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Pleading Auditor Fraud After Tellabs

Law360 (March 31, 2009, 12:00 AM EDT) -- On June 21, 2007, the Supreme Court in Tellabs Inc. v. Makor Issues & Rights Ltd. clarified what it meant to plead sufficient facts giving rise to a “strong inference” of scienter for the purposes of the Private Securities Litigation Reform Act (“PSLRA”).

The court held that “to qualify as ‘strong’ ... an inference of scienter must be more than merely plausible or reasonable — it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent.”[1]

The court developed a three-part...
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