II. Motive, Turnover & MD&A (2 points; fractional points are applied) (1) Report on all insider trading (amounts and by whom) during the fraud period, as alleged in the complaints. [Hint: Look to the consolidated amended complaints table of contents and portions of the complaint under “Scienter” or “Motive and Opportunity”]. (2) Discuss any other motive “pressure” for the fraud alleged or you may have in mind – provide some support or basis for your ideas? (e.g., inflating the price of the stock or assets and revenues to obtain bank loans, issue securities or acquire another company, etc.). [Hint: How is the company’s cash flow over two or three years – is it declining, etc.; look to the notes to the financial statements to see if the company is near breaching debt covenants, etc.; were their new issuances of stock during the fraud period?, etc.]. (3) Discuss any turnover in financial personnel or auditors immediately before or during the class period? [Hint: look at the Proxy Statements for changes in CFOs, Controllers, Audit Committee members, other senior financial officers change in Auditors). (4) What did the Management & Discussion & Analysis (the “MD&A”; Item 7 to the Form 10-K) report in the first fraud period Form 10-K, as defendants’ explanation for trends or changes in line items from the period immediately preceding the first fraud year? Only concern yourself with those trends that are relevant to the accounting or reporting problems at issue in your case. See also Nike Financials & FinSas on BB. (5) Provide the corrected explanation in the MD&A as reported in the Amended 10-K or Annual Report for number 4 above. (6) Discuss differences between the MD&As (items II. (4) and II. (5). these items are in the Shareholders Complaint folder. Most of the answers should be there. Paragraph (this is just a outline for the paragraph) 1. Insider Trading (if there is any) 2.Motive/ pressure (from Shareholders complaint) -double double -wall street journal estimates -incentives to stockholders -what did they do because of the pressure? Improper revenue recognition (channel stuffing) and Cookie Jar reserves ^ minimum 2-3 sentences each 3. (Few sentences 2-3) MD&A from the original statement 4. (Few sentences 2-3) MD&A from the restated 5. (Few sentences 2-3) comparing the differences in original and Restated MD&A Make sure to cite and reference each file.
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