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defendants participated in a systematic backdating of stock options, which led to the

issuance of false and misleading financial statements. The court granted the defendant

company’s motion to dismiss with respect to certain categories of disclosures because

the plaintiffs failed to adequately plead loss causation in connection with these

disclosures, including the company’s disclosure of an SEC investigation and receipt of a

subpoena from the U.S. Attorney’s office relating to stock option backdating. The court

stated:

Maxim[’s] disclosures regarding compliance with an SEC investigation, subpoenas from the United States Attorney’s office, and the formation of its own Special Committee to investigate options granting practices do not reveal the alleged fraud. A reasonable investor may view these disclosures as indicators of risk because they reveal the potential existence of future corrective information. However, they do not themselves indicate anything more than a “ risk” or “potential” that Defendants engaged in widespread fraudulent conduct. Thus, the Court finds that these statements are not corrective disclosures for which Plaintiffs can plead loss causation.

Id. at *6 (internal citations omitted).

b.

The same result obtains here. The critical instances of disclosure relied upon by

plaintiff are two press releases from the Company dated November 21, 2006 and

December 15, 2006, (attached as Exhibits A and B) disclosing an SEC investigation into

“(i) the efficacy or trading success [of] EduTrades, the Company’s market education

program, and (ii) the Company’s acquisition of certain other companies,” CAC ¶ 140,

and a grand jury investigation into “certain of the Company’s marketing activities . . .

and the Company’s prior acquisitions of other companies.” Id. at ¶ 142. The December

15, 2006 press release further disclosed that the Company “intends to withdraw its

EduTrades, Inc. registration statement filed with the [SEC].”

38

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