Opinion ID: 1434342
Heading Depth: 4
Heading Rank: 2

Heading: Insider sales of Diebold stock

Text: The Defendants' highly lucrative and suspiciously timed insider sales are the second set of facts alleged in the complaint in order to establish scienter. Five of the Defendants sold nearly 40,000 shares on February 11, 2005, two weeks after Diebold reported earnings that pushed the stock near its all-time high price. These five Defendants did not make any other sales during the Class Period. [I]nsider trading at a suspicious time or in an unusual amount is one of the nine factors usually relevant to scienter that this court first applied in Helwig v. Vencor, Inc., 251 F.3d 540, 552 (6th Cir. 2001). The fact that five management-level employees sold a significant amount of stock on the same day could be probative of the fact that they knew or at least suspected that Diebold's earnings reports were misleading. Insider trading, however, is suspicious only when it is dramatically out of line with prior trading practices at times calculated to maximize the personal benefit from undisclosed inside information. Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 1005 (9th Cir. 2009) (citation and internal quotation marks omitted). Thus, [f]or individual defendants' stock sales to raise an inference of scienter, plaintiffs must provide a meaningful trading history for purposes of comparison to the stock sales within the class period. Id. (citation and internal quotation marks omitted). The investors failed to provide such a history. A meaningful trading history requires information on non-Class Period sales, the amount of stock retained by the Defendants, or, as the Defendants allege, whether the amount of stock owned by the Defendants actually increased during the Class Period. Absent key background information confirming their suspicious nature, the stock sales in February 2005 do not by themselves raise a strong inference of scienter.