Full opinion text
MEMORANDUM AND ORDER ON DEFENDANTS’ MOTIONS TO DISMISS LINDSAY, District Judge. I. Introduction This is a consolidated securities fraud class action in which the lead plaintiffs are Ram Trust Services, Inc. and Lens Investment Management, LLC (“the plaintiffs”). The lead plaintiffs propose a class of all purchasers of Stone & Webster, Inc. (“S & W” or the “Company”) securities between January 22, 1998, and May 8, 2000. The defendants are S & W; H. Kerner Smith (“Smith”), S & W’s former Chief Executive Officer (“CEO”); Thomas Langford (“Langford”), S & W’s former Chief Financial Officer (“CFO”); and Pricewaterhou-seCoopers, LLP (“PwC”), S & W’s auditors. The Consolidated and Amended Class Action Complaint (“Amended Complaint”) is in three counts. Count one alleges violations by all the defendants of section 10(b) of the Securities Exchange Act of 1934 (“the Exchange Act”), 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder by the Securities and Exchange Commission (“SEC”). Count two alleges that Smith and Langford violated section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a). Count three alleges violations of section 18 of the Exchange Act, 15 U.S.C. § 78r, by all of the defendants. All proceedings against S & W itself were stayed on July 25, 2000, upon its filing of a suggestion of bankruptcy. The other defendants have filed motions to dismiss the Amended Complaint under Fed.R.Civ.P. 12(b)(6), arguing that the plaintiffs have failed to satisfy the strict pleading requirements of the Private Securities Litigation Reform Act (“PSLRA”), Pub L. No. 104-67 (1995) (codified at 15 U.S.C. § 78u-4 & -5), and Fed.R.Civ.P. 9(b). For the reasons stated below, I GRANT these motions in part and DENY them in part. II. Factual Allegations The facts recited here, unless otherwise noted, are drawn from the Amended Complaint. S & W was founded in 1889 by two graduates of the Massachusetts Institute of Technology. Am. Compl. ¶ 28. Originally an engineering services firm, S & W expanded into a construction, engineering, and consulting firm that executed projects around the world. Id. Over the years, it has been a major builder of urban transit systems, public utilities, and nuclear power ’ plants. Id. ¶ 29. By the 1990s, however, S & W’s business' was stagnating: net income, which had been $49 million in 1987, dropped to $1.9 million in 1993. Id. ¶ 30. In February 1996, S & W’s then CEO resigned and was replaced by Smith. Id. ¶ 31. In June 1997, Langford became an Executive Vice President and CFO. Id. ¶ 32. By the end of that year, S & W represented that a corporate restructuring program directed by Smith and Langford had turned the Company around, and the Company reported net income of $38.5 million. Id. The Company’s stock reached $55 per share. Id. The plaintiffs allege, however, that this turn-around and profitability “was a mirage.” Id. ¶ 33. They allege that: “Smith and Langford had employment contracts providing for lucrative payments should a ‘change of control’ occur. Therefore, from the outset, their strategy was to make the Company look good in the short-run to position it for a sale.” Id. To achieve this goal, S & W distorted and misrepresented its results throughout the Class Period by failing to book known losses on its income statement, by failing to reduce its net assets to account for its money-losing projects and by booking phantom revenue and receivables from a suspended job, long after there was no hope the job would be revived. Id. ¶ 50. The plaintiffs allege that Smith and Langford made false and misleading statements about S & W’s financial condition in press releases, SEC filings, and other public documents. Id. ¶ 20. Moreover, the plaintiffs claim, S & W’s auditors, PwC, knew of or recklessly disregarded false statements in S & W’s financial statements and issued false or misleading opinions with respect to those financial statements. Id. ¶¶ 24-25. A. Allegations Against Smith and Lang-ford As noted above, much of S & W’s work consisted of large construction projects. Such contracts usually took one of two forms: cost-plus or fixed-price. Am. Compl. ¶ 37. In a cost-plus contract, the contractor is paid its cost to complete the project plus an agreed-upon percentage of the total cost as profit. Id. By contrast, in a fixed-price contract, the contractor receives a fixed sum for performing the contract, no matter what the cost eventually proves to be. Id. Thus, under a fixed-price contract, as distinguished from a cost-plus contract, the contractor bears the risk of cost overruns on the project. Id. 1. The Underbidding Policy According to the plaintiffs, Smith and Langford established a policy of “underbidding” on projects in 1997. Id. ¶ 52. This strategy was an effort to increase the number and dollar magnitude of projects on S & W’s books, create the perception of growth in S & W’s business and tout an ever-increasing project backlog. Smith and Langford did this even though they knew that S & W’s backlog figures would then represent money losing projects. Id. The “backlog” is “the accumulated amount of the Company’s committed, but unexpended, contractual work.” Id. ¶ 38. Investors watch a contractor’s backlog “because backlog represents the best indication of a company’s future growth.” Id. Underbidding meant that Smith, often over the objections of his own project teams, was dictating project terms so that S & W was selling fixed-price jobs either at a loss or with such small margin for error that the slightest adverse change in a project’s economics would cause S & W to lose money on the job. Id. ¶ 53. The plaintiffs quote or paraphrase several S & W employees about the underbidding policy: “According to a confidential source who worked for S & W as an assistant controller before and during the Class Period CCS — 1’), Smith was warned by senior management that this policy would result in long-term disaster for the Company.” Id. ¶ 54. “Roger LeFavor, Vice President of Strategic Planning, regularly challenged Smith and told Smith numerous projects could not be done for the bid price, but Smith overruled his objections.” Id. ¶ 55. The significance of this policy to the plaintiffs’ legal claims is that, according to the plaintiffs, Generally Accepted Accounting Principles (“GAAP”) required S & W to recognize the prospective losses from underbid projects in the period that S & W was first obliged to perform the contract. Id. ¶¶ 39-46. S & W’s failure to do so, and its retention of the underbid projects in its backlog, the plaintiffs allege, rendered fraudulent all of S & W’s financial statements issued during the Class Period. The plaintiffs list ten projects which, according to several named and unnamed S & W employees, “were all bid at a loss pursuant to Smith and Langford’s undisclosed policy” of underbidding. Id. ¶ 58. 5 & W allegedly underbid these projects by 10-40%; on one project, S & W’s bid was approximately $70-80 million, whereas the bid of a competitor, Raytheon, for the same work was $120 million. Id. ¶¶ 60-61. 2. The TPPI Project In 1996, S & W joined a consortium of contractors to construct an integrated ethylene and olefins complex in Indonesia for Trans Pacific Petrochemical Indotama (“TPPI”). Id. ¶¶ 62-63. In late 1997, “TPPI suspended work on the project because it had exhausted its funding for the project.” Id. ¶ 65. As a result, in 1998 S 6 W incurred numerous expenses from the project— including payments to vendors for equipment shipped to Indonesia'— but received no corresponding payments. Id. ¶¶ 65-67. “CS-1 said that TPPI suggested to S & W that it try to get out of its contracts with its vendors due to the suspension. Based upon this suggestion, S & W knew in late 1997 that the project was dead even though they had not received an official termination notice.” Id. ¶ 65. The plaintiff further alleges that According to CS-1, ... beginning with the first quarter of 1998, S & W created phantom revenue and receivables from the TPPI project to cover S & W’s project related costs by recording revenue equal to the amount of those costs. The purpose of recording this revenue was to avoid showing a loss from the project on S & W’s financial statements. Id. ¶ 67. Again according to CS-1, S & W booked $86.9 million in revenues from TPPI in 1998 and $53 million in 1999. Id. ¶ 68. According to CS-1, [Daniel] Martino [a former S & W senior accountant] and CS-2 [confidential source 2], Smith and Langford knew the equipment sent to Indonesia for the project was being sold for pennies on the dollar and that the project would not be restarted. Accordingly, S & W’s statements that the TPPI project would likely restart were misleading and because Smith and Lang-ford knew that the TPPI project would not resume, S & W should not have kept the TPPI project in the Company’s backlog and should not have been booking phantom revenue and receivables from the project. Id. ¶ 75. 3. S & W’s Liquidity Problems The Amended Complaint alleges that S & W began to experience cash flow problems in 1998 as a result of the underbidding policy and the suspension of TPPI. “According to Tim McBride, a former controller for S & W’s industrial division, by the middle of 1998, S & W knew that the Company was ‘starting to get strapped for cash.’ ” Id. ¶ 70. “According to Daniel Gershkowitz, the original project manager on the Tiverton and Rumford projects,” S & W began ■ to have trouble paying its vendors, and some vendors refused to deliver materials because they had not been paid. Id. ¶ 71. Throughout 1998, according to CS-2, S & W circulated internal financial reports that showed that the Company was losing money, thereby conflicting with the Company’s publicly disclosed financial results. Id. ¶ 72. “Anyone who had access to the monthly financials could see that it was not what was being said publicly. You could read them and compare them with the quarterlies he [Smith] was reporting and ask what he was smoking. Knowing what we knew inside and seeing the quarterlies — they just did not jibe.” Id. The Amended Complaint further describes the Company’s increasing cash flow problems through 1998 and 1999. During this time, S & W was frequently unable to pay vendors or subcontractors. Id. ¶¶ 78-90. Smith and Langford became directly involved in deciding which subcontractors to pay and how much to pay them. Id. ¶¶ 87-88. “According to several different sources, those who called Smith regularly to collect money and threaten to walk off a project were usually the first to get paid.” Id. ¶ 85. Toward the end of 1999, one of S & W’s clients, Maine Yankee, “notified S & W in writing that it was in material breach of their [sic] contract for failing to pay its subcontractors and suppliers for work previously performed and for its inability to pay for work that was currently being performed and scheduled to be performed in the future.” Id. ¶ 108. “S & W did not notify its shareholders of the Maine Yankee letter, and instead took immediate steps to keep the matter quiet.” Id. ¶ 109. (i) The Credit Agreement. To deal with S & W’s cash flow problems, “Smith, Langford and other S & W personnel sought to obtain conventional long term financing through bonds, long or intermediate term bank loans, and preferred stock, but were unable to do so.” Id. ¶ 91. S & W therefore entered into a new Credit Agreement with several banks to provide short-term financing. Id. ¶ 92. S & W announced the new Credit Agreement in a 10-Q filed on August 12,1999. Id. However, the plaintiffs allege, “the 10-Q failed to disclose that, at the time S & W entered into the Credit Agreement, it was already in material default under Sections 6.06 and 9.01(f)(i) of the Credit Agreement, because it had failed to make timely payments to its vendors and subcontractors as their bills came due.” Id. “Smith and Langford thus knew that S & W could not reasonably rely on the Credit Agreement for additional funds because the lenders would immediately be in a position to cancel the availability of future funds and to call in the existing indebtedness due to S & W’s material defaults.” Id. ¶ 98. The plaintiffs allege further that On October 28, 1999, S & W announced it was taking steps to raise cash. It announced that it was selling its headquarters building and its Nordic cold processing and storage business ‘to concentrate on core competencies.’ In reality, defendants knew that S & W was attempting to sell such assets because this was the only way in which S & W could obtain any material amount of cash with which to placate its bank lending consortium and avoid bankruptcy. Id. ¶ 117. The plaintiffs claim that “[b]y November 19, 1999, the lenders had discovered the various defaults and demanded that the Credit Agreement be restructured.” Id. ¶ 118. The press release announcing this restructuring, however, did not reveal the reasons for it or the terms of the new borrowing facility. Id. (%%). The Retirement Fund Stock Purchase. On December 16, 1999, S & W announced that the S & W Retirement Plan Trust would buy one million shares of S & W stock at $15.35 per share and issued a press release stating that a fairness opinion with regard to the transaction had been issued by an independent investment bank. Id. ¶ 121-22. The plaintiffs allege that director John P. Merrill, Jr., “suddenly” resigned after this stock purchase because he was “in apparent disagreement” with it, and that S & W concealed his resignation from its shareholders “for several months.” Id. ¶ 124. (in). The Restatement. On April 14, 2000, S & W filed its 10-K form for fiscal year 1999, which “reported revenue of $1.17 billion, net income of $20.5 million, and net assets of $324.3 million.” Id. ¶ 144. Just over two weeks later, on April 30, 2000, S & W issued a press release that stated: Company officials were recently notified of an unanticipated cost overrun on a key project by a major subcontractor related to estimates to complete work during the first half of the current year. As a result, the Company conducted a thorough review of this project and, based on this review, the Company will record a provision of $27.5 million and will revise its 1999 financial statements and amend its 1999 Form 10-K. Id. ¶ 148. The plaintiffs contend that “these cost overruns were neither unanticipated nor previously unknown, nor were they just discovered pursuant to a review. Smith & Langford knew of the cost overruns since Spring of 1999, and had been desperately trying to cope with these problems while they hid them from investors and prospective buyers.” Id. ¶ 150. (iv). S &W Files for Chapter 11 Bankruptcy. On May 8, 2000, S & W announced that it had signed an agreement with Jacobs Engineering Group (“Jacobs”) for the sale of substantially all of S & W’s assets. Id. ¶ 153. S & W also announced that it intended to file a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. Id. Upon this announcement, trading in S & W stock was suspended. Id. When trading resumed on May 19, 2000, the stock fell to $0.7031 per share. Id. ¶ 154. On June 2, 2000, S & W filed a petition in the Delaware Bankruptcy Court under Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq. Id. ¶ 155. B. Allegations Against PwC PwC is a firm of certified public accountants. Id. ¶ 24. Under the direction of its audit partner Robert Spear (“Spear”), PwC audited S & W’s financial statements during the Class Period. Id. The plaintiffs assert that PwC is liable for violations of sections 10(b) and 18 of the Exchange Act, because PwC’s unqualified audit opinions on S & W’s 1997, 1998, and 1999 year-end financial statements were allegedly false and misleading. Id. ¶¶ 343-45. There are three branches to the plaintiffs’ allegations against PwC. First, the plaintiffs allege that PwC was aware of the full range of the alleged wrongdoing of Smith and Langford described above: the underbidding policy; the recording and reporting of phantom revenue from the TPPI project; S & W’s hidden cash flow problems; S & W’s false statements about the restructuring under the Credit Agreement; and the failure to disclose that S & W was “on the verge of bankruptcy” when it sold one million shares to its employee retirement plan. Id. ¶ 341. Second, the plaintiffs argue that PwC failed to comply with Generally Accepted Auditing Standards (“GAAS”), and was aware of or recklessly disregarded the fraud committed by management by failing to follow up on a variety of red flags. Id. ¶¶ 350-53; 361. Third, the plaintiffs allege that the restatement of S & W's 1999 financials was an artifice designed to save face in light of S & W’s financial collapse. Id. ¶ 361. To support these claims, the plaintiffs make a handful of somewhat more specific allegations against PwC. First, the plaintiffs allege that PwC served as S & W’s auditors for over fifty years, and received over $1 million in fees per year from S & W for auditing and consulting services. Id. ¶ 340. “As a result of its longstanding relationship with S & W and the nature of the accounting and auditing services rendered to the Company, PwC personnel ... were regularly present at S & W’s corporate headquarters throughout the year and had continual access to and knowledge of S & W’s private and confidential corporate financial and business information...” Id. ¶ 341. As to TPPI, the plaintiffs allege that PwC and Spear allowed S & W to recognize this phantom revenue and receivables based upon S & W’s representation that it believed TPPI would be resumed. There was no basis for this false representation and Spear and PwC would have discovered this had they chosen to independently test the representation, as they should have done for such a material contract. Id. ¶ 67. Furthermore, the plaintiffs allege that 5 & W and PwC violated GAAP by recording revenue from the TPPI project that was never received after the project was suspended. In fact, since S 6 W actually knew that the TPPI project would not be continued, under GAAP, S & W was required to evaluate the remaining estimated costs on the project, calculate any expected, future revenue and determine whether there would be a loss on the project. Since S & W knew it was going to incur a substantial overall loss on TPPI, FAS [Financial Accounting Standards] No. 5 required that S & W accrue the loss as a charge to income. S & W and PwC failed to do so. Id. ¶ 76. III. Analysis A. Pleading Requirements A court may grant a motion to dismiss for a failure to state a claim only if “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Roeder v. Alpha Indus., Inc., 814 F.2d 22, 25 (1st Cir.1987) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). In considering this motion, I must “accept as true all well-pleaded allegations and give the plaintiffs the benefit of all reasonable inferences.” Cooperman v. Individual, Inc., 171 F.3d 43, 46 (1st Cir.1999). While the foregoing rules are applicable in a securities fraud case, a court, in such a case, must consider, in addition, the strict pleading requirements of the PSLRA and Fed.R.Civ.P. 9(b). The PSLRA provides: (b) Requirements for securities fraud actions (1) Misleading statements and omissions In any private action arising under this chapter in which the plaintiff alleges that the defendant - (A) made an untrue statement of a material fact; or (B) omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances in which they were made, not misleading; the complaint shall specify" each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed. (2) Required state of mind In any private action arising, under this chapter in which the plaintiff may recover money damages only on proof that the defendant acted with a particular state of mind, the complaint shall, with respect to each act or omission alleged to violate this chapter, state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind. 15 U.S.C. § 78u-4(b)(1)-(2). The First Circuit has held that the pleading standards set out in this statute are “congruent and consistent with the pre-existing standards of this circuit” under Rule 9(b). Greebel v. FTP Software, Inc., 194 F.3d 185, 193 (1st Cir.1999). The plaintiff in a securities fraud action must specify each allegedly misleading statement or omission including its time, place and content. The plaintiff must provide factual support for the claim that the statements or omissions were fraudulent, that is, facts that show exactly why the statements or omissions were misleading. If the plaintiff brings his claims on information and belief, he must set forth the source of the information and the reasons for the belief. Aldridge v. A.T. Cross Corp., 284 F.3d 72, 78 (1st Cir.2002) (internal citations and quotation marks omitted). To state a prima facie case under section 10(b) and Rule 10b-5, a plaintiff must allege that the defendant intentionally or recklessly made a misrepresentation or omission of a material fact upon which the plaintiff relied and which proximately caused the plaintiffs injuries. See, e.g., Shaw v. Digital Equipment Corp., 82 F.3d 1194, 1216-17 (1st Cir.1996). Direct pleading of the “reliance” requirement was set aside by the Supreme Court for “fraud on the market” claims by virtue of the Court’s decision in Basic, Inc. v. Levinson, 485 U.S. 224, 246-47, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988). Rebanee, for such claims, is “now presumed, and plaintiffs- are held entitled to rely upon the ‘integrity of the market’ and information pubbcly released by corporations and their agents and employees.” Colby v. Hologic, Inc., 817 F.Supp. 204, 209 n. 7 (D.Mass.1993). A plaintiff stih must allege, even in a fraud-on-the-market case, that a defendant acted with scienter in order to establish liabihty under section 10(b) and Rule 10b-5. Scienter 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). “To win a section 10(b) case, the plaintiff must show either that the defendants consciously intended to defraud, or that they acted with a high degree of recklessness.” Aldridge, 284 F.3d at 82. The definition of recklessness for section 10(b) and Rule 10b-5 purposes involves “a highly unreasonable omission, involving not merely simple, or even inexcusable, negbgence, but an extreme departure from the standards of ordinary care ...” Greebel, 194 F.3d at 198 (quoting Sundstrand Corp. v. Sun Chem. Corp., 553 F.2d 1033, 1045 (7th Cir.1977)). In this circuit, there is no “particular test to determine scienter ...” Aldridge, 284 F.3d at 82. Rather, the First Circuit has adopted a “case by case fact-specific approach.” Id. A plaintiff may rely on a variety of forms of evidence, both direct and circumstantial. See id. “As part of the 'mix of facts, the plaintiff may allege that the defendants had the motive ... and opportunity ... to commit the fraud.” Id. However, “merely pleading motive and opportunity, regardless of the strength of the inferences to be drawn of scienter, is not enough.” Greebel, 194 F.3d at 197. The evidence, taken as a whole, must create a strong, and not merely a reasonable, inference of scienter. Id. at 195-96; see also 15 U.S.C. § 78u-4(b)(2). Yet a “strong” inference need not be an irrefutable one; a plaintiff must show only that “his characterization of the . events and circumstances as showing scienter is highly likely.” Aldridge, 284 F.3d at 82. Each defendant has challenged the plaintiffs’ allegations that his conduct violated the antifraud provisions of the securities laws upon which the plaintiffs have sued. B. Public Statements Other Than SEC Filings Certain of the statements made by or attributed to the defendants by the plaintiffs may not fall within the category of statements giving rise to a claim under the antifraud provisions of the securities laws. 1. Analysts’ Statements; Boston Globe Article The plaintiffs allege that certain reports by securities analysts and an article that appeared in the Boston Globe contain false or misleading statements made by or attributable to Smith and Langford. Where no direct attribution to Smith or Langford is made, plaintiffs argue that either or both of these defendants can be held hable for a statement of S & W under the “group published information” doctrine. This doctrine, as adopted by a number of circuits, ahows the plaintiff to “impute false or misleading statements conveyed in annual reports, quarterly and year-end financial results, or other group-published information to corporate officers.” In re Raytheon Secur. Litig., 157 F.Supp.2d 131, 152 (D.Mass.2001). While the First Circuit had accepted the group-published information doctrine before the adoption of the PSLRA, it has not yet ruled on whether the doctrine survived the passage of the PSLRA. See In re Cabletron Systems, Inc., 311 F.3d 11, 40 (1st Cir.2002). Even assuming that the doctrine remains viable in this circuit, the plaintiffs still must make “sufficiently particularized allegations that the individual officer knew about the fraud” in order to attribute statements by S & W to either Smith or Langford. Raytheon, 157 F.Supp.2d at 152 (citing Serabian v. Amoskeag Bank Shares, Inc., 24 F.3d 357, 367-68 (1st Cir.1994)). The reports and the article at issue are the following, as alleged in the Amended Complaint. • The April 1998 Salomon Smith Barney Analyst Report: At the Salomon Smith Barney (“SSB”) Industrial Capital Goods Conference, Smith and Langford are alleged to have misleadingly described S & W’s backlog and the likelihood of the resumption of the TPPI project. SSB analysts repeated these statements in a report on the Company. Am. Compl. ¶¶ 178-180. • The January 1999 Morgan Stanley Dean Witter Report: In early 1999, Smith and Langford allegedly stated to analysts that S & W had “scrubbed the backlog.” Analysts from Morgan Stanley Dean Witter (“MSDW”) included this information in a report released on January 27,1999. Id. ¶ 228. • The May 5, 1999 Credit Suisse First Boston Analyst Report: A report issued by Credit Suisse First Boston (“CSFB”) allegedly contained false statements about growth in revenues and operating margins and about the likelihood of a resumption of TPPI. Id. ¶¶ 257-259. • The June 1999 DLJ Report: In April of 1999, Smith made a presentation to the Environmental Services and Engineering and Construction Conference sponsored by Donaldson, Lufkin and Jenrette (“DLJ”). On June 9, 1999, DLJ issued a report that included an edited transcript' of Smith’s presentation. The remarks of Smith, as reported in the transcript, included allegedly false statements regarding improved margins in backlog and regarding future profitability. Id. ¶ 251. • The October 28, 1999 Press Report: An article contained allegedly misleading statements by Smith to a Boston Globe reporter to the effect that the Company was not facing insolvency. Id. ¶¶ 286-288. • The December 30, 1999 SSB Analyst Report: A report by SSB analysts allegedly contained materially false statements about backlog, cash position and piargins. Id. ¶¶ 313-315. The First Circuit has recently adopted the so-called “entanglement” test for liability for third-party statements. See Cabletron, 311 F.3d at 37. .Under the rule announced in Cabletron, “liability may attach to an analyst’s statements where the defendants have expressly or impliedly adopted the statements, placed their imprimatur on the statements, or have otherwise entangled themselves with the analysts to a significant degree[.]” Id. at 37-38 (quoting Schaffer v. Timberland Co., 924 F.Supp. 1298,1310 (D.N.H.1996)) (internal quotation marks omitted). Cable-tron also held that “an entanglement claim will be rejected if it merely suggests or assumes that company insiders provided the information on which analysts or other outsiders based their reports.” Id. at 38. (citing Suna v. Bailey Corp., 107 F.3d 64, 73 (1st Cir.1997) and In re No. Nine Visual Tech. Corp. Sec. Litig., 51 F.Supp.2d 1, 31 (D.Mass.1999)). Suna also rejects the notion that general statements regarding a company’s “practice” of “communicating] regularly with securities analysts ... and [of] providing] detailed ‘guidance’ to these analysts” are sufficiently particularized to survive a motion to dismiss, emphasizing that Rule 9(b)’s heightened pleading requirements apply. 107 F.3d at 73. The allegations in the Amended Complaint at ¶¶ 364-371 (pertaining to “guidance to securities analysts and use of them to provide false information to the securities market”) are nearly identical to those found in Suna to be insufficient to “satisfy the requirements of Rule 9(b) .... because appellants failed to identify the statements made I>y [an individual defendant] or describe how those statements were false or misleading.” Id. However, in the sections of the Amended Complaint dealing with specific statements, the plaintiffs allege that SSB “repeated [Smith and Langford’s] representations” regarding backlog and the TPPI project’s status in SSB’s April 1998 report, Am. Compl. ¶ 179; that CSFB’s report was “based on discussions with” or “representations of’ Smith and Lang-ford, id. ¶¶ 257-258; and that the , December 1999 SSB report (which plaintiffs concede expressed doubt as to S & W’s explanation for its 'poor results) was “based upon discussions with Smith and Langford,” id. ¶ 313. Although none of these allegations contains a “‘specification of the time, place and content of an alleged false representation!;,]’ ” Greebel, 194 F.3d at 193 (quoting McGinty v. Beranger Volkswagen, Inc., 633 F.2d 226, 228 (1st Cir.1980)), by Smith or Langford in anything but the most general terms, Cabletron indicates that these allegations may meet the entanglement test. See Cabletron, 311 F.3d at 38 (discussing examples of analysts’ statements based on company communications.) The statements contained in the DLJ report present a somewhat clearer set of facts for making a determination of entanglement. The Amended Complaint alleges that several statements made by Smith at the conference sponsored by DLJ in April of 1999 were false or misleading. However, the DLJ report, which reprinted “an edited transcript of a slide presentation” by Smith, was released on June 9, 1999 as stated earlier. The DLJ report also appears to contain content prepared by DLJ analysts and a transcript of a question-and-answer period that followed Smith’s presentation. Smith and Langford contend that “[plaintiffs have not pled with specificity who allegedly supplied the information set forth in the DLJ report ... how that information was supplied or how Defendants controlled the content of those third-party statements. Thus, these statements... are not attributable to Defendants, and they are not actionable,- as a matter of law.” Defendants H. Kerner Smith and Thomas L. Langford’s Joint Memorandum of Law in Support of Their Motion to Dismiss the Consolidated and Amended Class Action Complaint (“Smith and Langford Joint Memorandum”) at 70 (citing In re Medimmune, Inc. Sec. Litig., 873 F.Supp. 953, 965 (D.Md.1995)). They also point out the two-month period between the making of the statements and their publication in the DLJ report. The plaintiffs counter that the statements alleged to be misleading are contained in that portion of the DLJ report that sets forth a “substantially complete, verbatim transcript (even the content of the accompanying slides are [sic] reproduced) of a presentation delivered by Smith on April 14-15, 1999 at Donaldson, Lufkin’s 1999 Environmental Services and Engineering and Construction Conference in New York.” Lead Plaintiffs’ Brief in Opposition to Smith and Langford’s Motion to Dismiss (“Plaintiffs’ Opposition to Smith and Langford Motion”) at 67 (emphasis in original). Because the First Circuit has clarified the circumstances in which a determination of entanglement may be made, and because I conclude that the plaintiffs have sufficiently described the “who, what, when, where and how” with respect to the statements made by Smith at the DLJ conference, I will discuss infra the materiality of these statements and those contained in the SSB and CSFB reports and, where appropriate, I will discuss, as well, the sufficiency of the allegations regarding the defendants’ state of mind as concerns these statements. The allegations in the Amended Complaint with respect to the MSDW report appear to attribute a quote (the statement that S & W had “scrubbed the backlog”) to one or both of the individual defendants; however, this phrase, which appears twice in the MSDW report, is not attributed by MSDW to either of the individual defendants or to S & W generally. The allegations thus are insufficient to support the inference that S & W or either of the individual defendants, even under the Cabletron' rule, was sufficiently entangled in the issuance of the statement of the MSDW report to warrant the attachment of liability, and the report itself does not indicate how MSDW learned of the information it contains. Similarly, the Boston Globe article is alleged to have included a misleading statement by Smith that S & W was not facing bankruptcy. Although the article itself refers to an interview with Smith the day before publication, it quotes him on the subject of bankruptcy only indirectly. See Ross Kerber, Troubled Firm to Sell its Building, Boston Globe, Oct. 28, 1999, at C-1. As with the DLJ report, in which the preparer of the report cites Smith as the originator of the allegedly misleading slide presentation, it may be appropriate to allow such an indirect statement to be attributable to Smith. Although the First Circuit has not yet given guidance on whether such circumstances are sufficient to create an entanglement, the Second Circuit faced such a set of facts in San Leandro Emergency Medical Group Profit Sharing Plan v. Philip Morris Companies, 75 F.3d 801 (2d Cir.1996). That Court concluded that where indirectly quoted statements attributed only to unnamed executives appeared in an article that also quoted named company representatives, “it might be reasonable to permit a factfinder to infer- that the statement is attributable to the named officials.” Id. at 810: The plaintiffs claim that-the statement denying imminent bankruptcy was false or misleading because “Smith knew [that] S & W was insolvent and.. .without an additional infusion of cash or a buyer, S & W would have no choice but to file for bankruptcy.” Am. Compl. ¶ 288. The plaintiffs, however, have failed to provide any facts supporting their explicit contention that S & W was insolvent or the implied contention that S & W was considering bankruptcy at the time of 'the article. Moreover, the article’s statement that “bankruptcy isn’t being considered”, appearing as it does in the middle of an article that also mentions S & W’s breach of financial covenants under its Credit Agreement and that quotes analysts from major investment banks who express concerns about earnings, does little to change the total mix of information available to investors. See Basic, 485 U.S. at 231-32, 108 S.Ct. 978 (adopting as materiality standard for § 10b and Rule 10b-5, the principle that “ ‘there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the total mix, of information made available.’ ” (quoting TSC Indus. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976))). I conclude, therefore, that, even if the' information in the article can be attributed to- Smith, the plaintiffs have failed to make allegations that particularize the basis on which the information in the article is said to be misleading and that, in any event, any omission regarding S & W’á financial position is immaterial in light of what is disclosed in the article overall. 2. Corporate “Puffery” and Forward-Looking Statements The plaintiffs also direct the court’s attention to statements touting “improved margins” from projects in backlog that were allegedly underbid. The specific statements in the Amended Complaint to which this argument refers are the following; • The April 15, 1999 Press Release, which quotes Smith as stating: “We expect the improved margins included in our substantial backlog of work to be performed.... and ... to produce improved results in the second half of this year.” Am. Compl. ¶ 248. • The DLJ Report, containing quotes from Smith’s presentation: “On new bids, we are driving as-sold operating margins to 8-10% by being more focused and selective and sticking to the four core business areas that I am covering.” Id. ¶ 251. “We do have improved as-sold margins. They are approximately double the backlog margins that we had when I joined the company.” Id. • The April 27, 1999 Press Release, which quotes Smith as saying: ‘We have also taken steps to be more selective in avoiding high risk, lower margin business. We expect that the improved margins included in our backlog, and our continuing drive to reduce costs and operating expenses, will produce improved results in the second half of this year.” Id. ¶ 254. • The October 27, 1999 Press Release, which quotes Smith as stating: The Company has taken strong measures to prevent ... losses from recurring, including ... implementing a more selective process to determine which prospects [sic] will be bid and selecting higher as-sold margins We continue to expect that the improved margins included in our substantial backlog of work will be realized, and our continuing drive to reduce operating expenses will improve financial results. Id. ¶ 284. The plaintiffs’ challenge to S & W’s backlog figures includes a claim that the statements were misleading or inadequate as predictors of S & W’s future performance. See, e.g., Am. ComplA 284 (“Smith’s statements were intended to create the false impression that a complete house-cleaning had been accomplished and that S & W was now poised to produce earnings unimpacted by the money-losing projects included in the backlog, and to conceal the fact that further massive losses were on the horizon.”). As an initial matter, I note that none of these statements is attributed to Langford. Nor is Langford even alleged to have been aware of the statements. These allegations, therefore, cannot support a claim against Langford. As to Smith, the statements fall within the safe harbor provided by the PSLRA for forward-looking statements. See 15 U.S.C. § 784u-5. In other words, statements about “improved margins” are predictions of the profit margins that projects would achieve in the future. See Weiss v. Mentor Graphics Corp., No. CV-97-1376-ST, 1999 WL 985141, at * 11 (D.Ore. Oct. 6,1999) (holding that a reference “to backlog as a predictor of future performance is a forward-looking statement”). “[Cjourts in the First Circuit generally have declined to impose liability for so-called ‘forward-looking statements’ — that is, broad statements that express optimism about a company’s future — because these courts regard such statements as unlikely, as a matter of law, to be material to a reasonable investor.” Carney v. Cambridge Technology Partners, Inc., 135 F.Supp.2d 235, 245 (D.Mass.2001). As a reflection of the lighter scrutiny to which forward-looking statements are subjected, the PSLRA creates two specific “safe harbors.” “[T]he first shelters forward-looking statements that are accompanied by meaningful cautionary statements ... [and the second] precludes liability for a forward-looking statement unless the maker of the statement had actual knowledge it was false or misleading.” Greebel, 194 F.3d at 201 (citing 15 U.S.C. § 78u-6(c)(1)(A)(i) & (B)). Smith’s DLJ presentation began with a warning to his audience that he would be making forward-looking statements which “represent management’s best judgment as to what may occur in the future,” but which are subject to change for a variety of reasons. The April 15, 1999 press release contains similar cautionary statements. Smith and Langford Joint Appendix, Ex. 33. Furthermore, as discussed infra, the plaintiffs .have not adequately pleaded that S & W’s disclosures regarding backlog and the bidding of contracts were false or misleading. To prevail on a claim that Smith should be liable in fraud for stating that S & W was aiming to achieve margins of 8-10% on new business, or that management expected to obtain more high-margin business, the plaintiffs would have to show that he actually knew — and was not simply reckless in not knowing — that these statements were untrue. 15 U.S.C. § 78u-5(c)(1)(B); see also Greebel, 194 F.3d at 201. Smith’s statements regarding “strong measures” and “focus” “are typical of the kind of ‘self directed corporate puffery’ and sales talk that courts in this circuit have shielded from liability.” Carney, 135 F.Supp.2d at 245 (quoting Shaw, 82 F.3d at 1218). Such “broad, optimistic statements about a company’s future” cannot be the basis for a claim under the securities laws. Id. “The corporate puffery rule applies to loose optimism about both a company’s current state of affairs and its future prospects.” Fitzer v. Security Dynamics Technologies, 2000 WL 1477204, *8 (D.Mass.2000) (citing In re Boston Tech, Inc., 8 F.Supp.2d 43, 54 (D.Mass.1998)). D. Adequacy of Plaintiff’s Remaining Claims Under Section 10(b), RulelOb-5 and PSLRA Standards 1. The Statements Some sixty pages of the 137-page, 406-paragraph Amended Complaint list approximately thirty-seven documents (including the analysts’ reports and Boston Globe article discussed above) that the plaintiffs allege to contain false or misleading statements. Id. ¶¶ 160-338. Those documents include virtually every financial disclosure by S & W between January 1998 and May 2000. I list the remaining documents below and summarize the fraudulent statements each allegedly contains: • The January 22, 1998 Press Release: misleading revenue and earnings figures for quarter and year ending Dec. 31, 1997; misleading backlog figure; misleading disclosure of problems with TPPI project. Id. ¶¶ 162-166. • The 1997 10-K and Smith’s letter to shareholders: revenue and net income materially overstated; misleading backlog figure; misleading balance sheet figures; misrepresentation of level of concentration in credit risk in S & W’s business; misleading disclosure of problems with TPPI project. Id. ¶¶ 167-175. • The March 17, 1998 Press Release: misleading in its report of the Pha Lai II Power Plant project in that it did not disclose that S & W had underbid to get the project and would lose money on the project. Id. ¶¶ 176-177. • The April 21, 1998 Press Release: misleading revenue and earnings figures for first quarter of 1998; misleading statements and omissions about TPPI. Id. ¶¶ 181-185. • The May 5, 1998 Press Release: misleading in its report of the Maine Yankee project in that it did not disclose that S & W had underbid to get the project and would lose money on the project. Id. ¶¶ 186-187. • The March 1998 10-Q: revenue and earnings figures materially overstated; misleading backlog figure; misleading balance sheet figures; misleading disclosure of problems with TPPI project. Id. ¶¶ 188-194. • The July 21, 1998 Press Release (including statements by Smith): misleading revenue and earnings figures for second quarter of 1998; misleading statements and omissions about TPPI; misleading omission of liquidity problems. Id. ¶¶ 195-200. • The August 4, 1998 Press Release: misleading in its report of the Maine Yankee project in that it did not disclose that S & W would lose money on the project and that S & W’s liquidity problems would prevent S & W from being able to perform the contract adequately. Id. ¶¶ 201-203. • The June 1998 10-Q: revenue and earnings figures materially overstated; misleading backlog figure; misleading balance sheet figures; misleading disclosure of problems with TPPI project. Id. ¶¶ 204-210. • The October 26, 1998 Press Release: misleading in its report of the Cal Energy project in that it did not disclose that S & W had underbid to get the project and would lose money on the project. Id. ¶¶ 211-212 • The October 27, 1998 Press Release (including statements by Smith): misleading revenue and earnings figures for third quarter of 1998; misleading statements about backlog; misleading statements and omissions about TPPI. Id. ¶¶ 218-218. • The September 1998 10-Q: revenue and earnings figures materially overstated; misleading backlog figure; misleading balance sheet figures; misleading disclosure of problems with TPPI project. Id. ¶¶ 219-225. • The November 16, 1998 Press Release: misleadingly represented that S & W’s success in obtaining new projects was due to its competitiveness, rather than underbidding. Id. ¶¶ 226-227. • The January 26, 1999 Press Release (including statements by Smith): misleading revenue and earnings figures for fourth quarter of 1998; misleading statements about backlog; misleading statements and omissions about TPPI; phantom revenue from TPPI; misleading statement by Smith that S & W’s 1998 losses were an isolated event explainable by unanticipated circumstances. Id. ¶¶ 229-237. • The 1998 10-K (including Smith’s letter to shareholders): revenue and earnings materially overstated; misleading backlog figure; misleading balance sheet figures; misleading disclosure of problems with TPPI project. Id. ¶¶ 238-245. • The April 15, 1999 Press Rélease: misleading statements by Smith about projected earnings and statements about what earnings would have been absent costs on two international projects. Id. ¶¶ 246-250. • The April 27, 1999 Press Release (including statements by Smith): misleading revenue and earnings figures for first quarter of 1999; misleading statements by Smith about improved margins in backlog. Id. ¶¶ 252-256. • The March 1999 10-Q: revenue and earnings figures materially overstated; misleading backlog figure; misleading balance sheet figures; misleading statements that S & W had sufficient funds to meet its needs; misleading disclosure of problems with TPPI project. Id. ¶¶ 260-266. • The June 28, 1999 Press Release: misleading in its report concerning the Cordova Energy project in that it did not disclose that S & W had underbid to get the project and would lose money on the project. Id. ¶¶ 267-269. • The July 26, 1999 Press Release: misleading revenue and earnings figures for second quarter of 1999; misleading statements by Smith about improved margins in backlog. Id. ¶¶ 270-273. • The June 1999 10-Q: revenue and earnings figures materially overstated; misleading backlog figure; misleading balance sheet figures; misleading statements that S & W had sufficient funds to meet its needs; misleading disclosure of problems with TPPI project. Id. ¶¶ 274-280. • The October 27, 1999 Press Release: misleading revenue and earnings figures for third quarter of 1999; misleading statements about negotiations for new loans because it omitted that S & W was facing financial collapse and could not obtain these loans; misleading statements about backlog and margins. Id. ¶¶ 281-285. • The September 1999 10-Q: revenue and earnings figures materially over- . stated; misleading backlog figure; misleading balance sheet figures; belated, inadequate, and misleading statements about the severity of S & W’s financial, difficulties; misleading disclosure of problems with TPPI project. Id. ¶¶ 289-297. • The December 1, 1999 Restructuring Press Release: misleadingly touted restructuring of Credit Agreement that was actually demanded by S & W’s lenders because S & W was in a workout situation; statement that proceeds of sale of headquarters would be used to reduce debt and for general corporate, purposes was false because the proceeds were committed to the banks that were providing the credit facility; statements about new projects false or misleading because S & W obtained them through underbidding and was on the verge of bankruptcy. Id. ¶¶ 298-304. • The December 16, 1999 ESOP Press Release: statement that sale price of shares to retirement plan was fair was false because opinion had been based on false financial data; statement that “operating results would meet analyst expectations” was false and misleading. Id. ¶¶ 305-306. • The December 21, 1999 Building Sale Press Release: materially false representation that the sale would contribute to S & W’s future growth when all proceeds were committed to pay S & W’s existing lenders. Id. ¶¶ 307-310. • The December 28, 1999 Press Release: misleading in its report of the AES Enterprise project in New Hampshire in that it did not disclose that S & W had underbid to get the project and would lose money on the project. Id. ¶¶ 311-312. • The January 25, 2000 Press Release: misleading revenue and earnings figures for fourth quarter of 1999; false statements about backlog and liquidity. Id. ¶¶ 316-320. • The March 20, 2000 Press Release: misleading in its report of the AES Enterprise project in Texas in that it did not disclose that S & W had underbid to get the project and would lose money on the project. Id. ¶¶ 321-323. • The March 30, 2000 NT 10-K: misleading revenue and earnings (loss) figures; false statements about backlog (including misleading disclosures regarding TPPI). Id. ¶¶ 324-326. • The 1999 10-K: materially overstated revenue and earnings figures; misleading balance sheets; misleading statements about liquidity (including misleading disclosures regarding TPPI). Id. ¶¶ 327-330. 2. The TPPI Project Each 10-Q, 10-K and quarterly press release described above allegedly contains misleading disclosures regarding TPPI. The crux of plaintiffs’ argument is that (1) S & W did not disclose that the project was terminated upon the suspension of work in the fourth quarter of 1997, see, e.g., Am. Compl. at ¶ 166 (“TPPI was effectively, if not officially, terminated”); (2) S & W wrongfully failed to take a charge for its losses on TPPI at the time of the “effective” termination, see id.; (3) S & W continued to recognize “phantom revenue and receivables” from the project during the Class Period, id., without disclosing the amount of such revenue, see id. ¶ 341(2) (“S & W’s disclosures were incomplete because S & W never disclosed that it had booked $86.9 million of revenue in 1998 and $53 million of revenue in 1999”); and (4) S & W misled investors by using an overly high estimate of the resale proceeds it would receive from the sale of TPPI equipment in disclosing the amount of the charge it would take if TPPI were to be cancelled, see, e.g., id. ¶ 209. The claims based on alleged misrepresentations concerning the status of the TPPI project fail to meet the particularity standard because the allegations concerning these claims do not set forth “facts that show exactly why the statements or omissions were misleading.” Greebel, 194 F.3d at 193-94. First, the allegations themselves are internally inconsistent as to the point at which the project was known to have been “effectively, if not officially, terminated,” as alleged in paragraph 166 of the Amended Complaint. In paragraph 65 of the Amended Complaint, the plaintiffs allege that S & W knew in 1997 that the TPPI project was dead, and that S & W would not likely ever receive further payments. In paragraph 74, the plaintiffs revise the categorical knowledge alleged in paragraph 65. In paragraph 74, the plaintiffs say that in December, 1997, S & W knew only that it was “unlikely the project would ever restart.” “By December 1998,” paragraph 74 continues, “that was a certainty.” In that same paragraph, however, the plaintiffs also allege that it was “clear” by January 1999 that “the project would not restart,” because, by that time “TPPI had told S & W that the slight prospect that had existed during 1998 that they would find an investor to fund the project had fallen through.” The paragraph goes on to say, without elaborating on the source of or reasons for this conclusion, that it was at this point that it was a “certainty” that S & W would receive no further payments from TPPI. Of course, the Amended Complaint is to be read with indulgence toward the plaintiffs, but these conflicting allegations undermine the sufficiency of any claim that S & W’s disclosures regarding the status of TPPI were false. Did the defendants know or have reason to know that the project was “dead” in late 1997 (even though, as the plaintiffs concede, there existed a slight prospect of a restart as late as “during 1998” Am. Compl. ¶ 74), by December 1998 or by January 1999? With conflicting allegations concerning S & W’s knowledge of TPPI’s death, the plaintiffs undermine their own assertion that the disclosures in 1998 were false or misleading. Second, and quite apart from the conflicting dates noted above, the specific allegations offered to support the contention that Smith and Langford had actual knowledge throughout the Class Period that the TPPI project had been terminated, and that therefore the continued recognition of revenue from that project was fraudulent, on examination, assert much less than the plaintiffs claim for them. The first such allegation reads: [I]n the fourth quarter of 1997, TPPI suspended work on the project because it had exhausted its funding for the project ... CS-1 said that TPPI suggested to S & W that it try to get out of its contracts with its vendors due to the suspension. Based upon this suggestion, S & W knew in late 1997 that the project was dead even though they had not received an official termination notice. S & W also knew at this point that it was unlikely it would ever receive any additional payments on TPPI. Am. Compl. ¶ 65. As support for the contention that Smith and Langford knew that TPPI was dead in late 1997, the allegation has a number of problems. First, the plaintiffs claim that CS-1 said that “TPPI suggested” a course of action to S & W. The allegation does not state who at TPPI made the suggestion to whom at S & W or when or where the suggestion was made. It does not state that the “suggestion” was communicated to Smith or Langford. Furthermore, the suggestion by the unidentified person at TPPI to the unidentified persons at S & W was that S & W try to mitigate its costs during a suspension of the project. There is no allegation even that TPPI itself believed the project to be “dead” or terminated. To be sure, the Amended Complaint alleges that the project was suspended because funding had been exhausted — but there is no allegation of specific facts to support the claim in paragraph 65 that the amorphous “S & W,” not to mention Smith and Langford, knew that the TPPI project could not be resuscitated, and that suspension was in fact a termination of the project. The second allegation offered to support the contention that Smith and Langford knew throughout the Class Period that TPPI was dead is the allegation that “[b]y August, 1998, S & W had obtained approval from TPPI to resell the project materials and equipment.” Id. ¶ 73. This allegation, like the last, provides no reasonable basis for inferring that the project was terminated and not merely suspended, or that Smith and Langford knew that the project was terminated. As noted above, the Amended Complaint also alleges that CS-1 stated that by January 1999, “it was clear that the project would not restart.” Id. ¶ 74. The Amended Complaint follows this assertion with the statement, attributed to no source, that “[b]y that time, TPPI had told S & W that the slight prospect that had existed during 1998 that they would find an investor to fund the project had fallen through:” Id. The Amended Complaint does not explain the basis for these conclusory statements. CS-l’s statement does not explain to whom “it was clear” that the project was terminated. The allegation about what TPPI told S & W does not explain what person at TPPI imparted the information, what person at S & W received the communication, or what form the communication took. For that matter, neither of these allegations even mentions Smith or Langford by name. Next, the Amended Complaint alleges that, “[according to CS-1, Martino and CS-2, Smihh and Langford knew the equipment sent to Indonesia for [the TPPI project] was being sold for pennies on the dollar and that the project would not be restarted.” Id. ¶ 75. This statement too is entirely conclusory. It provides no details to explain the basis for the sources’ belief as to what Smith and Langford knew about sales of equipment in Indonesia and the prospects for restarting the project. Indeed, no detail is provided that would substantiate that discounted equipment sales ever took place and how the plaintiffs’ sources knew about such sales, let alone when such sales are alleged to have begun, and what was actually sold. Finally, the Amended Complaint alleges that by the conclusion of a “special meeting” of S & W’s board of directors in January 1999, “it was evident to the Board that the TPPI project had already caused S & W serious financial problems and that it was unlikely the project would ever restart.” Id. ¶77. The allegation fails to state even whether Smith and Langford attended the meeting or what happened at the meeting to make it evident that TPPI had caused S & W’s serious financial problems and that it was unlikely that the project would restart. If the allegations concerning whether the defendants had knowledge in 1997, 1998 or 1999 that TPPI was effectively terminated are insufficient, so too are the allegations concerning the recognition and reporting of what the plaintiffs call phantom revenue associated with the project. Here the insufficiency lies most significantly in their debility as support for a strong inference of the defendants’ scien-ter. Because the Amended Complaint does not allege facts supporting with particularity the allegation that the defendants knew that TPPI would never be restarted and generate revenues, one cannot say that the decision to continue to recognize and report revenues from the suspended project on an accrual basis amounted to a misrepresentation recklessly made or made with intent to defraud. Whether it was appropriate to recognize and report these revenues, once the project had been suspended, is .a matter of judgment “dependent on the knowledge that the defendants had at the time they made the [relevant accounting] decision.” In re Galileo Corp. Shareholders Litig., 127 F.Supp.2d 251, 265 (D.Mass.2001). As such, the decision to recognize and report revenues from the suspended TPPI project does not give rise to a strong inference of scienter. Perhaps the greatest obstacle to the sufficiency of the allegations of fraud, in connection with disclosures regarding TPPI exists in what S & W actually reported about TPPI in the relevant period. In its reports on forms 10-Q and 10-K, filed with the SEC for the reporting periods between March 30, 1998 and December, 1999, S & W reported the suspension of TPPI, the steps S & W was taking to mitigate costs, the impact on pre-tax income of a cancellation of the project at particular points in time, and other risks to S & W associated with the project. With these disclosures, S & W included the amount of backlog represented by the unexpended portion of the TPPI contract. The 1997 10-K disclosed TPPI-related backlog of $537.9 million, Am. Compl. ¶ 173, while the 1998 10-K and the 1999 10-K disclose