Opinion ID: 2789180
Heading Depth: 3
Heading Rank: 1

Heading: Cash balances

Text: During the class period, Jiangbo consistently reported in its filings with the SEC that its cash balances were near or above $100 million. As CFO, Ms. Sung certified to the SEC that Jiangbo had sufficient internal controls and procedures to ensure that the filings were accurate and that no material information was missing. 7 In addition to signing these certifications within Jiangbo’s filings, Ms. Sung participated in multiple conference calls with shareholders in which she reiterated cash balances from the filings. During these calls, Ms. Sung emphasized to shareholders that the company’s growth and cash position were “strong.” Doc. 43 at ¶¶ 150, 158, 170. The investors allege that Jiangbo’s cash balances were overstated in the SEC filings and, consequently, that Ms. Sung’s formal certifications and verbal confirmations of the figures were material misrepresentations. The complaint lists 6 The complaint also alleges that Jiangbo overstated its accounts receivable and failed to disclose the SEC investigation in filings that followed, but the investors do not assert these claims on appeal. 7 After Ms. Sung stepped down, she ceased to certify filings or make public statements about Jiangbo’s financial position on behalf of the company. Accordingly, the investors assert no claims against Ms. Sung based on misrepresentations or omissions occurring after her resignation became effective on March 31, 2011. 5 Case: 14-10213 Date Filed: 03/25/2015 Page: 6 of 24 irregularities in Jiangbo’s management of its finances that support an inference that its cash balances were actually much lower. First, Jiangbo defaulted in early 2011 on a relatively small principal payment—$3.5 million—that it owed on debt from its initial financing years earlier. Second, Jiangbo failed to make timely payments to Cadwalader and E&Y for their assistance in the internal investigation, and when the company ultimately made a partial payment of only RMB 2.2 million,8 the funds appeared to have come from the personal account of a Jiangbo employee. The investors reason that if Jiangbo’s cash balances really had been in excess of $100 million for most of the class period, Jiangbo would not have had trouble meeting such minimal obligations.