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

Heading: 2003 and First Quarter 2004 Financial Statements

Text: A strong inference of scienter might arise when there are sufficient red flags to alert senior officers to the unreliability of statements about internal controls and financial information. See Ottmann, 353 F.3d at 351. The red flags alleged in this caseincluding major internal control problems and large-scale misstatements of incomegive rise to a possible inference of scienter for statements made in 2003 and for the first quarter of 2004. But it is also possible to infer that defendants were only acting negligently with respect to the accuracy of the contested statements. During 2003 and 2004 BearingPoint was struggling to integrate thirty world-wide acquisitions that included using a new firm-wide financial reporting system, OneGlobe. Further, BearingPoint officers may not have had reason to know that OneGlobe problems and other internal control deficiencies existed and were sufficiently severe so as to threaten the reliability of financial reporting. To the extent the record speaks to the timeline, it suggests that BearingPoint was still putting OneGlobe into operation during the second quarter of 2004, which ended June 30, 2004. Absent additional allegations that BearingPoint officials had reason to know that the company's financial information was inaccurate, we conclude that the inference of scienter is not as compelling as competing nonculpable inferences for financial statements made during 2003 and for the first quarter of 2004.