Opinion ID: 2807988
Heading Depth: 4
Heading Rank: 3

Heading: Gifford

Text: Gifford was Guaranty’s Controller until December 2007 and was Guaranty’s Executive Vice President and Principal Accounting Officer from December 2007 until his resignation on October 27, 2008. Plaintiffs seek to hold Gifford liable for wrongful conduct from the beginning of the Class Period through his resignation. Plaintiffs identify three alleged misstatements made by Gifford. Gifford signed Guaranty’s 2007 10-K and two 10-Qs, filed on April 29, 2008 and August 11, 2008, all of which allegedly included the misrepresentation that the financial statements contained therein complied with GAAP. The case for Gifford’s scienter is the weakest of any defendant. Gifford was not a party to the Tepper action, nor are there any other allegations that he was aware of Guaranty’s undercapitalization at any point during the Class Period. The SAC does not allege that Gifford was privy to any concerns about deficiencies in Guaranty’s internal valuation models. Essentially, the SAC alleges only that Gifford held the position of Principal Accounting Officer at the time a large misstatement was made, and that red flags existed. We have already discussed why the magnitude of the misstatement and red flags do not create a strong inference of scienter, and Gifford’s position within Guaranty does not support a strong inference of scienter. “A pleading of scienter may not rest on the inference that defendants must have been aware of the misstatement based on their positions within the company.” Abrams, 292 F.3d at 432; see also Goldstein, 340 F.3d at 251 (concluding that the allegation that defendant was a “hands-on” CEO and therefore must have been aware of accounting error was not specific enough to 25 Case: 13-10928 Document: 00513076785 Page: 26 Date Filed: 06/12/2015 No. 13-10928 support an inference of scienter). Viewed holistically, the allegations against Gifford do not create a strong inference of scienter.