Opinion ID: 785790
Heading Depth: 5
Heading Rank: 4

Heading: Areas of Focus

Text: 64 Plaintiffs seek to draw additional support for a strong inference of the Individual Defendants' scienter by claiming that Intrenet's accounting improprieties occurred in areas of the business that the Individual Defendants had specifically identified as targets of intense focus for the Company and where they were under pressure to show success. As a basis for this proposition, Plaintiffs cite Telxon, 133 F.Supp.2d at 1029. In that case, the court considered a variety of circumstances relevant to reaching a strong inference of scienter, including allegations of motive and opportunity, large restatements of the company's financial disclosures, and accounting manipulations of substantial magnitude. Id. Another factor the court considered was the fact that Telxon and its officers were in a very difficult position, facing unusual pressures to perform during the class period, and stood to benefit substantially from a performance record which matched the healthy ones [a company executive] continually projected to the public. Id. The pressures to make public statements reflecting profitable performance stemmed from the need to stave off [another company's] take over efforts and ensuing proxy-battle. Id. at 1028. 65 Here, Plaintiffs contend that Intrenet's press releases announcing the Company's financial results touted the Individual Defendants' careful monitoring of the very areas in which Intrenet committed accounting violations. The press releases stated that the Company has implemented a program to eliminate, where possible, expenses and liabilities that have historically been a burden to profitable operations; [t]he new management team has been tireless in identifying and eliminating unnecessary costs throughout the organization; [t]he Company has made solid strides and positive progress during what, otherwise, has been a challenging year; and that the Company would be late in filing its 1999 10-K to analyze the impact of recent operational trends, primarily extraordinary increases in fuel prices, on the Company's ability to meet financial covenants in its bank loan agreements. 66 The Court is not persuaded that the aforementioned statements in Intrenet's press releases do much to support an inference that the Individual Defendants knew or should have known about the specific accounting problems alleged in the Complaint. These are little more than statements of broad operational plans or goals — eliminating costs, reducing liabilities, improving profits, etc. These statements do not show knowledge or reckless disregard of the discrete and particularized alleged GAAP violations and control deficiencies concentrated in the ADS subsidiary. 67