OPINION & ORDER
KATHERINE B. FORREST, District Judge.
The securities laws are not an insurance policy for investments gone wrong, inexperience, bad luck, poor choices, or unexpected market events. Here, despite years of litigation and a bench trial lasting several weeks, the Court is left with the firm conviction that plaintiff Delshah Group LLC ("Delshah") seeks just that - an insurance policy. Indeed, after years of discovery, plaintiff's case fails at every level. The Court does not find that defendants made a material misstatement or omission, that plaintiff reasonably relied on any misstatements or omissions, that defendants acted with scienter, or that plaintiff's losses were caused by the materialization of a concealed risk.
Therefore, and for the reasons set forth below, the Court finds for defendants as to both causes of action (asserting violations of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934). 15 U.S.C. §§ 78j(b), 78t(a).
I. THE PARTIES' POSITIONS
The parties agree on one fact: that the 40 Broad Street Project (the "Project" or the "40 Broad Project"), a Manhattan commercial to residential condominium conversion, was an investment failure. Plaintiff lost the bulk of its investment and defendant Asher Zamir personally lost in excess of $15 million. The central issue in this lawsuit, brought pursuant to §§ 10(b) and 20(a) of the Exchange Act, is whether defendants - Zamir and companies he managed or controlled (Zamir Equities LLC and Zamir Manager 40 LLC),  along with Zamir's employee, Atit Javeri committed securities fraud in connection with that failure.
A. Plaintiff's Claims
On March 29, 2007, plaintiff Delshah, represented by its managing member, Michael Shah, purchased membership interests the 40 Broad Street Project. At the time of its acquisition, the membership interests in the Project were fully bought out and Yahalom 40 LLC - the entity issuing the membership interests - was not seeking additional capital investment. As discussed below, Delshah approached defendants in connection with making an investment.
Delshah paid $4, 185, 000 for its interests, which included a purchase of $3 million from Zamir's interests and $1, 050, 000 from those of Javeri. The remainder constituted a fee paid to Javeri for his interests. In connection with its purchase, Shah executed both the Limited Liability Company Agreement of Yahalom 40, LLC ("Yahalom Operating Agreement") and the Yahalom 40, LLC Subscription Agreement ("Yahalom Subscription Agreement") on behalf of Delshah. (See Pl.'s Exs. 75 (Yahalom Operating Agmt.), 56 (Yahalom Subscription Agmt.).)
According to plaintiff, in connection with its purchase it relied upon the following material misrepresentations:
1. That the project was running smoothly, meaning that it was on schedule and on budget;
2. That the Project was "functionally bought out";
3. That Javeri, representing defendants in the purchase, represented that he was "project manager";
4. That, as of March 6, 2007, no part of the $7 million in contingency funds established for the Project had been used and that those funds were therefore available in case of any future cost overruns;
5. That a document entitled a "G702" could not be provided to plaintiff because it was an internal document only;
6. That Javeri's father was only willing to sell a $1 million "portion" of his investment in the Project;
7. That plaintiff's purchase needed to close as of March 23, 2007 at the latest;
8. That the pro formas and associated financial information defendants provided ("Pro Formas") to plaintiff prior to its purchase were accurate and reflected the current status of the Project;
9. That an Excel spreadsheet prepared by Shah and sent to Javeri for his review was accurate; and
10. That any cost overruns caused by delays associated with the Setai Group (a company that had entered into a branding relationship with the Project) or with the architectural plan, designs or changes, would be paid for by Setai.
Plaintiff also asserts the following material omissions:
1. Javeri failed to inform Shah that the interest he was selling constituted his entire interest in the Project;
2. That Shah was shown a figure representing Zamir's interest in the Project's capital account on the day of the closing, but that figure constituted the aggregate interest of the Zamir family and not Zamir's personal interest;
3. That Javeri failed to show plaintiff an email chain dated March 6, 2007, allegedly showing that the entire hard cost contingency of approximately $5.8 million had been depleted and the project was $3.6 million over budget;
4. That Javeri failed to inform plaintiff that a meeting had been set up between the ownership and senior mezzanine lenders for March 6, 2007 to discuss the contingency, the Anticipated Cost Reports ("ACRs") and increasing hard cost budget;
5. That the timeline that plaintiff had been provided was not the actual timeline for the project; and
6. That Javeri failed to inform plaintiff that the construction drawings were not complete and construction could not move forward until the drawings were finalized.
7. That individual condominium unit owners would be assessed an annual fee of $500, 000, pursuant to the Setai Condominium Operating Plan.
8. That defendants failed to inform plaintiff of several material aspects of the restaurant and spa component of the Project: namely, (1) the existence of an undisclosed agreement whereby Zamir's wholly-owned entity, 40 Broad Commercial, retained the exclusive right to purchase the Spa and Restaurant units at set prices; (2) the existence of a 15-year lease of the Spa and Restaurant to benefit 40 Broad Commercial; and (3) the "buildout" of the Restaurant and Spa would be paid for by 40 Broad LLC.
Plaintiff asserts that defendants' culpable state of mind is demonstrated by the fact that Javeri and Zamir both benefitted in a personal and concrete way because they received cash for the interests fraudulently sold to plaintiff. Plaintiff asserts that adequate reliance is demonstrated by virtue of the fact that Shah was not a sophisticated investor and had no previous experience in this type of project; and that, in any event, reliance is presumed in omission cases when the facts alleged to have been withheld are material.
Plaintiff alleges that the material misstatements and omissions induced its purchase - thereby meeting the requirement of transaction causation. Plaintiff also asserts that loss causation is demonstrated by the materialization of what it asserts were the known and concealed risks that the project was not running smoothly and was not on time or on budget, resulting in the Project's non-completion and a near total investment loss.
B. Defendants' Responses
Defendants have, as one would expect, a variety of responses: they assert that truthful and accurate information was provided to plaintiff prior to its acquisition and deny that any misstatements were made. They also deny that the purported omissions occurred, or, alternatively, argue that the information was not required to be disclosed. Defendants further assert that plaintiff's reliance on statements made by Javeri, an inexperienced young man just out of college, was unreasonable (and that if, in fact, he was the "project manager" that should itself have presented a red flag), that no statements or omissions were made with scienter, that the lack of actionable misstatements or omissions results in a lack of transaction causation, and that plaintiff's singular motivation to invest was its view that sales prices of apartment units were increasing. Defendants assert that the Project's failure was due to unexpected construction delays occurring subsequent to plaintiff's purchase, along with the collapse of the real estate and financial markets in 2008.
The Court held a bench trial lasting several weeks during which it heard from eleven witnesses and reviewed well over 100 admitted documents. The Court applies a preponderance of the evidence standard of review to make the below findings of fact.
II. FINDINGS OF FACT
A. The Witnesses
Based upon the demeanors of the various witnesses who testified live at trial, the Court makes the general finding that plaintiff's representative, Shah, lacked consistent credibility. The Court has no doubt - and indeed there is no dispute that he and the other investors in Delshah lost several million dollars in connection with their securities transaction. However, Shah's testimony came across as contrived; he contradicted himself at various points, was contradicted by testimony from more credible witnesses, and was contradicted by documents. The Court was left with the distinct impression that he was prepared to say whatever he deemed necessary to obtain a judgment in Delshah's favor.
Similarly, the Court found plaintiff's other major witness, Saahil Mehta, who had worked with Shah on the due diligence in connection with the securities purchase, also lacking in consistent credibility. His testimony appeared rehearsed on specific points and he was unable adequately to explain direct contradictions between his prior deposition testimony and his trial testimony. At times, when taken off script by questions from the Court or on cross-examination, he made statements that undermined plaintiff's case. Mehta appeared to be trying to say what he deemed necessary to support plaintiff's claim without particular regard for the truth.
Plaintiff also offered the testimony of Ben D. Nolan on the issue of loss causation. (Court Ex. 8 (Nolan's Report accepted as direct testimony as modified by the Court's Order dated October 26, 2012, ECF No. 113).) Nolan opined that the Project was behind schedule and over budget in March 2007 and that these issues "materialized" into the ultimate failure of the Project. (See, e.g., Id. at 19.) This analysis lacked fundamental indicia of reliability.
First, despite testifying to a methodology that he has previously utilized to assess the reason for construction delays, including interviews with construction managers and review of construction-related documentation, he had done none of that here. (Tr. at 2309-11.) In this instance, he opined that the delays dating to March 2007 caused the Project to fail, without ever speaking with a single individual from the construction team or reading their deposition transcripts. (Tr. at 2280-85, 2298-99.) (Indeed, plaintiff failed to offer any testimony from any member of the construction team to assist it in supporting its theory that intractable construction delays that existed as of March 2007 proximately caused the loss.) Nolan also failed to analyze the specific reasons for any delays he believed existed as of March 2007. (Tr. at 2364-68, 2383.) As a result, his opinions fail to account for the possibility that, even assuming there were delays and cost overruns as of March 2007, that those delays and overruns were not resolved (and that subsequent delays and overruns actually caused the Project to fail). Nolan, in fact, agreed that all construction projects bear an inherent risk of schedule delay. (See Dep. of Ben Nolan ("Nolan Dep."), August 3, 2012, at 40:20-22, 151:6-9, 152:6-8, ECF No. 141.) He also testified that contingencies for cost overruns are built into projects because of inherent risks. (Id. at 42:17-23.)
Nolan further opined that the drop in the real estate market in 2008 was not causally related to the Project's failure - without ever having done any particular market analysis in that regard. (Tr. at 2276-79.) Generally, apart from several admissions Nolan made when taken off script, the Court found that he was hired to state certain opinions - without particular attention to whether the facts supported those opinions.
In contrast, the Court found the testimony of defendants' fact witnesses credible. The Court found Zamir sincere and forthcoming. He readily acknowledged his responsibility for the Project and that he was the boss. (Tr. at 322.) He also testified credibly that prior to plaintiff's purchase of the securities, he expected that its representatives (Shah and Mehta) would receive any information sought. (Tr. at 322-23.) He testified credibly that as of March 29, 2007, the date of plaintiff's closing on the transaction, he strongly believed that the Project would come to a successful and profitable conclusion (tr. at 558-59); he did not believe that at that time the Project was behind schedule or had any significant cost overruns (id.). His testimony regarding his willingness to sell his shares when solicited by plaintiff to do so was also credible. The Court found it significant that ultimately, even after March 2007, Zamir continued to make personal investments in the Project including investing an additional $11 million in loans (which was ultimately lost). (Tr. at 378-79.)
The Court also found the testimony of Javeri credible. Javeri's demeanor was serious and sincere. He answered questions clearly and forthrightly. He was consistent with his deposition in every material respect. He struck the Court as a bright young man who had been trying diligently to answer questions from Shah prior to Shah's purchase. Javeri credibly explained his rationale for agreeing to sell his interest in the Project, why he originally thought the interest was his father's, why for a time be believed that even with the sale to plaintiff he still retained an interest in the Project, and that he believed the Project was running smoothly as of March 29, 2007. (See generally, Tr. at 1368-69.)
The Court also found the testimony of Noah Bilenker, who testified on behalf of defendants, particularly important. Bilenker is no longer employed by defendant Zamir or any of Zamir's companies; he is a practicing transactional attorney with the firm Gibson Dunn. Plaintiff did not expose any reason why Bilenker would have any personal interest in the outcome of this lawsuit or why he would perjure himself on behalf of defendants. The Court finds that he testified truthfully and credibly. Bilenker provided significant corroborating testimony supportive of Javeri's and Zamir's key positions in the case - namely, that as general counsel he was involved in major aspects of the Project and, as of March 2007, he understood that the Project was proceeding smoothly. He believed that the Project would have a profitable outcome and that it was on schedule and did not have any significant cost overruns. (See, e.g., Tr. at 1783, 1809, 1848.) Bilenker also provided the most detailed testimony on either side that explained the reasons for the undisputed delays and cost overruns in the Project, as well as the impact of the market downturn on sales velocity and prices. (Tr. at 1823, 1827-28.) Plaintiff did not offer a witness or evidence to rebut the specific delays to which Bilenker testified or with respect to the impact of the market downturn on sales velocity or prices.
Defendants also offered the expert testimony of Michael Falsetta on the issue of loss causation. (Court Ex. 10.) Falsetta had performed valuations of the Project as of March 2007 and also as of January 15, 2008, shortly after a letter (discussed below) was sent by Zamir to investors in the Project, referring to significant cost overruns and delays. (Id.) At both points, the Project was projected to be profitable. (Id. at 92-95.) The Court found that Falsetta's testimony was helpful, though the fact testimony provided by other witnesses was more important in establishing the lack of loss causation.
B. The Origins of Delshah's Securities Purchase
Plaintiff's purchase of the securities here has its roots in a social encounter at a wedding in India. There, three young men - Javeri, Mehta, and Shah - attending the wedding of a friend discussed a real estate project in which one, Javeri, was involved. In his first job out of college, Javeri had been hired to work for Zamir on the 40 Broad Project. Javeri testified credibly that he told Shah and Mehta that he was involved in sales and marketing aspects of the Project. (Tr. at 1634.) Shah testified that Javeri told him that he was the "project manager". (Tr. at 669, 842.) Mehta testified at his deposition that he did not know whether Javeri was an "an employee, a trainee or an intern, but he was part of the development". (Tr. at 1956-57.) By the time of trial, Mehta's testimony changed and he testified that he thought Javeri was a "project manager" and one of the "senior members managing the development." (Tr. at 1956-1957.) The Court finds that the weight of the credible evidence is that Javeri appropriately represented himself as involved in sales and marketing.
By the time of the wedding, the Project had lined up all of the equity funding it needed and closed on a significant construction loan on October 31, 2006. The parties do not dispute that in January 2007 Mehta approached Javeri about the possibility of investing in the project. (Tr. at 1627.)
In a PowerPoint presentation to potential investors in Delshah (which would, in turn, invest in the 40 Broad Project), Shah highlighted the following points: that the Project would be branded as a "Setai" condominium,  that 20 units were already under contract for sale, and that the condos would feature attractive sizes, amenities and location. (Defs.' Ex. RRRR.) Shah specifically recognized certain aspects of the New York residential condominium market, noting a "[b]urst of activity in Manhattan in 07; [a]cross all price ranges; [d]ouble digit growth from January 06; [p]eople held back for 2 yrs fearing crash that never materialized; [b]uying trend expected to continue;... [e]stimated sell out price: $1250 [per square foot]." (Id. at 5.) Shah's PowerPoint projects a completion date of September 2008. (Id. at 7.)
C. Shah and Mehta Lacked Experience in Conversion Projects
Prior to his involvement in the 40 Broad Project, Shah had never been involved in a commercial to residential condominium conversion. (Tr. at 670.) Neither had he been involved in any project that required significant construction. (Id.) He did not know what an "ACR" was at the time of his investment. (Tr. at 972-73.) Mehta did not believe that Shah had sufficient experience to be able to assess the status of a construction project based on a visual inspection. (Tr. at 2001.) Shah had never seen a construction site for an office to residential condominium conversion before seeing the 40 Broad site. (Tr. at 848.) When he viewed the 40 Broad site, he was accompanied only by Mehta and Javeri. (Tr. at 848-49.) Shah did not have anyone with him who had experience in seeing or evaluating progress on an office to residential condominium conversion project. (Tr. at 849.) Shah never spoke to a construction manager. (Tr. at 1003.)
At the time of Delshah's multi-million dollar investment, Shah, Mehta and Javeri were all in their 20s. (Tr. at 839.) Mehta came to work with Shah in December 2006. (Tr. at 835.) Shah did not believe that Mehta had had any prior real estate experience, (tr. at 836), and was going to teach him. (Id.) Shah was unaware as to whether Javeri had any prior experience in real estate. (Tr. at 840.) Shah testified that he does not think that he questioned Javeri as to whether he had any experience in real estate management, (id.), he does not recall asking Javeri whether he had had any prior experience in real estate construction, (tr. at 841), and he does not recall asking Javeri whether he had had any prior experience in condominium conversion (id.). Shah did, however, recall asking Javeri about a prior project called "Miraval" - which he saw displayed on a poster at Zamir Equities' office; Javeri told him that the project "was a disaster." (Tr. at 845.)
Together, Shah and Mehta performed the due diligence on the 40 Broad Project. (Tr. at 837.) Shah and Mehta agreed they were "the guys with the real estate experience" in the Delshah Group. (Tr. at 837.)
Shah executed the Yahalom Subscription Agreement to purchase Javeri's interest. (Defs.' Ex. ZZZ.) In that agreement, as Manager of Delshah, Shah acknowledges
Section 4(e): Economic Risk: The Subscriber recognizes that the Company Interest, as an investment, involves a high degree of risk including, but not limited to, the risk of economic losses from operations of the Company and total loss of the Subscriber's investment....
(f) Investment Risk: The Subscriber acknowledges that the purchase of the Company Interest is a speculative investment which involves a substantial degree of risk of loss by the Subscriber of the Subscriber's entire investment in the Company, that the Subscriber understands and takes full cognizance of the risk factors related to the purchase of the Company Interest...
(g) Investment Experience: The Subscriber is an experienced investor in unregistered and restricted securities and high-risk ventures and is capable of evaluating the merits and risks of an investment in the Company interest and has obtained, in the Subscriber's judgment, sufficient information from the Company to evaluate the merits and risks of an investment in the Company....
(I)Investor Awareness: the Subscriber acknowledges, represents, warrants, agrees and is aware that... (iii) An investment in the Company is an illiquid investment and the Subscriber must bear the economic risk of the ...