Opinion ID: 1434342
Heading Depth: 1
Heading Rank: 5

Heading: Defendants' Own Class Period Statements

Text: The fifth additional fact relied on by the investors is that the Defendants' own statements during the Class Period show that [they] were intimately familiar with Diebold's accounting and financial reporting practices, and that by participating in earnings conference calls and signing SEC certifications about Diebold's earnings and policies, the Defendants held themselves out as extremely knowledgeable about Diebold's financial results. But the Class Period statements detailed in the complaint are generalized and relate primarily to Diebold's overall profits and growth. They therefore do not establish that the Defendants were intimately familiar with Diebold's revenue-recognition practices. Moreover, a Sarbanes-Oxley certification is only probative of scienter if the person signing the certification was severely reckless in certifying the accuracy of the financial statements. Ley v. Visteon Corp., 543 F.3d 801, 812 (6th Cir.2008) (quoting Garfield v. NDC Health Corp., 466 F.3d 1255, 1266 (11th Cir.2006)). The investors have provided no contemporaneous facts showing that the Defendants knew or should have been aware that these statements were false. See In re MoneyGram Int'l, Inc. Secs. Litig., 626 F.Supp.2d 947, 981 (D.Minn.2009) ([F]alse [Sarbanes-Oxley] certifications are probative of scienter only if they are accompanied by allegations of particular facts demonstrating how the defendants knew of the scheme at the time they made their statements of compliance, that they knew the financial statements overrepresented the company's true earnings, or that they were aware of a GAAP violation and disregarded it. (citation and internal quotation marks omitted)). Finding scienter based on these allegations would be equivalent to the classic fraud by hindsight case where a plaintiff alleges that the fact that something turned out badly must mean defendant knew earlier that it would turn out badly. See Miss. Pub. Employees' Ret. Sys. v. Boston Scientific Corp., 523 F.3d 75, 91 (1st Cir.2008). Without specific allegations showing that the Defendants either knew of or recklessly disregarded the falsity of their own statements at the time the statements were made, the fact that their statements later turned out to be false is irrelevant to a cause of action under the PSLRA.