[00:00:08] Speaker 00:
Thank you your honors and may please the court and I'd like to reserve six minutes of my time for rebuttal Watch the clock and we'll try to help you along.

[00:00:15] Speaker 00:
All right.

[00:00:16] Speaker 00:
Thank you

[00:00:19] Speaker 00:
So this case concerns two separate sets of statements, one by AGIUS and the other by Allianz SE, the parent company.

[00:00:27] Speaker 00:
I'm going to address the AGIUS statements first.

[00:00:31] Speaker 00:
Defendants have made a variety of arguments, both below and before this court, about why statements by AGIUS describing its operations aren't actionable under 10b5 by holders of shares of the parent company.

[00:00:48] Speaker 00:
The first argument and the argument that the court ultimately accepted below is based on the presumption of reliance and the fraud of the market.

[00:00:57] Speaker 00:
We believe that this case is better analyzed under the purchaser-seller rule, as most recently discussed by Lucid in the Ninth Circuit.

[00:01:03] Speaker 00:
But since the court did decide some reliance, I'll address that point first.

[00:01:11] Speaker 00:
The Supreme Court's recent Halliburton case explains the factors that have to be considered in the fraud on the market presumption.

[00:01:17] Speaker 00:
And those are that the alleged misrepresentations were publicly known, they were material, that the market for the company's stock was efficient, and that the plaintiff traded in the stock between the time the misrepresentation was made and when the truth was revealed.

[00:01:33] Speaker 00:
The fraud on the market presumption is based on the economic theory that in an efficient market,

[00:01:39] Speaker 00:
are that the market securities are generally efficient, and that in an efficient market, all information material to a company's financial prospects are incorporated into the price of the stock.

[00:01:53] Speaker 01:
It's a broad... So, counsel, right off the bat, I've got a question about the trading.

[00:01:59] Speaker 01:
They didn't own anything from AGI.

[00:02:02] Speaker 00:
They didn't own anything from AGI, but, well, they didn't own anything directly from AGI, but Aliens owns AGI.

[00:02:10] Speaker 01:
Right, but they didn't trade in anything that, this is a very, you're one step removed from a 10b5 action against AGI.

[00:02:22] Speaker 01:
That's correct.

[00:02:23] Speaker 01:
You didn't own any financial instrument that AGI was issuing.

[00:02:30] Speaker 00:
That is correct.

[00:02:31] Speaker 00:
We do not own any financial instrument owned by AGI.

[00:02:34] Speaker 00:
Although that said, the fact that AGI is in the business of selling securities itself, we would argue, is not the main point here.

[00:02:41] Speaker 00:
The point is that these are statements about AGIUS's operations.

[00:02:45] Speaker 00:
AGI is a subsidiary of Allianz.

[00:02:47] Speaker 01:
So how is Allianz liable for AGI's statements?

[00:02:52] Speaker 01:
Well, so as a control person of Allianz.

[00:02:55] Speaker 00:
Okay.

[00:02:55] Speaker 00:
That's a completely different argument from where you started.

[00:02:58] Speaker 00:
We're saying that AGIUS is primarily liable for AGIUS's statements.

[00:03:04] Speaker 00:
Did you sue AGI?

[00:03:05] Speaker 00:
AGIUS, yes.

[00:03:08] Speaker 03:
But the statements in question aren't something you're... I think you may be right.

[00:03:16] Speaker 03:
The Purchase Installer Rule may be more clearly applicable to this than our court's decision in CCIV.

[00:03:25] Speaker 03:
I think it's a Roman numeral.

[00:03:28] Speaker 03:
may be more directly applicable.

[00:03:30] Speaker 03:
It found out of blue chip what it described as a bright line rule, that the stock in question means the security about which the alleged misrepresentations were made, and here the alleged misrepresentations you're talking about weren't about the stock that your clients purchased.

[00:03:48] Speaker 00:
What we would argue is that the statements were about the operations of AGIUS, and AGIUS is a subsidiary of Allianz.

[00:03:58] Speaker 03:
So you're trying to wipe out the bright line rule.

[00:04:01] Speaker 03:
I mean, that our court describes it as a bright line rule.

[00:04:05] Speaker 03:
suggests something to me very different than what you're trying to argue.

[00:04:09] Speaker 00:
What we would contend is really the point is, I guess, even with a bright line rule, you have to determine where it applies.

[00:04:15] Speaker 00:
And if you say that statements about a subsidiary by the subsidiary fall outside of the bright line rule, and again, it was a subsidiary at all relevant times,

[00:04:23] Speaker 00:
unlike CCIV V lucid where at the time of the statements these were unaffiliated companies, but you know for instance if You have you know so for instance the company meta owns Instagram if Instagram is a separate subsidiary I'm not sure the corporate structure, but say it that it is and they make a statement about Instagram I think anyone would understand that that statement really is a statement about meta but the statements were about a security issued by the

[00:04:52] Speaker 03:
separate subsidiary.

[00:04:53] Speaker 03:
I mean, they weren't about the general operations.

[00:04:56] Speaker 03:
They were about what the structured alpha funds.

[00:05:00] Speaker 03:
And so you're basically claiming about statements about a different security having ultimately an impact.

[00:05:07] Speaker 03:
In fact, actually, I can get that on the ultimate parent companies, in this case, ADRs, not directly stock.

[00:05:16] Speaker 03:
But that doesn't seem consistent with the bright line rule that our court has said

[00:05:21] Speaker 03:
was identified in blue chip.

[00:05:23] Speaker 00:
Well, what I would argue is that this happens to be the unusual case where the subsidiary is selling a product.

[00:05:29] Speaker 00:
In this case, that product happens to be security.

[00:05:31] Speaker 00:
But they weren't just making statements about the structured alpha product, what's in the structured alpha product.

[00:05:37] Speaker 00:
The statement's also concerned how AGIUS personnel were supervised.

[00:05:42] Speaker 00:
And that is a statement not merely about.

[00:05:45] Speaker 00:
So we're not saying that the statement

[00:05:50] Speaker 00:
that the statement is misleading as to Aaliyah as a parent company merely because it's describing the securities.

[00:05:57] Speaker 00:
It's describing the operations of the subsidiary.

[00:06:00] Speaker 00:
And by describing the operations of the subsidiary, that really is something that is about the parent company.

[00:06:06] Speaker 00:
So what we would say is, if AGIUS, instead of selling securities, sold, say,

[00:06:14] Speaker 00:
life insurance, which isn't a security, and all the other facts were exactly the same, then this would be a statement about Allianz.

[00:06:23] Speaker 00:
But the mere fact that the product that it sells happens to also be a security shouldn't bar a statement that in any other context would be a statement about Allianz, merely because it happens that the product it's selling is also a security.

[00:06:37] Speaker 00:
So that's why we think this is, it's the unusual case where, you know, it's the question of repairing the subsidiary, but in this case, the thing that the subsidiary is selling happens to also be the security.

[00:06:48] Speaker 00:
But the statements that were made were about the operations of the subsidiary and the operation and how that subsidiary was supervised and its personnel.

[00:06:55] Speaker 00:
So that's the reason we would say that this case is distinguishable from lucid and sort of falls on one side of the Bright Line rule.

[00:07:04] Speaker 00:
So again, we're asking for, we aren't arguing against the Bright Line rule, we're just saying that statements about a subsidiary fall within that Bright Line rule, and these are statements about a subsidiary.

[00:07:16] Speaker 00:
Turning to defendants' other arguments, they also argued that the in-connection with requirement precludes this.

[00:07:26] Speaker 00:
Again, we would say that, you know, lucid is the correct sort of doctrinal hook to resolve this question, and that the in-connection with argument largely mirrors their purchase or seller argument.

[00:07:38] Speaker 00:
And so, you know, we'd say the argument, the analysis, again, we think that the cleanest thing to do would just be to analyze this under lucid.

[00:07:45] Speaker 00:
Materiality.

[00:07:47] Speaker 00:
Defendants argue that because the subsidiary was small, there was no materiality.

[00:07:54] Speaker 00:
So we would simply point out that unlike and lucid, there is no bright line rule for materiality.

[00:08:00] Speaker 00:
And it depends on the circumstances.

[00:08:04] Speaker 00:
Statements about this small subsidiary made this much money versus that much money might not be material.

[00:08:10] Speaker 00:
But when a small subsidiary commits serious fraud,

[00:08:14] Speaker 00:
that results in serious fines that are ultimately paid by the parent company, statements about their internal controls, and statements about their level of supervision are materials of the parent company.

[00:08:26] Speaker 00:
And just for instance, as we noted in the AIG bankruptcy, it was a small subsidiary that ultimately led to the downfall of the entire, essentially threatened the viability of the parent company.

[00:08:43] Speaker 00:
And unless there's any questions on that, I will just say briefly, I just want to turn briefly to the statements by Allianz.

[00:08:52] Speaker 00:
And we would simply say that in that instance, the Allianz parent company's statements, the court found them to be too generic to be actionable.

[00:09:01] Speaker 00:
But we would point out that the company, that the statements didn't merely describe a three lines of defense model.

[00:09:05] Speaker 00:
They actually emphasized that this model ensures the timely flow of risk-related information.

[00:09:11] Speaker 00:
And so for that reason, we believe that those statements are far more concrete and particularized and therefore material than some of the statements that other courts have found not to be misleading.

[00:09:22] Speaker 00:
And simply the fact that a lot of companies use a three-line defense model doesn't mean that statements about it are immaterial per se.

[00:09:30] Speaker 00:
All it means is that this is an industry standard risk management model that many companies use it.

[00:09:38] Speaker 00:
But the particularities of how they're implemented

[00:09:41] Speaker 00:
could matter greatly.

[00:09:43] Speaker 00:
So for instance, every company says our internal controls in the 10K will state that their internal controls are effective.

[00:09:50] Speaker 00:
But just because that statement is so commonplace doesn't mean it's per se immaterial, especially when there's a material weakness in those internal controls.

[00:09:58] Speaker 00:
And so we think this is an analogous situation.

[00:10:01] Speaker 02:
I have one question before you sit down.

[00:10:02] Speaker 02:
Yes.

[00:10:03] Speaker 02:
In your view, does the purchaser-seller rule apply the same to all of the different theories that rule 10B5 allows?

[00:10:11] Speaker 00:
I don't think that issue has been addressed by the court yet.

[00:10:16] Speaker 00:
We haven't seen a decision about a fraudulent scheme.

[00:10:20] Speaker 00:
You know, the purchase or seller rule really only has addressed misstatement cases.

[00:10:25] Speaker 00:
It hasn't addressed the fraud.

[00:10:27] Speaker 02:
My reading of those cases is that the purchase or seller rule is based on the very last clause of in connection with the sale of a security.

[00:10:34] Speaker 02:
I may have that not quite right, but which applies to all the different theories, which is why I'm asking.

[00:10:41] Speaker 02:
Is there a reason to think that it applies differently to the different theories where it's based on language that applies to all of them?

[00:10:50] Speaker 00:
I am not aware of any authority to suggest that it would be otherwise.

[00:10:55] Speaker 00:
And I'll reserve the remainder of my time.

[00:10:56] Speaker 00:
Thank you.

[00:11:08] Speaker 04:
Good morning, may it please the court, Robert Sherford with Sullivan & Cromwell for Allianz SE.

[00:11:15] Speaker 04:
Allianz SE is one of the largest investment management companies in the world and the largest insurance company in the world, and it has more than a thousand subsidiaries.

[00:11:24] Speaker 04:
What happened here was there was a fraud in connection with one business unit within Allianz, AGIUS, and that fraud involved three rogue

[00:11:38] Speaker 04:
portfolio managers who clearly engaged in wrongdoing.

[00:11:43] Speaker 04:
Those funds, these structured alpha funds, generated 0.41% of the profits of Allianz SE.

[00:11:53] Speaker 04:
The plaintiff is a shareholder of Allianz SE, not an investor in the structured alpha funds.

[00:11:58] Speaker 04:
And I can represent to the court that AGIUS paid, and ultimately $6 billion was paid to both the government and to all the investors in the funds.

[00:12:11] Speaker 04:
And AGIUS is now dissolved, and that's disclosed in the corporate disclosure statement we have.

[00:12:17] Speaker 04:
We disclosed that that was going to happen to the plaintiff back in 23, and they did nothing about it.

[00:12:22] Speaker 04:
It's been dissolved.

[00:12:24] Speaker 04:
in Delaware.

[00:12:25] Speaker 04:
So really all we have left is a claim against Allianz SE.

[00:12:32] Speaker 04:
Now with respect, just for a second, the point is all the allegations that they're making about AGIUS, they didn't invest in the structured alpha funds under this court's decision in Lucid.

[00:12:44] Speaker 04:
Clearly the purchaser or seller rule applies in this case.

[00:12:47] Speaker 04:
You can't have a situation when

[00:12:49] Speaker 04:
You have a giant investment manager with funds all around the world and someone who is not an investor in the fund, something goes on like what went on here.

[00:12:58] Speaker 04:
And they say, well, even though I didn't buy in the fund, I can bring a claim about fraudulent statements made about the funds.

[00:13:07] Speaker 04:
And the courts have said repeatedly there's a Blight and Rhyme rule, and it does not apply.

[00:13:12] Speaker 04:
So as to Allianz SE, the only statements that plaintiffs focus on are the sorts of generic statements that courts have repeatedly held are not actionable.

[00:13:23] Speaker 04:
And these are the kinds of statements which banks make all the time, and we cite it in our brief.

[00:13:28] Speaker 04:
I believe it's Appendix A to our motion to dismiss.

[00:13:31] Speaker 04:
I went through all the examples of companies which will disclose.

[00:13:34] Speaker 04:
They have what are called the three-line defense of compliance.

[00:13:37] Speaker 04:
So you have like at the business unit level, then the legal and compliance, and then at the audit level.

[00:13:43] Speaker 04:
And companies make those kinds of disclosures all the time.

[00:13:46] Speaker 04:
Allianz Essie did not guarantee to investors in his shares that those controls would work 100 percent of the time.

[00:13:56] Speaker 04:
It would be impossible to do it given the sheer size of the company.

[00:13:59] Speaker 02:
Well, Council, one of the statements that I think is at issue is, quote, the risk of financial misstatement is mitigated by a system of internal controls covering financial reporting.

[00:14:09] Speaker 02:
It seems to me that that's objectively verifiable if the theory is that you told us that there was a system of internal controls and in fact there was none.

[00:14:18] Speaker 04:
In fact, Your Honor, that's exactly what's been alleged in other cases and been rejected.

[00:14:22] Speaker 04:
The plaintiff doesn't dispute that Allianz SE actually did have this system of controls, and it was described as a global risk management framework that cut across all of its businesses.

[00:14:33] Speaker 04:
The claim is that the controls at the level of one business unit within one subsidiary of its more than thousand subsidiaries failed.

[00:14:42] Speaker 04:
And in that circumstances, courts have repeatedly

[00:14:45] Speaker 04:
rejected such claims.

[00:14:46] Speaker 04:
So, for example, in the case against Deutsche Bank, court dismissed it because there was no allegation that the controls didn't exist, and that was a case involving $16 billion in money laundering.

[00:14:58] Speaker 04:
The Second Circuit and the Donska Bank, a case involving literally $230 billion of suspicious transactions, the court said that statements claiming that a company or stating that a company had three lines of defenses at a global level were too generic to be actionable.

[00:15:14] Speaker 04:
There was never a statement made at the global level or by Allianz SE about the controls surrounding the structured alpha funds at all, not one.

[00:15:22] Speaker 03:
The only time... The statements were about the entire company.

[00:15:27] Speaker 03:
And at that time, the structured alpha funds were within the broad umbrella.

[00:15:32] Speaker 03:
I'm not talking here about the purchase of seller rule.

[00:15:34] Speaker 03:
I'm talking about the statements made by Allianz and its, I guess, annual reports.

[00:15:41] Speaker 03:
And at one point, and I'm not finding it at the moment,

[00:15:44] Speaker 03:
I recall the word insurer came up suggesting more than just a description of the

[00:15:51] Speaker 03:
risk control mechanism that was in place, but suggesting perhaps they didn't use the word guarantee, but insurer seems to be close to that.

[00:16:01] Speaker 04:
Well, all the statements were, and they turned out they were true, was that the company had a system of controls in place, and there's no dispute that the company did have a system of controls in place.

[00:16:13] Speaker 04:
Control systems fail and are not perfect, and investors know that, and that's why courts have repeatedly held

[00:16:20] Speaker 04:
that statements about the existence of a control system at a global multinational company are not to be viewed by the marketplace as being a guarantee.

[00:16:32] Speaker 04:
And if it were, the securities laws would be a form of insurance whereby any time there was a failure of a control at a multinational company, someone could bring a claim.

[00:16:43] Speaker 03:
That's why the word insurer stuck in my head because it begins to suggest that it is insuring.

[00:16:51] Speaker 04:
In two of the cases we cite, the Owen case and the City Group case, both cases use the word insurer in the disclosures.

[00:17:00] Speaker 04:
In both cases, the courts held that those statements were too generic to be actionable.

[00:17:05] Speaker 04:
And I think the same is true here.

[00:17:07] Speaker 04:
Again, there was not a specific disclosure.

[00:17:10] Speaker 04:
We had really great controls around the structured alpha funds.

[00:17:13] Speaker 04:
You never have to worry about the structured alpha funds.

[00:17:15] Speaker 04:
There was never any disclosure about the structured alpha funds at all.

[00:17:19] Speaker 03:
That gets to the purchase of sale, but I'm not sure how Alianza's statements about its whole operation

[00:17:25] Speaker 03:
includes a carve out for something in the form in this case of the structured alpha funds.

[00:17:31] Speaker 03:
Somebody reading Alianz's statements wouldn't assume that applies to anything less than the whole.

[00:17:39] Speaker 04:
There's no question that the statements applied globally and would have picked up the AGIUS and ultimately the structured alpha funds, but there's no allegation that there weren't systems in place at AGIUS, that there weren't systems in place at the structured alpha funds.

[00:17:58] Speaker 04:
The only allegation is that the controls failed and they

[00:18:01] Speaker 04:
Department of Justice actually found that the controls failed at the structured alpha funds.

[00:18:06] Speaker 03:
Well, I don't know that they found that they said they didn't find any contrary evidence, but I don't think they made an affirmative finding that in fact

[00:18:15] Speaker 04:
I agree with that.

[00:18:16] Speaker 04:
I agree with that.

[00:18:17] Speaker 04:
Maybe I'm trying to be too candid almost with the court.

[00:18:20] Speaker 04:
But I think the point is, the other thing that the Department of Justice found, which is critical, is there was no evidence that anyone outside of the three wrongdoers at the structured alpha funds even knew about this wrongdoing.

[00:18:33] Speaker 04:
And one of the things the plaintiff doesn't do, and you'll notice, there's not an individual defendant in this case.

[00:18:39] Speaker 04:
And normally in a securities case, there's an individual defendant.

[00:18:42] Speaker 04:
There's no allegation that anyone

[00:18:44] Speaker 04:
other than the three bad actors knew about this fraud.

[00:18:48] Speaker 04:
So it's not a situation where, unlike in cases like Inray Alphabet or Washington Mutual, where there were individuals who were named who were alleged to have known about the control failures.

[00:18:58] Speaker 04:
Here the only thing the plaintiff can say is, well, the controls didn't work.

[00:19:03] Speaker 04:
But investors know that controls sometimes don't work.

[00:19:05] Speaker 04:
And in fact, Allianz in its annual report made it clear, and this is at SER32, that they aim to avoid risks.

[00:19:14] Speaker 04:
They didn't promise that they would avoid all risks.

[00:19:17] Speaker 04:
And no reasonable investor would view a description of a control system at a global company like Allianz as a guarantee there wouldn't be

[00:19:26] Speaker 04:
any wrongdoing.

[00:19:27] Speaker 04:
If there were no controls, they'd have a case, but they don't make that allegation.

[00:19:33] Speaker 04:
I think it's important also just in terms of the case, number one, to judge correctly with respect to Allianz SE, dismiss the claims

[00:19:42] Speaker 04:
with respect to this description of its global control framework, three-part control framework, and that was, and we think under settled law, this court should affirm on that.

[00:19:53] Speaker 04:
But in addition, the court didn't reach this, but on the question of science, there's literally no allegations of

[00:20:00] Speaker 04:
in this complaint at all.

[00:20:03] Speaker 04:
And on an alternative ground, this court can dismiss the complaint because there's no allegations of science or involving any human being in the complaint at all.

[00:20:13] Speaker 04:
Certainly not anyone from Allianz SC.

[00:20:14] Speaker 04:
And in fact, the Department of Justice, and this is SCR 26, this is paragraph two of the information, said again, no evidence anyone in any other organization within the broader umbrella of Allianz SC was aware of or participated in the misconduct by the three

[00:20:30] Speaker 04:
rogue employees.

[00:20:31] Speaker 04:
And so the inability to allege anyone had cyanter is a second ground for the dismissal of this complaint.

[00:20:41] Speaker 02:
Can I turn you to the fraud on the market issue?

[00:20:44] Speaker 02:
Just as a general matter, why wouldn't a statement made by a subsidiary be able to influence the value of the parent?

[00:20:52] Speaker 04:
It certainly could, Your Honor.

[00:20:53] Speaker 04:
We don't dispute that.

[00:20:54] Speaker 02:
There's a general matter you don't dispute that you just say it doesn't work here.

[00:20:57] Speaker 04:
Well, a couple of things here.

[00:20:59] Speaker 04:
Some of the statements that they talk about, for example, the master cop statement, one of the wrongdoers made the statement, this is Greg Tornant, that Allianz was the master cop on the beat.

[00:21:09] Speaker 04:
That statement was only made to one investor in the structured alpha fund, so it wasn't broadly disseminated.

[00:21:15] Speaker 02:
But moreover... So focusing on the public statements.

[00:21:19] Speaker 04:
Public statements could be statements that could impact the company's stock price, but here the statements that they're talking about were not material to the shareholders of Allianz SE.

[00:21:32] Speaker 04:
The shareholders of Allianz SE, which has a thousand subsidiaries and thousands of investment products, are not focused on the hedging strategies that are employed by one complex

[00:21:44] Speaker 02:
uh... options trading strategy which is what we're talking about i guess that's what i'm i'm straight sort of struggling to figure out in my mind the whole fraud on the market theory is the is a presumption that can apply to show reliance without showing individualized reliance the idea being that if there's information out in the market it's it is and it's public it is influencing choices and so if we have some public statements by this subsidiary a g i out there

[00:22:08] Speaker 02:
Why doesn't that presumption apply that those public statements are influencing people who are making decisions about the parents' securities?

[00:22:16] Speaker 04:
There's no question that those statements could be relevant to a fraud on the market analysis, but the court can dismiss here

[00:22:23] Speaker 04:
because of number one, the purchaser or seller requirement, which was referenced by Judge Fischer, was not satisfied because they didn't invest in the shares about which the statements were made.

[00:22:33] Speaker 04:
The statements were made about these private funds that you had to be an institutional investor to buy.

[00:22:39] Speaker 04:
So they invested in Allianz SE stock plaintiff, the single plaintiff in this case.

[00:22:45] Speaker 04:
Second, the statements that would be made about this one investment product of the thousands of investment products that are sold by Allianz SE, we don't think that would be material to a shareholder of Allianz SE.

[00:23:00] Speaker 03:
Do you contend that plaintiffs didn't actually suffer a loss?

[00:23:06] Speaker 03:
I didn't.

[00:23:08] Speaker 03:
go deeply into that, but they do allege that the Allianz ADR value was affected after the underlying fraud with regard to the structured alpha funds was revealed.

[00:23:22] Speaker 04:
Well, the mere fact that the stock price went down doesn't establish that the information was material, and this court held that in the Hewlett-Packard case, H45, F3.

[00:23:31] Speaker 03:
Oh, it may not be sufficient evidence, but at this point,

[00:23:34] Speaker 03:
Uh, we're not at that stage.

[00:23:36] Speaker 03:
We're here on a motion to dismiss and they've alleged they suffered a loss.

[00:23:40] Speaker 03:
They've alleged a causal connection.

[00:23:41] Speaker 03:
So it was material.

[00:23:43] Speaker 04:
No, no, but the information that's after the fact, you have to look at the information that they claim was misleading.

[00:23:49] Speaker 04:
The information they claim was misleading.

[00:23:51] Speaker 04:
was the description of the hedging strategy for one complex option strategy that generated 0.41 percent of the profits of the company.

[00:24:00] Speaker 03:
Told us it cost the Alliance $6 billion.

[00:24:04] Speaker 03:
That sounds, starts to sound material.

[00:24:07] Speaker 04:
Well, that's after the fact though.

[00:24:09] Speaker 04:
You have to look at, you have to look objectively whether that would be material at the outset.

[00:24:12] Speaker 04:
But in any event, it doesn't mean.

[00:24:13] Speaker 03:
I mean, if you look at, you got a car defect, what bad things can happen from a defect?

[00:24:20] Speaker 03:
And it turns out if the bad things are going to be real serious, then that's something that should be identified as material at the beginning.

[00:24:27] Speaker 04:
But again, those disclosures were not made by Allianz SC.

[00:24:30] Speaker 03:
Oh, that distinction I understand.

[00:24:32] Speaker 03:
But the argument that it wasn't material, I'm having more trouble given that it did seem to have a big impact on the parent.

[00:24:39] Speaker 03:
Six billion dollars is a kind of material amount of money.

[00:24:43] Speaker 03:
That's what ultimately cost Allianz, so maybe it was material.

[00:24:48] Speaker 04:
Well, Your Honor, in any event, I think they do not satisfy the perch.

[00:24:51] Speaker 04:
We don't believe the statements were material, because you have to look at them at the time the statements are being made.

[00:24:57] Speaker 04:
And a statement about the hedging strategy of one investment product of thousands of investment products of a giant investment management company and insurance company is not material to the shareholder who's buying at the top of the organization.

[00:25:13] Speaker 04:
But beyond all of that, as you correctly, I think, identified before,

[00:25:16] Speaker 04:
This court's decision in Lucid makes it quite clear that you've got to allege that you were... If the misstatement was about the security, you've got to satisfy the purchaser or seller requirement, and they didn't buy any of the shares.

[00:25:32] Speaker 04:
They were not investors in the structured alpha funds.

[00:25:35] Speaker 04:
Beyond all of that, I think it's important to keep in mind that the statements that they're focusing on with respect to AGIUS

[00:25:44] Speaker 04:
are statements that were about this fund that they didn't invest in.

[00:25:48] Speaker 04:
And in any event, with respect to Allianz SE, which is the only defendant that's still here, the only hook they would have would be some sort of control person liability theory if they could establish a primary violation, which we don't think they can.

[00:26:02] Speaker 04:
And then they haven't pledged sufficiently, we don't believe, that Allianz SE exercise control over AGIUS, which was a separate company from, was a subsidiary, but separately run.

[00:26:14] Speaker 04:
So we think the court should affirm the decision below, which was well-reasoned, and primarily the statements against Alianz, SCD's generic statements, are not actionable.

[00:26:23] Speaker 04:
And again, the Purchase to Sell a Rule should deem why this case should be dismissed.

[00:26:28] Speaker 04:
Thank you.

[00:26:30] Speaker 02:
Do we have time for rebuttal?

[00:26:38] Speaker 00:
Thank you, your honor.

[00:26:40] Speaker 00:
So just first thing, I know your honor brought up that Allianz, the parent company, did use the word insure.

[00:26:47] Speaker 00:
I wanted to read the exact quote.

[00:26:50] Speaker 00:
So the statement was that they, quote, insure the accurate and timely flow of risk-related information and a disciplined approach towards decision-making and execution at both the global and local level.

[00:27:02] Speaker 00:
that appears in the excerpts of record 59, 64, and 65.

[00:27:05] Speaker 00:
Those are paragraphs 102 and 114 of the complaint, I believe.

[00:27:12] Speaker 00:
And we'd say that these, you know, these are very concrete statements.

[00:27:16] Speaker 00:
They didn't have to say ensure.

[00:27:17] Speaker 00:
They could say help to support or some sort of softer language, but they chose to use this more definitive language.

[00:27:25] Speaker 00:
And in doing so, they made a material statement.

[00:27:28] Speaker 00:
And, you know, it does go directly to,

[00:27:31] Speaker 00:
So it does go directly just to the way that there were problems with the three lines of defense model at AGIUS.

[00:27:39] Speaker 00:
Specifically, the complaint notes, and this is at, I'm looking at, it's quoted several times, but I'm looking at page 63 of the excerpts of record, that no one in the control function sought to verify that Tornent and his colleagues were adhering to the hedging strategies they represented to investors they would follow, or to the alpha targets they had promised.

[00:28:01] Speaker 00:
And so this does go to the accurate and timely flow of risk-related information and the disciplined approach toward decision-making.

[00:28:08] Speaker 00:
So the misrepresentation does go exactly to how the statements were misleading.

[00:28:16] Speaker 00:
Now, defendants pointed out that the DOJ said no evidence was found that anyone knew of the fraud.

[00:28:23] Speaker 00:
But I do want to distinguish between two things.

[00:28:25] Speaker 00:
There was the fraud they were committing, and then there was the implementation of the three lines of defense model.

[00:28:30] Speaker 00:
And no one said, and there wasn't any claim by the D or J, that no one knew about these deficiencies in the three lines of defense model.

[00:28:41] Speaker 00:
So I think those are two things to distinguish.

[00:28:44] Speaker 00:
Because the statements we're alleging are not- Do you allege that they knew?

[00:28:47] Speaker 00:
We allege that the respondee at Superior applies and we allege that there were red flags because the AGIUS risk management directly reported to a member of the board of management.

[00:29:01] Speaker 00:
So we have sanitary allegations.

[00:29:03] Speaker 01:
But you haven't alleged that when somebody wrote, we can ensure the quality of our auditing controls, that they knew that there were problems and that that statement was false.

[00:29:16] Speaker 00:
We argue that, again, that a responding at superior theory could apply, and we also allege that... Are you answering his question, no?

[00:29:25] Speaker 01:
Can you name an official or identify anybody by office that would have known that at the time that that was written by Allianz that they knew that there were problems with AGI and that there was fraud going on?

[00:29:37] Speaker 00:
We do not we don't make a direct allegation of knowledge what we allege is that there were red flags And these reported to Jacqueline hunt who was the or and that the the there was reporting so I'm gonna rephrase on that as to AGI us The line of reporting was to Jacqueline hunt who was a member of the board of management And so that's right, but it would be somebody at alliance because alliance is the one who made the statement

[00:30:04] Speaker 01:
Is there anybody at Allianz who was involved in preparing that statement about using the word ensure that at that time would have known that there was fraud going on at AGI?

[00:30:17] Speaker 00:
We don't allege that anyone knew that there was fraud going on at AGI, but again, the statement isn't merely that there, you know, we don't think it's necessary to show that they knew that there was fraud going on at AGI to show that they knew that the three lines of defense model weren't working.

[00:30:31] Speaker 00:
And so I would distinguish between... Oh, do you allege the latter?

[00:30:34] Speaker 00:
We allege that there were red flags that... That's not the same.

[00:30:39] Speaker 00:
Understood.

[00:30:40] Speaker 00:
We don't allege directly that anyone was specifically informed.

[00:30:43] Speaker 03:
We allege... And have you made allegations that would make such a conclusion plausible?

[00:30:49] Speaker 00:
We allege... We argue that the... I'm hearing no.

[00:30:53] Speaker 00:
We would argue that the red flags make the conclusion plausible if they were aware of deficiencies in the Three Lines of Defense model.

[00:31:01] Speaker 02:
All right, unless there are any other questions, you've run out of time.

[00:31:05] Speaker 02:
All right, thank you, Council.

[00:31:07] Speaker 02:
We appreciate Council's argument.

[00:31:08] Speaker 02:
The matter of Weir versus Allianz SEA and Allianz Global Investors is submitted.

[00:31:16] Speaker 02:
And that concludes our sitting for the week.

[00:31:21] Speaker 02:
I'll rise.

[00:31:28] Speaker 02:
This court for this session stands adjourned.