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Former MDC Partners Chief Accounting Officer Wins Dismissal of Securities Fraud Class Action

Judge Richard Sullivan of the Southern District of New York dismissed a securities fraud class action complaint against Paul, Weiss client Michael Sabatino. The complaint alleged that MDC Partners, certain of its executives, including Mr. Sabatino, MDC's chief accounting officer, and its audit committee chair made material misstatements about goodwill, EBITDA, executive perquisites and internal controls in the company's SEC filings. With respect to Mr. Sabatino, the complaint alleged scienter based on his stock trades, compensation scheme, and approval of the CEO's expenses as well as the timing of his resignation. Judge Sullivan ruled that the plaintiffs failed to plead a material misstatement or omission and failed to plead scienter. He concluded that Mr. Sabatino's stock trades were not suspiciously timed and appeared to be for legitimate purposes, that compensation tied to corporate performance was insufficient to allege motive to commit fraud, and that neither Mr. Sabatino's corporate position nor his resignation supported an inference of scienter.

The Paul, Weiss team included partners Daniel Kramer, James Brochin and Audra Soloway.

October 3, 2016

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