The Ninth Circuit — per Chief Judge Alex Kozinski — yesterday upheld a class action complaint alleging securities fraud.  The opinion aptly described the feat as "something much harder now than in days gone by."  Whiting v. Applied Signal Technology, Inc., No. 06-15454 (9th Cir. June 5, 2008).

The complaint alleged that Applied Signal kept reporting a big "backlog" even after its biggest customer, the federal government, ordered it to quit work under four separate contracts.  The stop-work orders cut ongoing revenues by 25 percent and portended cancellation of the contracts.  But Applied didn’t disclose the orders and even continued to report the work under the rubric of "uncompleted portions of existing contracts".  When the truth outed, Applied’s stock took a 16 percent tumble.

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