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103. The statements are general statement about what the Company does, i.e.

providing educational and training courses in various areas such as real estate

investing, stock market techniques, cash management, asset protection and other

financially oriented subjects. Plaintiff alleges these statements were false and

misleading because Whitney’s business model was a “sham, premised on the concept

of luring unsophisticated students into signing up for near-worthless and

unconscionably-overpriced courses and then using the courses themselves as a

platform to sell still more worthless courses. Further, plaintiff says that Whitney’s

fraudulent business model resulted in dissatisfied customers demanding refunds, not

attending courses, and accusing the Company of bad business practices . . . CAC at ¶

104. Plaintiff further alleges that Whitney uses pushy sales tactics, up-sells products,

and forces contracts on customers. Id. at ¶ 38.

The Whitney Defendants argue that the CAC fails to allege scienter as to this

theory. To support its theory and show scienter, plaintiff relies on statements from four

confidential witnesses (“CW”).7 In Mizzaro, the Eleventh Circuit described how a court

must evaluate statements in a securities fraud complaint by a confidential witness:

. . . the weight to be afforded to allegations based on statements proffered by a confidential source depends on the particularity of the allegations made in each case, and confidentiality is one factor that courts may consider. Confidentiality, however, should not eviscerate the weight given if the complaint otherwise fully describes the foundation or basis of the confidential witness's knowledge, including the position(s) held, the proximity to the offending conduct, and the relevant time frame.

Mizzaro, 544 F.3d at 1239-40.

7The CAC refers to confidential witnesses as CW#1, CW#2, CW#3 and CW#5. There is no CW#4.


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