UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF FLORIDA 

Panama City Division 

ROBERT J. MEYER, Individually and on 

Behalf of All Others Similarly Situated, 

 Plaintiff, 

 v. 

THE ST. JOE COMPANY, et al., 

 Defendants. 

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Civil Action No. 5:11-cv-00027-RS-EMT 

FIRST AMENDED CONSOLIDATED 

CLASS ACTION COMPLAINT FOR 

VIOLATIONS OF FEDERAL 

SECURITIES LAWS 

JURY TRIAL DEMANDED

 

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TABLE OF CONTENTS

I. SUMMARY OF THE ACTION..........................................................................................1 

II. JURISDICTION AND VENUE ..........................................................................................6 

III. THE PARTIES.....................................................................................................................7 

A. Lead Plaintiff ...........................................................................................................7 

B. Defendants ...............................................................................................................7 

1. The Company...............................................................................................7 

2. Individual Defendants..................................................................................7 

C. Control Person Allegations......................................................................................9 

IV. SUBSTANTIVE ALLEGATIONS ...................................................................................11 

A. The Company and Its Business..............................................................................11 

B. St. Joe’s Real Estate Development Was a Core Operation During the Class 

Period .....................................................................................................................12 

C. The Drastic Downturn in the Florida Residential Real Estate Market 

Negatively Impacted St. Joe’s Core Business........................................................13 

1. The Real Estate Crash................................................................................13 

2. The Real Estate Crash Caused the Company’s Revenues to Decline 

and Losses to Increase Dramatically..........................................................15 

3. St. Joe Halts Further Development of Its Projects.....................................16 

D. The Values of St. Joe’s Residential Real Estate Development Projects 

Were Overstated During the Class Period .............................................................17 

1. RiverTown .................................................................................................18 

2. The WaterSound Developments ................................................................23 

3. SummerCamp Beach .................................................................................26 

4. WindMark Beach.......................................................................................30 

5. Victoria Park ..............................................................................................33 

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6. Seven Shores..............................................................................................34 

7. SouthWood ................................................................................................34 

V. DEFENDANTS FAILED TO COMPLY WITH SEC REGULATIONS AND 

GAAP.................................................................................................................................35 

A. Defendants Failed to Comply With Regulation S-K, Item 303.............................35 

B. Defendants Failed to Comply With Regulation S-X and GAAP...........................38 

C. Defendants’ GAAP Violations Caused Their Asset Values to Be 

Materially Overstated During the Class Period .....................................................40 

1. Fair Value Analysis....................................................................................41 

2. Assets Substantially Complete and Ready for Sale ...................................43 

3. Assets Under Development........................................................................45 

a. Step One – Evaluating recoverability: ...........................................45 

b. Step Two – Performing recoverability test to determine 

impairment:....................................................................................46 

c. Step Three – Recording the impairment:.......................................47 

VI. SCIENTER ALLEGATIONS............................................................................................51 

A. The Individual Defendants Were Heavily Involved In Valuing the 

Company’s Real Estate, a Core Operation ............................................................52 

B. The Individual Defendants Participated in Quarterly Meetings and Weekly 

Calls Regarding the Company’s Development Projects........................................54 

C. Defendants Knew of the Significant Impairments Related to the 

Company’s Core Operation ...................................................................................55 

D. The February 2008 Stock Offering........................................................................56 

E. Defendants Avoided Taking Necessary Impairments to Comply with Debt 

Covenants...............................................................................................................57 

F. Defendants Failed to Comply with Disclosure Requirements...............................59 

G. The Individual Defendants Were Highly Compensated During the Class 

Period .....................................................................................................................62 

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VII. DEFENDANTS’ FALSE AND MISLEADING STATEMENTS AND 

OMISSIONS......................................................................................................................63 

A. Fourth Quarter and Full Year 2007 Financial Results...........................................63 

B. First Quarter 2008 Financial Results .....................................................................68 

C. Second Quarter 2008 Financial Results.................................................................70 

D. Third Quarter 2008 Financial Results....................................................................73 

E. Fourth Quarter And Full Year 2008 Financial Results..........................................75 

F. First Quarter 2009 Financial Results .....................................................................79 

G. Second Quarter 2009 Financial Results.................................................................81 

H. Third Quarter 2009 Financial Results....................................................................85 

I. Fourth Quarter and Full Year 2009 Financial Results...........................................88 

J. First Quarter 2010 Financial Results .....................................................................92 

K. Second Quarter 2010 Financial Results.................................................................94 

L. Third Quarter 2010 Financial Results....................................................................96 

M. Fourth Quarter and Full Year 2010 Financial Results...........................................98 

N. First Quarter 2011 Financial Results ...................................................................102 

VIII. THE TRUTH BEGINS TO EMERGE ............................................................................106 

1. October 13, 2010 - Einhorn’s “Field of Schemes Presentation” .............106 

2. January 10, 2011 - The SEC Inquiry .......................................................111 

3. July 1, 2011 - The Company Announces that the SEC Investigation 

Has Become Formal.................................................................................115 

IX. NO SAFE HARBOR .......................................................................................................116 

X. APPLICABILITY OF PRESUMPTION OF RELIANCE UNDER THE 

AFFILIATED UTE DOCTRINE AND/OR, IN THE ALTERNATIVE, THE 

FRAUD ON THE MARKET DOCTRINE .....................................................................116 

XI. LOSS CAUSATION........................................................................................................118 

XII. PLAINTIFF’S CLASS ACTION ALLEGATIONS........................................................124 

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COUNT I .........................................................................................................................125 

COUNT II ........................................................................................................................129 

XIII. PRAYER FOR RELIEF ..................................................................................................130 

XIV. JURY TRIAL DEMANDED...........................................................................................130 

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 Lead Plaintiff City of Southfield Fire & Police Retirement System (“Lead Plaintiff” or 

“Plaintiff”), by its undersigned attorneys, hereby alleges the following against The St. Joe Company 

(“St. Joe” or the “Company”) and certain of its officers. The allegations herein are based on 

Plaintiff’s personal knowledge as to its own acts and on information and belief as to all other 

matters, such information and belief having been informed by the investigation conducted by and 

under the supervision of its counsel, which included interviews of former employees of St. Joe and 

other persons with knowledge of the matters alleged herein (some of whom have provided 

information in confidence; these confidential witnesses (“CWs”) will be identified herein by number 

(CW1, CW2, etc.)), review and analysis of publicly available information, including United States 

Securities and Exchange Commission (“SEC”) filings by St. Joe, as well as regulatory filings and 

reports, securities analysts’ reports and advisories about the Company, press releases and other 

public statements issued by the Company, media reports about the Company, and consultations with 

experts. Lead Plaintiff believes that substantial additional evidentiary support will exist for the 

allegations set forth herein after a reasonable opportunity for discovery. 

I. SUMMARY OF THE ACTION 

1. This is a federal securities class action against St. Joe and certain of its officers for 

violations of the federal securities laws. Plaintiff brings this action on behalf of itself and all 

similarly situated persons and entities that purchased St. Joe’s publicly traded securities between 

February 19, 2008 and July 1, 2011, inclusive (the purchasers being the “Class” and the time frame 

being the “Class Period”).1

 Lead Plaintiff seeks remedies under the Securities Exchange Act of 

1934, 15 U.S.C. §§78a et seq. (the “Exchange Act”). 

 

1

 The Class Period has been extended to reflect significant Company events, including an SEC 

inquiry and a formal SEC investigation into St. Joe and its officers. 

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2. St. Joe is one of the largest real estate development companies in Florida, owning 

approximately 577,000 acres of land concentrated primarily in Northwest Florida. Approximately 

405,000 acres (70%) of St. Joe’s total land holdings are within 15 miles of the coast of the Gulf of 

Mexico. St. Joe’s core business is real estate development, and the Company operates in residential 

development, commercial and industrial development and rural land sales. In addition, St. Joe owns 

significant interests in timber. 

3. For more than three years, St. Joe systematically and fraudulently misled the market 

regarding the true value of its residential real estate development projects. The Company recognized 

only marginal impairments over the Class Period (including quarters in which St. Joe booked no 

impairment at all), even though sales and sale prices of property lots in St. Joe’s real estate projects 

had plummeted, and St. Joe has dramatically reduced or halted development spending in its partially 

developed projects. By failing to take appropriate impairment charges reflecting the known (or 

reasonably knowable) true value of its development projects, St. Joe materially overstated its asset 

values and its earnings during the Class Period. 

4. Many of St. Joe’s residential real estate projects remain largely unfinished and 

undeveloped. As of 2009, one of its largest projects, RiverTown in St. Johns County, was less than 

5% developed with only 215 developed lots out of a planned 4,500. The WindMark project in Gulf 

County was only 15% developed with 224 developed lots out of a planned 1,516. Similarly, during 

the Class Period, the WaterSound and SummerCamp Beach projects in Walton and Franklin 

Counties, respectively, were both less than 50% developed. Even though only fractions of their 

biggest projects are developed, St. Joe has essentially ceased any further development, and large 

tracts of undeveloped land remain. In addition, St. Joe has had tremendous difficulty selling any of 

its developed properties, and its average sales prices for those it has sold have significantly declined. 

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5. Under the relevant accounting rules, including Generally Accepted Accounting 

Principles (“GAAP”), as explained more fully below, St. Joe must test its development projects for 

impairment when there are certain indicators of impairment such as, inter alia, a significant decrease 

in the market price of real estate properties or the ability to sell, as occurred in Florida during the 

Class Period. Indeed, St. Joe admits that these indicators were present throughout the Class Period 

since it claims to have tested its development projects for impairment every quarter during the Class 

Period. Testing for impairment is critical. Impairment charges are special, non-recurring charges on 

an asset with an overstated carrying value.2

 Thus, taking an impairment charge decreases the 

previously reported value of an asset and reduces earnings accordingly. 

6. St. Joe’s residential real estate assets fall into two categories: (1) assets substantially 

complete and ready for sale; and (2) assets under development, which were “to be held and used.” 

For assets substantially completed and “ready for sale,” St. Joe must record a loss each quarter to the 

extent the carrying value exceeded estimated fair value (minus the costs of selling that asset). For 

assets to be “held and used,” once certain indicators of impairment exist, St. Joe must conduct an 

undiscounted cash flow analysis to determine the “recoverable value” for each development project 

– i.e., the value of the project to St. Joe over its useful life. When the undiscounted cash flow total is 

less than the carrying value for the relevant project (which represents the amount St. Joe has spent to 

date in developing the land, including acquisition costs), an impairment loss must be recorded, 

measured as the difference between the carrying value and the current fair value. 

7. As explained below, the average sales prices of the Company’s developed properties 

(such as RiverTown) indicate that the carrying values assigned by St. Joe to those properties far 

 

2

 Carrying value is simply the amount at which an asset is shown in the accounting records 

(i.e. on the balance sheet). 

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exceeded the fair values during the Class Period, rendering the properties impaired. Moreover, for 

undeveloped properties, GAAP requires Defendants to consider all available evidence (including 

current conditions in the real estate market) when performing a valid cash flow analysis for the 

purposes of impairment testing and measurement. Despite overwhelming evidence during the Class 

Period that the Company’s properties were impaired, St. Joe repeatedly represented, quarter after 

quarter, that the values of its partially developed projects remained near constant. 

8. St. Joe and its senior officers knew, and were required to consider, certain core factors 

in order to derive the carrying value of the Company’s residential real estate projects, including but 

not limited to: (1) the recent sales prices of lots and units; (2) the “sales velocities” for the region 

(i.e., the sales volumes and rates of sales); (3) the number of developed units that were ready to be 

sold; and (4) the time period for each project’s useful life (i.e., the time period for complete 

development), which in turn depends on the expiration date of the permits and entitlements St. Joe 

obtained from agencies in order to develop the land. 

9. Given the severe decline in the economy generally and the real estate market in 

particular, the relevant sales history at St. Joe’s residential real estate projects, and the development 

rate of its projects, Defendants knew, or were severely reckless in not knowing, that the values of St. 

Joe’s residential real estate development projects should have been significantly impaired under 

GAAP, and that those values were accordingly overstated. As a result, the Company overstated its 

earnings throughout the Class Period. 

10. Ultimately, St. Joe’s failure to timely write down its impaired residential real estate is 

evidenced by the huge impairments that the Company recorded upon the sale of its entire residential 

projects at Victoria Park and Seven Shores. While St. Joe sold these projects, it was forced to writeoff the difference between the final sales price (which is dictated by current market conditions, as is 

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any valid fair value analysis) and reported carrying value. As late as two days before the sale, St. 

Joe maintained the full inflated value for the Victoria Park project. 

11. On October 13, 2010, the truth about St. Joe’s inflated carrying values began to 

emerge. David Einhorn (“Einhorn”), an investor in St. Joe, undertook a lengthy and in-depth 

analysis of St. Joe’s real estate properties, based on expert analysis of detailed information gleaned 

from more than twenty sources, not all of which were readily available to the public, and presented 

his analysis and conclusions to the market at the Value Investing Congress. Einhorn’s presentation 

provided original insight that revealed St. Joe’s improper accounting and its failure to have taken the 

necessary impairments based on historical data. Indeed, shocked investors learned that (1) many of 

St. Joe’s properties were undeveloped; (2) sales prices had plummeted at many of St. Joe’s projects; 

and (3) a large portion of St. Joe’s properties was less than ideally situated for residential projects. 

12. Einhorn’s presentation and associated analyst and media commentary on October 13 

and October 14, 2010 concerning the true value of St. Joe’s properties, and its failure to take the 

necessary impairments, caused St. Joe’s stock price to plummet approximately 20%, as it fell $4.80 

per share to close at $19.74 on October 14, 2010 on unusually high trading volume. 

13. Just months later, on January 10, 2011, the Company further disclosed in a Form 8-K 

that the SEC was conducting an informal inquiry into St. Joe’s practices regarding impairment of 

investment in real estate assets. The market reacted negatively, and St. Joe’s stock price dropped 

approximately 7% during after hours trading. 

14. The market learned the full truth regarding St. Joe’s improper accounting and failure 

to take required impairments after the market closed on July 1, 2011, when the Company revealed 

that after a six-month inquiry into St. Joe’s impairment practices, the SEC had issued a related order 

of private investigation covering several matters for the period beginning January 1, 2007 – 

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including the antifraud provisions of the federal securities laws applicable to Defendants. This 

announcement, like the January 10, 2011 announcement, disclosed the SEC’s investigation of the 

Company’s historical practices concerning its impairment of real estate assets, and conveyed to the 

market the extent and likelihood of the Company’s improper accounting. In response, the 

Company’s stock plummeted by approximately 9.1% on unusually high trading volume, causing 

investors to suffer millions of dollars in losses. 

II. JURISDICTION AND VENUE 

15. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the 

Exchange Act, (15 U.S.C. §§78j(b) and 78t(a)), and Rule 10b-5 promulgated thereunder (17 C.F.R. 

§240.10b-5). 

16. This Court has jurisdiction over the subject matter of this action pursuant to Section 

27 of the Exchange Act (15 U.S.C. §78aa) and 28 U.S.C. §1331. 

17. Venue is proper in this District pursuant to Section 27 of the Exchange Act, 15 U.S.C. 

§78aa and 28 U.S.C. §1391(b). Many of the acts and transactions alleged herein, including the 

preparation and dissemination of materially false and misleading information, occurred in this 

District. St. Joe’s principal executive offices are also located within this District. 

18. In connection with the acts, conduct, and other wrongs alleged in this Complaint, 

Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, 

including but not limited to, the United States mail, interstate telephone communications, and the 

facilities of a national securities market. 

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III. THE PARTIES 

A. Lead Plaintiff 

19. On January 25, 2011, this Court appointed City of Southfield Fire & Police 

Retirement System as Lead Plaintiff in this action. As evidenced by the Certificate previously filed, 

Lead Plaintiff purchased St. Joe stock during the Class Period and was damaged thereby. 

B. Defendants 

1. The Company 

20. Defendant St. Joe is a Florida corporation with its principal executive offices located 

at 133 South WaterSound Parkway, WaterSound, Florida. St. Joe is one of the largest real estate 

development companies in Florida, owning approximately 577,000 acres of land concentrated 

primarily in Northwest Florida. Approximately 405,000 acres (70%) of St. Joe’s total land holdings 

are within 15 miles of the coast of the Gulf of Mexico. The Company operates through four business 

segments: (1) residential real estate; (2) commercial real estate; (3) rural land sales; and (4) forestry. 

St. Joe trades its securities on the New York Stock Exchange under the ticker symbol “JOE.” 

2. Individual Defendants 

21. Defendant William Britton Greene (“Greene”) served as the Company’s Chief 

Executive Officer (“CEO”) from May 2008 and as President of the Company from October 2007 

until his resignation on March 2, 2011. Greene has worked at the Company since 1998, holding 

various positions, including President of West Florida Residential and Resort Operations, President 

of St. Joe Towns & Resorts, and President of St. Joe Commercial Real Estate. Greene signed the 

Company’s Forms 10-K for the Fiscal Years 2007, 2008, and 2009, and Forms 10-Q throughout the 

Class Period. Pursuant to Sections 302 and 906 of Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), 

Greene certified the accuracy of the Company’s Forms 10-K for the Fiscal Years 2008, 2009, and 

2010 as well as its Forms 10-Q throughout the Class Period. 

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22. Defendant William S. McCalmont (“McCalmont”) served as the Company’s Chief 

Financial Officer (“CFO”) from May 2007 and as Executive Vice President of the Company from 

January 2009 until May 20, 2011. McCalmont signed the Company’s Forms 10-K for the Fiscal 

Years 2007, 2008, and 2009, and Forms 10-Q throughout the Class Period. Pursuant to Sections 302 

and 906 of Sarbanes-Oxley, McCalmont certified the accuracy of the Company’s Forms 10-K for the 

Fiscal Years 2007, 2008, 2009, and 2010, as well as its Forms 10-Q throughout the Class Period. 

23. Defendant Peter S. Rummell (“Rummell”) was the Company’s Chairman of the 

Board and CEO from January 1997 until he retired from his position as CEO in May 2008, and as 

Chairman in July 2008. Rummell signed the Company’s Form 10-K for the Fiscal Year 2007 and 

Form 10-Q for the Second Quarter 2008. Pursuant to Sections 302 and 906 of Sarbanes-Oxley, 

Rummell certified the accuracy of the Company’s Form 10-K for the Fiscal Year 2007, as well as its 

Form 10-Q for the Second Quarter 2008. 

24. Defendant Janna L. Connolly (“Connolly”) is the Company’s Senior Vice President 

and CFO. Defendant Connolly served as the Company’s Senior Vice President and Chief 

Accounting Officer from January 2010 until May 21, 2011, when she became CFO. Connolly has 

approximately 32 years of accounting experience and joined the Company in November 1996 as 

Controller. Connolly is a Certified Public Accountant in the State of Florida. Defendant Connolly 

worked for KPMG, the Company’s outside auditor, for seven years. Connolly signed the 

Company’s Forms 10-K for the Fiscal Years 2007, 2008, and 2009, and Forms 10-Q throughout the 

Class Period. 

25. Defendants Greene, McCalmont, Rummell, and Connolly are collectively referred to 

hereinafter as the “Individual Defendants.” The Individual Defendants, because of their positions 

with the Company, possessed the power and authority to control the contents of St. Joe’s reports to 

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the SEC, press releases and presentations to securities analysts, money and portfolio managers, and 

institutional investors, i.e., the market. Each of the Individual Defendants was provided with copies 

of the Company’s reports and press releases alleged herein to be false and misleading prior to, or 

shortly after, their issuance and had the ability and opportunity to prevent their issuance or cause 

them to be corrected. Because of their positions and access to material non-public information 

available to them, each of the Individual Defendants knew that the adverse facts specified herein had 

not been disclosed to, and were being concealed from, the public, and that the positive 

representations which were being made were then materially false and misleading. 

C. Control Person Allegations 

26. The Individual Defendants, because of their positions of control and authority as 

senior executive officers and/or directors of the Company, had access to the adverse undisclosed 

information about the Company’s understated impairment charges for the residential real estate 

sector, and the Company’s financials as a whole (including its undiscounted cash flow analyses and 

the assumptions incorporated for each of the residential real estate properties in development), 

through their access to internal corporate documents and information, conversations and associations 

with other corporate officers and employees, attendance at management and Board of Directors 

meetings and committees thereof, and reports and other information provided to them in connection 

therewith with St. Joe’s business. 

27. Each of the above officers of St. Joe’s, by virtue of their high-level positions with the 

Company, directly participated in the management of the Company, was directly involved in the 

day-to-day operations of the Company at the highest levels and was privy to confidential proprietary 

information concerning each of St. Joe’s residential real estate properties in development, including 

its economic models and assumptions and cash flow analyses, financial statements, and financial 

condition, as alleged herein. 

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28. The Individual Defendants participated in drafting, preparing, and/or approving the 

public statements and communications complained of herein and were aware of, or recklessly 

disregarded, the material misstatements contained therein and omissions therefrom, and were aware 

of their materially false and misleading nature. 

29. The Individual Defendants, as senior executive officers and/or directors of the 

Company, were able to and did control the content of the various SEC filings, press releases, and 

other public statements pertaining to the Company during the Class Period. The Individual 

Defendants were provided with copies of the documents and statements alleged herein to be 

materially false and misleading prior to or shortly after their issuance or had the ability and 

opportunity to prevent their issuance or cause them to be corrected. Accordingly, the Individual 

Defendants are responsible for the accuracy of the public reports, releases, and other statements 

detailed herein and are primarily liable for the misrepresentations and omissions contained therein. 

30. As senior officers and controlling persons of a publicly-held company whose 

securities were, during the relevant time, registered with the SEC pursuant to the Exchange Act, 

traded on the New York Stock Exchange and governed by the provisions of the federal securities 

laws, the Individual Defendants each had a duty to promptly disseminate accurate and truthful 

information with respect to the Company’s performance, operations, business, and financial 

condition and to correct any previously issued statements that were or had become materially 

misleading or untrue, so that the market price of the Company’s publicly-traded securities would be 

based upon truthful and accurate information. The Individual Defendants’ wrongdoing during the 

Class Period violated these specific requirements and obligations. 

31. Each of the Individual Defendants, as well as St. Joe, is liable as a primary participant 

in a wrongful scheme and course of business that operated as a fraud and deceit on purchasers of St. 

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Joe’s securities during the Class Period, which included the dissemination of materially false and 

misleading statements and concealment or omission of material adverse facts. The scheme: (i) 

deceived the investing public regarding St. Joe’s core financial statements by improperly accounting 

for and understating the impairment charges for the carrying values of its residential real estate 

properties in development; (ii) deceived the investing public regarding the true value of the 

Company’s residential real estate properties; and (iii) caused Plaintiff and other members of the 

Class to purchase St. Joe securities at artificially inflated prices, which fell as the truth concerning 

the true value of the residential real estate properties ultimately became known. 

32. In making the statements complained of herein, the Individual Defendants, who were 

all senior officers and controlling persons of St. Joe, were acting on behalf of the Company in the 

regular course of business. Therefore, each of the statements made by the Individual Defendants are 

attributable to the Company. 

IV. SUBSTANTIVE ALLEGATIONS 

A. The Company and Its Business 

33. St. Joe was founded in 1936 as a paper mill and timber company. It is now one of the 

largest real estate development companies in Florida. The Company operates through four business 

segments: (1) Residential Real Estate, which develops mixed use resort, seasonal, and primary 

residences and amenities such as golf courses; (2) Commercial Real Estate, which plans, develops, 

and sells real estate for commercial purposes and concentrates on the area surrounding the airport in 

Panama City; (3) Rural Land Sales, which focuses in the sale and limited development of 

timberland; and (4) Forestry, which grows, harvests, and sells St. Joe’s extensive timber holdings. 

The Company currently owns approximately 577,000 acres of land, the majority in Northwestern 

Florida. Approximately 70 percent of St. Joe’s land is within 15 miles of the Gulf of Mexico. St. 

Joe acquired much of its land in the 1930s and 1940s. 

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B. St. Joe’s Real Estate Development Was a Core Operation During the 

Class Period 

34. Although the Company was originally formed to operate as a paper mill, by the 1990s 

St. Joe was focused on real estate development. Prior to and during the Class Period, residential real 

estate development made up the overwhelming majority of St. Joe’s business and was a core part of 

the Company’s operations. According to the Company’s Forms 10-K filed with the SEC during the 

Class Period, in 2008, St. Joe’s total investment in residential properties comprised almost 85% of its 

entire investment in real estate. In 2009 and in 2010, residential real estate investment totaled 82% 

of St. Joe’s total investment in real estate. This is illustrated in the table below: 

St. Joe’s Investment in Real Estate ($ in thousands) 

2010 2009 2008 

Residential Real Estate Operating Property $178,417 $173,190 $185,798 

Residential Real Estate Development 

Property $478,278 $487,870 $596,011 

Total Real Estate Investment $797,384 $802,006 $923,541 

Percentage Residential Real Estate of Total 

Real Estate Investment 82% 82% 85% 

35. Similarly, the Company’s financial statements reveal that residential real estate made 

up a majority of St. Joe’s total assets during the Class Period. Residential real estate made up 71.3% 

of St. Joe’s total assets in 2007, 67.1% in 2008, 59.0% in 2009, and 60.8% in 2010. 

36. The significance of real estate development to St. Joe’s business is set forth in a 2010 

letter to shareholders, which stated: 

When we first embarked on our highest and best use strategy, our 

priority was to seek as many land use entitlements for commercial 

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and residential development in our region as possible. This continues 

to be one of our core competencies.3

C. The Drastic Downturn in the Florida Residential Real Estate Market 

Negatively Impacted St. Joe’s Core Business 

1. The Real Estate Crash 

37. Just prior to and during the Class Period, the United States in general, and Florida in 

particular, experienced one of the largest real estate crashes in decades. Empirical evidence and the 

Company’s own disclosures demonstrate that the real estate market in Florida, which was one of the 

first states affected by the deteriorating real estate market, was devastated by this crash. For 

example, a comparison of the percent change, by quarter, in the Federal Housing Finance Agency’s 

Home Price Index for Florida and the United States, from 2007 to the third quarter of 2010, reveals 

the extent of the devastation suffered by the Florida real estate market:4 

 

3

 Internal citations are omitted, and emphasis is added, unless otherwise noted. 

4

 Home Price Index information obtained from www.fhfa.gov/Default.aspx 

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38. In addition, historical data from the Case Shiller Home Price Index for the city of 

Tampa, Florida for the same period further evidences this decline:5 

 

5

 Tampa is the closest city to the majority of St. Joe’s residential real estate for which Case 

Shiller provided housing index information. 

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2. The Real Estate Crash Caused the Company’s Revenues to 

Decline and Losses to Increase Dramatically 

39. Not surprisingly, the economic recession (with its concomitant real estate crash) had a 

profound effect on the Company, causing the Company’s residential real estate revenues – which 

was its largest asset class – to decline drastically during the Class Period, while at the same time its 

losses in residential real estate soared. This is evidenced in the chart below: 

2006 2007 2008 2009 2010 

Revenue from Residential 

Real Estate 

($ in thousands) 

$358,439 $155,550 $65,498 $89,850 $40,252 

(Loss) Income from 

Residential Real Estate6

($ in thousands) 

$23,827 ($43,071) ($115,062) ($137,855) ($47,370)

 

6

 Includes total impairment charges of $4.8 million, $94.8 million, $60.3 million and $13.6 

million in 2010, 2009, 2008, and 2007, respectively. The majority of the impairment charges of 

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40. In addition to the loss of revenue, St. Joe’s home and homesite sales plummeted as a 

result of the downturn in the real estate market. According to the Company’s Forms 10-K filed with 

the SEC during the Class Period, the Company’s closed units decreased by nearly 95% from 1,610 

closed units in 2005 to a mere 85 in 2010. 

2005 2006 2007 2008 2009 2010 

Closed Units 1610 1260 478 122 164 85 

41. Furthermore, the Company’s gross profit from home and homesite sales decreased 

dramatically during the Class Period. Gross profit plunged from $39.1 million to $2.2 million. 

2007 2008 2009 2010 

Sales of Homes & Homesites ($ in millions) $116.0 $28.0 $31.3 $8.5 

Gross Profit ($ in millions) $39.1 $4.0 $2.7 $2.2 

3. St. Joe Halts Further Development of Its Projects 

42. The state of the real estate market in the United States, particularly Florida, and the 

performance of St. Joe’s residential real estate projects over the course of the Class Period, forced 

the Company to conclude that it would not be economical to continue investing in the development 

of its residential real estate projects. 

43. Beginning in 2007, St. Joe effectively ceased its development activity. The Company 

drastically decreased the amount of money it invested in developing its residential real estate. As 

shown in the table below, St. Joe invested $570,925,000 in 2006 on its residential real estate. In 

2007, that amount dropped almost 60% to $227,675,000. In 2008, St. Joe’s capital expenditures on 

its properties again declined another 87% to $28,515,000, resulting in a decline of more than 95% in 

 

$94.8 and $60.3 million taken in 2009 and 2008, respectively, were related to the impairments for 

Victoria Park and Seven Shores, where the Company had no alternative but to take those charges. 

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only two years. By 2009, St. Joe’s expenditures on its residential real estate properties decreased yet 

again by more than 50%, to a mere $13,687,000, and in 2010, they were only $7,557,000. 

2006 2007 2008 2009 2010 

Capital Expenditures for 

Residential Real Estate 

($ in thousands) 

$570,925 $227,675 $28,515 $13,687 $7,557 

44. Moreover, the Company reduced its employee workforce by two-thirds, or 66%, in 

2007. A large portion of this reduction was centered in the residential real estate segment. In 2006, 

St. Joe reported that it had 441 employees in its residential real estate sector. By 2007, that declined 

to just 148 employees. 

D. The Values of St. Joe’s Residential Real Estate Development Projects 

Were Overstated During the Class Period 

45. As a result of the economic downturn, throughout the Class Period, St. Joe’s 

developments suffered. First, because the Company halted development, only a fraction of the 

planned units for many of these properties was ever completed, and the associated lots planned for 

retail, office, schools, golf courses, and light industrial space remain barren. Further, the average 

prices for the properties the Company has sold have substantially declined. Defendants knew or 

should have known of these significant problems during the Class Period because they were required 

to account for these problems, along with all available evidence when evaluating the Company’s 

properties for impairment. Defendants’ failure to write down these materially impaired assets during 

the Class Period demonstrates their knowing and reckless disregard for this critical information in 

their impairment analyses. 

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1. RiverTown 

46. RiverTown is a residential real estate project in St. Johns County, Florida that St. Joe 

began developing in 2006. In its 2009 Form 10-K, St. Joe described its plans for RiverTown: 

“[RiverTown is] situated on approximately 4,170 acres located in St. Johns County south of 

Jacksonville, [and] is currently planned for 4,500 housing units and 500,000 square feet of 

commercial space. The centerpiece of the community will be a 58-acre park along the St. Johns 

River. RiverTown is planned to include several distinct neighborhoods and amenities.” However, 

the Company’s Class Period SEC filings failed to disclose that only 215 units, or less than 5% of the 

planned 4,500 units for this project had actually been developed.7

 Indeed, of those 215 lots, only 12 

had homes built on them.8 Further, only 30 units, or less than 1% of the planned 4,500 units, had 

been sold.9

 In fact, on May 22, 2009, Issa Homes – one of the builders that had bought several lots 

within RiverTown – sued St. Joe, alleging that, inter alia, the lack of development rendered the 

property more of a “moonscape” than a “luxury development.”10 

47. By January 31, 2010, only a tiny fraction of the lots planned for RiverTown was 

developed, and St. Joe had yet to complete any of the retail space, office space, light industrial 

space, golf course, or school that had been planned. Of a planned 186 acres of community parks, 

 

7

 The number of developed lots cited in the RiverTown Development of Regional Impact 

(“DRI”) Biennial Monitoring Report 2008-2009, dated January 31, 2010 (“RiverTown Biennial 

Report”). 

8

 Einhorn Presentation, “Field of Schemes: If You Build It, They Won’t Come,” citing St. 

Johns County Tax Appraiser Office. 

9

 Id. 

10 Issa Homes, Inc. v. St. Joe Co., Case No. CA09-1229 (Fla. Cir. Ct. St. Johns County). 

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only 37 were completed.11 CW1, the former Site Development Manager at RiverTown from 2006 

through July 31, 2008, noted that only a “handful” of homes had been built, the project still lacked 

electricity, utility lines had not been cleared, and sewer lines had not been installed. Thus, it was 

highly unlikely that anyone would purchase the few completed homes that did exist. Accordingly, 

CW1 agreed with Issa Homes’ description of the development as a “moonscape.” 

48. Moreover, CW1 explained that, during CW1’s tenure at the Company, cost became a 

major concern for St. Joe. When CW1 was initially hired in 2006, the Company planned to develop 

all of the land for sale to builders. CW1 was later instructed to change the plans and focus only on 

particular neighborhoods. CW1 stated that infrastructure plans changed as well. The Company 

scaled back its plans for high-end aesthetics such as “fancy bridges” and similar features, and CW1 

was instead instructed to implement only the necessities. 

49. The lack of progress and the uncertainty of future development at RiverTown is 

underscored by the fact that its land entitlements, which are the necessary permits required in order 

to develop the land, expire in 2016. By January 31, 2010, development of RiverTown was far 

behind schedule, with no possibility of completion before 2016. 

50. In addition to the lack of development at RiverTown, St. Joe was unable to sell the 

properties it had completed. An independent study conducted in the first quarter of 2010 of the sales 

velocities over the course of 2008, 2009 and the first quarter of 2010, in conjunction with the amount 

of homesite inventory on the market in central St. Johns county (where RiverTown is located), 

 

11 Biennial Monitoring Report for RiverTown Development of Regional Impact progress 

reports from the RiverTown DRI Monitoring Report 2008-2009, dated January 31, 2010. 

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revealed that as of the first quarter of 2010, there was almost nine years of homesite inventory in the 

region.12 In other words, it would take nine years to sell the available lots. 

51. Moreover, the sales prices for the RiverTown units that were developed or completed 

also plummeted during the Class Period. For example, in October 2007, St. Joe sold six RiverTown 

lots to Weekley Homes at an average sales price of $72,133 per lot. However, by August 2010, St. 

Joe sold two similar lots to Weekley Homes for an average price of just $31,250 per lot. This 

difference represents a 57% decline in the value of RiverTown lots. 

52. Despite this decline, St. Joe listed the carrying values for RiverTown as follows:13 

St. Johns County 

Carrying Value (net of accumulated depreciation) 

($000’s) as of December 31 

2007 2008 2009 2010 

Land with infrastructure 5,119 5,023 1,016 1,016 

Buildings 3,393 2,912 611 513 

Residential 65,615 77,143 74,491 93,740 

Total 74,127 85,078 76,118 95,269 

53. St. Joe improperly maintained these overstated carrying values even though: (1) 

RiverTown was barely developed; (2) the Company had determined that it was not going to invest in 

any further development of the property; (3) the Company was selling very few lots, and the lots that 

did sell were for significantly lower amounts than prior to the Class Period; and (4) there was a nine-

 

12 See Einhorn’s October 13, 2010 presentation “Field of Schemes: If You Build It, They Won’t 

Come”, citing Metrostudy Jacksonville Residential Survey, 1Q 2010. 

13 St. Joe only reports carrying values by county, not by project, in its SEC filings, making it 

extremely difficult, if not impossible, to determine the carrying values for individual lots and 

projects, particularly if there is more than one residential real estate property in a county. 

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year supply of homesite inventory within the region of Florida where RiverTown was located. 

Accordingly, although Defendants knew or should have known these facts, they continued to 

represent that the carrying value of the project was 100% recoverable. 

54. In reality, RiverTown’s carrying values were overstated and its developed properties 

(assets substantially complete and ready for sale) and undeveloped properties were significantly 

impaired during the Class Period. Indeed, in 2008 and 2009, RiverTown’s developed lots ready for 

sale were impaired by between approximately $7 million and $12 million as illustrated in the table 

below: 

Dec. 31, 2009 Dec. 31, 2008

estimated RiverTown infrastructure costs 

allocated to single family residential lots14 $326,806,701 $326,806,701 

+ estimated RiverTown initial costs (land and 

encumbrances) allocated to single 

family residential lots15

$13,858,572 $33,479,021 

= estimated total capitalized costs allocated to 

single family residential lots16 $340,665,273 $360,285,722 

÷ total # of single family residential lots 3,822 3,822 

= estimated carrying value per single family 

residential developed lot $89,133 $94,266 

x # of developed lots 187 187 

= total estimated carrying value of 

developed lots $16,667,871 $17,627,742 

estimated total impairment on developed lots 

assuming fair value per lot of:17 

 

14 Main Street 2008 CDD Bond Offering Prospectus. 

15 Form 10-K December 31, 2009. Calculated as total residential initial costs applied 

proportionately to single family residential lots (3822/4500). 

16 Main Street 2008 CDD Bond Offering Prospectus. 

17 The $30,000, $40,000 and $50,000 represent various possible selling prices. This range is 

based on the average selling price of $31,000 for lots sold in August 2010. 

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$30,000 $11,057,871 $12,017,742 

$40,000 $9,187,871 $10,147,742 

$50,000 $7,317,871 $8,277,742 

55. RiverTown’s undeveloped lots were also significantly impaired as of December 31, 

2009. The following table represents an estimate of the undiscounted cash flow analysis that should 

have been performed as of December 31, 2009. This analysis utilizes data from the Main Street 

(RiverTown) 2008 CDD Bond Offering Prospectus and the 2009 10-K to estimate the total cash 

outflows to develop the remainder of the project. It also assumes a range of potential future selling 

prices based largely on the average selling price of lots sold in August 2010. 

# of remaining residential units (lots and 

multifamily) to be developed18

4,285 

estimated costs to develop remaining 

residential units19

$347,257,758 

- estimated development costs already incurred 

on undeveloped residential units20

$(48,135,332) 

+ estimated initial costs allocated to 

undeveloped units21

$15,537,410 

= estimated carrying value of remaining units 

after development 

$314,659,835 

 

18 Einhorn Presentation, “Field of Schemes: If You Build It, They Won’t Come”, citing 

RiverTown Development of Regional Impact Biennial Monitoring Report 2008-2009, dated January 

31, 2010. 

19 Einhorn Presentation, “Field of Schemes: If You Build It, They Won’t Come”, citing Main 

Street 2008 CDD Bond Offering Prospectus. Calculated as infrastructure costs allocated to 

residential units applied proportionately to remaining undeveloped units (4285/4500). 

20 Total residential capitalized costs to date ($65,559,000 per 2009 Form 10-K; $68,001,000 per 

2008 Form 10-K) less estimated costs allocated to 215 developed units ($17,423,668 per Main Street 

2008 CDD Bond Offering Prospectus; costs applied equally to all residential units)= $48,135,332. 

21 Schedule III of the 2009 Form 10-K. Calculated as total residential initial costs applied 

proportionately to undeveloped residential units (single-family residential) lots (4285/4500). 

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estimated total impairment for the developed 

project at average future unit selling price of: 

$30,000 $186,109,835 

$40,000 $143,259,835 

$50,000 $100,409,835 

56. This indicates that St. Joe would lose between approximately $100 million and $186 

million on the entire project after incurring all costs to complete it and then selling all of the units 

remaining as of December 31, 2009 for prices ranging from $30,000 to $50,000 per lot. Thus, an 

impairment loss should have been taken for most, if not all, of the approximately $58 million ($74.5 

million total St. Johns County carrying value minus $16.6 million carrying value of developed lots) 

carrying value on the Company’s books as of December 31, 2009. 

2. The WaterSound Developments 

57. The WaterSound developments, which include WaterSound, WaterSound Beach and 

WaterSound Beach West, are situated in Walton County in Northwest Florida.22 The WaterSound 

project is the largest of the three WaterSound projects with 1,432 units planned, but only 211, or 

14% of those units, had been developed23 and only 29 had been sold during the Class Period.24

58. The WaterSound projects are described by the Company in its 2009 Form 10-K as 

follows: 

 

22 WaterColor, WaterSound, WaterSound Beach and WaterSound Beach West are all St. Joe 

residential real estate development projects situated in Walton County in northwest Florida. The 

WaterColor development has 1,140 units planned, is 90% developed, and 81% of its planned units 

have been sold. 

23 WaterSound and WaterColor DRI Monitoring Report 2007-2008, dated April 1, 2009 

(“WaterSound North DRI Report”).

24 Form 10-Q for second quarter 2011. 

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WaterSound Beach is located approximately five miles east of 

WaterColor and is planned to include approximately 511 units. 

Situated on approximately 256 acres, WaterSound Beach includes 

over one mile of beachfront on the Gulf of Mexico. The WaterSound 

Beach Club, a private, beachfront facility featuring a 7,000 squarefoot, free-form pool and a restaurant, is located within the 

community. 

WaterSound West Beach is located approximately one-half mile west 

of WaterSound Beach on the beach-side of County Road 30A. This 

community is situated on 62 acres and includes 199 units with 

amenities that include private beach access through the adjacent Deer 

Lake State Park and a community pool and clubhouse facility. 

WaterSound is situated on approximately 2,425 acres and is planned 

for 1,432 residential units and approximately 450,000 square feet of 

commercial space. It is located approximately three miles from 

WaterSound Beach north of U.S. 98 in Walton County. WaterSound 

includes Origins, a uniquely designed Davis Love III golf course, as 

well as a community pool and clubhouse facility. 

59. There are no longer any beachfront lots available at WaterSound Beach. The 

Company sold its last beachfront lot on September 20, 2010 for $1,253,800.25 WaterSound, 

WaterSound Beach and WaterSound Beach West collectively contain 253 interior lots that cannot 

command nearly as high a sales price as the beachfront lots.26 Many of the remaining interior lots 

are situated on land separated from the ocean, and the rest of the development, by a highway. 

Moreover, the average sales prices at WaterSound steadily decreased during the Class Period.27

 

25 Einhorn Presentation, “Field of Schemes: If You Build It, They Won’t Come,” citing Walton 

County Tax Appraiser Office. 

26 Id. 

27 Walton County Property Appraiser’s website, http://qpublic.net/walton/index.html 

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60. At WaterSound, during the Class Period, none of the retail or office space had been 

completed and no other units had been initiated.28 With no further investment in the property, it is 

unclear when the WaterSound project will be fully developed, or even when the current existing 

units will be sold. According to CW2, the Director of Construction on several projects for St. Joe 

from March 2006 through September 2009,29 “WaterSound North was tremendously expensive” to 

develop. “It cost $100,000 per lot and couldn’t sell for close to that” because they were smaller lots 

with small backyards and big setbacks. They were “bad when the market was half-way decent and 

really bad after the market went bad.” 

61. Despite this, Defendants failed to take any significant impairment charges to these 

properties during the Class Period. The Company’s carrying values for Walton County 

(encompassing of the WaterSound projects as well as WaterColor) were:30

Walton County 

Carrying Value (net of accumulated depreciation) 

($000’s) as of December 31 

2007 2008 2009 2010 

Land with infrastructure 3,491 3,589 3,631 3,382 

 

28 Id. 

29 CW2 reported to former President of Development Nick Cassala and Executive Vice 

President for WaterSound Mary Rosenheim. During CW2’s tenure, CW2 did a lot of work at the 

Wild Heron and RiverCamps projects. CW2 focused primarily on building development amenities, 

and some commercial buildings. 

30 The Company only discloses its carrying value by county, therefore, it is impossible to know 

the carrying value for a project if there is more than one project in that county. WaterColor, 

WaterSound, WaterSound Beach and WaterSound Beach West are all located in Walton County and 

the reported carrying value is an aggregate carrying value for all of those properties. The decrease in 

the carrying value for Walton County during the Class Period is likely due to the sales made at those 

properties during the Class Period, and is not explained by the minimal impairment charges that St. 

Joe recorded to its existing homes and homesites of $7.8 million in 2007, $12.8 million in 2008, and 

$7.3 million in 2009. See 2009 Form 10-K. 

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Walton County 

Carrying Value (net of accumulated depreciation) 

($000’s) as of December 31 

2007 2008 2009 2010 

Buildings 39,016 32,823 63,385 63,856 

Residential 166,533 151,647 86,842 83,982 

Total 209,040 188,059 153,858 151,220 

62. The characteristics of the WaterSound development are very similar to those of the 

RiverTown development. Both developments were located in the same general area, faced the same 

market conditions, and were largely undeveloped. As of June 30, 2011, at the end of the Class 

Period, only 0.7% and 1.3% of the total planned residential units had been sold at RiverTown and 

WaterSound, respectively. Accordingly, an impairment analysis similar to the one above for 

RiverTown would apply to the WaterSound development, and would likely demonstrate that 

WaterSound was similarly impaired during the Class Period. 

3. SummerCamp Beach 

63. SummerCamp Beach is a residential real estate project located in Franklin County, 

Florida. In its 2009 Form 10-K, the Company describes SummerCamp Beach as being “situated on 

the Gulf of Mexico on approximately 762 acres in Franklin County. The community includes the 

SummerCamp Beach Club, a private beachfront facility with a pool, restaurant, boardwalks and 

canoe and kayak rentals. Plans for SummerCamp Beach include approximately 499 units.” 

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64. St. Joe failed to disclose, however, that Franklin County has a tiny population of 

11,280,31 with approximately 13% of that population living in Franklin County’s prison.32 In 2009, 

only 4,934 people were in the labor force, and the median income was $34,787.33 

65. SummerCamp Beach was not fully developed during the Class Period. Of its 499 

planned units, 226, or less than half, were developed.34 Of those 226 units, only 87 had been sold as 

of September 30, 2010. Because St. Joe has stopped further development of many of its residential 

real estate projects, it is unclear when or if this development will ever be completed. 

66. The sales prices at SummerCamp Beach also decreased significantly throughout the 

Class Period. In November 2006, the Company sold five beachfront lots for an average price of 

$880,000 per lot.35 However, in July 2010, St. Joe sold four beachfront lots for an average price of 

approximately $331,000, or a 62.4% decline in value.36 Moreover, St. Joe provided the mortgage on 

the four beachfront lots that it sold in July 2010.37 

 

31 US Census 2009 Estimate, http://quickfacts.census.gov 

32 Inmate population information list, http://www.dc.state.fl.us/activeinmates/list.asp? 

DataAction=Paging 

33 US Census 2009 Estimate, http://quickfacts.census.gov 

34 Einhorn Presentation, “Field of Schemes: If You Build It, They Won’t Come”, citing 

Franklin County Tax Appraiser Office. 

35 Franklin County Property Appraiser’s website, http://qpublic.net/franklin/index.html 

36 Id. 

37 http://www.myfloridacounty.com/services/officialrecords_intro.shtml 

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67. The value of interior lots at SummerCamp Beach also plummeted during the Class 

Period. Between 2005 and 2006, interior lots at SummerCamp Beach were sold for approximately 

$150,000 to $165,000.38 By 2010, St. Joe was pricing interior lots for as low as $39,000.39

68. St. Joe’s residential carrying value for this project was $36,329,000 in 2007, 

increasing to approximately $41,218,000 in 2008, and remaining relatively constant at 

approximately $41,361,000 in 2009 as set forth below: 40 

Franklin County 

Carrying Value (net of accumulated depreciation) 

($000’s) as of December 31 

2007 2008 2009 2010 

Land with infrastructure 55 51 48 38 

Buildings 8,504 3,607 2,035 2,701 

Residential 36,329 41,218 41,361 38,851 

Total 44,888 44,876 43,444 41,590 

69. Thus, St. Joe increased the carrying value for this project during the Class Period 

despite: (1) the free-falling sales prices for both beachfront and interior lots; (2) the location of the 

project in a sparsely populated and low-income area; and (3) halting its plans to complete the 

project’s development. 

 

38 Franklin County Property Appraiser’s website, http://qpublic.net/franklin/index.html 

39 Einhorn Presentation, “Field of Schemes: If You Build It, They Won’t Come”, citing listings 

offered by SummerCamp Beach exclusive realtor. 

40 These carrying values include the carrying value of the Cutter Ridge project, which is also in 

Franklin County. However, according to the 2008 Form 10-K, the value of Cutter Ridge is 

insignificant due to the minimal amount of work that has been done on the project and the stated 

carrying values largely represent the carrying value for SummerCamp Beach. 

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70. Moreover, average home sales prices in the SummerCamp Beach development during 

the Class Period illustrate that the development’s reported carrying value was overstated. St. Joe 

sold only one unit in SummerCamp Beach in each of 2008 and 2009. It sold six homesites in 2010, 

including four beachfront lots in the third quarter of 2010 for an average sales price of $331,000.41 

St. Joe also listed interior lots for a high price of only $59,000 in 2010.42 In 2008, however, St. Joe 

reported a carrying value of $41,218,000 for SummerCamp Beach, and a net carrying value of 

$41,361,000 in 2009. During the Class Period, there were 23 remaining developed beachfront lots 

and 121 remaining developed interior lots.43 Even assuming the highest average sales price 

numbers, the value of those remaining lots would have been $14,752,000. Notwithstanding this 

evidence, the Company took just $12 million and $7.3 million in impairment charges for all 

residential real estate homes and homesites for the entire company in 2008 and 2009, respectively. 

71. CW444 explained that the 2007 carrying value of $36,329,000 for SummerCamp 

Beach was inflated. According to CW4, in late 2006 St. Joe sold five lots at SummerCamp Beach 

for an average of $800,000, but the cheapest lots were being listed at $150,000. The number of lots 

 

41 Einhorn Presentation, citing Franklin County Property Appraiser’s website, 

http://qpublic.net/franklin/index.html 

42 Einhorn Presentation, “Field of Schemes: If You Build It, They Won’t Come,” citing listing 

for exclusive SummerCamp Beach agent. 

43 Einhorn Presentation, “Field of Schemes: If You Build It, They Won’t Come,” citing 

Franklin County Tax Appraiser Office. 

44 CW4 was a former Senior Vice President and General Manager for the “capital region” of 

Tallahassee, Florida, which included Leon, Franklin, and Wakulla Counties. CW4 was employed by 

the Company from 2004 until June 2008. CW4 reported directly to Defendant Greene and was 

responsible for all land management (including, but not limited to, environmental concerns, the DRI 

process, engineering, feasibility, planning, construction, sales, marketing) in CW4’s region. 

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available for sale was approximately 140. The carrying value of $36.3 million, when spread over 

140 lots, gives rise to an average of approximately $250,000 per lot at SummerCamp Beach. 

4. WindMark Beach 

72. WindMark Beach is located in Gulf County. In its 2009 Form 10-K, St. Joe describes 

WindMark as “a beachfront resort community situated on approximately 2,020 acres in Gulf County 

near the town of Port St. Joe. Plans for WindMark Beach include approximately 1,662 residential 

units and 75,000 square feet of commercial space.” WindMark is located in the rural area of Gulf 

County, with a population of 15,755.45 In 2009, there were only 6,411 people in the labor force and 

the median household income is $38,632.46 

73. Like many of St. Joe’s other residential real estate projects, WindMark was largely 

undeveloped during the Class Period. Of 1,516 planned units, only 224 (or 15%) were developed.47 

The Biennial Report48 for WindMark confirms that no development occurred during the two-year 

period covered by the report (April 1, 2008 – April 1, 2010). The project build-out date for all 

development is December 31, 2018, and the termination and development order expiration dates are 

December 31, 2023. From the current lack of development, it is unlikely that the Company will be 

able to meet these deadlines. Because St. Joe has ceased development of its projects, it is uncertain 

if the project will ever be completed. 

 

45 US Census 2009 Estimate, http://quickfacts.census.gov 

46 Id. 

47 WindMark Beach DRI Monitoring Report 2008-2009, dated April 1, 2010. 

48 Biennial reports are status reports that the developer of a property is required to submit to the 

relevant local government agencies that are monitoring the development project on a biennial basis. 

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74. The Company was also unsuccessful in selling its developed units during the Class 

Period. Of 224 developed units, only 150 units of the 1,516 planned units (10%) were sold as of 

September 30, 2010. Moreover, sales prices of the completed units in WindMark have, as with St. 

Joe’s other projects, plummeted during the Class Period. For example, in September 2007, St. Joe 

sold a beachfront lot at WindMark for $695,000. In October 2009, another beachfront lot sold for 

$350,000. By August 2010, a beachfront lot sold for only $188,000.49

75. St. Joe’s residential carrying value for WindMark, notwithstanding the plummeting 

sales prices, was $189,593,000 in 2007, $195,165,000 in 2008, $163,979,000 in 2009 and 

$160,211,000 in 2010 as detailed below: 

Gulf County 

Carrying Value (net of accumulated depreciation) 

($000’s) as of December 31 

2007 2008 2009 2010 

Land with infrastructure 3,111 4,695 5,462 5,520 

Buildings 3,197 14,004 38,926 41,515 

Residential 189,593 195,165 163,979 160,211 

Total 195,901 213,864 208,367 207,246 

76. Defendants knew that the carrying value for WindMark was overstated. According to 

CW4, the WindMark project began as a joint venture with two luxury resort, spa and timeshare 

developers. CW4 explained that in late 2007, the joint venture fell apart and St. Joe was forced to 

pay a $5 million break-up fee to one of its joint venture partners, with the concomitant knowledge 

 

49 The October 2009 and August 2010 sales were not made directly by St. Joe, but were resales 

between third parties. The Individual Defendants knew of resales of properties within the 

Company’s development projects. Rummell admitted on the Company’s 1Q 2008 earnings 

conference call that resale pricing was a “benchmark” for St. Joe. 

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that, without the business partner, the huge investment Defendants had made in this property would 

likely not be recovered. 

77. Sales data from the WindMark property further establishes that the carrying value for 

this property was overstated during the Class Period. Sales history data shows that a beachfront lot 

sold in October 2009 for $350,000.50 The seller was Regions Bank.51 In 2010, several interior lots 

at WindMark were sold for an average price of $93,950.52 There were 17 developed beachfront lots 

remaining in WindMark and 55 interior lots.53 Using recent sales history, the remaining developed 

beachfront lots are worth $5,950,000 (17x$350,000) and the remaining interior lots at WindMark are 

worth $5,167,250 (55 x $93,950).54 WindMark also contains condominium units that Einhorn has 

valued at $5,000,000. Collectively, therefore, the condominiums, beachfront and interior lots are 

worth $17,825,000. In 2009, St. Joe reported WindMark’s net residential carrying value as 

$163,979,000 and took just $7.3 million in impairment charges for all of the Company’s residential 

real estate. As detailed below, Defendants knew from comparable sales evidence and other detailed 

information presented to them at the Management Committee meetings that the reported carrying 

value was overstated. 

 

50 Gulf County Property Appraiser’s website, http://qpublic.net/gulf/index.html 

51 Id. 

52 Id. 

53 Einhorn Presentation, “Field of Schemes: If You Build It, They Won’t Come,” citing Gulf 

County Tax Appraisal Office. 

54 Einhorn used an average price of $125,000 for interior lots. He used that average price based 

on an August 2010 sale for $104,000 and then rounded up. Even using this higher average price, the 

interior lots are only worth $6,875,000 and the total value of all lots plus condominiums is 

$17,825,000. 

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5. Victoria Park 

78. The carrying value for the Company’s Victoria Park development was also inflated. 

In 2009, St. Joe sold all of its remaining assets in its Victoria Park development in Volusia County 

for $11 million. In sharp contrast to this $11 million dollar price, the Company’s carrying value for 

this property just before the sale was $78.8 million. Indeed, on December 18, 2009, the Company 

announced in a Form 8-K that on December 15, 2009, it had determined that material conditions for 

the $11 million sale had been met, and that St. Joe had taken an impairment charge of $67.8 million 

just two days before the sale closed. Prior to the sale, the Company had not taken any impairment 

charges to the property, falsely and fraudulently leading the market to believe that the value of the 

property was completely recoverable. However, when forced to categorize the project as “held for 

sale” and conduct a fair value analysis based on current market conditions, the Company took an 

impairment charge for over 80% of the project’s purported carrying value. 

79. CW4 confirmed that the Individual Defendants knew the 2007 carrying value for 

Victoria Park, a property CW4 analyzed in CW4’s spreadsheets, was overstated. According to 

CW4, St. Joe recorded a much higher book value for Victoria Park than its true value. CW4 

explained that builders were selling homes for approximately $250,000 to $300,000, and that 

sophisticated national builders would not pay more than 20% of the projected gross sales price for 

the land. Thus, the lots were only worth $40,000 to $60,000. CW4 further stated the undeveloped 

land at Victoria Park had a negative value because the prices builders were willing to pay for 

undeveloped lots were lower than the cost of developing the land. CW4 prepared an excel 

spreadsheet model of Victoria Park analyzing its value, and sent it to Defendants Greene and 

McCalmont, and a financial analyst at the Company. CW4 learned directly through conversations 

with Greene and McCalmont that both knew in late 2007 they were not going to be able to recoup 

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the book value for Victoria Park, and that “it was known that Victoria Park was a loser and they 

[Greene and McCalmont] wanted to get out.” 

6. Seven Shores 

80. The carrying value for the Company’s Seven Shores development was also inflated. 

The Seven Shores development project was also written down shortly before it was sold for 

significantly less than the carrying value on St. Joe’s books. St. Joe carried the project for nearly 

$45 million and sold it in the third quarter of 2009 for only $12.5 million. Prior to the fourth quarter 

of 2008, the Company had not taken any impairment charges to the property, falsely and 

fraudulently leading the market to believe that the value of the property was completely recoverable. 

However, in the fourth quarter of 2008, St. Joe was finally forced to take an impairment charge when 

Defendants decided not to exercise their option to acquire additional land under their option 

agreement, and the scope of the project was reduced. St. Joe was forced to take an additional 

impairment charge in the second quarter of 2009 resulting from the impending sale. Ultimately, the 

Company took an impairment charge totaling $35 million of the project’s purported carrying value 

during this time. 

7. SouthWood 

81. In addition, CW4 further confirmed that the 2007 residential net carrying value of $48 

million for the SouthWood project in Leon County was overstated. According to CW4, St. Joe 

developed about 50 to 75 SouthWood lots at a time, so the Company would have about that many 

lots on the books at any given time. Thus, the 2007 carrying value of approximately $47 million, 

spread over 50 to 75 lots, suggests that St. Joe would be able to recover between $940,000 and 

$626,000 per lot – a highly unrealistic number according to CW4, given market conditions and 

recent sales history. CW4 explained that, in 2007, SouthWood did not have many lots for sale, but 

had approximately 2000 entitlements. However, those entitlements were of only nominal value, 

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because of the difficulty in obtaining permits in Tallahassee, where SouthWood is located, and 

because costs of infrastructure were high. CW4 explained that St. Joe and the Individual Defendants 

could not realistically expect any significant profit when the development costs exceeded the price 

that St. Joe could obtain for developed lots. 

82. In sum, it is evident that the carrying values for many of St. Joe’s most significant 

development projects were overstated during the Class Period and that the Company failed to take 

the necessary impairments for these developments, causing its asset values and earnings to be 

materially inflated. This is further established by the accounting analysis below. 

V. DEFENDANTS FAILED TO COMPLY WITH SEC REGULATIONS AND 

GAAP 

83. As a result of the foregoing, all of the financial statements issued by St. Joe during the 

Class Period, including those set forth in its press releases, Forms 10-Q, 10-K and other SEC filings 

issued by the Company, were materially misleading because they violated the relevant GAAP and 

SEC rules. Defendants’ material overstatement of St. Joe’s assets, and their failure to record the 

necessary impairment charges, consequently inflated the Company’s net income and earnings per 

share. 

A. Defendants Failed to Comply With Regulation S-K, Item 303 

84. Federal regulations strictly govern what must be included in documents filed with the 

SEC. The SEC regulates statements by companies “that can reasonably be expected to reach 

investors and the trading markets, whoever the intended primary audience.” SEC Release No. 33 

6504, 3 Fed. Sec. L. Rep. (CCH) ¶23,120, at 17,095, 17 C.F.R. §241.20560 (Jan. 13, 1984). In 

addition to the periodic reports required under the Exchange Act, management of a public company 

has a duty promptly “to make full and prompt announcements of material facts regarding the 

company’s financial condition.” SEC Release No. 34 8995, 3 Fed. Sec. L. Rep. (CCH) ¶23,120A, at 

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17,095, 17 C.F.R. §241.8995 (Oct. 15, 1970). The SEC has emphasized that “[i]nvestors have 

legitimate expectations that public companies are making, and will continue to make, prompt 

disclosure of significant corporate developments.” SEC Release No. 18271, [1981 1982 Transfer 

Binder] Fed. Sec. L. Rep. (CCH) 1183,049, at 84,618 (Nov. 19, 1981). 

85. Regulation S-K provides, in part, that annual and period reports must contain a 

section entitled “management’s discussion and analysis of financial condition and results of 

operations” (the “Management Discussion”). See 17 C.F.R. §229.10, et seq. 

86. Item 303 of Regulation S-K, 17 C.F.R. §229.303 (“Item 303”), governs what must be 

contained in the Management Discussion. Item 303 requires, in part, that the Management 

Discussion must: 

Discuss registrant’s financial condition, changes in financial 

condition and results of operations. The discussion shall provide 

information as specified in paragraphs (a)(1) through (5) of this Item 

and also shall provide such other information that the registrant 

believes to be necessary to an understanding of its financial 

condition, changes in financial condition and results of operations. 

87. Paragraph (a)(3) of Item 303 requires, in part, that the Management Discussion 

discuss a company’s “results of operations” as follows: 

(i) Describe any unusual or infrequent events or transactions or any 

significant economic changes that materially affected the amount of 

reported income from continuing operations and, in each case, 

indicate the extent to which income was so affected. In addition, 

describe any other significant components of revenues or expenses 

that, in the registrant’s judgment, should be described in order to 

understand the registrant’s results of operations. 

(ii) Describe any known trends or uncertainties that have had or that 

the registrant reasonably expects will have a material favorable or 

unfavorable impact on net sales or revenues or income from 

continuing operations. If the registrant knows of events that will 

cause a material change in the relationship between costs and 

revenues (such as known future increases in costs of labor or 

materials or price increases or inventory adjustments), the change in 

the relationship shall be disclosed. 

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88. The instructions in the Notes to Item 303 provide the requirements for public 

companies like St. Joe. Instructions 1 - 3 provide: 

1.) The registrant’s discussion and analysis shall be of the 

financial statements and of other statistical data that the registrant 

believes will enhance a reader’s understanding of its financial 

condition, changes in financial condition and results of operations. 

Generally, the discussion shall cover the three year period covered by 

the financial statements and shall use year-to-year comparisons or 

any other formats that in the registrant’s judgment enhance a reader’s 

understanding. However, where trend information is relevant, 

reference to the five year selected financial data appearing pursuant to 

Item 301 of Regulation S-K (§229.301) may be necessary. 

2.) The purpose of the discussion and analysis shall be to provide 

to investors and other users information relevant to an assessment of 

the financial condition and results of operations of the registrant as 

determined by evaluating the amounts and certainty of cash flows 

from operations and from outside sources. 

3.) The discussion and analysis shall focus specifically on 

material events and uncertainties known to management that would 

cause reported financial information not to be necessarily indicative 

of future operating results or of future financial condition. This 

would include descriptions and amounts of (A) matters that would 

have an impact on future operations and have not had an impact in 

the past, and (B) matters that have had an impact on reported 

operations and are not expected to have an impact upon future 

operations. 

89. The Individual Defendants had knowledge of material adverse information 

concerning the recoverability of the carrying values of certain real estate projects in development as 

well as the fair value of homes and homesites substantially completed and ready for sale, and the 

effects that the lack of recoverability of those carrying values would — and did — have on St. Joe 

and its financial statements during the Class Period. These Defendants knew that the decrease in 

sales prices and sales volume, and the Company’s decision to halt development, would necessarily 

negatively affect the value of St. Joe’s assets, yet failed to disclose this to the public. The Individual 

Defendants had an obligation to disclose the financial impact on, and concomitant risks to, St. Joe 

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pursuant to Regulation S-K, Item 303. Their failure to adequately disclose this information renders 

St. Joe’s Class Period SEC filings materially incomplete, false, and misleading. Irrespective of St. 

Joe’s trend and risk disclosures, the financial statements were still misleading because “[f]inancial 

statements not in conformity with GAAP are presumed to be inaccurate or misleading, 

notwithstanding explanatory disclosures in footnotes or in the accountant’s report.” SEC Division of 

Corporate Finance Accounting Disclosure Rules And Practices training material March 31, 2000 and 

December 2010-Topic Four. 

B. Defendants Failed to Comply With Regulation S-X and GAAP 

90. At all relevant times during the Class Period, Defendants represented that the 

Company’s financial statements were prepared in conformity with GAAP. GAAP are those 

principles recognized by the accounting profession as the conventions, rules and procedures 

necessary to define accepted accounting practice at a particular time.55 St. Joe’s annual and interim 

(e.g., quarterly) financial statements must be prepared in accordance with GAAP. The SEC requires 

GAAP presentation in Regulation S-X, 17 C.F.R. §210.4-01(a)(1), which provides that financial 

statements filed both annually and quarterly with the SEC must comply with GAAP, except 

 

55 Prior to September 15, 2009 the hierarchy of authoritative GAAP literature was as follows. 

The highest authority was comprised of Financial Accounting Standards Board (“FASB”) 

Statements of Financial Accounting Statements (“SFAS”), FASB Interpretations (“FIN”), APB 

Opinions (“APB”), and AICPA Accounting Research Bulletins (“ARB”). GAAP provided other 

authoritative pronouncements including, among others, AICPA Statements of Position (“SOP”), 

Consensus Positions of the FASB Emerging Issues Task Force (“EITF”), and the FASB Concepts 

Statements (“SFAC”). On July 1, 2009 the Financial Accounting Standards Board launched the 

FASB Accounting Standards Codification (“ASC”) as the single source of authoritative 

nongovernmental U.S. generally accepted accounting principles. The Codification became effective 

for interim and annual periods ending after September 15, 2009. As a result of the Codification, all 

existing standards documents are superseded as described in SFAS No. 168, “The FASB Accounting 

Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.” Instead of 

issuing new FASB standards, the FASB now issues FASB Accounting Standards Updates (“ASU”). 

The Codification did not change existing GAAP, it only introduced a newly organized structure. 

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quarterly statements are not required to have the same level of footnote disclosure. If the filings do 

not comply with GAAP, they are “presumed to be misleading and inaccurate,” despite footnote or 

other disclosure. See Regulation S-X, 17 C.F.R. §210.4-01(a)(1). 

91. Moreover, as set forth in SFAC No. 1, “Objective of Financial Reporting by Business 

Enterprises,” one of the fundamental objectives of financial reporting is to provide accurate and 

reliable information concerning an entity’s financial performance during the period presented. For 

example, SFAC No. 1, ¶42 states: 

Financial reporting should provide information about an enterprise’s 

financial performance during a period. Investors and creditors often 

use information about the past to help in assessing the prospects of an 

enterprise. Thus, although investment and credit decisions reflect 

investors’ and creditors’ expectations about future enterprise 

performance, those expectations are commonly based at least partly 

on evaluations of past enterprise performance. 

92. It is management’s responsibility to prepare financial statements that conform to 

GAAP. As noted by Public Company Accounting Oversight Board (“PCAOB”) professional 

standards, AU Section 110, “Responsibilities and Functions of the Independent Auditor”: 

Financial statements are management’s responsibility... Management 

is responsible for adopting sound accounting policies and for 

establishing and maintaining internal controls that will, among other 

things, record, process, summarize, and report transactions consistent 

with management’s assertions embodied in the financial statements. 

The entity’s transactions and the related assets, liabilities and equity 

are within the direct knowledge and control of management... Thus, 

the fair presentation of financial statements in conformity with 

Generally Accepted Accounting Principles is an implicit and integral 

part of management’s responsibility. 

93. In Securities Act Release No. 6349 (September 8, 1981), the SEC stated that: 

[I]t is the responsibility of management to identify and address those 

key variables and other qualitative and quantitative factors which are 

peculiar to and necessary for an understanding and evaluation of the 

individual company. 

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94. In Accounting Series Release 173, the SEC reiterated the duty of management to 

present a true representation of a company’s operations: 

[I]t is important that the overall impression created by the financial 

statements be consistent with the business realities of the company’s 

financial position and operations. 

95. As such, GAAP imposes on public companies, such as St. Joe, a duty to: 

(i) disclose in periodic reports filed with the SEC “known trends or 

any known demands, commitments, events or uncertainties” that are 

reasonably likely to have a material impact on a company’s sales 

revenues, income or liquidity, or cause previously reported financial 

information “not to be necessarily indicative of future operating 

results or future financial condition.” 17 C.F.R. §229.303(a)(1)-3(3) 

and Instruction 3; and 

(ii) “make full and prompt announcements of material facts 

regarding the company’s financial condition,” as “[i]nvestors have 

legitimate expectations that public companies are making, and will 

continue to make, prompt disclosure of significant corporate 

developments.” SEC Release No. 34-8995, 3 Fed. Sec. L. Rep. 

(CCH) ¶23,120A, at 17,095 17 C.F.R. §241.8995 (October 15, 1970); 

SEC Release No. 18271, [1981-1982 Transfer Binder] Fed. Sec. L. 

Rep. (CCH) 1183,049, at 84,618 (November 19, 1981). 

96. Pursuant to these requirements, and as detailed herein, the Defendants fraudulently 

represented that the Company’s financial statements complied with SEC regulations and were 

prepared in conformity with GAAP in all material respects, when, in reality, they did not. As a 

result, St. Joe’s financial statements were materially false and misleading. See Regulation S-X, 17 

C.F.R. §210.4-01(a)(1). 

C. Defendants’ GAAP Violations Caused Their Asset Values to Be 

Materially Overstated During the Class Period 

97. St. Joe’s financial statements during the Class Period were materially false and 

misleading because Defendants overstated the value of the Company’s residential real estate assets 

due to their failure to timely and adequately record impairment charges for two categories of assets: 

(1) assets substantially complete and ready for sale; and (2) assets under development (i.e., “to be 

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held and used”). These categories of assets require different accounting treatments under GAAP, 

premised on a fair value analysis. During the Class Period, St. Joe falsely and fraudulently 

misrepresented: (1) fair values; (2) reported prospects for future cash inflows; and (3) misrepresented 

its ability to recover its capitalized costs for these assets. As a result, St. Joe failed to adequately 

disclose material facts regarding the extent to which income was affected throughout the Class 

Period. 

1. Fair Value Analysis 

98. GAAP provides detailed guidance for determining fair value. Beginning in 2008, St. 

Joe was required to comply with SFAS 157, “Fair Value Measurements” (subsequently codified as 

ASC 820) to measure the fair value of its assets, and the Company’s SEC filings state that this was 

St. Joe’s policy.56 SFAS 157 defines fair value as “the price that would be received to sell an asset 

 

56 Prior to 2008, in measuring the fair value of an asset SFAS No. 144 provided the following 

guidance: 

The fair value of an asset...is the amount at which that asset... could 

be bought (incurred) or sold (settled) in a current transaction between 

willing parties, that is, other than in a forced or liquidation sale. 

Quoted market prices in active markets are the best evidence of fair 

value and shall be used as the basis for the measurement, if 

available. However, in many instances, quoted market prices in 

active markets will not be available for the long-lived assets... In 

those instances, the estimate of fair value shall be based on the best 

information available, including prices for similar assets (groups) and 

the results of using other valuation techniques... A present value 

technique is often the best available valuation technique with which 

to estimate the fair value of a long-lived asset (asset group)... 

If a present value technique is used, estimates of future cash flows 

shall be consistent with the objective of measuring fair value. 

Assumptions that marketplace participants would use in their 

estimates of fair value shall be incorporated whenever that 

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or paid to transfer a liability in an orderly transaction between market participants at the 

measurement date.” The definition focuses on the price that would be received to sell the asset (an 

exit price), not the price that would be paid to acquire the asset (an entry price). Fair value is 

intended to be a market-based measurement, not an entity-specific measurement. 

99. To make these measurements market-based, paragraphs 22-30 of SFAS 157 create a 

“fair value hierarchy” that distinguishes among three levels of value:57

1) Level One: Observable inputs based on market data obtained from sources 

independent of the reporting entity, including most frequently the quoted prices 

(unadjusted) in active markets for identical assets or liabilities at the measurement 

date; 

2) Level Two: Observable inputs other than quoted prices for the asset or liability, 

either direct or indirect, including: 

(a) Quoted prices for similar assets or liabilities in active markets. 

(b) Quoted prices for identical/similar assets or liabilities in 

markets that are not active; i.e., in which there are few transactions 

for the asset or liability, the prices are not current, or price 

quotations vary over time or among market makers (some brokered 

markets), or in which little information is released publicly (a 

principal to principal market). 

(c) Observable inputs other than quoted prices for the asset or 

liability (e.g., interest rates and yield curves observable at 

commonly quoted intervals, volatilities, prepayment speeds, loss 

severities, credit risks, and default rates). 

(d) Inputs that are derived principally from or corroborated by 

observable market data by correlation or other means (marketcorroborated inputs); and 

 

information is available without undue cost and effort. Otherwise, 

the entity may use its own assumptions. [SFAS 144 ¶¶22-24] 

57 The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active 

markets (Level 1) and the lowest priority to unobservable inputs (Level 3). SFAS 157 ¶22. 

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3) Level Three: Unobservable inputs, developed from the reporting entity’s 

assessment of market participant assumptions, based on the best information 

available under the circumstances. 

100. In particular, the notion of unobservable or Level 3 inputs applies when there is little, 

if any, market activity for the asset or liability at the measurement date. As the Summary to SFAS 

157 explains: “In those situations, the reporting entity need not undertake all possible efforts to 

obtain information about market participant assumptions. However, the reporting entity must not 

ignore information about market participant assumptions that is reasonably available without undue 

cost and effort.” 

101. St. Joe had both assets that were ready for sale and assets under development which 

are analyzed for impairment using accounting processes largely premised on fair value. The 

Company’s SEC filings filed during the Class Period specifically state St. Joe was complying with 

SFAS 144, SFAS 157 and ASC 820 described above. According to St. Joe’s 2009 10-K, Defendants 

used final sales prices of inventory sold during the period (Level 2 inputs) to determine fair value of 

the Company’s homes and homesites substantially completed and ready for sale. For projects under 

development, an estimate of future cash flows on an undiscounted basis was performed using 

estimated future expenditures necessary to maintain and complete the existing project and using 

management’s best estimates about future sales prices and holding periods (Level 3 inputs). 

2. Assets Substantially Complete and Ready for Sale 

102. St. Joe stated that homes and homesites substantially completed and ready for sale 

were measured at the lower of carrying value (i.e., the amount at which the asset is shown on the 

balance sheet) or fair value less costs to sell. For a long-lived asset classified as held for sale GAAP 

requires that a long-lived asset “shall be measured at the lower of its carrying amount or fair value 

less cost to sell....” [ASC 360-10-35-43] In other words, the Company simply must evaluate each 

reporting period whether the asset’s carrying value is more than its fair value, where fair value is 

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determined following the guidance of ASC 820 as described in ¶98 above. Defendants disclose in 

St. Joe’s Forms 10-K that they comply with ASC 360 and ASC 820 and state that a provision for 

loss would be recorded to the extent that the carrying value exceeds estimated fair value less costs to 

sell. See, e.g., p. 27 of 2009 10-K. The expected gain or loss on sale “shall be recognized for any 

initial or subsequent write-down to fair value less cost to sell. A gain shall be recognized for any 

subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously 

recognized (for a write-down to fair value less cost to sell).” [ASC 360-10-35-40] 

103. As described in this Complaint, at least for RiverTown, SummerCamp and 

WindMark, Defendants knew St. Joe was unable to sell its homes and homesites for amounts that 

supported the excessive carrying values borne by the remaining unsold lots. For example, by the end 

of 2009, the fair value of the homes and homesites ready for sale at RiverTown was approximately 

between $5.6 and $9.4 million, while the carrying value on the Company’s balance sheet was 

approximately $16.7 million, indicating these assets were impaired by $7 to $11 million. See, e.g., 

¶54. Additionally, the number of units developed as a percentage of total planned units was less 

than 5%, 14%, 15% and 50% in RiverTown, WaterSound, WindMark and SummerCamp Beach 

respectively. The Company’s failure to complete these developments has reduced the overall value 

of the developed properties in these projects and has made the remaining properties more difficult to 

sell. The average selling prices had been declining drastically; the average sales price of a 

residential unit decreased nearly 50% from $221 million to $188 million to $114 million in 2008, 

2009 and 2010, respectively. The average sales price for RiverTown’s lots declined by more than 

57% between 2007 and 2010. Likewise, the average sales price for SummerCamp Beach lots 

declined by 62% between 2006 and 2010. Despite this, Defendants failed to record adequate 

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impairment losses to reduce the carrying value of its homes and homesites to fair value, resulting in 

inflated assets, net income and earnings per share during the Class Period. 

3. Assets Under Development 

104. The accounting guidance for assets (projects) under development is different than for 

assets substantially complete and ready for sale as described above. In accordance with Codification 

Subtopic 360-10 (formerly SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived 

Assets) there is essentially a three-step process for recording an impairment loss for assets that are 

held and used: (1) determine when to evaluate an asset for recoverability; (2) perform a 

recoverability test to determine if there is any impairment; and (3) if necessary, record an 

impairment loss based on the asset’s fair value. St. Joe had significant assets under development 

throughout the Class Period, which were classified as held for use and were subject to such 

evaluation. 

a. Step One – Evaluating recoverability: 

105. The first step in the process is to determine when to evaluate an asset for 

recoverability. According to ASC 360-10-35-21, “a long-lived asset shall be tested for 

recoverability whenever events or changes in circumstances indicate that its carrying amount may 

not be recoverable.” Examples of changes in events or circumstances include the following: 

(a) A significant decrease in the market price of a long-lived asset (asset 

group) 

(b) A significant adverse change in the extent or manner in which a longlived asset (asset group) is being used or in its physical condition 

(c) A significant adverse change in legal factors or in the business 

climate that could affect the value of a long-lived asset (asset group), 

including an adverse action or assessment by a regulator 

(d) A accumulation of costs significantly in excess of the amount 

originally expected for the acquisition or construction of a long-lived 

asset (asset group) 

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(e) A current-period operating or cash flow loss combined with a history 

of operating cash flow losses or a projection or forecast that 

demonstrates continuing losses associated with the use of a long-term 

lived asset (asset group) 

(f) A current expectation that, more likely than not, a long-lived asset 

(asset group) will be sold or otherwise disposed of significantly 

before the end of its previously estimated useful life. The term more 

likely than not refers to a level of likelihood that is more than 50 

percent. 

b. Step Two – Performing recoverability test to determine 

impairment: 

106. Once it is determined to evaluate a long-lived asset for recoverability, which St. Joe 

has acknowledged was necessary by purportedly performing an impairment analysis for every 

quarter during the Class Period, the next step is to perform a recoverability test to determine if there 

is any impairment. 

107. GAAP requires that the estimates used by management to test for recoverability must 

be reasonable. Paragraph 30 of ASC 360-10-35 states, “[e]stimates of future cash flows used to test 

the recoverability of a long-lived asset (asset group) shall incorporate the entity’s own assumptions 

about its use of the asset (asset group) and shall consider all available evidence. The assumptions 

used in developing those estimates shall be reasonable in relation to the assumptions used in 

developing other information used by the entity for comparable periods, such as internal budgets and 

projections, accruals related to incentive compensation plans, or information communicated to 

others...” 

108. GAAP also specifically addresses estimates of future cash flows for assets under 

development and for assets under development that are part of an asset group that is in use: 

Estimates of future cash flows used to test the recoverability of a 

long-lived asset (asset group) that is under development shall be 

based on the expected service potential of the asset (group) when 

development is substantially complete. Those estimates shall include 

cash flows associated with all future expenditures necessary to 

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develop a long-lived asset (asset group), including interest payments 

that will be capitalized as part of the cost of the asset (asset group)... 

[ASC 360-10-35-34] 

If a long-lived asset that is under development is part of an asset 

group that is in use, estimates of future cash flow used to test the 

recoverability of that group shall include the cash flows associated 

with future expenditures necessary to maintain the existing service 

potential of the group...as well as the cash flows associated with all 

future expenditures necessary to substantially complete the asset that 

is under development (see the preceding paragraph)... [ASC 360-10-

35-35] 

109. St. Joe disclosed in its SEC filings during the Class Period that it complied with 

GAAP as described in the paragraphs above. For example, the Company states in its 2009 Form 10-

K that “[f]or projects under development, an estimate of future cash flows on an undiscounted basis 

is performed using estimated future expenditures necessary to maintain and complete the existing 

project and using management’s best estimates about future sales prices and holding periods (level 3 

inputs).” 

c. Step Three – Recording the impairment: 

110. If the recoverability test determines an impairment, that impairment loss must be 

recorded based on the fair value of the particular long-lived asset. This process is described in the 

following paragraph: 

111. “An impairment loss shall be recognized only if the carrying amount of a long-lived 

asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived 

asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected 

to result from the use and eventual disposition of the asset (asset group). That assessment shall be 

based on the carrying amount of the asset (asset group) at the date it is tested for recoverability, 

whether in use...or under development....An impairment loss shall be measured as the amount by 

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which the carrying amount of a long-lived asset (asset group) exceeds its fair value.” [ASC 360-10-

35-17] 

112. Once an asset is impaired, an impairment loss is recognized which reduces the 

carrying amount of the asset on the balance sheet and reduces net income on the income statement. 

The adjusted carrying amount becomes the new cost basis and restoration of a previously recognized 

impairment loss is prohibited. [ASC 360-10-35-20] 

113. St. Joe disclosed in its SEC filings that its policy was consistent with that described 

above: “If we determine that an impairment exists due to the inability to recover an asset’s carrying 

value, a provision for loss is recorded to the extent that the carrying value exceeds estimated fair 

value.” See p. 27 of 2009 10-K. 

114. Given the facts detailed above, showing that Defendants should have deemed various 

real estate assets impaired during the Class Period, St. Joe was either not performing the quarterly 

evaluations as required by steps One and Two, or was performing them but failing to record the 

necessary provisions for impairment loss for its impaired projects under development, per step 

Three. As a result, St. Joe violated GAAP and its own publicly-stated policy, and the Company’s 

financial statements fraudulently reported inflated assets, net income, and earnings per share during 

the Class Period. 

115. In assessing the recoverability of its real estate – both assets ready for sale and assets 

under development – St. Joe should have considered certain core factors when estimating its future 

cash flows and fair value, including but not limited to: (1) the impact of market supply and demand; 

(2) the rate of sales and inventory on the market; (3) selling prices including sales incentives; (4) 

current sales; (5) anticipated land development and future development costs to be incurred 

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including interest and overhead costs; (6) price erosion; (7) the time to complete the project and sell 

its units; and (8) risks specific to each land parcel or community. 

116. Defendants knew, or should have known based on overwhelming evidence 

confronting them, that these eight factors supported impairment of its development properties during 

the Class Period. During the Class Period, Defendants cut back on their development plans and 

nixed some construction projects within various developments in order to cut costs. Indeed, in 

RiverTown, less than 5% of the planned 4,500 units have been developed. See ¶46 above. In 

WaterSound, only 14% of the Company’s planned 1,432 units have been developed. See ¶57 above. 

In WindMark, only 15% of the planned 1,516 planned units have been developed. See ¶73 above. 

And, in SummerCamp Beach, less than half of the planned units have been developed. See ¶65 

above. Moreover, the Company’s failure to complete these developments has reduced the overall 

value of the developed properties in these projects and has made the remaining properties more 

difficult to sell. The costs to complete these projects and sell these units would be massive. 

Defendants knew the anticipated development costs, which are established by engineers and 

managers in the planning stages of any project, and are also published in offering documents for the 

bonds to finance the developments. For example, the Main Street (RiverTown) 2008 CDD Bond 

Offering Prospectus indicates the average cost to develop a single family residential unit was 

$89,133 and the estimated costs to develop the remaining residential units were $347,257,758. 

117. In addition, the market demand and rate of sales was steadily decreasing throughout 

the Class Period. According to a Keefe, Bruyette & Woods analyst report dated January 11, 2011, 

there was an “oversupply” of residential real estate in Florida and the “oversupply and lackluster 

conditions” were not expected to improve in the near term. This reiterates what Defendants stated in 

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the Company’s SEC filings.58 Moreover, as detailed in ¶50 there is nine years of homesite inventory 

in central St. Johns County where RiverTown is located, indicating prices are not increasing there. 

118. In addition, the sales rate of St. Joe’s properties dramatically declined during the 

Class Period. St. Joe’s closed sales for residential units dwindled each year from 1,610 in 2005 to 

only 85 in 2010 – an approximate 95% decline.59 Moreover, the Company’s selling prices also 

declined drastically; the average price of a residential unit decreased nearly 50% from $221 million 

to $188 million to $114 million in 2008, 2009 and 2010, respectively. And, as detailed above, 

average sales prices for many of the Company’s developments declined during the Class Period. For 

example, the average sales price for RiverTown’s lots declined by more than 57% between 2007 and 

2010. See ¶51 above. Likewise, the average sales price for SummerCamp Beach lots declined by 

62% between 2006 and 2010. See ¶66 above. In addition, Defendants also knew that the 

Company’s gross profit percentage had decreased from 34% in 2007 to 14% in 2008 to 9% in 2009 

as a result of the price erosion. 

119. Accordingly, had Defendants done a valid recoverability analysis in accordance with 

GAAP and the Company’s own publicly-stated accounting policy, St. Joe would have recorded 

significantly larger impairment losses during the Class Period, resulting in significantly lower 

reported assets, net income and earnings per share. 

 

58 “Our residential sales remain weak due to the collapse of the housing markets in Florida. 

Inventories of resale homes and homesites remain high in our markets and prices continue to decline. 

With the U.S. and Florida economics battling the adverse effects of home foreclosures, severely 

restrictive credit, significant inventories of unsold homes and recessionary economic conditions, 

predicting when real estate markets will return to health remains difficult. Currently, we do not 

expect any significant favorable changes in these market conditions during 2010.” 2009 10-K, p. 37. 

59 The number of residential units for which sales were closed by St. Joe was 1,260 in 2006, 

478 in 2007, 122 in 2008, and 164 in 2009. 

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VI. SCIENTER ALLEGATIONS 

120. The Individual Defendants acted with scienter in that they knew or recklessly 

disregarded that the public documents and statements issued or disseminated in the name of the 

Company were materially false and misleading, and knowingly or severely recklessly substantially 

participated or acquiesced in the issuance or dissemination of such statements or documents as 

primary violators of the federal securities laws. 

121. In addition to the numerous allegations throughout the Complaint that demonstrate 

the Individual Defendants’ scienter, for the reasons below, each of the Individual Defendants knew 

or recklessly disregarded that the public statements and documents the Company issued or 

disseminated were materially false and misleading. Moreover, Individual Defendants were 

motivated to conceal the fraud alleged in order to conduct a public offering of 17,145,000 shares of 

common stock for $35.00 per share during the Class Period. 

122. Indeed, the Individual Defendants, because they received information reflecting the 

true facts regarding St. Joe and its business practices, and through their control over and/or receipt of 

St. Joe’s allegedly materially misleading misstatements and/or their associations with the Company 

that made them privy to confidential proprietary information, were active and culpable participants 

in the fraudulent scheme alleged herein. The Individual Defendants knew and/or severely recklessly 

disregarded the falsity and misleading nature of the information, which they caused to be 

disseminated to the investing public. Their ongoing fraud could not have been perpetrated over such 

a substantial period of time without the knowledge and/or severe recklessness and complicity of the 

personnel at the highest level of the Company, including the Individual Defendants. 

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A. The Individual Defendants Were Heavily Involved In Valuing the 

Company’s Real Estate, a Core Operation 

123. The Individual Defendants were all high-ranking officers who were heavily involved 

with, and had day-to-day responsibilities concerning, the Company’s core business of developing 

and selling residential real estate, including the overarching business of valuing the Company’s 

assets. Defendant Greene was, at all relevant times, the President of the Company and was the CEO 

for the majority of the Class Period, beginning in May 2008. As the President and CEO, Greene was 

intimately involved in all aspects of the Company’s business, including its “priority” and “core 

competency” of entitling land for residential development, and had access to internal reports and 

information regarding the residential real estate projects, their values and impairment charges. 

Moreover, Defendants Greene, McCalmont and Connolly signed the Company’s quarterly and 

annual filings during the Class Period, which stated that the Company’s financial statements were 

prepared in accordance with GAAP and set forth the GAAP provisions that the Company was 

required to follow to appropriately value its real estate assets. 

124. CW3, the Director of Financial Reporting at St. Joe from February 2006 through May 

2010, reported directly to Defendant Connolly and was responsible for compiling and preparing the 

Company’s SEC filings. CW3 stated that Defendants McCalmont and Connolly were responsible 

for determining the quarterly impairment charges. CW3 noted that impairment was a “hot topic” at 

St. Joe’s during CW3’s tenure and confirmed that the Company was undertaking impairment 

analyses for all of its properties on a quarterly basis during the Class Period. CW3 described the 

impairment reviews as “very detailed” and explained that the ultimate analysis was performed by 

Defendants McCalmont and Connolly. Based on these meetings, Defendants McCalmont and 

Connolly told CW3 what impairment charges to report in the Company’s SEC filings. 

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125. CW4 explained that valuations and the impairment process at St. Joe was primarily 

handled by Defendants McCalmont and Greene. Indeed, he stated that “[t]he chief architect” of 

impairment decisions at St. Joe was McCalmont, who had control of the “master spreadsheet” of 

values for real estate developments. CW4 explained that St. Joe’s Director of Accounting Phil Jones 

provided Defendant McCalmont an initial spreadsheet and data about values. McCalmont and 

Greene then met privately to finalize and edit the numbers. Moreover, CW4 explained that based on 

his experiences and observations at St. Joe, there is “no doubt in [his] mind” there was no process 

where they did discounting of future sales at some agreeable NPV [net present value] and then add 

up the NPV’s for all the developments. CW4 stated that St. Joe “didn’t do that.” Instead, St. Joe 

just used “straight cost” for determining value. St. Joe just “kept it at what they paid for it.” St. Joe 

was not projecting values out and then discounting them back. They “didn’t bother with it” and just 

used cost instead. CW4 stated “[w]e just said we spent $50 million developing that property” so that 

is what it is worth. 

126. By way of example, CW4 explained that he had oversight responsibility and tracked 

the numbers for the Summer Camp and Southwood developments. In addition, because CW4 was 

tasked with efforts to find a “strategic partner” to acquire RiverTown and Victoria Park, he also 

closely tracked the numbers for Victoria Park and Rivertown. Based on his experience and 

familiarity with these developments, CW4 is sure that the values on St. Joe books for the four 

developments was the same as the cost St. Joe had expended on those properties. If St. Joe was 

actually calculating present values based on future valuations, the valuations on those developments 

would not have equaled the amounts expended on the developments. There would have been some 

variations, at least on some of the developments. 

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127. Moreover, in late 2007, Defendant Greene asked CW4 to become familiar with the 

values of all of St. Joe’s residential real estate developments because St. Joe planned either to sell or 

to engage in strategic joint venture deals for certain of its properties. Greene asked CW4 to 

participate in negotiating with potential buyers or partners. As part of this process, CW4 produced a 

15-20 tab spreadsheet setting forth the revenue, cost and income of the respective projects he 

reviewed. CW4 determined the business plans that St. Joe had for properties including Seven 

Shores, Victoria Park and RiverTown, did not make any sense because they were using sales and 

absorption rates that were unrealistically high. CW4 also created versions of these spreadsheets to 

provide to potential buyers or partners, using realistic sales prices and absorption rates. CW4 

derived materially lower values than those reported in the Company’s fraudulently misleading SEC 

filings. In April 2008, CW4 wrote a memo to Greene that summarized the status of the troubling 

asset valuations that CW4 had uncovered at Seven Shores, Victoria Park, and RiverTown. 

128. Thus, the Individual Defendants were significantly involved with the Company’s 

impairment accounting and carefully followed development and sales data for St. Joe’s properties. 

B. The Individual Defendants Participated in Quarterly Meetings and 

Weekly Calls Regarding the Company’s Development Projects 

129. In addition to their heavy involvement with impairment valuations, the Individual 

Defendants were also aware of the conditions of the Company’s residential real estate developments 

from quarterly meetings and weekly calls. CW4, who reported directly to Defendant Greene, 

explained that as a Regional Manager, CW4 attended quarterly meetings of a committee known 

internally as the “Management Committee” which consisted of, among others, the other four 

Regional General Managers, Greene, Rummell, and McCalmont and Connolly. At the quarterly 

meetings, the Management Committee would discuss in detail all of the development projects on a 

project-by-project basis. Regional General Managers presented detailed information about their 

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projects, including revenues and revenue projections, absorption rates, sales information, 

development plans and budget requests. Often, sales directors from the various projects would also 

attend the meetings. 

130. In addition to these quarterly meetings, CW4 explained that the Management 

Committee had weekly calls in which Greene, Rummell and McCalmont also participated. On these 

calls the regional general managers provided updates on each of the projects in their regions. Thus, 

Defendants Greene and Rummell and McCalmont were constantly updated on the status of each of 

St. Joe’s residential real estate projects. 

C. Defendants Knew of the Significant Impairments Related to the 

Company’s Core Operation 

131. As is detailed above in ¶¶123-130, the Individual Defendants were all high-ranking 

officers who were intimately involved with, and had day-to-day responsibilities concerning the 

Company’s core business of developing and selling residential real estate, including the overarching 

business of valuing the Company’s assets. Defendant Greene was, at all relevant times, the 

President of the Company and was the CEO for the majority of the Class Period, beginning in May 

2008. As the President and CEO, Greene was intimately involved in all aspects of the Company’s 

business including its “priority” and “core competency” of entitling land for residential development, 

and had access to internal reports and information regarding the residential real estate projects, their 

values and impairment charges. According to CW3 and CW4, Defendants McCalmont, Greene and 

Connolly were intimately involved in the impairment valuation process. The improper accounting 

was not a result of inexperienced accounting managers who did not understand accounting rules. To 

the contrary, Connolly – the Company’s CFO and former Chief Accounting Officer – is a CPA with 

more than 30 years of experience in accounting, auditing, financial management, and business 

development. Connolly trained and was employed as a CPA for seven years with KPMG, a “Big 

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Four” accounting firm that is also the Company’s outside auditor. Subsequently, she served in 

senior financial positions with several other major companies prior to joining St. Joe in 1996. As 

such, Defendant Connolly was thoroughly versed in cost accounting procedures, financial reporting 

and internal accounting control, and would have discovered accounting problems quickly. 

Moreover, Defendants Greene, McCalmont and Connolly signed the Company’s quarterly and 

annual filings during the Class Period, which stated that the Company’s financial statements were 

prepared in accordance with GAAP and set forth the GAAP provisions that the Company was 

required to follow to appropriately value its real estate assets. Accordingly, Defendants knew or 

should have known of the average sales prices of its properties and that based on these prices, the 

carrying values for the remaining developed properties were materially overstated during the Class 

Period. See ¶¶51-54; 66-70. Moreover, Defendants knew from the impairments required by the fair 

value analyses they conducted in conjunction with the sale of the Victoria Park and Seven Shores 

properties, that the carrying values of these properties were materially overstated during the Class 

Period. See ¶¶78-80. 

D. The February 2008 Stock Offering 

132. The February 2008 stock offering also provided Defendants with a significant 

incentive to underreport necessary impairments and thereby overstate the Company’s assets and 

earnings to maintain the value of St. Joe stock. According to CW4, when McCalmont joined the 

Company, St. Joe had $300 to $400 million in debt and was in jeopardy of violating debt covenants. 

To eliminate the debt, the Company offered 17,145,000 shares of common stock for $35.00 a share. 

The Company used the proceeds of the offering to pay off substantially all of its outstanding debt. 

Had the Company taken significant impairment charges, it is highly unlikely that it would have 

received the same high price per share for the offering. 

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E. Defendants Avoided Taking Necessary Impairments to Comply with 

Debt Covenants 

133. Defendants also failed to take necessary impairments to avoid defaulting on its 

financial debt covenants during the Class Period. St. Joe executed a $100 million Credit Agreement 

with Branch Banking & Trust (“BB&T”) Company and BB&T Capital Markets on September 19, 

2008.60 The credit agreement contained several financial covenants relating to leverage (total 

indebtedness to total asset value of no more than 50%); unencumbered asset value (unencumbered 

assets value to unsecured debt of at least 2.00 to 1.00); net worth (at least 95% of the Company’s net 

worth at June 30, 2008); liquidity (at least $20 million, including the undrawn amount of the 

facility); and additional debt (limited to $250 million in the aggregate with a sublimit of $125 

million for secured debt). This credit agreement purposefully did not contain a fixed charge 

covenant, which the Company’s previous credit agreement had included. St. Joe found the fixed 

charge covenant to be “the most problematic covenant in the current real estate market” since it 

required the Company to generate earnings in excess of the Company’s fixed charges each quarter. 

Defendants were clearly aware that the market conditions were causing decreased sales, earnings, 

and fair market values and that St. Joe would not be able to meet this covenant going forward. 

134. Less than six weeks later, on October 30, 2008, Defendants amended the credit 

agreement that had been entered into on September 19, 2008 in order to lower the minimum 

consolidated tangible net worth from 95% to 90% of net worth at June 30, 2008. Defendants 

disclosed in the third quarter 2008 10-Q, “This change will provide us with greater flexibility to 

 

60 At the start of the Class Period, St. Joe had a $500 million revolving credit facility, a $100 

million term loan and $240 million of outstanding senior notes, all of which contained financial 

covenants. In connection with the execution of the $100 million credit agreement on September 19, 

2008, the Company terminated the lenders’ commitments under its $500 million revolving credit 

facility. 

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withstand the current difficult conditions in our real estate markets.” If St. Joe had not been able to 

amend the agreement, the Company would have violated the minimum net worth covenant in the 

fourth quarter of 2008. 

135. Defendants amended the credit agreement for a second time the following quarter, on 

February 20, 2009. Defendants disclosed in the 2008 10-K, “We have twice amended our Credit 

Agreement to provide for a lower minimum tangible net worth requirement. The current required 

level of $900 million will provide us with greater flexibility to withstand the current economic 

recession and the difficult conditions in our real estate markets.” If St. Joe had not been able to 

amend the agreement, the Company would have violated the minimum net worth covenant in the 

first quarter of 2009. 

136. On October 19, 2009, St. Joe again amended the credit agreement to lower the 

minimum tangible net worth requirement by $100 million, down to $800 million. If St. Joe had not 

been able to amend the agreement, the Company would have defaulted on the minimum net worth 

covenant in the fourth quarter of 2009, and all subsequent quarters. 

137. St. Joe could not afford to violate its financial covenants as described in its 10-K’s: 

If we do not comply with the minimum tangible net worth covenant, we could have 

an event of default under our credit facility. There can be no assurance that the bank 

will be willing to amend the facility to provide for more lenient terms prior to any 

such default, or that it will not charge significant fees in connection with any such 

amendment. If we had borrowings under the facility at the time of a default, the bank 

could immediately accelerate all outstanding amounts and file a mortgage on the 

majority of our properties to secure the repayment of the debt. Even if we had no 

outstanding borrowings under the facility at the time of a default, the bank may 

choose to terminate the facility or seek to negotiate additional or more severe 

restrictive covenants or increased pricing and fees. We could be required to seek an 

alternative funding source, which may not be available at all or available on 

acceptable terms. Any of these events could have a material adverse effect on our 

financial condition and results of operations. 

See 2009 Form 10-K at 15. 

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138. Nevertheless, St. Joe’s reported amounts were always dangerously close to violating 

the net worth requirement each quarter during the Class Period. Thus, a significant impairment 

charge in any one quarter during the Class Period would trigger a default on the Company’s financial 

covenants. For this reason, Defendants were motivated to avoid taking significant impairment 

charges during the Class Period. 

F. Defendants Failed to Comply with Disclosure Requirements 

139. In St. Joe’s 2007, 2008 and 2009 financial statements, Defendants knew but failed to 

provide all the required disclosures required by GAAP for fair value measurements for its projects 

that are under development and measured on a non-recurring basis. ASC 820 (formerly FAS 157) 

governs how the Company must measure the fair value of its real estate properties. In its Form 10-K 

for the period ended December 31, 2009, the Company disclosed that for its real estate assets held 

for sale it used final sales prices (level 2 inputs) or estimates of selling prices based on current 

market data (level 3 inputs). For projects under development that did not meet the criteria as held for 

sale, the Company disclosed that an estimate of future undiscounted cash flows including costs to 

complete and estimated future sales proceeds was performed. St. Joe disclosed that it used 

management’s best estimates about future sales prices and holding periods (level 3 inputs) for these 

projects under development, but failed to provide the pertinent disclosures necessary to enable 

investors to assess the inputs used to develop these fair value measurements. According to ASC 

820-10-50-5 (formerly FAS 157 ¶33), St. Joe was required to 

...disclose information that enables users of its financial statements to assess the 

inputs used to develop those measurements. To meet that objective, the reporting 

entity shall disclose all of the following information for each interim and annual 

period separately for each major category of assets and liabilities: 

a. The fair value measurements recorded during the period and the reasons for the 

measurements 

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b. The level within the fair value hierarchy in which the fair value measurements in 

their entirety fall, segregating fair value measurements using any of the 

following: 1. Quoted prices in active markets for identical assets or liabilities 

(Level 1) 2. Significant other observable inputs (Level 2) 3. Significant 

unobservable inputs (Level 3). 

c. For fair value measurements using significant unobservable inputs (Level 3), a 

description of the inputs and the information used to develop the inputs.

d. The inputs and valuation technique(s) used to measure fair value and a discussion 

of changes, if any, in the valuation technique(s) and related inputs used to 

measure similar assets and/or liabilities in prior periods. 

140. It was not until after Einhorn’s presentation and the filing of this action that 

Defendants belatedly and for the first time disclosed the inputs for the accounting estimate related to 

real estate impairment evaluation for projects under development. In the Form 10-K filed March 3, 

2011 for the year ended December 31, 2010, they stated as follows: 

The projection of undiscounted cash flows requires that management develop various 

assumptions including: 

• the projected pace of sales of homesites based on estimated market 

conditions and the Company’s development plans; 

• projected price appreciation over time, which can generally range from 0% to 

7% annually; 

• the amount and trajectory of price appreciation over the estimated selling 

period; 

• the length of the estimated development and selling periods, which can range 

from 5 years to 17 years depending on the size of the development and the 

number of phases to be developed; 

• the amount of remaining development costs and holding costs to be incurred 

over the selling period; 

• in situations where development plans are subject to change, the amount of 

entitled land subject to bulk land sales or alternative use and the estimated 

selling prices of such property; 

• for commercial development property, future pricing which is based on sales 

of comparable property in similar markets; and 

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• assumptions regarding the intent and ability to hold individual investments in 

real estate over projected periods and related assumptions regarding available 

liquidity to fund continued development. 

For operating properties, an estimate of undiscounted cash flows requires 

management to make similar assumptions about the use and eventual disposition of 

such properties. Some of the significant assumptions that are used to develop the 

undiscounted cash flows include: 

• for investments in hotel and rental condominium units, average occupancy 

and room rates, revenues from food and beverage and other amenity 

operations, operating expenses and capital expenditures, and the amount of 

proceeds to be realized upon eventual disposition of such properties as 

condo-hotels or condominiums, based on current prices for similar units 

appreciated to the expected sale date; 

• for investments in commercial or retail property, future occupancy and rental 

rates and the amount of proceeds to be realized upon eventual disposition of 

such property at a terminal capitalization rate; and 

• for investments in golf courses, future rounds and greens fees, operating 

expenses and capital expenditures, and the amount of proceeds to be realized 

upon eventual disposition of such properties at a multiple of terminal year 

cash flows. 

 Other properties that management does not intend to sell in the near term or under 

current market conditions are evaluated for impairment based on management’s best 

estimate of the long-term use and eventual disposition of the property. 

See pages 28-29 of the 2010 Form 10-K. 

141. Prior to this filing, no such disclosures were made by Defendants regarding 

assumptions used in determining fair value in any of the other financial statements filed (or 

elsewhere). St. Joe disclosed that it used significant unobservable inputs (level 3) for its projects 

under development in order to value those assets. See p. F-20, 2009 10-K. Thus, the disclosure 

requirements of ASC 820-10-50-5 and FAS 157 ¶33 clearly applied but Defendants wholly ignored 

them. By omitting these required disclosures, investors were unable to assess the inputs used to 

develop the Company’s fair value measurements for projects that were under development during 

the vast majority of the Class Period. 

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G. The Individual Defendants Were Highly Compensated During the 

Class Period 

142. Throughout the Class Period, the Individual Defendants profited from their false 

portrayal of the Company’s financial health, as St. Joe maintained grossly inflated carrying values on 

its books. According to the Company’s 2010 and 2011 Proxies, filed on March 29, 2010 and April 

6, 2011, respectively, Defendant Greene received total compensation of $2,085,941 in 2007, 

$6,697,540 in 2008, $2,808,270 in 2009, and $4,508,249 in 2010. He received grants of stock worth 

$312,517, $5,423,650, $1,109,736, and $2,344,059 on the grant dates in 2007, 2008, 2009, and 2010, 

respectively.61 Greene also sold shares of St. Joe stock or exercised his options for a total profit of 

$1,513,902.85 during the Class Period. 

143. According to the Company’s 2009 Proxy, filed on March 31, 2009, Defendant 

Rummell received total compensation of $2,836,798 in 2007 and $1,400,197 in 2008. According to 

his most recent Form 4, filed on October 12, 2007, Rummell owned 101,317 St. Joe shares directly 

and 920,695 shares through an LLC and limited partnerships. 

144. According to the Company’s 2010 and 2011 Proxies, filed on March 29, 2010 and 

April 6, 2011, respectively, Defendant McCalmont received total compensation of $4,078,507 in 

2007, $1,593,077 in 2008, $1,256,531 in 2009, and $1,807,635 in 2010. He received grants of stock 

worth $1,828,015, $986,929, $428,490, and $835,756 on the grant dates in 2007, 2008, 2009, and 

2010, respectively. McCalmont also sold shares of St. Joe’s stock or exercised his options for a total 

profit of $773,026.52 during the Class Period. Defendant Connolly also sold shares or exercised 

options for a total profit of $297,399.83 during the Class Period. 

 

61 2007 Proxy filed on April 13, 2007; 2008 Proxy, filed on March 28, 2008; 2009 Proxy filed 

on March 31, 2009. 

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VII. DEFENDANTS’ FALSE AND MISLEADING STATEMENTS AND 

OMISSIONS 

145. Because asset values and impairment charges are a key element of each core financial 

metric reported by St. Joe and relied upon by investors, and because St. Joe failed to take proper 

impairment charges, all of St. Joe’s key financial metrics that incorporate falsely and fraudulently 

understated impairment charges during the Class Period – including St. Joe’s impairment charges, 

asset values, income or loss from continuing operations, net income or loss and earnings per share 

(“EPS”) – were rendered materially false and misleading. 

A. Fourth Quarter and Full Year 2007 Financial Results 

146. On February 19, 2008, the first day of the Class Period, the Company issued a press 

release on Form 8-K entitled “The St. Joe Company (NYSE: JOE) Reports Fourth Quarter And Full 

Year 2007 Financials.” The press release reported that the Company’s investment in real estate was 

$943.5 million, and stated: 

The St. Joe Company (NYSE: JOE) today announced Net Income for 

the fourth quarter 2007 of $1.0 million, or $0.01 per share, compared 

with $22.3 million, or $0.30 per share, for the fourth quarter of 

2006... 

For the full year 2007, JOE had Net Income of $39.2 million, or 

$0.53 per share, compared with $51.0 million, or $0.69 per share, for 

the full year 2006. Full year results were affected by: 

• Pre-tax impairment charges for the full year 2007 totaled 

$23.2 million, or $0.19 per share after tax, which included: 

• Approximately $13.6 million primarily related to a writedown of costs on homes and home sites in JOE’s residential 

segment to approximate fair value; 

* * * 

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Consolidated Results 

 Quarter End 

Dec. 31, 2007 

Year End 

Dec. 31, 2007 

Impairment Losses $600,000 $13,600,000 

Pre-tax Income from 

Continuing Operations

$4,800,000 $18,400,000 

Net Income $1,000,000 $39,200,000 

Net Income Per Share $0.01 $0.53 

* * * 

Summary Balance Sheet 

 December 31, 2007 

Assets 

Investments in real estate $943,500,000 

147. On February 25, 2008, the Company filed its 2007 Annual Report with the SEC on 

Form 10-K. The Company’s Form 10-K reaffirmed the Company’s 2007 financial results, financial 

position, and the reported value of the Company’s investment in real estate as announced on 

February 19, 2008. With respect to the Company’s asset impairment costs, St. Joe’s 2007 Annual 

Report stated: 

During 2007, we recorded total asset impairment costs of 

$23.2 million, $13.0 million of which related to the write down of 

capitalized costs at certain projects due to changes in development 

plans and the impairment of completed homes in several of our 

communities due to current market conditions. If market conditions 

were to continue to deteriorate, and the market values for our home 

sites, remaining homes held in inventory and other project land were 

to fall below the book value of these assets, we would need to take 

additional write-downs of the book value of these assets. Any such 

write-downs would decrease the value of these assets on our balance 

sheet and would reduce our net income. 

* * * 

Impairment Losses. We review our long-lived assets for impairment 

whenever events or changes in circumstances indicate that the 

carrying amount of an asset may not be recoverable. Homes and 

home-sites substantially completed and ready for sale are measured 

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65

at the lower of carrying value or fair value less costs to sell. For 

projects under development, an estimate of future cash flows on an 

undiscounted basis is performed using estimated future expenditures 

necessary to maintain the existing service potential of the project and 

using management’s best estimates about future sales prices and 

holding periods. The decline in demand and market prices for 

residential real estate caused us to conclude that carrying amounts 

within our residential real estate segment may not be recoverable, and 

we performed an impairment analysis. As a result of our impairment 

analyses, we recorded an impairment charge of $13.6 million in the 

residential real estate segment. 

* * * 

In 2007 we recorded impairments totaling $13.6 million primarily 

due to current adverse market conditions for residential real estate. 

Approximately $5.2 million of the impairments related to capitalized 

costs at certain projects due to changes in development plans, 

approximately $7.8 million related primarily to completed spec 

homes in several communities and approximately $0.6 million related 

to the modified terms of certain promissory notes. 

* * * 

Consolidated Results 

 Year End Dec. 31, 

2007 

Impairment Losses $13,609,000 

Pre-tax Income from Continuing 

Operations 

$18,406,000 

Net Income $39,207,000 

Net Income Per Share $0.53 

* * * 

Balance Sheet 

 December 31, 2007 

Assets 

Investments in real estate $943,540,000 

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148. The Company’s Form 10-K for 2007 was signed by Defendants Greene and 

Connolly. Moreover, all of the Quarterly and Annual Reports also contained the certification 

required by Sarbanes-Oxley (“SOX”), which was signed by Defendants Rummell and McCalmont: 

I, [Peter S. Rummell / William S. McCalmont], certify that: 

1. I have reviewed this annual report on Form 10-K for the year 

ended December 31, 2007 of The St. Joe Company; 

2. Based on my knowledge, this report does not contain any untrue 

statement of a material fact or omit to state a material fact necessary 

to make the statements made, in light of the circumstances under 

which such statements were made, not misleading with respect to the 

period covered by this report; 

3. Based on my knowledge, the financial statements, and other 

financial information included in this report, fairly present in all 

material respects the financial condition, results of operations and 

cash flows of the registrant as of, and for, the periods presented in 

this report; 

4. The registrant’s other certifying officer and I are responsible for 

establishing and maintaining disclosure controls and procedures (as 

defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal 

control over financial reporting (as defined in Exchange Act Rules 

13a-15(f) and 15d-15(f)) for the registrant and have: 

(a) Designed such disclosure controls and procedures, or caused 

such disclosure controls and procedures to be designed under our 

supervision, to ensure that material information relating to the 

registrant, including its consolidated subsidiaries, is made known 

to us by others within those entities, particularly during the 

period in which this report is being prepared; 

(b) Designed such internal control over financial reporting, or 

caused such internal control over financial reporting to be 

designed under our supervision, to provide reasonable assurance 

regarding the reliability of financial reporting and the 

preparation of financial statements for external purposes in 

accordance with generally accepted accounting principles; 

(c) Evaluated the effectiveness of the registrant’s disclosure controls 

and procedures and presented in this report our conclusions 

about the effectiveness of the disclosure controls and procedures, 

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as of the end of the period covered by this report based on such 

evaluation; and 

(d) Disclosed in this report any change in the registrant’s internal 

control over financial reporting that occurred during the 

registrant’s most recent fiscal quarter that has materially 

affected, or is reasonably likely to materially affect, the 

registrant’s internal control over financial reporting; and 

5. The registrant’s other certifying officer and I have disclosed, 

based on our most recent evaluation of internal control over financial 

reporting, to the registrant’s auditors and the audit committee of the 

registrant’s board of directors: 

(a) All significant deficiencies and material weaknesses in the 

design or operation of internal control over financial reporting 

which are reasonably likely to adversely affect the registrant’s 

ability to record, process, summarize and report financial 

information; and 

(b) Any fraud, whether or not material, that involves management or 

other employees who have a significant role in the registrant’s 

internal control over financial reporting. 

* * * 

Pursuant to 18 USC §1350, the undersigned officer of The St. Joe 

Company (the “Company”) hereby certifies that the Company’s 

Annual Report on Form 10-K for the year ended December 31, 2007 

(the “Report”) fully complies with the requirements of Section 13(a) 

or 15(d), as applicable, of the Securities Exchange Act of 1934 and 

that the information contained in the Report fairly presents, in all 

material respects, the financial condition and results of operations of 

the Company.62 

149. For the reasons stated in the Substantive Allegations above, in Section V above, and 

as further detailed herein, the statements in ¶¶146-148 above were materially false and misleading 

when made or omitted to make such statements not false and misleading because: (1) the economic 

 

62 Each of the Company’s subsequent Class Period Form 10-Qs and 10-Ks also contain 

Sarbanes Oxley required certifications signed by certain of the Officer Defendants which are 

substantially similar to this certification. 

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downturn and associated real estate crash severely impacted the Company’s core operation – real 

estate development; (2) many of the Company’s large residential real estate projects, including 

RiverTown, the WaterSounds, SummerCamp Beach and WindMark remained largely undeveloped; 

(3) St. Joe had substantially halted further development activity at its residential real estate projects; 

(4) sales volumes at its residential real estate properties plummeted during the Class Period; (5) the 

average sales prices at St. Joe’s projects sharply declined; (6) as a result, Defendants violated GAAP 

and SEC regulations by failing to take appropriate impairment charges to their residential real estate 

assets; (7) accordingly, St. Joe had materially overstated its asset values and earnings during the 

Class Period; (8) St. Joe’s financial statements failed to comply with GAAP, despite Defendants’ 

false assurances; and (9) the Company’s Class Period Forms 10-K and 10-Q were also materially 

false and misleading because they failed to disclose (in violation of Item 303 of regulation S-K) that 

the Company’s decision to halt development, the decrease in sales volume, and the decline in 

average sales prices had a material adverse effect on the Company’s earnings. 

B. First Quarter 2008 Financial Results 

150. On May 6, 2008, the Company issued a press release on Form 8-K entitled “The St. 

Joe Company (NYSE: Joe) Reports First Quarter 2008 Financial Results.” The press release 

reported that the Company’s investment in real estate was $950.7 million, and stated: 

The St. Joe Company (NYSE: JOE) today announced Net Income for 

the first quarter 2008 increased $12.4 million to $32.1 million, or 

$0.40 per share, compared to Net Income of $19.7 million, or $0.27 

per share, for the first quarter of 2007. JOE’s first quarter results 

included pre-tax impairment charges of $2.3 million, or $.02 per 

share after taxes, as a result of continuing declines in sales and listing 

prices principally in our primary communities. Also included in 2008 

results are pre-tax restructuring charges of $0.5 million, or less than 

$0.01 per share after tax, compared to $3.2 million, or $0.03 per share 

after tax, in 2007. All per share references in this release are 

presented on a diluted basis. 

* * * 

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Consolidated Results 

 Quarter Ended 

March 31, 2008 

Impairment Losses $2,300,000 

Pre-tax Income from 

Continuing Operations 

$49,500,000 

Net Income $32,100,000 

Net Income Per Share $0.40 

* * * 

Summary Balance Sheet 

 March 31, 2008 

Assets 

Investments in real estate $950,700,000 

151. Also on May 6, 2008, St. Joe filed its Quarterly Report with the SEC on Form 10-Q. 

The Company’s Form 10-Q was signed by Defendants Rummell and Connolly, and reaffirmed the 

Company’s quarterly financial results, financial position, impairment losses and the reported value 

of the Company’s investment in real estate. Additionally, the Form 10-Q discussed asset 

impairments, reporting: 

The Company reviews its long-lived assets for impairment whenever 

events or changes in circumstances indicate that the carrying amount 

of an asset may not be recoverable. Homes and home-sites 

substantially completed and ready for sale are measured at lower of 

carrying value or fair value less costs to sell. For projects under 

development, an estimate of future cash flows on an undiscounted 

basis is performed using estimated future expenditures necessary to 

maintain the existing service potential of the project and using 

management’s best estimates about future sales prices and holding 

periods. The continued decrease in demand and market prices for 

residential real estate during the first quarter of 2008 indicated that 

certain carrying amounts within our residential real estate segment 

may not be recoverable. As a result of the first quarter 2008 

impairment analysis, the Company has recorded an impairment 

charge of $2.3 million in the residential real estate segment. 

* * * 

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Consolidated Results 

 Quarter End Mar. 

31, 2008 

Impairment Loss $2,257,000 

Pre-tax Income from 

Continuing Operations 

$49,447,000 

Net Income $32,052,000 

Net Income Per Share $0.40 

* * * 

Balance Sheet 

 March 31, 2008 

Assets 

Investments in real estate $950,669,000 

152. Following the reporting of its financial results on May 6, 2008, the Company held its 

quarterly earnings call for the first quarter 2008. Defendants Greene, Rummell and McCalmont 

participated in the call and discussed the Company’s impairment charges for residential real estate. 

Defendant Rummell stated: 

Joe’s first quarter results included pretax impairment charges of $2.3 

million or $0.02 a share after-tax as a result of continuing declines in 

sales and listing prices in our primary communities. Also included in 

first quarter results are pretax restructuring charges of $0.5 million or 

less than $0.01 per share after-tax, compared to $3.2 million or $0.03 

a share after-tax in 2007. 

153. The statements in ¶¶150-152 were false and misleading when made for substantially 

the same reasons set forth in ¶149. 

C. Second Quarter 2008 Financial Results 

154. On August 5, 2008, the Company issued a press release on Form 8-K entitled “The 

St. Joe Company (NYSE: JOE) Reports Second Quarter 2008 Financial Results.” The press release 

reported that the Company’s investment in real estate was $947.6 million, and stated: 

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The St. Joe Company (NYSE: JOE) today announced a Net Loss for 

the second quarter 2008 of $(20.8) million, or $(0.23) per share, 

compared to Net Income of $25.3 million, or $0.34 per share, for the 

second quarter of 2007, a decrease of $46.1 million. All per share 

references in this release are presented on a diluted basis. JOE’s 

second quarter results included the following significant charges: 

* * * 

• Pre-tax impairment of $1.0 million, or $0.01 per share aftertax, associated with certain of JOE’s communities and the writedown of a homebuilder note receivable; and 

* * *

Net income for the first half of 2008 was $11.2 million, or $0.13 per 

share, compared to $45.0 million, or $0.61 per share, for the first half 

of 2007. Included in results for the first six months of 2008 were the 

following significant charges: 

* * * 

• Pre-tax impairment of $3.2 million, or $0.02 per share aftertax; and 

* * * 

Consolidated Results 

 Quarter End 

Jun. 30, 2008 

Impairment Losses $1,000,000 

Pre-tax Income 

(Loss) from 

Continuing 

Operations 

($32,400,000) 

Net Income ($20,800,000) 

Net Income Per 

Share 

$0.23 

* * * 

Summary Balance Sheet 

 June 30, 2008 

Assets 

Investments in real estate $947,600,000 

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155. Also on August 5, 2008, St. Joe filed its Quarterly Report with the SEC on Form 10-

Q. The Company’s Form 10-Q was signed by Defendants Greene and Connolly, and reaffirmed the 

Company’s quarterly financial results, financial position, and the reported value of the Company’s 

investment in real estate. Additionally, the Form 10-Q discussed asset impairments, reporting: 

Impairment Losses. We review our long-lived assets for impairment 

whenever events or changes in circumstances indicate that the 

carrying amount of an asset may not be recoverable. Homes and 

home-sites substantially completed and ready for sale are measured 

at the lower of carrying value or fair value less costs to sell. For 

projects under development, an estimate of future cash flows on an 

undiscounted basis is performed using estimated future expenditures 

necessary to maintain the existing service potential of the project and 

using management’s best estimates about future sales prices and 

holding periods. The continued decline in demand and market prices 

for residential real estate during the first six months of 2008 caused 

us to evaluate certain carrying amounts within our residential real 

estate segment. As a result of our impairment analyses, we recorded 

an impairment charge in our residential real estate segment of $0.2 

million for the second quarter of 2008 and $2.2 million for the first 

quarter 2008 primarily related to completed homes in several 

communities. In addition, we recorded a charge of $0.8 million 

related to the write down of a renegotiated builder note receivable 

during the second quarter 2008. 

Consolidated Statements of Income 

 Quarter End 

Jun. 30, 2008 

Impairment Losses $976,000 

Pre-tax Income (Loss) 

from Continuing 

Operations 

($32,449,000) 

Net Income ($20,818,000) 

Net Income Per Share $0.23 

* * * 

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Balance Sheet 

 June 30, 2008 

Assets 

Investments in real estate $947,644,000 

156. The statements in ¶¶154-155 were materially false and misleading when made for 

substantially the same reasons as stated in ¶149. 

D. Third Quarter 2008 Financial Results 

157. On November 4, 2008, the Company issued a press release on Form 8-K entitled 

“The St. Joe Company (NYSE: JOE) Reports Third Quarter 2008 Financial Results.” The press 

release reported that the Company’s investment in real estate was $930.4 million, and stated: 

The St. Joe Company (NYSE: JOE) today announced a Net Loss for 

the third quarter 2008 of $(19.2) million, or $(0.21) per share, 

compared to a Net Loss of $(6.8) million, or $(0.09) per share, for the 

third quarter of 2007. 

* * * 

Year-to-Date Results 

Net Loss for the first nine months of 2008 was $(8.0) million, or 

$(0.09) per share, compared to Net Income of $38.2 million, or $0.51 

per share, for the first nine months of 2007. 

Consolidated Statements of Income 

 Quarter End 

Sept. 30, 2008 

Impairment Losses $1,300,000 

Pre-tax Income 

(Loss) from 

Continuing 

Operations 

($30,600,000) 

Net Income (Loss) ($19,200,000) 

Net Income (Loss) 

Per Share 

($0.21) 

* * * 

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Summary Balance Sheet 

 Sept. 30, 2008 

Assets 

Investments in real estate $930,400,000 

158. Also on November 4, 2008, St. Joe filed its Quarterly Report with the SEC on Form 

10-Q. The Company’s Form 10-Q was signed by Defendants Greene and Connolly, and reaffirmed 

the Company’s quarterly financial results, financial position, and the reported value of the 

Company’s investment in real estate. The Form 10-Q discussed asset impairments, reporting: 

The Company reviews its long-lived assets for impairment whenever 

events or changes in circumstances indicate that the carrying amount 

of an asset may not be recoverable. Homes and home-sites 

substantially completed and ready for sale are measured at lower of 

carrying value or fair value less costs to sell. For projects under 

development, an estimate of future cash flows on an undiscounted 

basis is performed using estimated future expenditures necessary to 

maintain the existing project and using management’s best estimates 

about future sales prices and holding periods. The continued 

decrease in demand and market prices for residential real estate 

during the first nine months of 2008 and 2007 indicated that certain 

carrying amounts within the Company’s residential real estate 

segment may not be recoverable. In addition, during the second 

quarter 2008 the Company recorded an impairment charge of $0.8 

million related to the write down of a renegotiated builder note 

receivable. As a result of its 2008 impairment analyses, the Company 

has recorded aggregate impairment charges of $1.3 million and $4.6 

million in the residential real estate segment for the three and nine 

months ended September 30, 2008. The Company also recorded an 

impairment charge of $13.0 million in the third quarter of 2007. 

* * * 

Consolidated Statements of Income 

 Quarter End 

Sept. 30, 2008 

Impairment Losses $1,329,000 

Pre-tax Income (Loss) 

from Continuing 

Operations 

($30,631,000) 

Net Income (Loss) ($19,198,000) 

Net Income (Loss) Per ($0.21) 

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Share 

* * * 

Balance Sheet 

 Sept. 30, 2008 

Assets 

Investments in real estate $930,420,000 

159. The statements in ¶¶157-158 were materially false and misleading when made for 

substantially the same reasons as stated in ¶149. 

E. Fourth Quarter And Full Year 2008 Financial Results 

160. On February 24, 2009, the Company issued a press release on Form 8-K entitled “The 

St. Joe Company (NYSE: Joe) Reports Fourth Quarter and Full Year 2008 Financial Results.” The 

press release reported that the Company’s investment in real estate was $890.6 million, and stated: 

The St. Joe Company (NYSE: JOE) today announced a Net Loss for 

the fourth quarter 2008 of $(27.9) million, or $(0.31) per share, which 

includes non-cash charges of $57.9 million, or $0.36 per share after 

tax. This compares to Net Income of $1.0 million, or $0.01 per share, 

for the fourth quarter of 2007, which includes non-cash charges of 

$10.5 million, or $0.09 per share after tax. All per-share references in 

this release are presented on a diluted basis. 

JOE’s fourth quarter 2008 results include the following non-cash 

charges: 

• Pre-tax impairment charges of $55.8 million, or $0.34 per 

share after tax, including: 

• $28.3 million write-down related to its SevenShores 

condominium development project; 

* * * 

• $8.3 million charge for the write-down of costs to 

approximate fair value on homes in several JOE 

communities; 

* * * 

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Full-Year Results 

For the full year 2008, JOE had a Net Loss of $(35.9) million, or 

$(0.40) per share, compared to Net Income of $39.2 million, or $0.53 

per share, for the full year 2007. Full year 2008 results include the 

following charges which totaled $109.5 million, or $0.69 per share 

after tax: 

• Pre-tax impairment charges totaling $60.4 million and pre-tax 

loss of $1.9 million related to abandoned property, or an 

aggregate of $0.35 per share after tax; 

* * * 

The full-year 2007 results were affected by the following: 

• Pre-tax impairment charges totaling $23.2 million, or $0.19 

per share after tax, which includes $9.6 million recorded in 

discontinued operations; 

* * * 

Summary Balance Sheet 

 December 31, 2008 

Assets 

Investments in real estate $890,600,000 

* * * 

Consolidated Statements of Income 

 Quarter End 

Dec. 31, 2008 

Impairment Losses $55,800,000 

Pre-tax Income (Loss) 

from Continuing 

Operations 

($48,700,000) 

Net Income ($27,900,000) 

Net Income Per Share ($0.31) 

161. Later on February 24, 2009, St. Joe held its quarterly earnings call for the fourth 

quarter and full year 2008. Defendants Greene and McCalmont participated on the call, reaffirming 

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the Company’s quarterly financial results and financial position, and discussing the Company’s 

impairment charges for residential real estate. Defendant McCalmont stated: 

The difficult economic conditions caused us to incur significant noncash impairment charges in the fourth quarter totaling $55.8 million 

pretax or $0.34 per share after tax. These non-cash impairment 

charges were primarily related to three items. First, we made a 

decision to reduce prices on the majority of our existing housing 

inventory to reflect current market conditions, facilitate sales and 

eliminate continuing carrying costs. These charges affected 114 

homes and totaled $8.2 million pretax....

162. On February 24, 2009, St. Joe filed its 2008 Annual Report with the SEC on Form 

10-K. The Company’s Form 10-K was signed by Defendants Greene and McCalmont, among 

others, and reaffirmed the Company’s 2008 financial results, financial position, and the reported 

value of the Company’s investment in real estate. With respect to the Company’s asset impairment 

costs, St. Joe’s 2008 Annual Report stated: 

During 2008, we recorded total asset impairment costs of $60.5 

million, $41.3 million of which primarily related to the write-down of 

capitalized costs at certain projects and the impairment of completed 

homes in several of our communities due to current market 

conditions. If market conditions were to continue to deteriorate, and 

the market values for our homesites, remaining homes held in 

inventory and other project land were to fall below the book value of 

these assets, we could be required to take additional write-downs of 

the book value of those assets. 

* * * 

Impairment of Long-lived Assets and Goodwill. Our long-lived assets, 

primarily real estate held for investment, are carried at cost unless 

circumstances indicate that the carrying value of the assets may not 

be recoverable. If we determine that an impairment exists due to the 

inability to recover an asset’s carrying value, a provision for loss is 

recorded to the extent that the carrying value exceeds estimated fair 

value. If such assets were held for sale, the provision for loss would 

be recorded to the extent that the carrying value exceeds estimated 

fair value less costs to sell. 

* * * 

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We review our long-lived assets for impairment whenever events or 

changes in circumstances indicate that the carrying amount of an 

asset may not be recoverable. Homes and homesites substantially 

completed and ready for sale are measured at the lower of carrying 

value or fair value less costs to sell. For projects under development, 

an estimate of future cash flows on an undiscounted basis is 

performed using estimated future expenditures necessary to maintain 

and complete the existing project and using management’s best 

estimates about future sales prices and holding periods. The 

continued decline in demand and market prices for residential real 

estate during 2008 caused us to evaluate certain carrying amounts 

within our residential real estate segment. As a result of our property 

impairment analyses, we recorded aggregate impairment charges in 

our residential real estate segment of $40.3 million during 2008. In 

addition, we recorded a charge of $1.0 million related to the write 

down of a renegotiated builder note receivable during 2008. 

* * * 

Asset Impairments 

* * *

As a result of the Company’s property impairment analyses for 2008, 

it recorded aggregate impairment charges of $41.3 million consisting 

of $12.0 million related to completed homes in several communities, 

$28.3 million related to the Company’s SevenShores condominium 

project and $1.0 million related to the write down of a renegotiated 

builder note receivable. 

* * * 

Summary Balance Sheet 

 December 31, 2008 

Assets 

Investments in real estate $890,583,000 

* * * 

Consolidated Statements of Income 

 Year End Dec. 31, 

2008 

Impairment Losses $60,354,000 

Pre-tax Income (Loss) from $(62,356,000) 

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Continuing Operations 

Net Income $(35,883,000) 

Net Income Per Share ($0.40) 

163. The Notes to Consolidated Financial Statements section of the 2008 Form 10-K also 

discussed asset impairments and the Company’s segment results, and provided the carrying values of 

the Company’s residential real estate and accumulated depreciation. In relevant part, the Form 10-K 

reported: 

Segment Results 

Residential Real Estate 

* * * 

Homes and homesites substantially completed and ready for sale are 

measured at lower of carrying value or fair value less costs to sell. 

For projects under development, an estimate of future cash flows on 

an undiscounted basis is performed. The overall decrease in demand 

and market prices for residential real estate indicated that certain 

carrying amounts within our residential real estate segment may not 

be recoverable. As a result of our impairment analyses for 2008, we 

recorded aggregate impairment charges of $41.3 million, consisting 

of $12.0 million related to completed homes in several communities, 

$28.3 million related to our SevenShores condominium project, and 

$1.0 million related to the write down of a renegotiated builder note 

receivable. 

164. The statements in ¶¶160-163 were materially false and misleading when made for 

substantially the same reasons as stated in ¶149. 

F. First Quarter 2009 Financial Results 

165. On May 5, 2009, the Company issued a press release on Form 8-K entitled “The St. 

Joe Company (NYSE: JOE) Reports First Quarter 2009 Financial Results.” The press release 

reported that the Company’s investment in real estate was $888.1 million, and stated: 

The St. Joe Company (NYSE: JOE) today announced a Net Loss for 

the first quarter 2009 of $(11.7) million, or $(0.13) per share, which 

includes non-cash charges of $1.5 million, or $0.01 per share after 

tax. This compares to Net Income of $32.1 million, or $0.40 per 

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80

share, for the first quarter of 2008, which included non-cash charges 

of $2.8 million, or $0.02 per share after tax. All per-share references 

in this release are presented on a diluted basis. 

Consolidated Statements of Income 

 Quarter End 

March 31, 2009 

Impairment Losses $1,500,000 

Pre-tax Income (Loss) from 

Continuing Operations 

($18,600,000) 

Net Income ($11,700,000) 

Net Income Per Share ($0.13) 

* * * 

Summary Balance Sheet 

 Mar. 31, 2009 

Assets 

Investments in real estate $888,100,000 

166. Also on May 5, 2009, St. Joe filed its Quarterly Report with the SEC on Form 10-Q. 

The Company’s Form 10-Q was signed by Defendants Greene and Connolly, and reaffirmed the 

Company’s quarterly financial results, financial position, and the reported value of the Company’s 

investment in real estate. Additionally, the Form 10-Q discussed asset impairments, reporting: 

The Company reviews its long-lived assets for impairment whenever 

events or changes in circumstances indicate that the carrying amount 

of an asset may not be recoverable. Homes and homesites 

substantially completed and ready for sale are measured at lower of 

carrying value or fair value less costs to sell. For projects under 

development, an estimate of future cash flows on an undiscounted 

basis is performed using estimated future expenditures necessary to 

maintain and complete the existing project and using management’s 

best estimates about future sales prices and holding periods. In the 

first quarter of 2009 and 2008, the Company recorded impairment 

charges in the residential real estate segment of $0.2 million and $2.3 

million, respectively, related to completed unsold homes. In addition 

as discussed in Note 3, the Company recorded a $1.3 million 

impairment charge in the first quarter of 2009 related to a 

renegotiated builder note receivable. 

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81

* * * 

Consolidated Statements of Income 

 Quarter End 

March 31, 2009 

Impairment Losses $1,536,000 

Pre-tax Income (Loss) from 

Continuing Operations 

($18,653,000) 

Net Income ($11,697,000) 

Net Income Per Share ($0.13) 

* * * 

Balance Sheet 

 Mar. 31, 2009 

Assets 

Investments in real estate $888,057,000 

167. The statements in ¶¶165-166 were materially false and misleading when made for 

substantially the same reasons as stated in ¶149. 

G. Second Quarter 2009 Financial Results 

168. On August 4, 2009, the Company issued a press release on Form 8-K entitled “The 

St. Joe Company (NYSE: JOE) Reports Second Quarter 2009 Financial Results.” The press release 

reported that the Company’s investment in real estate was $869.8 million, and stated: 

The St. Joe Company (NYSE: JOE) today announced a Net Loss for 

the second quarter 2009 of $(44.6) million, or $(0.49) per share, 

which includes pre-tax non-cash charges of $64.7 million, or $0.43 

per share after tax. This compares to a Net Loss of $(20.8) million, 

or $(0.23) per share, for the second quarter of 2008, which included 

significant charges of $35.3 million, or $0.24 per share after tax. All 

per-share references in this release are presented on a diluted basis. 

* * * 

The remaining non-cash charges of $20.0 million pre-tax, or $0.13 

per share after-tax, included the $7.4 million write-off of a note 

receivable from GVA Advantis, the $6.7 million write-down related 

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to JOE’s SevenShores condominium and marina development 

project, $5.5 million of impairments associated with homes and home 

sites in certain of JOE’s communities and $0.4 million of 

impairments for the write-down of a builder note receivable. 

Net Loss for the first half of 2009 was $(56.3) million, or $(0.62) per 

share, compared to Net Income of $11.2 million, or $0.13 per share, 

for the first half of 2008. 

Included in the results for the first six months of 2009 were the 

following significant non-cash charges: 

• Settlement charge on pension annuitization of $44.7 million, 

or $0.30 per share after-tax; and 

• Pre-tax impairment charges of $21.5 million, or $0.14 per 

share after-tax. 

* * * 

Consolidated Statements of Income 

 Quarter End 

Jun. 30, 2009 

Six Months End 

Jun. 30, 2009 

Impairment Losses $20,000,000 $21,500,000 

Pre-tax Income (Loss) 

from Continuing 

Operations 

($73,600,000) $(92,300,000) 

Net Income ($45,300,000) ($57,000,000) 

Net Income Per Share ($0.49) ($0.62) 

* * * 

Summary Balance Sheet 

 June 30, 2009 

Assets 

Investments in real estate $869,800,000 

169. Also on August 4, 2009, St. Joe held its quarterly earnings call for the second quarter 

of 2009 which reaffirmed the Company’s quarterly financial results, financial position, and 

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83

discussed impairment charges. Defendants Greene and McCalmont participated on the call. 

McCalmont stated: 

This morning, we announced a net loss for the second quarter of 

$44.6 million or $0.49 per share on revenues of $40.6 million. Our 

net loss includes pretax non-cash charges of $64.7 million or $0.43 

per share after tax. This compares to a net loss of $20.8 million or 

$0.23 per share, and revenues of $67.5 million for the second quarter 

last year. Last year’s quarter included pretax non-cash charges of 

$35.3 million or $0.24 per share after tax...we also incurred 

impairments related to our real estate holdings. These charges 

included an approximate $7 million impairment related to an 

additional write-down of our Seven Shores condominium 

development and the Perico marina project located on non-legacy 

land in Bradenton, Florida. This project was written down to 

approximate the current fair market value of the project. We also 

incurred impairments of approximately $6 million [to] associate 

homes, home sites, and a builder note receivable in certain of our 

communities. 

170. During the call McCalmont also addressed an analyst’s direct question about the 

modest $6 million impairment taken by the Company on its residential real estate. McCalmont 

implied that the Company was writing down all of its residential real estate projects to reflect current 

market value: 

Buck Horne - Raymond James & Associates - Analyst 

A couple of questions here. I guess, first, a little housekeeping -- can I 

get the finished home count that you still had left in inventory and 

what the remaining book value is of those -- of that inventory? 

Bill McCalmont - The St. Joe Company - EVP and CFO 

Buck, at the end of the quarter, we had 123 homes in inventory and 

1,370 home sites, for a total of 1,493 units. 

Buck Horne - Raymond James & Associates - Analyst 

Okay, all right. And I guess just trying to get a feel for the 

impairments that you took on those homes -- can you give us any 

color on the assumptions or the price reduction that you took intraquarter that required the impairments? 

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Bill McCalmont - The St. Joe Company - EVP and CFO 

Sure. We took them at a variety of our communities as we trued up 

the carrying values to reflect current market values; that the largest 

impairments in terms of dollars were at five homes at WindMark 

Beach. And then as we wrote down the carrying value of the 27 

condominium units at Artisan Park, following the auction results that 

we experienced this past weekend. 

171. Also on August 4, 2009, St. Joe filed its Quarterly Report with the SEC on Form 10-

Q. The Company’s Form 10-Q was signed by Defendants Greene and Connolly, and reaffirmed the 

Company’s quarterly financial results, financial position, and the reported value of the Company’s 

investment in real estate. Additionally, the Form 10-Q discussed asset impairments, reporting: 

Impairment Losses. We review our long-lived assets for impairment 

whenever events or changes in circumstances indicate that the 

carrying amount of an asset may not be recoverable. Homes and 

homesites substantially completed and ready for sale are measured at 

the lower of carrying value or fair value less costs to sell. For 

projects under development, an estimate of future cash flows on an 

undiscounted basis is performed using estimated future expenditures 

necessary to maintain and complete the existing project and using 

management’s best estimates about future sales prices and holding 

periods. During the second quarter of 2009 we recorded impairment 

charges of $12.1 million in the residential real estate segment related 

to completed unsold homes and homesites and a write-down of our 

SevenShores condominium and marina development project. 

During the first six months of 2009 we recorded impairment charges 

of $12.4 million in the residential real estate segment related to 

completed unsold homes and homesites and a write-down of our 

SevenShores condominium and marina development project. 

 * * * 

Consolidated Statements of Income 

 Quarter End 

Jun. 30, 2009 

Impairment Losses $19,962,000 

Pre-tax Income (Loss) 

from Continuing 

Operations 

($73,636,000) 

Net Income ($45,275,000) 

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Net Income Per Share ($0.49) 

* * * 

Balance Sheet 

 June 30, 2009 

Assets 

Investments in real estate $869,750,000 

172. The statements in ¶¶168-171 were materially false and misleading when made for 

substantially the same reasons as stated in ¶149. 

H. Third Quarter 2009 Financial Results 

173. On November 3, 2009, the Company issued a press release on Form 8-K entitled 

“The St. Joe Company Reports Third Quarter 2009 Results.” The press release reported that the 

Company’s investment in real estate was $844.9 million, and stated: 

The St. Joe Company (NYSE: JOE) today announced a Net Loss for 

the third quarter of 2009 of $(14.4) million, or $(0.16) per share, 

which included pre-tax charges of $12.9 million, or $0.08 per share 

after tax. This compares to a Net Loss of $(19.2) million, or $(0.21) 

per share, for the third quarter of 2008, which included pre-tax 

charges of $13.0 million, or $0.09 per share after tax. All per-share 

references in this release are presented on a diluted basis. 

St. Joe’s third quarter earnings included $11.1 million of pre-tax, 

non-cash impairment charges including $9.0 million related to the 

settlement of the Saussy Burbank notes receivable, $2.0 million 

associated with various homes, homesites and other long-term assets

and $0.1 million related to various builder notes receivable. 

* * * 

Year-to-Date Results 

Net Loss for the first nine months of 2009 was $(70.7) million, or 

$(0.77) per share, compared to Net Loss of $(8.0) million, or $(0.09) 

per share, for the first nine months of 2008. Included in the results 

for the first nine months of 2009 were significant pre-tax charges of 

$79.1 million, or $0.52 per share after tax, compared to pre-tax 

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charges of $51.8 million, or $0.35 per share after tax, in the first nine 

months of 2008. 

* * * 

Consolidated Statements of Income 

 Quarter End 

Sept. 30, 2009 

Impairment Losses $11,100,000 

Pre-tax Income (Loss) 

from Continuing 

Operations 

($26,300,000) 

Net (Loss) Income ($14,400,000) 

Net Income Per Share ($0.16) 

* * * 

Summary Balance Sheet 

 Sept. 30, 2009 

Assets 

Investments in real estate $844,900,000 

174. On November 3, 2009, St. Joe held its quarterly earnings call for the second quarter 

of 2009. Defendants Greene and McCalmont participated on the call. McCalmont commented on 

third quarter impairment charges: 

We also incurred pretax non-cash impairments of approximately $2.1 

million, associated with various homes, home sites and builder note 

receivables in certain communities. 

175. Also on November 3, 2009, St. Joe filed its Quarterly Report with the SEC on Form 

10-Q. The Company’s Form 10-Q was signed by Defendants Greene and Connolly, and reaffirmed 

the Company’s quarterly financial results, financial position, and the reported value of the 

Company’s investment in real estate. Additionally, the Form 10-Q discussed asset impairments, 

reporting: 

Impairment Losses. We review our long-lived assets for impairment 

whenever events or changes in circumstances indicate that the 

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carrying amount of an asset may not be recoverable. Homes and 

homesites substantially completed and ready for sale are measured at 

the lower of carrying value or fair value less costs to sell. For 

projects under development, an estimate of future cash flows on an 

undiscounted basis is performed using estimated future expenditures 

necessary to maintain and complete the existing project and using 

management’s best estimates about future sales prices and holding 

periods. 

During the third quarter of 2009: 

• We recorded a $9.0 million write-down related to the 

settlement of the Saussy Burbank notes receivable, a $0.1 

million write-down of builder notes receivable and a $1.1 

million impairment charge related to other long-term assets; 

and 

• We recorded a $0.9 million write-down related to completed 

unsold homes and homesites within other communities. 

During the third quarter of 2008 we recorded impairment charges of 

$1.3 million related to completed unsold homes. 

During the first nine months of 2009: 

• We recorded a $6.5 million impairment charge related to 

completed unsold homes and homesites in our communities

and a $6.7 million write-down of our SevenShores 

condominium and marina development project. 

* * * 

Consolidated Statements of Income 

 Quarter End 

Sept. 30, 2009 

Impairment Losses $11,100,000 

Pre-tax Income (Loss) 

from Continuing 

Operations 

($26,300,000) 

Net (Loss) Income ($14,400,000) 

Net (Loss) Income 

Per Share 

($0.16) 

* * * 

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Balance Sheet 

 Sept. 30, 2009 

Assets 

Investments in real estate $844,900,000 

176. The statements in ¶¶173-175 were materially false and misleading when made for 

substantially the same reasons as stated in ¶149. 

I. Fourth Quarter and Full Year 2009 Financial Results 

177. On February 23, 2010, the Company issued a press release on Form 8-K entitled “The 

St. Joe Company Reports Full Year and Fourth Quarter 2009 Results.” The press release reported 

that the Company’s investment in real estate was $749.5 million, and stated: 

The St. Joe Company (NYSE: JOE) today announced a Net Loss for 

the full year ended 2009 of $(130.0) million, or $(1.42) per share, 

compared to a Net Loss of $(35.9) million, or $(0.40) per share, for 

the year ended 2008. Included in the 2009 results were significant 

pre-tax charges of $163.1 million, or $1.07 per share after tax, 

compared to pre-tax charges of $109.5 million, or $0.69 per share 

after tax, in the year ended 2008. All per-share references in this 

release are presented on a diluted basis. 

* * * 

Fourth Quarter 2009 Financial Results 

For the fourth quarter of 2009, St. Joe had a Net Loss of $(59.3) 

million, or $(0.65) per share, which included pre-tax charges of $84.0 

million, or $0.56 per share after tax. This compares to a Net Loss of 

$(27.9) million, or $(0.31) per share, for the fourth quarter of 2008, 

which included pre-tax charges of $57.9 million, or $0.36 per share 

after tax. 

St. Joe’s fourth quarter earnings included $73.3 million of pre-tax, 

non-cash impairment charges including $67.8 million related to the 

sale of the remaining assets at Victoria Park ($6.9 million recorded in 

discontinued operations), $3.5 million related to the sale of the St. 

Johns Golf & Country Club (recorded in discontinued operations), 

$1.1 million related to the sale of the assets acquired in connection 

with the settlement of our Saussy Burbank notes receivable, $0.8 

million associated with various homes and homesites and $0.1 

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89

million associated with a builder note receivable. The Company also 

wrote-off $7.2 million of capitalized costs related to abandoned 

development plans in certain of our projects and incurred a 

restructuring charge of $3.5 million related to one-time termination 

benefits. 

* * * 

Consolidated Statements of Income 

 Quarter End 

Dec. 31, 2009 

Year End 

Dec. 31, 2009 

Impairment Losses $70,100,000 $102,700,000 

Pre-tax Income (Loss) 

from Continuing 

Operations 

($86,900,000) ($205,100,000) 

Net (Loss) Income ($59,300,000) ($130,800,000) 

Net Income Per Share ($0.65) ($1.42) 

* * * 

Summary Balance Sheet 

 Dec. 31, 2009 

Assets 

Investments in real estate $749,500,000 

178. Also on February 23, 2010, St. Joe held its quarterly earnings call to discuss the 

Company’s the fourth quarter and year end 2009 results. Defendants Greene and McCalmont 

participated on the call. During the call, McCalmont stated: 

For the fourth quarter of 2009 we had a net loss of $59.3 million or 

$0.65 per share, which included pretax charges of $84 million or 

$0.56 per share after tax. Included in the pretax charges were $73 

million of noncash impairment charges, including $67.8 million 

related to the sale of the company’s remaining assets at Victoria Park 

in DeLand, Florida; $3.5 million related to the sale of the St. Johns 

Golf & Country Club near Jacksonville; $1 million related to the sale 

of assets acquired in connection with the settlement of our Saussy 

Burbank notes receivable; and approximately $1 million associated 

with various homes, home sites and a builder’s note receivable. 

We also wrote off just over $7 million of capitalized costs related to 

abandoned development projects in certain of our projects and 

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incurred a restructuring charge of $3.5 million related to one-time 

termination benefits. 

179. On February 23, 2010, St. Joe filed its 2009 Annual Report with the SEC on Form 

10-K. The Company’s Form 10-K was signed by Defendants Greene and McCalmont, among 

others, and reaffirmed the Company’s 2009 financial results, financial position, and the reported 

value of the Company’s investment in real estate. With respect to the Company’s asset impairment 

costs, St. Joe’s 2009 Annual Report reported: 

Impairment Losses. During the past three years, we have recorded 

significant impairment charges as a result of the continued decline in 

demand and market prices within our real estate markets. The 

following table summarizes our impairment charges for the three 

years ended December 31: 

Year End Dec. 31 

2009 2008 2007 

Impairment Charge: 

Home and Homesites – 

various residential 

communities 

$7,300,000 $12,000,000 $7,800,000 

Investment in Real Estate:

We review our long-lived assets for impairment whenever events or 

changes in circumstances indicate that the carrying amount of an 

asset may not be recoverable. Homes and homesites substantially 

completed and ready for sale are measured at the lower of carrying 

value or fair value less costs to sell. For projects under development, 

an estimate of future cash flows on an undiscounted basis is 

performed using estimated future expenditures necessary to maintain 

and complete the existing project and using management’s best 

estimates about future sales prices and holding periods. The 

continued decline in demand and market prices for residential real 

estate during 2007 through 2009 caused us to reevaluate certain 

carrying amounts within our residential real estate segment, which 

resulted in the recording of significant impairment charges. 

Given the downturn in our real estate markets, we implemented a tax 

strategy for 2009 to benefit from the sale of certain non-strategic 

assets at a loss. Under federal tax rules, losses from asset sales 

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realized in 2009 can be carried back and applied to taxable income 

from 2007, resulting in a federal income tax refund for 2009. 

As part of this strategy, we conducted a nationally marketed sale 

process for the disposition of the remaining assets of our nonstrategic Victoria Park community in Deland, Florida, including 

homes, homesites, undeveloped land, notes receivable and a golf 

course. Based on the likelihood of the closing of the sale, we 

concluded on December 15, 2009 that an impairment charge for 

$67.8 million was necessary. We completed the sale on December 17, 

2009 for $11.0 million. 

In addition, we completed the sale of our SevenShores condominium 

and marina development project for $7.0 million earlier in 2009, 

which resulted in an impairment charge of $6.7 million due to lower 

market pricing. We also wrote-off $7.2 million of capitalized costs 

related to abandoned development plans in certain of our 

communities. We also sold our St. Johns Golf and Country Club for 

$3.0 million in December 2009 which resulted in an impairment 

charge of $3.5 million. 

* * * 

Consolidated Statements of Income 

 Year End Dec. 

31, 2009 

Impairment Losses $102,683,000 

Pre-tax Income (Loss) from 

Continuing Operations 

($205,127,000) 

Net (Loss) Income ($130,840,000) 

Net Income Per Share ($1.42) 

* * * 

Summary Balance Sheet 

 Dec. 31, 2009 

Assets 

Investments in real estate $749,500,000 

180. The statements in ¶¶177-179 were materially false and misleading when made for 

substantially the same reasons as stated in ¶149. 

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J. First Quarter 2010 Financial Results 

181. On May 4, 2010, the Company issued a press release on Form 8-K entitled “The St. 

Joe Company Reports First Quarter 2010 Results.” The press release reported that the Company’s 

investment in real estate was $747.3 million, and stated: 

The St. Joe Company (NYSE: JOE) today announced a Net Loss for 

the first quarter ended March 31, 2010 of $(11.4) million, or $(0.13) 

per share, compared to a Net Loss of $(12.0) million, or $(0.13) per 

share, for the first quarter of 2009. 

* * * 

Consolidated Statements of Income 

 Quarter End 

March 31, 2010 

Impairment Losses $100,000 

Pre-tax Income (Loss) from 

Continuing Operations 

($17,600,000) 

Net (Loss) Income ($11,400,000) 

Net Income Per Share ($0.13) 

* * * 

Summary Balance Sheet 

 March 31, 2010 

Assets 

Investments in real estate $747,300,000 

182. Also on May 4, 2010, St. Joe filed its Quarterly Report with the SEC on Form 10-Q. 

The Company’s Form 10-Q was signed by Defendants Greene and Connolly, and reaffirmed the 

Company’s quarterly financial results, financial position, and the reported value of the Company’s 

investment in real estate. Additionally, the Form 10-Q discussed asset impairments, reporting: 

The Company reviews its long-lived assets for impairment whenever 

events or changes in circumstances indicate that the carrying amount 

of an asset may not be recoverable. Homes and homesites 

substantially completed and ready for sale are measured at lower of 

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carrying value or fair value less costs to sell. The fair value of 

homes and homesites is determined based upon final sales prices of 

inventory sold during the period (level 2 inputs). For inventory held 

for sale, estimates of selling prices based on current market data are 

utilized (level 3 inputs). For projects under development, an estimate 

of future cash flows on an undiscounted basis is performed using 

estimated future expenditures necessary to maintain and complete the 

existing project and using management’s best estimates about future 

sales prices and holding periods (level 3 inputs). In the first quarter 

of 2010 and 2009, the Company recorded impairment charges in the 

residential real estate segment of $0.1 million and $0.2 million, 

respectively. 

* * * 

Segment Results 

Residential Real Estate 

Our residential real estate segment typically plans and develops 

mixed-use resort, primary and seasonal residential communities of 

various sizes, primarily on our existing land. We own large tracts of 

land in Northwest Florida, including significant Gulf of Mexico 

beach frontage and waterfront properties, and land near Jacksonville 

and Tallahassee. 

Our residential sales remain weak due to the real estate downturn and 

economic recession in Florida. Inventories of resale homes and 

homesites remain high in our markets and prices remain depressed, 

and, predicting when real estate markets will return to health remains 

difficult. Although we have noticed some renewed interest in 

residential real estate activity, we do not expect any significant 

favorable changes in market conditions during 2010. 

* * * 

Consolidated Statements of Income 

 Quarter End 

March 31, 2010 

Impairment Losses $53,000 

Pre-tax Income (Loss) from 

Continuing Operations 

($17,636,000) 

Net (Loss) Income ($11,424,000) 

Net Income Per Share ($0.13) 

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* * * 

Balance Sheet 

 March 31, 2010 

Assets 

Investments in real estate $747,341,000 

183. The statements in ¶¶181-182 were materially false and misleading when made for 

substantially the same reasons as stated in ¶149. 

K. Second Quarter 2010 Financial Results 

184. On August 5, 2010, the Company issued a press release on Form 8-K entitled “The 

St. Joe Company Reports Second Quarter 2010 Results.” The press release reported that the 

Company’s investment in real estate was $748.2 million, and stated: 

The St. Joe Company (NYSE: JOE) today announced a Net Loss for 

the second quarter ended June 30, 2010 of $(8.6) million, or $(0.09) 

per share, including a pre-tax restructuring charge of $1.2 million or 

$0.01 per share after tax. This compares to a Net Loss in the second 

quarter of 2009 of $(44.8) million, or $(0.49) per share, which 

included pre-tax non-cash charges of $64.7 million or $0.43 per share 

after tax. 

Net Loss for the first half of 2010 was $(20.0) million, or $(0.22) per 

share. This compares to a Net Loss during the same period of 2009 

of $(56.9) million, or $(0.62) per share, which included pre-tax noncash charges of $66.2 million or $0.44 per share after tax. 

* * * 

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Consolidated Statements of Income 

 Quarter End 

June 30, 2010 

Impairment Losses $500,000 

Pre-tax Income (Loss) 

from Continuing 

Operations 

($14,700,000) 

Net (Loss) Income ($8,600,000) 

Net Income Per Share ($0.09) 

* * * 

Summary Balance Sheet 

 June 30, 2010 

Assets 

Investments in real estate $748,200,000 

185. Also on August 5, 2010, St. Joe filed its Quarterly Report with the SEC on Form 10-

Q. The Company’s Form 10-Q was signed by Defendants Greene and Connolly, and reaffirmed the 

Company’s financial results, financial position, and the reported value of the Company’s investment 

in real estate. Additionally, the Form 10-Q discussed asset impairments, reporting: 

Impairment Losses. We review our long-lived assets for impairment 

whenever events or changes in circumstances indicate that the 

carrying amount of an asset may not be recoverable. Homes and 

homesites substantially completed and ready for sale are measured at 

the lower of carrying value or fair value less costs to sell. For 

projects under development, an estimate of future cash flows on an 

undiscounted basis is performed using estimated future expenditures 

necessary to maintain and complete the existing project and using 

management’s best estimates about future sales prices and holding 

periods. During the second quarter of 2010 and the first six months 

of 2010, we recorded impairment charges on homes and homesites of 

zero and $0.1 million, respectively, in the residential real estate 

segment. During the second quarter of 2010 we also recorded a $0.5 

million write-down resulting from a renegotiated builder note 

receivable in the residential segment. 

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* * *

Consolidated Statements of Income 

 Quarter End 

June 30, 2010 

Impairment Losses $502,000 

Pre-tax Income (Loss) 

from Continuing 

Operations 

($14,719,000) 

Net (Loss) Income ($8,630,000) 

Net Income Per Share ($0.09) 

* * * 

Summary Balance Sheet 

 June 30, 2010 

Assets 

Investments in real estate $748,195,000 

186. The statements in ¶¶184-185 were materially false and misleading when made for 

substantially the same reasons as stated in ¶149. 

L. Third Quarter 2010 Financial Results 

187. On November 2, 2010, the Company issued a press release on Form 8-K entitled 

“The St. Joe Company Reports Third Quarter 2010 Results.” The press release reported that the 

Company’s investment in real estate was $746.8 million, and stated: 

The St. Joe Company (NYSE: JOE) today announced a Net Loss for 

the third quarter ended September 30, 2010 of $(13.1) million, or 

$(0.14) per share, including pre-tax charges of $13.1 million, or $0.09 

per share after tax. This compares to a Net Loss in the third quarter of 

2009 of $(14.5) million, or $(0.16) per share, which included pre-tax 

charges of $12.9 million or $0.08 per share after tax. Third quarter 

2010 pre-tax charges included an $8.8 million reserve for litigation 

involving a contract dispute related to a 1997 land purchase, a $2.6 

million charge for legal and clean-up costs resulting from the 

Deepwater Horizon oil spill and $1.7 million of restructuring charges. 

Year-to-Date Net Loss for 2010 was $(33.2) million, or $(0.36) per 

share including pre-tax charges of $15.8 million or $0.11 per share 

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after tax. This compares to a Net Loss during the same period of 2009 

of $(71.4) million, or $(0.78) per share, which included pre-tax 

charges of $79.1 million or $0.52 per share after tax. 

* * *

Consolidated Statements of Income 

 Quarter End 

Sept. 30, 2010 

Impairment Losses -- 

Pre-tax Income (Loss) 

from Continuing 

Operations 

($21,700,000) 

Net (Loss) Income ($13,100,000) 

Net Income Per Share ($0.14) 

* * * 

Summary Balance Sheet 

 Sept. 30, 2010 

Assets 

Investments in real estate $746,800,000 

188. Also on November 2, 2010, St. Joe filed its Quarterly Report with the SEC on Form 

10-Q. The Company’s Form 10-Q was signed by Defendants Greene and Connolly, and reaffirmed 

the Company’s financial results, financial position, and the reported value of the Company’s 

investment in real estate. Additionally, the Form 10-Q discussed asset impairments, reporting: 

Results of Operations 

Net loss decreased by $1.4 million to a loss of $(13.1), or $(0.14) per 

share, in the third quarter of 2010, compared to a net loss of $(14.5) 

million, or $(0.16) per share, for the third quarter of 2009. 

* * * 

Impairment Losses. We review our long-lived assets for impairment 

whenever events or changes in circumstances indicate that the 

carrying amount of an asset may not be recoverable. Homes and 

homesites substantially completed and ready for sale are measured at 

the lower of carrying value or fair value less costs to sell. For 

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projects under development, an estimate of future cash flows on an 

undiscounted basis is performed using estimated future expenditures 

necessary to maintain and complete the existing project and using 

management’s best estimates about future sales prices, sales volume, 

sales velocity and holding periods. In addition, the estimated length 

of expected development periods, related economic cycles and 

inherent uncertainty with respect to these projects, such as the impact 

of change in development plans and our intent and ability to hold the 

projects through the development period, could result in changes to 

these estimates. During the nine months ended September 30, 2010, 

we recorded impairment charges on homes and homesites of $0.1 

million, in the residential real estate segment. During the first nine 

months of 2010 we also recorded a $0.5 million write-down resulting 

from a renegotiated builder note receivable in the residential segment. 

* * *

Consolidated Statements of Income 

 Quarter End 

Sept. 30, 2010 

Impairment Losses -- 

Pre-tax Income (Loss) 

from Continuing 

Operations 

($21,649,000) 

Net (Loss) Income ($13,126,000) 

Net Income Per Share ($0.14) 

* * * 

Summary Balance Sheet 

 Sept. 30, 2010 

Assets 

Investments in real estate $746,791,000 

189. The statements in ¶¶187-188 were materially false and misleading when made for 

substantially the same reasons as stated in ¶149. 

M. Fourth Quarter and Full Year 2010 Financial Results 

190. March 1, 2011, the Company issued a press release on Form 8-K entitled “The St. Joe 

Company Reports Full Year and Fourth Quarter 2010 Results.” The press release reported that the 

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Company’s investment in real estate for the year ending December 31, 2010 was $755.4 million, and 

stated in pertinent part: 

WATERSOUND, Fla.--(BUSINESS WIRE)--March 1, 2011--The St. 

Joe Company (NYSE: JOE) today announced a Net Loss for the full 

year ended 2010 of $(35.9) million, or $(0.39) per share, which 

included pre-tax charges of $27.1 million, or $0.12 per share after 

tax. This compares to a Net Loss of $(130.0) million, or $(1.42) per 

share, for the year ended 2009, which included pre-tax charges of 

$163.1 million, or $1.07 per share after tax. 

For the fourth quarter of 2010, St. Joe had a Net Loss of $(2.7) 

million, or $(0.03) per share, which included pre-tax charges of $10.7 

million, or $0.12 per share after tax. This compares to a Net Loss of 

$(58.7) million, or $(0.64) per share, for the fourth quarter of 2009, 

which included pre-tax charges of $84.0 million, or $0.56 per share 

after tax. Pre-tax charges for the fourth quarter of 2010 included $8.0 

million, or $.05 per share after tax, for impairments on 

unconsolidated affiliates, real estate and other assets; $1.6 million, or 

$.06 per share after tax, for costs resulting from the Deepwater 

Horizon oil spill; and $1.1 million, or $0.01 per share after tax, of 

restructuring and other charges. 

* * * 

Consolidated Results 

 Quarter End 

Dec. 31, 2010 

Year End 

Dec. 31, 2010 

Impairment Losses $4,200,000 $4,800,000 

Pre-tax Income from 

Continuing 

Operations 

$(1,400,000) $(55,400,000) 

Net (loss) Income $(2,700,000) $(35,900,000) 

Net (loss) Income Per 

Share 

$(0.03) $(0.39) 

* * * 

Summary Balance Sheet 

 December 31, 2010 

Assets 

Investments in real estate $755,400,000 

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191. Also, on March 2, 2011, St. Joe filed its 2010 Annual Report with the SEC on Form 

10-K. The Company’s Form 10-K was signed by Defendants Greene and McCalmont, among 

others, and reaffirmed the Company’s 2009 financial results, financial position, and the reported 

value of the Company’s investment in real estate. With respect to the Company’s asset impairment 

costs, St. Joe’s 2010 Annual Report reported: 

Impairment Losses. During the past three years, we have recorded 

significant impairment charges as a result of the decline in demand 

and market prices in our real estate markets. The following table 

summarizes our impairment charges for the three years ended 

December 31, 2010, 2009 and 2008: 

 Year End Dec. 31 

 2010 2009 2008 

Impairment Charge: 

Home and Homesites – 

various residential 

communities 

$4,300,000 $7,300,000 $12,000,000 

* * * 

We review our long-lived assets for impairment whenever events or 

changes in circumstances indicate that the carrying amount of an 

asset may not be recoverable. Homes and homesites substantially 

completed and ready for sale and which management intends to sell 

in the near-term under current market conditions, are measured at the 

lower of carrying value or fair value less costs to sell. Other 

properties that management does not intend to sell in the near term or 

under current market conditions are evaluated for impairment based 

upon management’s best estimate of the long-term use and the 

eventual disposition of the property. For projects under development, 

an estimate of future cash flows on an undiscounted basis is 

performed using estimated future expenditures necessary to maintain 

and complete the existing project and using management’s best 

estimates about future sales prices and holding periods. The 

continued decline in demand and market prices for residential real 

estate during 2008 through 2010 caused us to reevaluate certain 

carrying amounts within our residential real estate segment. During 

2010, we recorded a $3.8 million impairment on our investment in 

East San Marco L.L.C., a joint venture located in Jacksonville, 

Florida and approximately $4.3 million in impairment charges on 

homes and homesites. 

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Given the downturn in our real estate markets, we implemented a tax 

strategy in 2009 to benefit from the sale of certain non-strategic 

assets at a loss. Under federal tax rules, losses from asset sales 

realized in 2009 can be carried back and applied to taxable income 

from 2007, resulting in a federal income tax refund for 2009. 

As part of this strategy, during 2009, we conducted a nationally 

marketed sale process for the disposition of the remaining assets of 

our non-strategic Victoria Park community in Deland, Florida, 

including homes, homesites, undeveloped land, notes receivable and 

a golf course. Based on the likelihood of the closing of the sale, we 

determined on December 15, 2009 that an impairment charge for 

$67.8 million was necessary. We completed the sale on December 17, 

2009 for $11.0 million. 

In addition, we completed the sale of our SevenShores condominium 

and marina development project for $7.0 million earlier in 2009, 

which resulted in an impairment charge of $6.7 million due to lower 

market pricing. We also wrote-off $7.2 million of capitalized costs 

related to abandoned development plans in certain of our 

communities in 2009. We also sold our St. Johns Golf and Country 

Club for $3.0 million in December 2009 which resulted in an 

impairment charge of $3.5 million. 

As a result of our property impairment analyses for 2008, we 

recorded impairment charges related to investment in real estate of 

$40.3 million consisting of $12.0 million related to completed homes 

in several communities and $28.3 million related to our SevenShores 

condominium and marina development project. 

The SevenShores condominium project was written down in the 

fourth quarter of 2008 to approximate the fair market value of land 

entitled for 278 condominium units. This write-down was necessary 

because we elected not to exercise our option to acquire additional 

land under our option agreement. Certain costs had previously been 

incurred with the expectation that the project would include 686 

units. 

A continued decline in demand and market prices for our real estate 

products may require us to record additional impairment charges in 

the future. 

* * * 

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Consolidated Statements of Operations 

 Year End 

Dec. 31, 2010 

Impairment Losses $4,799,000 

Pre-tax Income (Loss) from 

Continuing Operations 

($55,446,000) 

Net Loss ($35,905,000) 

Net Income Per Share ($0.39) 

* * * 

Summary Balance Sheet 

 Dec. 31, 2010 

Assets 

Investments in real estate $755,392,000 

192. The statements in ¶¶190-191 were materially false and misleading when made for 

substantially the same reasons as stated in ¶149. 

N. First Quarter 2011 Financial Results 

193. On May 5, 2011, the Company issued a press release on Form 8-K entitled: “The St. 

Joe Company Reports First Quarter 2011 Results.” The press release reported that the Company’s 

investment in real estate was $750.4 million, and stated in pertinent part: 

The St. Joe Company (NYSE:JOE) today announced Net Income for 

the first quarter of 2011 of $14.1 million, or $0.15 per share, 

compared to a Net Loss of $(11.4) million, or $(0.13) per share for 

the first quarter of 2010. 

* * * 

Consolidated Statements of Operations 

 Quarter End 

March 31, 2011 

Impairment Losses $800,000 

Pre-tax Income (Loss) from 

Continuing Operations 

$21,600,000 

Net Income (Loss) $14,100,000 

Net Income Per Share $0.15 

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* * * 

Summary Balance Sheet 

 March 31, 2011 

Assets 

Investments in real estate $750,400,000 

194. Also, on May 5, 2011, St. Joe filed its Quarterly Report with the SEC on Form 10-Q. 

The Form 10-Q was signed by Defendant Connolly and Park Brady, the Company’s Chief Operating 

Officer, and reaffirmed the Company’s quarterly financial results, financial position, and the 

reported value of the Company’s investment in real estate. Additionally, the Form 10-Q discussed 

asset impairments, reporting: 

The Company reviews its long-lived assets for impairment whenever 

events or changes in circumstances indicate that the carrying amount 

of an asset may not be recoverable. Long-lived assets include the 

Company’s investments in operating, development and investment 

property. Some of the events or changes in circumstances that are 

considered by the Company as indicators of potential impairment 

include: 

• a prolonged decrease in the market price or demand for the 

Company’s properties; 

• a change in the expected use or development plans for the 

Company’s properties; 

• a current period operating or cash flow loss for an operating 

property; and, 

• an accumulation of costs in a development property that 

significantly exceeds its historically low basis in property 

held long-term. 

Homes and homesites substantially completed and ready for sale are 

measured at the lower of carrying value or fair value less costs to sell. 

Homes and homesites ready for sale include properties that are 

actively marketed with an intent to sell such properties in the near 

term. Management identifies properties as being ready for sale when 

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the intent is to sell such assets in the near term and under current 

market conditions. Other properties for which management does not 

intend to sell in the near term under current market conditions are 

evaluated for impairment based on management’s best estimate of the 

long-term use and eventual disposition of such property. 

For projects under development, an estimate of future cash flows on 

an undiscounted basis is performed using estimated future 

expenditures necessary to develop and maintain the existing project 

and using management’s best estimates about future sales prices and 

holding periods. The projection of undiscounted cash flows requires 

that management develop various assumptions including: 

• the projected pace of sales of homesites based on estimated 

market conditions and the Company’s development plans; 

• projected price appreciation over time, which can range from 

0% to 7% annually; 

• the amount and trajectory of price appreciation over the 

estimate selling period; 

• the length of the estimated development and selling periods, 

which can range from 5 years to 17 depending on the size of 

the development and the number of phases to be developed; 

• the amount of remaining development costs and holding costs 

to be incurred over the selling period; 

• in situations where development plans are subject to change, 

the amount of entitled land subject to bulk land sales or 

alternative use and the estimated selling prices of such 

property; 

• for commercial development property, future pricing is based 

on sales of comparable property in similar markets; and 

• assumptions regarding the intent and ability to hold individual 

investments in real estate over projected periods and related 

assumptions regarding available liquidity to fund continued 

development. 

* * * 

Segment Results 

Residential Real Estate 

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Our residential real estate segment typically plans and develops 

mixed-use resort, primary and seasonal residential communities of 

various sizes, primarily on our existing land. We own large tracts of 

land in Northwest Florida, including significant Gulf of Mexico 

beach frontage and waterfront properties, and land near Jacksonville 

and Tallahassee. 

Our residential sales improved from the previous year, although due 

to the real estate downturn, the slow economic recovery, the 

Deepwater Horizon oil spill and other adverse market conditions, 

sales remain weak. Inventories of resale homes and homesites remain 

high in our markets and prices remain depressed, and predicting when 

real estate markets will return to health remains difficult. Although 

we have noticed some renewed interest in residential real estate 

activity, we do not expect any significant favorable changes in market 

conditions during 2011. 

We review our long-lived assets for impairment whenever events or 

change in circumstances indicate that the carrying amount of an asset 

may not be recoverable. Homes and homesites substantially 

completed and ready for sale which management intends to sell in the 

near term under current market conditions are measured at lower of 

carrying value or fair value less costs to sell. Other properties that 

management does not intend to sell in the near term or under current 

market conditions, including development and operating properties, 

are evaluated for impairment based on management’s best estimate of 

the long-term use and eventual disposition of the property. For 

projects under development, an estimate of future cash flows on an 

undiscounted basis is performed. These estimates did not indicate any 

need for impairment charges in the first quarter 2011. In the first 

quarter of 2010, we recorded impairment charges of $0.1 million. 

* * * 

Consolidated Statements of Income 

 Quarter End 

March 31, 2011 

Impairment Losses $782,000 

Pre-tax Income (Loss) from 

Continuing Operations 

($21,667,000) 

Net (Loss) Income ($14,090,000) 

Net Income Per Share $0.15 

* * * 

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Balance Sheet 

 March 31, 2011 

Assets 

Investments in real estate $750,473,000 

195. The statements in ¶¶193-194 were materially false and misleading when made for 

substantially the same reasons as stated in ¶149. 

VIII. THE TRUTH BEGINS TO EMERGE 

1. October 13, 2010- Einhorn’s “Field of Schemes Presentation” 

196. On October 13, 2010, the truth about the inflated carrying values for St. Joe’s 

residential real estate began to emerge when Einhorn, an investor with a short position in St. Joe’s 

stock, presented the results of the extensive investigation he had conducted into St. Joe’s residential 

real estate development business to the investing public at the Value Investing Congress, in a 

presentation entitled “Field of Schemes: If You Build It, They Won’t Come.”63 Einhorn’s 

presentation was based on an in-depth analysis he undertook with the assistance of a battery 

professional staff and real estate valuation experts, of the current value of certain of St. Joe’s 

residential real estate projects that were in development, relying on detailed information gleaned 

from various disparate sources not readily accessible to the investing public. For example, Einhorn’s 

presentation used photographs of St. Joe’s properties, including aerial photos, that are not likely 

available to all investors without traveling to St. Joe’s properties. It also used information from 

conversations with the Airport Authority and FOIA requests sent to the Airport Authority Board. 

 

63 The presentation included a 139-page slide show of the Company’s real estate holdings, 

including footage and film of St. Joe’s developments. 

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197. In addition, Einhorn’s presentation gathered and analyzed information from more 

than twenty sources, including: 

• Broyhill Asset Management, “Buy When There’s Oil in the Water” presentation 

Q2 2010 

• Airport Board Minutes, June 2010 

• Walton County, FL property appraiser’s December 2009 sale list 

• county appraisal office records 

• Issa Homes v. The St. Joe Company, filed May 22, 2009 

• RiverTown Development of Regional Impact Biennial Monitoring Report 2008-

2009, dated January 31, 2010 

• St. Johns County Tax Appraisal Office 

• Metrostudy Jacksonville Residential Survey, 1Q 2010 

• Walton County Tax Appraisal Office 

• Warranty Deed on file with Walton County 

• US Census 2009 estimate, http://quickfacts.census.gov 

• Inmate population information list, http://www.dc.state.fl.us/activeinmates/ 

list.asp?DataAction=Paging 

• http://www.eflorida.com/floridasregionsSubpage.aspx?id=284 

• Franklin County Florida zoning ordinances 

• Franklin County Tax Appraisal Office 

• Franklin County Property Appraiser’s website, http://qpublic.net/franklin/ 

index.html 

• Florida Official Records office http://www.myfloridacounty.com/services 

/officialrecords_intro.shtml 

• Listing offered by SummerCamp executive realtor 

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• Gulf County Tax Appraisal Office 

• WaterSound North DRI, 2007-2008 Biennial Report 

• WindMark DRI, April 1, 2008 - April 1, 2010 Biennial Report 

• RiverTown Development of Regional Impact Biennial Monitoring Report 2008-

2009 

• WaterSound North DRI, 2007-2008 Biennial Report 

• Public filings for other companies relevant to an analysis of St. Joe, including 

Leucadia National Corp, IP, Timber Mart-South Market News Quarterly, 2nd 

Quarter 2010 – Vol.15 No.2-A 

• St. Joe’s public filings, including press releases, letters to shareholders, 

conference call transcripts, and investor conference transcripts from an investor 

conference 

198. Based on Einhorn’s investigation and expert analysis, which evaluated evidence 

similar to the evidence set forth in Section IV above,64 Einhorn concluded that based on current and 

historical information, the Company should take impairments that should have been but were not 

previously taken on various residential real estate projects, because it was not possible for the value 

of the properties to meet or exceed their stated carrying values. In such a way, Einhorn’s 

presentation provided original insight that revealed St. Joe’s improper accounting and its failure to 

have taken the necessary impairments during the Class Period. 

 

64 Moreover, as detailed by CW5, who worked for Greenlight Capital and was the individual 

responsible for putting together the “Field of Schemes” presentation, Einhorn’s analysis “utilized 

different experts in the real estate valuation community to confirm the accounting discrepancy and 

perform a ‘comp analysis’ of Joe for the time period of 2008-2010.” According to CW5, the purpose 

for the presentation was to show the “enormous gap” between St. Joe’s “market value” and its 

internal valuation. From CW5’s analysis, it was evident that as of early 2008, the Company should 

have written off 20% of their carrying value, yet it has only written off 2%. 

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199. Based on current and historical data, Einhorn’s presentation indicated that 

impairments needed to be taken to correct flaws in historical accounting and management practices. 

This is evident from the transcript of the presentation.65 For example, during the presentation, 

Einhorn stated: 

• With respect to the SummerCamp East, he stated that “Joe has 144 remaining 

developed lots that we have generously valued at $15 million. The carrying value of 

about 42 million is 290,000 per developed lot. There’s nothing go on at the site and 

we think it should be impaired.” 

• With respect to WindMark, he stated that “I assume most of that is for the vacant 

city center. There are around 224 residential lots of a total planned for 1,516 lots, 72 

that we count available for sale. And the developed ones are of course the ones on 

the beach. So there’s less than 15 percent developed. Somehow there’s 165 million 

in capitalized costs on the balance sheet. If we allocate those costs over the 224 

actual developed lots, that implies $736,000 cost per lot. Even if all remaining 

1,367 lots were eventually developed, that was applied over $120,000 [sic] allocated 

to each lot, counting the future costs to actually develop them. What exactly did Joe 

capitalize in mid-month? I suspect it includes the cost of moving the highway, 

which might be sitting on Joe’s balance sheet. Joe has 42 million in developed and 

we think 50 commercial real estate here. We think there should be a large 

impairment on this property.” 

• “Now Joe says that the market value falling below the book value would cause a 

required writedown. I think that Joe and its accountants might want to update 

their calculations. Joe has taken substantial impairments but only for communities 

it has sold.” 

200. Following this presentation, Reuters reported that Einhorn’s presentation notes that 

St. Joe’s “development plans have fallen flat, leaving it with ‘ghost towns’ and inevitable 

writedowns.” Einhorn also stated how the Company “was ‘stuck’ after making an aggressive bet on 

beachfront developments that have gone nowhere, and that it was overvaluing the real estate 

 

65 See Audio Transcript of “Field of Schemes,” marketfolly, “Why David Einhorn is Short St. 

Joe (JOE): Presentation from Value Investing Congress, ” available at: 

http://www.marketfolly.com/2010/10/why-david-einhorn-is-short-st-joe-joe.html#ixzz1YjRjQd9H 

(last visited Sept. 22, 2011). 

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holdings on its books,” and that “[t]here’s little evidence of how Joe spent so much money on these 

developments. Many developments are ghost towns and little value remains.” In addition, Einhorn 

stated that “[w]ith the popping of the bubble, Joe’s business has practically stopped.” 

201. After the close of the market on October 13, 2010, Bloomberg published an article 

entitled “Einhorn Says St. Joe Needs ‘Substantial’ Writedowns.” The article recounted: 

St. Joe Co.’s shares plunged after David Einhorn, who profited from 

bets against Lehman Brothers Holdings Inc. in 2008, said the Florida 

real-estate firm must take “substantial” asset-impairment charges and 

that further building will drive the stock price to zero. 

“The best properties have been sold, many lots were sold to 

speculators during the boom, and when the boom ended, business 

essentially stopped,” Einhorn, who runs hedge-fund operator 

Greenlight Capital Inc., said today at the Value Investing Congress in 

New York. “There’s little evidence of how Joe spent so much money 

on these developments. Many developments are ghost towns and 

little value remains.” 

* * * 

The company is accounting for untouched land as developed, Einhorn 

said. Also, St. Joe’s RiverTown community is a “moonscape,” and 

WaterSound is empty, he said. 

“Joe’s highest and best use is to return to a rural land company,” he 

said. “Management should sell the company, but it can’t because the 

stock price is too high.” 

202. The market was shocked by Einhorn’s presentation and associated media commentary 

on October 13 and October 14, 2010, which revealed the true value of St. Joe’s properties and its 

failure to take the necessary impairments, causing the price of St. Joe’s stock to plummet 

approximately 20%, as it fell $4.80 per share to close at $19.74 on October 14, 2010 on unusually 

high trading volume. 

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2. January 10, 2011-The SEC Inquiry 

203. On January 10, 2011, the market learned that the SEC was conducting an informal 

inquiry into St. Joe’s practices concerning impairment of investment in real estate assets, when after 

the market closed, Defendants issued the following statement on Form 8-K: 

The Securities and Exchange Commission (the “SEC”) has notified The St. Joe 

Company (“St. Joe”) that it is conducting an informal inquiry into St. Joe’s policies 

and practices concerning impairment of investment in real estate assets. St. Joe 

intends to cooperate fully with the SEC in connection with the informal inquiry. The 

notification from the SEC does not indicate any allegations of wrongdoing, and an 

inquiry is not an indication of any violations of federal securities laws. 

204. This announcement indicated that the SEC was looking into the Company’s prior 

practices66 concerning its impairment of real estate assets and conveyed to the market the extent and 

likelihood of the Company’s improper accounting. As a result, the market reacted negatively to this 

announcement, causing St. Joe’s stock price to drop approximately 7% during after hours trading, as 

it fell $1.57 per share to open at $21.50. 

205. While the Company’s stock price did close up on January 11, 2011, this was due to 

Defendants’ attempt to offset the announced SEC inquiry with information that global asset manager 

BlackRock, Inc. had boosted its stake in St. Joe to 11.7 million shares or 12.59%, from the 6.3 

million shares it held at the same time last year. While this information was revealed in a Schedule 

SC 13G/A during trading on January 10, 2011, it was not until after the close of trading on that day 

and the following day that the market learned, through news articles the significance of this 

information. 

 

66 As detailed in the Company’s July 1, 2011 10-K, the SEC was investigating the Company’s 

practices for the period beginning January 1, 2007. 

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206. For example, on January 10, 2011, at 7:08 PM, Businessweek published an article 

online entitled “St. Joe Reports Informal SEC Inquiry of Impairments,” which stated: 

- St. Joe Co., the largest private landholder in northern Florida, said it faces an 

informal inquiry by the U.S. Securities and Exchange Commission over its policies 

for impairing investment in real estate assets. 

The notification by the SEC “does not indicate any allegations of wrongdoing,” and 

St. Joe will “cooperate fully,” the WaterSound, Florida-based company said today in 

a regulatory filing made after the close of regular U.S. trading. Its shares fell as much 

as 11 percent in after-hours trading. 

The filing comes three months after David Einhorn, who runs hedge-fund operator 

Greenlight Capital Inc., said St. Joe failed to properly write down the value of its 

land after having sold its most valuable waterfront properties. Einhorn was shorting 

the stock, meaning he bet the share price would decline. 

“St. Joe’s valuation practices remain open to question,” Jonathan Doorley, a 

spokesman for Greenlight Capital, said today. “It is hard to understand how the 

company invested hundreds of millions of dollars during the real estate bubble and 

hasn’t seen fit to take a material writedown.” 

St. Joe Chief Executive Officer Britt Greene said in November that the land was 

acquired decades ago, when the company was primarily in the timber business, and 

needs little revaluation because the cost basis is so low. The company has taken more 

than $196 million of impairments since 2007, St. Joe Chief Financial Officer William 

McCalmont said in November. 

Falling Land Values 

Land values have plummeted in Florida, which has the highest number of home 

foreclosures after California, according to RealtyTrac Inc., an Irvine, Californiabased real estate information company. 

BlackRock Inc., the world’s largest money manager, today reported its funds owned 

a 12.6 percent stake in St. Joe, according to a regulatory filing. The company’s 

largest shareholder is Bruce Berkowitz’s Fairholme Capital Management LLC. 

Berkowitz was named to St. Joe’s board last month. 

St. Joe shares fell to $20.74 as of 6:22 p.m. New York time, and traded as low as 

$20.60. They have dropped 22 percent in the past 12 months. 

207. Also, at 11:02 PM, RTTNews issued an online article entitled “St. Joe Plunges 10% 

On News Of Informal SEC Inquiry,” which stated: 

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 - Real estate developer St. Joe Co. (JOE: News ) revealed Monday in a regulatory 

filing that the U.S. Securities and Exchange Commission has launched an informal 

inquiry into its policies and practices concerning impairment of investment in real 

estate assets. Following the announcement, the company’s stock plunges nearly 10% 

in after-hours trading. 

The news of the informal inquiry comes months after hedge fund Greenlight Capital, 

Inc.’s President and Co-founder David Einhorn reportedly questioned St. Joe’s realestate accounting in October, claiming its holdings of Florida land are overvalued 

and nowhere St. Joe’s valuation. 

The Jacksonville, Florida-based company noted that it intends to cooperate fully with 

the regulatory agency in connection with the informal inquiry. 

However, the company added in the filing that the notification and informal inquiry 

by the agency does not indicate any allegations of wrongdoing, and is not an 

indication of any violations of federal securities laws. 

Meanwhile, global asset manager BlackRock, Inc. (BLK: News ) revealed in a 

regulatory filing earlier in the day that it has boosted its stake in St. Joe to 11.7 

million shares or 12.59%, from the 6.3 million shares it held at the same time last 

year. 

In early November, St. Joe reported a loss for the third quarter that narrowed from 

the year-ago quarter, despite a downturn in residential real estate sales, helped by the 

recognition of deferred revenue from the Florida Department of Transportation and 

increased revenues from rural land sales and commercial sales. 

Loss narrowed to $13.1 million or $0.14 per share from $14.5 million or $0.16 per 

share in the year-ago quarter. Total quarterly revenues dropped to $27.1 million from 

$41.9 million in the same quarter last year. 

JOE closed Monday’s regular trading session at $23.07, up $0.02 or 0.09% on a 

volume of 1.42 million shares, lower than the three-month average volume of 1.70 

million shares. However, the stock plunged $2.25 or 9.75% in after-hours trading. 

208. On January 11, 2011, the popular economic news and analysis blog, Seeking Alpha, 

published an article entitled “Battleground Stock St. Joe Co. Gets a Boost and a Blow,” which stated: 

Since The St. Joe Company (JOE) is now a battleground stock (Bruce Berkowitz 

versus David Einhorn), it’s only fitting that we continue our coverage of the name. 

Just Monday, some interesting developments arose that we wanted to highlight. 

First, JOE revealed in an 8-K filed with the SEC that the company is the subject of an 

SEC informal inquiry into St. Joe’s policies and practices concerning impairment of 

investment in real estate assets. 

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SEC Inquiry 

Shares of JOE plunged almost 10% in after-hours trading Monday on this news. 

Market Folly readers will, of course, recall that Greenlight Capital’s David Einhorn 

is short JOE. His bearish thesis centers largely around the company needing to take 

impairments and writedowns, the exact issue the SEC seems to be looking into. 

The 8-K went on to say that, St. Joe intends to cooperate fully with the SEC in 

connection with the informal inquiry. The notification from the SEC does not 

indicate any allegations of wrongdoing, and an inquiry is not an indication of any 

violations of federal securities laws. 

Einhorn has garnered a reputation as a successful short-seller and it might not be too 

much of a stretch to suggest that his involvement has piqued the SEC’s interest. After 

all, Einhorn had correctly identified problems at both Allied Capital and Lehman 

Brothers in the past and profited from his short positions. You can read about his 

short-selling battle in his book, Fooling Some of the People All of the Time. 

BlackRock Boosts Stake 

In a separate development involving St. Joe, we also saw an updated 13G filed with 

the SEC by BlackRock. The money manager has disclosed a 12.59% ownership stake 

in JOE with 11,668,299 shares, boosting its collective position. This disclosure was 

made due to activity on December 31st, 2010. 

This development is interesting because it brings another large institutional player 

into the ring. Previously, the main notable JOE long was Bruce Berkowitz’s 

Fairholme Capital, who owns almost 29% of the company. However, Berkowitz is 

currently in a standstill agreement and can’t purchase more shares. Instead, he has 

joined the company’s board. BlackRock’s position increase marks a second vote of 

confidence on the long side of the trade. 

Battleground Stock 

So now that Berkowitz has BlackRock for company, the two major shareholders will 

square off against David Einhorn and a bevy of other short-sellers, including 

Whitney Tilson’s T2 Partners, among many other hedge funds who have 

undoubtedly not disclosed their position (yet). With word of the SEC’s informal 

inquiry, the short sellers have delivered another potential blow to JOE longs. What 

comes out of the inquiry, though, remains to be seen. 

209. These articles which further explained the import of BlackRock’s stake in St. Joe had 

the intended effect of offsetting the news regarding the SEC inquiry and buoying the stock price. 

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3. July 1, 2011 – The Company Announces that the SEC 

Investigation Has Become Formal 

210. On July 1, 2011, just after the market closed at the start of a holiday weekend, the 

Company revealed the full truth regarding Defendants’ improper accounting when it disclosed that 

on June 24, 2011, after a six month inquiry by the SEC regarding its impairment practices, the 

Company learned it was now the subject of a more formal investigation. On that day, after the close 

of the market, Defendants disclosed the following on Form 8-K: 

The Company previously disclosed in January 2011 that the Securities and Exchange 

Commission (the “SEC”) is conducting an informal inquiry into the Company’s 

policies and practices concerning impairment of investment in real estate assets. On 

June 24, 2011, the Company received notice from the SEC that it has issued a related 

order of private investigation. The order of private investigation covers a variety of 

matters for the period beginning January 1, 2007 including (a) the antifraud 

provisions of the Federal securities laws as applicable to the Company and its past 

and present officers, directors, employees, partners, subsidiaries, and/or affiliates, 

and/or other persons or entities, (b) compliance by past and present reporting persons 

or entities who were or are directly or indirectly the beneficial owner of more than 

5% of the Company’s common stock (which includes Fairholme Funds, Inc., 

Fairholme Capital Management L.L.C. and the Company’s current Chairman Bruce 

R. Berkowitz) with their reporting obligations under Section 13(d) of the Exchange 

Act, (c) internal controls, (d) books and records, (e) communications with auditors 

and (f) financial reports. The order designates officers of the SEC to take the 

testimony of the Company and third parties with respect to any or all of these 

matters, and the Company is cooperating with the SEC. 

211. This announcement indicated that the SEC was looking into the Company’s prior 

practices concerning impairment of its real estate assets (for the period beginning January 1, 2007) 

and conveyed to the market the extent and likelihood of the Company’s improper accounting. 

Accordingly, as this announcement made its way into the market, the market reacted negatively, 

causing the Company’s stock price to plummet by approximately 9%, as it fell $1.90 per share to 

close at $18.97 on July 5, 2011 on abnormally high trading volume, causing millions in investor 

losses. 

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IX. NO SAFE HARBOR 

212. The statutory safe harbor provided for forward-looking statements under certain 

circumstances does not apply to any of the allegedly false statements pleaded in this Complaint. 

Many of the specific statements pleaded herein were not identified as “forward-looking statements” 

when made. To the extent there were any forward-looking statements, there were no meaningful 

cautionary statements identifying important factors that could cause actual results to differ materially 

from those in the purportedly forward-looking statements. Alternatively, to the extent that the 

statutory safe harbor does apply to any forward-looking statements pleaded herein, Defendants are 

liable for those false forward-looking statements because at the time each of those forward-looking 

statements was made, the particular speaker knew that the particular forward-looking statement was 

false, and/or the forward-looking statement was authorized and/or approved by an executive officer 

of St. Joe’s who knew that those statements were false when made. 

X. APPLICABILITY OF PRESUMPTION OF RELIANCE UNDER THE 

AFFILIATED UTE DOCTRINE AND/OR, IN THE ALTERNATIVE, THE 

FRAUD ON THE MARKET DOCTRINE 

213. Plaintiff is entitled to a presumption of reliance under Affiliated Ute v. United States, 

406 U.S. 128 (1972), because the claims asserted herein are primarily predicated upon omissions of 

material fact which there was a duty to disclose. 

214. Plaintiff is entitled to a presumption of reliance because, as more fully alleged above, 

the Defendants failed to disclose material information regarding the Company’s understated 

impairment charges and the assumptions that formed the basis of its undiscounted cash flow analyses 

for residential real estate projects in development, as well as the resulting false financial information 

reported by St. Joe’s throughout the Class Period. 

215. In the alternative, Plaintiff is entitled to a presumption of reliance under the fraud on 

the market doctrine of the Defendants’ material misrepresentations and omissions, because at all 

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relevant times, the market for St. Joe’s common stock was an efficient market for the following 

reasons, among others: 

(a) St. Joe’s stock met the requirements for listing, and was listed and 

actively traded on the New York Stock Exchange, a highly efficient and automated market; 

(b) As a regulated issuer, St. Joe filed periodic public reports with the SEC 

(and was eligible to file SEC Forms S-1) and the New York Stock Exchange; 

(c) St. Joe regularly communicated with public investors via established 

market communication mechanisms, including through regular disseminations of press releases 

on the national circuits of major newswire services and through other wide-ranging public 

disclosures, such as communications with the financial press and other similar reporting 

services; and 

(d) St. Joe was followed by numerous investor research services that 

published publicly available reports, as well as by numerous securities analysts (including Buck 

Horne of Raymond James & Associates; Sheila McGrath of Keefe Bruyette & Woods; David 

Cohen of Morgan Stanley; Eric Landry of Morningstar; and Chris Haley of Wachovia 

Securities) employed by major brokerage firms who wrote reports which were distributed to the 

sales force and certain customers of their respective brokerage firms. Each of these reports was 

publicly available and entered the public marketplace. 

216. As a result of the foregoing, the market for St. Joe’s common stock promptly digested 

current information regarding St. Joe from all publicly available sources and reflected such 

information in St. Joe’s stock price. Under these circumstances, all purchasers of St. Joe’s common 

stock during the Class Period suffered similar injury through their purchase of St. Joe’s common 

stock at artificially inflated prices and a presumption of reliance applies. 

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XI. LOSS CAUSATION 

217. As detailed in this Complaint, Defendants’ fraudulent scheme artificially inflated St. 

Joe’s stock price by failing to disclose that: (a) the Company’s core operation – real estate 

development – was dramatically impacted by the economic downturn and associate real estate crash; 

(b) many of the Company’s large residential real estate projects, including RiverTown, the 

WaterSounds, SummerCamp Beach, and WindMark remained largely undeveloped; (c) St. Joe had 

halted further development activity at its residential real estate projects; (d) sales volumes at its 

residential real estate properties plummeted during the Class Period; (e) the average sales prices at its 

projects sharply declined; (f) as a result, Defendants failed to take appropriate impairment charges to 

their residential real estate assets in violation of GAAP and SEC regulations; and (g) accordingly, St. 

Joe had materially overstated its asset values and earnings during the Class Period. These false and 

misleading statements, individually and collectively, concealed St. Joe’s true financial circumstances 

and future business prospects, resulting in the stock being artificially inflated until, as indicated 

herein, the relevant truth about St. Joe was revealed. While each of these misrepresentations was 

independently fraudulent, they were all motivated by Defendants’ desire to artificially inflate St. 

Joe’s stock price and the image of its future business prospects to give the market the false notion 

that St. Joe’s residential real estate development projects were performing well and that its asset 

values and earnings during the Class Period were higher than they actually were. Defendants’ false 

and misleading statements had the intended effect and causes, or were a substantial contributing 

cause of St. Joe’s stock trading at artificially inflated levels, reaching as high as $46.82 on March 24, 

2008, throughout the Class Period. 

218. These false and misleading statements and omissions, among others, had the intended 

effect of preventing the market from learning the full truth and keeping the Company’s stock price 

artificially inflated throughout the Class Period. The true picture of St. Joe’s business, operations, 

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and finances was disclosed to the market through a series of revelations beginning on October 13 

and 14, 2010, January 10, 2011, and, finally, July 1, 2011. 

219. On October 13 and 14, 2010, the market learned from Einhorn’s presentation and 

related news coverage that St. Joe had impermissibly failed to take the necessary and required 

impairment charges to its residential real estate projects in development. On January 10, 2011, after 

the market closed, the Company announced that the SEC had notified the Company that it was 

conducting an informal inquiry into its policies and practices concerning impairment of investment 

in real estate assets. Then, on July 1, 2010, after the market closed, the Company announced that the 

SEC issued an order of private investigation related to its previous inquiry into the Company’s 

policies and practices concerning impairment of investment in real estate assets. The 

announcements regarding the SEC’s investigation into St. Joe indicated that the SEC was looking 

into the Company’s historical practices concerning impairment of its real estate assets and conveyed 

to the market the extent and likelihood of the Company’s improper accounting. The disclosures on 

October 13 through 14, 2010, January 10, 2011, and July 1, 2011 revealed to the market that St. Joe 

had materially overstated its asset values and earnings during the Class Period. 

220. When these revelations were disclosed, the market learned that Defendants’ prior 

Class Period statements were false and misleading. As a result of the information revealed on 

October 13 and 14, 2010, investors cast doubt on the veracity of Defendants’ prior statements 

causing St. Joe’s stock to drop approximately 20%, as it fell $4.80 per share to close at $19.74 on 

October 14, 2010 on abnormally high trading volume. The market’s negative reaction to the October 

13 and 14, 2010 revelation is demonstrated in the stock chart below: 

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0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

10/12/2010 10/13/2010

Date

20.5

21

21.5

22

22.5

23

23.5

24

24.5

25

Dollars

Volume

Price

221. Likewise, as a result of the information revealed to the market after it closed on 

January 10, 2011 concerning the SEC’s informal inquiry into St. Joe, the market cast doubt on the 

veracity of Defendants’ prior statements causing St. Joe’s stock to drop approximately 7% during 

after hours trading, as it fell $1.57 per share to open at $21.50. This negative reaction to St. Joe’s 

January 10, 2011 revelation is demonstrated in the stock chart below: 

Price

20.5

21

21.5

22

22.5

23

23.5

Close 1/10/2011 Open 1/11/2011

Date

Dollars

Price

222. While the Company’s stock price did increase at the end of trading on January 11, 

2011, this was due to Defendants’ attempt to offset the announced SEC inquiry with information that 

global asset manager BlackRock, Inc. had boosted its stake in St. Joe to 11.7 million shares or 

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12.59%, from the 6.3 million shares it held at the same time last year. While this information was 

revealed in a Schedule SC 13G/A during trading on January 10, 2011, it was not until after the close 

of trading on that day and the following day that the market learned, through news articles and other 

commentary of the significance of this information. As Defendants intended, the BlackRock 

disclosure offset the news regarding the SEC inquiry and buoyed the stock price. 

223. Finally, as a result of the information revealed to the market on July 1, 2011, the 

market cast doubt on the veracity of Defendants’ prior statements causing St. Joe’s stock to drop 

approximately 9%, as it fell $1.90 per share to close at $18.97 on July 5, 2011 on abnormally high 

trading volume. The market’s negative reaction to St. Joe’s July 1, 2011 revelation is demonstrated 

in the stock chart below: 

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

7/1/2011 7/5/2011

Date

18

18.5

19

19.5

20

20.5

21

21.5

Dollars

Volume

Price

224. The rapid declines in St. Joe’s stock price following the Company’s October 13 and 

14, 2010, January 10, 2011, and July 1, 2011 disclosures were a direct consequence of the revelation 

of the falsity of Defendants’ Class Period misrepresentations and omissions to the market. Thus, the 

revelation of truth at the close of the Class Period, as well as the clear market reaction, support a 

reasonable inference that the market understood St. Joe’s prior statements were false and misleading. 

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225. In sum, as the truth about Defendants’ prior misrepresentations and concealments was 

revealed, the Company’s stock price quickly sank, the artificial inflation came out of the stock, and 

Plaintiff was damaged suffering true economic losses. The declines in St. Joe’s stock price by: (1) 

approximately 20% from $24.54 on October 12, 2010 to $19.74 on October 14, 2010; (2) 

approximately 7% during after hours trading between January 10 and January 11, 2011; and (3) 

approximately 9% from $20.87 on July 1, 2011 to $18.97 on July 5, 2011, were the direct result of 

the nature and extent of the revelations made to investors and the market regarding the Company’s 

failure to take appropriate impairment charges reflecting the known true value of its development 

projects and its overstatement of its asset values and earnings during the Class Period, that had been 

concealed or misrepresented by Defendants’ scheme and misstatements. 

226. The timing and magnitude of St. Joe’s stock price decline negates any inference that 

the losses suffered by Plaintiff were caused by changed market conditions, macroeconomic or 

industry factors or Company-specific facts unrelated to Defendants’ fraudulent conduct. This point 

is evidenced by the chart below that demonstrates the clear divergence of St. Joe’s stock price from 

its peer index67 as the revelation of the truth became known to the market:

 

67 The Company’s Peer Group consists of the following real estate-related companies: AMB 

Property Corporation (AMB), Developers Diversified Realty Corporation (DDR), Duke Realty 

Corporation (DRE), Highwoods Properties, Inc. (HIW), Jones Lang LaSalle Incorporated (JLL), 

Kimco Realty Corporation (KIM), The Macerich Company (MAC), MDC Holdings Inc. (MDC), 

NVR, Inc. (NVR), Plum Creek Timber Company, Inc. (PCL), Regency Centers Corporation (REG), 

Rayonier Inc. (RYN), Toll Brothers Inc. (TOL), and WP Carey & Co. LLC (WPC). See 2010 Form 

10-K for the period ending December 31, 2010, filed on March 3, 2011. 

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St Joe Co. vs. S&P 500 Index (SPX) and Peer Group Index (PEER)

50

60

70

80

90

100

110

120

130

140

1/4/20102/4/20103/4/20104/4/20105/4/20106/4/20107/4/20108/4/20109/4/2010

10/4/201011/4/201012/4/2010

1/4/20112/4/20113/4/20114/4/20115/4/20116/4/20117/4/20118/4/20119/4/2011

January 4, 2010 

=

JOE SPX PEER

227. Moreover, after extracting general market and industry conditions between October 

12, 2010 and October 14, 2010 and July 1, 2011 and July 5, 2011, the price of St. Joe’s stock on 

those dates reacted with high statistical significance to the revelations detailed above. Indeed, while 

the price of St. Joe’s stock declined approximately 20% between October 12 and October 14, 2010, 

the Dow Jones U.S. Real Estate Index (“DJUSRE”) did not experience a similar decline. In fact, the 

DJUSRE was up 0.97% on October 13, 2010 and down only 0.44% on October 14, 2010. Similarly, 

while the price of St. Joe’s stock declined approximately 9.1% between July 1 and July 5, 2011, the 

DJUSRE was up 0.58% and the market was down only 0.08% between these dates. 

228. Accordingly, the economic loss, i.e., damages, suffered by Plaintiff was a direct and 

proximate result of Defendants’ scheme and misrepresentations and omissions which artificially 

inflated St. Joe’s stock price and the subsequent significant decline in the value of St. Joe’s stock 

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when the truth concerning Defendants’ prior misrepresentations and fraudulent conduct entered the 

market place. 

XII. PLAINTIFF’S CLASS ACTION ALLEGATIONS 

229. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil 

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all purchasers of the securities of St. 

Joe’s (the “Class”) between February 19, 2008 and July 1, 2011 inclusive (the “Class Period”), and 

who were damaged when the truth about St. Joe’s business was disclosed. Excluded from the Class 

are Defendants, the officers and directors of the Company, at all relevant times, members of their 

immediate families and their legal representatives, heirs, successors or assigns and any entity in 

which Defendants have or had a controlling interest. 

230. The members of the Class are so numerous that joinder of all members is 

impracticable. According to the Company’s Form 10-Q filed with the SEC on August 5, 2010, St. 

Joe had over 92 million shares of stock outstanding, owned by thousands of persons. While the 

exact number of Class members is unknown to Plaintiff at this time and can only be ascertained 

through appropriate discovery, Plaintiff believes that there are hundreds or thousands of members in 

the proposed Class. Record owners and other members of the Class may be identified from records 

maintained by St. Joe or its transfer agent and may be notified of the pendency of this action by mail, 

using the form of notice similar to that customarily used in securities class actions. 

231. Plaintiff’s claims are typical of the claims of the members of the Class as all members 

of the Class are similarly affected by Defendants’ wrongful conduct in violation of federal law that is 

complained of herein. 

232. Plaintiff will fairly and adequately protect the interests of the members of the Class 

and has retained counsel competent and experienced in class and securities litigation. 

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233. Common questions of law and fact exist as to all members of the Class and 

predominate over any questions solely affecting individual members of the Class. Among the 

questions of law and fact common to the Class are: 

(a) whether the federal securities laws were violated by Defendants’ acts as 

alleged herein; 

(b) whether and to what extent the Company’s financial statements failed to 

comply with GAAP during the Class Period; 

(c) whether statements made (or omissions) by Defendants to the investing public 

during the Class Period misrepresented (or omitted) to state material facts about the business, 

operations and management of St. Joe; and 

(d) to what extent the members of the Class have sustained damages and the 

proper measure of damages. 

234. A class action is superior to all other available methods for the fair and efficient 

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the 

damages suffered by individual Class members may be relatively small, the expense and burden of 

individual litigation make it impossible for members of the Class to individually redress the wrongs 

done to them. There will be no difficulty in the management of this action as a class action. 

COUNT I 

For Violations Of Section 10(b) Of the Exchange Act 

And Rule 10b-5 Promulgated Thereunder Against 

St. Joe and the Individual Defendants

235. Plaintiff repeats and realleges each and every allegation contained above as if fully set 

forth herein. This claim is asserted against St. Joe and the Individual Defendants. 

236. During the Class Period, St. Joe and the Individual Defendants carried out a plan, 

scheme and course of conduct which was intended to and, throughout the Class Period, did: (i) 

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deceive the investing public regarding St. Joe’s business, operations, management and the intrinsic 

value of St. Joe common stock; and (ii) cause Plaintiff and other members of the Class to purchase 

St. Joe common stock at artificially inflated prices. In furtherance of this unlawful scheme, plan and 

course of conduct, these Defendants, and each of them, took the actions set forth herein. 

237. St. Joe and the Individual Defendants (a) employed devices, schemes, and artifices to 

defraud; (b) made untrue statements of material fact and/or omitted to state material facts necessary 

to make the statements not misleading; and (c) engaged in acts, practices, and a course of business 

which operated as a fraud and deceit upon the purchasers of the Company’s common stock in an 

effort to maintain artificially high market prices for St. Joe’s securities in violation of Section 10(b) 

of the Exchange Act and Rule 10b-5. All of these Defendants are sued either as primary participants 

in the wrongful and illegal conduct charged herein or as controlling persons as alleged below. 

238. St. Joe and the Individual Defendants, individually and in concert, directly and 

indirectly, by the use, means or instrumentalities of interstate commerce and/or of the mails, engaged 

and participated in a continuous course of conduct to conceal the improper accounting for 

impairment of residential real estate, in order to manipulate St. Joe’s reported financials, as specified 

herein. 

239. St. Joe and the Individual Defendants employed devices, schemes and artifices to 

defraud, while in possession of material adverse non-public information, and engaged in acts, 

practices, and a course of conduct as alleged herein in an effort to assure investors of St. Joe’s value 

and performance and continued substantial growth, which included the making of, or the 

participation in the making of, untrue statements of material facts and omitting to state material facts 

necessary in order to make the statements made about St. Joe’s and its business operations in the 

light of the circumstances under which they were made, not misleading, as set forth more 

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particularly herein, and engaged in transactions, practices and a course of business which operated as 

a fraud and deceit upon the purchasers of St. Joe’s common stock during the Class Period. 

240. Each of these Individual Defendants’ primary liability, and controlling person 

liability, arises from the following facts: (i) the Individual Defendants were high-level executives 

and/or directors at the Company during the Class Period and members of the Company’s 

management team or had control thereof; (ii) each of these Defendants, by virtue of his 

responsibilities and activities as a senior officer and/or director of the Company was privy to and 

participated in the creation, development and reporting of the Company’s internal budgets, plans, 

projections and/or reports; (iii) each of these Defendants enjoyed significant personal contact and 

familiarity with the other Defendants and was advised of and had access to other members of the 

Company’s management team, internal reports and other data and information about the Company’s 

finances, operations, and sales at all relevant times; and (iv) each of these Defendants was aware of 

the Company’s dissemination of information to the investing public which they knew or recklessly 

disregarded was materially false and misleading. 

241. St. Joe and the Individual Defendants had actual knowledge of the misrepresentations 

and omissions of material facts set forth herein, or acted with reckless disregard for the truth in that 

they failed to ascertain and to disclose such facts, even though such facts were available to them. 

Such Defendants’ material misrepresentations and/or omissions were done knowingly or recklessly 

and for the purpose and effect of concealing St. Joe’s operating condition from the investing public 

and supporting the artificially inflated price of its common stock. As demonstrated by these 

Defendants’ overstatements and misstatements of the Company’s business, operations and earnings 

throughout the Class Period, these Defendants, if they did not have actual knowledge of the 

misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by 

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deliberately refraining from taking those steps necessary to discover whether those statements were 

false or misleading. 

242. As a result of the dissemination of the materially false and misleading information 

and failure to disclose material facts regarding the materially understated impairment charges, as set 

forth above, the market price of St. Joe securities was artificially inflated during the Class Period. In 

ignorance of the fact that market prices of St. Joe publicly-traded securities were artificially inflated, 

and relying directly or indirectly on the false and misleading statements made by these Defendants, 

or upon the integrity of the market in which the common stock trades, and/or on the absence of 

material adverse information that was known to or recklessly disregarded by these Defendants but 

not disclosed in public statements during the Class Period, Plaintiff and the other members of the 

Class acquired St. Joe’s securities during the Class Period at artificially high prices and were 

damaged when the value of their securities declined upon disclosure of the truth about the 

Company’s false and misleading statements and omissions. 

243. At the time of said misrepresentations and omissions, Plaintiff and other members of 

the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff and the other 

members of the Class and the marketplace known the truth regarding St. Joe’s financial results, 

which were not disclosed by St. Joe and the Individual Defendants, Plaintiff and other members of 

the Class would not have purchased or otherwise acquired their St. Joe securities, or, if they had 

acquired such common stock during the Class Period, they would not have done so at the artificially 

inflated prices which they paid. 

244. By virtue of the foregoing, St. Joe and the Individual Defendants have violated 

Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder. 

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245. As a direct and proximate result of such wrongful conduct, Plaintiff and the other 

members of the Class suffered damages in connection with their respective purchases and sales of 

the Company’s securities during the Class Period. 

COUNT II 

For Violations Of Section 20(a) Of the Exchange 

Act Against the Individual Defendants

246. Plaintiff repeats and realleges each and every allegation contained above as if fully set 

forth herein. This claim is asserted against Greene, McCalmont, Rummell and Connolly. 

247. The Individual Defendants acted as controlling persons of St. Joe within the meaning 

of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, and 

their ownership and contractual rights, participation in and/or awareness of the Company’s 

operations and/or intimate knowledge of the false financial statements filed by the Company with the 

SEC and disseminated to the investing public, the Individual Defendants had the power to influence 

and control and did influence and control, directly or indirectly, the decision-making of the 

Company, including the content and dissemination of the various statements which Plaintiff 

contends are false and misleading. The Individual Defendants were provided with or had unlimited 

access to copies of the Company’s reports, press releases, public filings and other statements 

regarding St. Joe’s core financials, which were materially misstated as set forth above, prior to 

and/or shortly after these statements were issued and had the ability to prevent the issuance of the 

statements or cause the statements to be corrected. 

248. In particular, each of these Defendants had direct and supervisory involvement in the 

day-to-day operations of the Company and, therefore, is presumed to have had the power to control 

or influence the particular transactions giving rise to the securities violations as alleged herein, and 

exercised the same. 

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249. As set forth above, St. Joe violated Section 10(b) and Rule 10b-5 by their acts and 

omissions as alleged in this Complaint. By virtue of their positions as controlling persons, the 

Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and 

proximate result of these Defendants’ wrongful conduct, Plaintiff and other members of the Class 

suffered damages in connection with their purchases of the Company’s securities during the Class 

Period. 

XIII. PRAYER FOR RELIEF 

WHEREFORE, Plaintiff prays for relief and judgment, as follows: 

(a) Determining that this action is a proper class action, designating Plaintiff as 

Lead Plaintiff and certifying Plaintiff as a class representative under Rule 23 of the Federal Rules of 

Civil Procedure and Robbins Geller Rudman & Dowd LLP and Labaton Sucharow LLP as Lead 

Counsel; 

(b) Awarding compensatory damages in favor of Plaintiff and the other Class 

members against all Defendants, jointly and severally, for all damages sustained as a result of 

Defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon; 

(c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred 

in this action, including counsel fees and expert fees; and 

(d) Such other and further relief as the Court may deem just and proper. 

XIV. JURY TRIAL DEMANDED 

Plaintiff hereby demands a trial by jury. 

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131

DATED: September 23, 2011 ROBBINS GELLER RUDMAN 

 & DOWD LLP 

s/ Jack Reise 

JACK REISE 

PAUL J. GELLER 

Florida Bar No. 984795 

JACK REISE 

Florida Bar No. 58149 

STEPHEN R. ASTLEY 

Florida Bar No. 139254 

120 East Palmetto Park Road, Suite 500 

Boca Raton, FL 33432-4809 

Telephone: 561/750-3000 

561/750-3364 (fax) 

pgeller@rgrdlaw.com 

jreise@rgrdlaw.com

sastley@rgrdlaw.com 

LABATON SUCHAROW LLP

MARK S. ARISOHN 

JONATHAN GARDNER 

MINDY S. DOLGOFF 

140 Broadway, 34th Floor 

New York, NY 10005-1108 

Telephone: 212/907-0700 

212/818-0477 (fax) 

Co-Lead Counsel for Plaintiff 

VANOVERBEKE MICHAUD & 

 TIMMONY, P.C.

THOMAS C. MICHAUD 

79 Alfred Street 

Detroit, MI 48201-3120 

Telephone: 313/578-1200 

313/578-1201 (fax) 

Additional Counsel for Plaintiff

Case 5:11-cv-00027-RS-EMT Document 101 Filed 09/23/11 Page 136 of 137
132

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on September 23, 2011, I electronically filed the foregoing with 

the Clerk of the Court using the CM/ECF system, which will send a Notice of Electronic Filing to all 

counsel of record. 

 s/Jack Reise 

 JACK REISE

Case 5:11-cv-00027-RS-EMT Document 101 Filed 09/23/11 Page 137 of 137