Improper Accounting Adjustments Held Insufficient Basis for Securities Fraud Claims

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A federal district court in California recently dismissed class action securities fraud claims arising out of several improper accounting adjustments made by VeriFone Holdings, Inc. On September 15, 2010, purchasers of VeriFone common stock filed their Third Amended Complaint in a consolidated securities fraud class action against the corporation and certain of its officers and directors. Plaintiffs alleged that defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5 by engaging in a scheme to defraud, making false statements, omitting material facts and performing deceptive acts which led to the gross overstatement of operating income and, ultimately, the restatement of VeriFone's financials. Defendants moved to dismiss, arguing, among other things, that that plaintiffs did not adequately allege scienter as to each individual or the corporation.

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