Case 1:12-cv-00033-JRN Document 12 Filed 02/29/12 Page 1 of 32

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Case 1:12-cv-00033-JRN Document 12 Filed 02/29/12 Page 26 of 32that it could not "discern a pattern where ... [the] revenue was strategically shifted.,,68 Finally,the court rejected the argument that the CFO's single sale of stock "significantly below the alltimehigh and at months away from the secondary offering" supported scienter. 69Although theCohen case was a bench trial in which the SEC had an opportunity to present evidence ofscienter, the fact that Plaintiff has not even asserted such allegations in this case - or, to theextent it has, has only done so improperly - further highlights the necessity for dismissal ofPlaintiff s claims in this case.Plaintiff improperly attempts to allege "knowledge" of improper revenue recognitionwhen it asserts that Martin reviewed and approved quarter-end accrual journal entries, andasserts that Pardo and Peden "monitored daily, monthly, quarterly, and annual contract activity,including contract funding status .... ,,70However, Plaintiff fails to specifically identify towhich reports Plaintiff refers, and how those reports revealed to each Defendant that revenue wasbeing recognized improperly; therefore, the allegations are violative of Rule 9(b). See Abrams,292 F.3d at 432; Kurtzman, 2002 U.S. Dist. LEXIS 26569 at *10-18, 38-50. 71 Likewise,Plaintiffs claim that "Pardo, Peden and Martin were aware of periodic cancellations andrescission of Seller Agreements, which exposed the impropriety of Life Partners' revenuerecognition practices" is conclusory and fails to sufficiently state a claim for scienter. 72 See SECv. Shanahan, 646 F.3d at 544.2. Plaintiff Failed to Plead Scienter with Respect to Impairment.Plaintiff s allegations regarding the calculation of impairment is premised on the samefaulty analysis of Dr. Cassidy's LEs discussed supra, coupled with improper conclusory claims.68Id. at *51.69!d. at *52-53.70 Compl., ~73.71 Plaintiff's allegations regarding auditor communications from 2004 (Compl., ~~81-83) must be disregarded, asPlaintiff makes no claims against Defendants for time periods prior to January 2007.72 Compl., ~88DEFENDANTS LIFE PARTNERS HOLDINGS, INC. AND R. SCOTT PEDEN'S MOTION TO DISMISSAND BRIEF IN SUPPORT - Page 20
Case 1:12-cv-00033-JRN Document 12 Filed 02/29/12 Page 27 of 32For example, without any factual support, Plaintiff alleges that, "[d]espite their awareness thatthese policies may have been impaired when acquired, Defendants failed to properly evaluatepotential impairment.,,73 This allegation fails to satisfy the pleading requirements for scienter.Plaintiff further improperly alleges that "Pardo, Peden, and Martin understood that theCompany's impairment calculations depended on the validity of Cassidy's LEs.,,74 However,Plaintiff provides no factual basis to support the claim that (1) the policies at issue were allpurchased using Dr. Cassidy's LEs, (2) Defendants Pardo, Peden and Martin knew, at the timethat the policies were purchased, that the policies were "impaired," or (3) assuming Defendantsknew the policies were impaired, that Defendants knew the extent of the impairment.Next, Plaintiff contends that in the summer of 2010, in a response to a request by Ernst &Young, Defendants Peden and Martin provided a chart "on the most recent 300 maturities ofviatical and life settlement policies sold by Life Partners.,,75 Plaintiff then attempts to attach anefarious motive to the provision of the chart, when it alleges that Peden and Martin "failed toalert E&Y" that insureds underlying 1,200 of the outstanding policies had outlived Dr. Cassidy'sLEs.76 The absurdity of this claim is obvious - if, as readily admitted by Plaintiff, Peden andMartin provided E& Y with the "most recent" maturities, how was E& Y misled? Plaintiff doesnot allege that E& Y requested information regarding all outstanding policies, that Defendantsrefused to provide that information, or that Defendants provided false information in response tosuch hypothetical request. Absent such assertions, this allegation provides no basis to establishscienter related to LPHI's impairment analysis.73 Compl., ~119.74 Compl., ~126.75 Compl., ~127.76 Compl., ~127.DEFENDANTS LIFE PARTNERS HOLDINGS, INC. AND R. SCOTT PEDEN'S MOTION TO DISMISSAND BRIEF IN SUPPORT - Page 21
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Case 1:12-cv-00033-JRN Document 12 Filed 02/29/12 Page 1 of 32

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