Opinion ID: 1434342
Heading Depth: 1
Heading Rank: 3

Heading: The Proximity In Time Between The False Statements and the Disclosure of the Fraud

Text: The third additional fact relied on by the investors is the proximity in time between the allegedly false statements by the Defendants and the later corrections. On August 12, 2005, Diebold stated in an SEC filing that its disclosure controls and procedures were effective. Three days later, another SEC filing stated that such controls and procedures were not effective. The investors argue that [t]he fact that these two statements were made a mere three days apart strongly suggests that Defendants knew the first statement was false when it was made. [C]loseness in time of an allegedly fraudulent statement . . . and the later disclosure of inconsistent information is one of the nine Helwig factors supporting a finding of scienter. Helwig v. Vencor, Inc., 251 F.3d 540, 552 (6th Cir.2001). The difference of only three days suggests that the Defendants knew or had reason to know that their certification that the controls were effective was false when it was made. Proximity alone, however, does not support a strong inference of scienter. Fidel v. Farley, 392 F.3d 220, 232 (6th Cir. 2004) (holding that the plaintiffs had not adequately plead scienter despite the temporal proximity of statements because there is no indication from the class members' allegations that [the defendant] knew or recklessly disregarded information it had before it at the time it issued its allegedly false statements). Because the investors in the present case do not allege any specific facts establishing that the Defendants knew or recklessly disregarded the falsity of their statements, the proximity of the inconsistent statements is not sufficient to support a strong inference of scienter.