Broker-Dealer Litigation - Greenberg Traurig LLP

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Stephenson v. Pricewaterhousecoopers, LLP, 768 F. Supp. 2d 562 (S.D.N.Y. 2011).
Plaintiff, investor in a feeder fund to a firm engaged in a massive Ponzi scheme brought a
class action suit against a defendant, auditor of the firm alleging violations of federal securities
laws. Defendants filed a motion to dismiss for failure to state a claim as required under the
heightened pleading standards of the PSLRA. The court granted the defendant’s motion to
dismiss finding that the allegations that the auditor ignored certain red flags relating to verifiable
controls, aggregate asset value reporting discrepancies, and exceptional returns insufficient to
establish scienter.
In re Jeanneret Associates, Inc., 769 F.Supp.2d 340 (S.D.N.Y. 2011).
Plaintiffs, investors brought suit against defendants, investment advisors, asset
management consultant, accounting firm, and individuals associated with investment firm
alleging violations of federal securities laws. Defendants moved to dismiss for failure to state a
claim as required under the heightened pleading requirements of the PSLRA. Plaintiffs claimed
defendants failed to disclose a lack of diligence concerning a multi-billion dollar investment firm
when soliciting investors. Plaintiffs further claimed that they would not have entrusted firm with
their money if they had understood it would be placed with the un-investigated firm. The court
denied defendants’ motion to dismiss reasoning that the plaintiffs sufficiently alleged facts
giving rise to inference of recklessness. However, the court granted the independent auditor’s
motion to dismiss finding that the allegation of defendants’ failure to identify the problems with
firm that was engaged in Ponzi Scheme was insufficient to plead the required scienter.
Alki Partners, L.P. v. Vatas Holding Gmbh, 769 F. Supp. 2d 478 (S.D.N.Y. 2011).
Plaintiff, hedge fund filed suit against defendants, international corporations, their
executives, and their subsidiaries alleging violations of federal securities laws. Defendants filed
a motion to dismiss for failure to state a claim as required under the heightened pleading
standards of the PSLRA. The court granted defendants’ motion in part and denied it in part
finding that plaintiff failed to allege facts sufficient to give rise to scienter on the part of
defendants’ corporation or its U.S. agent. The court also held that allegations of
undercapitalization and that the corporation and its managing director knew that trading would
have an impact on the market price were insufficient to allege scienter. However, plaintiff did
sufficiently allege the managing director’s deceptive acts with requisite particularity.
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