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violate GAAP alone is not sufficient. A claim of non-compliance with GAAP, even if pled

and proven, does not establish securities fraud. In re Recoton Corp. Sec. Litig., 358 F.

Supp. 2d 1130, 1147 (M.D. Fla. 2005). In Recoton, plaintiffs sued the officers, directors,

and auditor of a bankrupt company for failure to write down obsolete inventory and

overstating accounts receivable and inflating revenues. Plaintiffs alleged that they paid

artificially inflated prices for the stock; they did not allege how the purported

misrepresentations and omissions caused the decline in the stock’s value. The court

granted defendants’ motion to dismiss the securities fraud class action, holding that

allegations that corporate officers and directors signed public filings and press

releases and had access to company financial records was not sufficient to establish

scienter. Id.

Here, plaintiff makes sweeping allegations that deferred revenues were

manipulated, but the CAC is devoid of any details as to the amount of alleged

improperly deferred revenue, when it was allegedly recognized in error, or why such

recognition was in error. These are the types of questions that a securities fraud

complaint must answer in order to survive a motion to dismiss. See, e.g. Malin v. IVAX

Corp., 17 F. Supp. 2d 1345, 1360 (S.D. Fla. 1998). In Malin, the court dismissed a

securities fraud class action finding that plaintiffs pleading of an undisclosed “massive

practice of shelf-stock adjustments on numerous pharmaceutical products” was not

sufficient to show scienter. Id.

To show the existence of scienter, plaintiff relies on an e-mail by former

employee Robert Paisola, dated August 18, 2005 (the “Paisola E-mail”). CAC at ¶¶

117-125. As will be explained, the Paisola E-mail does not establish scienter. Putting


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