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Allegations of accounting mischief are subject to the same high pleading standards applied to other securities fraud cases, the 9th U.S. Circuit Court of Appeals ruled Friday. In upholding the dismissal of a class action against the former Vantive Corp., a unanimous three-judge panel criticized the complaint in question as too vague to bother overturning the lower court. “Indeed the bulk of the alleged adverse facts are generic, subjective, difficult to prove or refute, and could be alleged against almost any company that has experienced a drop in sales revenue,” wrote Senior Judge William Canby Jr. “The 102-page complaint rarely, if ever, sets forth a particularized basis to support the existence of these ‘concealed facts.’” The decision is a blow for Milberg Weiss Bershad Hynes & Lerach and its famed San Diego, Calif.-based partner William Lerach, who argued the appeal. Now-retired U.S. District Judge William Orrick Jr. threw the case out without leave to amend after demanding to know whether the firm had any more specific evidence than what was in the complaint. Shirli Weiss, the Gray Cary Ware & Freidenrich partner who argued the case for Vantive, said it was the first time the 9th Circuit has applied 1995′s Private Securities Litigation Reform Act to allegations that a company cooked its books. Vantive, which sold and serviced customer relationship management software, has since been acquired by Pleasanton, Calif.-based Peoplesoft Inc. The case is significant, Weiss said, “particularly in the post-Enron era. The 9th Circuit is saying that we’re going to keep a high standard.” The collapse of Texas-based Enron Corp. and questions about the role of the company’s accountants, Arthur Andersen LLP, have shined a spotlight on the quality of corporate accounting. Milberg Weiss was recently named lead counsel in a securities fraud suit against Enron. Lerach did not return a phone call seeking comment. Canby, joined by Judges Michael Daly Hawkins and Ronald Gould, wasted little ink in dispatching the primary allegations that Vantive deliberately overstated its ability to sell and the marketability of its customer service software. “We hardly need to elaborate on the inadequacy of these generalized allegations,” Canby wrote in In Re Vantive Corporation Securities Litigation, No. 00-16136. He then turned to allegations that the company inflated the value of a key contract and improperly changed its revenue recognition methods, holding that they ultimately failed for lack of specifics. “There is no sufficient allegation of the amounts by which revenues were allegedly overstated,” Canby wrote.

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