Seemingly every securities fraud lawsuit has one these days � a “confidential source” who supposedly can corroborate the key allegations in the complaint, and who claims that senior management knew of impending bad news long before it was announced to the public.
Often, almost no identifying information about the source is provided. No name is given and the person’s position within the company is hazy at best. As a result, it is virtually impossible � for the defendants, the court, or anyone else � to figure out who the person is, or, more importantly, whether the confidential source was in a position to have known the information attributed to him or her in the complaint. Nonetheless, and despite the heightened pleading standards applicable to securities fraud complaints, the complaint survives a motion to dismiss (at least in some jurisdictions) and the parties plunge into costly discovery.
