Full opinion text
MEMORANDUM & ORDER KATZ, Senior District Judge. This shareholder class action raises a claim of securities fraud under Section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5. The plaintiffs have settled with defendant IKON Office Solutions, Inc. (IKON) and the individual defendants named in the complaint-. See In re Ikon Office Solutions, Inc. Sec. Litig., 194 F.R.D. 166 (E.D.Pa.2000). The parties have further stipulated to the dismissal of certain allegations against the remaining defendant, IKON’s accounting firm, Ernst & Young LLP (E & Y or Ernst). See Order of October 27, 2000. The only remaining claim is the allegation of fraud pertaining to Ernst’s unqualified audit opinion on IKON’s consolidated, year-end financial statements for fiscal year 1997. These financial statements allegedly overstated pretax income by $54.9 million. Now before the court is defendant E & Y’s motion for summary judgment on the grounds that plaintiffs cannot establish two elements necessary to a Section 10(b) claim: that the accounting firm’s actions caused a loss to the plaintiff class, and that the defendant accounting firm acted with -the-r-equisite state of mind. E & Y also seeks partial summary judgment on the grounds that liability cannot attach to E & Y with respect to a press release issued by IKON. Summary judgment is granted on the grounds that no genuine issue of material fact has been raised as to either causation or scienter, and E & Y is entitled to judgment as a matter of law. Partial summary judgment with respect to the press release is also granted. 1. Background IKON provides copiers, printing systems, and related services throughout the United States, Canada, and Europe. Its shares are publicly traded on the New York Stock Exchange. Between 1995 and 1998, IKON embarked on a “transformation” initiative in which it purchased close to 200 independent companies that it attempted, with some difficulty, to integrate into its own network. Throughout IKON’s fiscal year ending September 30, 1997 (FY97), E & Y performed certain internal audit functions for IKON. Ernst also served as independent auditor of IKON’s FY97 consolidated year-end financial statements (the FY97 financial statements). On October 15, 1997, IKON issued a press release regarding its FY97 financial status. On December 24, 1997, Ernst publicly issued its unqualified, or “clean,” audit opinion stating that the FY97 financial statements fairly presented IKON’s financial position in conformance with professional accounting standards. The integrity of this audit opinion is at the heart of the dispute before this court. The plaintiff class, as revised, encompasses those who acquired IKON’s common stock, call options, and/or convertible preferred stock from October 15, 1997 through August 13, 1998, inclusive. See Order of October 5, 2000. From the start of the class period until April 22, 1998, IKON’s stock price experienced a net gain. On April 22, 1998, when IKON announced its second quarter 1998 earnings and warned that its third and fourth quarter earnings would fall below expectations, the stock price dropped significantly. It experienced further net decline over the remainder of the spring and summer of 1998. On May 31, 1998, IKON engaged E & Y to assist in a detailed review of all significant account balances on the books of certain IKON units, an undertaking known as the “Special Procedures.” On August 14, 1998, after the conclusion of the Special Procedures, IKON announced a $110 million charge to earnings — $94 million in pre-tax charges applied to its 1998 third fiscal quarter earnings, and a restatement of its previously reported and unaudited 1998 second quarter earnings to reflect $16 million in pre-tax charges. The $110 million in charges consisted of an increase in the lease default reserve of $28 million, an increase in the doubtful accounts receivable reserve of $20 million, adjustments due to the breakdown in internal controls at four operating units totaling $35 million, other adjustments of $7 million, and a loss due to asset impairment of $20 million. These charges were applied to fiscal year 1998 (FY98), not to the FY97 financial statements at issue in this case. . In essence, plaintiffs’ complaint is that the FY97 financial statements also overstated pretax income, and that E & Y knew or must have been aware of these overstatements when it issued its “clean” audit opinion with respect to those statements. Plaintiffs thus allege that E & Y violated Section 10(b) and Rule 10b-5 when it opined that IKON’s FY97 financial statements conformed with Generally Accepted Accounting Principles (GAAP) and that E & Y’s own audit of the FY97 financial statements complied with Generally Accepted Accounting Standards (GAAS). Plaintiffs claim that two different documents give rise to E & Y’s liability: the December 24, 1997 unqualified audit opinion on the FY97 financial statements, and the October 15, 1997 IKON press release, which E & Y allegedly approved prior to its dissemination. As noted previously, the defendant seeks summary judgment on two alternative grounds. First, the defendant claims that plaintiffs have offered no evidence that the shareholders suffered a loss due to the allegedly fraudulent misstatements, but rather, that the evidence shows that plaintiffs’ loss was due to problems unrelated to the misstatements. The defendant also claims that there is no evidence that Ernst acted with scienter in conducting its FY97 audit and issuing its audit opinion. As discussed below, the court finds that plaintiffs have failed to make the requisite showing as to loss causation and, in the alternative, that' plaintiffs have failed to make the requisite showing as to scienter. In addition, as noted in the margins, the court also finds, in the alternative, that the October 15, 1997 press release does not form a basis for a Section 10(b) claim, and thus grants defendant’s request for partial summary as to the period from October 15, 1997 to December 24, 1997. II. Legal Standards A. Summary Judgment Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. See Fed. R.CivP. 56(c). At the summary judgment stage, the court does not weigh the evidence and determine the truth of the matter; rather, it determines whether or not there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In making this determination, all of the facts must be viewed in the light most favorable to, and all reasonable inferences must be drawn in favor of, the non-moving party. Id. at 255, 106 S.Ct. 2505. The moving party has the burden of showing there are no genuine issues of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Mathews v. Lancaster General Hosp., 87 F.3d 624, 639 (3d Cir.1996). In response, the non-moving party must adduce more than a mere scintilla of evidence in its favor, and cannot simply reassert factually unsupported allegations contained in its pleadings. See Anderson, 477 U.S. at 248, 250, 106 S.Ct. 2505; Celotex, 477 U.S. at 325, 106 S.Ct. 2548; Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir.1989). If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505. B. Section 10(b) Section 10(b) makes it unlawful for any person to “use or employ, in connection with the purchase or sale of any security, ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe.” 15 U.S.C. § 78j(b). Rule 10b-5 makes it unlawful to “make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading[.]” 17 C.F.R. § 240.10b-5(b). The elements of a Section 10(b) claim are that the defendant (1) made a misstatement or an omission of a material fact (2) with scienter (3) in connection with the purchase or the sale of a security (4) upon which the plaintiff reasonably relied and (5) that the plaintiffs reliance was the proximate cause of his or her injury. See Semerenko v. Cendant Corp., 223 F.3d 165, 174 (3d Cir.2000) (citations omitted). III. Causation To prove loss causation in the Third Circuit, a plaintiff MUST show both: 1) that he or she “purchased a security at market price that was artificially inflated due to a fraudulent misrepresentation,” Semerenko, 223 F.3d at 184 (citation omitted); and 2) “that the artificial inflation was actually ‘lost’ due to the alleged fraud,” id. at 185, that is, that the stock price “dropped in response to disclosure of the alleged misrepresentations.” Id. at 186. Whether the plaintiffs purchased securities at a price inflated by the alleged misrepresentations is not at issue. The defendant strenuously argues, however, that the stock price never “dropped in response to disclosure of the alleged misrepresentations.” The court agrees. As a preliminary matter, the defendant argues that loss should be measured on the day that IKON announced the results of the Special Procedures. On that day, August 14, 1998, IKON announced that it was taking $110 million in charges to the FY98 financial statements. Defendant’s argument for measuring loss on that day is based on plaintiffs’ implicit claim that even though the Special Procedures did not formally apply charges to or require restatement of the FY97 financial statements, they essentially disclosed the existence of the alleged FY97 misstatements. It is undisputed that on the day that IKON announced the results of the Special Procedures, IKON stock did not decline; therefore, the defendant argues, no loss occurred. However, plaintiffs counter that the disclosure was not made via a single surprise announcement by IKON on August 14, but that the relevant disclosure effectively occurred during three specific “windows” of time in April, June, and July of 1998 when stock price did decline. See Def. Ex. 1 (pis.’ expert, Professor Gregg Jarrell, Rpt.) at ¶¶ 39-61. The court agrees with plaintiffs that, in theory, the relevant disclosure or disclosures could have been made through channels other than the company’s public announcement on August 14, 1998, and that loss could be measured by the market’s reaction to those disclosures. However, it remains plaintiffs’ burden under Semeren-ko to provide evidence supporting a reasonable inference that such disclosures were in fact made, and that they were a proximate cause of loss. Semerenko, 223 F.3d at 184-87 (plaintiffs must show that the stock price “dropped in response to disclosure of the alleged misrepresentations,” because “[wjhere the value of the security does not actually decline as a result of an alleged misrepresentation, it cannot be said that there is in fact an economic loss attributable to that misrepresentation”). Plaintiffs have not met this burden. Turning to the substantive issue of causation, the persuasive authority is Robbins v. Roger Properties, Inc., 116 F.3d 1441 (11th Cir.1997), which the Third Circuit found to be instructive on loss causation in Semerenko, 223 F.3d at 185. In Robbins, as in the case at bar, shareholders brought a Section 10(b) action against an accounting firm that issued a clean audit opinion for a company whose stock price subsequently declined. The accounting firm in Robbins approved the real estate company’s 1988, 1989, and 1990 cash flow statements despite allegedly knowing that a variety of improper capitalization procedures had caused cash flow to be overstated. See Robbins, 116 F.3d at 1444. This overstatement in cash flow supposedly enabled the company to continue its practice of paying very high dividends, until analysts downgraded its credit rating due to their publicly-stated concerns about the company’s increasing debt, declining equity base, and the deteriorating real estate market. See id. at 1445. Concerned about tighter financing and declines in its stock price, the company announced a drastic dividend cut in October 1990, and the stock price dropped even further on the day the dividend cut was announced. See id. It was not disclosed until some point in 1992 that it was discovered that the company had engaged in the accounting fraud that caused the overstatement of cash flow. See id. In Robbins, the plaintiffs’ damages expert measured loss by the drop in stock price that occurred on the day of the dividend cut. See id. The expert reasoned that the dividend cut exposed the company’s true financial status, which was the same grim reality that would have been disclosed had the cash flow figures been correctly reported in the first place. See id. Thus, the expert assumed that the loss caused by the alleged fraud was the same as or equal to the loss associated with the dividend cut. However, the Robbins plaintiffs did not claim that the dividend cut actually resulted from, or was in any way related to, the discovery of misstatements in the cash flow or other financial reports. See id. at 1445^16. Because the jury did not receive any evidence that the loss was caused by the defendant’s alleged fraud, the Eleventh Circuit reversed the district court and granted judgment as a matter of law. See id. at 1448. As the plaintiffs’ loss was not caused by the accounting fraud, the court concluded, whatever inflation the fraud might have caused was still incorporated into the stock value and had not been “lost” by the plaintiffs. See id. As previously noted, plaintiffs’ principle expert on causation, Professor Gregg Jar-rell, identified three windows of loss as occurring on April 22, June 26 through 30, and July 27 through August 17, with each window triggered by a public announcement by IKON. See Def. Ex. 1 (Jarrell Rpt.) at ¶ 39-61. Professor Jarrell’s report stated that “the information disclosed to the market [during these windows] caused the traded price of IKON to decline in a statistically significant manner and that the information revealed to the market included specific problems that Plaintiffs allege should have been disclosed by IKON at the beginning of the Class Period [October 15, 1997].” Id. at ¶ 63. Thus, unlike in Robbins, where the plaintiffs made no claim and presented no evidence that the decline associated with the dividend cut announcement was related to the accounting misstatements, plaintiffs’ expert in this case asserts that a link exists between the loss and the alleged misstatements. However, these conclusions are not supported by any evidence, but rather, the analysts’ reports and the expert testimony show that the plaintiffs’ loss was caused by problems unrelated to the misstatements. See Brooke Group Ltd. v. Brown and Williamson Tobacco Corp., 509 U.S. 209, 242, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993) (summary judgment appropriate where an expert opinion is not supported by sufficient facts, or where indisputable facts on the record contradict opinion or otherwise render it unreasonable) (citation omitted); In re Apple Computer Sec. Litig., 886 F.2d 1109, 1116 (9th Cir.1989) (summary judgment is generally not appropriate where nonmovant is supported by an expert, but is permissible if the evidence is clear and contrary to the opinion of such expert) (citation omitted). Neither analysts’ reports nor plaintiffs’ expert analysis indicate that the stock decline was caused by anything other than business conditions and operational and management problems. IKON’s announcement of its FY98 second quarter earnings shortfall, which set off the first “window” of decline on April 22, 1998, blamed “issues related to the transformation [i.e., IKON’s aggressive merger and acquisition- initiative], competitive pressures, and costs associated with product rationalization,” as described by Professor Jarrell. Def. Ex. 1 at ¶ 42. Jarrell testified that the market learned in the April announcement that the company was having problems with, among other things, managing and getting the synergistic benefits and integrating these many, many companies that they had been acquiring ... [0]ne of the things the April announcement did with respect to these mergers was to cause the market to be very concerned that this problem was not gone and that it was causing the company to be unhealthy and it could get worse. Def. Ex. 8 (Jarrell Dep.) at 37-38. During the second window of decline, which was triggered by an announcement of lower-than-expected third quarter earnings on June 26, 1998, an analyst report cited by Professor Jarrell blamed “the same factors that led to the 2Q earnings shortfall, namely weak equipment sales amid tough competition from bigger industry rivals ... and problems associated with integrating and absorbing recent acquisitions.” Def. Ex. 1 at ¶ 48. The third window of loss began on July 27, 1998 with an announcement that IKON was investigating the causes of the FY98 earnings shortfalls and its .operating problems. See id. at ¶ 52. Overall, in contemplating the analysts’ reports, Jarrell summarized that with respect to most analysts’ reports, “the problem is the consolidation. The problem is the mergers.” Def. Ex. 8 at 85. Thus, as .described by plaintiffs’ expert, IKON’s announcements and analysts’ reports focused on factors such as the transformation initiative, tough competition, and weak sales, and not on the alleged accounting misstatements or income inflation. Plaintiffs also contend, however, that they need not point to any direct reference to the financial misstatements or inflated income, because the fact that income had been inflated was disclosed indirectly through the disclosures of business troubles and earnings shortfalls. The argument is, in essence, that the inflated income report led to unrealistically high earnings projections, and that these earning projections were subsequently exposed as too high when the market recognized the true state of IKON’s business and operating conditions in the spring of 1998, resulting in the loss. For example, when asked whether the price declines triggered by the April and June announcements were “related in any way to the matters that were allegedly wrongfully withheld at year end 1997,” plaintiffs’ damage expert, Professor R. Alan Miller, responded, “[B]oth price declines were caused by lower earnings than had been expected, and that’s the issue that was involved in the fiscal 1997 financials.” Def. Ex. 9 (Miller Dep.) at 210; see also Def. Ex. 1 at ¶ 69 (Jarrell’s report stating that the announcements of earnings shortfalls “alerted the market that IKON’s expected growth in earnings was too optimistic ... [H]ad IKON made a hypothetical corrective disclosure [in the FY97 financial statements] that its 1997 earnings would be significantly below expectations, the market would have at that time revised downward its earning growth expectations”)- Thus, plaintiffs argue that the announcements of earnings shortfalls and other operational and business problems exposed the grim reality of the company’s situation, and corrected the undue optimism caused by the FY97 income inflation. See Def. Ex. 1 at ¶ 39 (the three windows of decline, according to Professor Jarrell, were caused by “material disclosures ... [that] revealed IKON’s true financial condition to investors”). In this respect, however, the plaintiffs’ theory is the same as that in Robbins, where the plaintiffs claimed that the loss associated with the dividend cut exposed the true value of the stock and thus corrected the inflation caused by the fraud, even though there was no evidence that the market recognized any relationship between the dividend cut and the fraud. See Robbins, 116 F.3d at 1448. In this case, as in Robbins, it is not sufficient to show inflation caused by a misrepresentation and subsequent loss; the determina-five factor is that there is no evidence that the alleged misstatements loss caused the loss, as opposed to or in addition to other factors. The evidence that comes closest to showing that the market was aware of potential problems with the financial statements is Professor Jarrell’s finding that the market anticipated the need to take charges prior to IKON’s August 14 announcement. See Def. Ex. 8 at 64-97. The anticipation of charges to previous accounting statements is an indication that the market recognized the possibility of accounting problems, rather than or in addition to other problems. See generally Pis.’ App. of Ex. to Mem. in Opp’n to E & Y’s Mot. for Summ. J. Tab (Pls.Ex.) 58 (APB Opinion No. 20) (discussing the reporting of changes or errors to accounting statements). Professor Jarrell explained that bad news about earnings and operations such as that announced by IKON often precedes charges, and pointed to certain reports that explicitly or implicitly support the idea that the market anticipated charges during the spring and summer of 1998. For example, Jarrell highlighted an analyst’s report of July 9, 1998 that stated that the company announced this morning ... that the reporting of the fiscal third quarter results would be delayed in order for IKON to dig into the current numbers before reporting to shareholders what the outcome is likely to be. We would not be surprised to see some charges and reserves taken in fiscal quarter three as well. Def. Ex. 8 at 92; see also id. at 80 (explaining that in analyst report of May 27, 1998, “Smith Barney is talking about could more cost cutting be in the eards[.] And a major way that you do that is with taking charges and writeoffs”); id. at 89 (citing a July 6, 1998 report that discusses IKON’s balance sheet, and interpreting the analyst’s wish that IKON “get its house in order” as a euphemism for the expectation that charges would be taken). However, none of the reports cited for this proposition were issued within any of the identified windows of loss, nor does it appear that the announcements coincided with any loss at all, which undermines the notion that the anticipation of charges caused any of the loss of which plaintiffs complain. Finally, plaintiffs seek to explain the lack of explicit connection between the stock price declines and the FY97 financial statements by asserting that the announcements blaming the company’s troubled state on business conditions and transformation problems deliberately obscured the real problem — the fraudulent FY97 income inflation. Whether or not this is true, the assertion of a cover-up does not appear to help plaintiffs establish loss causation. If the FY97 misstatements were successfully covered up, they were never disclosed to the market and therefore could not have caused a loss. Alternatively, if the cover-up did not succeed, and the market became aware at some time that the accounting statements were incorrect, then proof of the market’s awareness and proof of loss caused by such awareness is still required. As discussed, the evidence presented does not support a reasonable inference that the disclosure of the alleged misstatements caused plaintiffs’ loss. TV. Scienter A. Standards Plaintiffs must also be able to prove that the defendant acted with scienter, that is, “a mental state embracing intent to deceive, manipulate, or defraud.” Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n. 12, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976). The Third Circuit has held that a showing of “recklessness” satisfies the scienter requirement, but only, where the reckless acts constitute highly unreasonable conduct, involving not merely simple, or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it. McLean v. Alexander, 599 F.2d 1190, 1197 (3d Cir.1979) (citing and adopting standard set forth in Sundstrand Corp. v. Sun Chemical Corp., 553 F.2d 1033, 1045 (7th Cir.1977)) (punctuation omitted). The Third Circuit has further explained that an opinion must not be made with reckless disregard for its truth or falsity, or with a lack of genuine belief that the information disclosed was accurate and complete in all material respects. Therefore, an opinion that has been issued without a genuine belief or reasonable basis is an untrue statement which, if made knowingly or recklessly, is culpable conduct actionable under § 10(b) and Rule 10b-5. Kline v. First Western Gov’t Sec., 24 F.3d 480, 486 (3d Cir.1994) (citing Eisenberg v. Gagnon, 766 F.2d 770, 776 (3d Cir.1985) (punctuation omitted)). The Third Circuit therefore requires a very strong form of recklessness, one that is “relatively close to intentional conduct.” Healey v. Catalyst Recovery of Penn., 616 F.2d 641, 649 (3d Cir.1980) (rejecting jury instructions defining a reckless act under 10b-5 as one done with “indifference to the consequences”). However, the Third Circuit has also stressed that to prove scienter the plaintiff need not produce direct evidence of the defendant’s state of mind. Circumstantial evidence may often be the principal, if not the only, means of proving bad faith. A showing of shoddy accounting practices amounting at best to a pretended audit, or of grounds supporting a representation so flimsy as to lead to the conclusion that there was no genuine belief back of it have traditionally supported a finding of liability.... In such cases, the factfinder may justifiably conclude that despite [repeated] assertions [of good faith,] the danger of misleading ... was so obvious that the actor must have been aware of it. McLean, 599 F.2d at 1198 (citations, punctuation omitted); see also Herman & MacLean v. Huddleston, 459 U.S. 375, 390 n. 30, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983) (noting that circumstantial evidence can be “more than sufficient” to prove scienter in fraud cases). It is important to note that “negligence[,] whether gross, grave or inexcusable, cannot serve as a substitute for scienter.” McLean, 599 F.2d at 1198. For example, mistakes in accounting calculations, unreasonable accounting procedures, or even outright violations of professional standards, without more, simply do not establish scienter. See In re Worlds of Wonder, 35 F.3d 1407, 1426 (9th Cir.1994) (“The mere publication of inaccurate accounting figures, or a failure to follow GAAP, without more, does not establish scienter.”); In re Bell Atlantic Corp. Sec. Litig., No. 91-0514, 1997 WL 205709, at *30 (E.D.Pa. Apr.17, 1997) (same), aff'd per curiam, 142 F.3d 427 (3d Cir.1998); CL-Alexanders Laing & Cruickshank v. Goldfeld, 739 F.Supp. 158, 163 (S.D.N.Y. 1990) (“[T]o establish scienter through recklessness, it is not enough for plaintiff to establish that the method of preparation for the projections used simply was unreasonable.”); Quest Med., Inc. v. Kirschner Med. Corp., No. WN 90-858, 1992 WL 311193, at *3-4 (D.Md. Jul.29,1992) (“If an accounting firm could be charged with fraud every time that its audit did not conform to [GAAP], then every claim of malpractice would also constitute a claim of fraud.”) (citation omitted). Generally, scienter is a fact-specific issue which should ordinarily be left to the trier of fact. See In re Apple Computer Sec. Litig., 886 F.2d 1109, 1113 (9th Cir.1989) (citations omitted). However, summary judgment may be granted in appropriate cases. Id. For example, summary judgment has been granted where the evidence presented permits only an inference of negligence, not of scienter. See, e.g., In re Goodyear Tire & Rubber Co., No. 88-8633, 1993 WL 130381, at *17 (E.D.Pa. Apr.22, 1993) (granting summary judgment, in part for failure to prove recklessness rather than negligence); In re Bell Atlantic Corp., 1997 WL 205709, at *30 (same). Summary judgment has also been granted where an inference of scienter is raised but is rebutted by other evidence. See, e.g., In re Software Toolworks, 50 F.3d 615 (9th Cir.1994) (affirming summary judgment where a factual issue existed as to whether prospectus properly reflected revenues, but no issue existed as to scienter of accounting firm that helped prepare the prospectus because the firm actively worked to confirm such revenues); In re Worlds of Wonder, 35 F.3d at 1421- 22 (affirming summary judgment as to corporate officers accused of fraudulent expansion scheme, where inference of scienter was rebutted by officers’ overall pattern of conduct). B. Overview of Evidence Presented With Respect To Scienter In this case, plaintiffs claim that the FY97 financial statements included numerous fraudulent misstatements, causing income to be inflated by $54.9 million. Plaintiffs provide several types of evidence to prove that when Ernst issued its clean audit opinion, it approved those alleged misrepresentations with scienter. To raise an inference of scienter as to the 1997 audit as a whole, plaintiffs try three different approaches. First, plaintiffs describe “red flags” that should have alerted Ernst that IKON might be concocting fraudulent nümbers. Plaintiffs claim that Ernst failed to investigate these red flags, indicating that Ernst acted with either knowing or reckless disregard for the truth when it opined on the FY97 financial statements. However, the court does not find that the evidence reasonably supports an inference that Ernst failed to properly investigate the allegations of fraud. Second, plaintiffs provide evidence that Ernst knew that IKON’s internal accounting structure was in utter disarray, and claim that such knowledge supports the allegation that Ernst acted recklessly in approving the FY97 financial state-merits. The court finds that a reasonable jury could not infer that recklessness based on the fact that Ernst knew of problems with IKON’s internal accounting structure. Third, plaintiffs claim that the Special Procedures, which applied charges to the FY98 financial statements but not to the FY97 financial statements, consisted merely of sham procedures and were performed with the express purpose of obscuring the alleged FY97 misstatements. The court further finds that the evidence presented rebuts any inference that the Special Procedures were such a sham. Plaintiffs also offer evidence as to each individual alleged misrepresentation. A significant portion of the $54.9 million in alleged misstatements, plaintiffs claim, can be proven to be fraudulent because the calculations failed to accord with IKON’s internal accounting policies. Plaintiffs claim that IKON’s internal policies equaled the standards set forth by GAAP, and that therefore, when Ernst approved calculations that deviated from those internal policies, its approval was either in knowing or reckless violation of professional standards. The court disagrees, finding that the evidence presented does not reasonably support the theory that calculations that violated internal policy also violated GAAP, and thus does not reasonably support the theory that Ernst acted with scienter when it approve such calculations. Plaintiffs also claim that scienter can be proven through evidence that certain calculations performed during the 1997 audit — for example, the calculation of the inventory reserve in the Southern California District — were performed, either knowingly or recklessly, in violation of professional standards. The court finds that although there are issues of fact as to whether certain discrete calculations in fact complied with GAAP, there is insufficient evidence to raise an inference of scienter with respect to the entirety of the 1997 audit and audit opinion. C. Ernst’s Response to Allegations of Fraud, Plaintiffs claim that Ernst failed to properly investigate or otherwise respond to allegations of accounting fraud raised against IKON management during both the 1997 audit and the Special Procedures. Ernst’s conduct during the 1998 Special Procedures is relevant to plaintiffs’ claim that the Special Procedures covered up and continued the 1997 financial statements fraud. See generally Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (holding that in establishing intentional discrimination in employment, proving a defendant’s efforts to cover up the discriminatory purpose is “part of (and often considerably assists) the greater enterprise” of proving wrongful intent). Plaintiffs are correct that if Ernst merely forged ahead blindly in auditing the FY97 financial statements or while conducting the Special Procedures, despite knowing that its client might be supplying fraudulent numbers, such conduct could reasonably raise an inference that Ernst acted with either knowing or reckless disregard for the truth. See Eisenberg, 766 F.2d at 776 (“When the opinion or forecast is based on underlying materials which ... under the circumstances suggest that they cannot be relied on without further inquiry, then the failure to investigate further may support an inference that when the defendant expressed the opinion it had no genuine belief that it had the information on which it could predicate that opinion.”) (citation, punctuation omitted); SEC v. Infinity Group Co., 212 F.3d 180, 193 (3d Cir.2000) (affirming district court ruling that even if defendant was not aware of fraud because he did not investigate warning signs, “ignorance provides no defense to recklessness where a reasonable investigation would have revealed the truth to the defendant”). Furthermore, a failure to reasonably investigate known allegations of fraud seems especially relevant, albeit clearly not indispensable, to the task of distinguishing scienter from mere negligence. See McLean, 599 F.2d at 1198 (negligence, whether gross, grave or inexcusable, cannot serve as a substitute for scienter). In other words, since the publication of inaccurate accounting figures or the failure to follow GAAP, “without more,” do not establish scienter, Worlds of Wonder, 35 F.3d at 1426, then plaintiffs could potentially show “more” by establishing the defendant’s failure to investigate potentially unreliable information. See generally DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir.1990) (“The story in this complaint is a familiar one. At one time the firm bathes itself in a favorable light. Later the firm discloses that things are less rosy. The plaintiffs contends that the difference must be attributable to fraud.... [However, because only a fraction of financial deteriora-tions reflects fraud, ... [i]nvestors must point to some fact suggesting that the difference is attributable to fraud.”); In re Advanta Corp. Sec. Litig., 180 F.3d 525, 538 (3d Cir.1999) (same, citing DiLeo, 901 F.2d at 627, and affirming district court’s dismissal of complaint pled under Section 10(b)). The evidence in this case indicates that Ernst did not fail to respond to the red flags it encountered, but that it received reasonable assurances that the top management at IKON was infoimed of all potential problems and that all allegations received due investigation by outside counsel. In the spring of 1997, George Berry, the E & Y partner responsible for the IKON account, was told that a top IKON officer had accused IKON CFO Kurt Dinkelacker of “cooking the books.” See Pis. Ex. 54 (handwritten notes of Berry); Def. Ex. 15 (Berry Dep.) at 56-88. Dinke-lacker told Berry that the remark was meant to suggest that Dinkelacker was hiding expenses, that the remark was politically motivated, and that Dinkelacker had told John Stuart, then the President and CEO of IKON, that the allegation was false. See Def. Ex. 15 at 61-62. IKON ordered an independent investigation conducted by two senior partners in the law firm of Ballard Spahr Andrews & Inger-soll, LLP, who subsequently reported to Berry that there was “nothing” to the allegation, see id. at 88, and that the alleged accuser, Peter Shoemaker, either denied making the comment or was misunderstood. See id. at 77-78; see also Def. Ex. 14 (Shoemaker Dep.) at 7-22. Berry testified that he was sufficiently reassured by the company’s decision to engage counsel to investigate, by that counsel’s oral assurances, by his knowledge that IKON’s President and CEO was aware of the allegation, and by the fact that Ernst would eventually review the transformation expenses in question as part of the audit procedures. See Def. Ex. 15 at 88. Another red flag was waved in the spring of 1998, when internal audit work at the Florida District suggested that inter-company transactions, which are required to be “eliminated” so that income is not inflated due to internal transactions that merely transfer profits and/or assets from one part of the company to another, were being hidden in other accounts. See Pis. Ex. 50 (internal audit report on Florida District dated June 2, 1998) and Pis. Ex. 8 (ARB 51) (setting .forth professional standards on elimination of accounts). On July 2, 1998, the IKON board formally engaged Ernst to perform the Special Procedures. See Pis. Ex. 51 (engagement letter). The board also hired the law firm of Dechert Price & Rhoads to advise the outside directors as to the Special Procedures, and Dechert in turn hired Arthur Andersen, another accounting firm, to provide accounting expertise in connection with its investigation. See Def. Ex. 22 (M. McAleer, Andersen partner, Dep.) at 9 and Ex. 23 (T. Costello, Andersen partner, Dep.) at 7. Ernst was well aware of the fact that the board had engaged Andersen, since three top Ernst partners signed an agreement on July 2,1998 that permitted Andersen to review all workpapers prepared in connection with the FY97 audit, the first and second limited FY98 quarterly reviews, and the Special Procedures. See Pis. Ex. 69. Although Berry testified that he did not know the precise nature of Andersen’s engagement, he also testified that their general object was apparent. Def. Ex. 15 at 110 (Berry stating that “[b]y their conduct I would say they were hired to review our work in connection with the special procedures”). While Ernst was performing the Special Procedures, yet another serious allegation came to light. In July of 1998, several IKON employees “indicated that they are not comfortable with certain accounting directions which they had been receiving from IKON Corporate” and were being instructed to perform “unnatural acts.” Pis. Ex. 52 (encompassing several memo-randa, including memorandum dated July 16, 1998 from M.' Dudek to J. Forese, executive vice-president and president of IKON’s international operations, and Dinkelacker). Berry and other senior Ernst employees received written notice of these allegations; Berry further documented in writing his discussions with head IKON officers and the steps he took to identify the individuals making the allegations, see id., and he then delivered these memoranda to the independent investigators at Dechert. See Def. Ex. 15 at 88, 93. Around the same time, Berry learned of two additional suspicious incidents in which Ernst inquired after certain IKON calculations, and IKON executives reported that upper management had simply directed them to ignore the issues or deal with them in a certain way. See id. at 19-32. Berry encouraged the board to hire counsel to investigate these incidents, see id. at 19, 24-25, 91-92, spoke to the investigator at Dechert about them, see id. at 90-94, and testified that Ernst’s own inquiry into one of the incidents ultimately revealed a satisfactory explanation of the calculation. See id. at 32. Berry was not the only Ernst manager who was aware of these red flags; another senior Ernst manager, Carmen Nepa, testified that in response to the investigations, Ernst expanded the scope of their 1998 procedures to ensure that the field auditors reviewed the areas of concern. See Pis. Ex. 6 at 24-28. While these episodes clearly raised concerns as to the conduct of IKON management with respect to its own accounting practices, a jury could not reasonably infer scienter on Ernst’s part based on its reaction to these red flags. Cf. In re Kidder Peabody Sec. Litig., 10 F.Supp.2d 398, 415-17 (S.D.N.Y.1998) (finding that managers of unethical stock trader engaged in “willful blindness” where they monitored trader’s fantastically high profits, facilitated trader’s fraud by modifying computer system and giving him advice, did not investigate other employees’ suspicions, and did not respond to Federal Reserve’s inquiries). While plaintiffs’ expert on auditing procedures complains that Ernst should have alerted its field auditors to the allegations of fraud, and claims that Ernst should have instigated an investigation of its own in the summer of 1998, see Def. Ex. 74 (Devor Dep.) at 472-84, the professional standard regarding auditor investigations states only that the auditor should, as soon as practicable, undertake to determine whether the information is reliable and whether the facts existed at the date of his report. In this connection, the auditor should discuss the matter with his client at whatever management levels he deems appropriate, including the board of directors, and request cooperation in whatever investigation may be necessary. Pis. Ex. 53 (AU Section 561, issued by the AICPA and entitled “Subsequent Discovery of Facts Existing at the Date of the Auditor’s Report”) at ¶ .04. The plain language of the professional standard states that further investigation is required only if, among other things, the information is deemed reliable and would have changed the report previously made. See id. at ¶ .05. Although plaintiffs’ expert testified that he felt that Ernst should have done more, Def. Ex. 74 at 481-83, he also agreed that under the professional standard, the precise means of investigation are left to the auditor’s judgment. See id. at 481. In both 1997 and 1998, Ernst knew that the board was informed of the allegations and had hired independent investigators. It appears that Berry and other Ernst employees cooperated with the independent investigators in 1997 and 1998. Berry was assured by independent counsel that the 1997 allegations were groundless, and with respect to the 1998 allegations, Ernst partners knew that the board had hired counsel as well as outside accountants to review, among other things, the workpapers related to the FY97 audit, the FY98 quarterly statements, and the Special Procedures; furthermore, the results of the Special Procedures were ultimately discussed with and approved by the outside accountant. See Def. Ex. 22 at 155-56, 167-68, 182-83; Def. Ex. 23 at 219-223. Under these circumstances, Ernst’s responses to the allegations of fraud do not reasonably permit an inference that Ernst engaged in “highly unreasonable conduct, involving ... an extreme departure from the standards of ordinary care.” McLean, 599 F.2d at 1197. D. Evidence that Ernst Knew that IKON’s Internal Controls Were Faulty As further evidence that E & Y acted recklessly with respect to the FY97 audit as a whole, plaintiffs offer proof that Ernst knew that IKON’s internal accounting system was in utter disarray. However, plaintiffs offer no evidence as to why Ernst’s knowledge of the failure of IKON’s internal accounting system is relevant to Ernst’s independent audit or to its audit opinion. Rather than supporting an inference of scienter, the evidence presented indicates that Ernst not only gave due consideration to areas where internal controls had failed, but also planned its audit with the express purpose of avoiding rebanee on the faulty internal control systems. Prior to serving as IKON’s independent auditor for the year-end financial statements, E & Y also performed many of IKON’s internal audit functions for FY97, which required it to evaluate whether IKON’s own accounting policies were being followed. Ernst discovered high rates of noncompbance with internal auditing policies throughout the company, and its findings were reported to top IKON management by IKON CFO Dinkelacker both at midyear and year-end. See Pis. Exs. 23 and 48. These findings were also followed up with detailed letter reports by Ernst that analyzed each internal control problem and made recommendations for its improvement, which were sent at year-end to key IKON officers, the board, and the presidents of the districts at which Ernst performed audit procedures. See Pis. Ex. 38. A plain reading of these letters reflects a detailed review of problem areas, aimed at ferreting out unreliable procedures and preventing their recurrence. Each letter’s introductory paragraph states that “[Ernst] considered [IKON’s] internal control structure to determine [Ernst’s] auditing procedures for the purpose of expressing [its] opinion on the consobdated financial statements.... The following suggestions, which resulted from [Ernst’s] consideration of the internal control structure, are submitted to assist in improving procedures and controls.” Id. (emphasis added). The bsts of deficiencies and suggested reforms contained in these letters clearly had a forward-looking purpose, and nothing suggests that Ernst relied on the deficient internal controls in conducting the 1997 audit. To the contrary, in some cases, Ernst explained how it resolved the problem, even if on a temporary basis. See id. (noting that in the Central District, accounts payable reconciliations were not prepared each month as required, but that “[d]uring June, all open items were resolved, and the accounts payable balance was properly reconciled to the general ledger”). Such efforts do not indicate a knowing or reckless acceptance of or reliance on faulty internal controls, but rather, indicate an effort to identify and reconcile them. Furthermore, there is evidence that Ernst designed its audit procedures with the express purpose of avoiding rebanee on failed internal controls. One of the steps in planning the scope of the year-end audit involved analyzing IKON’s internal controls, including the internal audit findings that were complete as of April 1997. See Decl. of J. Mulherin (E & Y’s engagement partner for the year-end audit) at ¶¶ 8-11 (attached to Def.’s Mot. for Summ. J.). Ernst then established an “effective/not rely” approach for the year-end audit, which set forth the general principle that IRON’S internal controls would be considered “effective” since they were “designed and placed in operation,” but that in conducting the 1997 audit, E & Y “would not rely on the testing of controls as the primary support for an audit opinion. Rather, [Ernst] would perform substantive testing' — such as analytical procedures and tests of details — to serve as [its] principal source of audit evidence.” Mul-herin Decl. at ¶ 17; see also Pis. Ex. 19 (Ernst’s “Generalized Audit Program Steps” for 1997 audit) (stating that the program “assumed that substantive testing without placing reliance on the related systems is the most efficient way to audit,” and permitting each district to determine whether addition substantive testing was necessary). See generally Pis. Ex. 74 (AU 322, issued by the AICPA) (approving approach where auditors do not consider internal controls after completion of initial analysis). While it is far from clear how these generalized audit principles translated into practice or the extent Ernst to which actually avoided relying on internal controls, especially in light of the fact that Ernst employed a “roll forward method” for the fourth quarter that contemplated partial reliance on internal controls, see Mulherin Decl. ¶ 18 and Def. Ex. 73 at 302, plaintiffs cannot rest on their allegations but must come forth with evidence establishing a genuine issue of material fact. Far from supporting plaintiffs’ claim that Ernst must have acted recklessly simply because it knew that IKON’s internal controls were deficient, however, the evidence here indicates that Ernst used that knowledge to try to ferret out and improve the faulty controls, and made obvious attempts to avoid undue rebanee on them. E. Evidence that Special Procedures Were a Cover-up As circumstantial evidence that the FY97 audit, as a whole, was fraudulently conducted, plaintiffs also offer evidence that the Special Procedures were a coverup for that fraud. The court has already considered plaintiffs’ claim that E & Y failed to properly investigate the allegations of fraud that came to light during the Special Procedures. Plaintiffs also contend that the actual accounting work performed during the Special Procedures so egregiously violated professional standards that Ernst knew, or must have been aware, that the Special Procedures were merely a sham exercise. The court finds that there is insufficient evidence to support this theory, because the conduct of Arthur Andersen sufficiently rebuts any inference of scienter that might be raised by the commission of GAAP violations. It is clear that Andersen did not review the 1997 opinion or financial statements for compliance with GAAP or GAAS, see Def. Ex. 22 at 15-17, 147 and Def. Ex. 23 at 37-39, nor did it assess the overall quality of the audit. See Def. Ex. 22 at 28. However, Andersen was hired as the board’s accounting expert in connection with its investigation of the Special Procedures, and in this capacity had a clear duty to notify the board if it disagreed with the allocation of adjustments proposed by Ernst. See Def. Ex. 22 at 155-56; Def. Ex. 23 at 223. While Andersen did not review the allocations “line by line,” Def. Ex. 22 at 67, it did sign off on the final allocation of charges at the conclusion of the Special Procedures, and concurred with the decision not to restate the FY97 financial statements. See id. at 155-56, 167-68, 182-83; Def. Ex. 23 at 219-223. For a jury to credit plaintiffs claim that the Special Procedures were a cover-up, however, the jury must receive evidence discrediting the fact that Andersen approved the outcome of the Special Procedures. For example, the jury would require evidence as to how the allegedly blatant cover-up escaped the notice of the investigators, or evidence suggesting that Andersen was somehow involved in the cover-up. No such evidence is presented, and therefore the court is satisfied that Ernst’s conduct during the Special Procedures was not such an extreme departure from the standards of ordinary care that it could constitute evidence of scienter. See In re Worlds of Wonder, 35 F.3d at 1426 (in establishing scienter, “[t]he plaintiff must prove that ... the accounting judgment which were made were such that no reasonable accountant would have made the same decisions if confronted with the same facts”) (citations, punctuation omitted). F. Evidence that Calculations that Violated IKON’s Internal Policy Also Violated GAAP The court now turns to the evidence presented as to each allegedly fraudulent misstatement. Plaintiffs claim that many of the alleged misrepresentations — indeed, the bulk of the $54.9 million in total alleged misrepresentations — were violations of GAAP because they were not calculated in accordance with IKON’s internal accounting policies. Specifically, plaintiffs place in this category a $4.2 million shortfall in the lease default reserve in the Southern California District, a $17.0 million reckless misstatement with respect to the accounts receivable reserve, a $3.6 million known misstatement with respect to the accounts receivable reserve in the IKON Management Services unit (IMS), and a $10.4 million overstatement due to unsupported or unreconciled accounts. Plaintiffs argue that IKON’s internal accounting practices were substantially equivalent to GAAP, and that therefore, because these specific calculations deviated from the internal policy, they also deviated from GAAP. The showing that internal policy equaled GAAP is critical to this claim, because “there can be no claim of fraud based merely on a company’s deviation from its own undisclosed internal accounting policies.” In re Cirrus Logic Sec. Litig., 946 F.Supp. 1446, 1458 (N.D.Cal.1996) (citations omitted); see also In re Worlds of Wonder, 147 F.R.D. 214, 217 (N.D.Cal. 1992) (“It is unfair to use professionals’ self imposed standards, which may exceed industry standards, against them to try to prove fraud. This violates public policy, which encourages the highest standards, in order to protect the public.”). “Where, however, a company deviates from its own procedures in a way that violates GAAP, that deviation from internal policy may be evidence of scienter.” In re Cirrus Logic, 946 F.Supp. at 1458 n. 10 (citations omitted). The court now addresses the evidence presented to show that internal policy equaled GAAP in the areas of accounts receivable reserves and lease default reserves. 1. Accounts Receivable Reserves With respect to the doubtful accounts receivable reserves, plaintiffs offer a report jointly authored by Professors Douglas Carmichael and Harris Devor, as well as testimony from both experts, to show that internal IKON accounting policies were substantially equivalent to GAAP. However, the expert opinions do not provide sufficient facts in support of their conclusions. See Brooke Group, 509 U.S. at 242, 113 S.Ct. 2578 (expert opinion lacking factual basis may not defeat a motion for summary judgment); Advo, Inc. v. Philadelphia Newspapers, Inc., 51 F.3d 1191, 1198-99 (3d Cir.1995) (same); Fireman’s Insur. Co. v. DuFresne, 676 F.2d 965, 969 and n. 4 (3d Cir.1982) (party resisting summary judgment may not rely merely on bare assertions, conclusory allegations or suspicions); Peerless Heater Co. v. Mestek, Inc., No. 98-CV-6532, 2000 WL 637082, at *8 (E.D.Pa. May 11, 2000) (conclusory statements in briefs and expert report alone are insufficient to create a genuine issue of material fact) (citations omitted). Professor Carmichael explained that “[w]hat GAAP requires is ... an estimate of whether a loss is probably and reasonably estimable. If those two requirements are met, then there needs to be an accrual of that amount or, in common terms, the loss has to be booked.” Def. 73 (Carmichael Dep.) at 41. In other words, in Carmichael’s opinion GAAP requires that there be a general reserve and a specific reserve that in total will reduce receivables to not realizable value ... [T]he determination ... requires identifying specific accounts for which collection is not probable and for which the loss is reasonably estimable and other accounts ... that may not be able to be specifically identified. Id. at 29-30. These requirements, according to Professor Carmichael, are substantively the same as what IKON’s internal policy required. However, this conclusion merely assumes that existence of the internal policy proves that it is intended to comply with GAAP. For example, Professor Carmichael stated that “[a] company in applying GAAP in its particular circumstances will choose an appropriate means of making that estimate [that is required by GAAP]. It is my opinion that IKON chose the policy as reflected here as the appropriate means of achieving that end.” Id. at 30. Similarly, he concluded that since other companies commonly use internal “percentage aging” policies to comply with GAAP, IKON’s use of an internal “percentage aging” policy meant that IKON’s policy too was created for the purpose of GAAP compliance. He stated that Companies ... develop their own more detailed policies on how in their circumstances they will achieve an estimate that conforms with [GAAP]. A general, say, accepted and commonly used approach to that is what is referred to generally as a percentage of aging category ... Where a company such as IKON has identified a percentage of aging policy as its internal policy, that is the way they achieve conformity with GAAP. Id. at 42-48. At best, Professor Carmichael has noted a similarity in the structure of IKON’s policy and those of other companies, without any facts to support the idea that substantively, a deviation from IKON’s policy necessarily was a deviation from GAAP. Plaintiffs other expert, Professor Devor, based his conclusion regarding the accounts receivable reserve on similarly unreliable assumptions. See Def. 74 at 186-196. Professor Devor cited IKON’s policy manual’s one-line description of the accounts receivable reserve allowance, which stated that “[e]ach operating unit should evaluate the collectibility of accounts receivable on no less than a quarterly basis and maintain an allowance for doubtful accounts equal to the total of certain and probably uncollectible accounts,” and concluded, “yes, that is GAAP.” Id. at 192-93. However, as explained, IKON’s policy involved a particular percentage aging approach, not merely the generalized dictates set forth in the manual. Based on Professor Devor’s conclusion, a jury would have no evidence as to whether a calculation that did not follow IKON’s particular percentage aging approach necessarily deviated from GAAP. Professor Devor also stated that it appeared from Ernst’s own workpapers and testing methods that Ernst thought that internal policy equaled GAAP, id. at 187-88, but no Ernst witnesses testified to believing that the internal policy equaled GAAP. See Def. E & Y’s Mot. for Summ. J. at 37 n.15. Professor Devor further stated that testimony by Michael Royce, IKON’s Northern California District CFO, indicated that he believed policy equaled GAAP, see Def. 74 at 187-88; however, at most, Mr. Royce suggested that in some instances, policy might equal GAAP, but that such was clearly not the case with respect to the accounts receivable allowance. See Def. Ex. 31 (Royce Dep.) at 387-88, 393-94, 423. Such expert testimony does not support the theory that the accounts receivable reserve violated GAAP where they violated IKON’s internal policy. 2. Lease Default Reserves The second area in which plaintiffs claim that internal policy equaled GAAP is the lease default reserves. Professor Carmichael again drew unsupported conclusions. “GAAP would require a reserve that reflected the probable and estimable amount of the loss expected on the lease portfolio. IKON had a particular way of implementing what GAAP required, and that was reflected in its accounting policy.” Def. Ex. 73 at 166. Professor Carmichael also estimated what he believed to be the proper lease default reserve by multiplying the chargeback rate by the balance of the lease portfolio, and that “[biased on my understanding of the situation that existed here, a loss of at least that amount was probable, and I believe that the method of calculation is reasonable in order to make that estimate.” Id. at 170-71. The fact that plaintiffs’ expert finds it reasonable to calculate the reserve differently is not evidence of a extreme departure from ordinary care. See Mathews v. Centex Telemanagement, Inc., No. 92-1837 CAL, 1994 WL 269734, at *5 (N.D.Cal. Jun.8, 1994) (granting summary judgment despite expert’s explanation of why the reserve should have been higher, since differences of opinion are not evidence of misstatements or material omissions); see also In re Citrus Logic, 946 F.Supp. at 1457 (GAAP “is not a set of rules ensuring identical treatment of identical transac-tibns; rather it tolerates a range of reasonable treatments, leaving the choice among alternative to management,” because “flexible accounting concepts do not always (or perhaps ever) yield a single correct figure.”) (citations, punctuation omitted). This is especially true with respect to reserves, which are “essentially predictions about the future. The fact that a future prediction turns out to be wrong does not mean it was fraudulent when made. Because reserves are me