Replies to post #125246 on Plastic2Oil Inc (PTOI)

[Rawnoc]

Thank you for your awesome DD. You just annihilated any faint hope for the bogus suits.

[Zardiw]

From analysis of her handwriting.......seems she has very low self esteem.....Notice the downward slanting date and signature.....

And has anyone considered that she is a plant and this is all a setup?

Read 2. And remember this was signed under threat of PERJURY

z

[loanranger]

John,
Scienter (an awareness that the act in question is a violation), as you point out is an important element of this and many cases and the plaintiffs have to establish that the defendants were aware that they were committing an offending act or acts.
Item 51 of the complaint, which unfortunately is in a format that I don't have the skill to copy and paste, lists the allegations of scienter.......I'll have to paraphrase or I'll be typing all day. The complainant implies that they are able to prove the following:
1. The defendants knew that the documents issued were false or misleading.
2. They knew that the documents would be issued to the investing public.
3. They participated in their issuance.
4. They were aware of the true facts.

I don't know how they are going to prove that stuff......items 2 and 3 are obviously easily established, 1 and 4 will require documents and testimony that I don't think the public has seen.

However, I don't really think that this would be difficult at all:
"The plaintiff must prove that the accounting practices were so deficient that the audit amounted to no audit at all, or an egregious refusal to see the obvious, or to investigate the doubtful, or that the accounting judgments which were made were such that no reasonable accountant would have made the same decisions if confronted with the same facts."
In fact, if that were the only requirement (as you point out vis-a-vis scienter, it isn't), liability would be easy to establish. The true value of the media credits, if not obvious, certainly was doubtful merely based on the consideration given for them, and any reasonable investigation of them would have precluded them from being accounted for the way they were. The company itself virtually establishes that by the fact that they, recorded initially as the company's largest asset, were written off entirely a short time later. (I'm not addressing any of the other acquisition accounting for lack of study).



I'm afraid that the case you cited isn't on point:
http://scholar.google.com/scholar_case?q=288+f.3d+385&hl=en&as_sdt=2,22&case=14286418464571855843&scilh=0
The plaintiff in that case named as defendants both the company and the auditor. The auditor is not a named defendant in the JBI case. The auditor was judged to lack scienter and absolved of liability, not the company.

"It is alleged that the auditor egregiously failed to see the obvious — that according to Generally Accepted Accounting Principles ("GAAP"), millions of dollars in revenue from software sales reflected in a financial statement should not have been recognized. We hold that the complaint sets out a compelling case of negligence — perhaps even gross negligence — but does not give rise to a strong inference that the auditor acted with an intent to defraud, conscious misconduct, or deliberate recklessness, as is required in a securities fraud case. We affirm the district court's dismissal of the plaintiffs' complaint."

I didn't check to see what the case outcome was with the company itself, but the scienter issue raised in the example provided had nothing to do with them.