Full opinion text
OPINION & ORDER STEIN, District Judge. Table of Contents I. Background. 602 A. Overview . 602 B. The Parties . 603 C. The Alleged Scheme. 603 1. The Mahonia Transactions. 603 2. LJM2............606 The Fall of Enron. 605 E. JPM Chase’s Alleged Misstatements and Omissions. 608 1. Allegedly Improper Accounting for the Mahonia Transactions as Trades Rather Than as Loans and as Viable Rather than Impaired 609 a. Mahonia Transactions Should Allegedly Have Been Booked as Loans, Not Trades. 609 b. The Mahonia Assets Were Allegedly Non-performing . 610 2. Alleged Failure to Disclose Legal and Financial Liability. 611 3. Representations Regarding Integrity and Risk Management.... 612 4. Analysts’ Buy Ratings for Enron Stock. co 613 5. JPM Chase’s Alleged Downplaying of its Enron-related Exposure co 613 II. Discussion.615 A. Standard. 615 1. Motion to Dismiss the Amended Complaint Pursuant to Fed.R.Civ.P. 12(b)(6) .615 2. Pleading Requirements of Fed.R.Civ.P. 9(b) and the PSLRA.615 Plaintiffs’ Claims.616 W Securities Fraud in Violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 Promulgated Thereunder.616 Q 1. Mismanagement.617 2. Why the Alleged Misstatements and Omissions Were Fraudulent.618 3. Scienter.. . . .618 a. Motive and Opportunity to Commit Fraud 05 < b-1 1 co ( b. Alleging Facts That Constitute Strong Circumstantial Evidence of Conscious Misconduct or Recklessness. 05 to co 4. Material Falsity of The Alleged Misstatements. 05 DO cn a. Allegedly Improper Accounting for the Mahonia Transactions ... 05 to 05 b. Failure to Disclose Alleged Improprieties in Connection with the Mahonia and LJM2 Transactions. CO to c. Representations Regarding Integrity and Risk Management CO to d. Analysts’ Buy Ratings for Enron Stock. CO co e. JPM Chase’s Alleged Downplaying of Its Enron-related Exposure. u) CO ^ 5. Dismissal of the Section 10(b) Claim. o) CO D. Section 11 of the Securities Act. u) CO CR E. Section 15 of the Securities Act. 05 CO Cr? F. Section 14(a) of the Exchange Act. 05 CO 05 III. Conclusion. .636 This consolidated litigation has been brought as a class action against J.P. Morgan Chase & Co. and arises from the infamous implosion of the Enron Corporation. Plaintiffs, a proposed class of J.P. Morgan Chase & Co. shareholders, seek to recover losses they suffered due to that bank’s alleged misrepresentations concerning its transactions with Enron. Specifically, plaintiffs bring claims pursuant to Sections 11 and 15 of the Securities Act of 1933, 15 U.S.C. §§ 77k and 77o, and Sections 14(a), 10(b) and 20(a) of the Securities and Exchange Act of 1934, 15 U.S.C. §§ 78n(a), 78j(b), 78t(a) and 78t-l. Plaintiffs charge that J.P. Morgan Chase & Co. and two of its officers— defendants William Harrison, Jr. and Marc J. Shapiro—made misleading statements regarding J.P. Morgan Chase & Co.’s exposure to Enron-related liabilities in various public communications, including a joint proxy statement filed in anticipation of Chase Manhattan’s acquisition of J.P. Morgan. Defendants have brought a motion to dismiss plaintiffs’ First Amended and Consolidated Class Action Complaint for Violations of Federal Securities Laws (“Amended Complaint”) for failure to state a claim for relief pursuant to Fed.R.Civ.P. 12(b)(6), and for failure to comply with the heightened pleading standard that Fed. R.Civ.P. 9(b) and the Private Securities Litigation Reform Act, 15 U.S.C. § 78u-4, mandate for securities fraud actions. Because plaintiffs have failed to plead scien-ter in connection with any material misrepresentation or omission with the required particularity, the complaint is dismissed without prejudice to its re-pleading. I. BACKGROUND A. Overview Plaintiffs bring this action on behalf of those who purchased securities in The Chase Manhattan Corp. (“Chase”) between November 8, 1999 and December 31, 2000, as well as those who purchased securities in J.P. Morgan Chase & Co. (“JPM Chase”) between January 2, 2001 and July 23, 2002. (Am.Compl^ 1). JPM Chase was formed when Chase acquired J.P. Morgan & Co. (“JP Morgan”) at the end of 2000. (Id.). The factual allegations in the Amended Complaint, which are recounted below, are accepted as true for the purposes of this motion to dismiss the complaint. See In re Carter-Wallace, Inc. Sec. Litig., 220 F.3d 36, 38 (2d Cir.2000). Plaintiffs allege that during the class period, JPM Chase made various assertions, including public comments, financial statements and filings with the Securities and Exchange Commission (“SEC”), that omitted and misrepresented material information relating to transactions in which the bank provided Enron credit disguised as revenue from prepaid commodity trades (“prepays”). According to the Amended Complaint, by 2001, JPM Chase had arranged eight such prepays with Enron, totaling $3.7 billion in value. (Am. Comply 65). During the class period, JPM Chase allegedly helped structure and finance Special Purpose Entities (“SPEs”) so that Enron could conceal debt that would otherwise have appeared on its balance sheet. (Id. ¶ 42). With JPM Chase’s allegedly knowing collusion, Enron characterized loans as revenue, and thereby obscured its actual financial position behind the specter of healthy cash flow and a manageable debt burden. (Id. ¶ 61). Meanwhile, JPM Chase’s analysts issued allegedly false and misleading positive reports that designated Enron’s stock a “buy.” (Id. ¶ 51). Essentially, plaintiffs allege that JPM Chase complicitly participated in a Ponzi scheme—by loaning Enron huge amounts of money and falsely perpetuating the appearance that Enron was financially healthy, JPM Chase generated substantial fees and induced the infusion of fresh capital into Enron. (Id. ¶¶ 49-50; 81). Plaintiffs allege that JPM Chase enjoyed various benefits from participating in Enron’s scheme. First, the non-sustainable revenue artificially inflated the price of JPM Chase stock, which JPM Chase allegedly planned to use in stock-for-stock acquisitions of other financial institutions. (Id. ¶¶ 457-58). Second, JPM Chase received underwriting, consulting and commitment fees, as well as interest and other payments. (Id. ¶¶ 43-49). These fees were allegedly greater than those paid in typical lending arrangements. (Id. ¶ 55). JPM Chase allegedly hoped to receive even greater remuneration by marketing its prepay services to other companies. (Id. ¶¶ 484-88). Third, as a result of artificial stock price inflation, the individual defendants received large performance-based bonuses. (Id. ¶¶ 462-68). Fourth, JPM Chase minimized its own exposure by enticing others to sink fresh capital into Enron. (Id. ¶¶ 49-50). JPM Chase also allegedly sought to protect the hundreds of millions of dollars worth of credit default put options it had written on Enron’s publicly traded debt. (Id. ¶ 51). To avoid massive exposure, JPM Chase had to keep Enron from defaulting within the time period covered by those puts. (Id.). Fifth, Enron allegedly gave JPM Chase and its executives a “kickback”; specifically, the opportunity to invest in LJM2, a lucrative partnership. (Id. ¶ 43). The Amended Complaint charges that throughout the class period, defendants’ knowing misrepresentations artificially inflated the price of JPM Chase stock above its inherent value and defrauded the members of the proposed class. (Id. ¶ 24). JPM Chase shareholders were allegedly unable to appreciate the nature and extent of JPM Chase’s dealings with Enron, until July 23, 2002, when testimony during a Senate Permanent Subcommittee on Investigations (“the Senate Subcommittee”) hearing on the role of financial institutions in Enron’s collapse cast light on these practices of JPM Chase. (Id. ¶ 21). Over time, as news of JPM Chase’s Enron-related exposure became public, JPM Chase’s share price fell from a high of around $41 per share in July of 2001—a year before the Senate Subcommittee hearings—to around $20 per share on the first day of the Senate Subcommittee hearings, to around $18 per share in September of 2002, when plaintiffs filed the Amended Complaint. (Id. ¶¶ 22; 372). Plaintiffs claim that the fall in stock price reflected not only direct financial loss, but also surrendering of the “reputation premium” for integrity that JPM Chase had previously enjoyed. (Id. ¶ 24). B. The Parties This Court has previously consolidated various actions and appointed lead plaintiffs: ECA & Local 134 IBEW Joint Pension Trust of Chicago, a labor union-sponsored pension trust that purchased JPM Chase shares; Penn Security Bank & Trust Co., a bank that purchased shares of JPM Chase and also acquired shares of JPM Chase in exchange for the shares of JP Morgan it held at the time of the formation of JPM Chase; and Empire Life Insurance Co., an insurance company that purchased shares of JPM Chase. (Id. ¶¶ 29-31). Defendants are JPM Chase, one of the largest banks in the United States, William Harrison, Jr., President and Chief Executive Officer of Chase before the merger and of JPM Chase after the merger, and Marc. J. Shapiro, Vice Chairman of Chase before the merger. (Id. ¶¶ 32-37). C. The Alleged Scheme Chase first orchestrated prepays for Enron in 1992. (Id. ¶ 65). At that time, the transactions were designed to help Enron timely claim tax credits that were nearing expiration. (Id.). By the mid 1990s, Enron discovered that it could employ prepays to perform financial alchemy—conversion of debt into revenue. (Id.). Plaintiffs claim that JPM Chase knowingly assisted Enron, selling it “accounting fraud packages[.]” (Id. ¶ 55). JPM Chase allegedly hid from its shareholders the lack of sustainability of these transactions, as well as the massive contingent liabilities and the threat to JPM Chase’s reputation for integrity that the transactions caused. (Id. ¶ 57). JPM Chase also failed to set aside loss reserves to reflect that these transactions were, according to plaintiffs, impaired assets. (Id. ¶ 258). 1. The Mahonia Transactions A number of allegedly sham transactions were carried out through companies, such as Mahonia Ltd. and Mahonia Natural Gas Ltd., that JPM Chase formed and operated. (Id. ¶ 58, 70). JPM Chase allegedly structured prepays between the Mahonia entities and Enron (the “Mahonia transactions”) to help “Enron to obtain an inflated credit rating by manipulating Enron’s operating cash flow and the amount of its balance sheet debt.” (Id. ¶ 61). Plaintiffs contend that JPM Chase’s purposeful involvement in this scheme is evidenced by JPM Chase’s “(1) making Mahonia[,] its controlled, off-shore, shell corporation[,] available for Enron’s accounting manipulations; (2) charging exorbitant ‘advisory’ fees for the exploitation of Mahonia transactions by Enron; and (3) providing the ‘disguised loan’ financing to enable the Ma-honia ‘prepay’ transactions.” (Id. ¶ 59). To generate cash for Enron, JPM Chase loaned money to Mahonia in exchange for a commitment to deliver a fixed amount of gas at specified dates. (Id. ¶ 67). Maho-nia and Enron then executed a mirror deal—-Enron would get the same amount of funds from Mahonia that Mahonia had received from JPM Chase, and Enron would agree to deliver the same amount of gas to Mahonia that Mahonia owed to JPM Chase. (Id. ¶ 68). Simultaneously, Enron and JPM Chase struck a commodity swap agreement, pursuant to which Enron hedged against price fluctuation in the gas. (Id. ¶ 69). Essentially, Mahonia borrowed money from JPM Chase and used that money to buy gas from Enron; Mahonia would then satisfy its debt to JPM Chase by providing the gas to JPM Chase, which would resell the gas at a fixed future price back to Enron. In reality, according to the Amended Complaint, neither the physical commodity nor title to it were ever intended to be transferred. (Id. ¶¶ 69, 74). The series of simultaneous transactions enabled JPM Chase to avert any price-risk inherent in the transfer of the commodity (id. ¶ 73), allegedly leaving the parties with a loan in which JPM Chase provided Enron a sum of money in exchange for repayment of a greater fixed amount at a later date. (Id. ¶ 74). Between 1997 and 2000, Chase arranged more than $3.5 billion in these Mahonia transactions. (Id. ¶ 89). The transactions tended to be for around $150 million until the summer of 1999, when Enron sought increasingly large prepays, including one for $500 million. (Id. ¶ 83). JPM Chase also allegedly structured at least nine similar transactions for other energy companies. (Id. ¶ 94). JPM Chase endeavored to secure insurance to protect against the risk that Enron would default on its obligations arising from the Mahonia transactions. (Id. ¶ 85). Accordingly, surety bonds were obtained from eleven insurance companies to cover JPM Chase’s exposure. (Id.). Following Enron’s bankruptcy, the eleven insurers refused to make payments to compensate JPM Chase for the $2.6 billion Enron still owed it in connection with the Mahonia transactions. (Id. ¶ 90). The dispute over the surety bonds has been litigated in other actions between JPM Chase and its insurance carriers. (Id. ¶ 90); see, e.g., Mahonia v. WestLB, No.2001/1400 (Q.B. Aug. 3, 2004); JPMorgan Chase Bank ex. rel. Mahonia Ltd. v. Liberty Mut. Ins. Co., 189 F.Supp.2d 24 (S.D.N.Y.2002). Plaintiffs allege that in actively assisting Enron to hide debt, JPM Chase mischar-acterized the transactions in its own financial reports, thereby violating Generally Accepted Accounting Principles (“GAAP”) and SEC regulations. (Id. ¶¶ 77, 80). In addition to the structure of the transactions themselves, various JPM Chase communications allegedly demonstrate the bank’s knowledge that the Mahonia prepays were actually loans and not trades. These are: • A 1998 Chase “pitch book” for selling these transactions, which described them as being “[b]alance sheet ‘friendly’ ” and an “[alternative source of finanee[.]” (Id. ¶¶ 97, 361). It also explained that the transactions have an “[ajttractive accounting impact by converting funded debt into ‘deferred revenue’ or long-term trade payable.” (Id. ¶ 361). • An internal Chase email, dated November 25, 1998, which stated, “Enron loves these deals as they are able to hide funded debt from their equity analysts because they (at the very least) book it as deferred rev[enue] or (better yet) carry it in their trading liabilities.” (Id. ¶ 98) (bracketed text in Am. Compl.). • An August 5, 1999 meeting, discussed in a Wall Street Journal article, in which defendant Shapiro was briefed on the bank’s trading with energy companies, including the fact that “one reason companies like Enron were entering the complex trades was to carry forward losses and lower tax burdens.” (Am.Compl^ 326). The article notes that a person familiar with the briefing said that “Mr. Shapiro reviewed the trades and said they were fine.” (Id.). • A September 20, 2001 recorded telephone conversation between three JPM Chase employees, including JPM Chase Vice President Robert W. Tra-band, which included explanations of the prepays as “not hedging, they’re just, they’re just, they do the back-to-back swap[,j” “a circular deal that goes right back to them[,j” “basically a structured financef,]” and “amortizing debt.” (Id. ¶¶361, 369). • A September 13, 2001 recorded telephone conversation among JPM Chase and Enron employees, including JPM Chase Managing Director Jeffrey W. Dellapina, which involved discussions relating to “mak[ingj sure that Maho-nia seems independent.” (Id. ¶¶ 361, 369) • A June 2002 court filing in an action to collect from the surety bond issuers, in which JPM Chase claimed that those entities knew the “surety bonds were part of financing transactions in which the funds advanced by JPM[ Chase] to Mahonia were ultimately used by Enron for general corporate purposes, not to secure future sources of the oil and gas to be delivered.” (Id. ¶ 361). • Testimony by JPM Chase Managing Director Jeffrey W. Dellapina during the Senate Subcommittee hearings, in which he acknowledged that “[w]e were trying to eliminate price risk” when questioned about a specific Ma-honia transaction (Id. ¶ 365). Plaintiffs also urge that JPM Chase must have been aware of the nature of these transactions, because it was common knowledge in the accounting community how to structure prepays so that they could be deceptively classified as trades rather than loans. (See id. ¶¶ 384-89 (quoting from various Arthur Andersen documents)). Notwithstanding the specific allegations regarding JPM Chase’s knowledge that the Mahonia transactions were not, in fact, bona fide trades, the Amended Complaint contains no specific allegations that the defendants knew the Mahonia transactions were impaired or non-performing assets. Rather, plaintiffs conelusorily allege that JPM Chase never disclosed the risks of these transactions to its shareholders even though it “was aware or was reckless in not knowing that Enron’s financial results were materially misstated as a result [of the prepays], and that Enron’s financial condition was an elaborate ‘house of cards’ that would someday come tumbling down.” (Id. ¶ 92). Plaintiffs further suggest that JPM Chase knew of the contingent liabilities inherent in the prepay transactions, because it had created these types of structured finance contracts for other companies. (Id. ¶¶ 93-99). 2. LJM2 In 1999, before the merger that created JPM Chase, LJM2 Co-Investment LLP (“LJM2”), a partnership comprised of 52 limited partners, was formed with nearly $400 million in capital to fund energy and communications related projects. (Id. ¶¶ 101-05). The partners included Chemical Investments, Inc., an affiliate of Chase, and J.P. Morgan Partners and Sixty Wall Street Fund, LP, affiliates of JP Morgan. (Id.). In addition to taking an equity position in LJM2, Chase also allegedly lent the partnership at least $65 million. (Id. ¶ 112). The Amended Complaint never makes clear how much JP Morgan, Chase or the officers of either of those companies, invested in LJM2. At one point in the Amended Complaint, plaintiffs allege that entities affiliated with Chase and JP Morgan invested a total of $25 million. (Id. ¶ 105) The Amended Complaint elaborates as follows: As JPM[ Chase] told the [Senate] Committee, one of the investment partnerships established by J.P. Morgan for its senior officers, known as Sixty Wall Street Fund, L.P. (“Sixty Wall”), invested $3 million to [sic] LJM2 in 1999. J.P. Morgan made additional investments at this time, which, together with the Sixty Wall investments, brought the total J.P. Morgan-related investments in LJM2 to $15 million. Separately, Chase, “through an affiliate,” invested $10 million as a limited partner in LJM2. According to JPM[ Chase], J.P. Morgan, together with its officer’s investment arm, Sixty Wall, received a 3.8% interest in the LJM2 partnership and Chase received a 2.5% interest. (Am. Compl. ¶ 460 (footnotes omitted)). The Amended Complaint also charges con-clusorily that “top executives of JPM[ Chase] were permitted to personally invest at least $25 million in the lucrative LJM2 partnership as a reward to them for orchestrating JPM[ Chase]’s participation in the Enron fraud” (id. ¶ 43; see also id. ¶ 116). The Amended Complaint fails to explain whether the $25 million that the executives allegedly invested personally is the same $25 million that the partnerships affiliated with the banks allegedly invested. Plaintiffs contend that with the involvement of Andrew Fastow, who was Enron’s Chief Financial Officer and an LJM2 investor, Enron and LJM2 consummated various sham transactions that hid the ownership risks of many of Enron’s assets from its shareholders. (Id. ¶¶ 102; 113— 15). Without specifically alleging how the LJM2 transactions operated, plaintiffs claim that in some of those transactions, Enron sold assets to LJM2 and recognized revenue, even though Enron was essentially selling assets to itself. (Id. ¶ 103). Plaintiffs allege that because LJM2 received lucrative fees from Enron in connection with these transactions, “investment [in LJM2] was virtually guaranteed to produce extremely good returns[,]” so the opportunity to invest was reserved for “certain favored investment banks and/or high-level officers of those investment banks.” (Id. ¶ 113-14). The alleged virtual guarantee of profit from investment in LJM2 derived from “Enron Chief Financial Officer Andrew Fastow’s dual role, by which he could self-deal on behalf of the partnership with Enron’s assets.” (Id. ¶ 113). Plaintiffs claim that JPM Chase’s involvement in LJM2 demonstrates the bank’s knowledge of the actual state of Enron’s financial health. Plaintiffs contend that in performing the requisite due diligence in connection with financing LJM2, JPM Chase would have learned of Enron’s actual financial situation. (Id. ¶ 112). Plaintiffs point to LJM2’s annual meeting on October 26, 2000. Chase Capital, an affiliate of Chase, and J.P. Morgan Capital, an affiliate of JP Morgan, were listed as attendees. (Id. ¶ 106). At that meeting, a presentation package disseminated to the attendees outlined why Enron needed LJM2. (Id. ¶¶ 106-07). That package explained that Enron sought to “de-consolidate assets” and to “create structures which accelerate projected earnings and cash flows.” (Id. ¶ 107). Plaintiffs urge that the obvious meaning of these stated goals was the distortion of the asset and liability picture on Enron’s balance sheet. (Id.). Plaintiffs cite the presentation package as evidence that the JPM Chase affiliates attending the LJM2 annual meeting would have been aware of Enron’s deceptive accounting practices. (Id. ¶¶ 107-11). For example, the package included a chart showing that although Enron’s reported “Total Assets” were $33.3 billion, the “Total Assets and Combined Assets of Unconsolidated Affiliates” were in excess of $60 billion. (Id. ¶ 108). The package also included a description of the “Raptor IIP’ transaction, in which Enron allegedly hid the volatility of an investment by engaging in a hedging transaction with LJM2. (Id. ¶ 111). D. The Fall of Enron Plaintiffs allege, in vague terms, that Enron participated in forward contracts for the purchase of its own stock that purportedly resulted in embedded value, which Enron then used to capitalize SPEs that would engage in transactions to hedge potential Enron losses. (Id. ¶ 137). In other words, Enron formulated complex derivative transactions between itself and the SPEs in an effort to hedge its risk, but because the SPEs were essentially capitalized with Enron stock, Enron “was only ‘hedging’ the transactions with itself.” (Id.). As numerous Enron investments soured, the SPEs grew unable to meet their mounting obligations, particularly given that they were funded with Enron stock that was declining in value. (Id. ¶ 140). In the third quarter of 2001, Enron purchased LJM2’s equity position in several SPEs, denominated Raptor I, Raptor II, Raptor III and Raptor IV, for $35 million, accounting for the transaction as a reduction to shareholders’ equity and notes receivable of $1.2 billion. (Id. ¶ 145). That correction of the improper accounting for the initial funding of the Raptor entities began Enron’s implosion. In reporting its financial results for the third quarter of 2001, on October 16, 2001, Enron announced a $1.01 billion charge, resulting in a $618 million loss. (Id. ¶¶ 307-08). In the wake of this earnings report, on October 17, 20 and 23, JPM Chase analysts issued “buy” ratings for Enron stock and expressed confidence in the company’s sustainable earnings notwithstanding the recent loss. (Id. ¶¶ 310-13). On November 19, 2001, after having amended its financial statements for 1997 through 2000 to reduce net income as previously reported for that period by an aggregate of $586 million (id. ¶ 314), Enron filed its third quarter form 10-Q, which reported total debt of $12,978 billion (id. ¶ 315). On the same day as the 10-Q filing, at the Waldorf Astoria hotel in New York City, Enron’s executives allegedly met with representatives of Enron’s financing banks and disclosed that Enron’s debt was, in reality, $38,094 billion, $25,116 billion of which was “off balance sheet,” including $4,822 billion in “[cjommodity [transactions with [financial [i]nstitutions[.]” (Id. ¶ 316). Two weeks later, on December 2, 2001, Enron filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York. The following summer, in July of 2002, the Senate Subcommittee conducted the hearings on the role of financial institutions in the collapse of Enron. The first day of hearings, July 23, was, according to plaintiffs, when accurate information first surfaced regarding JPM Chase’s dealings with Enron; consequently, that is the end of the class period in this litigation. (Id. ¶ 357). During the hearings, the Chief Investigator for the Subcommittee, Robert Roach, and Senators Carl Levin and Susan Collins chastised JPM Chase and other banks for formulating transactions that disguised loans as trades. (Id. ¶¶ 358-61). Roach informed the committee that “the documents that we have reviewed show that the financial institutions clearly understood what Enron’s objective was in engaging in these transactions.” (Id. ¶ 362). Another witness, the former Chief Accountant of the SEC, Lynn Turner, expressed his belief that the banks planned the prepay transactions “for the purpose of reducing Enron’s transparency to investors and the investment banker’s risk.” (Id. ¶ 364). On July 23, 2002—the first day of the Senate hearings and the end of the proposed class period in this litigation—the price of JPM Chase fell 18.7% from $24.52 per share to $20.08 per share. (Id. ¶ 372). E. JPM Chase’s Alleged Misstatements and Omissions Plaintiffs allege that defendants made a number of misstatements and omissions in connection with their role in financing Enron-related entities. Many of these alleged misstatements were contained in SEC filings, beginning with the quarterly 10-Q form that Chase filed with the SEC on November 8, 1999, the first day of the class period. Plaintiffs contend that that 10-Q, which purported to comply with GAAP, omitted disclosure of JPM Chase’s substantial financial vulnerabilities in connection with Enron. Specifically it “(i) failed to record any contingent liability for probable losses from the Mahonia and other transactions with Enron; (ii) improperly accounted for the Mahonia and other ‘prepay’ transactions as ‘trades’ rather than ‘loans’; and (iii) failed to make the required disclosures about credit risk related to the Mahonia transactions, as was required by GAAP and SEC Regulations.” (Id ¶¶ 149, 151). Consequently, plaintiffs claim JPM Chase overstated net income, understated loan assets and failed to provide important information about Enron’s outstanding obligations. (Id. ¶ 152). In the filing, JPM Chase allegedly emphasized its own integrity and risk management procedures, even though its alleged participation in fraudulent transactions exposed it to significant reputation cost and legal liability. (Id. ¶¶ 153-57; 161-62). Plaintiffs make substantially similar allegations regarding a series of Chase and JPM Chase public disclosures. One of those disclosures is the Joint Proxy Statement and Prospectus that Chase and JP Morgan filed on November 21, 2000 in anticipation of Chase’s acquisition of JP Morgan. Plaintiffs locate additional alleged misstatements and omissions in various public statements, analysts’ reports and press releases. The alleged misstatements and omissions are discussed below in the following categories: 1) allegedly improper accounting for the Mahonia transactions as viable trades rather than as impaired loans; 2) failure to disclose alleged violations of the law in connection with the Mahonia and LJM2 Transactions; 3) representations regarding integrity and risk management; 4) analysts’ “buy” ratings for Enron stock; and 5) JPM Chase’s alleged downplaying of its Enron-related exposure. 1. Allegedly Improper Accounting for the Mahonia Transactions as Trades Rather Than as Loans and as Viable Rather than Impaired a. Mahonia Transactions Should Allegedly Have Been Booked as Loans, Not Trades Plaintiffs allege that JPM Chase should have accounted for the Mahonia prepay transactions as loans rather than as trades and as impaired assets rather than viable ones. Plaintiffs maintain that various JPM Chase SEC filings contain GAAP violations as a result of the misleading characterizations of these transactions. Allegedly, defendants failed to comply with the strictures of Financial Accounting Standard 133, because: 1) the parties to the Mahonia transactions were not independent; 2) the trades among the three parties were linked; 3) the trades entailed no price risk; and 4) the trades did not involve a legitimate business reason. (Id. ¶¶ 378-80). In addition, plaintiffs allege that JPM Chase failed to make required footnote disclosures regarding potential off-balance sheet losses. (Id. ¶¶ 408-09). i. Independence JPM Chase allegedly created Mahonia for the purpose of offering clients structured financing products. (Id. ¶ 393). According to the complaint, Mahonia, which had no employees, office or independent business purpose, was capitalized with only £10,000 and operated by Chase. (Id. ¶¶ 393, 397). A single island of Jersey law firm, Mourant du Feu & Jeune, allegedly not only created Mahonia and a trust, Eastmoss Charitable Trust, that owned Mahonia, but also served as the trustee of Eastmoss. (Id. ¶ 394). For each prepay transaction, Mahonia allegedly provided Chase, which acted as Mahonia’s agent, a lien on all rights to receive whatever commodity was supposedly being traded. (Id. ¶ 396-97). ii. Trades Among the Three Parties Were Linked The various trades involved in each of the prepay transactions were allegedly “simultaneously conceived and implemented....” (Id. ¶ 399). Hi. Elimination of Price Risk Plaintiffs maintain that the commodity swaps arranged in connection with the prepay transactions “effectively exchanged any Chase profit (or loss) on the natural gas price fluctuation for a fixed payment from Enron.” (Id. ¶ 401). Chase earned a profit that did not depend on the price of the commodity being traded. (Id. ¶ 402). According to the Amended Complaint, other evidence of the elimination of price risk included that Mahonia did not exercise margin calls that Enron owed it—because Mahonia saw no variation in its profit from market fluctuations in the price of the commodity—and that the pricing of the transactions was based on LIBOR, conventionally used for pricing bank loans, not commodities. (Id.). In addition, during testimony before the Senate subcommittee, Jeffrey Dellapina, a Managing Director at JP Morgan Chase, admitted with respect to one specific Mahonia transaction that “[w]e were trying to eliminate price risk.” (Id. ¶ 365). iv. Reason for the Purported Trades Plaintiffs claim that the complex Maho-nia trading structure served no purpose other than to permit Enron to hide its debt obligations to Chase. (Id. ¶ 403). b. The Mahonia Assets Were Allegedly Non-performing Plaintiffs contend JPM Chase violated GAAP principles, as set forth in Financial Accounting Standards 105, 107, 114 and 119, as well as SEC Staff Accounting Bulletins 99 and 102, by failing to report the sums that Enron-related entities owed it as non-performing or non-accrual. (See, e.g., id. ¶¶ 179-84, 259-60; 420-21). By virtue of its working relationship with Enron, JPM Chase allegedly knew or should have known of Enron’s fragile financial health and reflected that knowledge in its own accounting. (See, e.g., id. ¶¶ 100-41). Specifically, plaintiffs urge that as early as 2000, the Mahonia transactions were “doubtful” loans that should have been classified as impaired and been reflected in JPM Chase’s credit loss allowance. (See, e.g., id. ¶¶ 255-58). JPM Chase “actively assisted Enron in concealing the very cash flow numbers that were necessary to accurately compute impairment pursuant to GAAP.” (Id. ¶ 436). “Since most of the JPM[ Chase] Enron credit arrangements were either unsecured or directly or indirectly secured by Enron stock (the value of which correlated, to a large degree, to the cash flow and balance sheet debt of Enron), the assessment of credit risk and loss, required by regulatory and accounting principles, depended heavily on the very financial criteria JPM[ Chase] was intrinsically involved with Enron in manipulating.” (Id. ¶ 422; see also id. ¶¶ 423-26). Consequently, JPM Chase “could not compute loan impairment on the Enron credit facilities so long as JPM[ Chase] assisted Enron in providing cash flow numbers that were overstated and completely unreliable.” (Id. ¶ 436). Rather, JPM Chase allegedly “should have used appropriately adjusted (downward) cash flow projections [for Enron] which, if JPM[ Chase] had been forthcoming, would have reflected its substantial inherent losses in the Enron credits.” (Id. ¶ 439). By not doing so, JPM Chase allegedly failed to monitor properly Enron’s ability to meet its obligations. (Id. ¶¶ 431-32). Plaintiffs conclusorily allege that JPM Chase “knew that it was probable that Enron’s Ponzi scheme would come to an end, leaving it unable to pay for its massive outstanding loans-—-including the Ma-honia transactions!)]” (Id. ¶ 407). JPM Chase allegedly should have accounted for the probable losses, because the “amount of the losses could be reasonably estimated as the balances outstanding to Enron in the Mahonia and other loans.” (Id.). The failure to meet this obligation allegedly led JPM Chase to issue misleading statements when claiming to have set aside adequate reserves for impaired assets and to have followed proper accounting procedures. (See, e.g., id. ¶¶ 261-64). Plaintiffs claim that the existence of surety contracts that guaranteed the Ma-honia transactions did not relieve JPM Chase of the obligation to treat the Maho-nia transactions as non-performing. Allegedly, JPM Chase should have booked the Mahonia transactions as unsecured and non-performing, because JPM Chase should have known that the insurance companies would refuse to perform on the surety contracts. (Id. ¶¶ 326, 329). Plaintiffs allege the surety contracts were fraudulently obtained in that the underlying transactions were characterized to the insurance companies as trades rather than as loans. After its insurance carriers challenged the surety contracts, JPM Chase acknowledged that insurance proceeds from the Mahonia surety contracts were subject to litigation. (Id. ¶ 18). 2. Alleged Failure to Disclose Legal and Financial Liability JPM Chase allegedly failed to convey to the public that it had violated 18 U.S.C. §§ 216 and 1005. Section 1005 prohibits making false entries in disclosures with the fraudulent intent to deceive government entities or financial institutions. By improperly accounting for the Mahonia transactions and facilitating Enron’s similarly inaccurate accounting, as well as by making false statements to syndicated loan participants to entice them to participate in the extension of credit to Enron-related entities, JPM Chase allegedly violated Section 1005. (See Am. Compl. ¶¶ 546-52). JPM Chase executives also allegedly received benefits, specifically the opportunity to invest in LJM2 and other Enron SPEs, in alleged violation of another provision of 18 U.S.C. § 1005 that prohibits the receipt of a benefit through a banking transaction with intent to defraud a governmental entity. (Am.Compl.1ffl 546-52). The availability of the LJM2 investments to JPM Chase executives also allegedly violated Section 215 of the same title, which essentially prohibits bank officers from taking “kickbacks.” (See id. ¶¶ 553-55). Plaintiffs contend JPM Chase failed to disclose the liabilities inherent in these alleged legal infractions. JPM Chase allegedly breached its duty pursuant to SEC Accounting Bulletin 99, which requires disclosure of information deemed material by virtue of qualitative, not merely quantitative, effect on the corporation. (Id. ¶¶ 441-47). 3. Representations Regarding Integrity and Risk Management Plaintiffs allege that JPM Chase made a series of misrepresentations by portraying itself as a low-risk company with adequate financial discipline to manage risks. (See, e.g., id. 154-57; 168-73). Plaintiffs allege a multitude of such misleading statements; a representative list of examples follows: • In its form 10-Q filed on November 8, 1999, Chase stated, “The strong 1999 third quarter results continued to demonstrate Chase’s disciplined approach to managing capital and making investments that propel future growth.” (Id. ¶ 155). In that same filing, Chase claimed to “set the standard for best practices in risk management techniques.” (Id. ¶ 153). • In its current report on form 8-K filed on June 19, 2000, JPM Chase recounted the substance of a conference call in which it communicated that it had adequate reserves for its non-performing assets. (Id. ¶ 198). • In connection with an earnings announcement on July 18, 2000, defendant Harrison noted that “we will continue to reposition and strengthen our franchises with a focus on fiscal discipline.” (Id. ¶ 200). • Chase’s 2000 Annual Report noted that JPM Chase set the standard for integrity and that “[disciplined management of market, credit and operating risks is fundamental to protecting shareholder value.” (Id. ¶¶ 268). • JPM Chase asserted in its 2000 form 10-K that it used its Vulnerability Identification System, so that “[t]rad-ers and others responsible for managing risk positions were accountable for identifying potential ‘worst-case’ losses and estimating the probability of loss[,]” thereby enabling the bank to “identify material risks and potential earnings vulnerabilities that might not be captured by statistical methodologies.” (Id. ¶ 275). In that same filing, JPM Chase claimed that its risks were “accurately assessed.” (Id. ¶ 270). • JPM Chase’s form 10-K filed on March 22, 2002 represented JPM Chase as one of the “world’s premier banks[,]” explaining that “integrity, drive, partnership, excellence, insight and reliability permeate everything JPM[ Chase] does.” (Id. ¶ 333). • JPM Chase claimed that its various financial filings during the proposed class period were prepared in accordance with GAAP. (See, e.g., id. ¶ 340). 4. Analysts’ Buy Ratings for Enron Stock Despite allegedly knowing the extent of Enron’s financial woes, JPM Chase issued “buy” ratings on Enron stock and continued to do so even after public announcements signaling Enron’s demise. (See id. ¶ 310-13; 531-45). 5. JPM Chase’s Alleged Downplaying of its Enron-related Exposure JPM Chase allegedly downplayed its Enron-related exposure by issuing deceptive press releases. In November 2001, JPM Chase acknowledged Enron-related exposure amounting to $500 million in unsecured debt and $400 million in secured debt. (Id. ¶ 494). That amount omitted JPM Chase’s insured interests in the Ma-honia transactions. In a December 19, 2001 press release, after the insurers that had guaranteed those transactions challenged their obligations, JPM Chase disclosed the outstanding insurance receivables that were subject to litigation. (Id. ¶ 18). Plaintiffs claim that the earlier of these statements—which pegged the exposure at $900 million—was false because JPM Chase knew that it faced much greater exposure. (Id. ¶¶ 494-95). To support that contention, plaintiffs point to testimony of JPM Chase executives before the Senate Subcommittee in July 2002. In response to a question regarding the amount Enron-related entities owed JPM Chase in May of 2001, a JPM Chase Vice President, Robert W. Traband, answered, “I don’t recall specifically how much they owed us. But I would imagine [sic] was, you know, something greater than $2 billion.” (Id. ¶ 366). Donald H. McCree, a J.P. Morgan Securities Managing Director, explained further that “we actually increased our credit exposure in a number of different ways through the fall of 2001 prior to the bankruptcy.” (Id.). Plaintiffs contend that “[g]iven the testimony of Mr. Traband and Mr. McCree, ... at the time JPM[ Chase] issued its November 28, 2001 press release representing that it had only $900 million in combined exposure to Enron, it actually knew facts and had access to information that it was understating its exposure by an amount well in excess of $1 billion.” (Id. ¶ 368). Plaintiffs allege further that when questioned about the December correction in the amount of JPM Chase’s exposure, JPM Chase Vice Chairman Marc Shapiro said, according to the Neiu York Times, “It’s not an issue of what we knew, but what was appropriate to disclose.” (Id. ¶ 496). Plaintiffs urge that despite disclosing the full $2.6 billion of its exposure in the December 19 press release, JPM Chase intimated that it expected to receive payment on that amount in several subsequent public statements. First, plaintiffs vaguely allege that at a December 20, 2001 conference, the day after the press release was issued, an unidentified employee of JPM Chase represented that JPM Chase’s legal position in the dispute with the insurers was correct and that the bank should receive payment from the insurance companies. Second, on March 22, 2002, JPM Chase’s form 10-K treated only $169 million of the bank’s Enron-related exposure as unsecured. (Id. ¶¶ 328-29, 331). The form acknowledged that $1.1 billion in expected insurance payments were subject to litigation, but JPM Chase did not write down that receivable. (Id. ¶ 329). Third, JPM Chase held a news conference for investors on April 6, 2002, during which the company reassured investors that “most of the SPE transactions” were “plain vanilla” and constituted “real economic substance.” (Id. ¶ 335). Fifth, in May, the form 10-Q that JPM Chase filed with the SEC allegedly overstated net income by not properly accounting for outstanding Mahonia transactions. (Id. ¶ 343). That filing allegedly “buried” the outstanding Mahonia exposure in an “innocuous footnote.” (Id. ¶ 251). Sixth, at a conference the following month, Harrison expressed confidence in his bank, commenting that “he felt ‘good about the basic fundamentals of JPM[ Chase],’ ” which had the “right model” and the “best capabilities of an investment bank.” (Id. ¶ 345). Harrison lauded JPM Chase’s “financial discipline,” and he “depicted graphically JPM[ Chase’s] exposure as a result of Enron, to be less than $500 [sic].” (Id. ¶¶ 346—47). From June 18, 2002 to July 17, 2002, the price of JPM Chase stock fell from $34 per share to $28. (Id. ¶ 348). Plaintiffs contend that “[t]his decline was a direct result of leaks into the market that JPM[ Chase’s] involvement in Enron’s illegal activities and its financial and reputa-tional exposure were greater than previously represented.” (Id.). As evidence, plaintiffs quote from July 23 and 24, 2002 Prudential Securities Reports and a July 24, 2002 Wall Street Journal article, all of which conveyed market concern about the extent of JPM Chase’s Enron-related exposure. (Id. ¶¶ 349-51). Facing mounting negative publicity in the wake of the Senate Subcommittee hearings, JPM Chase responded publicly. During an analyst briefing and a television appearance on July 24, as well as in a press release issued on July 29, JPM Chase executives insisted that the bank had acted properly in connection with its Enron-related transactions. (Id. ¶¶ 352-55). Nevertheless, in August 2002, JPM Chase formed a committee to identify and avoid conflicts of interest in specific transactions. (Id. ¶ 356). In September 2002, JPM Chase’s Chief Executive Officer, William Harrison, admitted in a speech that the company was attempting to “bottle up” and “mitigate the damage from negative publicity over its relationships with Enron Corp., WorldCom Inc. and other troubled companies[,]” because JPM Chase had made “mistakes of judgments.” (Id. ¶ 23). That same month Harrison wrote an op-ed in The Wall Street Journal, in which he urged that “the notion that bankers were conspiring with Enron executives to hide transactions which date back to 1992 and which were accounted for correctly does not make a lot of sense—especially when the bankers were left with large losses.” (Id. ¶ 373). As noted above, plaintiffs have moved to dismiss the Amended Complaint for failure to comply with Fed.R.Civ.P. 12(b)(6) and 9(b), as well as the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), 15 U.S.C. § 78u-4. 11. DISCUSSION A. Standard 1. Motion to Dismiss the Amended Complaint Pursuant to Fed. R.Civ.P. 12(b)(6) When reviewing a motion to dismiss a complaint for failure to state a claim for relief pursuant to Fed.R.Civ.P. 12(b)(6), a district court may only dismiss plaintiffs’ claims 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.” Drake v. Delta Air Lines, Inc., 147 F.3d 169, 171 (2d Cir.1998) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)) (quotation marks omitted). A court must treat all factual allegations in the complaint as true and draw all reasonable inferences in plaintiffs’ favor. See Ganino v. Citizens Utils. Co., 228 F.3d 154, 161 (2d Cir. 2000); Lee v. Bankers Trust Co., 166 F.3d 540 (2d Cir.1999). In considering this motion, the Court is free to review plaintiffs’ complaint, including “any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference, as well as public disclosure documents required by law to be, and that have been filed with the SEC.... ” Rothman v. Gregor, 220 F.3d 81, 88-89 (2d Cir.2000) (internal citations omitted). 2. Pleading Requirements of Fed. R.Civ.P. 9(b) and the PSLRA A complaint charging securities fraud must satisfy the heightened pleading requirements of Federal Rule of Civil Procedure Rule 9(b) and the PSLRA, 15 U.S.C. § 78u-4. See Kalnit v. Eichler, 264 F.3d 131, 138. Rule 9(b) provides that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” The U.S. Court of Appeals for the Second Circuit interprets that rule to require that “[t]he complaint ... identify the statements plaintiff asserts were fraudulent and why, in plaintiffs view they were fraudulent, specifying who made them, and where and when they were made.” In re Scholastic Corp. Sec. Litig., 252 F.3d 63, 69-70 (2d Cir.2001). Though Rule 9(b) permits “[mjalice, intent knowledge and other condition of mind of a person [to] be averred generally[,]” the Second Circuit has admonished that “we must not mistake the relaxation of Rule 9(b)’s specificity requirement regarding condition of mind for a ‘license to base claims of fraud on speculation and conclusory allegations.’ ” Acito v. IMCERA Group, Inc., 47 F.3d 47, 52 (2d Cir.1995) (quotation marks and citation omitted). Instead, plaintiffs must “allege facts that give rise to a strong inference of fraudulent intent.” Chill v. Gen. Elec. Co., 101 F.3d 263, 267 (2d Cir.1996) (emphasis in original) (quoting Acito, 47 F.3d at 52). The PSLRA mandated a uniform national pleading standard for securities fraud actions that mimics the standard the Second Circuit had derived from Rule 9(b), except insofar as the PSLRA requires particularity in the pleading of the requisite mental state. See Novak v. Kasaks, 216 F.3d 300, 310 (2d Cir.2000) (“[T]he PSLRA effectively raised the nationwide pleading standard to that previously existing in this circuit and no higher (with the exception of the ‘with particularity’ requirement.”)). Courts must dismiss pleadings that fail to adhere to the requirements of the PSLRA. See 15 U.S.C. § 78u-4(b)(3)(A); see also Novak, 216 F.3d at 307. B. Plaintiffs’ Claims Plaintiffs bring four’ specific claims: 1) against all defendants for violation of Section 11 of the Securities Act of 1933 (“the Securities Act”), 15 U.S.C. § 77k; 2) against defendant Harrison for violation of Section 15 of the Securities Act, 15 U.S.C. § 77o; 3) against all defendants for violation of Section 14(a) of the Securities and Exchange Act of 1934 (“the Exchange Act”), 15 U.S.C. § 78n(a), and Rule 14(a)-9(a) promulgated thereunder, 17 C.F.R. § 240.14a-9(a); and 4) against all defendants for violation of Sections 10(b), 15 U.S.C. § 78j, and 20(a), 15 U.S.C. § 78t(a), of the Exchange Act, as well as Rule lob-5, 17 C.F.R. § 240.10b-5, promulgated thereunder. C. Securities Fraud in Violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 Promulgated Thereunder Section 10(b) of the Exchange Act makes it unlawful 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 proscribe.” 15 U.S.C. § 78j. One such rule, Rule 10b-5, prohibits “mak[ing] an untrue statement of material fact or [omitting] 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. To bring a cause of action pursuant to these provisions, “a plaintiff must plead that the defendant, in connection with the purchase or sale of securities, made a materially false statement or omitted a material fact, with scienter, and that the plaintiffs reliance on the defendant’s action caused injury to the plaintiff.” Lawrence v. Cohn, 325 F.3d 141, 147 (2d Cir.2003) (quoting Canino v. Citizens Utils. Co., 228 F.3d 154, 161 (2d Cir.2000)). Defendants assert three bases for dismissing plaintiffs’ Section 10(b) claim. First, they urge that the Amended Complaint alleges mismanagement of JPM Chase by the defendants, rather than the type of manipulation or deception that the federal securities fraud laws prohibit. Second, they contend that plaintiffs have failed to plead facts supporting a strong inference of scienter. Third, they claim that plaintiffs have failed to allege that the misrepresentations or omissions by defendants were material. 1. Mismanagement Section 10(b) of the Securities Act and rules promulgated thereunder apply only to conduct that is “manipulative or deceptive.” See Santa Fe Indus., Inc. v. Green, 430 U.S. 462, 473-74, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977) (quoting Section 10(b)). Defendants contend that plaintiffs’ allegations do not involve manipulation or deception. Rather, defendants argue, the Amended Complaint charges mismanagement, which cannot be the predicate for Section 10(b) liability. See id. at 477, 97 S.Ct. 1292. In In re Citigroup, Inc. Securities Litigation, 330 F.Supp.2d 367, 375 (S.D.N.Y. 2004), Judge Swain dismissed a Section 10(b) claim against Citigroup and its officers for misrepresentations and omissions relating to that bank’s role in the collapse of Enron. The plaintiffs in In re Citigroup alleged conduct substantially similar to that charged against JPM Chase in the instant litigation. Among the allegations were that Citigroup 1) did not properly account for its prepay transactions with Enron in that it booked those transactions as trades rather than loans; 2) failed to describe the revenues from its prepay transactions as non-sustainable and to provide adequate loan loss reserves for those transactions; 3) had falsely represented its risk management processes and business practices; 4) conveyed misleading information through its analysts’ reports on corporations that were Citigroup clients; and 5) failed to disclose litigation risks and legal violations. The Court in that action concluded that the alleged misconduct did not “rise to the level of depicting manipulative or deceptive conduct within the meaning of the securities laws[,]” id. at 376, and held that the plaintiffs’ claims against Citibank amounted to .nothing more than mismanagement, for which the federal securities do not provide a remedy. Id. at 375-78. However, deliberate misrepresentations that impaired loans are instead viable trades can constitute more than mere mismanagement. Although the federal securities laws do not require a corporation to “accuse itself of wrongdoing,” id. at 377, they do .prohibit misrepresentation of material facts, even when those material facts relate to corporate mismanagement. See In re Atlas Air Worldunde Holdings, Inc. Sec. Litig., 324 F.Supp.2d 474, 494 n. 11 (S.D.N.Y.2004) (“Although poor business judgment is not actionable under federal securities laws, a plaintiff has alleged more than mere corporate mismanagement when he has adequately alleged that the defendant made false statements concerning historical facts.”) (citation and internal quotation marks omitted); see also Milman v. Box Hill Sys. Corp., 72 F.Supp.2d 220, 233 (S.D.N.Y.1999) (“Although managerial incompetence is not a necessary disclosure, a company engaging in the public offering of its shares is under an affirmative obligation to disclose any specific material consequence of that incompetence.”). Plaintiffs have not alleged mere “[p]ost-stock-purchase corporate mismanagement or breach of fiduciary duty[,]” but rather that “a misleading statement regarding the value of a security to be sold ... .lulled [them] ... into investing in [JPM Chase] to their loss.” Suez Equity Investors, L.P. v. Toronto Dominion Bank, 250 F.3d 87, 99 (2d Cir.2001). The Amended Complaint charges that defendants artificially inflated JPM Chase’s stock price by making misrepresentations and omissions that concealed the nature of the transactions the bank had conducted with Enron. This is precisely the type of deception that Section 10(b) prohibits. See id. (rejecting the argument that at a Section 10(b) claim alleged mere mismanagement, because “defendants allegedly made an affirmative misrepresentation to plaintiffs, as outside investors, concerning the quality of the proffered securities.”). 2. Why the Alleged Misstatements and Omissions Were Fraudulent To state a Section 10(b) claim in compliance with Fed.R.Civ.P. 9(b) and the PSLRA, “a complaint must: (1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.” Stevelman v. Alias Research, Inc., 174 F.3d 79, 84 (2d Cir.1999) (citations and internal quotation marks omitted). Defendants do not claim that plaintiffs’ allegations fail to satisfy the first three pleading requirements. With respect to most of the misrepresentations alleged in the Amended Complaint, plaintiffs have complied with the first three particularity requirements by specifying the statements alleged to be fraudulent, the identity of the speaker and the context in which the statements were made. See In re Globalstar Sec. Litig., No. 01 Civ. 1748, 2003 WL 22953163, at *5 (S.D.N.Y. Dec. 15, 2003) (finding that the first three particularity requirements had been met when “the misrepresentations alleged in the ... complaint were made in specifically identified financial disclosures, news articles, communications with analysts or press releases discussing financial disclosures.”). The fourth particularity requirement—setting forth why the statements were fraudulent—requires the plaintiffs to convey through factual allegations that the defendants made materially false statements, and that they did so with scienter. See id.; In re Revlon, Inc. Sec. Litig., No. 99 Civ. 10192, 2001 WL 293820, at *7 (S.D.N.Y. Mar. 27, 2001) (citing San Leandro Emergency Medical Group Profit Sharing Plan v. Philip Morris Companies Inc., 75 F.3d 801, 812-13 (2d Cir.1996)). It is this requirement that defendants claim plaintiffs have not met. 3. Scienter The PSLRA mandates that in a securities fraud complaint, plaintiffs “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)(2). For a Section 10(b) claim, the required state of mind is “an intent to deceive, manipulate or defraud.” Kalnit v. Eichler, 264 F.3d 131, 138 (2d Cir.2001) (citations and quotation marks omitted). Plaintiffs cannot satisfy this scienter pleading requirement by alleging facts that give rise to a weak yet reasonable inference of scienter. See In re Invent Inc., Sec. Litig., 148 F.Supp.2d 331, 361 (S.D.N.Y.2001). However, “[i]n determining whether a strong inference of scienter has been pleaded, the Court must read the complaint ‘in toto and most favorably to plaintiff.’ ” In re Regeneron Pharm., Inc. Sec. Litig., No. 03 Civ. 3111, 2005 WL 225288, at *24 (S.D.N.Y.2005) (quoting In re Complete Mgmt. Sec. Litig., 153 F.Supp.2d 314, 333 (S.D.N.Y.2001)). The Second Circuit permits plaintiffs to establish scienter in one of two ways: “(a) by alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious behavior or recklessness.” Novak v. Kasaks, 216 F.3d 300, 307 (2d Cir.2000) (quoting Acito v. IMCERA Group, Inc., 47 F.3d 47, 51 (2d Cir.1995)). Plaintiffs have attempted to employ both means of scienter pleading. a. Motive and Opportunity to Commit Fraud Plaintiffs have failed to allege motive, which would entail a concrete and personal benefit from the alleged fraud. See Novak v. Kasaks, 216 F.3d 300, 311 (2d Cir.2000); Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir.1994). Opportunity is “the means and likely prospect of achieving concrete benefits by the means alleged.” Shields, 25 F.3d at 1128. Defendants, who have not contested their opportunity to commit the alleged fraud, had the means to benefit from defrauding JPM Chase shareholders. Opportunity can be inferred from the ability of the officers of JPM Chase to obtain confidential financial information unavailable in the market. See Stevelman v. Alias Research, Inc., 174 F.3d 79, 86 (2d Cir.1999) (“ ‘Opportunity’ can be inferred from the [defendants’] officers’ access to financial information ... to which the general public did not have access.”). Defendants maintain that they did not have a legally cognizable motive to commit the alleged fraud. “Motives that are generally possessed by most corporate directors and officers do not suffice; instead, plaintiffs must assert a concrete and personal benefit to the individual defendants resulting from the fraud.” Kalnit v. Eichler, 264 F.3d 131, 139 (2d Cir.2001). For example, “the desire for the corporation to appear profitable and ... the desire to keep stock prices high to increase officer compensation” are insufficient motives, whereas the desire “to inflate stock prices while [defendants] sold their own shares” may support a viable claim. Id.; see also Novak, 216 F.3d at 307; Chill v. Gen. Elec. Co., 101 F.3d 263, 267 (2d Cir. 1996); San Leandro Emergency Med. Group Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801, 814 (2d Cir.1996); Acito v. IMCERA Group, Inc., 47 F.3d 47, 54 (2d Cir.1995); Shields, 25 F.3d at 1128. Plaintiffs allege that JPM Chase and its officers possessed several motives to defraud its shareholders: inflation of the price of Chase stock in anticipation of acquiring two other financial institutions, Flemings and J.P. Morgan; receipt of considerable interest and fees in connection with the prepays and the hope of marketing similar transactions to other customers; reduction of credit exposure by inducing others to invest in Enron; earning significant performance-based bonuses; and garnering substantial returns for the bank and its executives in connection with the LJM2 investments. None of these motives is legally sufficient, because, as discussed respectively below, each is a type of benefit that most corporations and corporate insiders seek. i Inflation of Stock Price in Contemplati