New Oriental in the United States again met class-action: focus and analysis of the war arguing-new Oriental, fraud-IT information
Four years later, New Oriental once again encounters United States shareholder class action lawsuit
In July 2012, due to "fish in troubled waters" trouble-maker, New Oriental's shares plunged almost 60%, lost more than $2 billion, and encounters and VIE information disclosure-related shareholder class action lawsuit; the lawsuit in May 2014, for $4.75 million the amount to be reconciled.
But, four years later, New Oriental once again encounters United States shareholder class-action lawsuits.
On December 2, 2016, Reuters published an article entitled the United States top University how to meet China's disputed reports of the company, agents of the new East and another Chinese agent for the customer's written application statement and letters of recommendation, help customers to fraud in college applications. Reports covering the 8 former and current employees of new Oriental, New Oriental in helping customers when applying for University, will help customers to write school essays, teacher recommendations, fake high school diploma.
Under the influence of the report, New Oriental's share price tumbled in the day on the NYSE, closed or 14.27%. While the stock is low, companies in market capitalization of more than $1.8 billion. Trading volume on the day more than 15.4 million ADS, several times the average daily volume of 1.8 million ADS. Market data show that new Oriental's shares continue to rise since last October, rose from $18 to $54.
Since then, several lawyers have already announced that the investigation and intends to launch a class action suit.
On December 16, the official outbreak of the class-action lawsuit, there are at least four law firms have announced that it has submitted a case to court, accused New Oriental, New Oriental's Chairman, CEO and CFO violates United States Securities Exchange Act of 1934 related terms and SEC10b-5 rules. During the proceedings on September 27, 2016 until December 1, 2016.
This is the third broke out in 2016 United States Unit in a class action suit.
The focus of the argument in the present case may be what?
United States federal securities class-action lawsuits to gain successful prosecutions are in litigation must be able to meet five key elements (significant misrepresentation/information hiding: the importance of elements of fraud, securities trading actually happens, trust factors, loss of causality). Which is the most important two principles of importance (materiality) and fraudulent elements (Scienter).
Plaintiffs to can success prosecution accused, (just is prosecution, is not refers to eventually ruling must is on plaintiffs favourable), so, plaintiffs of litigation-like must can full stated accused exists major not real (false) statement (including hide major information); and, plaintiffs of litigation-like must can was strong to is derived out, accused of behavior in subjective consciousness Shang belongs to fraud (Scienter), including: informed and deliberately (knowingly) and negligence along the (recklessness).
Judging from the current proceedings, the defendant may argue that the focus will be on these two points. Zhuo Jimin, author of cross-Ocean battle, then you do a bit of simple analysis.
Importance of principles (materiality)
Which plaintiff alleged content from rational investment decisions, are important content? This involves the question of materiality principle is applied to the present case. The materiality principle needs from both a quantitative and qualitative point of view.
The business is involved in the case of new Oriental education consulting business, new disclosures in the annual report of the East, which is one of the most 2016, seven business section, but not a core business. New Oriental 10% annual income does not exceed its income. Of course, from a quantitative point of view, the 5% can constitute the materiality principle. However, the present complaint, it is very simple, the plaintiff does not indicate what the new East of this so-called study abroad advice, such as "fake" business as a percentage of their total education consulting business? So, plaintiffs of allegations up also only description, new East study advisory business in the exists some "fraud" behavior, but study advisory business itself is new East general business in the is small part business (up also not over 10%, see Xia figure new East Business Division information), by allegations of "fraud" behavior corresponds to of income amount specific proportion is how many also not clear (unspecified portion).
In other words, the "false" is just the case? Or a common situation? Present complaint does not specify, and is very difficult to do the specific allegations, the new Oriental can refute the plaintiff from this angle.
From the qualitative point of view, although some of the information from the data on the amount or proportion of it is small, but it is very important for the investment decisions of investors. United States securities litigation case law point of view, usually includes these cases:
This hidden information leads to changes in corporate profits or profit trends change; new Oriental suits, for now, still does not meet the situation;
Hidden this information assists the company's management to increase their individual remuneration; the situation at present is not obvious, it is difficult to set up.
Of course, the plaintiff may from price fluctuations in the stock market (xindongfang shares tumbled in the day) description in terms of investors is very serious about this information, so the concealing of information are of a significant nature. However, the fluctuation of stock prices is the result of many factors, such as too much panic in the market, and so on, and, from the United States securities law cases, only to fall in share prices hard to prove the importance of information, the key is to see whether the information itself is should be disclosed.
If only some individual staff of new Oriental Education Consulting "false" behavior, from the company's point of view, this does not need to make specific disclosures, general risk disclosure is enough.
The plaintiffs will introduce a "secret witness"?
In United States federal securities class-action lawsuits, secret witnesses often plays a very important role, however, the secret witness testimony only if the following two conditions are satisfied, can be adopted: (1) description of the secret witness itself must be specific enough (sufficient
Particularity), which only serves to show the reliability of their information (reliability) and was informed about this on their own (personal knowledge), and (2) secret testimony provided by the witnesses, which can really show the existence of fraud (indicative of Scienter).
The case is currently in the initial stages of prosecution, does not rule out similar in other class-action lawsuits, plaintiffs ' lawyers will introduce next secret witness. Therefore, how to strengthen the Organization's information security management, New Oriental has to guard against it.
Elements of fraud (Scienter)
Three defendants in the case of natural persons is a new Oriental's Chairman, CEO and CFO. Plaintiff's allegations and failed to consult the so-called study "false" behavior, and New Oriental company executives, including the Chairman, CEO and CFO (or others) linked so, plaintiff's allegations is difficult to meet the elements of fraud.
On currently complaint see, new East completely can refuted plaintiffs, pointed out that, plaintiffs and no any evidence showed that new East of executives (Chairman, and CEO or CFO,) on so-called of study advisory "fraud" is informed of; also no any evidence showed that, new East company any personnel will these so-called of study advisory "fraud" behavior to company executives reported, also no pointed out that company executives is deliberately negligence along the (
Deliberately reckless) for such "frauds" have no knowledge. Therefore, New Oriental can refute the plaintiff's allegations from this angle does not meet the elements of fraud.
Of course, is likely to further rebut the plaintiff, plaintiff possible reasons may include: (1) New Oriental education consulting business is one of the core business (core operations); (2) the defendant itself is hoped to conceal the fraudulent transactions, which also serves to show the defendant of fraud.
Unless the plaintiff is able to come up with further evidence, or, New Oriental can rebut the plaintiffs, pointed out that the plaintiffs ' allegations are simply a guess and speculate.
As for the other elements in a securities class-action lawsuit (elements of trust, loss causation, and so on), because the case is in the preliminary stage of the proceedings, petitions are relatively simple, and therefore not analyzed.
新东方在美国再次遇到集体诉讼：争辩焦点和战情分析 - 新东方,欺诈 - IT资讯
时隔四年，新东方再次遭遇美国股东集体诉讼
2012年7月，由于“浑水摸鱼”的捣乱，新东方股价暴跌近60%，缩水超过20亿美元，并遭遇和VIE信息披露相关的股东集体诉讼；该诉讼案于2014年5月以475万美元金额得到和解。
没想到，时隔四年，新东方再次遭遇美国股东集体诉讼。
2016年12月2日，路透社发表了一篇题为《美国顶尖大学如何结识中国争议公司》的报道称，留学中介新东方与另一家中国留学中介为客户代写申请陈述和推荐信，帮助客户在大学申请中造假。报道内容涉及8名前任和现任新东方的员工透露，新东方在帮助客户申请大学的时候，会帮助客户撰写申请学校的文章、教师推荐信，捏造中学文凭。
受此报道影响，新东方在纽交所的股价当天大跌，最终收盘跌幅14.27%。在股价最低点时，公司市值蒸发超过18亿美元。当天交易量超过1540万个ADS，是平均日交易量月180万个ADS的数倍。市场数据显示，新东方的股价自去年10月起持续上涨，从18美元一路涨至近54美元。
此后，有数家律师宣布调查，拟发起集体诉讼。
12月16日，集体诉讼正式爆发，目前至少有四家律所宣布已经向法院提交诉讼状，指控新东方公司，新东方董事长，CEO和CFO违反美国1934年证券交易法相关条款和SEC10b-5规则。诉讼期间从2016年9月27日至2016年12月1日。
这是2016年爆发的第三起美国中概股集体诉讼。
本案争辩的焦点可能会是哪些？
美国联邦证券集体诉讼如要获得成功起诉，则诉讼状必须要能够同时满足五个重大要素（重大不实陈述/信息隐瞒：重要性；欺诈要素，证券交易的实际发生，信赖要素，损失的因果关系）。其中最为关键的两个是重要性原则（materiality）和欺诈性要素（scienter）。
原告要能成功起诉被告，（仅仅是起诉，并非指最终裁决一定是对原告有利），那么，原告的诉讼状必须能够充分阐明被告存在重大不实（虚假）陈述（包括隐瞒重大信息）；而且，原告的诉讼状必须能够令人强有力地推导出，被告的行为在主观意识上属于欺诈（scienter），包括：知情而故意（knowingly）和疏忽大意（recklessness）。
从目前诉讼状来看，原被告双方可能的争辩焦点也会在这两点。接下来《跨洋大鏖战》作者卓继民向大家稍做简单的分析。
重要性原则（materiality）
也就是原告所指控的内容从理性投资者投资决策来看，是否属于重大内容？这涉及到重要性原则如何具有运用到本案的问题。重要性原则需要从定量和定性两个角度考虑。
本案所涉及的业务内容是新东方的留学咨询业务，从新东方年报披露看，这是其2016年七大业务版块内容之一，不过不是最为核心的业务。其收入不会超过新东方年度总收入的10%。当然，从定量的角度看，5%就可以构成重要性原则。但是，目前的诉状内容十分简单，原告并没有指出到底新东方所谓的此等留学咨询“造假”业务占其总留学咨询业务的比重有多大？所以，原告的指控最多也只能说明，新东方留学咨询业务中存在某些“造假”行为，但是留学咨询业务本身是新东方总体业务中很小一部分业务（最多也不会超过10%，见下图新东方业务分部信息），所指控的“造假”行为对应的收入金额具体比例是多少也不明确（unspecified portion）。
也就是说，这个“造假”行为仅仅是个案？还是普遍情况？目前诉状并没有指明，而要做到这个具体指控难度很大，所以新东方可以从这个角度驳斥原告。
从定性角度看，虽然有些信息从数据金额或者比重上看不大，但是对投资者的投资决策十分重要。从美国证券诉讼案例法角度看，通常包括这些情形：
这个信息的隐瞒导致了公司盈利局面的改变，或者盈利趋势的改变；新东方诉讼案件，从目前来看，还不符合这个情形；
这个信息的隐瞒其实有助于公司管理层增加其个人报酬；这个情形目前也不明显，难以成立。
当然，原告可能会从股票市场的价格波动（新东方当天股价暴跌）的角度来说明，投资者其实十分看重该信息，所以次信息的隐瞒属于重大性质。但是，股价的波动是多方面因素造成的，比如市场的过分恐慌等等；而且，从美国证券法的案例看，仅仅是以股价的大跌是很难以证明信息的重要信，关键还是要看该信息本身是否属于应该对外披露。
如果新东方仅仅是某些个别员工存在留学咨询的“造假”行为，从公司层面来看，并不需要对此做出具体的披露，一般性的风险披露足矣。
原告是否会引入“秘密证人”？
在美国联邦证券集体诉讼中，秘密证人经常会起到十分重要的作用，但是，秘密证人的的证言只有在符合以下两个条件，才可以被采纳：（1）对秘密证人本身的情况描述必须足够具体（sufficient
particularity），从而才足以说明他们的信息是可靠的（reliability）和他们自身对此确实是知情的（personal knowledge）；（2）秘密证人所提供的证言，其本身确实可以显示欺诈的存在（indicative of scienter）。
本案目前处于起诉的初始阶段，不排除类似在其他集体诉讼状，原告律师接下来会引入秘密证人。因此，如何加强公司的信息安全管理，也是新东方不得不要防范的。
欺诈要素（scienter）
本案中的三位被告自然人是新东方的董事长、CEO和CFO。原告的指控并没有将所谓的留学咨询“造假”行为，和新东方公司包括董事长、CEO及CFO在内的高管（或者其他高管）相联系起来；所以，原告的指控很难满足欺诈要素。
就目前诉状看，新东方完全可以反驳原告，指出，原告并无任何证据表明新东方的高管（董事长、CEO或者CFO等）对所谓的留学咨询“造假”是知情的；也没有任何证据表明，新东方公司任何人员将这些所谓的留学咨询“造假”行为向公司高管汇报，也没有指出公司高管是故意疏忽大意（
deliberately reckless）从而对此等“造假”不知情。因此，新东方可以从这个角度反驳原告的指控不符合欺诈要素。
当然，原告有可能会进一步反驳，原告可能采用的理由可能会包括：（1）留学咨询业务是新东方的核心经营业务之一（core operations）；（2）被告本身就是希望能够隐瞒这些虚假交易，这也足以说明被告存在欺诈。
除非原告能够拿出进一步的证据，不然，新东方可以反驳原告，指出原告的指控仅仅是一种猜测和推测。
至于，证券集体诉讼中的其他要素（信赖要素，损失因果关系等），由于该案处于初步的诉讼阶段，诉状也相对简单，因此就先不展开分析。