Bruce v. Suntech Power Holdings Co., Ltd et al ($STP)

For those following Suntech, docket number 82 in Bruce v. Suntech Power Holdings Co., Ltd et al. is a must read. That case is the class action lawsuit against Suntech alleging securities fraud in relation to the GSF loan guarantee and missing government bonds.

This entry is the plaintiffs' memorandum of law in opposition to the motions to dismiss. The outline of the argument is worth posting.

I. Plaintiffs’ Allegations Support a Strong Inference of Scienter
A. Defendants’ Deliberate Disregard Of Numerous Red Flags Supports a Strong Inference of Scienter
(1) Defendants Chose Not To Verify The Existence Of The Collateral Which They Claimed To Backstop Suntech’s Guarantee to GSF, and Chose Not To Examine The Documents Referencing The Purported Collateral
(2) Defendants Suntech and Shi Had Actual Knowledge That The Person Claiming To Provide The Collateral Was Not Trustworthy
(3) That Defendants Knew GSF Projects Were Being Investigated For Criminal Misconduct Put Defendants On Notice That GSF Assertions Required Scrutiny
(4) The Fraudulent Nature Of GSF Was Apparent And Was Recognized By Others
B. The Fraudulent Nature Of GSF Was Apparent And Was Recognized By Others
C. The Complaint’s Allegations That Suntech And Shi Had A Motive And Opportunity To Disregard The Truth Supports Scienter
II. The Complaint Alleges Numerous Misrepresentations by Defendants
A. Defendants’ Misrepresentations Regarding Internal Controls are Actionable
B. Defendants’ Misrepresentations Regarding the Fair Value of the Loan
Guarantee are Actionable
C. Defendants’ Concealment of the Loan Guarantee is Actionable
III. Loss Causation is Adequately Pled as to Each Misrepresentation
IV. Plaintiffs Have Standing to Represent Noteholders
V. Plaintiffs Have Adequately Alleged Control Person Claims Against Shi and King

Scienter refers to intent or knowledge of wrongdoing. In order to prevail in a securities fraud claim under Section 10(b) of the Securities Exchange Act of 1934, a plaintiff must allege and prove that the defendant acted with scienter.