The court wrote that:
Plaintiffs have clearly alleged facts, including the suspicious timing and the “risk-free” quality of the loans, that give rise to a strong inference of scienter, that is, that the Mayer Brown Defendants knew or acted in reckless disregard of Refco’s intention to use the transactions to inflate its revenues, and knew or should have known that the resulting financial statements issued would be relied upon by research analysts and investors. Plaintiffs allege, moreover, that acting with such knowledge, the Mayer Brown Defendants engaged in conduct that materially aided Refco’s fraud. Such allegations if proven true, are adequate to establish liability for aiding and abetting securities fraud, but are not enough to establish civil liability as a primary actor. As was the case in Stoneridge, it was Refco, not the Mayer Brown Defendants, “that . . . filed fraudulent financial statements; nothing [the Mayer Brown Defendants] did made it necessary or inevitable for [Refco] to record the transactions as it did.” 128 S. Ct. at 770.
John “Sean” Coffey of Bernstein Litowitz Berger & Grossmann, who represents the Refco shareholders, told the American Lawyer he was disappointed with Lynch’s ruling, but not terribly surprised, given the tough standard set by Stoneridge. “It highlights that something is very very wrong with the state of the law,” said Coffey.
The American Lawyer also notes that Collins still faces federal criminal charges of securities fraud and bank fraud, and is scheduled to begin his trial in the SDNY on April 6, 2009.