527_F._Supp._2d_728,_2007_U.S._Dist._LEXIS_

527_F._Supp._2d_728,_2007_U.S._Dist._LEXIS_ -...

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IN RE PROQUEST SECURITIES LITIGATION, Case No. 06-10619 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN,  SOUTHERN DIVISION 527 F. Supp. 2d 728 ; 2007 U.S. Dist. LEXIS 82222; Fed. Sec. L. Rep. (CCH) P94,510 November 6, 2007, Decided  November 6, 2007, Filed CASE SUMMARY   PROCEDURAL POSTURE: Defendants, a corporation, its current and former chief executive officers, its current chief financial officer, and a vice-president of finance who was terminated based on his accounting practices, filed motions under Fed. R. Civ. P. 9(b) and 12(b)(6) to dismiss a purported class action asserting violations of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C.S. §§ 78j(b) and 78t(a) . OVERVIEW: Plaintiff investors alleged that defendants made false and misleading statements regarding revenue and earnings. The corporation's stock fell sharply when the corporation issued a restatement of previously reported earnings after accounting improprieties were disclosed in a Form 8-K that the corporation filed with the Securities and Exchange Commission. The Form 8- K blamed the accounting problems on defendant vice-president. The court found it appropriate to consider the allegations of two confidential informants to the extent they were consistent with other evidence of scienter. Contrary to defendants' claims, the court found that the complaint adequately alleged scienter, actionable misrepresentation, and control person liability. The accounting issues described in the complaint had not been definitively confined to the division under the vice-president's control. The complaint sufficiently alleged that accounting malfeasance occurred as a result of a failure to have adequate financial controls in place. The complaint also described a high level or recklessness in alleging that defendants knew or should have known of accounting irregularities in the exercise of reasonable care. OUTCOME: The court denied defendants' motions to dismiss. CORE TERMS:  scienter, accounting, securities fraud, restatement, press releases, stock,  certification, earning, misstatement, confidential informants, class action, disclosure,  misleading, actionable misrepresentation, fiscal, intentionally, confidential, indirectly,  discovery, motive, financial statements, consolidated, securities laws, manipulated,  quarterly, opposing, senior, irregularities, materially, trading LexisNexis® Headnotes  Hide Headnotes
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State Claims HN1 A motion under Fed. R. Civ. P. 12(b)(6) seeks dismissal for a plaintiff's failure to state a claim upon which relief can be granted. The court must construe the complaint in the light most favorable to the plaintiff, accept all the factual allegations as true, and determine
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527_F._Supp._2d_728,_2007_U.S._Dist._LEXIS_ -...

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