UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

No. 92-2519

_____________________

FELIX SHUSHANY, and SHEPARD BARTNOFF,

Plaintiffs-Appellants,

VERSUS

ALLWASTE, INC., and RAYMOND L. NELSON,

Defendants-Appellees.

____________________________________________________

Appeal from the United States District Court

for the Southern District of Texas

_____________________________________________________ (May 21, 1993)

Before WIENER, BARKSDALE, and DeMOSS, Circuit Judges.

BARKSDALE, Circuit Judge:

In issue is the degree of particularity required by Fed. R.

Civ. P. 9(b) to plead fraud, especially securities fraud. Felix

Shushany and Shepard Bartnoff appeal the dismissal with prejudice,

for failure to comply with the rule, of their consolidated action

against Allwaste, Inc., and Raymond L. Nelson. We AFFIRM.

I.

Allwaste is a diversified environmental services company. One

of its subsidiar i es, Allwaste Asbestos Abatement, Inc. (AAA),

provides asbestos abatement services. Nelson was chairman of

All waste's board. (Allwaste and Nelson are referred to

collectively as "Allwaste".) The complaint alleges that from its

incorporation in 1986 through 1990, Allwaste engaged in an- 2 -

amb itious acquisition program, almost totally through stock for

stock transactions, and reported phenome nal growth and success,

including in its asbestos a batement division; that in December

1990, however, an Allwaste press release announced its decision "to

restructure its Asbestos Abatement Division to reduce costs and

return the division to profitability pending its u ltimate

disposition"; and that, following this adverse disclosure, Allwaste

common stock lost approximately 70 percent of its value.

In May 1991, seeking to represent a class of Allwaste

shareholders, Shushan y sued Allwaste under, i nter alia

, federal

securitie s laws. He basically alleged that Allwaste had

fraudulently maintaine d in its public financial reports and

releases the appearance of continue d financial growth, when in

fact, its a sbestos abatement division had been suffering since

early 1989. In its answer, Allwaste asserted, i nter alia

, that the

complaint failed to state fraud with particularity as required by

Rule 9(b).

Additionally, Allwaste propounded contention interrogatories,

seeking the factual bases of Shushany's claims. In response,

Shushany essentially referred Allwast e to the complaint, without

providing any further detail. Allwaste then moved to compel more

complete answers, again asserting that the complaint did not

satisfy Rule 9(b). After two extensions of time to respond to the

motion, Shushany su bmitted amended responses to the interrogatories, which still lacked the specificity sought by Allwaste.- 3 -

Because Shushany had not purchased Allwaste stock during the

purported class period, he moved to amend the complaint to extend

the period. Prior to a ruling on that motion, however, Shushany's

counsel filed another action for a different plaintiff, Bartnoff,

stating the desired class period, and moved to consolidate the two

cases. (The plaintiffs are referred to collectively as

"Shushany".) Allwaste opposed both motions.

At a hearing on the motions in December 1991, the asserted

Rule 9(b) deficiencies were discussed; and the court informed

Shushany's counsel: "in a case like this the defendant company is

entitled to know which of their documents you feel give you a claim

and what you feel are wrong with them, right up front". Shushany's

counsel responded: "we believe that we can do that, we believe that

we can get out the specific documents that we think

misrepresentations were mad e, [sic] and we think from those

documents we can set out our complaint within the requisites of

9(b)". With Allwaste's agreement, the court granted the motion to

consolidate, ordering the pla intiffs to "file their Consolidated

Amended Complaint in accordance with Federal Rule 9(b)".

As Shushany concedes, the consolidated complaint, however, was

virtually identical to the prior comp laints. Consequently,

Allwaste moved to dismiss for failure to comply with Rule 9(b). At

the hearing in May 1992, Shushany referred to additional

information regarding the fraud, which he had supposedly provided1 To the contrary, our review of those amended responses reveals

that many of the details Shushany referred to at the hearing were

not contained in the responses.

2 In light of the district court's prior discussions on the

asserted Rule 9(b) deficiencies, we are at a loss to understand

Shushany's characterization of the district court's holding as "a

judicial broadside". As discussed, the motion to consolidate was

agreed to by Allwaste and granted by the district court only upon

the understanding that Shushany would make good on his promise to

"set out [the] complaint within the requisites of 9(b)".

3 As to the dismissal being with prejudice, see infra note 11.

4 Shushany alternatively contends, as he did in district court,

that Allwaste waived any Rule 9(b) objection by filing an answer to

the original complaint and engaging in discovery. We agree with

the district court that this contention "borders on being

frivolous". From the time of its answer, which, as noted, included

a Rule 9(b) objection, Allwaste repeatedly and consistently

con tended that the complaint failed to comply with the rule.

Contrary to Shushany's contention, it is not the law in this

circuit that "[t]he entire concept behind [Rule 9(b)]" is solely to

enable the defendant to p repare a responsive pleading. Furthermore, we see no reason to penalize a defendant who, rather than

initiating time-consuming and costly motions to dismiss a deficient

complaint, chooses to pursue the needed information through

- 4 - in a second set of amended responses to interrogatories. 1 Shushany

did not, however, request leave to amend the complaint to include

those details. After extensive argument, the district court

stated: "I do not believe that the Plaintiffs have cured the

problem from their original complaint...." And in its written

opinion, it stated that the consolidated complaint was "virtually

the same" as the prior complaint which "[the court] had previously

found to be insufficient". 2 Accordingly, it dismissed the action

with prejudice. 3

II.

Shushany contends that the consolidated complaint complied

with the rule. 4 A dismissal for failure to state fraud withdiscovery. It was only after this avenue of pursuit failed that

Allwaste moved to dismiss.

Moreover, at the first hearing (Decem ber 1991) on the Rule

9(b) deficiencies, Shushany's counsel took a quite opposite

position to the present assertion of waiver. When the court asked,

"[h]ave you any serious complain t about the interrogatories

[defendants] propounded that go to that [Rule 9(b)] area?", counsel

stated:

No, your Honor, our only objection is that we

thought the complaint in itself was good enough to

begin with, however, we can respond to the

interrogatories as best we can, and if things don't

work out they can file their

... 9(b) motion

, which

we have never seen before. It's always been this

threat that's been hanging out there in the wings

against us, but we've never seen it, we don't

particularly know what they're talking about.

(Emphasis added.)

And, finally, the Rule 9(b) motion addressed the consolidated

complaint, as to which no answer or discovery had been filed.

- 5 - particularity as required by Rule 9(b) is a dismissal on the

pleadings for failure to state a claim. S ee Guidry v. Bank of

LaPlace (" Guidry II "), 954 F.2d 278, 281 (5th Cir. 1992); Fed. R.

Civ. P. 12(b)(6). Accordingly, we review the dismissal d e novo

,

and in so doing, "accept the complaint's well-pleaded factual

allegations as true." Id.

The consolidated complaint had four claims: (1) against both

defendants for violations of § 10(b) of the Securities and Exchange

Act of 1934, 15 U.S.C. § 78(j)(b), and Rule 10b-5 promulgated

thereunder, 17 C.F.R. 240.10b-5; (2) against Nelson, as a

"controlling person" of Allwaste, for violations of § 20(a) of the5 We assume that the same Rule 9(b) concerns apply to the common

law fraud claims as to the securities fraud claims. The complaint

relies on the sam e allegations for them. In any event, Shushany

made no attempt to distinguish the claims in his brief. See Fed.

R. App. P. 28(a)(5); Zeno v. Great Atlantic & Pacific Tea Co.

, 803

F.2d 178, 180-81 (5th Cir. 1986) (issues not briefed are waived).

Likewise, because Shushany does not contest in his appellate

b rief the district court's dismissal of his negligent misrepresentation claim, we do not address it.

- 6 - Act, 15 U.S.C. § 78t(a); and against both defendants for (3) fraud

and deceit and (4) negligent misrepresentation. 5

The elements of a securities fraud claim are "(1) a

misstatement or an omission (2) of material fact (3) made with

scienter (4) on which the plaintiff relied (5) that proximately

caused his injury". C yrak v. Lemon

, 919 F.2d 320, 325 (5th Cir.

1990). A fact is considered material if "there is a substantial

likelihood that a reasonable shareholder would consider it

important ...". TSC Industries, Inc. v. Northway, Inc. , 426 U.S.

438, 449 (1976); s ee also Krim v. BancTexas Group, Inc.

, No. 92-

1208, slip op. at 4137 (5th Cir. May 12, 1993). Scienter is the

intent to deceive, manipulate, or defraud. E rnst & Ernst v.

Hochfelder , 425 U.S. 185, 193-94 (1976). The scienter element is

satisfie d by proof that the defendant acted with severe

recklessness, which is "limited to those highly unrea sonable

omissions or misrepresentations that involve not merely simple or

e ven inexcusable negligence, but an extreme departure from the

standards of ordinary care, and that present a danger of misleading

buyers or sellers which is either known to the defendant or is so

obvious that the defendant must have been aware of it". B road v.- 7 -

Rockwell Int'l Corp.

, 642 F.2d 929, 961-62 (5th Cir.) ( en banc ),

cert. denied , 454 U.S. 965 (1981).

Rule 9(b) provides: "In all averments of fraud or mistake, the

circumstances constituting fraud or m istake shall be stated with

particularity". Thus, allegations of fraud must meet a higher, or

more strict, standard than the basic notice p leading required by

Rule 8. This standard "stems from the obvious concerns that

general, unsu bstantiated charges of fraud can do damage to a

defendant's reputation". G uidry II

, 954 F.2d at 288.

Additionally, Rule 9( b) is designed "to preclude litigants from

filing baseless complaints and then attempting to discover unknown

wrongs". G uidry v. Bank of LaPlace (" Guidry I "), 740 F. Su pp.

1208, 1216 (E.D. La. 1990), aff'd as modi fied , 954 F.2d 278 (5th

Cir. 1992); see als o O'Brien v. National Property Analysts

Partners , 936 F.2d 674, 676 (2d Cir. 1991) (recognizing threefold

purpose of Rule 9(b) for securities fraud claims

-- to provide

defendant with fair notice of claim, to safeguard defendant's

re putation, and to protect defendant against the institution of

strike suits).

"At a minimum, Rule 9(b) requires allegations of the

particulars of time, place, and contents of the false

representations, as well as the identity of the person making the

misrepresenta tion and what he obtained thereby". T el-Phonic

Services, Inc. v. TBS Int'l, Inc.

, 975 F.2d 1134, 113 9 (5th Cir.

1992). "What constitutes `particularity' will necessarily differ

with the facts of each case and hence the Fifth Circuit has never6 Shushany cited various statements from the Allwaste 1989 Form

10-K; its first, second, and third quarter 1990 Forms 10-Q; and an

October 30, 1990, press release by Nelson.

- 8 - articulated the requirements of Rule 9(b) in great detail". G uidry

II , 954 F.2d at 288.

Shushany alleged three types of fraudulent statements

contained in various Allwaste public documents and reports: 6 (1)

that employees of various AAA divisions were instructed to engage

in improper accounting practices, which resulted in a n

overstatement of earnings and inc ome in Allwaste's financial

reports; (2) that statements about increasing demand and

opportunities for growth in the asbestos abatement industry were

false; and (3) that a statement regarding the integrity and

business ethics of Allwaste employees was false. We address each

category separately.

A.

For the period November 22, 1989, through December 21, 1990,

Shushany alleged that "[i]n the face of the worsening business

environment for the asbestos abatement market", Allwaste "embarked

on a plan and scheme to have Allwaste report inflated revenues and

earnings". As examples, Shushany alleged the following:

(a) By no later than the Winter of 1989, the

Defendants or Defendants' agents began a course and

scheme designed to defraud investors by instructing

employees to make arbitrary adjustments for the

accounting of inventory of the asbestos operations

in Houston, Texas;

(b) In January of 1990, the Defendants, or

Defendants' agents, instructed employees, including

Don Higginbotham, an employee of Defendant

Allwaste, to increase bad debt reserves rather7 Cf. Decker v. Massey-Ferguson

, 681 F.2d 111, 117 (2d Cir.

1982) (allegations of two instances of a debt placement and a

financi ng arranged in the "fall of 1977" were insufficient

allegations of the time and place of the fraud); Recchion v. Westinghouse Elec. Corp.

, 606 F. Supp. 889, 895 (W.D. Pa. 1985)

(allegations that defendant misstated value of various facilities,

which in turn affected defendant's financial statements, were

insufficient in part because complaint fail ed to state which

facilities were involved).

8 In fact, surprisingly, the consolidated complaint deleted the

general references to generally accepted accounting principles

- 9 - than, as required, writing off certain accounts

receivable;

(c) In the Spring of 1990, the Defendants'

agents instructed Mr. Higginbotham to arbitrarily

realize an additional $650,000 on one of Allwaste's

largest asbestos contracts for the third quarter of

1990;

(d) Defendants or Defendants' agents were

instructing employees in other Allwaste divisions

to make arbitrary increases to inflate income

during at least the Spring of 1990; and

(e) In the Spring of 1990, the Defendants or

Defendants' agents, instructed their employees to

conceal the securities fraud committed by Allwaste

from the shareholders of Allwaste.

The complaint then cites particul ar statements from Allwaste's

financial reports, and alleges variously that they were "materially

false and misleadin g as such amounts were improperly inflated",

were "made without a reasonable basis", and were "inaccurate" due

to the fraudulent accounting procedures.

But, the complaint did not identify who in particular was

instructing the employees to make the arbitrary accounting

adjustments, what particular adjustments were made, 7 how those

adjustments were improp er in terms of reasonable accounting

practices, 8 how those adjustments were incorporated into Allwaste's(GAAP) that had been in the prior complaints, replacing allegations

that the defendants violated GAAP with allegations that the facts

reported "were [not] in fact true" and were "inaccurately

reported". C f. Christidis v. First Pennsylvania Mortg. Trust

, 717

F.2d 96, 99 (3d Cir. 1983) (complaint insufficient in absence of

allegation of manner in which defendant's accounting method

departed from reasonable accounting practices and procedures); In

Re Frank B. Hall & Co., Inc.

, 693 F. Supp. 1460, 1465-66 (S.D.N.Y.

1988) (allegation that accountant arbit rarily valued company $10

million under GAAP, with citation to specific accounting rules

violated, was sufficient); Fox v. Equimark Corp.

, 782 F. Supp. 295,

301 (W.D. Pa. 1991) (allegations that defendant failed to increase

loan loss reserves when substantial losses were virtually certain

were insufficient, in part because complaint failed to specify

manner in which reserves were improperly established).

9 At oral argument in both the district court and our court,

Shushany argued only that the adjustments must have been material,

or Allwaste would not have made, and attempted to conceal, them.

Obviously, any such inference does not satisfy Rule 9(b)

particularity requirements. Cf. D ecker v. Massey-Ferguson

, 681

F.2d at 116 (where complaint alleged failure to record value of

certain assets but did not even app roximate figures involved, it

failed to demonstrate materiality in light of the overall figures

of the company); Wool v. Tandem Computers, Inc.

, 818 F.2d 1433,

1440 (9th Cir. 1987) (complaint sufficient where each alleged

misstatement was identified by content, date, and document or

announcement, and complaint stated exac t dollar amount of each

alleged oversta tement); I n Re AM International, Inc., Securities

Litigation

, 597 F. Supp. 1117, 1119 & n .3 (S.D.N.Y. 1984)

(allegations that defendant placed intense pressure on accounting

management to overstate income and assets and to withhold adverse

accounting information " prior to 1980" in a "material amount not

yet calculated, but in excess of $5 million" were insufficient with

respect to the 1978 financial reports in part because no factual

basis w as provided for the $5 million figure); R ecchion v. Westinghouse Elec. Corp.

, 606 F. Supp. 889, 895 (W.D. Pa. 1985)

(allegations that defendant misstated production costs for various

facilities, which in turn affected defendant's financial

statements, were insufficient in part because complaint failed to

state extent of the misstatements); In Re Wyse Technology

Securitie s Litigation , 1990 WL 169149 (N.D. Cal. 1990)

(unpublished) (allegations that improper accounting procedures with

respect to sales and income affected defendant's public financial

statements insufficient where complaint failed to allege

- 10 - financial statements, and if incorporated, whether those

adjustments were material in light of Allwaste's overall financial

position. 9 Although we need not identify which of theseapproximate amount involved to establish materiality).

10 The a ttorneys made several references to the Higginbotham

action in arguments to the district court, but no evidence of it

appears in the record.

- 11 - deficiencies, standing alone, might render the complaint

insufficient under Rule 9(b), we hold that altogether, they do.

Shushany contends that the facts sought lie parti c ularly

wit hin Allwaste's knowledge, and therefore, he is excused from

pleading them, citing, inter a lia

, M ichaels Building Co. v.

Ameritrust Co., N.A.

, 848 F.2d 674, 680 (6th Cir. 1988); Craftmatic

Securities Li tigation v. Kraftsow , 890 F.2d 628, 645 (3d Cir.

1989); and Christidis v. First Pennsylvania Mortgage Trust , 717

F.2d 96, 100 (3d Cir. 1983). Shushany demonstrated at the motion

to dismiss hearing, however, that he had ample access to at least

some of the information sought, through a "whistleblower" AAA

employee, the earlier-referenced Don Higginbotham, who was

assertedly represented by Shushany's counsel in a separate action

against Allwaste. 10

As noted, Shushany referred at the hearing to a second set of

amended responses to interrogatories, which purportedly provided

additional facts gleaned from Higginbotham's testimony in the other

case. These included an alleged dispute between Nelson and a Mr.

Stewart over the acquisition of American Environmental, the names

of three individuals who allegedly directed the accounting fraud,

and the date of one such incident. Shushany also represented that

"the securities fraud was directed to be concealed by at least

Wayne Rachlin[, who] directed Don Higginbotham and Olga Guerra to11 This notwithstanding, Shushany complains several times in his

appel late briefs -- but does not raise as an issue -- that the

district court dismissed without granting leave to amend.

Additionally, in his reply brief, he states, "[t]o the extent that

Plaintiffs have not so requested Plaintiffs request leave to amend

to address any 9(b) complaint". This untimely request is totally

lacking in merit.

Furth ermore, Shushany does not contend that the dismissal

should have been without prejudice. Thus, he has waived any error

in that regard.

- 12 - revise schedules to direct the auditors' at tention from the

arbitrary increases to income ... [and] required Mr. Higginbotham

and Ms. Guerra to practice false responses to potential questions

concerning the increases to income". Shushany further represented

to the district court that Higginbotham "will testify that ... he

believes that the same activities were going on not just in Houston

but also at the Argon Asbestos Abatement Division and also in

Birmingham ...". Shushany's counsel then stopped, stating, "I'm

not going to bore the Court by going through all [the] responses".

Although, as also noted, much of this information was not

contained in the amended responses, Shushany demonstrated a greater

knowledge of the factual basis for the fraud claims than appears in

the complaint, yet no effort was made to amend it to include these

details, in spite of the district court's prior admonition and

Allwaste's repeated Rule 9(b) objections. 11 Allwaste responded in

part to Shushany's argument by stating, "it's fine to say Mr.

Higginbotham told us this and told us that. In that case, then why

don't they share that with us in an amended complaint that

s pecifies what it is". Indeed, as Allwaste states in its brief,12 Shushany may have been under the impression that because the

same counsel supposedly defended Allwaste in the Higginbotham

action, Allwaste was presumed to have knowledge of Higginbotham's

testimony. Our review, however, as well as the district court's,

is limited to the record established in this case. Therefore, even

if this case turned on Allwaste's actual knowledge, we could not

take note of information not contained in the record.

13 Although Allwaste contends that Higginbotham's employer, AAA

of Houston, was actually a subsidiary of AAA, which would further

attenuate any link between the al leged accounting fraud and

Allwaste's financial reports, we do not find that fact in the

record, and Allwaste provides no record cite to it. S ee Fed. R.

A pp. P. 28(a)(4) (the statement of the facts shall contain

"appropriate references to the record").

- 13 - "[i]f there was a claim to be made, few 10b-5 plaintiffs have had

more information with which to make it". 12

We find the deficiencie s in the complaint particularly

troubling because the alleged fraudulent acts occurred at AAA, an

Allwaste subsidiary. 13 Although it is foreseeable that

misstatements in AAA's ledgers could materially skew the accuracy

of Allwaste's financial reports, such an inference standing alone

is obviously insufficient to support a securities fraud claim

against Allwaste and Nelson. The complaint provides only

conclusory allegations to support any connection between the

alleged fraudulent accounting practices at AAA and Allwaste's

finan cial reports, which do not satisfy the requirements of Rule

9(b).

In sum, Shushany fa iled to state his allegations regarding

accounting fraud with sufficient particularity to comply with Rule

9(b). As stated, and because this court has recognized that the

degree of particularity requ ired differs with the facts of each14 Shushany alleged that the various statements "were materially

false and misleading as they included earnings and sales for the

asbestos ab a tement business of Allwaste which were improperly

- 14 - case, see Guidry II

, 954 F.2d at 288, we base our holding on the

entirety of the complaint rather than on any single defect.

B.

Shushany's allegations about Allwaste's misrepresentations

concernin g the demand and opportunity for growth in the asbestos

abatement industry likewise lack sufficient particularity.

Specifically, Shushany quoted the fo llowing statements from the

various Allwaste financial reports listed supra , note 6:

1. "Management of the Company believes that

there i s a substantial opportunity for growth in

the asbestos abatement business due to the rapidly

increasing demand for these services". (1989 Form

10-K).

2. "Revenues increased at all of the

Company's asbestos abatement operating locations".

(First quarter 1990 Form 10-Q).

3. "Demand for these [asbestos abatement]

services has continued to inc rease as the Company

has steadily expanded its wor k force between the

periods, particularly in the Pacific Northwest and

in Houston, Texas". (Second quarter 1990 Form 10-

Q).

4. "Demand for these [asbestos abatement]

services has continued to increase, particularly in

Houston, Texas and along the West Coa st". (Third

quarter 1990 Form 10-Q).

5. "Our abatement backlog remains high [in

spite of a decli ne in fourth quarter results]".

(October 30, 1990, press release).

Shushany variously alleged that these representations were

fraudulent because they were based on the a lleged inaccurately

reported financial figures. 14inflated, and were made witho ut a reasonable basis"; "were

materially fals e and misleading because, Allwaste and defendant

Nelson were aware or were reckless in knowing that due to decreased

margins on sales and revenues, the asbestos abatement division was suffering financially"; "[were] false and misleading because

Allwaste and defendant Nelson were aware that A llwaste was

fraudulently instructing its employees to increase bad debt

reserves, rather than as required writing off certain accounts

receivable, and the financial figures it was reportin g were,

therefore, inaccurate"; "[were] false and materially misstated both

the revenues for the Company and the prospects for future revenues

in that Allwaste and Defendant Nelson were aware that Allwaste was improperly inflating its earnings and was experiencing significant

objections from its employees regarding the manner in which

Allwaste was recognizing i ncome in its asbestos abatement

divisio n"; and "were false and misleading because Allwaste and

Defendant Nelson were fraudulently instructing its employees to

increase it s bad debt reserve, rather than making required write

offs, and to make arbitrary increases to inflate the income

recognized by Allwaste".

- 15 - Statements that are predictive in nature are actionable only

if they were false when made. Isquith v. Middle South Utilities,

Inc.

, 847 F.2d 186, 203 (5th Cir. 1988), cert. denied

, 488 U.S. 926

(1988). Furthermore, "projections of future performance not worded

as guarantees are generally not actionable under the federal

securities laws". K rim

, slip op. at 4138. To the extent that the

falsity of these statements depends upon Shushany's g eneral

allegations about the "worsening business environmen t for the

asbestos abatement market", no facts were pleaded to support them.

Nor does Shushany's comparison of Allwaste stock prices before and

a fter the alleged events support an inference of fraud. As the

Seventh Circuit has explained:

At one time the firmbathes itself in a favorable

light. Later the firm discloses that things are

less rosy. The plaintiff contends that the

difference must be attribut able to fraud. "Must

be" is the critical phrase, for the co mplaint

offers no information other than the differences- 16 - between the two statements of the firm's

con dition.... Investors must point to some facts

suggesting that the difference is attributable to

fraud.

DiLeo v. Ernst & Young

, 901 F.2d 624, 627 (7th Cir. 1990), c ert.

denied

, 498 U.S. 941 (1990). As noted, the only allegations

suggesting that the statements were false when made are those

concerning the accounting fraud at AAA. Because we have determined

that the accounting fraud allegations were n ot pleaded with

sufficient particularity, these allegations, which depend upon

them, also must fail.

C.

Finally, regarding the business ethics of Allwaste employees,

Shushany cited the following statement from the annual report

attached to Allwaste's 1989 Form 10-K: "These men and women share

the same fundamental principles upon which your company was founded

-- integrity, hard work, business ethics and fervent commitment to

the highest level of customer service ". Again, Shushany's

characterization of this statement as fraudulent depends solely on

the allegations regarding the "unscrupulous and unethical business

practices by the Company", i.e.

, the alleged accounting fraud. For

the reasons explained above, these allegations also fail to satisfy

Rule 9(b).

III.

Accordingly, the dismissal with prejudice for failure to

comply with Rule 9(b) is

AFFIRMED.