Case Summary

4873 No authority establishes that California accepts suspicious stock sales by corporate directors as circumstantial evidence of scienter in a fraud case; sales of stock by directors who sold more stock before an alleged fraud occurred or after it was publicly announced than at any other time did not support an inference that they sold with inside knowledge of the fraud; a corporate CEO's expression to directors regarding concerns about existing accounting methods were not sufficient to justify the conclusion that directors were aware of fraud in those methods; a single email to a director, from a single employee, reporting on a single allegedly unethical practice, was not sufficient to suggest that the directors knew or should have known about extensive fraud accounting fraud in the corporation.

BAINS v MOORES (Corporate Fraud) 172 CA4 445 [See: Unterberger v Red Bull 162 CA4 414, T/AT 5/08; Charnay v Cobert 145 CA4 170, T/AT 2/07; Zucco v Digimarc 552 F3 981; Kamen v Lindly 94 CA4 197, T/AT 1/02]