The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Mon, 04 May 2026 18:46:31 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png Scrutiny of Confidential Witnesses Endorsed in Securities Fraud Complaint – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 Scrutiny of Confidential Witnesses Endorsed in Securities Fraud Complaint https://corpgov.law.harvard.edu/2010/04/22/scrutiny-of-confidential-witnesses-endorsed-in-securities-fraud-complaint/?utm_source=rss&utm_medium=rss&utm_campaign=scrutiny-of-confidential-witnesses-endorsed-in-securities-fraud-complaint https://corpgov.law.harvard.edu/2010/04/22/scrutiny-of-confidential-witnesses-endorsed-in-securities-fraud-complaint/#comments Thu, 22 Apr 2010 13:37:17 +0000 http://blogs.law.harvard.edu/corpgov/?p=8488?d=20150120102546EST Posted by Paul Vizcarrondo, Wachtell, Lipton, Rosen & Katz, on Thursday, April 22, 2010
Editor's Note:

Paul Vizcarrondo Jr. is a partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz specializing in corporate and securities litigation and regulatory and white collar criminal matters. This post is based on a Wachtell Lipton firm memorandum by Mr. Vizcarrondo, Emil A. Kleinhaus and Jonathan Goldin, and relates to the opinion in the recent case of Campo v. Sears Holdings Corp., which is available here.

It has become routine for plaintiffs’ lawyers to make allegations purportedly obtained from confidential witnesses to meet the stringent pleading requirements applicable to federal securities fraud complaints, and the weight that courts should give such allegations in deciding motions to dismiss has been hotly contested. In affirming the dismissal of a federal securities fraud class action, the United States Court of Appeals for the Second Circuit has questioned the use of anonymous sources in securities complaints and endorsed the examination of those sources in determining whether such complaints should be dismissed. Campo v. Sears Holdings Corp., No. 09-3589, 2010 WL 1292329 (2d Cir. Apr. 6, 2010).

Citing information purportedly obtained from several confidential witnesses, the complaint in Campo alleged that Kmart Holding Corporation, now part of Sears Holdings Corporation, and certain of its officers had intentionally understated the value of Kmart’s real estate in the company’s SEC filings. When the defendants moved to dismiss the complaint, the district court allowed the defendants to depose these confidential witnesses to determine if they had made the statements attributed to them in the complaint. Upon being deposed, the witnesses disowned and contradicted many of those statements.

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