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Auditor Liability
The U.S. District Court for the Central District of California recently dismissed would-be class securities fraud claims against Deloitte & Touche LLP over its allegedly deficient audits of now failed First Regional Bancorp (Buttonwood Tree Value Partners LP v. Sweeney, CD. CaI., No. 8:10-cv-00537-CJC-MLG, 6/7/12).
Judge Cormac J. Carney concluded June 7 that the plaintiffs failed to allege scienter- culpable intent- with the required specificity pursuant the Private Securities Litigation Reform Act's heightened pleading standards.
However, he gave the plaintiffs 20 days to amend their complaint.
Red Flags. The court recounted that earlier this year, the plaintiffs filed a second amended complaint, alleging that the defendants made material misstatements regarding the bank's capitalization, the quality of its underwriting,...