Opinion ID: 1029539
Heading Depth: 1
Heading Rank: 2

Heading: Second and Third Quarter 2004 Financial Statements

Text: There is a stronger case for an inference of scienter for the Form 10-Q filed for the second quarter of 2004 (filed August 6, 2004), because the record suggests that OneGlobe problems could have manifested themselves by August 2004, and because the financial report issued for that period misstated net income by a particularly large amount ($37.6 million). Nevertheless, the allegations fail to establish that it is as likely as not that the alleged misstatements and omissions were obvious on August 6, 2004, to BearingPoint officials struggling to integrate recent worldwide acquisitions, manage thousands of employees, and account for billions in revenue. See Zucco Partners v. Digimarc Corp., 552 F.3d 981, 1007 (9th Cir.2009) (Although the allegations in this case are legion, even together they are not as cogent or compelling as a plausible alternative inference namely, that although Digimarc was experiencing problems controlling and updating its accounting and inventory tracking practices, there was no specific intent to fabricate the accounting misstatements at issue here. Instead, the facts alleged by Zucco point towards the conclusion that Digimarc was simply overwhelmed with integrating a large new division into its existing business.); see also In re BearingPoint, 525 F.Supp.2d at 762 (noting that as of December 31, 2004, BearingPoint had about 16,800 full-time employees worldwide and $3.3 billion in revenue). Absent additional allegations suggesting that BearingPoint officials knew that OneGlobe problems jeopardized the accuracy of their second quarter financial statements, the inference of scienter is not as compelling as competing inferences. The same analysis applies to the Form 10-Q for the third quarter of 2004, filed on November 8, 2004.