Compliance January 9, 2012

Pension Funds’ Securities Fraud Suit Revived by Appellate Court

The 2nd U.S. Circuit Court of Appeals reversed a lower court’s dismissal of a securities fraud lawsuit brought by four pension funds.
Reported by

Investors of Celestica Inc., a Canadian electronics manufacturer, sued the company and its former chief executive officer, Stephen Delaney, and former chief financial officer, Anthony Puppi, in 2007.  Investors claimed misstatements artificially inflated the company’s share price, causing them to lose money when the true costs associated with a restructuring became public, according to Bloomberg.

The group seeks damages on behalf of all those who bought the Toronto-based company’s stock from January 27, 2005 to January 30, 2007.  

The appellate panel found the shareholders alleged sufficient facts to support the defendants’ scienter, or knowledge they knew they were misstating Celestica’s earnings and financial prospects.  

“The particular allegations that Delaney and Puppi were specifically informed, and had reason to know of the growing inventory stockpile in Celestica’s Mexican and American facilities are sufficient to establish the individual defendants’ scienter,” the panel said in the ruling. “Moreover, those allegations are sufficient to establish corporate scienter on behalf of Celestica.”  

The lead plaintiffs are the New Orleans Employees Retirement System and three Ontario funds: Millwright Regional Council of Ontario Pension Trust Fund, Carpenter’s Local 27 Benefit Trust Fund and Dry Wall Acoustic Lathing and Insulation Local 675 Pension Fund.  

The decision in New Orleans Employees Retirement System v. Celestica, Inc. is here.

 

«