(The news featured below is a selection from the news covered in the Federal Securities Law Reporter.)

Accounting Violations Showed Scienter, Statements Not Forward-Looking 

A complaint against a manufacturer of components for data storage systems stated a cause of action. According to the court, the accounting fraud claims sufficiently identified the statements and speakers and why the statements were misleading. While motive and opportunity claims failed to show scienter, as the claimed motives were general rather than specific and personal to particular defendants, the court found that the complaint raised a sufficient inference of recklessness or knowing misconduct. According to the court, the investors sufficiently alleged that the defendants had knowledge of or recklessly ignored a series of accounting improprieties, each of which violated Generally Accepted Accounting Principles and the company's internal policies.

The complaint also adequately alleged loss causation, as the allegations linked the fraud and subsequent corrective disclosures to their financial losses without any intervening causes. Because the challenged statements and omissions directly related to the company's profits and losses, they were also material with regard to the plaintiffs' investment decisions. 

Finally, the court concluded that the Private Securities Litigation Reform Act safe harbor for forward-looking statements did not protect most of the alleged misstatements. The statements were not forward-looking, as they were either affirmative representations about current or historical performance or statements that failed to disclose material information regarding the alleged accounting improprieties.

In re Veeco Instruments, Inc. Securities Litigation (SD NY).