ABSTRACT :: Some securities fraud plaintiffs contend that greed-in the form of perpetuating a prestigious executive position, ensuring a gainful bonus, or maintaining the appearance of corporate profitability-is a bona fide motive evidencing scienter. But currently, no single judicial standard or analytical rubric guides the analysis of whether allegations of greed indicate scienter in these cases. The Private Securities Litigation Reform Act of 1995 (PSLRA) requires that the complaint state “with particularity” facts giving rise to a “strong inference” that the defendant acted with the scienter required for the cause of action. Plaintiffs have long established scienter through “motive and opportunity” pleading: facts demonstrating the presence of a motive in tandem with the perpetrator’s opportunity to commit the fraud. As part of motive and opportunity pleading, some plaintiffs have contended that greed can be a manifestation of scienter. Such allegations have met disparate and somewhat unreasoned fates.
This Article draws from the over one hundred reported circuit court cases interpreting the “strong inference” standard in a variety of factual settings to propose a framework for more orderly analysis of allegations of corporate and personal avarice. Guided by the way some courts analyze the role of insider stock transactions in scienter pleading, the contextual model identifies three dimensions- magnitude, timing, and atypicality-that can heighten ordinary profit-seeking activities to suspicious or unusual conduct and can provide a motive that properly gives rise to a strong inference of scienter.
“The point is, ladies and gentlemen, that greed-for lack of a better word-is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms-greed for life, for money, for love, knowledge-has marked the upward surge of mankind. And greed-you mark my words-will not only save Teldar Paper, but that other malfunctioning corporation called the USA.” Gordon Gekko, Wall Street
“[Greed] is a sin directly against one’s neighbor, since one man cannot over- abound in external riches, without another man lacking them . . . .” Saint Thomas Aquinas
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September 2013, Vol. 65, No. 5
Thomas J. Horton & Robert H. Lande, Should the Internet Exempt the Media Sector From the Antitrust Laws?
Thomas J. Horton, Robert H. Lande, & Virginia Callahan, APPENDIX
Chad Flanders, Pardons and the Theory of the “Second Best”
Brett McDonnell, Dampening Financial Regulatory Cycles
Dane Ullian, Retroactive Application of State Long-Arm Statutes