In re Key Energy Services, Inc. Securities Litigation (166 F. Supp. 3d 822, 2016)

OPINION AND ORDER

MELINDA HARMON, UNITED STATES DISTRICT JUDGE

The above referenced securities-fraud, putative class action alleges material misrepresentations and omissions by Defendants regarding Key Energy Services, Inc.’s (“Key’s”) financial condition and the future of its business, leading to inflated stock prices in violation of §§ 10(b), control person liability under 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78j(b) and 78t(a), as amended by the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), 15 U.S.C. § 78u-4(b)(2), et seq., Securities and Exchange Commission (“SEC”) Rule 10b-5, 17 C.F.R. § 240.10b-5, and by the Foreign Corrupt Practices Act of 1977 (the “FCPA”), 15 U.S.C. § 78dd-1, et al., by overstatement of lucrative business opportunities in foreign countries despite significant, highly publicized risks, particularly in Mexico and Russia, and by failure to disclose serious deficiencies in Key’s internal control systems to protect Key from the threat of FCPA violations and to attract and maintain investor interest in Key’s business operations in areas known for corruption.

Pending before the Court are two motions to dismiss the Consolidated Amended Complaint (instrument #37) of Lead Plaintiff Inter-Local Pension Fund of the Graphic Communications of the International Brotherhood of Teamsters, pursuant to the PSLRA and Federal Rules of Civil Procedure 9(b) and 12(b)(6), filed by (1) Defendants Key Energy Services, Inc. (“Key”), Richard J. Alario (“Alario”), J. Marshall Dodson (“Dodson”), and Newton W. “Trey” Wilson III (“Wilson”) (#49); and (2) Defendant Taylor M. Whichard, III (#50), who also joins in #49.

This action is brought on behalf of a putative class composed of all persons and entities, excluding Defendants and their affiliates, who or which purchased or acquired Key’s common stock from September 4, 2012 to July 17, 2014 (the “Class Period”).

I. Standards of Review

A. Rule 12(b)(6)

When a district court reviews a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), it must construe the complaint in favor of the plaintiff and take all well-pleaded facts as true. Randall D. Wolcott, MD, PA v. Sebelius, 635 F.3d 757, 763 (5th Cir.2011), citing Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir.2009). The plaintiffs legal conclusions are not entitled to the same assumption. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)(“The tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.”), citing Bell Atlantic Corp. v. Twombly, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); Hinojosa v. U.S. Bureau of Prisons, 506 Fed.Appx. 280, 283 (5th Cir.2012).

“While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, ... a plaintiffs obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.... ” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007)(citations omitted). “Factual allegations must be enough to raise a right to relief above the speculative level.” Id. at 1965, citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236 (3d ed. 2004)(“[T]he pleading must contain something more ... than ... a statement of facts that merely creates a suspicion [of] a legally cognizable right of action”). “Twombly jettisoned the minimum notice pleading requirement of Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)[“a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief’], and instead required that a complaint allege enough facts to state a claim that is plausible on its face.” St. Germain v. Howard, 556 F.3d 261, 263 n. 2 (5th Cir.2009), citing In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir.2007)(“To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead ‘enough facts to state a claim to relief that is plausible on its face.’”), citing Twombly, 127 S.Ct. at 1974). “ ‘A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’ ” Montoya v. FedEx Ground Package System, Inc., 614 F.3d 145, 148 (5th Cir.2010), quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The plausibility standard is not akin to a “probability requirement,” but asks for more than a “possibility that a defendant has acted unlawfully.” Twombly, 550 U.S. at 556, 127 S.Ct. 1955. Dismissal is appropriate when the plaintiff fails to allege “ ‘enough facts to state a claim to relief that is plausible on its face’ ” and therefore fails to “ ‘raise a right to relief above the speculative level.’ ” Montoya, 614 F.3d at 148, quoting Twombly, 550 U.S. at 555, 570, 127 S.Ct. 1955.

In Ashcroft v. Iqbal, 556 U.S. at 679, 129 S.Ct. 1937, the Supreme Court stated that “only a complaint that states a plausible claim for relief survives a motion to dismiss,” a determination involving “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” “[Tjhreadbare recitals of the elements of a cause of action, supported by mere conclusory statements do not suffice” under Rule 12(b). Iqbal, 129 S.Ct. at 1949. The plaintiff must plead specific facts, not merely conclusory allegations, to avoid dismissal. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir.2000). “Dismissal is proper if the complaint lacks an allegation regarding a required element necessary to obtain relief....” Rios v. City of Del Rio, Texas, 444 F.3d 417, 421 (5th Cir.2006), cert. denied, 549 U.S. 825, 127 S.Ct. 181, 166 L.Ed.2d 43 (2006).

Dismissal under Rule 12(b)(6) is proper not only where the plaintiff fails to plead sufficient facts to support a cognizable legal theory, but also where the plaintiff fails to allege a cognizable legal theory. Kjellvander v. Citicorp, 156 F.R.D. 138, 140 (S.D.Tex.1994), citing Garrett v. Commonwealth Mortgage Corp., 938 F.2d 591, 594 (5th Cir.1991); ASARCO LLC v. Americas Min. Corp., 382 B.R. 49, 57 (S.D.Tex.2007). “A complaint lacks an ‘arguable basis in law* if it is based on an indisputedly merit-less legal theory’ or a violation of a legal interest that does not exist.” Ross v. State of Texas, Civ.A. No. H-10-2008, 2011 WL 5978029, at *8 (S.D.Tex. Nov. 29, 2011).

When a plaintiffs complaint fails to state a claim, the court should generally give the plaintiff at least one chance to amend the complaint under Rule 15(a) before dismissing the action with prejudice. Great Plains Trust Co v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329 (5th Cir.2002)(“District courts often afford plaintiffs at least one opportunity to cure pleading deficiencies before dismissing a case, unless it is clear that the defects are incurable or the plaintiffs advise the court that they are unwilling or unable to amend in a manner that will avoid dismissal.”); United States ex rel. Adrian v. Regents of the Univ. of Cal., 363 F.3d 398, 403 (5th Cir.2004)(“Leave to amend should be freely given, and outright refusal to grant leave to amend without a justification ... is considered an abuse of discretion, [citations omitted]”). The court should deny leave to amend if it determines that “the proposed change clearly is frivolous or advances a claim or defense that is legally insufficient on its face.... ” 6 Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Proc. § 1487 (2d ed. 1990).

“Rule 12(b) is not a procedure for resolving contests about the facts or the merits of a case.” Gallentine v. Housing Authority of City of Port Arthur, Tex., 919 F.Supp.2d 787, 794 (E.D.Tex.2012), citing 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure: Civil 2d § 1356, at 294 (1990).

As noted, on a Rule 12(b)(6) review, although generally the court may not look beyond the pleadings, the Court may examine the complaint, documents attached to the complaint, and documents attached to the motion to dismiss to which the complaint refers and which are central to the plaintiffs claim(s), as well as matters of public record. Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir.2010), citing Collins, 224 F.3d at 498-99; Cinel v. Connick, 15 F.3d 1338, 1341, 1343 n. 6 (5th Cir.1994). See also United States ex rel. Willard v. Humana Health Plan of Tex., Inc., 336 F.3d 375, 379 (5th Cir.2003)(“the court may consider ... matters of which judicial notice may be taken”). Taking judicial notice of public records directly relevant to the issue in dispute is proper on a Rule 12(b)(6) review and does not transform the motion into one for summary judgment. Funk v. Stryker Corp., 631 F.3d 777, 780 (5th Cir.2011). “A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b).

B. Rule 9(b)

Federal Rule of Civil Procedure 9(b) provides,

In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person must be averred generally.

“In every case based upon fraud, Rule 9(b) requires the plaintiff to allege as to each individual defendant ‘the nature of the fraud, some details, a brief sketch of how the fraudulent scheme operated, when and where it occurred, and the participants.” Hernandez v. Ciba-Geigy Corp. USA, 200 F.R.D. 285, 291 (S.D.Tex.2001).

Unlike the alleged fraud, Rule 9(b) allows a plaintiff to plead intent to deceive or defraud generally. Nevertheless a mere conclusory statement that the defendant had the required intent is insufficient; the plaintiff must set forth specific facts that raise an inference of fraudulent intent, for example, facts that show the defendant’s motive. Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1068 (5th Cir.1994)(“ Although scienter may be averred generally, ease law amply demonstrates that pleading scienter requires more than a simple allegation that a defendant had fraudulent intent. To plead scien-ter adequately, a plaintiff must set forth specific facts that support an inference of fraud.”); Melder v. Morris, 27 F.3d 1097, 1102 (5th Cir.1994).

The particularity requirement of Rule 9(b) also governs a conspiracy to commit fraud. Southwest Louisiana Healthcare System v. MBIA Ins. Corp., No. 05-1299, 2006 WL 1228903, *5 & n. 47 (W.D.La. May 6, 2006); Hernandez v. Ciba-Geigy Corp. USA, No. Civ. A. B-00-82, 2000 WL 33187524, *4 (S.D.Tex. Oct. 17, 2000)(“The weight of Fifth Circuit precedent holds that a civil conspiracy to commit a tort that sounds in fraud must be pleaded with particularity.”); In re Ford Motor Co. Vehicle Paint Litigation, No. MDL 1063, 1994 WL 426548, *34 (E.D.La. July 30, 1996); and Castillo v. First City Bancorporation of Texas, Inc., 43 F.3d 953, 961 (5th Cir.1994).

The Fifth Circuit, although construing Rule 9(b) strictly, has recognized an exception and permits the requirements to be “relaxed” where facts relating to the fraud are “peculiarly within the perpetrator’s knowledge”; then the alleged fraud “may be pled on information and belief, provided the plaintiff sets forth the factual basis for his belief.” United States ex rel. Russell v. Epic Healthcare Management Group, 193 F.3d 304, 308 (5th Cir.1999), citing United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir.1997)(warning that thq exception “must not be mistaken for license to base claims of fraud on speculation and conclusory allegations.”). The relaxed standard is not applicable where the information is available from another source or where the plaintiff fails to allege a factual basis for his beliefs. Sealed Appellant I v. Sealed Appellee I, 156 Fed.Appx. 630, 634 (5th Cir.2005)(plaintiff must allege sufficient factual basis for his belief defendant committed fraud, e.g., particular documents containing false statements, identified by number, date or otherwise, or explain how he tried, but failed to obtain the information, whom he contacted, etc.).

A dismissal for failure to plead with particularity in accordance with Rule 9(b) is treated as a Rule 12(b)(6) dismissal for failure to state a claim. Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir.1996). If it appears that given an opportunity to amend the pleading, the plaintiff would be able to state a claim upon which relief could be granted, the court should grant leave to amend. People’s Choice Home Loan, Inc. v. Mora, No. 3:06-CV-1709-G, 2007 WL 708872, *4 (N.D.Tex. Mar. 7, 2007), citing Kennard v. Indianapolis Life Ins. Co., 420 F.Supp.2d 601, 608-09 (N.D.Tex.2006).

C. The Exchange Act and the PSLRA’s Heightened Pleading Requirements

The PSLRA heightened the particularity requirements to plead securities fraud in two ways: (1) the plaintiff 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)(l)(B); and (2) for “each act or omission alleged” to be false or misleading, the plaintiff 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). Indiana Elec. Workers’ Pension Trust Fund IBEW v. Shaw Group, Inc., 537 F.3d 527, 533 (5th Cir.2007). Rule 9(b) requires the plaintiff in a securities fraud suit to “ ‘specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.’ ” Southland Securities Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353, 362 (5th Cir.2004), quoting Williams v. WMX Technologies, Inc., 112 F.3d 175, 177-78 (5th Cir.1997), cert. denied, 522 U.S. 966, 118 S.Ct. 412, 139 L.Ed.2d 315 (1997). See 15 U.S.C. § 78u-4. In other words, “ ‘[pjleading fraud with particularity in this circuit requires ‘time, place and contents of the false representations, as well as the identity of the person making the misrepresentation and what [that person] obtained thereby.’ ” Williams, 112 F.3d at 177 (5th Cir.1997), quoting Tuchman, 14 F.3d at 1068. “ ‘In eases concerning fraudulent misrepresentation and omission of facts, Rule 9(b) typically requires the claimant to plead the type of facts omitted, the place in which the omissions should have appeared, and the way in which the omitted facts made the representations misleading.’” Carroll v. Fort James Corp., 470 F.3d 1171, 1174 (5th Cir.2006), quoting United States ex rel. Riley v. St. Luke’s Hosp., 355 F.3d 370, 381 (5th Cir.2004). These facts “must be laid out before access to the discovery process is granted.” Williams, 112 F.3d at 178.

The Fifth Circuit does not permit group pleading in securities fraud suits. Owens v. Jastrow, 789 F.3d 529, 537 (5th Cir.2015), citing Southland, 365 F.3d at 365 (“[T]he PSLRA requires the plaintiffs to distinguish among those they sue and enlighten each defendant as to his or her particular part in the alleged fraud.... [W]e do not construe allegations contained in the [second amended complaint] against ‘defendants’ as a group as properly imputable to any particular defendant unless the connection between the individual defendant and the allegedly fraudulent statement is specifically pleaded.”). Group pleading or group publishing doctrine fails to satisfy the heightened pleading standards of the PSLRA. Southland, 365 F.3d at 363 n. 9.

II. Relevant Substantive Law

Exchange Act and the PSLRA

“[T]o state a claim under section 10(b) of the 1934 [Exchange] Act and Rule 10b-5, a plaintiff must allege, in connection with the purchase or sale of securities, ‘(1) a misstatement or an omission (2) of material fact (3) made with scienter (4) on which plaintiff relied (5) that proximately caused [the plaintiffs] injury.’ ” Nathenson v. Zonagen, Inc., 267 F.3d 400, 406-07 (5th Cir.2001), quoting Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1067 (5th Cir.1994). See also Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157, 128 S.Ct. 761, 169 L.Ed.2d 627 (2008)(to state a claim that a defendant made material misrepresentations or omissions in violation of § 10(b) and Rule 10b-5, a plaintiff must allege “(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.”). The PSLRA, 15 U.S.C. § 78u-4(b)(l) mandates,

In any private action arising under this chapter in which the plaintiff alleges that the defendant-

(A) made an untrue statement of a material fact; or

(B) omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances in which they were made, not misleading;

the complaint shall specify each statement alleged to have been misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all the facts on which that belief is formed.

See, e.g., ABC Arbitrage Plaintiffs Group v. Tchuruk, 291 F.3d 336, 349-50 (5th Cir.2002).

An untrue statement is “material” under section 10(b) of the Exchange Act and Rule 10b-5 if there is a “ ‘substantial likelihood that’ the false or misleading statement ‘would have been viewed by the reasonable investor as having altered the ‘total mix’ of information made available,’ ” or in other words, “if there is a substantial likelihood that a reasonable investor would consider the information important in making a decision to invest.” Nathenson, 267 F.3d at 418, quoting Basic, Inc. v. Levinson, 485 U.S. 224, 231-32, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988); R & S Technical Servs. Ltd. v. Commodity Futures Trading Comm’n, 205 F.3d 165, 169 (5th Gir.)(citing TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976)), cert. denied, 531 U.S. 817, 121 S.Ct. 54, 148 L.Ed.2d 22 (2000).

For the “made with scienter” requirement, the PSLRA, 15 U.S.C. § 78u-4(b)(2), states, “In any private action under this chapter in which the plaintiff may recover money damages on proof that the defendant acted with a particular state of mind, the complaint shall, with respect to each act or omission alleged to violate this chapter, state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” Nathenson, 267 F.3d at 407. In Ernst & Ernst v. Hochfelder, 425 U.S. 185, 194 n. 12, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976), without determining if scienter included recklessness, the Supreme Court defined scienter in the context of securities fraud as “ ‘a mental state embracing intent to deceive, manipulate or defraud.’ ” Id. at 408. The Fifth Circuit has since held that “severe recklessness” satisfies the scienter requirement. Nathenson, 267 F.3d at 407, citing Broad v. Rockwell Intern. Corp., 642 F.2d 929, 961-62 (5th Cir.1981)(“ ‘Severe recklessness is limited to those highly unreasonable omissions or misrepresentations that involve not merely simple or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and that present a danger of misleading buyers or sellers which is either known to the defendant or is so obvious that the defendant must have been aware of it.’ ”), quoting Sundstrand Corp. v. Sun Chemical Corp., 553 F.2d 1033, 1039-40 (7th Cir.), cert. denied, 434 U.S. 875, 98 S.Ct. 225, 54 L.Ed.2d 155 (1977). Plaintiffs may satisfy the scienter requirement by allegations of intentional misconduct or of severe recklessness, which “resembles a slightly lesser species of intentional misconduct.” Nathenson, 267 F.3d at 408-09. Circumstantial evidence of such conscious behavior or severe recklessness is sufficient to support a strong inference of scienter. Id. at 410, citing Greebel v. FTP Software, Inc., 194 F.3d 185, 195 (1st Cir.1299)(“Congress plainly contemplated that scienter could be proven by inference, thus acknowledging the role of indirect and circumstantial evidence.”). Usually “ ‘the mere publication of inaccurate accounting figures, or failure to follow GAAP, without more, does not establish scienter.’ ” Shaw Group, 537 F.3d at 534, quoting Barrie v. Intervoice-Brite, Inc., 397 F.3d 249, 264 (5th Cir.2005). “To plead scienter adequately, plaintiffs must state with particularity facts giving rise to a strong inference that the party knew that it was publishing materially false information, or that the party was severely reckless in publishing such information.” Id. Plaintiffs may not rely on a general assertion that Defendants knew about a particular bribe or a specific accounting violation or internal control problem because of their positions in the company, because they are officers, or because of their day-to-day involvement in the company; instead there must be specific allegations of facts showing that they actually knew about a particular accounting violation, bribe, or internal control problem. Abrams, 292 F.3d at 432; Fin. Acquisition Partners, LP v. Blackwell, 440 F.3d 278, 287 (5th Cir.2006); Shaw Group, 537 F.3d at 540-41.

In rejecting the Second Circuit’s “motive and opportunity” pleading standard, the Fifth Circuit has concluded, “What must be alleged is not motive and opportunity as such, but particularized facts giving rise to a strong inference of scienter. Appropriate allegations of motive and opportunity may meaningfully enhance the strength of the inference of scienter, but it would seem to be a rare set of circumstances indeed where those allegations alone are both sufficiently persuasive to give rise to a scienter inference of the necessary strength and yet at the same time there is no basis for further allegations also supportive of that inference.” Id. at 412. In evaluating whether pleaded facts give rise to a strong (i.e., “a powerful or cogent”) inference of scienter, the court must “assess all the allegations holistically,” following a three-step procedure “geared to the PSLRA’s twin goals: to curb frivolous, lawyer-driven litigation, while preserving investors’ ability to recover on meritorious claims.” Tellabs, Inc. v. Makor Issues & Rights, 551 U.S. 308, 326, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). As the first step, the court accepts factual allegations in the pleadings as true; second, the court must review the entire complaint, including documents incorporated by reference and matters of which the court should take judicial notice; and third, the court must consider all plausible inferences, both supporting and opposing a strong inference of scienter. Id. at 322-23, 127 S.Ct. 2499 (“The inquiry is inherently comparative: How likely is it that one conclusion, as compared to others, follows from the underlying facts.”). To be a “strong” inference of scienter an inference must be more that merely plausible or reasonable under the Iqbal standard; it will survive a motion to dismiss “only if a reasonable person would find it cogent and at least as compelling an any opposing inference that could be drawn from the facts alleged,” taken collectively. Id. at 324, 127 S.Ct. 2499 “The inference that the defendant acted with scienter need not be irrefutable ... or even the ‘most plausible of competing inferences.’ ... Yet the inference must be more than merely ‘reasonable’ or permissible’-it must be' cogent, thus strong in light of other explanations.” Id. at 324, 127 S.Ct. 2499 (citations omitted)(holding that “[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.”). Circumstantial evidence can support a strong inference of scienter. Nathenson, 267 F.3d at 410.

The Fifth Circuit has held that “ ‘pleading[s] of scienter may not rest on the inference that defendants must have been aware of the misstatement based on their positions with the company.’ ” Shaw Group, 537 F.3d at 535, quoting Abrams v. Baker Hughes, Inc., 292 F.3d 424, 432 (5th Cir.2001).

If the plaintiff fails to satisfy this scienter requirement, the district court “ ‘shall,” on defendant’s motion, ‘dismiss the complaint.’ ” Id. at 407, citing § 78u-4(b)(3).

Finally, regarding the reliance element in section 10(b) of the Exchange Act and Rule 10b-5, the Fifth Circuit opined in Abell v. Potomac Ins. Co., 858 F.2d 1104, 1117-18 (5th Cir.1988), vacated on other grounds sub nom. Fryar v. Abell, 492 U.S. 914, 109 S.Ct. 3236, 106 L.Ed.2d 584 (1989),

“The element of reliance is the subjective counterpart to the objective element of materiality. Whereas materiality requires the plaintiff to demonstrate how a ‘reasonable’ investor would have viewed the defendants’ statements and omissions, reliance requires a plaintiff to prove that it actually based its decisions upon the defendants’ misstatements or omissions. ‘Reliance is causa sine qua non, a type of “but for” requirement: had the investor known the truth he would not have acted.” Huddleston [v. Herman and MacLean, 640 F.2d 534[, 549] (5th Cir.1981), rev’d in part on other grounds, 459 U.S. 375, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983).

Nathenson, 267 F.3d at 414, quoting Abell, 858 F.2d at 1117-18. “Reliance, in other words, generally requires that the plaintiff have known of the particular misrepresentation complained of, have believed it to be true and because of that knowledge and belief purchased or sold the security in question.” Id. Proof of reliance is necessary to establish a “ ‘proper connection between a defendant’s misrepresentation and a plaintiffs injury.’ ” Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds, — U.S. —, 133 S.Ct. 1184, 1192, 185 L.Ed.2d 308 (2013), citing Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804, 131 S.Ct. 2179, 2184, 180 L.Ed.2d 24 (2011).

Because the Supreme Court determined that requiring direct proof of individualized reliance “would place an unnecessarily unrealistic evidentiary burden on [a] plaintiff who has traded in an impersonal market,” and “effectively would” prevent plaintiffs “from proceeding with a class action” under Rule 23(b)(3), in Basic, Inc., 485 U.S. at 241-42, 245,108 S.Ct. 978, the Supreme Court approved of a rebuttable presumption of clásswide reliance by recognizing the “fraud-on-the-market theory” in an efficient market. As an alternative and practical way to balance “the substantive requirement of proof of reliance in securities cases against the procedural requisites of Federal Rule of Civil Procedure 23 and to meet the reliance requirement, the theory presumes that potentially significant, publicly distributed information is reflected in the price of a stock”. The high court described it succinctly as follows:

“The fraud on the market theory is based on the hypothesis that, in an open and developed securities market, the price of a company’s stock is determined by the available material information regarding the company and its business .... Misleading statements will therefore defraud purchasers of stock even if the purchasers do not directly rely on the misstatements.... The causal connection between the defendants’ fraud and the plaintiffs’ purchase of stock in such a case is no less significant than a case of direct reliance on misrepresentations.” Peil v. Speiser, 806 F.2d 1154, 1160-61 (CA3 1986).

Id. at 989. See also Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds, — U.S. —, 133 S.Ct. 1184, 1192, 185 L.Ed.2d 308 (2013)(“In Basic, we held that if a market is shown to be efficient, courts may presume that investors who traded securities in that market relied on public, material misrepresentations regarding those securities.”). “[A] plaintiff must make the following showings to demonstrate that the presumption of reliance applies in a given case: (1) that the alleged misrepresentations were publicly known, (2) that they were material, (3) that the stock traded in an efficient market, and (4) that the plaintiff traded the stock between the time the misrepresentation was made and when the truth was revealed.” Halliburton Co. v. Erica P. John Fund, Inc., — U.S. —, 134 S.Ct. 2398, 2408, 189 L.Ed.2d 339 (2014). The presumption can be rebutted by “any showing that severs the link between the alleged misrepresentation and either the price received (or paid) by the plaintiff, or his decision to trade at a fair market price,” e.g., that “the alleged misrepresentation did not, for whatever reason, actually affect the market price, or that a plaintiff would have bought or sold the stock even had he been aware that the stock’s price was tainted by fraud.” Id. The high court explained that “[r]equiring proof of individualized reliance from each member of the proposed plaintiff class effectively would have prevented respondents from proceeding with a class action, since individual issues then would have overwhelmed the common ones.” Basic, Inc., at 242, 108 S.Ct. 978. Where a case depends on the “fraud-on-the-market” presumption, “the complained of misrepresentation or omission [must] have actually affected the market price of the stock.” Nathenson, 267 F.3d at 415.

Under the PSLRA plaintiffs bear the burden of showing that the defendants’ act or omission caused the economic loss for which plaintiffs seek to recover damages. 15 U.S.C. § 78u-4(b)(4). Under Rule 10b-5 Plaintiffs must allege proximate causation as well as economic loss. Dura Phamn., Inc. v. Broudo, 544 U.S. 336, 338, 125 S.Ct. 1627, 161 L.Ed.2d 577 (2005). Artificially inflated purchase price, by itself, will not constitute or proximately cause the requisite economic loss because at the time of purchase, plaintiff has not suffered a loss because the price is offset by ownership of the share at that time and because any link between the inflated price and any later economic loss is usually weak. Id. at 342, 125 S.Ct. 1627. While the Supreme Court did not discuss what must be pleaded to establish the causation and economic loss elements, it generally stated that the complaint must provide defendants “with notice of what the relevant economic loss might be or of what the causal connection might be between that loss and the misrepresentation.” Id. at 347, 125 S.Ct. 1627.

The Fifth Circuit has opined that under Dura Pharmaceuticals and Twombly, the plausibility standard in Rule 8(a) would apply to pleading causation and economic loss. Public Employees Retirement System of Mississippi, Puerto Rico Teachers Retirement System v. Amedisys, Inc., 769 F.3d 313, 320 (5th Cir.2014), cert. de nied, — U.S. —, 135 S.Ct. 2892, 192 L.Ed.2d 926 (2015). The Fifth Circuit has held that to demonstrate loss causation,

[T]he plaintiff must allege that when the ‘relevant truth’ about the fraud began to leak out or otherwise make its way into the marketplace, it caused the price of the stock to depreciate, and, thereby, proximately caused the plaintiffs economic harm. Loss causation in fraud-on-the-market cases can be demonstrated circumstantially by ’(1) identifying a ‘corrective disclosure’ (a release of information that reveals to the market the pertinent truth that was previously concealed or obscured by the company’s fraud); (2) showing that the stock price dropped soon after the corrective disclosure; and (3) eliminating other possible explanations for this price drop, so that the fact finder can infer that it is more probable than not that it was the corrective disclosure — as opposed to other possible depressive factors — that caused at least a ‘substantial’ amount of price drop.”

Id. at 320-21, quoting FindWhat Investor Group v. FindWhat.com, 658 F.3d 1282, 1311-12 (11th Cir.2011). The corrective disclosure may be comprised of “a series of partial disclosures.” Lormand v. US Unwired, Inc., 565 F.3d 228, 261 (5th Cir.2009). See also Greenberg v. Crossroads Sys., Inc., 364 F.3d 657, 665 (5th Cir.2004)(In demonstrating reliance and loss causation, “plaintiffs cannot trigger the presumption or reliance by simply offering evidence of any decrease in price following the release of negative information. Such evidence does not raise an inference that the stock’s price was actually affected by an earlier release of positive information. To raise an inference through a decline in stock price that an earlier false, positive statement affected a stock’s price, the plaintiffs must show that the false statement causing the increase was related to the statement causing the decrease.”). In the Fifth Circuit, “the testimony of an expert — along with some kind of analytical research or event study — is required to show loss causation.” Fener v. Operating Engineers Const. & Misc. Pension Fund (Local 66), 579 F.3d 401, 409 (5th Cir.2009). Nevertheless, opined the Fifth Circuit, “[N]either Fener not Halliburton even considers whether internal non-public disclosures from Defendants can provide the basis for establishing loss causation. As such, these cases do not disturb the established principle that proof of loss causation in the context of a fraud-on-the-market regiment is drawn from public data and public filings.” In re TETRA Technologies, Inc. Sec. Litig., Civ.A. No. 4:08cv0965, 2010 WL 1335431, at *3 (Bnkrty.S.D.Tex. Apr. 5, 2010)(finding the Fifth Circuit’s “bar for demonstrating loss causation” to be “a high one” and allowing additional merits discovery as a matter of law prior to submission of Plaintiffs expert report and seeking class certification). Plaintiffs in a private securities fraud suit do not have to prove loss causation (i.e., that the defendant’s deceptive conduct caused the investors’ claimed economic loss) before they can obtain class certification. Erica P. John Fund, Inc., — U.S. —, 134 S.Ct. 2398, 189 L.Ed.2d 339, abrogating Oscar Private Equity Investments v. Allegiance Telecom, Inc., 487 F.3d 261 (5th Cir.2007)(holding that plaintiffs must prove defendants’ alleged misrepresentations were the proximate cause of their economic loss to qualify for class certification).

As to the requirement that an allegation of a statement or omission “made on information and belief’ requires that the complaint “state with particularity all facts on which that belief is formed,” the Fifth Circuit adopts the Second Circuit’s interpretation in Novak v. Kasaks, 216 F.3d 300, 313 (2d Cir.), cert. denied, 531 U.S. 1012, 121 S.Ct. 567, 148 L.Ed.2d 486 (2000), which held that “ ‘plaintiffs who rely on confidential sources are not always required to name those sources, even when they make allegations on information and belief concerning false or misleading statements.’ ” ABC Arbitrage, 291 F.3d at 351-54. Observing that “ ‘the applicable provision of the law as ultimately enacted requires plaintiffs to plead only facts and makes no mention of the sources of these facts,’ ” the Second Circuit in Novak held,

“More fundamentally, our reading of the PSLRA rejects any notion that confidential sources must be named as a general matter. In our view, notwithstanding the use of the word, ‘all,’ paragraph (b)(1) does not require that plaintiffs plead with particularity every single fact upon which their beliefs concerning false or misleading statements are based. Rather, plaintiff need only plead with particularity sufficient facts to support those beliefs. Accordingly, where plaintiffs rely on confidential personal sources but also on other facts, they need not name their sources as long as the latter facts provide an adequate basis for believing that the defendants’ statements were false. Moreover, even if personal sources must be identified, there is no requirement that they be named, provided they are 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. In both these situations, the plaintiffs will have pleaded enough facts to support their belief, even though some arguably relevant fact have been left out. Accordingly, a complaint can meet the new pleading requirement imposed by paragraph (b)(1) by providing documentary evidence and/or a sufficient general description of the personal sources of the plaintiffs’ beliefs.”

ABC Arbitrage, 291 F.3d at 351-52, quoting Novak, 216 F.3d at 313-14. The Fifth Circuit, id. at 352, further quoted Novak, 216 F.3d at 314 n. 1:

“Paragraph (b)(1) is strangely drafted. Reading ‘all’ literally would produce illogical results that Congress cannot have intended. Contrary to the clearly expressed purpose of the PSLRA, it would allow complaints to survive dismissal where ‘all’ the facts supporting the plaintiffs information and belief were pled, but those facts were patently insufficient to support that belief. Equally peculiarly, it would require dismissal where the complaint pled facts fully sufficient to support a convincing inference if any known facts were omitted. Our reading of the provision focuses on whether the facts alleged are sufficient to support a reasonable belief as to the misleading nature of the statement or omission.”

The “other facts” can be documentary evidence (for which the plaintiff specifies the internal report(s), the person(s) who prepared them, when, which company officer reviewed them) that “provide[s] an adequate basis for believing that the defendants’ statement or omissions were false or misleading” or “descriptions of personal sources” with sufficient particularity “to support the probability that a person in the position occupied by the source would possess the information pleaded to support the allegations of false or misleading statements made on information and belief.” Id. at 353. Therefore only “if the other facts, i.e., do not provide an adequate basis for believing that the defendants’ statements were false and the descriptions of the personal sources are not sufficiently particular to support the probability that a person in the position occupied by the source would possess the information pleaded to support the allegations of false or misleading statements made on information and belief,” must the complaint name personal sources. Id. at 353. See also Shaw Group, 537 F.3d at 535.

Nevertheless in the wake of Tellabs, 551 U.S. at 757, 127 S.Ct. 2499, which requires comparative weighing of allegations and consideration of plausible nonculpable explanations for a defendant’s conduct to determine if there is a cogent and compelling inference of scienter, the Fifth Circuit opined in Shaw Group., id. at 535, that

Following Tellabs, courts must discount allegations from confidential sources. Higginbotham v. Baxter Int’l Inc., 495 F.3d 753, 756-57 (7th Cir.2007). Such [confidential] sources afford no basis for drawing the plausible competing inferences required by Tellabs. Id. at 757 (“Tellabs requires judges to weigh the strength of plaintiffs’ favored inference in comparison to other possible inferences; anonymity frustrates that process.”). At the very least, such sources must be described “with sufficient particularity to support the probability that a person in the position occupied by the source ... would possess the information pleaded_” ABC Arbitrage Plaintiffs Group v. Tchuruk, 291 F.3d 336, 353 (5th Cir.2002); see also Central Laborers’ [Pension Fund v. Integrated Elec. Services, Inc.], 497 F.3d [546,] 552 [(5th Cir.2007],

See also Local 731 I.B. of T. Excavators and Pavers Pension Trust Fund v. Diodes, Inc., 67 F.Supp.3d 782, 788 (E.D.Tex.2014)(“The Fifth Circuit cautions against reliance on confidential witnesses, even at the pleading stage. See [Shaw Group], 537 F.3d at 535. In order to establish the reliability of confidential witness statements, Plaintiffs allegations must include ‘particular job descriptions, individual responsibilities, and specific employment dates for the witnesses. See Cent. Laborers’ Pension Fund v. Integrated Elec. Servs., Inc., 497 F.3d 546, 552 (5th Cir.2007). But even if described ‘with sufficient particularity to support the probability that a person in the position occupied by the source ... would possess the information pleaded,’ the Court discounts allegations based on confidential witnesses. ABC Arbitrage, 291 F.3d at 353.”)(Schneider, J.); Dawes v. Imperial Sugar Co., 975 F.Supp.2d 666, 692-93 (S.D.Tex.2013)(Rosenthal, J.).

Where a plaintiff relies on documentary evidence with company-generated statistics instead of personal sources, the Fifth Circuit followed the Second Circuit’s standard in In re Scholastic Corp. Securities Litigation, 252 F.3d 63, 72-73 (2d Cir.), cert. denied sub nom. Scholastic Corp. v. Truncellito, 534 U.S. 1071, 122 S.Ct. 678, 151 L.Ed.2d 590 (2001). ABC Arbitrage, 291 F.3d at 356. While declining to require as a threshold requirement in every case that plaintiffs provide details about purported “negative internal reports, such as report titles, when they were prepared, who prepared them, to whom they were directed, their content, and the sources from which plaintiffs obtained this information,” the Fifth Circuit did agree that an “‘unsupported general claim of existence of confidential company sales reports that revealed the large decline in sales is insufficient to survive a motion to dismiss.’ ” ABC Arbitrage, 291 F.3d at 355-56. A sensible standard pleading on information and belief would require, “beyond bare pleadings,” “specifying who prepared the internal company reports, how frequently the reports were prepared and who reviewed them”; it would not require the pleading of detailed evidentiary matter. Id. at 356, quoting Scholastic, 252 F.3d at 73-74.

Allegations of a conversation between one party’s unnamed high ranking official/top executive and a named executive of another is sufficient to meet the Novak standard for a source if the unnamed person in such a position would possess the information pleaded and that this executive was the source for the information. Id. at 357.

A “forward-looking statement” is defined in 15 U.S.C. § 77z-2(i)(1) in relevant 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;

(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....

The PSLRA creates a safe harbor for forward looking statements, whether written or oral, under § 78u-5(e)(l) if “(A) the forward-looking statement is — (i) identified as a forward-looking statement, and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement; or (ii) immaterial; or (B) the plaintiff fails to prove that the forward-looking statement (i) if made by a natural person was made with actual knowledge by that person that the statement was false or misleading; or (ii) if made by a business entity: was — (i) made by or with the approval of an executive officer of that entity; and (ii) made or approved by such officer with actual knowledge by that officer that the statement was false or misleading.” 15 U.S.C. § 78u-5(c)(1). See generally Southland Securities Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353, 371-72 (5th Cir.2004). “Meaningful” requires “ ‘substantive’ company-specific warnings based on a realistic description of the risks applicable to the particular circumstances, not merely a boilerplate litany of generally applicable risk factors.” Southland, 365 F.3d at 372. Oral statements can satisfy the safe harbor requirements if “(i) the statement is accompanied by a cautionary statement that the ‘particular’ oral statement is forward-looking and that actual results could differ materially...; (ii) the statement is accompanied by an oral statement that additional information that could cause actual results to differ materially is contained in a readily-available document; (iii) the statement identifies the document or portion thereof containing the additional information; and (iv) the identified document itself contains appropriate cautionary language. Id., citing 15 U.S.C. §§ 77z-2(c)(2), 77u-5(e)(2). Such readily available documents can include those filed with the SEC or generally disseminated. Id., citing §§ 77z-2(c)(3), 77u-5(c)(3).

Nor do statements of material fact include puffery, i.e., generalized, positive statements about the company’s competitive strengths, experienced management, and future prospects that are too vague, optimistic, and lacking in concrete factual or material misrepresentations to support a securities fraud claim. Southland, 365 F.3d at 372, citing inter alia Rosenzweig v. Azurix Corp., 332 F.3d 854, 869 (5th Cir.2003). No reasonable investor would rely on such obviously false or misleading statements. Rosenziveig, id.

In order to prevent costly discovery until the court can determine whether a filed securities fraud suit has merit, with two rare exceptions the PSLRA instituted an automatic, mandatory stay of discovery in 15 U.S.C. § 78u-4(b)(3)(B), which provides,

In any private action arising under this chapter, all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss, unless the court finds upon the motion of any party that particularized discovery is necessary to preserve evidence or to prevent undue prejudice to that party.

See, e.g., Davis v. Duncan Energy Partners, L.P., 801 F.Supp.2d 589 (S.D.Tex.2011)(Lake J.).

Rule 10b-5’s implied private right of action does not apply to suits against aiders and abettors. Janus Capital Group, Inc. v. First Derivative Traders, 564 U.S. 135, 131 S.Ct. 2296, 2302-03, 180 L.Ed.2d 166 (2011), citing Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994), and Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 152-53, 128 S.Ct. 761, 169 L.Ed.2d 627 (2008). Section 20(a) of the Exchange Act, 15 U.S.C. § 78t, imposes a derivative liability on persons who control those primarily liable under the Exchange Act and those who aid and abet them:

Every person who, directly or indirectly, controls any person liable under any provision of this chapter or any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action.

For a violation of § 20(a), a plaintiff must show (1) an underlying, primary violation of § 10(b) of the Exchange Act and Rule 10b-5 and (2) direct or indirect control of the violator by the defendant. Southland, 365 F.3d at 383-84. The plaintiff bears the burden of establishing control, while the defendant bears the burden of proving a good faith affirmative defense; therefore, for a prima facie case of control person liability, the plaintiff is not required to plead facts showing that the defendant acted in bad faith. In re Enron Corp. Sec., Derivative & ERISA Litig., 258 F.Supp.2d 576, 598 (S.D.Tex.2003), citing G.A. Thompson & Co. v. Partridge, 636 F.2d 945, 958 & nn. 22 and 23 (5th Cir.1981). Pleading standards for claims for control person liability are relaxed: the heightened pleading standards of Rule 9(b) do not apply, as neither fraud nor scienter is an element of such a claim. On Longhorn Land I, LP v. Defendant FF Arabian LLC, No. 4:15cv203-RC-CMC, 2015 WL 7432360, at *2 (E.D.Tex. Nov. 23, 2015). Moreover in the Fifth Circuit the plaintiff only has to allege that the defendant possessed the power to control the primary violator, not that he exercised that power. In re Enron Corp. Sec., Derivative & ERISA Litig., Civ.A. No. H-01-3624, 2004 WL 764664, at *5 (S.D.Tex. Mar. 31, 2004).

Control person liability is derivative: if a plaintiff fails to state a claim for a primary violation of section 10(b) or Rule 10b-5, any claim for control person liability fails. ABC Arbitrage, 291 F.3d at 348 n.57; Thomas Lee Hazan, The Law of Securities Regulation § 13.15 (1990).

B. FCPA

The FCPA is both a civil and a criminal statute. Penalties for knowingly violating the FCPA can be civil and criminal and include monetary penalties and imprisonment. 15 U.S.C. § 78ff. The U.S. Sentencing Guidelines are used to determine the criminal penalty range. The application of these Guidelines will lower a corporate fíne if the corporation “ ‘reported the offense to appropriate governmental authorities, fully cooperated in the investigation, and clearly demonstrated recognition and affirmative acceptance of its responsibility for its criminal conduct.’ ” Mike Koehler, The Facade of FCPA Enforcement, 41 Fed. J. Int’l L. 907, 927 ((Summer 2010), quoting U.S. Sentencing Guidelines Manual § 8C2.5(g)(2009).

The FCPA, an amendment to the Exchange Act, contáins both (1) anti-bribery provisions and (2) auditing and accounting provisions, the latter comprised of (a) the “books and records” provision and (b) the “internal controls” provisions. The Department of Justice (“DOJ”) and the SEC share enforcement authority for both. The anti-bribery provisions are criminally enforced by the DOJ with criminal penalties over “issuers” (public companies) and their officers, directors, employees, agents or stockholders acting on the company’s behalf, while the DOJ also enforces both criminally and civilly the anti-bribery provisions over “domestic concerns,” i.e., those including “(a) U.S. citizens, nationals, and residents and (b) U.S. businesses and their officers directors, employees, agents or stockholders acting on the domestic concern’s behalf — and certain foreign persons and businesses that act in furtherance of an FCPA violation while in the territory of the United States.” A Resource Guide to the U.S. Foreign Corrupt Practices Act, at p.4, put out by the DOJ and the SEC on November 14, 2012 (“DOJ/SEC Resource Guide”), available at www.sec.gov/ spotlight/fcpa/fcpa-resource-guide.pdf). The SEC is responsible for civil enforcement of the FCPA. Id. at pp. 4-5.

The FCPA controls bribery by (1) prohibiting any U.S. citizen (individual or corporate) from bribing a foreign official, 15 U.S.C. § 78dd-l; and (2) establishing record-keeping rules for issuers of securities of publicly held corporations registered under the Exchange Act, 15 U.S.C. § 78m(b)(2). The latter (2) is composed of two categories: (1) the issuers are required to “make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the issuer,” § 78m(b)(2)(A), and (2) the issuers must “devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances of compliance,” § 78m(b)(2)(B). “Records”' under § 78m(b)(2)(A) include “accounts, correspondence, memorandums, tapes, discs, papers, books, and other documents or transcribed information of any type, whether expressed in ordinary or machine language.” 25 U.S.C. § 78c(a)(37). There is no scienter requirement for record-keeping violations under § 13 of the Exchange Act, 15 U.S.C. § 78m(b)(2).

More specifically, the anti-bribery provisions of the FCPA, 15 U.S.C. § 78dd-1(a), prohibit issuers of registered securities from attempting to influence foreign officials by offering, promising, or giving “anything of value” to a foreign official to secure “any improper advantage” “in order to assist that issuer in obtaining or retaining business for or with, or directing business to, any person,” i.e., in other words bribe a foreign official to obtain or retain business. 15 U.S.C. §§ 78dd-l(a) and 78dd-2(a). See, e.g., Midwestern Teamsters Pension Trust Fund v. Baker Hughes, Inc., Civ.A. No. H-08-1809, 2009 WL 6799492, at *1 (S.D.Tex. May 7, 2009). A “foreign official” is broadly defined as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency or instrumentality, or for or on behalf of any such public international agency.” Id. § 78dd-l(f)(l)(A).

From 1977 to 1979 the SEC mainly focused on anti-bribery provisions of § 78dd-l(a)(l), but subsequently it has focused its enforcement proceedings on the books and records provision, section 13(b)(2)(A), as amended, 15 U.S.C. § 78m(b)(2)(A) violations, and on the internal controls provisions, § 78m(b)(2)(B) that breach the statute’s two requirements: “(1) a company must keep accurate books and records reflecting the transactions and dispositions of the assets of the issuer, and (2) a company must maintain a reliable and adequate system of internal accounting controls.” S.E.C. v. World-Wide Coin Investments, Ltd., 567 F.Supp. 724, 748 (N.D.Ga.1983). The “books and records” provision, section 13(b)(2)(A) of the FCPA, provided the SEC with complete authority over the financial management and reporting requirements of publicly held United States corporations. World-Wide Coin, 567 F.Supp. at 746. The FCPA also imposes accounting controls for companies subject to either the registration or the reporting provisions of the Exchange Act. Midwestern Teamsters, 2009 WL 6799492, at *1. Observing that “investors are entitled to rely on the implicit representations that corporations will account for their funds properly and will not channel funds out of the corporation or omit to include such funds in the accounting system so there are no checks possible on how much the corporation’s funds are being expended in the manner management later claims,” the Honorable Robert L. Vining quoted Section 13(b)(2) of the FCPA to demonstrate the internal accounting controls on every issuer having a class of securities registered pursuant to section 12 of the Exchange Act, id.:

“(a) Make and keep books, records, and accounts which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; and

(b) Devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that

(i) transactions are being executed with management’s general or specific authorization;

(n) transactions are recorded as necessary (l) to permit preparation of financial statements in conformity with generally accepted accounting principles, and (11) to maintain accountability for assets;

(iii) access to assets is permitted only in accordance with management’s general or specific authorization; and

(iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences....

An “issuer’s” books and records for purposes of accounting control requirements include those of the subsidiaries and affiliates under its controls, including foreign subsidiaries and joint ventures. DOJ/SEC Resource Guide at p. 43.

Section 13(b)(2) of the FCPA and the rules promulgated under it “are rules of general application which were enacted to (1) assure that an issuer’s books and records accurately and fairly reflect its transactions and the disposition of assets, (2) protect the integrity of the independent audit of issuer financial statements that are required under the Exchange Act, and (3) promote the reliability and completeness of financial information that issuers are required to file with the Commission or disseminate to investors pursuant to the Exchange Act.” World-Wide Coin, 567 F.Supp. at 747.

In re Nature’s Sunshine Products Securities Litigation, 486 F.Supp.2d 1301 (D.Utah 2007), a court recognized for the first time control person liability in the context of an FCPA enforcement action.

Here the FCPA allegations, which cite ever increasing enforcement actions by the SEC and the DOJ in recent years, in Lead Plaintiffs view serve to show the heightened risk of Key’s investment and of doing business in Mexico and Russia, as well as misrepresentations by Defendants, given Key’s repeated statements that Key fully complied with FCPA provisions, yet its internal controls were so inadequate as to “underscore[ ], at minimum, the gross recklessness with which Defendants misled investors.” #37 at ¶¶ 5-6. Lead Plaintiff asserts that ultimately Key revealed that the SEC was investigating Key for potential FCPA violations in its Russian operations, with the result that Key’s share price and the company suffered significant economic loss. Id. at ¶¶ 9-13. The complaint states that because of this SEC’s investigation of its Russian operations, “Key discovered potential FCPA violations in Mexico that required self-disclosure to both the DOJ and SEC, and that Key recorded a massive impairment to goodwill and other assets at its Russia reporting unit.” #37 ¶ 73.

There is no implied private right of action under the FCPA. Lamb v. Phillip Morris, Inc., 915 F.2d 1024 (6th Cir.1990)(relying on Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975)), cert. denied, 498 U.S. 1086 (1991); J.S. Service Center Corp. v. Gen. Elec. Technical Services Co., Inc., 937 F.Supp. 216 (S.D.N.Y.1996); Lewis on Behalf of Nat. Semiconductor Corp. v. Sporck, 612 F.Supp. 1316 (N.D.Cal.1985); Scientific Drilling International, Inc. v. Gyrodata Corp., 215 F.3d 1351 (table of Decisions without Reported Opinion), Nos. 99-1077, 99-1084, 1999 WL 674511, at *3-4 (Fed. Cir. Aug. 30. 1999)(coneluding that “the Fifth Circuit would likely follow the Sixth Circuit’s decision in Lamb”).

III. Allegations of the Consolidated Amended Complaint (#37)

With the continuing downturn in its domestic oil and gas operations, by 15.4% just in 2013, in 2011 Key had begun a couple of years earlier aggressively expanding its international business and subsequently during the Class Period as part of its business and growth strategies, Defendants urged investors to take advantage of international growth opportunities in foreign markets, especially Russia and Mexico, even though these operations involved high risk because of substantial official corruption, inadequate rule of law, and a lack of transparency in the accounting/bookkeeping.

In its 2009 Form 10-K, filed with the SEC on February 26, 2010, Key reported that in the United States in 2009, it had “1.8 million rig hours and 1.7 million trucking hours, which was a decrease of 35.2% and 28.2%, respectively, from 2008 activity levels and 28.1% and 24.8%, respectively from 2007 activity levels.” #87, ¶ 14. At the same time, it reported this decline as offset by “our expansion into Mexico and Russia during 2009, and the full year effect of acquisitions completed during 2008.” Id. It further stated that it expected Petróleos Mexicanos (“PEMEX”), Mexico’s state-owned oil company and Key’s bigge