On June 21, 2007, in a much anticipated ruling affecting the ability of federal securities fraud complaints to withstand a motion to dismiss, the United States Supreme Court resolved a dispute between the federal circuit courts regarding what securities fraud plaintiffs must plead concerning the state of mind of the defendants in order for a complaint to withstand dismissal. 

In North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, 2007 WL 1453705 (Del. May 18, 2007), the Delaware Supreme Court, in a case of first impression, provided some clarity on the controversial issue of whether and to what extent creditors have the ability to assert fiduciary duty claims against directors. 

The first criminal trial of stock options backdating conduct may end with the court finding that government prosecutors failed to present sufficient evidence of intent to support a conviction.  

The United States government appears to have conceded that a complete dismissal of indictments against 12 former KPMG partners is the only appropriate remedy in light of an earlier ruling that federal prosecutors violated the defendants’ constitutional rights.  The action, U.S. v. Stein, No. 05 Crim. 0888 (S.D.N.Y.), stems from allegations that KPMG employees participated in a scheme to defraud the IRS by creating fraudulent tax shelters for wealthy clients. 

The prosecution in the first criminal trial arising out the widespread corporate practice of stock options backdating concluded its case on Monday, July 2, 2007.  The defendant, Brocade Communications’ former CEO Greg Reyes, has moved to dismiss the case.