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Keywords

settlementdefendantliabilitysummary judgment
defendantliabilitysummary judgment

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S.E.C. v. Lucent Technologies, Inc., 610 F.Supp.2d 342, Fed. Sec. L. Rep. P 95,216

Facts

The SEC alleged that Lucent Technologies and its executives violated the Exchange Act of 1934 by improperly recognizing revenue and pre-tax income. The allegations centered around the executives' approval of verbal side agreements and incentives that cast doubt on the collectability of sales, leading to improper revenue recognition. Several executives reached settlements, but four former executives remained in the case, seeking summary judgment on the claims against them.

The SEC alleged that Lucent Technologies and its executives violated the Exchange Act of 1934 by improperly recognizing revenue and pre-tax income. The allegations centered around the executives' approval of verbal side agreements and incentives that cast doubt on the collectability of sales, leading to improper revenue recognition.

Issue

Whether the former executives could be held liable as primary violators of the securities laws and whether the SEC sufficiently alleged scienter.

Whether the former executives could be held liable as primary violators of the securities laws and whether the SEC sufficiently alleged scienter.

Rule

To establish a violation of Rule 10b–5, the SEC must prove that the defendant made a materially false statement or omitted a material fact with scienter in connection with the purchase or sale of a security.

To establish a violation of Rule 10b–5, the SEC must prove that the defendant made a materially false statement or omitted a material fact with scienter in connection with the purchase or sale of a security.

Analysis

The court analyzed the evidence presented by the SEC and the defendants, concluding that the SEC did not meet its burden of proving that the executives made false statements or acted with the requisite intent. The court found that the executives' actions did not constitute primary violations under the applicable legal standards.

The court analyzed the evidence presented by the SEC and the defendants, concluding that the SEC did not meet its burden of proving that the executives made false statements or acted with the requisite intent.

Conclusion

The court granted summary judgment in favor of the defendants, concluding that the SEC failed to establish primary liability and did not sufficiently allege scienter.

The court granted summary judgment in favor of the defendants, concluding that the SEC failed to establish primary liability and did not sufficiently allege scienter.

Who won?

The defendants prevailed in the case because the court found that the SEC did not provide sufficient evidence to hold them liable as primary violators.

The defendants prevailed in the case because the court found that the SEC did not provide sufficient evidence to hold them liable as primary violators.

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