Full opinion text
ORDER COUGHENOUR, District Judge. TABLE OF CONTENTS I. INTRODUCTION........................................................1125 II. BACKGROUND .........................................................1125 III. APPLICABLE STANDARD UNDER FED. R. CIV. P. 12(b)(6)................1127 IV. SECTION 10(b) CLAIMS.................................................1127 A. Materially false and misleading statements..............................1128 1. Identification of statements........................................1128 2. Threshold actionability of accused statements........................1128 S. Materiality of misrepresentations or omissions.......................1137 B. Scienter.............................................................1139 1. Knowledge.......................................................1139 2. Stock sales.......................................................1143 а. Defendant Killinger...........................................1144 б. Defendant Casey..............................................1145 c. Defendant Oppenheimer.......................................1145 d. Defendant Longbrake..........................................1146 e. Defendant Chapman ..........................................1146 f. Defendant Vanasek............................................1146 S. GAAP violations..................................................1147 C. Causation...........................................................1147 D. Reliance and damages................................................1148 V. SECTION 20(a) CLAIMS .................................................1148 VI. LEAD PLAINTIFFS’ STANDING.........................................1148 VII. CONCLUSION ..........................................................1149 I. INTRODUCTION This matter has come before the Court on Defendants’ motion to dismiss Plaintiffs’ Consolidated Amended Complaint. (Dkt. No. 65.) Having carefully considered the papers filed by the parties in support of and in opposition to the motion, the Court has determined that no oral argument shall be necessary. For the reasons that follow, Defendants’ motion is GRANTED in part and DENIED in part. II. BACKGROUND Plaintiffs’ complaint alleges that Defendants, Washington Mutual, Inc. (“WAMU”) and certain of its senior executive officers, violated federal securities laws by issuing a series of materially false and misleading statements between April 15, 2003, and June 28, 2004 (the “Class Period”). (Opp’n 1.) More specifically, Plaintiffs claim that Defendants made materially false and misleading statements representing that WAMU had successfully integrated its acquisitions and that it was well positioned to withstand changes in interest rates. According to Plaintiffs, these statements were materially false and misleading because WAMU had, in fact, not integrated its acquisitions, and in particular, had not integrated the different information technology systems used by each, and because the lack of an integrated information technology system made it impossible for WAMU to be well positioned to deal with changes in the interest rate environment. In order to understand the significance of the accused statements made by Defendants, it is necessary to understand the context in which they were made. During 2001 and the early part of 2002, WAMU acquired almost $25 billion in assets through five acquisitions. (Am. Comply 30.) By April 2003, WAMU was the nation’s second largest mortgage loan originator. (Id.) WAMU’s mortgage banking business originates and services home mortgage loans, buys and sells home mortgage loans in the secondary market, and provides mortgage-related insurance products. (Id. ¶ 31.) The mortgage banking business was exposed to two major sources of interest rate-related risk: (1) “pipeline” risk associated with new loans in the origination pipeline that are not yet closed and funded, and (2) loan servicing risk (mortgage servicing rights, or “MSR” risk). Pipeline risk is attributable to the practice of allowing borrowers to lock in rates until their mortgages close. If rates rise before the loans are funded, the bank takes a loss. MSR risk derives from the fact that MSR value “is an estimate of the present value of the income (net of expense) a servicer expects to receive over the life of the serviced obligation.” (Defs.’ Mot. 5.) MSR value “depends largely on the number of years of servicing income that the servicer can expect, which in turn depends on the anticipated number of years each borrower will keep the loan before refinancing or selling their home.” (Id.) Falling interest rates cause borrowers to pre-pay and re-finance their loans in order to take advantage of the lower rates. To a certain extent, WAMU’s loan origination business and its mortgage servicing business balanced or were expected to balance each other out as interest rates changed. As WAMU Chief Executive Officer Kerry Killinger, a defendant in this action, explained in an interview, [W]e have a very balanced business model[,] one in which when housing’s doing [sic ] strong, we get high levels of loan originations and gains on sale of those loans and so forth. When interest rates go up and we start to get a slowdown in housing, then we will have a real benefit of the servicing portfolio that we have of loans that we service for others, and that income should really kick in. (Am.Compl^ 59.) In addition to the somewhat complementary relationship between the loan origination and the mortgage servicing businesses, each of these two businesses was “internally” hedged against decreases in value. As Defendants explain in their brief, pipeline risk is hedged “by executing forward sales commitments, interest rate contracts, mortgage option contracts and interest rate futures.” (Defs.’ Mot. 7.) MSR risk is hedged by purchasing financial instruments which tend to increase in value when long term interest rates decline. (Id.) The central theme of Plaintiffs’ complaint is that “throughout the Class Period, [WAMU] was saddled with outdated and incompatible computer systems which could not share information necessary to allow for effective hedging and satisfactory performance in the face of increasing interest rates.” Defendants have now moved to dismiss the complaint because it does not meet the heightened pleading requirements of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). 15 U.S.C. § 78u-4. III. APPLICABLE STANDARD UNDER FED. R. CIV. P. 12(b)(6) Fed.R.Civ.P. 12(b)(6) provides that an action will be dismissed for failure to state a claim upon which relief may be granted. A court will grant dismissal 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.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). While a court must accept all material allegations in the complaint as true and construe them in the light most favorable to the nonmoving party, conclusory allegations of law or unwarranted inferences of fact urged by the nonmoving party are insufficient to defeat a motion to dismiss. Ove v. Gwinn, 264 F.3d 817, 821 (9th Cir.2001). In addition, a court’s obligation to construe allegations in the light most favorable to the nonmoving party does not mean that those allegations must be construed in a light favorable to the nonmoving party, if such a construction cannot reasonably be made. IV. SECTION 10(b) CLAIMS Here, Plaintiffs’ claims are brought pursuant to Sections 10(b) and 20 of the Securities Exchange Act of 1934 (“Exchange Act”). Section 10(b) makes it unlawful “for any person, directly or indirectly ... to use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe.” 15 U.S.C. §§ 78j, 78j(b). Rule 10b-5, promulgated by the Securities and Exchange Commission (“SEC”) pursuant to Section 10(b), provides that “[i]t shall be unlawful for any person ... [t]o make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.” 17 C.F.R. § 240.10b-5(b). Accordingly, the Ninth Circuit has held that the elements of a 10b-5 claim are: (1) a misrepresentation or omission of a material fact; (2) scienter; (3) causation; (4) reliance; and (5) damages. In re Daou, Sys., Inc. Sec. Litig., 397 F.3d 704, 710 (9th Cir.2005). The complaint in this matter is also subject to the pleading requirements of the Private Securities Litigation Reform Act of 1995. 15 U.S.C. § 78u-4. The PSLRA requires that a complaint must “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.” 15 U.S.C. § 78u-4(b)(l). In addition, the complaint must “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). In the Ninth Circuit, the required state of mind is one of “deliberate or conscious recklessness.” In re Silicon Graphics Sec. Litig., 183 F.3d 970, 979 (9th Cir.1999). In the context of a Fed.R.Civ.P. 12(b)(6) motion, the Court must determine whether “particular facts in the complaint, taken as a whole, raise a strong inference that defendants intentionally or [with] ‘deliberate recklessness’ made false or misleading statements to investors.” Id. (citation omitted). A. Materially false and misleading statements In order to simplify the analysis of Defendants’ arguments with respect to the identification, actionability, and materiality of the statements accused by Plaintiffs, the Court has prepared a non-exhaustive summary table, attached as Appendix A. Where suitable, the Court may refer to a specific statement by the number assigned to it in the table. 1. Identification of statements Defendants argue that Plaintiffs’ complaint should be dismissed because the complaint fails to adequately identify the statements claimed to be false and misleading. In addition, Defendants claim that Plaintiffs do not articulate how or why any particular statement is false or misleading. In support of their argument, Defendants cite to various district courts who have expressed dissatisfaction with what is ultimately an issue of style rather than of substance. See, e.g., Wenger v. Lumisys, Inc., 2 F.Supp.2d 1231, 1243-44 (N.D.Cal.1998) (complaining that analyzing the complaint “requires a laborious deconstruction and reconstruction of a great web of scattered, vague, redundant, and often irrelevant allegations”); In re Capstead Mortgage Corp. Sec. Litig., 258 F.Supp.2d 533, 557 n. 8 (N.D.Tex.2003) (complaining that “Plaintiffs’ fifty-page complaint is ... a document replete with circular statements. Indeed, the simplest and easiest thing for the court to have done would have been to deny the motions to dismiss with no explanation, rather than expend considerable hours of time on their resolution. Such an approach, however, although employed by some courts, is inconsistent with the court’s duty to fully and fairly discharge its obligations to the litigants.”). Having reviewed the amended complaint in fairly exhaustive detail, the Court finds that Plaintiffs have clearly identified the particular statements alleged to be false or misleading by emphasizing the relevant phrases, where necessary, and have adequately and clearly stated the reasons why the accused statements are alleged to be false and misleading. The Court also notes that Plaintiffs’ complaint supplies the requisite information about who made the statement and when it was made. In particular, the Court does not find that the complaint is organizationally defective. Cf. Wenger, 2 F.Supp.2d at 1243 (deploring the fact that the complaint had lumped all of the accused statements together in one section and all of the reasons why the statements were alleged to be false and misleading in another section, with no matching between the two, ie., which statements corresponded to which reasons). Here, Plaintiffs grouped certain statements together simply because they were made during the course of the same conference call, or in the same document. The Court finds that following this structure did not excessively tax its judicial resources. Further, the Court finds that Plaintiffs’ attempt to comply with the heightened pleading standard applicable in this case has not led Plaintiffs to “disregard the requirement of simplicity, directness and clarity of Fed.R.Civ.P. 8.” 2 F.Supp.2d at 1239. The Court therefore declines to dismiss the complaint on the basis of Plaintiffs’ pleading structure. 2. Threshold actionability of accused statements Defendants argue that Plaintiffs have not identified any actionably false statements because the statements identified in the complaint are (1) statements of historical fact, the falsity of which are not alleged; (2) non-actionable puffery; or (3) forward-looking statements for which the PSLRA provides a safe harbor. (Defs.’ Reply 13.) In general, accurately reported historical data cannot provide the basis for a securities fraud claim. See, e.g., In re VeriFone Sec. Litig., 784 F.Supp. 1471, 1481 (N.D.Cal.1992), aff'd, 11 F.3d 865 (9th Cir.1993). Plaintiffs’ amended complaint refers to and incorporates many sentences that contain only historical financial information. However, taking the pleading as a whole, it is clear that these sentences are provided for their contextual value, rather than as examples of Defendants’ alleged misleading and false statements. Indeed, the sentences containing factual financial data are interwoven with sentences containing the allegedly false and misleading statements in such a way that (1) excising them would have made the complaint very difficult to read and understand, and (2) in some cases, bolstered the allegedly false and misleading nature of the accused statements. (See, e.g., Statement 4, relying on financial data reflecting growth in the first quarter of 2003 and attributing the growth to WAMU’s balanced business model; Statement 6, relying on financial data reflecting growth in the second quarter of 2003 and attributing the growth to WAMU’s balanced business model; Am. Compl. ¶ 97, referring to growth in WAMU’s home loan mortgage banking income and attributing it to the “natural balance in our mortgage banking model.”) The Court is particularly mindful of the Ninth Circuit’s admonition that statements cannot be considered in isolation, but must be considered in the context of the total presentation. Hughes v. Dempsey-Tegeler & Co., 534 F.2d 156, 176 (9th Cir.1976). Here, the factual information provides— and was provided for — context. For these reasons, although Plaintiffs’ amended complaint refers to numerous statements involving accurately reported historical information, the Court does not find that this feature renders the complaint’s securities fraud claims any less cognizable. Generally speaking, “projections and general statements of optimism may trigger liability under federal securities laws.” In re Syntex Corp. Sec. Litig., 855 F.Supp. 1086, 1096 (N.D.Cal.1994), aff'd, 95 F.3d 922 (9th Cir.1996). However, statements that are “so vague or amorphous that no reasonable investor could rely on them” are considered non-actionable puffery. Id. The Third Circuit clarified “puffery” as follows: Strictly speaking, the securities laws recognize no distinct “puffing” exception. To say that a statement is mere “puffing” is, in essence, to say that it is immaterial, either because it is so exaggerated (“You cannot lose.”) or so vague (“This bond is marvelous.”) that a reasonable investor would not rely on it in considering the “ ‘total mix’ of available information.” Hoxworth v. Blinder, Robinson & Co., 903 F.2d 186, 200-01 (3d Cir.1990) (citing TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976)). Thus, statements on the extreme edge of generality and vagueness may be insufficient as a basis for a securities fraud claim. However, as Hoxworth’s discussion of puffery demonstrates, the exception for puffery is narrowly drawn. In addition, the Ninth Circuit has held that “[wjhat might be innocuous ‘puffery’ or mere statement of opinion standing alone may be actionable as an integral part of a representation of material fact when used to emphasize and induce reliance upon such a representation.” Casella v. Webb, 883 F.2d 805, 808 (9th Cir.1989). Although Defendants’ brief specifically identifies only two statements, Defendants point to paragraphs in the amended complaint that they argue contain puffery. (Defs.’ Mot. 27.) The statements pointed to are certainly optimistic. However, given that they are either immediately preceded or followed by very specific statements of fact that supposedly justify or supply a foundation for the optimism, the Court cannot conclude that Plaintiffs’ claims are founded on mere puffing by Defendants. For example, in paragraph 89, Plaintiffs cite to statements made by Defendant Oppenheimer at a conference on December 9, 2003: As highlighted earlier, we have not been in a position to fully integrate the system to the mortgage companies that we acquired in 2000 and 2001. The end of the refinance wave now affords us that opportunity, and this slide shows you that our point-of-sale origination system, Optus.l, is now rolled out to the vast majority of our systems. We anticipate that we’ll be on a common operational and technology platform for loans servicing in the third quarter of 2004. We have chosen to partner with Fidelity Financial as our loan servicing provider for two reasons. First, the lower risk to convert the smaller home side portfolio onto the larger Washington Mutual portfolio as opposed to the other way. The second reason is cost. Our renegotiated agreement with Fidelity enables us to achieve the efficiencies that we originally projected in the acquisitions of home side ALLS platforms. In the fulfillment area we have our work cut out for us. Our past systems integration experience in acquisitions will be put to good use as we tackle the complexities of this challenge. We currently have nine different loan origination systems in our mainstream home lending channel. (Am.Compl^ 89.) Defendants argue that the penultimate sentence of the statement above is mere puffery. The Court disagrees. This sentence, standing alone or in a different context, could constitute puffery. However, in this specific textual (Defendant Oppenheimer’s whole statement containing several very specific representations of fact) and factual (historical) context, both of which highlighted the importance of WAMU’s ability to integrate its acquisitions and to hedge its operations, a reasonable investor would assign some importance to Defendant Oppenheimer’s reference to WAMU’s past systems integration experience. For example, a reasonable investor might rely on this sentence to conclude that despite the obvious challenge of integrating nine different loan originations systems, WAMU’s seasoned systems integration people would be able to pull the company through. For these reasons, the Court does not find that the sentence singled out by Defendants constitutes non-actionable puffery. The analysis is virtually identical for the other paragraphs listed by Defendants. Therefore, the Court finds that Plaintiffs’ amended complaint is not founded on non-actionable puffery. Finally, Defendants argue that the bulk of the accused statements are forward-looking statements for which the PSLRA provides a safe harbor. The safe harbor provisions of the Exchange Act provide that a person shall not be liable for any (1) “forward-looking statement,” (2) that is identified as such, and (3) is accompanied “by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement.” Id. § 78u-5(c)(l)(A)(I). However, a forward-looking statement may be actionable if it was made with actual knowledge that the statement was false or misleading. Id. § 78u-5(c)(l)(B). The threshold requirement for the PSLRA’s safe harbor is that a statement be forward looking. The statute defines “forward-looking statement,” in pertinent part, as: (A) a statement containing a projection of revenues, income (including income loss), earnings (including earnings loss) per share, capital expenditures, dividends, capital structure, or other financial items; (B) a statement of the plans and objectives of management for future operations, including plans or objectives relating to the products or services of the issuer; [or] (C) a statement of future economic performance, including any such statement contained in a discussion and analysis of financial condition by the management or in the results of operations included pursuant to the rules and regulations of the Commission. Id. § 78u-5(i)(l)(A)-(C). At first glance, these provisions appear to cover a very wide range‘of statements. However, the effect of these provisions is limited in several material ways. First, all three of these definitions delimit certain categories of statements about future expectations that are non-actionable under the PSLRA if accompanied by an adequate cautionary statement. Second, these three sections describe statements with very specific subject matters. In other words, the PSLRA does not exempt all statements whose subject happens to involve the future. Third, there are statements couched in the future tense, but whose effect is to convey information about the present. The Ninth Circuit has recognized this principle and has refused to extend safe harbor protection to statements that are grammatically about the future but whose subject matter is firmly lodged in the present. No. 8k Employer-Teamster Joint Council Pension Trust Fund v. Am. W. Holding Corp., 320 F.3d 920, 936-37 (9th Cir.2003). In America West, the court considered the following two statements: (1) a press release stating that “the settlement agreement’s provisions will not have a material adverse affect [sic ] on the Company’s operations or financial results,” id. at 936; and (2) a conference call during which the defendant said “[w]e are not anticipating any major increase in maintenance costs or the cost of oversights going forward as a result of [the settlement agreement],” id. The court found that these two statements were not “forward looking” because “[e]ach is a disclosure of the fine imposed by the settlement agreement for past violations of FAA regulations and a description of the present effects of their imposition on the company.” Id. at 937. America West’s discussion of these two statements also illustrates a fourth, and possibly the most important, way in which the safe harbor is curtailed. America West recognized that even though the forward-looking aspect of a particular statement may not be actionable, that very same statement may be actionable because of other misleading content. In this way, the PSLRA safe harbor operates in a way similar to hearsay rules, which forbid the admission of certain statements for the truth of the matter asserted, but allow those statements to be admitted for their corollary value. Thus, America West is an example of how a single statement may communicate many different meanings, some of which may render the statement actionable. Finally, as in the “puffery” analysis, when evaluating a statement’s eligibility for the safe harbor, the Court must consider the statement’s context, both textual and factual. The statute itself, by mandating the consideration of cautionary statements and by condemning “forward-looking” statements made with actual knowledge of their falsity, contemplates that statements will be considered within their surrounding contexts. Thus, a statement, standing alone, whose primary import may be “forward looking” within the meaning of the statute, may in context convey information not covered by the safe harbor. In light of these material ways in which the definition of “forward looking” is limited, the Court finds that none of the twenty-two statements catalogued in the table in Appendix A are “forward looking” within the meaning of the statute. In making this finding, the Court is mindful of the following relevant factual context, in addition to the facts set forth supra in Part II. In 2002, Washington Mutual was the largest servicer and the second largest originator of mortgage loans in the nation. The Group’s strategy is to remain a leading originator and servicer of home loans and to increase its market share in both loan origination and loan servicing. The Group is migrating to single platforms for originating and servicing home loans. The process of reducing the number of origination systems from seven to a single platform will occur in stages throughout 2003 and should be completed in 2004. In the fourth quarter of 2003, we expect to begin the multi-year process of converting from an outsourced loan servicing system to a proprietary system acquired as part of the HomeSide Lending transaction. During 2003, we will also be consolidating our nationwide loan fulfillment operations from approximately 500 locations to approximately 60 locations. We anticipate that these initiatives will improve operational efficiencies and productivity. Forward-looking statements provide our expectations or predictions of future conditions, events or results. They are not guarantees of future performance. (Rummage Decl. Ex. B, WAMU 2002 Annual Report (Form 10-K), at 3-5 passim (Mar. 17, 2003).) The preceding excerpt is typical of the language used in WAMU’s SEC filings, and is notable in three significant ways. First, it establishes WAMU as a leading presence in the home lending market. Second, it communicates management’s expectations of how WAMU’s integration of its recent acquisitions would proceed over the following two years. Finally, it recognizes that while the predictions and expectations themselves might not come to fruition, the statements do reflect actually-held expectations and predictions. (Id. at 5, stating “[fjorward-looking statements provide our expectations.”) With context-laying statements like the one cited above in mind, the Court concludes that although some of the statements contained in the table in Appendix A have some elements that qualify as “forward looking” within the meaning of the PSLRA, none of the statements are fully protected by the safe harbor. Generally speaking, the statements in the table fall into three discernible categories (with some statements belonging to more than one category): (1) statements of present or historical fact; (2) statements of fact attributing results to specific actions or factors; and (3) statements about the future that also function as communications of current expectations and are actionable as such. The first two categories do not constitute forward-looking statements within the meaning of the statute. The statements falling into the first category include, but are not limited to Statements 2:1, 2:3, 4, 5, 8, 9, 10, 11, 12, 14, 15, 17, 18, 19:2, 20:2, 21:1, 21:2, and 22. These statements are not forward looking because they are about present or historical facts. For example, Statement 5 is as follows: Our goal is to ensure that our senior management has timely access to all material financial and non-financial information concerning our business. While we believe the present design of our disclosure controls and procedures is effective to achieve our goal, future events affecting our business may cause us to modify our disclosure controls and procedures. (Am. Compl. ¶ 61, citing WAMU Quarterly Report for the Quarter Ended Mar. 31, 2003 (Form 10-Q) (May 15, 2003).) A reasonable investor reading this statement would conclude that at the time the statement was made, WAMU’s disclosure controls and procedures were providing senior management with timely access to all material information about the business. Thus, although this statement invokes the future, it does not do so in a way that alters the present character of the statement. Therefore, the Court concludes that this statement is not a forward-looking statement within the meaning of the PSLRA. Consequently, the statement is not eligible for the safe harbor. Another example of a statement in this category is Statement 12, which states “We have identified the issues that led to these challenges [ie., net loss from mortgage loans] and have implemented measures to address them.” (Rummage Decl. Ex. N., Press Release, WAMU, Washington Mutual Announces Third Consecutive $1 Billion Quarter (Oct. 21, 2003).) A reasonable investor would read this statement to mean that WAMU had recognized the problems and was well on its way to resolving them. Unlike Statement 5, Statement 12 does not even invoke the future. For these reasons, the Court concludes that this statement is not a forward-looking statement and is therefore ineligible for the PSLRA safe harbor. The statements falling in the second category, those attributing results to certain actions or factors, include, but are not limited to Statements 3:2, 4, 6, 7, 8, 11, 13, 16, and 19. Like the statements in the first category, these statements are representations of a presently existing or historical fact, and thus are not eligible for the PSLRA safe harbor. One example from this category is Statement 4, which states, Part of our business does better when interest rates are going up, part of it does better when interest rates are going down. And those really do a nice job of offsetting each other. And that’s given us this very, very strong secular growth rate over the last many years and relatively little volatility. (Am. Compl. ¶ 59, citing CNBC interview with Def. Killinger on Apr. 16, 2003.) A reasonable investor would construe this statement to mean that WAMU’s excellent first quarter results were, in part, attributable to the specific and unique way WAMU structured its business. If the excellent first quarter results had in fact been due to a market-related windfall, this statement would be a false and misleading statement of present or historical fact. In a similar vein, Statement 7 said, “With interest rates remaining at near historic lows, high prepayment rates have reduced the value of the mortgage servicing asset; however, as in prior periods, the company’s risk management activities effectively mitigated the change in the MSR valuation.” (Rummage Decl. Ex. M, Press Release, WAMU, Washington Mutual Announces Record Earnings; Company Delivers Second Consecutive $1 Billion Quarter (July 15, 2003).) A reasonable investor would read this statement to mean that WAMU’s then-present risk management activities were functioning as intended. For these reasons, the Court finds that statements attributing results to specific aspects of the way WAMU conducted its business are not forward-looking and thus are not eligible for the PSLRA safe harbor. The final category of statements consists of statements about the future that also function as communications of current expectations and are actionable as such. Statements in this category include, but are not limited to Statements 1, 2:2, 2:3, 3:1, 3:2, 8, 9, 11, 16, 19, 20, and 22. For example, Statement 1, made by Defendant Killinger during a conference call discussing WAMU’s results from the first quarter of 2003, stated that WAMU would be in a “stronger position when the current interest' rate environment changes.” This statement is not forward looking insofar as it purports to accurately reflect his or WAMU’s actual expectations. Read in this way, the statement is a present-tense communication of present facts, and as such, is not included in the safe harbor. Therefore, to the extent that Plaintiffs can prove that the statement did not actually reflect WAMU and Defendant Killinger’s actual expectations, the statement may be false and misleading. Other statements that fall into this category of statements actionable as representations of current expectations include, but are not limited to Statements 2:2, 2:3, 3:1, 3:2, 8, 9, 11,16, 19, 20, and 22. The question of whether statements actionable as representations of current expectations are also actionable in their capacity as forward-looking statements must be answered through a full safe harbor analysis. With respect to Statement 1, for example, the question is whether this statement is actionable on the basis that WAMU was not actually in a stronger position when the interest rate environment changed First, because the statement refers to future economic performance, the Court finds that the statement is “forward looking” within the meaning of the statute. See 15 U.S.C. § 78u-5(i)(1)(C). Once a statement has been determined to be forward looking, the Court must determine whether the statement is identified as a forward-looking statement and whether it is accompanied by meaningful cautionary language. 15 U.S.C. § 78u-5(c)(1). Finally, the Court must determine whether Plaintiffs have sufficiently alleged that the statement was made with “actual knowledge” that it is false or misleading. In re Daou Sys., Inc., 411 F.3d 1006, 1021 (9th Cir.2005). When determining whether cautionary language is sufficient under the statute, courts refer back to the judicial “bespeaks caution” doctrine. Employers Teamsters Local Nos. 175 & 505 Pension Trust Fund v. Clorox Co., 353 F.3d 1125, 1132 (9th Cir.2004) (accepting that the PSLRA’s safe harbor provision is the statutory enactment of the judicial “bespeaks caution” doctrine). See also Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 947 (9th Cir.2005) (invoking the “bespeaks caution” doctrine). Courts require that “the cautionary language mention important factors that could cause actual results to differ materially from those in the forward-looking statement.” Clorox, 353 F.3d at 1133 (citing 15 U.S.C. § 77z-2(c)(1)(A)®). “Dismissal on the pleadings under the bespeaks caution doctrine ... requires a stringent showing: There must be sufficient cautionary language or risk disclosure such that reasonable minds could not disagree that the challenged statements were not misleading.” Livid, 416 F.3d at 947 (9th Cir.2005) (citation omitted). Where an accused statement is oral, the Ninth Circuit has found that the safe harbor “extends to an oral statement that ‘additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statement is contained in a readily available written document.’ ” Clorox, 353 F.3d at 1133 (citing 15 U.S.C. § 78u-5(c)(2)(B)(I)). However, the sufficiency of the oral cautionary language depends on the sufficiency of the underlying written cautionary language referred to. Here, Statements 1, 2, and 3 were oral statements made during the April 16, 2003 conference call and were prefaced by the following oral statement: Statements contained in our commentary today which are not historical facts and which pertain to future operating results of Washington Mutual and its subsidiaries, constitute forward-looking statements within the meaning of the [PSLRA] .... Actual results may differ materially from the results discussed in these forward-looking statements for the reasons among others, stated in our annual report on form 10-K and the section entitled “Factors that may affect future results.” In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. (Rummage Decl. Ex. T, Transcript of WAMU 1Q03 Conference Call, at 1.) The Court finds that this statement is enough to invoke and incorporate the language in WAMU’s annual report. Thus we proceed to assess the sufficiency of the written cautionary language contained therein. This language is as follows: From time to time, we have made and will make forward-looking statements. Our Form 10-K and other documents that we file with the [SEC] have forward-looking statements. In addition, our senior management may make forward-looking statement orally to analysts, investors, the media and others. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts.... Forward-looking statements provide our expectations or predictions of future conditions, events or results. They are not guarantees of future performance. By their nature, forward-looking statements are subject to risks and uncertainties. These statements speak only as of the date they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made. There are a number of factors, many of which are beyond our control, that could cause actual conditions, events, or results to differ significantly from those described in the forward-looking statements. (WAMU 2002 Annual Report at 5.) The annual report goes on to disclose risks associated with the following five factors: (1) general business and economic conditions, including interest rates; (2) potential volatility of the mortgage banking business; (3) ability to implement business operations technology solutions; (4) competition in the financial services industry; and (5) regulatory changes. (Id. at 5-7.) In the context of this lawsuit, the disclaimers regarding volatility in the mortgage banking business and WAMU’s ability to implement its operations technology solutions are particularly important and require further scrutiny. WAMU warned that “[c]hanges in interest rates significantly affect the mortgage banking business” and that “[o]ne of the principal risks ... is prepayments and their effects on MSR.” (Id. at 6.) WAMU acknowledged that the success of its hedging efforts in the MSR arena was “dependent on management’s judgments regarding the amount, type and mix of MSR risk management instruments that we believe are appropriate to managed the changes in fair value of our MSR asset.” (Id.) With respect to implementation of the operations technology, WAMU stated: During 2001 and early 2002, we consummated five acquisitions.... On the mortgage banking side, we are currently integrating the technology platforms of the acquired companies into our business. We are developing single operating platforms for the origination and servicing of home loans and are migrating from a decentralized mortgage operations model to a regional processing configuration. We anticipate that these initiatives will result in economies of scale and operating efficiencies.... If we experience difficulties in the integration of the technology platforms or the upgrading of software or any prolonged interruption of our service, we could experience higher than anticipated administrative costs and the loss of customers, among other things. These events could cause our earnings to be lower than anticipated and could adversely affect our operations and financial condition. (Id.) Plaintiffs argue that these statements do not “immunize [D]efendants’ failure to reveal that the Company was not prepared for rising interest rates as [DJefendants had repeatedly stated and had not ‘fully integrated’ its interest rate hedging activities for ‘more effective’ hedging as [D]efendants had claimed.” (Opp’n 17.) The Court must agree. Defendants’ cautionary statements with respect to the MSR hedging refer only to the possibility that management’s judgment could be flawed, not that WAMU was technologically unable to produce the necessary information so that it could properly hedge the MSR risk, as Plaintiffs allege. To the extent that WAMU acknowledged the risk inherent in its technology upgrade, it disclosed only risks pertaining to administrative costs and loss of customers, not risks pertaining to its ability to hedge its mortgage business. These cautionary statements do nothing to put the investor on notice that WAMU’s hedging depended, as Plaintiffs allege, on its ability to access information in a certain way. For these reasons, the Court finds that this cautionary language is neither meaningful nor adequate with respect to the statements listed in the table in Appendix A. Defendants’ argument that it had fully and fairly disclosed to investors the risks inherent in a business so dependent on interest rate fluctuations rather misses the mark. Plaintiffs’ arguments are much more finely drawn and more focused on the technological aspects of WAMU’s woes. According to Plaintiffs, while Defendants warned investors that interest rates posed a potential problem, Defendants also, in no uncertain terms, reassured investors that WAMU was prepared both strategically and technologically to confront and surmount the challenge. Thus, to the extent that Defendants’ cautionary statements generically warned investors that WAMU’s success depended on interest rates, the Court agrees with Plaintiffs that these warnings did not speak to the particular’ issue on which Plaintiffs have focused. For this reason, the Court does not find that Defendants’ forward-looking statements were accompanied by meaningful cautionary language such that the statements are protected by the PSLRA safe harbor. 3. Materiality of misrepresentations or omissions Having found that the accused statements do not qualify for the safe harbor, the Court proceeds to determine whether the statements were material. In the context of a Rule 10b-5 claim, “a misrepresentation or omission is material if there is a substantial likelihood that a reasonable investor would have acted differently if the misrepresentation had not been made or the truth had been disclosed.” Livid, 416 F.3d at 947. “[T]o fulfill the materiality requirement]]] 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.” Basic Inc. v. Levinson, 485 U.S. 224, 231-32, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988). Basic emphasized that the inquiry to be undertaken is a fact-specific one. Id. at 240, 108 S.Ct. 978. Here, Plaintiffs’ complaint is that WAMU did not disclose to investors the range and depth of its technological woes and that these problems had a significant negative impact on WAMU’s ability to steer its mortgage business through a sea of changing interest rates. Plaintiffs allege that WAMU “was plagued with company-specific problems which undermined the veracity of their public representations as the Company could not properly hedge its interest rate exposure.” (Am. Compl.¶ 38.) Plaintiffs add: In order to properly hedge Washington Mutual’s interest rate exposure, [Defendants needed to have complete and precise information concerning the Company’s aggregate mortgage loan portfolio and MSR positions at all times. Absent such information, it would have been impossible to configure proper hedges due to interest rate fluctuations. In other words, because interest rates are constantly changing, [Defendants needed to know, at all relevant times, the details of each loan in the Company’s pipeline so that they could hedge the interest rate exposure associated with those loans. Complete and precise information, however, would have required effective communication between and among Washington Mutual’s many computer systems. In reality, the Company’s systems could not (and did not) function properly. Because of its outdated and problematic computer systems throughout the Class Period, [WAMU] did not have a clear understanding of its loan pipeline and the corresponding interest rate risk associated with those loans in the face of fluctuating interest rates. Assumptions underlying hedging in the face of interest rate changes include critical information regarding the loan pipeline, complete and precise knowledge of all loans in the system, the interest rates being locked, the existence of loan processing delays, and whether the computer systems and personnel can process the volume and capacity of loans in the pipeline. (Am.Compl.1ffl 46-47.) Having reviewed this and other similar sections containing specific allegations of how WAMU’s technological abilities impact its ability to conduct its business, the Court concludes that there is a substantial likelihood that a reasonable investor would have acted differently if WAMU had fully and fairly disclosed its progress or lack thereof in developing and/or integrating its technology platforms. In particular, the Court takes notes of a series of events during the fall of 2003. On September 9, 2003, Defendant Killinger disclosed that “several mortgage banking process system challenges ... came to light[,] ... some imprecision in the matching of our loan commitments and pipeline hedging activities.” (Am.ComplA 74.) These problems resulted in a $0.27 per share charge for the third quarter of 2003. (Am. Compl. ¶ 81, citing Jefferies Securities Report (Oct. 23, 2003).) However, Defendant Killinger reassured investors that “we took immediate steps to address any of the operating challenges and are back on track.” (Am.Compl. ¶ 74.) He also stated that WAMU had taken affirmative steps to position itself for a rising interest rate environment and that WAMU’s business model was performing as planned. (Id.) Despite the negative impact of the “system challenges,” to the tune of $400 million, analysts were sufficiently convinced by Defendant Killinger’s remarks to maintain their positive outlook on WAMU’s future performance. (See Am. Compl. ¶ 81, citing financial analyst reports.) In addition, the market in general dismissed the significance of the “system challenges,” as evidenced by the 3.21% increase in WAMU stock on October 22, 2003, after WAMU’s third quarter conference call. This pattern continued through the spring of 2004: slight and unexpected financial disappointments, excused and explained by management, followed by analyst reports justifying their positive outlooks by citing to WAMU’s historical ability to navigate the market and its representations that it was streamlining its operations and boosting its ability to hedge its mortgage business. Because the analysts covering WAMU repeatedly and expressly relied on WAMU’s reassurances to justify their continued positive outlook, the Court finds that WAMU’s statements, or lack thereof, regarding its technology problems were material within the meaning of Rule 10b-5. In addition to WAMU’s alleged failure to disclose its technological problems, Plaintiffs’ complaint also challenges statements that more generally attribute WAMU’s historical success to its ability to balance its loan origination and servicing businesses, as well as to its hedging ability. To the extent that these statements fail to disclose WAMU’s technology problems, that failure is material for the same reasons as discussed in the immediate preceding paragraphs. However, these statements are also material to the extent that they might have falsely attributed WAMU’s historical successes. As in the case of the technological issues, analysts repeatedly relied on the fact that WAMU had attributed its success to its balanced business model and concluded that what had worked so well in the past was likely to work well in the future. If, however, WAMU’s strategy had not worked well in the past, there is a substantial likelihood that analysts and reasonable investors would have made different decisions as to their willingness to bet that WAMU’s strategy would work well in the future. For this reason, the Court finds that statements attributing WAMU’s successes to its business and hedging strategy are material within the meaning of Rule 10b-5. In sum, the Court finds that all the statements challenged by Plaintiffs meet the PSLRA test. B. Scienter Scienter is the second necessary element of a Rule 10b-5 claim. The PSLRA requires plaintiffs to “plead, in great detail, facts that constitute strong circumstantial evidence of deliberately reckless or conscious misconduct.” Silicon Graphics, 183 F.3d at 974. “[T]o show a strong inference of deliberate recklessness, plaintiffs must state facts that come closer to demonstrating intent, as opposed to mere motive and opportunity [to commit fraud].” Id. When determining whether scienter has been sufficiently pled, a court may go beyond each individual allegation to consider “whether the total of plaintiffs’ allegations, even though individually lacking, are sufficient to create a strong inference that defendants acted with deliberate or conscious recklessness.” America West, 320 F.3d at 938. In performing this analysis, the Court must consider all inferences in the light most favorable to Plaintiffs, keeping in mind that this deliberate bias may still result in inferences unfavorable to Plaintiffs. Gompper v. VISX, Inc., 298 F.3d 893, 897 (9th Cir.2002). 1. Knoioledge One avenue by which to establish scienter is to show, through direct or circumstantial evidence, that the defendants knew or should have known that their statements were false or misleading. Because the Court found that none of Defendants’ statements were forward looking within the meaning of the statute, Plaintiffs’ complaint need not allege actual knowledge. “The most direct way to show both that a statement was false when made and that the party making the statement knew that it was false is via contemporaneous reports or data, available to the party, which contradict the statement.” Nursing Home Pension Fund Local Hip v. Oracle Corp., 380 F.3d 1226, 1230 (9th Cir.2004). However, where allegations of actual knowledge are not necessary, “it may be inferred that facts critical to a business’s core operations or an important transaction are known to a company’s key officers.” In re Northpoint Communications Group, Inc. Sec. Litig., 184 F.Supp.2d 991, 998 (N.D.Cal.2001). Either way, Plaintiffs must show through sufficiently specific factual allegations that Defendants had knowledge, constructive or actual, of the data alleged to be contradictory to their statements. Thus, the showing is two-fold: (1) that there was information contradictory to the challenged statements, and (2) that Defendants knew or should have known this information by virtue of their roles at the company. Here, Plaintiffs make the showing through both direct and circumstantial evidence. Plaintiffs’ main source of direct evidence is a group of twelve confidential witnesses (“CW”). “[P]ersonal sources of information relied upon in a complaint should be described in the complaint with sufficient particularity to support the probability that a person in the position occupied by the source would possess the information alleged.” Nursing Home, 380 F.3d at 1233. In general, plaintiffs must show how confidential witnesses “came to learn of the information they provide.” North-point, 184 F.Supp.2d at 1000. However, the fact-specific nature of the analysis means that “[t]he precise amount of detail required in describing confidential witnesses varies based on the circumstances of the case.” In re Secure Computing Corp. Sec. Litig., 184 F.Supp.2d 980, 988 (N.D.Cal.2001). Here, Plaintiffs’ descriptions of their confidential witnesses included (1) job title, (2) time period during which he or she was employed by WAMU, (3) location where he or she worked, and (4) brief job description. (See Am. Compl. ¶¶ 48-54.) For ease of reference, the Court has created a summary table reflecting most of the information provided by and about the confidential witnesses. See Appendix B. Having reviewed the section of the complaint involving the confidential witnesses, the Court finds that for the most part, Plaintiffs have sufficiently established that each of their confidential witnesses were in a position to have personal knowledge of the information about which they spoke. In addition, the Court finds that the consistent and interlocking nature of the evidence provided by each witness bolsters the evidence’s reliability and credibility. For these reasons, the Court finds that Plaintiffs have pled with sufficient particularity that (1) WAMU suffered technology problems affecting its ability to timely process and monitor loans after customers had locked in rates, (2) Optis was a failure and was never completely rolled out, and (3) WAMU’s failure to integrate its different technology platforms created significant problems, including insufficient and inaccurate reporting of data critical to its hedging operations. However, certain statements made by Plaintiffs’ confidential witnesses are not obviously within the range of the personal and firsthand knowledge of the confidential witness who made it. These statements include Allegations 4, 6:2, 7:3, 8, 9:2, 10, and 11:3. The Court will address each statement in turn. With respect to Allegation 4, Plaintiffs have not sufficiently explained what CW4 did in IT and how his or her job responsibilities included exposure to and experience with Optis. With respect to Allegation 6:2, Plaintiffs provide no background information regarding how CW6 knew that it was “widely known” at WAMU that Optis was a failing technology. As to Allegation 7:3 — that WAMU’s directive not to deter customers from locking in rates exacerbated delays — the Court finds that this allegation is more in the nature of personal speculation than a factual allegation, and as such, is not appropriately considered at this time. CW8’s allegation that “many of [WAMUJ’s loans needed extensions” and that this was “exacerbated by [WAMU]’s archaic computer systems requiring separate processing and underwriting systems” suffers from the same problem as Allegation 7:3. (Am. ComplJ 51.) However, this shortcoming could be cured by information showing that CW8 was in a position to know firsthand that the separate processing and underwriting systems caused many loans to need extensions. With respect to Allegation 9:2, the information provided about CW9 does not establish how or why he or she would know when Optis was designed or how the fact that Optis had been designed during a period of falling interest rates would affect its operation. As to Allegation 10, there is no information about CW10 that suggests why or how CW10 would know what “WAMU” knew or didn’t know. If CW10 himself or herself did not know, that is one matter; to allege that “WAMU” as an institution knew or didn’t know is a different matter altogether, requiring a different foundation or basis of knowledge. Finally, CW11 alleges that WAMU’s “multiple systems and the failure to properly integrate product offerings from its multiple acquisitions were major problems.” However, it is not clear how an individual hired to be an Optis release manager and who worked on unnamed “strategic projects” would come into this knowledge. Because the Court finds, as to these particular statements, that Plaintiffs’ confidential witnesses have not been described with “sufficient particularity to support the probability that a person in the position occupied by the source would possess the information alleged,” the Court must disregard the enumerated statements. As Plaintiffs do not allege any other direct evidence of knowing or reckless behavior, the Court must now assess the sufficiency of the circumstantial evidence of Defendants’ knowledge, actual or constructive. As the Court noted infra, the remaining confidential witness statements are sufficient to allege that (1) WAMU suffered technology problems affecting its ability to timely process and monitor loans after customers had locked in rates, (2) Optis was a failure and was never completely rolled out, and (3) WAMU’s failure to integrate its different technology platforms created significant problems, including insufficient and inaccurate reporting of data critical to its hedging operations. Plaintiffs allege that Defendants’ knowledge of this information can be inferred because of the nature of the statements they were making and the nature of these specific alleged operational problems. See Northpoint, 184 F.Supp.2d at 998 (“[I]t may be inferred that facts critical to a business’s core operations or important transaction are known to a company’s key officers.”). The Court agrees. In addition, as discussed below, because of the specific nature of the challenged statements, the Court finds that the complaint alleges with sufficient particularity that making the challenged statements without knowing whether they were accurate was actionably reckless. The facts alleged in the complaint show that WAMU needed to reassure the market that it could successfully integrate its many acquisitions and that it was well positioned to perform well in a potentially unstable interest rate environment. According to Plaintiffs, in order to do both of these, WAMU needed to have certain technological capabilities. Thus, WAMU’s assurances on both counts also amounted to an acknowledgment that its technology systems were adequate. Because of this, the Court finds that Plaintiffs have made sufficient allegations that technological capabilities were critical to WAMU’s core operations. In addition to the inferred statements about WAMU’s technological capabilities, Defendants made several statements expressly addressing WAMU’s technological capabilities. (See, e.g., Appendix A, Statements 11, 12, 14, 15.) For this reason, the Court finds that WAMU’s technological systems and the actions it was taking with respect to the systems amounted to an “important transaction” that would have been known to the officers making statements about them. Thus, the Court finds that Plaintiffs’ complaint sufficiently alleges that knowledge of WAMU’s various technology problems may be inferred to those Defendants making statements about them. To the extent that such knowledge cannot be inferred, the nature of Defendants’ statements is such that to make them without the requisite knowledge would be actionably reckless. Defendants Killinger and Casey stated emphatically that the problems plaguing the loan originations business had been resolved. (See, e.g., id., Statements 11, 12, 14, 15, 17.) In addition, Defendant Killinger assured the market that WAMU had sufficient technology for the future. {See, e.g., Statement 16, 19, 20, 21.) Defendant Oppenheimer’s statement, during or shortly after a time period when WAMU was rushing to assure investors that its loan originations problems had been contained, that WAMU was balancing its businesses in a very sophisticated fashion, was an express endorsement of the assurances Defendants Killinger and Casey had been making. For all the above reasons, the Court finds that Plaintiffs’ complaint shows with sufficient particularity that knowledge of WAMU’s technological problems may be attributed to Defendants Killinger, Casey, and Oppenheimer. In addition, because WAMU’s technological capabilities were apparently so crucial to its ability to perform as promised, the Court finds that Plaintiffs’ complaint sufficiently alleges that these defendants’ reckless misinformation, or failure, if any, to acquire the relevant knowledge before making the accused statements was deliberate or conscious recklessness. Finally, and again because of the importance of the subject matter, the Court finds that Plaintiffs’ circumstantial evidence regarding this factor alone is sufficient to establish scienter in the context of a motion to dismiss. Defendants Chapman, Longbrake, and Vanasek are in a slightly different s