Milton Arbitrage Partners, LLC v. Syncor International Corp.

MEMORANDUM **

Plaintiffs, who purchased stock in Syn-cor International Corporation between 1998 and 2002, appeal the district court’s dismissal of their Second and Third Amended complaints alleging that Syncor, its officers, and its directors made false and misleading statements in violation of SEC Rule lOb-5. 1 We reverse and remand as to defendants Monty Fu, Robert Funari, Haig Bagerdjian, and Syncor. We affirm as to all other defendants.

Treating plaintiffs’ factual allegations as true, we conclude that defendants’ statements about the reasons for Syncor’s overseas earnings were misleading. Defendants made numerous statements attributing Syncor’s overseas earnings to a variety of legitimate business practices, while omitting any mention of illegal payments. However, plaintiffs have alleged specific facts suggesting that illegal payments were in fact a significant reason for Syncor’s overseas growth. Confidential Witness # 2 alleged that two officer defendants — Fu and Bagerdjian — privately credited the illegal payments for spurring overseas growth. When corporate officers credit an illegal payment scheme for raising revenues, a reasonable inference is that the scheme did…