Marvell is a "fabless" manufacturer of semiconductors (meaning that it is active entirely in core competencies of engineering and design, with the actual manufacturing outsourced to contract manufacturers in lower-cost emerging markets) that ships more than one billion integrated circuits (known as "chips") per year.

On June 27, 2006, the sale of Intel's XScale assets was announced.

On June 7, 2007, the company said the SEC issued a formal probe order related to its stock-options grants.

Abraham David Sofaer was hired to investigate the investigation after Gloss alleged it was not independent.

In announcing the results of its own inquiry, the SEC did not give Marvell the credit granted other companies in the options scandal for cooperating [with the SEC’s investigation] or [for] cleaning up.

We affirm the district court order dismissing the complaint and all of the claims included because its allegations fail to meet the heightened pleading standards imposed by the Private Securities Litigation Reform Act (“PSLRA”), 15 U. Backdating options is not itself illegal under the securities laws, nor is it improper under accounting principles. To provide a strong inference of scienter, the plaintiff alleged that (1) the defendant had responsibility to make decisions about stock option grants; (2) the mismeasurement of stock option grants resulted in substantial additional compensation expenses; (3) the defendant himself was granted allegedly misdated stock options; (4) the defendant made materially false statements; (5) the defendant sold approximately 39 percent of his shares during the class period; and (6) the defendant resigned from the corporation after the discrepancies came to light. The shareholders contend that the accounting expertise of several of the Appellees in this case distinguishes the two cases, because some Jabil executives should have known about the proper accounting practices.

At no point does the complaint identify any particular transaction or scheme of backdating or specific recipients of such a scheme. As with any fraud claim, a plaintiff must plead the circumstances of the conduct with particularity. They effectively concede that no single allegation, standing alone, is sufficient to meet the Tellabs standard, see 551 U. There, the plaintiff alleged that the defendant fraudulently issued backdated stock options, signed false securities filings, and overstated earnings during the plaintiff's stock ownership. We held that all of these allegations failed to create an inference of scienter that exceeded other inferences of nonfraudulent intent. We reasoned that it was most plausible that the defendant did not realize that the backdated options would affect later financial statements because he had no accounting experience. We also concluded that the restatement, as a percentage of total revenue during the class period, was de minimis and would not have alerted the defendant to the false statements. Finally, we rejected the assertion that backdating stock options is inherently an intentional fraud that demonstrates scienter. The allegations in this case are strikingly similar to those we encountered in Rosenberg.

It had previously said a preliminary review suggested no intentional backdating occurred and any charges were likely to be minor. (Headlines) (Options chart) The maker of gene-testing devices said on Aug 1 that an internal probe has uncovered "certain documentation lapses" in its stock options grant processes from 1997 through 1999, including one instance when the option grant date should have been recorded differently.

In the wake of an article by the Wall Street Journal surmising that Jabil’s CEO may have received backdated stock options because the options he received were consistently timed at a low price and followed up by a significant price increase, and an informal investigation by the SEC, Jabil formed a special committee to examine the allegations. Third, plaintiffs alleged that defendants made false projections regarding the company’s business conditions in violation of Section 10(b) and Rule 10b-5. Among other things, plaintiffs did not plead particularized facts indicating that the individual defendants knew that any accounting standard was being violated or plead each individual defendant’s trading history to support a showing that his class period stock sales were “dramatically” out of line with prior trading practices or otherwise sufficiently suspicious to support a strong inference of scienter.

The specific allegations of backdating in the complaint rely almost exclusively on circumstantial evidence (analyst commentary and comparative graphs) to show that stock option grants to executives were backdated. Scientific-Atlanta, Inc., 374 F.3d 1015, 1017 (11th Cir.2004). Jabil responds that all of the allegations here, even after aggregation, fail to raise a cogent and compelling inference of scienter. Gould, 554 F.3d 962 (11th Cir.2009), we recently confronted the specific question of whether similar allegations in a complaint that alleged a backdating scheme satisfied the standard for pleading scienter.

The issue price of backdated options comes from a day where the trading price was lower than that on the actual date it is issued, resulting in an instant paper gain to the issuee. The district court evaluated all of these circumstances and concluded that, taken together, they failed to create a strong inference of scienter. Severe recklessness is limited to those highly unreasonable omissions or misrepresentations that involve not merely simple or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and that present a danger of misleading buyers or sellers which is either known to the defendant or is so obvious that the defendant must have been aware of it. The shareholders charge the district court with failing to aggregate their factual allegations in evaluating the inference of scienter, as permitted by our decision in Phillips v. at 2510, which requires the complaint to offer a cogent and compelling inference of scienter, but contend that the district court erred by considering each allegation in a vacuum.

First, plaintiffs alleged that defendants made false statements regarding the accounting for employee stock options in Jabil’s periodic SEC filings in violation of Section 10(b) of the Securities Exchange Act of 1934 (“1934 Act”), 15 U. As long as a forward-looking statement is accompanied by meaningful cautionary language, the Court recognized, the speaker is protected from liability irrespective of his state of mind.