Full opinion text
MEMORANDUM AND ORDER RE: MOTIONS TO DISMISS MARVIN J. GARBIS, District Judge. The Court has before it Defendants Merrill Lynch, Pierce, Fenner & Smith Inc.’s and RBC Capital Markets Corp.’s Motion to Dismiss [Document 70], Municipal Mortgage & Equity, LLC and the Individual Defendants’ Motion to Dismiss [Document 72], and Defendant Melanie Lundquist’s Motion to Dismiss [Document 76] and the materials submitted related thereto. The Court has held a hearing and had the benefit of the arguments of counsel. I. SUMMARY INTRODUCTION In the early 2000’s, Municipal Mortgage & Equity, LLC (“MuniMae”) was one of the country’s largest “syndicators” of low income housing tax credits (“LIHTCs”). As discussed more fully herein, MuniMae syndicated hundreds of LIHTC funds, retained a small (typically 1% or less) ownership interest, and received syndication and asset management fees for its services. Effective 2004, there was a drastic change to the accounting rules pertinent to MuniMae’s financial statements, requiring consolidation on its financial statements of substantially all of its LIHTC funds. In 2004, MuniMae (and its outside accountants) took the erroneous position that such consolidation was not required. However, by 2007, MuniMae announced that its position had been wrong and that its financial statements had to be restated. The cost of preparing the restatements was so enormous that MuniMae’s compliance efforts had serious effects on its financial condition. On January 28, 2008, MuniMae announced a cut to its long-standing dividend rate by 37% and stated that it would be delisted from the New York Stock Exchange (“NYSE”). The next day, MuniMae announced that it faced difficulties in its efforts to meet its restatement obligation. The price of MuniMae shares fell in response to these announcements. The instant case is brought on behalf of a class consisting of all investors who purchased MuniMae common stock between May 3, 2004 and January .29, 2008 (the “Class Period”). Plaintiffs present claims in eight counts: Count Statute and Rule Defendants One Exchange Act § 10(b) [15 U.S.C. § 78j(b) ] & Rule 10b-5_ MuniMae & Individual Defendants Two Exchange Act § 20(a) [15 U.S.C. § 78t(a) 1 Individual Defendants Three Securities Act § 11 [15 U.S.C. § 77k] MuniMae, Individual Defendants & Director Defendants Four Securities Act § 12(a)(2) U5 U.S.C. § 771(a)(2) 1 MuniMae Five Securities Act § 15 U5 U.S.C. § 77ol Individual Defendants & Director Defendants Six Securities Act § 11 [15 U.S.C. § 77k] MuniMae, Individual Defendants & Director Defendants Seven Securities Act § 12(a)(2) [15 U.S.C. § 771(a)(2) 1 MuniMae & Underwriter Defendants Eight Securities Act § 15 [15 U.S.C. § 77o] Individual Defendants & Director Defendants By the instant motions, Defendants seek dismissal of all claims. II. PLEADING STANDARDS A. In General A motion th dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a complaint. Pursuant to Federal Rule of Civil Procedure 8(a)(2), a complaint need only contain “a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the ... claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citations omitted). When evaluating a 12(b)(6) motion to dismiss, a plaintiff’s well-pleaded allegations are accepted as true and the complaint is viewed in the light most favorable to the plaintiff. However, conclusory statements or a “formulaic recitation of the elements of a cause of action” will not suffice. Id. A complaint must allege sufficient facts to “cross ‘the line between possibility and plausibility of entitlement to relief.’ ” Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir.2009) (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955). Inquiry into whether a complaint states a plausible claim is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. Thus, if the well-pleaded facts contained within a complaint “do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not shown—that the pleader is entitled to relief.” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)) (internal quotation marks omitted). B. Heightened Pleading for Fraud Where a claim alleges fraud or mistake, a party must “state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). To satisfy Rule 9(b)’s heightened pleading standard, a plaintiff must allege facts establishing the “who, what, when, where, and how” of the claimed fraud. U.S. ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 379 (4th Cir.2008) (citations omitted). In evaluating whether a cause of action must be pled with particularity, a court examines whether the claim requires an essential showing of fraud. Baltimore Cnty. v. Cigna Healthcare, 238 Fed.Appx. 914, 921 (4th Cir.2007). “Fraud is a generous tort, encompassing affirmative misrepresentations and omissions alike, its boundaries limited only by the imaginations of crafty and unprincipled minds.” Wamsley v. LifeNet Transplant Servs., 2011 WL 5520245, *4, 2011 U.S. Dist. LEXIS 130760, *9-12 (S.D.W.Va. Nov. 10, 2011) (citing Black’s Law Dictionary 731 (9th ed.2009), defining fraud as a “knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment”). Rule 9(b) applies to allegations under the Securities Act where those allegations “sound in fraud,” even though claims under Sections 11 and 12(a)(2) do not have fraud as an element. Cozzarelli v. Inspire Pharms., Inc., 549 F.3d 618, 629 (4th Cir.2008). C. Securities Fraud Actions A special pleading standard applies to certain elements of a securities fraud claim brought under Section 10(b) of the Exchange Act. To succeed in a Section 10(b) private suit, a plaintiff must prove “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation (that is, the economic loss must be proximately caused by the misrepresentation or omission).” Matrix Capital Mgmt. Fund, L.P. v. Bearing-Point, Inc., 576 F.3d 172, 181 (4th Cir.2009). Prior to the enactment of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), 109 Stat. 737, the sufficiency of a complaint for securities fraud under Section 10(b) of the Exchange Act was governed by the heightened pleading standard set forth in Federal Rule of Civil Procedure 9(b). Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 319, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). In 1995, Congress enacted the PSLRA, clarifying and strengthening the particularity requirements of Rule 9(b) as applied in the context of federal securities class action lawsuits. Under the PSLRA, to survive a motion to dismiss, a complaint for violation of the federal securities laws must meet the heightened pleading requirements set forth under 15 U.S.C. § 78u-4(b). First, any private securities complaint alleging that the defendant made a false or misleading statement must “specify each statement alleged to have been misleading [and] the reason or reasons why the statement is misleading.” 15 U.S.C. § 78u-4(b)(1)(B). Second, with respect to each act or omission, the plaintiff must “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” § 78u-4(b)(2). Thus, the PLSRA’s heightened pleading standard is applicable only to the scienter and misrepresentation elements of a § 10(b) claim. Teachers’ Ret. Sys. v. Hunter, 477 F.3d 162, 172 (4th Cir.2007). Loss causation must only be pled with “sufficient specificity,” consistent with Rule 9(b). Katyle v. Penn National Gaming, Inc., 637 F.3d 462, 471 (4th Cir.2011). As with any motion to dismiss for failure to state a claim on which relief can be granted, when faced with a Rule 12(b)(6) motion to dismiss a claim brought under Section 10(b) of the Exchange Act, district courts must consider the complaint in its entirety. The district court must accept all factual allegations in the complaint as true, and consider only such sources outside the complaint that are, in effect, deemed to be part of the complaint, for example, documents incorporated into the complaint by reference and matters of which a court may take judicial notice. Tellabs, 551 U.S. at 322, 127 S.Ct. 2499. If a complaint does not satisfy the pleading requirements of the PSLRA, upon motion of the defendant, the court must dismiss the complaint. 15 U.S.C. § 78u-4(b)(3)(A). III. FACTUAL ALLEGATIONS A. MuniMae’s LIHTC Syndications MuniMae, a Delaware corporation based in Baltimore, Maryland, became, by 2003, one of the country’s largest “syndicators” of low-income housing tax credits (“LIHTCs”). Federal income tax law includes LIHTCs to provide an incentive for developers to construct low-income rental housing. Frequently, low-income housing developers find it advantageous to sell these tax credits to a syndicator. The syndicator will form an investment fund (an “LIHTC Fund”) to invest in the developer’s low-income housing projects. The syndicator will assemble a group of investors to invest in the LIHTC Fund and obtain the benefit of the tax credits. As a syndicator, MuniMae would organize investors into “upper-tier partnerships” that held investments in multiple “lower-tier partnerships” developing affordable housing projects. MuniMae acted as a general partner of the LIHTC Funds with an ownership interest ranging from .1% to 1.0%. Compl. ¶ 20. Typically, MuniMae’s ownership share was larger than that of any single investor. MuniMae developed approximately three hundred of these LIHTC Funds, and received syndication and asset management fees for its services. B. The Consolidation Requirement 1. What Was Required To Be Consolidated? Prior to 2003, MuniMae’s financial reporting complied with Financial Accounting Standards Board (“FASB”) Accounting Research Bulletin No. 51. This required an enterprise’s financial statements to consolidate financial data of subsidiaries in which the enterprise had a majority voting interest. However, by 2003, after the Enron accounting scandal, the FASB decided that this approach was not sufficient to identify financial risks from “off-balance sheet” entities. Compl. ¶ 27. The FASB, therefore, drastically changed the reporting rules for consolidated financial statements. In early 2003, it adopted GAAP Financial Interpretation No. (“FIN”) 46 and, in December of that year, a revision, FIN 46R. Effective with the first quarter of 2004, FIN 46R defined a category of entities called “Variable Interest Entities” (“VIEs”) and required consolidation of VIE financial statements onto the financial statement of the VIE’s “primary beneficiary.” In 2004, MuniMae took the erroneous position that FIN 46R required consolidation on its financial statements for only some, not essentially all, of its LIHTC Funds. MuniMae announced in May 2004 that it had not consolidated LIHTC Funds with assets of $970.3 million and liabilities of $90.8 million. Compl. ¶ 128. MuniMae’s interpretation of FIN 49R was reviewed by MuniMae’s outside auditor, PricewaterhouseCoopers (“PwC”), which certified that MuniMae’s financial statements for the year ended December 31, 2004 were prepared in accordance with GAAP. See Mar. 16, 2005 Form 10-K at 63-63, Holland Ex. 10. Thereafter, until a January 2007 announcement that its interpretation had been erroneous, MuniMae repeatedly represented that it was in compliance with FIN 46R. 2. Cost of Consolidation The cost of compliance with the consolidation requirement became enormous and had serious effects on MuniMae’s financial condition. During the Class Period, MuniMae utilized Cash Available for Distribution (“CAD”), a non-GAAP measure of current earnings, as the relevant indicator of the Company’s ability to pay dividends. According to Defendants, the calculation of CAD was not materially affected by whether or not the LIHTC Funds were consolidated pursuant to FIN 46R. See MuniMae Defs.’ Mot. 8. However, the determination of CAD took into account costs such as those necessary to restate financial statements. Therefore, the costs of performing the financial restatements that ultimately took place were expense items that reduced. CAD, and thereby substantially impacted MuniMae’s payment of dividends. C. The Restatements 1. First Restatement On March 10, 2006, MuniMae announced that it had to restate its financial statements covering fiscal year 2002 through the third quarter of 2005 due to certain accounting errors and its previously filed financial statements could not be relied upon (the “First Restatement”). This First Restatement was necessary due primarily to the (1) recognition of syndication fees; (2) application of equity method accounting; (3) recognition of interest income; and (4) amortization of mortgage servicing rights. See Compl. ¶ 194. The press release stated that the First Restatement “does not impact [CAD] in any period.” Id. The Company completed the First Restatement and filed restated financials on June 22, 2006. According to Defendants, “[t]he First Restatement did not concern the issue of whether entities should be consolidated under FIN 46R.” Mot. Dismiss [Doc. 72] 8. 2. Second Restatement On September 13, 2006, MuniMae announced that it had to, again, restate its financial statements covering fiscal years 2003 through 2005. The Second Restatement was necessary to correct: (1) accounting for equity commitments related to affordable housing projects; (2) cash flow classification of cash received from investors in guaranteed tax credit equity funds; and (3) accounting for syndication fees. Compl. ¶ 220. MuniMae announced that “ ‘[t]he restatement will not impact cash available for distribution ... in any period, or the Company’s ability-to pay future distributions to common shareholders.’ ” Compl. ¶ 221. On October 26, 2006, MuniMae announced that it had dismissed PwC as its independent registered public accounting firm and hired KPMG to replace it. Oct. 26, 2006 Form 8-K, Holland Ex. 15. As part of this disclosure, MuniMae stated that “[d]uring the years ended December 31, 2005 and December 31, 2004 and through October 20, 2006, there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure or audit scope or procedure, which disagreements if not resolved to the satisfaction of PwC would have caused them to make reference thereto in their reports on [MuniMae’s] financial statements.” Id. MuniMae attached to its Form 8-K a letter from PwC that acknowledged and agreed with this assertion. Oct. 26, 2006 Form 8-K Ex. 16, Holland Ex. 15. On January 31, 2007, MuniMae announced that, as part of the Second Restatement, it was required to consolidate “substantially all” of its LIHTC Funds. Jan. 31, 2007 MuniMae Press Release, Holland Ex. 25. In May and July of 2007, MuniMae reiterated its need to consolidate the LIHTC Funds, stating that “it did not maintain effective policies and procedures over the identification of entities requiring consolidation,” and that these control deficiencies resulted in financial misstatements. May 4, 2007 Form 12b-25, Holland Ex. 16; July 11, 2007 Form 8-K, Holland Ex. 17. In August 2007, MuniMae announced that it had hired Navigant Consulting Company to assist with the restatement process, noting that 20 company employees and 72 consultants were working on the effort. Compl. ¶ 231. MuniMae stated that “the obvious downside to these efforts is expense .... we are not done with our assessment of the work remaining” and “we can’t completely assess the magnitude of unbudgeted fees for our outside auditors that will result from our restatement efforts.” August 7, 2007 Form 8-K Ex. 99.1, Holland Ex. 18. In November 2007, in conjunction with a dividend announcement, MuniMae announced that it had over 100 full-time consultants and employees working on the restatement, and that its “budget for the year did not contemplate external resources of nearly this magnitude and the costs will be very significant for this year and well into next year.” Compl. ¶ 235; Nov. 8, 2007 Form 8-K Ex. 99.2, Holland Ex. 19. However, it also noted that “management plans to ask the Board to maintain the current dividend policy.” Compl. ¶ 234; Nov. 8, 2007 Form 8-K Ex. 99.2, Holland Ex. 19. The Second Restatement was not concluded until MuniMae issued restated financial statements on February 13, 2009. D. Dividend Distributions MuniMae’s stock was attractive to investors because of its regular dividend distributions. See Hr’g Tr. 10 June 23, 2010. Despite the costs incurred in its efforts to comply with its consolidation requirements under FIN 46R, MuniMae continued to provide consistent increases in its quarterly dividend distribution throughout the Class Period. According to Plaintiffs, this gave a false impression of MuniMae’s financial condition. On November 2, 2007, MuniMae announced its 43rd consecutive increase in its quarterly distribution. However, at this time, MuniMae stated: Due to the costs incurred by the Company in connection with the Company’s previously announced restatement of its financial statements, it is possible that the dividend payout ratio for the 2007 fiscal year may exceed 100% of the Company’s net cash generated from operations for the fiscal year 2007. The exact payout ratio for 2007 will not be known until after the completion of the fiscal year. Compl. ¶233; Nov. 2, 2007 MuniMae Press Release, Holland Ex. 27. E. The January 2008 Announcements On January 28, 2008, MuniMae announced that it was cutting the dividend by 37%. MuniMae attributed the reduction in the dividend distribution to (1) the costs associated with the Company’s ongoing restatement of its financial statements; (2) the decision to conserve capital given the then-current volatility in the credit and capital markets; and (3) the desire to dedicate additional capital to its high-growth Renewable Energy Finance business. Compl. ¶ 237. On January 28, 2008 the Company also announced that it would be delisted from the NYSE as a result of its inability to complete its restatement by the NYSE-imposed March 3, 2008 deadline. Id. at ¶ 238. The price of MuniMae shares dropped approximately 47%, from $17.20 per share on January 28, 2008 to $9.19 per share on January 29, 2008, on unusually heavy trading volume of more than 3.7 million shares. Compl. ¶¶ 43, 239. On January 29, 2008, MuniMae announced that (1) the restatement involved analyzing over 200 variable interest entities, which would require analysis of more than 2,000 partnerships and 6,000 separate financial statements; (2) the Company had to create and implement a process to analyze these variable interest entities; (3) the restatement reached back 3 years and required analyzing 10 financial periods; and (4) due to MuniMae’s change in auditors, PwC’s work was not being relied upon. See Opp’n [Doc. 84] 14. The price of MuniMae shares fell further, to $7.13 per share. Compl. ¶¶ 44, 241. F. The Secondary Public Offering In early 2005, during the Class Period, MuniMae made allegedly actionable statements relating to a Secondary Public Offering (“SPO”). The parties dispute the effective date of the SPO. The SPO registration statement was filed on January 3, 2005, and was initially declared effective on January 14, 2005. On February 1, 2005, the Defendants filed a “prospectus supplement” that stated that the SPO Prospectus would be effective the following day, February 2, 2005, with a closing date of February 8, 2005. On February 2, 2005, MuniMae and the Underwriter Defendants commenced the secondary public offering of 2,575,000 shares of MuniMae common stock priced at $26.51 per share. A finalized version of the supplement was filed, pursuant to Rule 424(b)(5), on February 3, 2005. Opp’n [Doc. 86] 37. G. The Dividend Reinvestment Plan MuniMae made allegedly actionable statements that were incorporated by reference in its MuniMae’s Form S-3 Dividend Reinvestment Plan (“DRP”). The purpose of the Dividend Reinvestment Plan was to provide investors with a method to reinvest their cash dividends by purchasing additional “Growth Shares” of the company. Filed on September 4, 1997, the DRP registration statement incorporated by reference “[a]ll documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of th[e] Prospectus and prior to the termination of this offering.” Compl. ¶ 324. Thus, actionable statements made during the Class Period would be incorporated by reference in the Form S-3 Registration Statement. IV. DISCUSSION Plaintiffs’ Consolidated Amended Class Action Complaint (the “Complaint”) [Document 45] seeks remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), S.E.C. Rule 10b-5, and the Securities Act of 1933 (the “Securities Act”). The Exchange Act and S.E.C. Rule 10b-5 claims are brought on behalf of all persons who acquired MuniMae common stock between May 3, 2004 and January 29, 2008 (the “Class Period”), against MuniMae and six of MuniMae’s senior officers and directors: Chief Executive Officer (“CEO”) Michael L. Falcone (“Falcone”), Chairman and former CEO Mark K. Joseph (“Joseph”), former Executive Vice President and Chief Financial Officer (“CFO”) William S. Harrison (“Harrison”), former CFO Melanie M. Lundquist (“Lundquist”), former Chief Operating Officer and interim-CFO Charles M. Pinckney, and CFO David Kay (collectively, the “Individual Defendants”). The Securities Act claims are brought on behalf of all persons who purchased MuniMae common stock pursuant to the registration statement and prospectus filed with the S.E.C. in connection with MuniMae’s February 2, 2005 Secondary Public Offering (“SPO”) and all persons that purchased MuniMae Growth Shares pursuant to the registration statement and prospectus dated September 4, 1997 filed with the S.E.C. in connection with MuniMae’s Dividend Reinvestment and Growth Share Purchase Plan (the “DRP”). The Securities Act claims are brought against “the Securities Act Defendants”: the lead underwriters of the February 2, 2005 Secondary Public Offering of 2,575,-000 common shares: Merrill Lynch, Pierce, Fenner & Smith Inc. and RBC Capital Markets Corp. (collectively, the “Underwriter Defendants”); members of the MuniMae Board of Directors: Charles C. Baum, Richard O. Berndt, Robert S. Hillman, Douglas A. McGregor, Eddie C. Brown, Fred N. Pratt, Jr., and Arthur S. Mehlman (collectively the “Director Defendants”); and three of the Individual Defendants: Falcone, Harrison, and Joseph. MuniMae, the Individual Defendants, and the Director Defendants will collectively be referred to as the “MuniMae Defendants.” A. Exchange Act Claims (Counts One and Two) In Count One, Plaintiffs allege that MuniMae and the Individual Defendants violated Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and S.E.C. Rule 10b-5 promulgated thereunder. Plaintiffs allege that during the Class Period, these Defendants knowingly or recklessly engaged in a fraudulent scheme and made deceptive statements and omissions of material fact, the purpose and effect of which was to induce the Plaintiffs to purchase MuniMae shares at artificially inflated prices. In Count Two, Plaintiffs allege that the Individual Defendants violated Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), because they were controlling persons who, by virtue of their positions, influenced and controlled the decision-making of MuniMae, including the decisions to disseminate the allegedly false and misleading statements. 1. The Statute and Rule Section 10(b) of the Securities and Exchange Act of 1934 makes it unlawful “[t]o use or employ, in connection with the purchase and sale of any security registered on a national securities exchange ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [S.E.C.] may prescribe.” 15 U.S.C. § 78j(b). The Supreme Court has implied a private cause of action from the text and purpose of Section 10(b). See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 318, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). The Securities and Exchange Commission promulgated its Rule 10b-5 to implement Section 10(b), which makes it unlawful: (a) To employ any device, scheme, or artifice to defraud, (b) To make any untrue statement of a material fact or 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, or (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. 17 C.F.R. § 240.10b-5. 2. Elements of a Rule 10-5 Claim There are six basic elements of a Rule 10b-5 claim: (1) A material misrepresentation or omission by the defendant, (2) Scienter, (3) A connection between the misrepresentation or omission and the purchase or sale of a security, (4) Reliance upon the misrepresentation or omission, (5) Economic loss, and (6) Loss causation. Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157, 128 S.Ct. 761, 169 L.Ed.2d 627 (2008). These elements shall be addressed in turn. a. Material Misrepresentation or Omission Plaintiffs allege that many statements made during the class period constitute material misrepresentations or omissions. These allegations include assertions that: (1) Defendants falsely claimed that MuniMae had complied with FIN 46R in the Class Period roughly spanning 2004 to 2006. (2) Defendants concealed the fact that MuniMae had no processes in place to . consolidate the LIHTC Funds onto its financial statements. (3) Defendants falsely claimed that the financial restatements would not affect CAD or MuniMae’s dividend. (4) MuniMae concealed its disagreement with PwC about whether to consolidate the LIHTC Funds onto MuniMae’s financial statements. (5) Defendants concealed the scope and the significant costs of the restatement. Defendants do not admit that there were any material misrepresentations or omissions, but do not contend that Plaintiffs have failed to allege that there were some. b. Scienter Under the PSLRA, a plaintiff must “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” § 78u-4(b)(2). Scienter, in this context, is defined as “ ‘a mental state embracing intent to deceive, manipulate, or defraud.’ ” Tellabs, 551 U.S. at 319, 127 S.Ct. 2499 (quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193-94 & n. 12, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976)). Scienter can be established by alleging sufficient facts to show either that the statement or omission was made intentionally or with “severe recklessness” regarding the danger of deceiving the plaintiff. Teachers’ Ret. Sys. v. Hunter, 477 F.3d 162, 183-84 (4th Cir.2007). The Fourth Circuit has defined, for purposes of Section 10(b), a reckless act as one “so highly unreasonable and such an extreme departure from the standard of ordinary care as to present a danger of misleading the plaintiff to the extent that the danger was either known to the defendant or so obvious that the defendant must have been aware of it.” Matrix Capital Mgmt. Fund, L.P. v. BearingPoint, Inc., 576 F.3d 172, 181 (4th Cir.2009). In 2007, the Supreme Court in Tel-labs noted that, in determining the adequacy of an allegation of scienter, the proper inquiry is whether all of the facts alleged, taken collectively, give rise to a strong inference of scienter, not whether any individual allegation, scrutinized in isolation, meets that standard. 551 U.S. at 322-23, 127 S.Ct. 2499. In determining whether the pleaded facts give rise to a “strong” inference of scienter, the court must take into account plausible opposing inferences. Id. at 323, 127 S.Ct. 2499. It is not enough for a plaintiff to plead facts from which a reasonable person merely could infer that the defendant acted with the required intent; rather, plaintiffs must plead facts giving rise to a “strong,” “powerful,” or “cogent” inference. Id. “A complaint will survive ... only if a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged.” Id. at 324, 127 S.Ct. 2499. “ ‘In sum, the reviewing court must ask: When the allegations are accepted as true and taken collectively, would a reasonable person deem the inference of scienter at least as strong as any opposing inference?’ ” Matrix, 576 F.3d at 182 (quoting Tellabs, 551 U.S. at 326, 127 S.Ct. 2499). To the extent a plaintiff alleges fraud against a corporate defendant, the plaintiff must allege facts that support a strong inference of scienter with respect to at least one authorized agent of the corporation. Matrix, 576 F.3d at 182. Additionally, to the extent a plaintiff alleges fraud claims against individual defendants, the plaintiff must allege facts supporting a strong inference of scienter as to each defendant. Id. Plaintiffs contend that their allegations, viewed holistically, give rise to a cogent and compelling inference that MuniMae and the Individual Defendants misled the market intentionally or with severe recklessness. Plaintiffs allege the following indicia of scienter: (1) The Individual Defendants were the most senior executive and financial officers of MuniMae and thus had direct responsibility for and knowledge of public disclosures and financial statements; (2) Compliance with FIN 46R involved MuniMae’s core business of syndicating LIHTC Funds in which it was the industry leader; (3) Successive Chief Financial Officers resigned during the Class Period; (4) Based on the magnitude of the restatements, which took two and a half years to complete, and the magnitude of the value of the discrepancy (the financial statements understated liabilities by $1.9 billion), the underlying accounting problems must have been known to the Defendants; (5) PwC insisted on the consolidation of the LIHTC Funds prior to the First Restatement in March 2006; (6) Defendants disagreed with PwC regarding the consolidation of the LIHTC Funds and ultimately fired them; (7) The Individual Defendants knew about MuniMae’s noncompliance with FIN 46R as early as the First Restatement and understood the massive scale and exorbitant costs associated with the restatement project — -that is, that the restatement project required review of over 300 LIHTC Funds and consolidation of 230 LIHTC Funds, which involved reviewing more than 2,000 partnerships, preparing over 6,000 financial statements for 10 reporting periods, and redoing all of PwC’s work which could not be relied upon. (8) MuniMae did not have the automated systems in place to accomplish the consolidations, thereby necessitating significant, manual labor; (9) Defendants were motivated to keep the LIHTC Funds off its books in order to keep the LIHTC Funds’ operating losses and liabilities from interfering with MuniMae’s ability to maintain the leverage and debt ratios needed to the obtain the bank financing to fund its core investment activities; and (10) Defendants were motivated to artificially inflate the price of MuniMae stock so that they could profit from the inflated value through insider sales, the SPO, private placements, and corporate acquisitions. 1. Confidential Witnesses Many of Plaintiffs’ scienter allegations are based on information obtained from three confidential witnesses (referred to as “CW1”, “CW2”, and “CW3”). CW1 was the Administrative Assistant to MuniMae’s head of Internal Audit, Angela Barone, from June 2004 through June 2007 and continued to work at the Company in the Asset Management Department until April 2008. The Complaint states that During CWl’s tenure in Internal Audit, the Internal Audit Department conducted weekly meetings attended by the head of Internal Audit, the Audit Manager (Kim Huffman), a representative from IT (Michelle Smith and later Lisa Shank), and CW1. The purpose of the meetings was to give status reports on ongoing audit work. The meetings usually lasted approximately one hour. Half of the time, or about 30 minutes, was usually spent discussing FIN 46R and SAS 70. Frustration about the progress of work pursuant to FIN 46R was an ongoing complaint expressed at the weekly meetings.... The head of Internal Audit ... met with Defendant Falcone at least twice per month and regularly communicated the audit issues and frustration with FIN 46R compliance to Defendant Falcone. CW1 knew of Barone’s reports to Defendant Falcone because Barone reported at the weekly Internal Audit meetings Defendant Falcone’s reaction to Barone’s frustrations. Barone also spoke to Defendant Lundquist every day and kept her “in the loop” to the same extent as Defendant Falcone. Compl. ¶ 80. Thus, the Complaint specifies that CW1 personally attended meetings in his or her capacity as Administrative Assistant where frustrations related to FIN 46R were discussed. The Complaint reflects that some of CWl’s knowledge was gained by virtue of hearsay, and the allegations are very vague as to when any Defendant realized that the LIHTC Funds all needed to be consolidated onto MuniMae’s financial statements. CW1 also states that Defendant Falcone sent a memo to all MuniMae employees in the fall of 2006, presumably which CW1 received directly, regarding the restatement. The memo explained that the Company was restating its financials, that the auditing staff would be focusing all of their efforts on the restatement and would be required to work overtime, and that questions should be directed to Defendant Falcone or the comptroller. CW1 is vague as to the exact date of this memo, but “fall of 2006” is consistent with the announcement of the Second Restatement, which occurred on September 13, 2006. See Compl. ¶ 81. CW2 was an in-house certified public accountant who worked in MuniMae’s Baltimore headquarters from late 2005 through April 2007 and reported directly to Defendant Lundquist and Chief Accounting Officer Greg Thor (“CAO Thor”). The Complaint alleges, that according to CW2: In late 2005 and early 2006, CW2, Defendant Lundquist and CAO Thor began to quantify various accounting problems and determined that the Company needed to restate its financials.... [CAO] Thor’s primary role was reviewing the LIHTCEFs to determine if they should have been consolidated under FIN 46R.... [F]or each fund, they would review the contract and other documentation about the entity and then map out the deal to determine whether MuniMae was the primary beneficiary.... [A]t the time of the first restatement (by mid-2006), they had concluded that the primary beneficiary determinations for the tax credit equity funds had been done incorrectly and that most of the funds should have been consolidated. Compl. ¶ 82. Moreover, CW2 states that the Company’s outside auditors, PwC, and later, KPMG, communicated with MuniMae through the Company’s CFO, Harrison and later Lundquist. CW2 states that PwC was present at all Board of Directors meetings and discussed “riskier” accounting issues like FIN 46. Compl. ¶ 83. According to the Complaint, CW2 was involved in the First Restatement from the beginning and worked alongside various outside consultants. CW2 states that accountants from Deloitte were brought in to help with the project, and that Deloitte served as a project manager and facilitated communication between the team working on the restatement, which included Lundquist and Falcone, who, according to CW2, “were very involved in the restatement process in late 2005 and 2006.” Compl. ¶ 84. Throughout CW2’s tenure at MuniMae, Defendant Lundquist met with Defendant Falcone to provide him with updates regarding the restatement at least on a weekly basis and sometimes on a daily basis. During these meetings, Lundquist would repeatedly bring up FIN 46. Also, there were bi-weekly meetings attended by Defendants Lundquist and Falcone, as well as Thor and CW2, during which status updates on the restatement, including PowerPoint presentations, were given. These updates included information as to how many tax credit equity funds needed to be consolidated and the financial impact of consolidating these entities.... Through these meetings and presentations, Defendants Falcone and Lundquist had actual knowledge of the Company’s failure to comply with FIN 46R at the time of MuniMae’s first restatement, but they concealed this information from investors. Through their direct and personal involvement in the restatements, Defendants Falcone and Lundquist also had first-hand knowledge about the scope and massive scale of the restatement project and the efforts undertaken to consolidate over 230 VIEs as required by FIN 46R, but concealed from investors the fact that the costs of this project would have a devastating effect on MuniMae’s CAD and would threaten its ability to continue increasing quarterly distributions to shareholders. Compl. ¶ 84-85. CW2 also states that CAD was “a big focus of the company” and “all Falcone cared about.” Compl. ¶ 84. Finally, CW3 was hired as a staff accountant by MuniMae in 2000 and was eventually promoted to a position in the Internal Auditing Department as project manager for Sarbanes-Oxley Act compliance. As an Internal Auditing manager, CW3 reported to the head of Internal Audit, Angela Barone, and regularly attended meetings concerning MuniMae’s accounting policies with Defendants Falcone, Harrison and Joseph and later, Defendant Lundquist. CW3 left MuniMae in approximately March 2006, “just as it was announcing its first restatement.” Compl. ¶ 88. According to CW3, Defendants Falcone, Harrison, and Lundquist disagreed with PwC about the consolidation of tax credit equity funds pursuant to FIN 46R, and discussions about whether to restate went on for months prior to the First Restatement announcement in March 2006. CW3 attributed the need for the First Restatement to the “ ‘debate around FIN 46’s documentation process,’ ” which had “‘come to a head’” between PwC and MuniMae’s senior executives. Compl. ¶ 88. CW3 stated that the FIN 46 issues pertained to the consolidation of various tax credit equity funds and whether they should be considered VIEs. According to CW3, the PwC partner leading the MuniMae engagement insisted that the value of the LIHTC Funds be disclosed on MuniMae’s financial statements, and MuniMae argued with PwC about how to classify the LIHTC Funds and how to determine the percentage of ownership MuniMae held in each one. These arguments occurred in monthly meetings attended by CW3, Falcone, Harrison and later Lundquist, and Angela Barone. According to CW3, Defendant Joseph had been “ ‘fairly hands on’ ” with respect to these accounting issues. Compl. ¶ 88. CW3 also described MuniMae’s accounting as “ ‘always’ ” being in a state of “ ‘some confusion and chaos’ ” because of the Company’s rapid expansion, acquisition of multiple partnerships, and inadequate accounting staff to appropriately handle each transaction. Compl. ¶ 90. 2. Insider Trading Plaintiffs allege that the Defendants were motivated to commit fraud so they could improperly profit from insider stock sales. During the Class Period, three of the six Individual Defendants sold some of their MuniMae stocks. Plaintiffs allege that the sales by Defendants Joseph, Falcone and Harrison were suspicious due to the large percentage of holdings sold and the gross proceeds yielded as a result of those sales: • Harrison sold 77.91% of his Class Period holdings, realizing gross proceeds of $1,131,434. • Joseph sold 36.53% of his Class Period holdings, realizing gross proceeds of approximately $4,680,771. • Falcone sold 28.65% of his Class Period holdings, realizing gross proceeds of approximately $1,229,526. Plaintiffs also contend that the timing of some of the trades is suspicious. As described above, Plaintiffs rely on the confidential witnesses to allege that Falcone and Lundquist had actual knowledge that MuniMae had failed to comply with FIN 46R by mid-2006, by which time Falcone and Harrison attended monthly meetings to discuss disclosing the value of the LIHTC Funds on MuniMae’s financial statements, and Joseph was “ ‘fairly hands on’ with respect to these accounting issues.” Compl. ¶¶ 85, 88. Defendant Joseph’s single largest stock sale of the Class Period occurred just weeks before the First Restatement announcement (Feb. 21, 2006), and eight of Defendant Joseph’s ten highest-yielding trades during the Class Period occurred between January and May 2006 (around the time that CW2 and CW3 state that Defendants were aware of MuniMae’s violations of FIN 46R). Defendant Falcone’s largest-yielding trade during the Class Period occurred just weeks after the announcement of the First Restatement (on April 3, 2006). However, all of Harrison’s sales took place in early December 2004. 3. Other Indicia Plaintiffs include in their alleged indicia of scienter, the Individual Defendants’ involvement in the core business of MuniMae, the magnitude of the FIN 46R discrepancy, and the allegations that Defendants were motivated to avoid consolidation of the LIHTC Funds for other financial reasons. Plaintiffs’ theory is that MuniMae feared the uncertain effects of consolidation of the LIHTC Funds onto MuniMae’s financial statements and believed consolidation would hurt MuniMae because it would lead to a less favorable debt to equity ratio, would hinder MuniMae’s ability to maintain bank financing on affordable terms, and would impact MuniMae’s treatment of syndication and management fees. Once the need to consolidate the LIHTC Funds was disclosed, MuniMae and its officers were motivated to conceal the costs of the restatement to maintain the inflated share price. Plaintiffs further assert that: • The alleged scheme facilitated MuniMae’s ability to engage in acquisitions during the Class Period. • MuniMae and the Individual Defendants feared that the outcome of the Second Restatement could cause MuniMae to default on its net worth covenants, precipitating bankruptcy. See Compl. ¶¶ 254-56. • MuniMae was motivated to keep the LIHTC Funds off its financial statements so that it could more easily seek additional financing through the February 2005 Secondary Public Offering and raise additional capital through private offerings by MuniMae subsidiaries and by closing certain credit equity funds. • The magnitude of the costs of the restatement was so great — approximately $54M in 2007 — that MuniMae and its officers had to have known prior to the January 2008 disclosures that the costs were becoming so' great that they would impact the dividend. 4. Competing Inferences Defendants urge the Court to conclude that it is more likely that there were innocent rather than improper reasons for their behavior. They assert that MuniMae and its officers struggled with a difficult accounting rule that had a dramatic impact on MuniMae’s financial statements, and while doing so, made repeated disclosures in an attempt to keep its shareholders apprised of the developments and costs as they occurred. Defendants argue that the Complaint fails to plead a compelling and cogent inference of scienter because MuniMae disclosed all relevant information to its accountants, auditors, and investors; FIN 46R was a new and challenging accounting standard; MuniMae undertook its restatements on its own initiative; the costs of the restatement started to mount substantially in late 2007 when outside consultants were brought in; and MuniMae did made disclosures about the restatement and its costs throughout the class period, even if they were arguably inadequate. Defendants contend that no confidential witness states that the senior executives knew about the costs of the restatement long before the costs were disclosed, and Plaintiffs’ allegations with respect to the costs boil down to an argument that because the cost was so high, MuniMae and its executives should have known of the scale. Defendants also point out that PwC, a prestigious accounting firm, also struggled with the application of FIN 46R in this case. Defendants argue that the audited financial statements from PwC for 2004 and 2005 that said they were in compliance with GAAP, including FIN 46R, contradicts Plaintiffs’ contention that the relevant Defendants knew early in the class period that MuniMae had failed to comply with FIN 46R. In October 2006, MuniMae announced, and PwC agreed, that “[d]uring the years ended December 31, 2005 and December 31, 2004 and through October 20, 2006, there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure or audit scope or procedure, which disagreements if not resolved to the satisfaction of PwC would have caused them to make reference thereto in their reports on [MuniMae’s] financial statements.” Oct. 26, 2006 Form 8-K & Ex. 16, Holland Exs. 10 & 15. With respect to insider trading, Defendants argue that insider sales in this case were not unusual or suspicious because the sales took place early in the class period, well before the January 2008 disclosures, a declining number of insiders were selling shares, the percentage of holdings sold were not too great, and that Joseph and Falcone traded pursuant to non-discretionary S.E.C. Rule 10b5-l plans, thus, the trades were made automatically, and not at the defendants’ specific direction. 5. Holistic Scienter Analysis To evaluate whether Plaintiffs’ factual allegations give rise to a strong inference of scienter, the Court must first discuss whether they permit an inference of scienter. Matrix Capital Mgmt. Fund, L.P. v. BearingPoint, Inc., 576 F.3d 172, 183 (4th Cir.2009). “While we ultimately evaluate plaintiffs’ allegations of scienter holistically, we only afford their allegations the inferential weight" warranted by context and common sense.” Id. Then, the Court discusses “whether ‘a reasonable person would deem [any] inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged.’ ” Id. (quoting Tellabs, 551 U.S. at 324, 127 S.Ct. 2499). The Court will discuss Plaintiffs’ allegations in turn. a. Confidential Witnesses “When the complaint chooses to rely on facts provided by confidential sources, it must describe the sources with sufficient particularity to support the probability that a person in the position occupied by the source would possess the information alleged or in the alternative provide other evidence to support their allegations.” Teachers’ Ret. Sys., 477 F.3d at 174 (internal quotation marks and citations omitted); see also Lefkoe v. Jos. A Bank Clothiers, 2008 WL 7275126, at *7 (D.Md.2008) (Nickerson, J.) (relying on confidential source allegations where the complaint provided “job descriptions that suggest that the sources would have personal knowledge of the facts alleged and, in many cases, provides multiple sources to corroborate facts”). Hearsay allegations and bald assertions made by confidential witnesses will not defeat a Rule 12(b)(6) motion. In re Pall Corp., 2009 WL 3111777, *6, 2009 U.S. Dist. LEXIS 88240, *17-18 (E.D.N.Y. Sept. 21, 2009). Confidential witness allegations must be examined to consider the sources’ basis of knowledge, the reliability of the sources, the corroborative nature of other facts alleged, the coherence and plausibility of the allegations, and similar indicia. See id. (citations omitted). The main thrust of the Confidential Witness allegations is that: • Frustrations related to the application of FIN 46R were discussed in • weekly Internal Audit Department meetings as early as 2004; • In fall 2006 the internal audit staff were told that they would be focusing their efforts on the Second Restatement, • By mid-2006, Lundquist and others had concluded that most of the LIHTC Funds should have been consolidated; . • Falcone and Lundquist were aware of scope and scale of the restatement project but concealed its cost, • MuniMae “argued” with PwC about how to classify the LIHTC Funds and determine ownership, and • The PwC partner leading the MuniMae engagement “insisted” that the LIHTC Funds be consolidated on MuniMae’s financial statements prior to March 2006. See Compl. ¶¶ 80-88. There is no doubt that these allegations are somewhat supportive of an inference that MuniMae and some of the Individual Defendants acted with fraudulent intent. They would, if accurate, establish that in mid-2006 Defendant Lundquist and other accounting staff had concluded that the LIHTC Funds needed to be consolidated, a determination that was not announced until January 2007, after MuniMae had issued restated financial statements in June and July of 2006 with no such disclosure, and well after the announcement of the Second Restatement in September 2006. However, these confidential witness allegations are not inconsistent with the competing inference that Falcone, Lundquist, Joseph, and PwC struggled with the proper interpretation and application of FIN 46R to its business from the time of the standard’s inception in 2004 until January 2007, when MuniMae announced that substantially all of the LIHTC Funds would have to be consolidated. b. Insider Trading The significance that may be attributed to an allegation of motive depends on an analysis of a complaint in its entirety. Tellabs, 551 U.S. at 324, 127 S.Ct. 2499. Allegations of personal financial gain “may weigh heavily in favor of a scienter inference.” Id. “[I]nsider trading can imply scienter only if the timing and amount of a defendant’s trading were ‘unusual or suspicious.’”.Teachers’ Ret. Sys., 477 F.3d at 184. Whether an insider’s -sale of stock is “unusual in scope” depends on factors such as “the amount of profit made, the amount of stock traded, the portion of stockholdings sold, or the number of insiders involved.” In re Suprema Specialties, Inc. Sec. Litig., 438 F.3d 256, 277 (3d Cir.2006). The Court does not find the insider trading that took place in the instant case to be unusual or suspicious. The fact that only six insiders, and only three of the six Individual Defendants, sold shares during the Class Period is supportive of the defense position. See Acito v. IMCERA Group, 47 F.3d 47, 54 (2d Cir.1995); In re First Union Corp. Sec. Litig., 128 F.Supp.2d 871, 898 (W.D.N.C.2001). Moreover, while the overall value of the shares sold during the Class Period was up from before the Class Period, fewer insiders made sales. See Compl. ¶¶ 248-49 (charts comparing pre-Class Period insider trading to Class Period insider trading show that twelve insiders sold approximately $7 million in shares in the period leading up to the Class Period, whereas six insiders sold approximately $12 million in shares during the Class Period). The Court does not find the timing of the sales to be suspicious. While Harrison sold nearly 78%' of his holdings, he did so in early December 2004. This was well béfore the financial restatements and well before mid-2006, when, according to CW2, certain officers had knowledge that all of the LIHTC Funds would have to be consolidated. Joseph made 36 trades during the Class Period to sell 36.53% of his holdings at regular intervals every month starting in April 2005 through June 2006. While Plaintiffs note that Joseph’s highest sale took place in February 2006, shortly before the First Restatement announcement, and that eight of his ten largest sales were between January and May, 2006, Joseph had repeatedly sold the same number of shares in 2005 when the share price was lower (thus the sale proceeds were smaller). Falcone, who sold 28.65% of his holdings, did so mostly in 2004 (7 sales) and 2005 (7 sales), with only 2 sales taking place in 2006, and those sales were not out of line with his prior sales. See First Union Corp. Sec. Litig., 128 F.Supp.2d at 899-90 (finding that insiders sales were “of little probative value” when the bulk of the sales occurred prior to the time that most of the problems arose at the company, and many months before the allegedly corrective disclosure). Thus, any inference of fraudulent intent based on the timing and volume of Harrison and Falcone’s insider trading is very slight. Plaintiffs raise some inference of fraudulent intent with respect to Joseph, who allegedly was “ ‘fairly hands on’ ” with the accounting issues, and thus was aware of the discussions about FIN 46R that had been going on “for months” prior to the March 2006 announcement of the First Restatement. See Compl. ¶ 88. However, these sales began at regular intervals fairly early in 2005, and Joseph sold only 36.53% of his holdings, thus the inference of fraud created is hardly significant. c. Magnitude of Discrepancy Plaintiffs urge this Court to find that because the discrepancies revealed by the restatements were so astronomical, the Defendants must have known of the accounting problem. See In re Atlas Air Worldwide Holdings, Inc. Sec. Litig., 324 F.Supp.2d 474, 488-89 (S.D.N.Y.2004) (“When a company is forced to restate its previously issued financial statements, the mere fact that the company had to make a large correction is some evidence of scienter.”); In re MicroStrategy Inc. Sec. Litig., 115 F.Supp.2d 620, 636 (E.D.Va.2000) (“significant overstatements of revenue tend to support the conclusion that defendants acted with scienter”) (citations and internal quotation marks omitted). However, the nature of the discrepancy in this case does not lead to the inference that the Defendants acted with scienter. Here, MuniMae held a less than one percent interest in the 230 LIHTC Funds that were not initially consolidated, and as a result of the determination that it was the “primary beneficiary” according to FIN 46R it was required to consolidate all of the LIHTC Funds’ assets and liabilities onto its financial statements. Thus, the error had a vast effect on MuniMae’s cost of compliance. However, in a realistic sense, because MuniMae’s ownership interest in each LIHTC Fund was minor (1% or less), the practical impact of the consolidation on MuniMae’s viability (as distinct from the cost to prepare the restated financials) was not significant. In short, MuniMae was no Enron. A perhaps useful analogy may be provided in a hypothetical pollution context in which a manufacturer certified that its facility emitted no pollutants but had not utilized state of the art measuring devices. When forced, at great expense, to use the modern measuring devices, the company admitted that there was more than zero emission of pollutants but the amount was below the environmentally permitted level. d.Core Operations The LIHTC Funds were part of MuniMae’s core business. However, the alleged misstatements and omissions concerned the application of a challenging new accounting rule to the funds. Thus, it does not necessarily follow that the officers knew that their statements were false when made. “Although in some circumstances it may be reasonable to assume that officers of a company know of facts critical to the company’s core operations, that is not the case here.” In re Constellation Energy Group, Inc., 738 F.Supp.2d 614, 635 (D.Md.2010) (declining to apply the core operations inference where plaintiffs alleged that company executives should have known that downgrade collateral obligations were miscalculated despite the importance of liquidity to company’s core business); cf. In re Campbell Soup Co. Sec. Litig., 145 F.Supp.2d 574, 599 (D.N.J.2001) (finding that it was fair to infer that Campbell Soup Co. executives had pertinent knowledge about quarter-end soup discounting practices and related accounting effects). e.Other Motivation Plaintiffs’ allegations that the alleged fraud enabled MuniMae to benefit from a more favorable debt to equity ratio and an artificially inflated stock price are not persuasive allegations of scienter. The SPO took place in early 2005, near the beginning of the Class Period, at a time when FIN 46R was being discussed. No Confidential Witness alleges that any Defendant knew that FIN 46R had been applied incorrectly at this time. Similarly, one of the two acquisitions relied upon by Plaintiffs took place early on, in June 2005, although the other took place in May 2006. Plaintiffs’ allegations related to obtaining favorable financing and avoiding default on debt covenants are nonspecific. “Courts have repeatedly rejected these types of generalized motives — which are shared by all companies — as insufficient to plead scienter under the PSLRA.” Ottmann v. Hanger Orthopedic Group, Inc., 353 F.3d 338, 352 (4th Cir.2003) (emphasis in original); see also Cozzarelli v. Inspire Pharm. Inc., 549 F.3d 618, 627 (4th Cir.2008) (post-Tellabs) (“Indeed, the motivations to raise capital or increase one’s own compensation are common to every company and thus add little to an inference of fraud.”). While the Court considers these allegations alongside the others in the holistic scienter analysis required by Tellabs, 551 U.S. at 326, 127 S.Ct. 2499, these allegations are not inherently suspicious, as the same can be said of most any other company. f.Class Period Disclosures During the Class period, MuniMae made repeated disclosures about the cost and difficulty of the restatement project. This, the Court finds, tends to negate an inference that MuniMae was intentionally or recklessly misleading investors. “A disclosure that meaningfully alerts investors to the risk that financial information is not accurate may suggest that the individuals responsible for the disclosure did not knowingly (or perhaps not even recklessly) misstate the underlying financial information.” Matrix, 576 F.3d at 187-89 (finding that, under the circumstances, a class period disclosure made about internal control deficiencies lent some weight to the “inference that defendants were not acting with scienter but rather were endeavoring in good faith to inform investors of their internal control and financial reporting problems.”). As in Matrix, the fact that MuniMae repeatedly alerted financial investors that it needed to restate its financials, that its internal accounting controls were deficient, that it had hired outside consultants, and that the costs of the restatements were very significant and beyond what had been contemplated, tends to negate the inference of scienter. See id. 6. Scienter Conclusion a. All Defendants On balance, the Court finds that Plaintiffs have not created a cogent or compelling inference that MuniMae or any of the Individual Defendants acted knowingly or recklessly, in a way that “embrac[ed] intent to deceive, manipulate, or defraud.” Tellabs, 551 U.S. at 319, 127 S.Ct. 2499. The Court finds the inference that Defendants nefariously avoided consolidating the LIHTC Funds onto MuniMae’s financial statements for fear of the unknown, and then nefariously avoided revealing the true cost of the restatement, to be at the low end of plausibility. The competing inference offered by Defendants — that they struggled with a new and difficult accounting rule that ultimately required a restatement that was more expensive and had a greater impact on their bottom line than they had anticipated — is more compelling. “[W]hen the facts as a whole more plausibly suggest that the defendant acted innocently