The extent to which secondary actors (e.g., accountants, lawyers, or bankers) can be held primarily liable under Rules 10b-5(a) and (c) – covering deceptive devices, schemes, and acts – has been the subject of recent judicial contention. A column in the June 13 edition of the New York Law Journal (subscrip. req’d) attempts to reconcile the different positions taken by the Southern District of New York in the Parmalat case and the Eighth Circuit in the Charter Communications case.
Quote of note: “The two cases may be reconciled, not by use of the Eighth Circuit’s guidelines, but rather by the fact-specific inquiry suggested in Parmalat. In Parmalat, the banks were alleged to have engaged in the worthless invoice transactions to cover up loans to Parmalat, thus making financial fraud the only possible purpose for the transactions. On the other hand, the transactions in Charter Communications were not as plainly fraudulent, despite the plaintiffs’ characterization of them as “sham or wash transactions.'”
The 10b-5 Daily 