Plaintiff Can’t Pin Insider-Trading Label on Me, Says ex-Intelsat Chair

Walleye asserts the FCC’s apparent rejection in a Nov. 5, 2019, meeting of the proposed “do-or-die” deal for Intelsat and other C-Band Alliance members to privately auction $60 billion in spectrum, and the $246 million in Intelsat stock divested by top investors in “a rushed overnight fire sale” before the bad news got out, “would lead any reasonable person and juror to believe that there was insider trading” (see 2303030050). But McGlade maintains Walleye can’t pin the insider-trading label on him, despite having gone through “two lengthy pleadings and two rounds of briefing,” said his reply.

McGlade participated in the stock divestiture only by exercising his “tag-along rights” in the “block sale” that was led by co-defendant BC Partners, a former top Intelsat shareholder, said McGlade’s reply. Walleye’s new allegations in its SAC provide claims from a single new confidential witness, "CW-3," who doesn’t claim “to have interacted with McGlade at any time,” it said. CW-3, identified in the SAC only as a former Intelsat vice president, also lacked personal knowledge about what information McGlade did or didn’t have before the block sale, it said.

The SAC also relies extensively on bankruptcy testimony that didn’t mention anything about McGlade or his knowledge before the block sale, said the reply. The SAC “tellingly” omits testimony from the same witnesses that “specifically and directly foreclosed” Walleye’s claims, it said. To the extent the SAC adds allegations about a Nov. 14, 2019, Intelsat board meeting, “that meeting sheds no light on McGlade’s knowledge at the time of the block sale” nine days before the board meeting, it said.

Walleye’s opposition to the motion to dismiss shows it has “no response to these fatal deficiencies,” said McGlade’s reply. Though Walleye “spends page after page attempting to establish” that whatever occurred during the FCC’s meeting with C-Band Alliance members on the morning of Nov. 5, 2019, must have been material nonpublic information (MNPI), “that argument is irrelevant,” it said. Even "assuming arguendo" that information divulged by the FCC during the Nov. 5 meeting was MNPI, Walleye fails to plead any fact to show that McGlade possessed that information when he exercised his tag-along rights, it said.

Walleye’s SAC attempts to use the analysis required to establish scienter, defined as one’s state of mind in the “intentional or reckless commission of fraud,” to claim that McGlade’s possession of MNPI “can be inferred in the absence of the required specific facts,” said the reply. But that’s “not the law,” it said. Walleye, “unsurprisingly,” doesn’t cite a single authority under case law “that supports the suggestion that possession of MNPI can be inferred in the absence of specific, particularized facts” to show what information McGlade obtained, when and from whom he obtained it, “and how he used it for his own advantage,” it said.

The SAC should be dismissed because it contains “no cogent or compelling inference of McGlade’s scienter,” said the reply. “Indeed the SAC adds no new allegation regarding McGlade’s state of mind at all,” it said. Walleye “still has no response regarding the implausibility of its timeline of events, nor the undisputed fact that McGlade had no control whatsoever over the timing of the block sale,” when he “merely” exercised his tag-along rights in BC Partners’ decision to sell, it said.

Walleye’s opposition to the motion to dismiss suggests McGlade “elected to lose over $80 million to provide a smokescreen for his supposed insider trading,” said the reply. But the suggestion remains “preposterous on its face,” it said. Amid “the dearth of any facts” to suggest McGlade possessed MNPI, “the only cogent and compelling inference “is that McGlade “innocently” elected to “tag along” in the block sale to take a small portion of his Intelsat holdings off the table “when the outcome of the FCC process was uncertain,” it said. “The SAC should be dismissed with prejudice.”