* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 07-20455

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Plaintiff – Appellee

v.

BRUCE E. SNYDER, JR.

Defendant – Appellant

Appeal from the United States District Court 

for the Southern District of Texas 

USDC No. 4:03-CV-4658

Before SMITH, WIENER, and HAYNES, Circuit Judges.

PER CURIAM:*

This case involves civil securities fraud allegations against

Defendant-Appellant Bruce Snyder, the former vice president and chief

accounting officer of Waste Management, Inc. (“WMI”). The Securities and

Exchange Commission (“SEC”) alleged that Snyder filed a materially false and

misleading Form 10-Q for the first quarter of 1999 because it overstated income

and included certain “nonrecurring” adjustments to income without appropriate

United States Court of Appeals

Fifth Circuit

F I L E D

September 16, 2008

Charles R. Fulbruge III

Clerk
No. 07-20455

2

disclosure. The SEC also alleged that Snyder committed insider trading when

he sold stock after filing the allegedly false Form 10-Q. 

Snyder argued to the jury that he did not act with scienter because he

reasonably believed that the overstated income was immaterial and that the

adjustments were recurring and need not have been disclosed. Snyder

established that WMI’s outside accountant, Arthur Andersen (“AA”), conducted

an unaudited review of the 10-Q before it was filed. Snyder argued that if

outside accountants believed the disclosures in the 10-Q were adequate, he was

not severely reckless for believing the same. 

After a four week trial, the jury returned a verdict against Snyder on all

claims. Snyder asks this court to reverse and render a judgment in his favor, or

in the alternative, for a new trial. Finding error in the jury instructions, we

REVERSE and REMAND for a new trial.

I. BACKGROUND

On July 16, 1998, USA Waste Services, Inc., completed a merger with

Waste Management, Inc. to create WMI. Snyder was chief accounting officer of

the merged company. The company was organized into five geographic

operating areas, each of which was overseen by an area vice president. 

Following the merger, WMI reaffirmed its earnings outlook for 1999,

saying it expected earnings to be $3.00 to $3.05 per share for the year. Rod

Proto, WMI’s chief operating officer, scheduled a meeting in mid-November 1998

to discuss the company’s budget for 1999. The chief executive officer, chief

financial officer, five area vice presidents, Proto, and Snyder attended the

meeting. The financial results discussed during the meeting were disappointing.

Although the company predicted earnings per share of $3.00 to $3.05 for 1999,

the area vice presidents projected earnings totaling only $1.98 per share.

Several of the areas reported first quarter results that would be tens of millions

of dollars below their respective targets. The area vice presidents described the
No. 07-20455

3

targets as aggressive and very difficult to achieve. Proto pressed the area vice

presidents to get to $2.92 per share for the year. 

On April 26, 1999, Proto organized a conference call with Snyder and the

area vice presidents to discuss the first quarter numbers in advance of a May 6

call with investors. Proto indicated during the call that investors expected

earnings of close to sixty cents per share for the first quarter. Snyder’s notes of

the call indicate that Proto said “we need help now” and “we need operating

results, not just journal entries.” They also discussed the anticipated second

quarter performance during the call. Three of the four area vice presidents who

were on the call predicted significant shortfalls from their second quarter budget

targets. Snyder’s handwritten notes from the call reflect that the projected

revenue for WMI’s second quarter was running short by $110 million, or eleven

cents per share. Snyder wrote “Acctg Solutions?” in the margin next to his

discussion of the shortfall. 

On May 13, 1999, Snyder signed WMI’s Form 10-Q for the first quarter of

1999, which was then filed with the SEC. WMI stated in the Form 10-Q that its

earnings per share for the first quarter would be sixty-one cents per share, only

one cent short of market expectations. WMI’s Form 10-Q for the first quarter of

1999 formed the basis of the SEC’s case against Snyder. Four days after signing

the Form 10-Q, Snyder sold 5500 shares of WMI stock. 

The preparation of the financial statements in the Form 10-Q was

governed by generally accepted accounting principles (“GAAP”), including the

SEC’s Regulation S-X. 17 C.F.R. § 210 (2006). If a company’s earnings include

adjustments that are not normal and recurring, that fact had to be disclosed in

the financial statements under Regulation S-X even though they are

appropriately accounted for as income in the financial statements. Among other

things, Regulation S-X provided:
No. 07-20455

4

Any unaudited interim financial statements furnished shall reflect

all adjustments which are, in the opinion of management, necessary

to a fair statement of the results for the interim periods presented.

. . . If all such adjustments are of a normal recurring nature, a

statement to that effect shall be made; otherwise, there shall be

furnished information describing in appropriate detail the nature

and amount of any adjustments other than normal recurring

adjustments entering into the determination of the results shown. 

17 C.F.R. § 210.10-01(b)(8) (emphasis added). 

The management discussion and analysis (“MD&A”) in the Form 10-Q,

which was separate from the financial statements, was governed by Item 303 of

Regulation S-K. 17 C.F.R. § 229.303 (2006). Instruction 4 to Paragraph (b) of

Item 303 provided that the company’s “discussion of material changes in results

of operations shall identify any significant elements of the registrant’s income

or loss from continuing operations which do not arise from or are not necessarily

representative of the registrant’s ongoing business.” Id. 

The SEC argued to the jury that the Form 10-Q overstated WMI’s income

and contained undisclosed nonrecurring accounting adjustments intended to

close the gap between investor expectations and WMI’s true financial

performance. The accounting adjustments can be divided into two categories:

(1) adjustments identified by WMI’s outside accountants as troublesome before

Snyder signed the Form 10-Q; and (2) adjustments about which AA raised no

concerns before the Form 10-Q was signed.

a. Accounting Adjustments Identified by 

WMI’s Outside Accountants as Troublesome 

Before Snyder Signed the Form 10-Q

AA, WMI’s outside accountant, was hired to perform a quarterly review in

connection with WMI’s first quarter Form 10-Q for 1999. In that role, AA

performed an unaudited review of WMI’s first quarter 1999 financial results,

including a review of WMI’s journal entries, to determine if there were any

questions. If it disagreed with WMI’s accounting treatment or had a question,
No. 07-20455

5

AA would make proposed adjusting journal entries (“PAJEs”), which are

proposed revisions to the financial statements. 

AA proposed five PAJEs in connection with its review of the first quarter

Form 10-Q, four of which would have reduced WMI’s reported income if adopted.

Although the fifth PAJE would have increased WMI’s reported income if

adopted, the SEC argued that the entire adjustment, including the increase

proposed by WMI, should have been disclosed as nonrecurring. 

PAJE 1: Change in life of burners. The first PAJE related to a change in

the estimate of the useful life of certain waste-to-energy plants. AA concluded

that $5.7 million of the adjustment related to a prior period and should not have

been included in first quarter income. 

PAJE 2: Change in treatment of outage costs. The second PAJE related

to an income adjustment associated with a change in how WMI accounted for

certain costs that were incurred when WMI’s plants were annually shut down

for repairs and maintenance. AA concluded that $2.2 million of the adjustment

related to a prior period and should not have been included in first quarter

income. 

PAJE 3: Conforming landfill entries. The third PAJE related to three

landfills operated by Whellabrator Technologies, Inc. (“WTI”) prior to the USA

Waste/Old Waste merger. WTI made an adjustment because the landfills had

been accounted for in a way that was different from all of WMI’s other landfills,

and WMI decided to conform the accounting to its other landfills. AA concluded

that the $20.3 million adjustment should have been recorded under “Merger

Costs and Unusual Items” rather than as a reduction of operating costs. 

PAJE 4: Change in landfill reserves. The fourth PAJE involved a change

in estimates to certain reserves at two landfills. AA concluded that adjustments

made to two landfills were to closure or post-closure reserves, but that WMI had

improperly recorded the adjustment on a cumulative basis rather than
No. 07-20455

6

accounting for the adjustment prospectively. This adjustment increased income

by $12.1 million. 

After WMI reviewed AA’s PAJEs, WMI “elected to pass the entries.” AA’s

first four proposed adjustments would have reduced WMI’s reported income by

$40.3 million. The fifth PAJE would have increased WMI’s income by $10

million, but as discussed below, that increase was to an accounting adjustment

that the SEC contends should have been disclosed as nonrecurring. Snyder

determined that the accounting errors identified by AA were immaterial to

WMI’s total reported income. AA concurred that “the passing of these entries

does not have the effect of making the Company’s consolidated financial

statements materially misleading.” On May 6, 1999, AA issued its “Report of

Independent Public Accountants,” explaining that it had reviewed WMI’s

financial statements. Based on its review (and with full knowledge that WMI

had passed on the PAJEs), AA gave a “negative assurance” that it was “not

aware of any material modifications that should be made to the financial

statements referred to above for them to be in conformity with generally

accepted accounting principles.” 

b. Accounting Adjustments About Which 

AA Raised No Concerns Before the Form 10-Q Was Signed

After Snyder signed the Form 10-Q for the first quarter of 1999, WMI

continued to be concerned that it would not meet its earnings forecast for the

second quarter. After another meeting to discuss WMI’s financial performance

on June 9, 1999, Snyder exercised options to acquire 8700 shares and instructed

the broker to sell 2700 of the shares. 

On July 6, 1999, WMI issued a press release advising that it had lowered

its earnings projections for the second quarter and for the full year. WMI

further lowered its second quarter projections downward in a July 29, 1999 press

release. WMI’s stock price plummeted. 
No. 07-20455

7

WMI’s board created an Executive Committee to investigate the missed

projections. Ralph Whitworth, chairman of the board, became aware that

certain “soft” items included in the second quarter projections did not relate to

WMI’s ongoing business, but instead related to accounting changes or

nonrecurring items. He asked Snyder to come up with a list of similar income

items that were included in WMI’s first quarter reported income. 

Snyder created a list of accounting adjustments in August 1999 titled

“Nonrecurring adjustments,” which was admitted during trial as Exhibit 92.

The adjustments listed in Exhibit 92 totaled $101 million of reported income for

WMI in the first quarter of 1999 and were not disclosed in the Form 10-Q. Both

Snyder and AA were aware of all the adjustments listed in Exhibit 92 when

Snyder signed the Form 10-Q for the first quarter of 1999. In addition to the

four PAJEs discussed above, Snyder listed three other accounting adjustments

under the title “Nonrecurring adjustments.”

Reduction of Reserves for Seven Eastern Area Landfills. After

listing the four PAJEs discussed above, the fifth adjustment identified on

Exhibit 92 was made up of seven individual adjustments to reserves for landfills

in the company’s eastern area, adding $24 million to WMI’s first quarter pre-tax

earnings. Although AA was aware of this adjustment in connection with its first

quarter review, it did notflag itfor correction. John King, an AA audit manager,

testified that it was only after being asked to do additional procedures by WMI’s

board of directors later that summer (around the time that Exhibit 92 was

created) that AA “became aware of new and different facts that ultimately led

us to conclude that the adjustments–or some portion of the adjustments were

inappropriate.” 

For several landfills WMI reduced closure or post-closure reserves, but it

did not account for them prospectively. According to King, the “accounting was

inappropriate” and not representative of the company’s ongoing business.
No. 07-20455

8

Another two landfills, Cuyahoga and Deep Valley, had been closed and then

reopened. WMI reversed its closure/post-closure reserves. AA agreed that some

reversal was appropriate but not to the extent the company had taken it. King

testified thatthe adjustment was not representative of WMI’s ongoing business.

In the case of two landfills, DSI and East Kentucky, there appears to be no

explanation for the adjustments. 

Change in Accounting for Vickery Deepwell. The sixth adjustment

identified on Exhibit 92 was a change in accounting for a landfill called Vickery

Deepwell. WMI changed its accounting from viewing two facilities as separate

to viewing them as one integrated facility. According to King, the resulting $12

million increase in pre-tax earnings was a “unique” event, and not

representative of ongoing business. Stephen Brown, an AA partner, agreed that

the adjustment made to the Vickery reserve was “an example of something that’s

a nonrecurring adjustment to a reserve.” 

Reduction of International Environmental Reserves. The seventh

adjustment identified on Exhibit 92 pertained to a reduction of environmental

reserves for foreign sites that had not been reviewed for more than five years.

The adjustment added $25 million to operating income. Charles Williams,

WMI’s vice president of environmental engineering, testified that typically the

company looked at the reserves quarterly, and that five years was a “very long

period of time to us.” This was a “special case and something that probably

would not repeat itself.” 

The SEC argued to the jury that these three categories of accounting

adjustments should have been disclosed as nonrecurring in the first quarter

Form 10-Q. 

On August 3, 1999, WMI issued another press release:

An ongoing review, with our independent auditors, is being made of

the recording in the first quarter of 1999 of remedial reserves for

landfills and other assets managed as part of the International
No. 07-20455

9

operating unit and by the Eastern Area of the Company’s North

American operations, and of changes made in the residual values of

landfills formerly managed by Whellabrator Technologies, Inc. This

review may demonstrate that approximately $95 million ($0.09

diluted EPS) of non-recurring pretax income items were included in

operating income (as reported and as adjusted) for the quarter

ended March 31, 1999. The results of this review will be discussed

in the Company’s August 16, 1999 filings with the SEC. Depending

on the outcome of the review, the Company may restate its Form

10-Q for the period ended March 31, 1999.

The adjustments identified on Exhibit 92 and discussed above were then

reviewed by AA. The results of the investigation were reported in an August 16,

1999 press release and in WMI’s second quarter Form 10-Q, which disclosed that

WMI overstated its first quarter income by $30.2 million, slightly less than the

total amount of overstated income identified by AA in the PAJEs. In addition,

the MD&A stated that “[f]or the six months ending June 30, 1999, operating

costs and expenses were favorably impacted by $58 million in the three months

ended March 31, 1999 attributable to downward revisions in remediation

liabilities to certain of the Company’s operations.” Of this $58 million, $23

million was “attributable to revisions of reserves associated with the Company’s

Eastern Area” and $35 million was “attributable to revisions of remediation

liabilities associated with the Company’s international operations.” 

The SEC sued Snyder claiming that WMI’s first quarter Form 10-Q

mistated WMI’s income and failed to disclose a material amount of nonrecurring

adjustments, in violation of section 10(b) of the Securities Exchange Act of 1934

(“Exchange Act”) and SEC Rule 10b-5, and that he aided and abetted WMI’s

filing of a materially false and misleading Form 10-Q for the first quarter of

1999, in violation of Section 20(e) of the Exchange Act. The SEC also alleged

that Snyder committed insider trading in violation of Section 17(a) of the

Securities Act of 1933, Section 10(b) of the Exchange Act, and SEC Rule 10b-5

in connection with two sales of WMI stock that occurred after he signed and filed
No. 07-20455

10

the materially misleading first quarter Form 10-Q. Snyder argued to the jury

that he did not act with scienter because three outside accountants believed the

disclosures in the Form 10-Q were adequate.

After a four week trial, the jury found that Snyder filed a materially false

and misleading Form 10-Q and that he aided and abetted WMI’s filing of a

materially false and misleading Form 10-Q. The jury also found that Snyder

committed insider trading when he sold WMI stock on May 17, 1999 and on June

9, 1999. After the verdict, Snyder moved for judgment as a matter of law,

contending that reasonable jurors could not have reached those verdicts based

on the evidence presented. The district court denied Snyder’s motion, finding

that the record contained sufficient evidence to support the jury verdicts and

emphasizing that the court’s role was not to make credibility determinations or

weigh the evidence. 

Snyder now appeals the final judgment entered against him.

II. DISCUSSION

Snyder argues that there was no evidence supporting the jury’s finding of

scienter and requests this court to reverse and render judgment in his favor on

all claims. In the alternative, Snyder argues that a new trial is required because

of erroneous jury instructions. We address each issue in turn.

A. Sufficiency of the Evidence

We first address whether the SEC produced sufficient evidence to support

the jury’s finding that Snyder acted with scienter. Snyder argues his motion for

judgment as a matter of law should have been granted because the accounting

errors identified by AA before theForm 10-Q was filed were immaterial and both

he and AA reasonably believed thatthe other adjustments identified by the SEC

were recurring and did not need to be disclosed. We hold that there was

sufficient evidence to supportthe jury’s findings that Snyder acted with scienter.
No. 07-20455

11

This court reviews the denial of a motion for judgment as a matter of law

de novo. Evans v. Ford Motor Co., 484 F.3d 329, 334 (5th Cir. 2007). “‘Although

our review is de novo, . . . our standard of review with respect to a jury verdict

is especially deferential.’” Id. (alteration in original) (quoting Flowers v. S. Reg’l

Physician Servs. Inc., 247 F.3d 229, 235 (5th Cir. 2001)). We review “all of the

evidence in the record, drawing all reasonable inferences in favor of the

nonmoving party.” Id. This court “‘may not make credibility determinations or

weigh the evidence.’” Id. (quoting Reeves v. Sanderson Plumbing Prods., Inc.,

530 U.S. 133, 150 (2000)). Thus, in reviewing the record as a whole, the court

“must disregard all evidence favorable to the moving party that the jury is not

required to believe.” Id. “[J]udgment as a matter of law should only be granted

if ‘the facts and inferences point so strongly and overwhelmingly in the movant’s

favor that reasonable jurors could not reach a contrary conclusion.’” Coffel v.

Stryker Corp., 284 F.3d 625, 630 (5th Cir. 2002) (quoting Flowers, 247 F.3d at

235). 

In order to establish that Snyder is liable, either for filing a false or

misleading Form 10-Q, or for aiding and abetting WMI’s filing of the Form 10-Q,

the SEC had to show that he acted with scienter, “‘a mental state embracing

intent to deceive, manipulate, or defraud.’” Goldstein v. MCI Worldcom, 340

F.3d 238, 245 (5th Cir. 2003) (quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185,

193 n.12 (1976)). The scienter element can be satisfied by a showing of “severe

recklessness.” Id. This court has repeated the definition of severe recklessness

for this circuit on several occasions: 

those highly unreasonable omissions or misrepresentations that

involve not merely simple or even inexcusable negligence, but an

extreme departure from the standards of ordinary care, and that

present a danger of misleading buyers or sellers which is either

known to the defendant or is so obvious that the defendant must

have been aware of it.
No. 07-20455

12

Id. at 245-46 (internal quotation marks omitted); Abrams v. Baker Hughes Inc.,

292 F.3d 424, 430 (5th Cir. 2002); Nathenson v. Zonagen Inc., 267 F.3d 400, 408

(5th Cir. 2001); see also Broad v. Rockwell Int’l Corp., 642 F.2d 929, 961 (5th Cir.

1981) (en banc). Snyder contends that this Court should apply a “no reasonable

accountant”formulation ofthe severe recklessness standard, which was adopted

by the court in SEC v. Price Waterhouse, 797 F. Supp. 1217, 1240 (S.D.N.Y.

1992). We decline to adopt an explicit “no reasonable accountant” requirement

and, instead, apply this court’s well established definition of severe recklessness.

Snyder is correct that the SEC cannot satisfy its burden of proving scienter

by demonstrating that he was aware of some accounting errors that, with the

benefit of hindsight, turned out to be significant. The SEC had the burden of

proving that Snyder acted with scienter with regard to both the truth and the

materiality of the allegedly misleading statements. See Fine v. Am. Solar King

Corp., 919 F.2d 290, 297 (5th Cir. 1990) (“[T]he mere publication of inaccurate

accounting figures, or a failure to follow GAAP, without more, does not establish

scienter. The party must know that it is publishing materially false information,

or the party must be severely reckless in publishing such information.”). 

Snyder argues that the SEC proved only that he was aware of $40.3

million of improperly reported income identified by AA in the PAJEs, which he

contends was not clearly material. Snyder contends there was no evidence that

he was severely reckless in failing to disclose the other $61 million of accounting

adjustments that the SEC argued were nonrecurring. Without the allegedly

nonrecurring accounting adjustments, Snyder claims there is no evidence that

he acted with severe recklessness with regard to a material amount of WMI’s

income. 

Even assuming that the improperly reported income identified by AA in

the PAJEs was immaterial by itself, there was sufficient evidence to supportthe

jury’s findings. The SEC offered abundant evidence that Snyder acted with
No. 07-20455

1 Many of Snyder’s arguments appear to be belated attempts to challenge the

admissibility of Hoffman’s opinions under FED. R. EVID. 702 and Daubert v. Merrell Dow

Pharms., Inc., 509 U.S. 579 (1993), rather than challenges to the sufficiency of the evidence.

Because Snyder did not object to the admissibility of Hoffman’s testimony concerning the

accounting practices at issue, that issue has been forfeited. Foradori v. Harris, 523 F.3d 477,

508 (5th Cir. 2008). Nonetheless, this court looks “to the basis of the expert’s opinion, and not

the bare opinion alone,” to determine whether there is legally sufficient evidence to support a

jury verdict. Guile v. United States, 422 F.3d 221, 227 (5th Cir. 2005) (internal quotation

marks omitted); see also Stevenson v. E.I. DuPont De Nemours & Co., 327 F.3d 400, 406 (5th

Cir. 2003). Our review of expert testimony for sufficiency of the evidence is not as rigorous as

it would be under a properly preserved challenge to the admissibility of the testimony under

Daubert. See In re Joint E. & S. Dist. Asbestos Litig., 52 F.3d 1124, 1132-33 (2d Cir. 1995).

In the present case, Hoffman’s testimony was clearly supported by the evidence. 

13

severe recklessness in not disclosing the accounting adjustments alleged to have

been nonrecurring. In the aggregate, the accounting errors identified by AA in

the PAJEs and the alleged nonrecurring accounting adjustments that were not

disclosed total more than $101 million. This total amount was obviously

material, which Snyder does not dispute. 

The SEC’s evidence of scienter consisted primarily ofthe experttestimony

of Sally L. Hoffman, a Certified Public Accountant and Certified Fraud

Examiner, as well as a number of documents to which Hoffman referred.

Hoffman opined that the nondisclosure of certain adjustments to income in the

footnotes and MD&A section of WMI’s Form 10-Q for the first quarter of 1999

made the Form 10-Q materially misleading. Hoffman testified that, to someone

with Snyder’s training, education, information, and experience with WMI, it

would have been obvious that not disclosing these adjustments in the Form 10-Q

rendered it materially misleading. Although Snyder asserts that Hoffman’s

opinion was conclusional,1 Hoffman testified as to the particular accounting

rules that required disclosure of certain adjustments in WMI’s Form 10-Q, the

nature of these adjustments, the reasons why the applicable rules required

disclosure of these specific adjustments, and how the nondisclosure of these

adjustments rendered the Form 10-Q false and misleading. 
No. 07-20455

2 Although we discuss Snyder’s attacks on the evidence document by document, as the

parties have in their briefs, we note that our decision is based on the evidence as a whole and

is not a decision concerning the validity of each independent piece of evidence. United States

v. Garza, 990 F.2d 171, 175 (5th Cir. 1993). 

14

SEC’s Exhibit 82A is one example of information known to Snyder prior

to the filing of the Form 10-Q, and consists of an April 26, 1999 memorandum

sentto Snyder and other WMI officers.2It contains a list of “closure/post closure

adjustments” for WMI’s eastern area, totaling approximately $47.3 million in the

aggregate. Hoffman testified that changes in closure and post-closure costs are

types of adjustments that are not representative of WMI’s regular business, and

that the adjustments listed in Exhibit 82A were notable because they all

increased WMI’s income. Hoffman testified that this exhibit would have raised

a red flag for Snyder that WMI’s income from the eastern area included

approximately $47.3 million in adjustments that were not representative of

WMI’s usual business, and which, when aggregated with other adjustments,

would need to be disclosed in the Form 10-Q. 

Snyder argues that Hoffman’s testimony relating to Exhibit 82A is based

upon erroneous and conclusional assumptions. He claims that Hoffman based

her conclusion that the $47.3 million consisted of adjustments to closure and

post-closure costs on the fact that the list was titled “Closure/Post Closure

Adjustments,” rather than on her own research into the nature of WMI’s eastern

area adjustments. Snyder asserts that the eastern area adjustments were

adjustments to remediation reserves appropriately accounted for as income in

the first quarter. Snyder also asserts that Hoffman’s testimony is illogical

because, if Hoffman were correct that the adjustments shown in Exhibit 82A

were adjustments to closure/post-closure costs, then AA should have listed all

$47.3 million asPAJEs. Snyder further urges that Hoffman’s testimony relating

to Exhibit 82A is contradicted by AA’s conclusion that $23 million of the eastern

area adjustments were properly made to WMI’s environmental remediation
No. 07-20455

15

reserves. Each of these arguments goes to the credibility and weight to be

accorded Hoffman’s testimony, not to the sufficiency of the evidence. See Coffel,

284 F.3d at 631. That Hoffman based her opinion on the assumption that

Exhibit 82A meant what it said is not a basis for reversal. 

In addition to Exhibit 82A, Hoffman discussed the SEC’s Exhibit 88,

another schedule of eastern area adjustments, this time totaling approximately

$70 million. Hoffman testified that the descriptions of the items on this schedule

as “correction[s] of error” and the terms “correct” and “correcting” show that

these items were corrections of error, which, when aggregated with other

adjustments, were required to be disclosed. Hoffman opined that Snyder’s

knowledge of these “correction” entries should have made it obvious to him that

the adjustments had to be disclosed in the Form 10-Q. 

Snyder contends that Hoffman’s characterization of all of the items as

corrections of error mistakenly rests upon the description of only one item

(relating to the Vickery Deepwell landfill) as a “correction of error.” Snyder

asserts that Hoffman’s characterization of the adjustments is contradicted by

AA’s conclusions that almost all of the eastern area adjustments related to

remediation reserves and would not require disclosure. 

Hoffman’s testimony and the exhibit itself constitute circumstantial

evidence that Snyder knew that at least some of the adjustments should be

characterized as corrections of error, which should have been disclosed in the

Form 10-Q if material when aggregated with other adjustments. Snyder’s

remaining arguments again go to the credibility and weight of Hoffman’s

testimony and do not warrant reversal. 

Additionally, Hoffman testified that the SEC’s Exhibit 92, a list of

“Nonrecurring adjustments” prepared by Snyder after the filing of the Form

10-Q, showed that Snyder was aware that several adjustments to WMI’s income

were not representative of WMI’s ongoing business, and thatthese adjustments,
No. 07-20455

16

when aggregated, were material to WMI’s first quarter 1999 income. Hoffman

testified that each of the adjustments should have been disclosed because they

were nonrecurring, regardless of whether the adjustments were proper.

According to Hoffman’s testimony, it would have been obvious to an accountant

with Snyder’s training that these adjustments, which were not representative

of WMI’s regular business, were material in the aggregate and were required to

be disclosed in the Form 10-Q. 

Snyder contends thatthere is no evidence that he ever believed that items

five through seven listed in Exhibit 92 were unusual items that were required

to be disclosed, or that the failure to disclose these items was an extreme

departure from the ordinary standard of care. This argument ignores the

circumstantial evidence produced at trial. Snyder personally typed Exhibit 92,

including the title “Nonrecurring adjustments.” Although Snyder argues that

Exhibit 92 was really just a list of things he thought the board might want to

investigate, the jury was free to disregard his explanation and believe that

Snyder meant what he wrote when he described the adjustments as

“nonrecurring.” Hoffman testified at length as to each item listed in Exhibit 92,

reaching the conclusion that each item was not representative of WMI’s usual

and ongoing business. Accountants at AA also provided testimony that the

adjustments listed on Exhibit 92 were not representative of WMI’s ongoing

business and should have been disclosed. 

In addition to the documents discussed above,the SEC offered substantial

evidence that Snyder was motivated to mislead WMI investors into believing

that WMI was performing at analysts’ expectations, and that he thought

accounting adjustments like those discussed in Exhibit 92 could help make up

for anticipated shortfalls. For example, the SEC introduced Snyder’s

handwritten notes from an April 26, 1999 discussion with WMI’s area vice

presidents and other officers as evidence of his awareness that the first quarter
No. 07-20455

17

adjustments had boosted WMI’s earnings. On the final page of the notes, Snyder

wrote that “we need operating results, not just JEs,” which he testified referred

to journal entries, like the adjustments listed in Exhibit 92. Similarly, the SEC

referred to Snyder’s discussion of the anticipated shortfall and a notation of

“Acctg Solutions?” in the margin of the page. 

To rebut the SEC’s evidence, Snyder points to the testimony of AA

accountants John King, Steve Brown, and Phil Wedemeyer, who testified that

they did not believe WMI’s Form 10-Q was materially false or misleading. As

part of their engagement with WMI, the AA accountants read the entire first

quarter Form 10-Q before it was filed, including the financial statements,

footnotes, and the MD&A. After this review, AA issued its Report of

Independent Public Accountants, which stated that, “[b]ased on our review, we

are not aware of any material modifications that should be made to the financial

statements . . . for them to be in conformity with generally accepted accounting

principles.” 

Snyder argues that AA’s approval of the Form 10-Q is fatal to the SEC’s

case because it demonstrates that reasonable accountants could find that the

Form 10-Q was not materially misleading, and therefore, that Snyder could not

have acted with severe recklessness. We disagree. AA’s review of the Form 10-Q

was limited and involved no analysis of whether all required disclosures had

been made in the MD&A section. In addition, the jury also could have found the

testimony of AA’s accountants to be less credible than the evidence offered by the

SEC, or it could have concluded that AA was itself severely reckless. 

Additionally, Snyder’s contentions that AA later concluded that some of

the adjustments were “appropriately accounted for as income in the first

quarter” and “agreed with WMI’s treatment of Vickery Deepwell as an

adjustmentto remediation reserves properly taken as income in the first quarter

1999” may indicate that AA agreed that the adjustments could be included in
No. 07-20455

18

WMI’s income, but they say nothing about whether the adjustments needed to

be disclosed as nonrecurring. The obligation to disclose nonrecurring

adjustments presupposes that the adjustments were appropriately included in

income in the first place. 

Snyder also relies on WMI’s subsequent revision of the first quarter

numbers. He asserts that the revised numbers reduced income by only a net of

$30.2 million, an immaterial amount. He says the company determined that all

the other adjustments, including the $58 million in adjustments to the eastern

area reserves and the international environmental covenant, were “normal

recurring adjustments.” Snynder ignores that the company also moved another

$14 million to “merger costs,” which meant they were effectively reclassified as

nonrecurring. In addition, the jury was free to disregard WMI’s description of

the adjustments. It certainly is possible that the jury did not view WMI’s

description ofthe adjustments as credible, particularly because WMI ultimately

decided that it needed to disclose the $58 million in adjustments despite the fact

that it described them as “normal” and “recurring.” 

Bearing in mind our obligation to draw all reasonable inferences in favor

of the jury’s verdict, AA’s role in the preparation of WMI’s Form 10-Q and AA’s

lack of disagreement with Snyder do not mandate a judgment in Snyder’s favor.

Accordingly, we hold that the SEC presented legally sufficient evidence to

support the jury’s findings that Snyder acted with the requisite scienter in filing

the first quarter Form 10-Q.

Scienter is also an element of an insider trading case. See Dirks v. SEC,

463 U.S. 646, 664 n.23 (1983). Snyder argues that because there is no evidence

that he acted with scienter in filing the Form 10-Q, then he also did not have

scienter with regards to his sales of WMI stock. As discussed above, we hold

that there was sufficient evidence that Snyder acted with scienter in filing the

first quarter Form 10-Q. When drawing all reasonable inferences in favor of the
No. 07-20455

19

SEC, the jury could have concluded that Snyder sold WMI stock with knowledge

thatthe first quarter Form 10-Q materially inflated WMI’s income and earnings.

In addition to knowing that the income reported in the Form 10-Q was

inflated and included undisclosed nonrecurring adjustments, Snyder was also

aware from the April 26, 1999 call that four of the five area vice presidents were

predicting that they would miss their earnings targets in the second quarter.

Snyder’s notes calculated an eleven cent per share shortfall, which represented

a thirteen percent drop from the company’s target of eighty-two cents for the

second quarter. Snyder attended a May 3, 1999 meeting during which similar

projections were discussed just two weeks before his May 17, 1999 sale of WMI

stock. 

Snyder argues that the projections were not final and cannot form the

basis of an insider trading claim, relying on two securities class actions from the

Seventh Circuit, In re HealthCare Compare Corp. Sec. Litigation, 75 F.3d 276

(7th Cir. 1996) and Searls v. Glasser, 64 F.3d 1061 (7th Cir. 1995). In those

cases, the court considered whether tentative estimates and loose predictions

were sufficiently certain and reliable to require immediate disclosure by the

company. In re HealthCare, 75 F.3d at 282; Searls, 64 F.3d at 1067. Neither

case concerned insider trading. 

The cases cited by Snyder are inapposite because they do not excuse his

failure to disclose the misstated income and nonrecurring adjustments contained

in the first quarter Form 10-Q, which was final when he sold WMI stock. In

addition, this court has held that forecasts may be material. SEC v. Fox, 855

F.2d 247, 253 (5th Cir. 1988). As we held in Fox, “the determination of

materiality ‘requires delicate assessments of the inferences a ‘reasonable

shareholder’ would draw from a given set of facts and the significance of those

inferences to him, and these assessments are peculiarly ones for the trier of

fact.’” Id. (quoting SEC v. Mize, 615 F.2d 1046, 1053 (5th Cir. 1980). We held
No. 07-20455

20

in Fox that the fact that insiders had access to certain forecasts “would have

supported a finding of materiality.” Id. In the present case, the jury was

entitled to find thatthe predictions of significant shortfalls in the second quarter

was information that a reasonable investor would have found important.

Snyder also argues that he could not have acted with scienter regarding

his sale of WMI stock on June 9, 1999, although he attended a meeting to discuss

WMI’s financial performance the same day. Snyder sold 2,700 shares of WMI

stock, but he exercised 8,700 options to purchase WMI stock, for a net purchase

of 6,000 shares. Although his net purchase is some evidence tending to show

that he did not sell stock on June 9, 1999 on the basis of material, nonpublic

information about WMI’s negative financial performance, the facts and

inferences do not point so strongly and overwhelmingly in Snyder’s favor that

reasonable jurors could not reach a contrary conclusion. For these same reasons,

we also hold that the verdict was not against the great weight of the evidence.

See Shows v. Jamison Bedding, Inc., 671 F.2d 927, 931 (5th Cir. 1982)(To grant

a new trial, the district judge “must be convinced that the verdict is against the

great weight of the evidence.”). 

B. Jury Instructions

Snyder argues that the district court erred by instructing the jury that it

was his burden to prove certain “elements” of a reliance-on-accountants defense

before the jury could consider his reliance on AA to negate scienter. The SEC,

citing authority from two other circuits, asserts that the district court’s

instruction was appropriate. Because the district court’s instruction was an

incorrect statement ofthe law in this circuit and could have affected the outcome

of the case, we reverse and remand for a new trial. 

District courts enjoy substantial latitude in formulating jury instructions.

United States v. Jobe, 101 F.3d 1046, 1059 (5th Cir. 1996). This court applies a

two-part test in considering a challenge to the district court’s jury instructions.
No. 07-20455

21

“The party challenging the instructions must first ‘demonstrate that the charge

as a whole creates a substantial and ineradicable doubt whether the jury has

been properly guided in its deliberations.’” Navigant Consulting, Inc. v.

Wilkinson, 508 F.3d 277, 293 (5th Cir. 2007) (quoting Russell v. Plano Bank &

Trust, 130 F.3d 715, 719 (5th Cir. 1997)). “Second, even where a jury instruction

was erroneous, ‘we will not reverse if we determine, based upon the entire

record,thatthe challenged instruction could not have affected the outcome of the

case.’” Id. 

A centraltheme of Snyder’s defense was AA’s knowledge ofthe accounting

adjustments and Snyder’s purported reliance on AA’s review of WMI’s financial

statements for compliance with GAAP. Snyder argued that if it was not obvious

to AA that disclosure of the adjustments was required in the footnotes, it could

not have been obvious to Snyder.

The district court instructed the jury as follows:

In this case, Mr. Snyder has presented evidence that, in connection

with WMI’s preparation of the Form 10-Q for the first quarter 1999,

he relied on the advice of other accountants. A good faith reliance

on an accountant’s advice is not a defense to securities fraud. It

simply represents possible evidence of an absence of any intent to

defraud.

Mr. Snyder was only entitled to rely on an accountant’s advice if he

establishes each of the following facts by a preponderance of the

evidence (note that it is Mr. Snyder who has the burden of proof on

these elements):

1. That Mr. Snyder informed the accountants of all

relevant facts;

2. That Mr. Snyder did not misrepresent any relevant

facts to the accountants;

3. That the accountants were asked to give a specific

opinion about the particular point that Mr. Snyder

claims he relied on;
No. 07-20455

3 Although we conclude that Snyder preserved error, an issue not raised by the SEC in

its brief, we note that this was a very close case. Snyder never specifically stated that the

district court’s instruction improperly shifted the burden of proof. Under FED. R. CIV. P. 51, a

party must object to a proposed jury instruction, “stating distinctly the matter objected to and

the grounds for the objection.” FED. R. CIV. P. 51(c)(1). The “‘objection must be sufficiently

specific to bring into focus the precise nature of the alleged error.’” Navigant Consulting, 508

F.3d at 294 (quoting Delancey v. Motichek Towing Serv., Inc., 427 F.2d 897, 900 (5th

Cir.1970)). Snyder stated in his written objection that he was relying on AA only to rebut the

testimony of Hoffman. Snyder raised similar objections during the charging conference in

response to the SEC’s contention that Snyder had the burden of proof. Given the context of

Snyder’s objection and the fact that he directed the court to the appropriate legal authority,

we hold that the assertion that he was not raising an affirmative defense was sufficiently

specific to bring into focus the nature of the alleged error. 

22

4. That the accountants actually gave a specific opinion

about the particular point that Mr. Snyder claims he

relied on.

Snyder objected to the instruction, pointing out that he had “never

asserted this narrow, affirmative defense” and that it was improper to require

him to adduce specific proof that he asked for and received from AA a specific

opinion on the particular point.3 Snyder offered an alternative instruction that

stated as follows:

A good faith reliance on an accountant’s advice is not a defense to

securities fraud. It simply represents possible evidence of an

absence of any intent to defraud. To decide whether any such

reliance was in good faith, you may consider whether Mr. Snyder

sought the advice of a competent accountant concerning the

material facts allegedly omitted or misrepresented, whether Mr.

Snyder gave the accountant all the relevant facts known to him at

the time, and whether Mr. Snyder received an opinion from his

accountant that he could reasonably rely upon.

The district court’s instruction was in error. In United States v. Peterson,

101 F.3d 375 (5th Cir. 1996), this court recognized that reliance on counsel’s

advice is not an affirmative defense. Id. at 381. Rather, “[i]t is simply a means

of demonstrating good faith and represents possible evidence of an absence of

any intent to defraud.” Id. In so holding, the court approved of an instruction

that provided as follows:
No. 07-20455

23

Reliance on the advice of an attorney may constitute good faith. To

decide whether such reliance was in good faith, you may consider

whether the Defendant sought the advice of a competent attorney

concerning the material fact allegedly omitted or misrepresented,

whether the Defendant gave his attorney all the relevant facts

known to him at the time, whether the Defendant received an

opinion from his attorney, whether the Defendant believed the

opinion was given in good faith and whether the defendant

reasonably followed the opinion.

Id. at 381 n.5 (emphasis omitted). 

We find no meaningful distinction between the reliance on counsel and

reliance on an accountant. Both defensive theories provide an explanation of the

defendant’s conduct tending to negate the element of scienter. Under both

theories, the jury is free to decide for itself whether the facts demonstrate that

the defendant acted with scienter in light of the advice he received from his

attorneys or accountants. The defendant does not have the burden of proving

any “elements” of the defense before the jury can weigh the defendant’s theory

of reliance. However, a district court may suggest relevant factors that the jury

may consider in its deliberations, such as the instruction approved in Peterson.

The cases cited by the SEC do not support placing the burden on Snyder

before the jury may consider his reliance on outside accountants. In United

States v. Duncan, 850 F.2d 1104 (6th Cir. 1988), overruled on other grounds by

Schad v. Arizona, 501 U.S. 624 (1991), the court recognized two elements that

a defendant must show before he is entitled to a jury instruction concerning

reliance on accountants, but the court did not shift the burden of proof to the

defendant in the jury instruction itself. Id. at 1116. The issue was whether the

district court erred in providing no instruction to the jury concerning advice of

counsel. Id. The Sixth Circuit held that the district court did err in failing to

provide an instruction. Id. at 1118-19. 
No. 07-20455

4 The parties do not raise, and we do not reach, the issue of whether a reliance on

accountant instruction was required in the present case. 

24

The other case cited by the SEC, SEC v. Savoy Industries, Inc., 665 F.2d

1310 (D.C. Cir. 1981), did suggest in a footnote that the defendant bears the

burden of proof and did list elements similar to the ones proposed by the SEC

and adopted by the district court. 665 F.2d at 1315 n.28. But that case has since

been repudiated by the same court that authored it. See Howard v. SEC, 376

F.3d 1136, 1147 (D.C. Cir. 2004) (“Despite dicta in [Savoy], reliance on the advice

of counsel need not be a formal defense; it is simply evidence of good faith, a

relevant consideration in evaluating a defendant’s scienter.”).

The SEC also suggests that Snyder cannot complain of the reliance on

accountant instruction given to the jury because he requested a reliance on

accountant instruction. The fact that Snyder asked for some instruction

concerning reliance on accountants does not mean that the district court was

free to shift the burden of proof to him.4

The erroneous instruction could have affected the outcome of this case.

Snyder sought to rebut Hoffman’s testimony that the need to disclose the first

quarter adjustments was obvious and to support his defense that other

reasonable accountants agreed with WMI’s treatment of the first quarter

adjustments. The court’s instruction may have misled the jury by suggesting

that the conclusions of the AA accountants were not relevant to scienter unless

Snyder proved by a preponderance of the evidence that he specifically sought

and received an express opinion from AA concerning the adjustments at issue.

Thus, the jury may have rejected Snyder’s theory of defense based on his failure

to meet a burden of proof that was not his. 

Although we reverse and remand for a new trial, we also address the

remaining jury instruction issues raised by Snyder for reasons of economy. See

United States v. Wright, 496 F.3d 371, 375 (5th Cir. 2007).
No. 07-20455

5 We do not reach the issue of whether such an instruction was necessary.

25

Snyder argues that the district court improperly instructed the jury that

the first quarter Form 10-Q was incorrect when it instructed the jury that it

could not consider the second quarter Form 10-Q for purposes of Snyder’s

scienter. Snyder relied on the second quarter Form 10-Q as part of his defense,

but he requested that the district court instruct the jury that it could not

consider the second quarter revisions as evidence that (1) Snyder acted with

scienter in the first quarter, or (2) WMI’s first quarter Form 10-Q was materially

misleading. The district court instructed the jury as follows:

The parties agree that in August of 1999, WMI made certain

revisions to its first quarter 1999 financial statements, including

some additional disclosures regarding its first quarter results. You

may not consider these disclosures as evidence that Mr. Snyder

knew or recklessly disregarded that the original Form 10-Q was

incorrect at the time that it was filed with the SEC.

The instruction given by the district court was not a clear abuse of

discretion. The instruction informs the jury that it could not consider the second

quarter Form 10-Q as evidence of scienter, as requested by Snyder.5 Snyder

argues thatthe instruction erroneously instructed the jury thatthe first quarter

Form 10-Q was incorrect, but this does not create any doubt that the jury was

properly guided in its deliberations. All the parties agreed that the first quarter

Form 10-Q contained inaccuracies; this fact was never in dispute. The only

issues were of Snyder’s scienter and the need to disclose the alleged

nonrecurring adjustments. In addition, the instruction does not state that the

first quarter Form 10-Q was incorrect but only states “[y]ou may not consider

these disclosures as evidence that Mr. Snyder knew or recklessly disregarded

that the original Form 10-Q was incorrect.” The question of whether the Form

10-Q was incorrect was left for the jury to decide. 
No. 07-20455

26

Snyder also argues that the district court erred by failing to charge the

jury on the “no reasonable accountant” standard. Although Snyder asserts in his

brief that the district court “declined, over Snyder’s objections to instruct the

jury on the ‘no reasonable accountant’ standard,” Snyder’s draft proposed jury

instructions and objections to the district court’s instructions contain no such

objection. Snyder waived this claim by failing to object to the jury instruction

as required by FED. R. CIV.P.51(c). Even if Snyder had not waived his objection,

the district court did not clearly abuse its discretion by instructing the jury on

this circuit’s well established “severe recklessness” standard.

Because we reverse the district court’s judgment on the basis of an

improper jury instruction, we do not reach Snyder’s argument that the district

court abused its discretion in ordering disgorgement.

III. CONCLUSION

For the reasons discussed above, we REVERSE and REMAND for a new

trial.