the gigo solar case in both instances the governments are warning or those warnings made to governments by senior management not to say the executives with respect to violations of law and here we have similar warnings that there the court held that there's warnings but i guess the question is what do we know about what these individuals knew about the warnings and the link between the warnings and the public statements that were made by the company that used to be that that isn't that isn't that the nexus that really has to be sort of drawn here so we do know that those are there is responsibility as far as being on the management board was for risk compliance we do know that the d f s and other regulators warns i'm actually fin the class period regarding anti money laundering concerns and is simply strains as as a court ruled in ma and as a court ruled in go solar is simply strains credibility to argue that somehow these actives didn't know about this to say the federal reserve tells you for a decade we've been warning you about your internal controls and you and yet you haven't responded and it's unacceptable and to say that somehow jane doesn't know that simply you're out of the simply and the common sense and second circuit precedents here with the second circuit says is that not only is the five whether or not the executives knew but there's the subject of corporate cmdr we have the new york the fs states they identify clear warnings repeal ignored and unaddressed by senior management what else can that say with their warnings throughout the class period ma policy that goes that infiltrates route the corporation to find a bank that's been fined six hundred seventy five million dollars by over five regulators throughout the class period in the final g c executives didn't know here's just mismanagement this is a mismanagement i understand the law that says that general statements about reputation integrity and compliance with ethical norms are viewed as immaterial puffery but when you look at the prevent money laundering that its compliance management system had been and i'm quoting been achieving good results for years how how do these statements which go to past effectiveness  respect to context with the bank said in every annual report that risk management techniques have not been and may not be in the future fully effective plaintiffs alighted that quotation when they cited to the document judge bolton of course they said none of these measures are absolute none of them sure and guarantee perfection pla that quote from when they side of the document plaintiffs first they also say i mean you're you you have a statement in the appendix of one twelve that do it your bank's personnel and i quote comply with all laws and regulation i was just going to point that out i had to find where that was said it's not said in any annual report it's not said in any press release it's not said at any press conference it's not said in any published document of the bank cited in the complaint where it is said and in paragraph one twelve of the complaint they don't source that quote i found it it's in the bank's internal code of ethics that's the only place that statement is made and they allied the prior sentence which says quote all doubt boys should bank employees are expected to comply with the laws that's allied that's not a published representation of the bank that's an internal aspiration it's on page ten sixty two of the appendix under the heading our values and beliefs with respect to the d f s new york state department of financial services twenty two pages of their briefs to the score site that over a half a dozen times counsel mentioned it in argument a moment ago that's settled negligence based claims only and as the chief judge pointed out when the matter percolated a management level within deutsche bank that consent order expressly finds that deutsche bank reported self reported to the regulators commenced an investigation and in a serious and timely fashion implemented remedial measures chief judge katzman as you stated for this court in slayton versus american express quote ordering an investigation as soon as it learned of the issue was a prudent course of action that weakens rather than strengthens see enter what we have here is a situation where the bank made statements aspiration just like in children's general electric where general electric said we have robust internal controls and then there was a problem this court said the f statements about the efficacy of financial controls are not adequate to state a securities fraud claim regardless of the accuracy unless plaintiffs allege the requisite see enter and your point is spot on correct there are no allegations of c enter as to any of the individuals that could be imputed to the corporation there is no concrete benefit no motive established and absent that the circumstantial evidence has to be greater and there is none what we have here is not a situation where the bank had no controls and said that it did the bank's controls were imperfect and as this court said playing catch up with internal controls is not securities fraud it's magnum hunter and i think so this mirror trade scheme apparently went on for about five years from two thousand and eleven to two thousand and fifteen is that right that's what's alleged was alleged and during that period of time there were various regulatory actions being taken against the bank  by regulators domestic and international connect the german federal bank had accused them of tax fraud there were warnings by various regulators there was a letter from the fed reserve for new york fed outlining lack of appropriate controls were any and so so on during this period and from really from during the period of the mirror tracing to where any of these particular events that were occurring in the regulatory arena public with a known to the public at all where these private between the bank and regulators where where were their public announcements about the regulations oh th every one of them was publicly announced every one of them was either announced by the byte by the regulatory authority south africa dubai or by the bank what i'm trying to do is figure out whether an investor would be on notice of problems continuing problems during the marriage rates of the controls at the bank course and controls are not perfect and there was no representation they would let me think about was the total mix of information was out there for the investors that the mix of information is this is an international bank and just like u b s had issues with controls and those claims were dismissed and affirmed by this court  it is a constant game of catch up where you are in a changing technological environment internal controls are constantly leapfrogging with improper conduct and the bank is simply in reality and is improving at a point what i'm looking at is what would the investor think from all the available information that was available during from from two thousand and eleven to two thousand fifteen that what would they be aware of in other words there's a difference it seems to me this you know i'm throwing a softball here actually there's a difference it seems to me where there  are matters going on privately that are not public that really show that the company is is is failing in its controls and the public has no idea about any of that and continues investing buying stock and so forth and but but but the information is out there for as part of the mix you're exactly right and a reasonable investor would understand that this bank it had issues that this bank had had had settlements that this bank had paid regulatory fines and that was in the public domain plaintiffs the first paragraph of their brief to this court demonstrates the problem with their case they say that it is manifest because the wrong is manifest because the violation was later announced your honor has made clear that this court does not permit plaintiffs to proceed based on fraud hindsight they have to allege specific facts the p s l or a they have to demonstrate a strong inference that at the time the statements were made they were known to be false solar the case that the council cited is not a thirty five or i case it's a thirty three act case with a public offering there was a prospectus put out in may of two thousand and ten and in june two thousand and ten the directors knew that all those statements had been false because they filed with the chinese environmental authorities a report noting the history of their existing violations existing thirty days ago the time of the public offering we don't have a case like that this is not a thirty three act offering where there are disclosure obligations twenty five cents out of disclosure statute it's an anti fraud provision and there is no fraud alleged by any individual there is no corporate fraud alleged there is no clear allegation that at the time any of these aspirational statements were made they were not believed and this court has been very clear that the fact that later on there is a violation when the corporation previously referred to having robust controls or having complied with law and a number of the other statements we've marshaled the seven decisions of the circuit affirming dismissals of cases just like this hindsight doesn't do it and that's all this case is thank you thank you owners have asked where was the evidence that they had known about these deficiencies prior to the end of the class period and as your own had previously stated there was a raid in germany of five hundred please my question is looking at the reports that you cited conclude that management knew about it and measure clearly knew about the five hundred police officers coming into the german headquarters and throwing out the head of the entity the head of the n t money laundering unit he was actually arrested and so he's arrested  thousand and twelve they're told that your biggest weak spot is russia that's really where you are the worst of anyone here you're the worst twenty eight appear bangs your worst vision is russia and nobody goes into russia to see what was happening actually the russian moscow saying there's severe weaknesses that throughout the complaint there's issues of severe well known widespread and as and bank policy throughout the class but these are allegations made by plaintiffs by regulators and yet and yet this record here found there was no misstatement no see enter it's simply it's simply we wouldn't see how in the case of ma where there was one meeting with a regulator where there are issues raised no no even the statements really regarding counterfeit items misrepresentation seem to be sort of you know you describe his views sort of cherry picked and don't sort of take it take things sort of out of context so the question then becomes taking in context what you consider b the material misstatements and the individuals what they knew at the time the statements were made it's simple it's what we know is a senior management knew about the issues senior management was on reference to the question is is that enough to infer that somebody of the corporation well who had authority over the statement oversight and court has recognized that will be it will be simply under ma under my you can have you can have the executor at the meeting either there's no allegation that the that the person making the statement knew the allegation was it was such a key issue and it was raised high enough there was it was a company finding severe recklessness finding finding fraud on all different types of issues by by by five different countries and to find that somehow the bank didn't make a misstatement investors should been aware we think it was send a very bad message to to to to the investing public and soak up corporations throughout your honor thank you thank you both for your arguments the court will reserve decision to hear the next cat