Opinion ID: 785790
Heading Depth: 5
Heading Rank: 8

Heading: Summary of Scienter Allegations Against Individual Defendants

Text: 81 Plaintiffs have accumulated numerous circumstantial allegations from which they ask the Court to draw the strong inference of scienter required for this case to move forward. In the foregoing discussion, we noted that, while some of these allegations suggest little about the Individual Defendants' states of mind, other allegations favor the implication that they may have known, or were reckless in not knowing, of the accounting problems at Intrenet and its true financial condition. See MicroStrategy, 115 F.Supp.2d at 649 (Just as otherwise-unremarkable individual points of colored paint in the aggregate become a Seurat painting, so, too, do the individual allegations in this case — which, when viewed in isolation may or may not by themselves give rise to a `strong inference' of scienter — collectively paint an equally compelling picture of scienter.). However, [a] mere reasonable inference is insufficient to survive a motion to dismiss. Greebel v. FTP Software, Inc., 194 F.3d 185, 196 (1st Cir.1999). Even when added up and viewed in their entirety, the ultimate inference of scienter the allegations in this case raise is not strong — that is, the most plausible of competing inferences. 82 In Helwig, this Court set forth a non-exhaustive list of factors usually relevant to scienter. 251 F.3d at 552. Few of these factors emerge in this case. First, there are no allegations of insider trading at a suspicious time or in an unusual amount. Second, there are no specific allegations of a divergence between internal reports and external statements on the same subject. The allegations regarding the outside consultant lack any detail about when or to whom the consultant reported the information he allegedly discovered. Third, there is little temporal proximity between the allegedly fraudulent statements and the later disclosure of inconsistent information in October of 2000. Fourth, there are no allegations of bribery by a top company official. Fifth, there is no ancillary lawsuit charging fraud by the Company and the Company's quick settlement of the suit. Sixth, allegations that the Individual Defendants disregarded the most current factual information before making statements lack specific facts concerning how or when any accounting improprieties became known to them. Once again, the activities of the consultant are so vaguely described as to offer little insight into what the Individual Defendants knew or when they knew it. Seventh, the Complaint contains no allegations that accounting information was disclosed in such a way that its negative implications could only be understood by someone with a high degree of sophistication. Eighth, there are no allegations of certain directors holding a personal interest in not informing disinterested directors of a sale of stock. Finally, allegations of the Individual Defendants' self-interested motivation in the form of saving their salaries or jobs only mildly suggest scienter. 83 For all these reasons, the Section 10(b) and Rule 10b-5 claims against the Individual Defendants were properly dismissed pursuant to Fed.R.Civ.P. 12(b)(6). 84