pensacola division )class action complaint...

Case 3:10-cv-00452-RS -EMT Document 1 Filed 11/03/10 of 60

UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF FLORIDA

Pensacola Division

)ROBERT J. MEYER, Individually and On Behalf )of All Others Similarly Situated, )

) CIVIL ACTION NO.Plaintiff, )

)vs. )

)CLASS ACTION COMPLAINTTHE ST. JOE COMPANY, WILLIAM BRITTON )GREENE, WILLIAM S. MCCALMONT, PETER )S. RUMMELL, JANNA L. CONNOLLY, )MICHAEL L. AINSLIE, HUGH M. DURDEN, ) JURY TRIAL DEMANDED THOMAS A. FANNING, HARRY H. )FRAMPTON, III, ADAM W. HERBERT, JR., )DELORES M. KESLER, JOHN S. LORD, )WALTER L. REVELL, WILLIAM H. WALTON, )III, DEUTSCHE BANK SECURITIES INC. and )KPMG LLP, )

Defendants. ))

Plaintiff, Robert J. Meyer (“Plaintiff”), alleges the following based upon the investigation

of Plaintiff’s counsel, which included, among other things, a review of defendants’ public

documents, conference calls and announcements, United States Securities and Exchange

Commission (“SEC”) filings, wire and press releases published by and regarding The St. Joe

Company (“St. Joe” or the “Company”) and securities analysts’ reports and advisories about the

Company. Plaintiff incorporates by reference the October 13, 2010 presentation about St. Joe by

David Einhorn (“Einhorn”) entitled “Field of Schemes: If You Build It, They Won’t Come.”

Plaintiff believes that substantial additional evidentiary support will exist for the allegations set

forth herein after a reasonable opportunity for discovery.

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NATURE OF THE ACTION AND OVERVIEW

1. This is a federal class action on behalf of purchasers of the securities of St. Joe,

who purchased or otherwise acquired St. Joe securities between February 19, 2008 and

October 12, 2010, inclusive (the “Class Period”), including purchasers of the Company’s

securities pursuant or traceable to the Company’s public offering of over 17 million shares of

common stock on or about February 27, 2008, seeking to pursue remedies under the Securities

Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange

Act”).

2. St. Joe is one of the largest real estate development companies in Florida. The

Company is engaged in town and resort development, commercial and industrial development

and rural land sales. The Company operates in four segments: Residential Real Estate,

Commercial Real Estate, Rural Land Sales and Forestry. As of December 31, 2009, St. Joe

owned approximately 577,000 acres of land concentrated primarily in northwest Florida, as well

as approximately 405,000 acres on the coast of the Gulf of Mexico. St. Joe’s 2009 Annual

Report valued the Company’s real estate holdings at $749,500,000.

3. On October 13, 2010, St. Joe’s investors were shocked as Greenlight Capital’s

Mr. Einhorn detailed at the Value Investing Congress how St. Joe needed to take “substantial

impairments” and accounting writedowns on many of its properties, and that further building by

the Company “will drive the stock price to zero.” As subsequently reported by Reuters, Mr.

Einhorn’s presentation, entitled “Field of Schemes: If You Build It, They Won’t Come,” noted

that St. Joe’s “development plans have fallen flat, leaving it with ‘ghost towns’ and inevitable

writedowns.” For example, Mr. Einhorn said he would “generously” place a value of $17.8

million on the remaining residential development at St. Joe’s Windmark Beach property while

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the company is carrying the property at $164.5 million on its balance sheet. Mr. Einhorn also

stated that the Company “was ‘stuck’ after making an aggressive bet on beachfront

developments that have gone nowhere, and that it was overvaluing the real estate holdings on its

books.” According to Mr. Einhorn, “[t]here’s little evidence of how Joe spent so much money

on these developments. Many developments are ghost towns and little value remains.”

4. On this news, shares of the Company’s stock fell $2.38 per share, or 9.7 percent,

to close on October 13, 2010 at $22.16 per share, on unusually heavy trading volume. The

following day the Company’s shares declined an additional $2.42 per share, or 10.9 percent, to

close on October 14, 2010 at $19.74 per share, again on heavy trading volume. Cumulatively,

over these two days St. Joe’s shares declined a total of $4.80 per share, or over 19.5 percent.

5. The Complaint alleges that, throughout the Class Period, defendants failed to

disclose material adverse facts about the Company’s financial well-being, business relationships,

and prospects. Specifically, defendants failed to disclose that: (1) as the Florida real estate

market was in decline, St. Joe was failing to take adequate and required impairments and

accounting write-downs on many of its Florida based property developments; (2) as a result, St.

Joe’s financial statements materially overvalued the Company’s Florida based property

developments; (3) the Company’s financial statements were not prepared in accordance with

Generally Accepted Accounting Principles (“GAAP”); (4) the Company lacked adequate internal

and financial controls; and (5) as a result of the foregoing, the Company’s financial statements

were materially false and misleading at all relevant times.

6. As a result of defendants’ wrongful acts and omissions, and the precipitous

decline in the market value of the Company’s securities, Plaintiff and other Class Members

suffered damages.

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JURISDICTION AND VENUE

7. The claims asserted herein arise under and pursuant to Sections 11, 12(a)(2), and

15 of the Securities Act (15 U.S.C. §§ 77k and 77o), and under and pursuant to Sections 10(b)

and 20(a) of the Exchange Act, (15 U.S.C. §§ 78j(b) and 78t(a)), and Rule 10b-5 promulgated

thereunder (17 C.F.R. § 240.10b-5).

8. This Court has jurisdiction over the subject matter of this action pursuant to

Section 22 of the Securities Act (15 U.S.C. § 77v) and pursuant to Section 27 of the Exchange

Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331.

9. Venue is proper in this District pursuant to Section 22 of the Securities Act and

pursuant to Section 27 of the Exchange Act, 15 U.S.C. § 78aa and 28 U.S.C. § 1391(b). Many of

the acts and transactions alleged herein, including the preparation and dissemination of

materially false and misleading information, occurred in substantial part in this District.

Additionally, St. Joe’s principal executive offices are located within this District.

10. In connection with the acts, conduct and other wrongs alleged in this Complaint,

defendants, directly or indirectly, used the means and instrumentalities of interstate commerce.

PARTIES

11. Plaintiff, Robert J. Meyer, as set forth in the accompanying certification,

incorporated by reference herein, purchased St. Joe securities at artificially inflated prices during

the Class Period and has been damaged thereby.

12. Defendant St. Joe is a Florida corporation with its principal executive offices

located at 133 South WaterSound Parkway, WaterSound, Walton County, Florida.

13. Defendant William Britton Greene (“Greene”) was, at relevant times, the

Company’s President, Chief Executive Officer (“CEO”), and a member of the Company’s Board

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of Directors.

14. Defendant William S. McCalmont (“McCalmont”) was, at relevant times, the

Company’s Chief Financial Officer (“CFO”) and an Executive Vice President.

15. Defendant Peter S. Rummell (“Rummell”) was, at relevant times, the Company’s

CEO and Chairman of the Board.

16. Defendant Janna L. Connolly (“Connolly”) was, at relevant times, the Company’s

Controller.

17. Defendant Michael L. Ainslie (“Ainslie”) was, at relevant times, a member of the

Company’s Board of Directors.

18. Defendant Hugh M. Durden (“Durden”) was, at relevant times, a member of the


19. Defendant Thomas A. Fanning (“Fanning”) was, at relevant times, a member of

the Company’s Board of Directors.

20. Defendant Harry H. Frampton, III (“Frampton”) was, at relevant times, a member

of the Company’s Board of Directors.

21. Defendant Adam W. Herbert, Jr. (“Herbert”) was, at relevant times, a member of


22. Defendant Delores M. Kesler (“Kesler”) was, at relevant times, a member of the


23. Defendant John S. Lord (“Lord”) was, at relevant times, a member of the


24. Defendant Walter L. Revell (“Revell”) was, at relevant times, a member of the


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25. Defendant William H. Walton, III (“Walton”) was, at relevant times, a member of


26. Defendants Greene, McCalmont, Rummell, Connolly, Ainslie, Durden, Fanning,

Frampton, Herbert, Kesler, Lord, Revell and Walton are collectively referred to hereinafter as the

“Individual Defendants.” The Individual Defendants, because of their positions with the

Company, possessed the power and authority to control the contents of St. Joe’s reports to the

SEC, press releases and presentations to securities analysts, money and portfolio managers and

institutional investors, i.e., the market. Each defendant was provided with copies of the

Company’s reports and press releases alleged herein to be misleading prior to, or shortly after,

their issuance and had the ability and opportunity to prevent their issuance or cause them to be

corrected. Because of their positions and access to material non-public information available to

them, each of these defendants knew that the adverse facts specified herein had not been

disclosed to, and were being concealed from, the public, and that the positive representations

which were being made were then materially false and misleading. The Individual Defendants

are liable for the false statements pleaded herein, as those statements were each “group-

published” information, the result of the collective actions of the Individual Defendants.

27. Defendant Deutsche Bank Securities Inc. (“Deutsche Bank”) was an underwriter

of the Company’s February 2008 public stock offering. Deutsche Bank served as a financial

advisor and assisted in the preparation and dissemination of the offering materials for St. Joe’s

public stock offering.

28. Defendant KPMG LLP (“KPMG”) was, at all relevant times, the Company’s

public accounting firm. KPMG audited St. Joe’s financial statements, and issued unqualified

opinions about the effectiveness of the Company’s internal control over financial reporting.

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SUBSTANTIVE ALLEGATIONS

Background

29. St. Joe is a real estate development company, and is one of the largest such

companies in Florida. The Company is engaged in town and resort development, commercial

and industrial development and rural land sales. The Company operates in four segments:

Residential Real Estate, Commercial Real Estate, Rural Land Sales and Forestry. The

Residential Real Estate segment develops mixed-use resort, and seasonal and primary residential

communities. This segment also focuses on selling undeveloped land to third-party developers

or investors. The Commercial Real Estate segment develops and sells real estate primarily for

commercial and light industrial uses. The Rural Land Sales segment markets parcels for rural

recreational, conservation, and timberland uses. The Forestry segment grows, harvests and sells

timber and wood fiber, and provides land management services for conservation properties. As

of December 31, 2009, St. Joe owned approximately 577,000 acres of land concentrated

primarily in northwest Florida, as well as approximately 405,000 acres on the coast of the Gulf

of Mexico.

Materially False and MisleadingStatements Issued During the Class Period

30. The Class Period begins on February 19, 2008. On this day the Company issued a

press release entitled “The St. Joe Company (NYSE: JOE) Reports Fourth Quarter And Full

Year 2007 Financial.” The press release reported that the Company’s investment in real estate

was $943.5 million, and stated:

The St. Joe Company (NYSE: JOE) today announced Net Income for the fourthquarter 2007 of $1.0 million, or $0.01 per share, compared with $22.3 million, or$0.30 per share, for the fourth quarter of 2006. JOE’s fourth quarter resultsincluded pre-tax restructuring charges of $6.2 million, or $0.05 per share after tax,and $4.3 million, or $0.04 per share after tax, related to the write-off of a minority

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position in a liquidating trust. All per share references in this release are presentedon a diluted basis.

For the full year 2007, JOE had Net Income of $39.2 million, or $0.53 per share,compared with $51.0 million, or $0.69 per share, for the full year 2006. Full yearresults were affected by:

• Pre-tax impairment charges for the full year 2007 totaled $23.2 million, or$0.19 per share after tax, which included:

o Approximately $13.6 million primarily related to a write-down ofcosts on homes and home sites in JOE’s residential segment toapproximate fair value;

* * *

Summary Balance Sheet

December 31, 2007 December 31, 2006

Assets

Investments in real estate $943,500,000 $1,213,500,000

31. On February 25, 2008, the Company filed its 2007 Annual Report with the SEC

on Form 10-K. The Company’s Form 10-K was signed by Defendants Rummell, Greene and

McCalmont, among others, and reaffirmed the Company’s 2007 financial results, financial

position, and the reported value of the Company’s investment in real estate as previously

announced on February 19, 2008. With respect to the Company’s asset impairment costs, St.

Joe’s 2007 Annual Report stated:

During 2007, we recorded total asset impairment costs of $23.2 million,$13.0 million of which related to the write down of capitalized costs at certainprojects due to changes in development plans and the impairment of completedhomes in several of our communities due to current market conditions. Ifmarket conditions were to continue to deteriorate, and the market values for ourhome sites, remaining homes held in inventory and other project land were tofall below the book value of these assets, we would need to take additional write-downs of the book value of these assets. Any such write-downs would decreasethe value of these assets on our balance sheet and would reduce our net income.

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* * *

Impairment Losses. We review our long-lived assets for impairment wheneverevents or changes in circumstances indicate that the carrying amount of an assetmay not be recoverable. Homes and home-sites substantially completed and readyfor sale are measured at the lower of carrying value or fair value less costs to sell.For projects under development, an estimate of future cash flows on anundiscounted basis is performed using estimated future expenditures necessary tomaintain the existing service potential of the project and using management’s bestestimates about future sales prices and holding periods. The decline in demandand market prices for residential real estate caused us to conclude that carryingamounts within our residential real estate segment may not be recoverable, andwe performed an impairment analysis. As a result of our impairment analyses,we recorded an impairment charge of $13.6 million in the residential real estatesegment.

* * *

Impairment of Long-lived Assets and Goodwill. Our long-lived assets, primarilyreal estate held for investment, are carried at cost unless circumstances indicatethat the carrying value of the assets may not be recoverable. If we determine thatan impairment exists due to the inability to recover an asset’s carrying value, aprovision for loss is recorded to the extent that the carrying value exceededestimated fair value. If such assets were held for sale, the provision for loss wouldbe recorded to the extent that the carrying value exceeds estimated fair value lesscosts to sell.

Depending on the asset, we use varying methods to determine fair value, such as(i) analyzing expected future cash flows, (ii) determining resale values by market,or (iii) applying a capitalization rate to net operating income using prevailing ratesin a given market. The fair value determined under these methods can fluctuate upor down significantly as a result of a number of factors, including changes in thegeneral economy of our markets, demand for real estate and the projected netoperating income for a specific property.

* * *

Asset Impairments

The Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Homes and home-sites substantially completed and ready for sale aremeasured at lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain the existingservice potential of the project and using management’s best estimates aboutfuture sales prices and holding periods. The overall decrease in demand and

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market prices for residential real estate indicated that carrying amounts of certainassets within its residential real estate segment may not be recoverable and,accordingly, the Company recorded an impairment charge of $13.6 million in theresidential real estate segment during 2007. [Emphasis added.]

32. The Notes to Consolidated Financial Statements section of the 2007 Form 10-K

also discussed asset impairments and the Company’s segment results, and provided a schedule of

the carrying value of the Company’s residential real estate and accumulated depreciation. In

relevant part, the Form 10-K stated:

In 2007 we recorded impairments totaling $13.6 million primarily due to currentadverse market conditions for residential real estate. Approximately $5.2 millionof the impairments related to capitalized costs at certain projects due to changes indevelopment plans, approximately $7.8 million related primarily to completedspec homes in several communities and approximately $0.6 million related to themodified terms of certain promissory notes.

* * *

THE ST. JOE COMPANY

SCHEDULE III (CONSOLIDATED) —REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2007

Initial Cost to Company Carried at Close of PeriodDescription Encumbrances Land Buildings & Costs Land & Land Buildings and Total Accumulated

Improvements Capitalized Improvements Improvements DepreciationSubsequent

toAcquisition

(in thousands)Bay County, FloridaLand with infrastructure $3,346 $642 $— $30,545 $31,187 $— $31,187 $75Buildings — — 1,296 11,850 — 13,146 13,146 1,113Residential — 2,203 — 53,474 55,677 — 55,677 223Timberlands 8,257 3,896 — 12,046 15,942 — 15,942 360Unimproved land — 1,504 — — 1,504 — 1,504 —

Broward County, Florida — — — — — — — —Building — — — — — — — —

Calhoun County, Florida — — — — — — — —Buildings — — — 181 181 — 181 56Timberlands 5,510 1,774 — 5,155 6,929 — 6,929 156Unimproved land — 979 — 725 1,704 — 1,704 —

Duval County, Florida — — — — — — — —Land with infrastructure — 255 — 5 260 — 260 —Buildings — — — 2,795 — 2,795 2,795 1,983Residential — — — — — — — —

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Timberlands — — — 1 1 — 1 —

Franklin County, Florida — — — — — — — —Land with infrastructure — 44 — 11 55 — 55 —Residential — 9,003 — 27,326 36,329 — 36,329 —Timberlands 415 1,241 — 1,367 2,608 — 2,608 59Unimproved Land — 211 — 3 214 — 214Buildings — — 1,537 7,499 — 9,036 9,036 532

Gadsden County, Florida — — — — — — — —Land with infrastructure — — — 3,288 3,288 — 3,288 —Timberlands 969 1,302 — 778 2,080 — 2,080 47Unimproved land — 1,836 — 329 2,165 — 2,165 —

Gulf County, Florida — — — — — — — —Land with infrastructure — 1,591 — 1,520 3,111 — 3,111Buildings — — 930 3,036 — 3,966 3,966 769Residential — 29,847 — 159,953 189,800 — 189,800 207Timberlands 14,958 5,238 — 17,939 23,177 — 23,177 523Unimproved land — 521 — 704 1,225 — 1,225 —

Hillsborough County,Florida — — — — — — — —Buildings — — — — — — — —

Jefferson County, Florida — — — — — — — —Buildings — — — 198 — 198 198 177Timberlands — 1,214 — — 1,214 — 1,214 27Unimproved land — 215 — — 215 — 215 —

Leon County, Florida — — — — — — — —Land with infrastructure 672 573 — 4,121 4,694 — 4,694 48Buildings — — 5,718 11,513 — 17,231 17,231 2,666Residential 984 23 58 48,120 48,143 58 48,201 1,281Timberlands — 923 — 2,827 3,750 — 3,750 85Unimproved land — 238 — — 238 — 238 —

Liberty County, Florida — — — — — — — —Buildings — — 821 28 — 849 849 223Timberlands 4,401 3,449 — 4,679 8,128 — 8,128 244Unimproved land — 145 — — 145 — 145 —

Manatee CountyLand with infrastructure — — — — — — —Buildings — 2,379 67 — 2,446 2,446 360Residential — 26,730 — 17,225 43,955 — 43,955 12

Orange County, Florida — — — — — — — —Land with infrastructure — — — — — — — —Buildings — — — — — — — —

Osceola County —Land with infrastructure — — — — — — —Residential 393 5,769 — 12,133 17,902 — 17,902 —Buildings — — — — — — — —

Palm Beach County,Florida — — — — — — — —Land with infrastructure — — — — — — —Residential — — — — — — —Buildings — — 5 27 — 32 32 32

Pinellas County, Florida — — — — — — — —Buildings — — — — — — — —

St. Johns County, Florida — — — — — — — —

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Land with infrastructure — 1,016 — 4,744 5,760 — 5,760 641Buildings — — 1,854 2,632 — 4,486 4,486 1,093Residential 30,276 9,142 — 56,473 65,615 — 65,615 —

Polusia County, Florida — — — — — — — —Land with infrastructure — — — — — — — —Buildings — — 1,644 2,265 — 3,909 3,909 810Residential — 14,005 — 60,900 74,905 — 74,905 1,864

Wakulla County, Florida — — — — — — — —Land with infrastructure — — — 371 371 — 371 —Buildings — — 41 41 — 82 82 53Timberlands — 1,175 — 43 1,218 — 1,218 27Unimproved Land — 30 — 11 41 — 41 —

Walton County, Florida — — — — — — — —Land with infrastructure — 56 — 3,435 3,491 — 3,491 —Buildings — — 33,498 12,182 — 45,680 45,680 6,664Residential — 22,676 — 148,995 171,671 — 171,671 5,138Timberlands 534 354 — 1,040 1,394 — 1,394 31Unimproved land — — — — — — — —

Other Florida Counties — — — — — — — —Land with infrastructure — — — — — — — —Timberlands — 689 — 112 801 — 801 18Unimproved land — 79 — 68 147 — 147 —

33. The Company’s 2007 Form 10-K also contained Sarbanes-Oxley required

certifications, signed by Defendants Rummell and McCalmont, which stated:

I, [Peter S. Rummell / William S. McCalmont], certify that:

1. I have reviewed this annual report on Form 10-K for the year endedDecember 31, 2007 of The St. Joe Company;

2. Based on my knowledge, this report does not contain any untrue statementof a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financialinformation included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of,and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible forestablishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financialreporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:

(a) Designed such disclosure controls and procedures, or caused suchdisclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its

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consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is beingprepared;

(b) Designed such internal control over financial reporting, or causedsuch internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controlsand procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internalcontrol over financial reporting that occurred during the registrant’s mostrecent fiscal quarter that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting;and

5. The registrant’s other certifying officer and I have disclosed, based on ourmost recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the designor operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record,process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management orother employees who have a significant role in the registrant’s internalcontrol over financial reporting.

* * *

Pursuant to 18 USC §1350, the undersigned officer of The St. Joe Company (the“Company”) hereby certifies that the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2007 (the “Report”) fully complies with therequirements of Section 13(a) or 15(d), as applicable, of the Securities ExchangeAct of 1934 and that the information contained in the Report fairly presents, in allmaterial respects, the financial condition and results of operations of the Company

34. St. Joe’s 2007 Form 10-K also contained a report from KPMG, the Company’s

public accounting firm, which stated that the Company’s financial statements “present fairly, in

all material respects, the financial position of The St. Joe Company and subsidiaries as of

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December 31, 2007.” KPMG also expressed an unqualified opinion on the effectiveness of the

Company’s internal control over financial reporting:

We have audited the accompanying consolidated balance sheets of The St. JoeCompany and subsidiaries as of December 31, 2007 and 2006, and the relatedconsolidated statements of income, changes in stockholders’ equity, and cash flowfor each of the years in the three-year period ended December 31, 2007. Inconnection with our audits of the consolidated financial statements, we also haveaudited financial statement schedule III — Consolidated Real Estate andAccumulated Depreciation. These consolidated financial statements and financialstatement schedule are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these consolidated financial statementsand financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of The St. Joe Company andsubsidiaries as of December 31, 2007 and 2006, and the results of their operationsand their cash flows for each of the years in the three-year period endedDecember 31, 2007, in conformity with U.S. generally accepted accountingprinciples. Also in our opinion, the related financial statement schedule, whenconsidered in relation to the basic consolidated financial statements taken as awhole, presents fairly, in all material respects, the information set forth therein.

* * *

We also have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), The St. Joe Company’s internalcontrol over financial reporting as of December 31, 2007, based on criteriaestablished in Internal Control - Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission (COSO), and ourreport dated February 25, 2008, expressed an unqualified opinion on theeffectiveness of the Company’s internal control over financial reporting.

35. The statements contained in ¶¶ 30 – 34 were materially false and misleading when

made because defendants failed to disclose that: (1) as the Florida real estate market was in

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decline, St. Joe was failing to take adequate and required impairments and accounting write-

downs on many of its Florida based property developments; (2) as a result, St. Joe’s financial

statements materially overvalued the Company’s Florida based property developments; (3) the

Company’s financial statements were not prepared in accordance with GAAP; (4) the Company

lacked adequate internal and financial controls; and (5) as a result of the foregoing, the

Company’s financial statements were materially false and misleading at all relevant times.

36. On or about February 27, 2008, the defendants conducted a public offering (the

“Offering”) and sold 17,145,000 shares of St. Joe stock to investors at a price of $35.00 per share

for proceeds of approximately $580,000,000. In connection with this Offering, the Company

filed a Registration Statement and Prospectus on February 25, 2008 and a Prospectus

Supplement on February 26, 2008 (collectively, the “Offering Materials”). The Offering

Materials were signed by the Individual Defendants, and incorporated certain information by

reference, including the false statements identified at ¶¶ 30 – 34. The Offering Materials stated,

in relevant part:

INFORMATION INCORPORATED BY REFERENCE

The SEC allows us to incorporate by reference the information contained indocuments we file with the SEC, which means that we can disclose importantinformation to you by referring you to those documents. The informationincorporated by reference is an important part of this prospectus and anyapplicable prospectus supplement. Any statement contained in a document whichis incorporated by reference in this prospectus or the applicable prospectussupplement is automatically updated and superseded if information contained inthis prospectus or any applicable prospectus supplement, or information that welater file with the SEC, modifies or replaces that information. Any statement madein this prospectus or any applicable prospectus supplement concerning thecontents of any contract, agreement or other document is only a summary of theactual contract, agreement or other document. If we have filed or incorporated byreference any contract, agreement or other document as an exhibit to theregistration statement, you should read the exhibit for a more completeunderstanding of the document or matter involved. Each statement regarding acontract, agreement or other document is qualified in its entirety by reference tothe actual document.

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We incorporate by reference the following documents we filed with the SEC(other than any information contained therein or attached as exhibits theretowhich has been furnished but not filed in accordance with SEC rules):

(1) Our Annual Report on Form 10-K for the year ended December 31, 2007,filed February 25, 2008;

(2) Our Current Reports on Form 8-K filed on January 24 and February 19,2008; and

(3) Our Proxy Statement on Schedule 14A filed April 13, 2007.

37. The Offering Materials were materially false and misleading because defendants

failed to disclose that: (1) as the Florida real estate market was in decline, St. Joe was failing to

take adequate and required impairments and accounting write-downs on many of its Florida

based property developments; (2) as a result, St. Joe’s financial statements materially overvalued

the Company’s Florida based property developments; (3) the Company’s financial statements

were not prepared in accordance with GAAP; (4) the Company lacked adequate internal and

financial controls; (5) the Company’s financial statements were materially false and misleading

at all relevant times; and (6) as a result of the foregoing, the Company’s Offering Materials were

false and misleading at all relevant times.

38. On February 27, 2008, St. Joe issued a press release announcing that it had priced

the public offering of 17,145,000 shares of its common stock. The public offering price was

$35.00 per share, and St. Joe stated that the “approximately $580 million of net proceeds from

the offering will be used to repay substantially all of JOE’s outstanding indebtedness. The

offering is expected to close on March 3, 2008.” The sole underwriter for the Offering was

Deutsche Bank Securities Inc.

39. On or about March 3, 2008, the Offering closed, and the Company received

proceeds of approximately $580,000,000.

40. On May 6, 2008, the Company issued a press release entitled “The St. Joe

16


Company (NYSE: Joe) Reports First Quarter 2008 Financial Results.” The press release

reported that the Company’s investment in real estate was $950.7 million, and stated:

The St. Joe Company (NYSE: JOE) today announced Net Income for the firstquarter 2008 increased $12.4 million to $32.1 million, or $0.40 per share,compared to Net Income of $19.7 million, or $0.27 per share, for the first quarterof 2007. JOE’s first quarter results included pre-tax impairment charges of $2.3million, or $.02 per share after taxes, as a result of continuing declines in salesand listing prices principally in our primary communities. Also included in 2008results are pre-tax restructuring charges of $0.5 million, or less than $0.01 pershare after tax, compared to $3.2 million, or $0.03 per share after tax, in 2007.All per share references in this release are presented on a diluted basis.

“Like the rest of the country, Florida is facing very challenging real estate marketconditions. Consumer confidence is declining and many consumers seem to bedeferring residential real estate purchases until there is more economic clarity,”said chairman and CEO Peter S. Rummell. ”With the U.S. and Florida economiesbattling rising home foreclosures, a tightening of credit and a significant inventoryof unsold homes, predicting when residential real estate markets will return tohealth remains difficult. However, demand for rural land remains strong, and weare having success selling non-strategic rural land parcels to a wide variety ofcustomers.”

During the first quarter, significant progress was achieved in four areas:

• Construction of the Panama City - Bay County International Airportmoved forward on time and on budget after several favorable judicialdecisions;

• JOE’s successful equity offering made JOE virtually debt free andincreased its financial flexibility to weather the current market downturn;

• JOE sold 57,435 acres of non-strategic rural lands for a total of $91.1million; and

• JOE’s succession plan was implemented smoothly with president andCOO Britt Greene slated to become CEO on May 13th.

“While it is impossible to predict when conditions in JOE residential markets willimprove, we are taking important steps to be properly positioned when they do,”said Rummell. ”We have become a leaner, more nimble company.”

“Looking ahead two years from today, 2010 will be an important time for JOE,”said Rummell. ”The new Panama City - Bay County airport is scheduled to openat that point and many economists think economic conditions will be improvingby then. Our job between now and then is to focus on the demand side of the

17


equation and work with a broad range of strategic allies - from the state economicdevelopment organizations to third-party developers - to ensure West Bay and thenew airport are a success.”

* * *

JOE’s Balance Sheet

On March 3, 2008, JOE sold 17,145,000 shares of its common stock. Theapproximately $580 million of net proceeds from the public offering were used torepay substantially all of JOE’s outstanding indebtedness.

“JOE’s successful equity offering has dramatically increased our financialflexibility in weathering the current market downturn,” said William S.McCalmont, JOE’s CFO. ”As we move forward, we are committed tomaintaining a strong balance sheet.”

At March 31, 2008, JOE’s debt was $288.7 million, including $30.2 million ofdefeased debt. On April 4, 2008, JOE paid off $240 million of Senior Notesmaking it virtually debt free. At the end of the first quarter, JOE hadapproximately $480.3 million of available capacity under its $500 millionRevolving Credit Facility.

* * *

“Demand for both large and small tracts of rural land has held up well during thiscurrent market downturn,” said JOE president and COO Britt Greene. ”Wecontinue to see interest from large landowners, recreational land buyers,conservation land buyers and pension funds.”

Resort and primary residential sales generated $9.7 million in revenue. Asanticipated, conditions in JOE’s residential markets remain difficult. JOE did notclose any commercial land sales during the first quarter. Due to the challengesfacing the retail industry, as well as the nature of commercial land transactions,JOE expects its revenue from commercial land sales to remain lumpy.

41. Also on May 6, 2008, St. Joe filed its Quarterly Report with the SEC on Form 10-

Q. The Company’s Form 10-Q was signed by Defendants Rummell and Connolly, and

reaffirmed the Company’s quarterly financial results, financial position, and the reported value of

the Company’s investment in real estate. The Company’s Form 10-Q also contained Sarbanes-

Oxley required certifications, which were substantially similar to the certifications contained in

¶33. Additionally, the Form 10-Q discussed asset impairments, stating:

18


The Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Homes and home-sites substantially completed and ready for sale aremeasured at lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain the existingservice potential of the project and using management’s best estimates aboutfuture sales prices and holding periods. The continued decrease in demand andmarket prices for residential real estate during the first quarter of 2008 indicatedthat certain carrying amounts within our residential real estate segment may notbe recoverable. As a result of the first quarter 2008 impairment analysis, theCompany has recorded an impairment charge of $2.3 million in the residentialreal estate segment.

42. On August 5, 2008, the Company issued a press release entitled “The St. Joe

Company (NYSE: JOE) Reports Second Quarter 2008 Financial Results.” The press release


The St. Joe Company (NYSE: JOE) today announced a Net Loss for the secondquarter 2008 of $(20.8) million, or $(0.23) per share, compared to Net Income of$25.3 million, or $0.34 per share, for the second quarter of 2007, a decrease of$46.1 million. All per share references in this release are presented on a dilutedbasis. JOE’s second quarter results included the following significant charges:

• $29.9 million pre-tax, or $0.20 per share after-tax, related to a loss on theearly extinguishment of debt in conjunction with the prepayment of JOE’ssenior notes;

• Pre-tax restructuring of $2.5 million, or $0.02 per share after-tax;

• Pre-tax impairment of $1.0 million, or $0.01 per share after-tax, associatedwith certain of JOE’s communities and the write-down of a homebuildernote receivable; and

• $1.9 million pre-tax loss, or $0.01 per share after-tax, related to a fairvalue adjustment on retained interests of monetized installment notes.

Net income for the first half of 2008 was $11.2 million, or $0.13 per share,compared to $45.0 million, or $0.61 per share, for the first half of 2007. Includedin results for the first six months of 2008 were the following significant charges:

• $29.9 million pre-tax, or $0.21 per share after-tax, related to a loss on theearly extinguishment of debt;

• Pre-tax restructuring of $3.0 million, or $0.02 per share after-tax;

19


• Pre-tax impairment of $3.2 million, or $0.02 per share after-tax; and

• $1.9 million pre-tax loss on the monetization of installment notes, or $0.01per share after-tax.

* * *

“With continuing economic weakness in the national economy, our northernFlorida real estate markets face difficult conditions,” said JOE’s president andCEO Britt Greene. “We cannot predict exactly when the national economy or ourreal estate markets will recover, but we are continuing to execute our strategicplan and keep JOE lean and efficient to better withstand these very difficultconditions. We have significantly reduced capital expenditures, virtuallyeliminated our debt and meaningfully reduced employee headcount.”

“We intend to be well positioned when real estate markets eventually return tohealth by providing a variety of real estate products for the cycle’s upturn,” saidGreene. “This includes key parcels in Bay County near the new internationalairport now under construction, and WindMark Beach in Port St. Joe.”

* * *

Commitment to a Solid Balance Sheet

At June 30, 2008, JOE had cash and marketable securities of $74.0 million,compared to debt of $54.2 million, which includes $29.8 million of defeased debt.On April 4, 2008, JOE paid off $240 million of senior notes along with a $29.7million make-whole payment with the proceeds of the first-quarter equityoffering.

“JOE is committed to maintaining a strong balance sheet and continuing to reduceSG&A expenses,” said CFO William McCalmont. “We fully understand theimportance of operating with extreme efficiency, and we are evaluating allexpenditures and strategic initiatives to ensure we are well prepared when the realestate environment improves. With our strong balance sheet and cash position, weare prepared to withstand this prolonged downturn and will continue to prudentlymanage our inventory and assets to preserve long-term shareholder value.”

43. Also on August 5, 2008, St. Joe filed its Quarterly Report with the SEC on Form

10-Q. The Company’s Form 10-Q was signed by Defendants Greene and Connolly, and




20



The Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Homes and home-sites substantially completed and ready for sale aremeasured at lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain the existingservice potential of the project and using management’s best estimates aboutfuture sales prices and holding periods. The continued decrease in demand andmarket prices for residential real estate during the first six months of 2008indicated that certain carrying amounts within the Company’s residential realestate segment may not be recoverable. In addition, for the second quarter 2008the Company recorded an impairment charge of $0.8 million related to the writedown of a renegotiated builder note receivable. As a result of its impairmentanalyses, the Company has recorded aggregate impairment charges of$3.2 million in the residential real estate segment for the first six months of 2008of which $2.2 million was recognized in the first quarter and $1.0 million in thesecond quarter.

44. On November 4, 2008, the Company issued a press release entitled “The St. Joe

Company (NYSE: JOE) Reports Third Quarter 2008 Financial Results.” The press release


The St. Joe Company (NYSE: JOE) today announced a Net Loss for the thirdquarter 2008 of $(19.2) million, or $(0.21) per share, compared to a Net Loss of$(6.8) million, or $(0.09) per share, for the third quarter of 2007.

* * *

Third Quarter Highlights

“During these extraordinary times that are impacting the entire real estateindustry, we continue to make progress in the third quarter fortifying JOE,” saidBritt Greene, JOE’s President and CEO. “With virtually no debt and a strong cashposition, JOE’s solid balance sheet better positions us to withstand the globalfinancial crisis and the downturn in the Florida real estate market. We remaincommitted to continuing to manage costs during this prolonged downturn and willmaintain our focus on managing our inventory and assets to preserve long-termshareholder value. At the same time, we are focusing on the opportunities to bepresented by the opening of the airport and are positioning JOE for when the realestate markets begin to recover.”

* * *

21


Third Quarter Operating Results

“The third quarter operating results reflect a challenging environment,” saidGreene. “The summer selling season in our resort markets was disappointing andthe primary home market remains difficult. We continue to see long-term interestin Northwest Florida commercial markets, but they continue to be affected by thecurrent economic conditions.”

* * *

Year-to-Date Results

Net Loss for the first nine months of 2008 was $(8.0) million, or $(0.09) pershare, compared to Net Income of $38.2 million, or $0.51 per share, for the firstnine months of 2007.

45. Also on November 4, 2008, St. Joe filed its Quarterly Report with the SEC on

Form 10-Q. The Company’s Form 10-Q was signed by Defendants Greene and Connolly, and





The Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Homes and home-sites substantially completed and ready for sale aremeasured at lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain the existingproject and using management’s best estimates about future sales prices andholding periods. The continued decrease in demand and market prices forresidential real estate during the first nine months of 2008 and 2007 indicated thatcertain carrying amounts within the Company’s residential real estate segmentmay not be recoverable. In addition, during the second quarter 2008 the Companyrecorded an impairment charge of $0.8 million related to the write down of arenegotiated builder note receivable. As a result of its 2008 impairment analyses,the Company has recorded aggregate impairment charges of $1.3 million and$4.6 million in the residential real estate segment for the three and nine monthsended September 30, 2008. The Company also recorded an impairment charge of$13.0 million in the third quarter of 2007.

22


46. On February 24, 2009, the Company issued a press release entitled “The St. Joe

Company (NYSE: Joe) Reports Fourth Quarter and Full Year 2008 Financial Results.” The

press release reported that the Company’s investment in real estate was $890.6 million, and

stated:

The St. Joe Company (NYSE: JOE) today announced a Net Loss for the fourthquarter 2008 of $(27.9) million, or $(0.31) per share, which includes non-cashcharges of $57.9 million, or $0.36 per share after tax. This compares to NetIncome of $1.0 million, or $0.01 per share, for the fourth quarter of 2007, whichincludes non-cash charges of $10.5 million, or $0.09 per share after tax. All per-share references in this release are presented on a diluted basis.

JOE’s fourth quarter 2008 results include the following non-cash charges:

• Pre-tax impairment charges of $55.8 million, or $0.34 per share after tax,including:

o $28.3 million write-down related to its SevenShores condominiumdevelopment project;

o $19.0 million write-off of goodwill related to JOE’s 1997 purchaseof Arvida;

o $8.3 million charge for the write-down of costs to approximate fairvalue on homes in several JOE communities;

* * *

For the fourth quarter of 2007, JOE recorded pre-tax restructuring charges of $6.2million, or $0.05 per share after tax, and $4.3 million, or $0.04 per share after tax,related to the write-off of a minority position in a liquidating trust.

“Preserving JOE’s unique asset base while identifying and capitalizing on futuregrowth options are our primary focus in these unprecedented economic times,”said Britt Greene, JOE’s President and CEO. “Our solid balance sheet, bolsteredby a strong cash position with virtually no debt, better positions JOE to weatherthis economic crisis. We have benefited greatly from our successful costmanagement and asset preservation initiatives. As we look forward, we are alsocommitting significant resources to the opportunities presented by the opening ofthe new international airport in Panama City projected for May 2010.”

Liquidity and Capital Expenditures

At December 31, 2008, JOE had cash and pledged treasury securities of $144.4million, compared to debt of $49.6 million, which includes $28.9 million of

23


defeased debt. For the year 2008, JOE’s capital expenditures were approximately$35 million, compared to approximately $247 million in 2007.

“During the economic uncertainty of 2008, we prudently managed our assets witha restructured business model, reduced capital expenditures and reduced operatingand overhead expenses,” said William S. McCalmont, JOE’s Executive VicePresident and CFO. “Our strong balance sheet, augmented by our healthy cashposition and virtually no debt, allows us to plan for future opportunities wheneconomic conditions improve.”

* * *

Full-Year Results

For the full year 2008, JOE had a Net Loss of $(35.9) million, or $(0.40) pershare, compared to Net Income of $39.2 million, or $0.53 per share, for the fullyear 2007. Full year 2008 results include the following charges which totaled$109.5 million, or $0.69 per share after tax:

• Pre-tax impairment charges totaling $60.4 million and pre-tax loss of $1.9million related to abandoned property, or an aggregate of $0.35 per shareafter tax;

* * *

The full-year 2007 results were affected by the following:

• Pre-tax impairment charges totaling $23.2 million, or $0.19 per share aftertax, which includes $9.6 million recorded in discontinued operations;

* * *



Assets

Investments in real estate $890,600,000 $943,500,000

47. Also on February 24, 2009, St. Joe filed its 2008 Annual Report with the SEC on

Form 10-K. The Company’s Form 10-K was signed by Defendants Greene and McCalmont,

among others, and reaffirmed the Company’s 2008 financial results, financial position, and the

24


reported value of the Company’s investment in real estate. The Company’s Form 10-K also

contained Sarbanes-Oxley required certifications, which were substantially similar to the

certifications contained in ¶33. With respect to the Company’s asset impairment costs, St. Joe’s

2008 Annual Report stated:

If the market values of our homesites, our remaining inventory of completedhomes and other developed real estate assets were to drop below the book valueof those properties, we would be required to write-down the book value of thoseproperties, which would have an adverse affect on our balance sheet and ourearnings.

Unlike most other real estate developers, we have owned the majority of our landfor many years, having acquired most of our land in the 1930’s and 1940’s.Consequently, we have a very low cost basis in the majority of our lands. Incertain instances, however, we have acquired properties at market values forproject development. Also, many of our projects have expensive amenities, suchas pools, golf courses and clubs, or feature elaborate commercial areas requiringsignificant capital expenditures. Many of these costs are capitalized as part of thebook value of the project land. Adverse market conditions, in certaincircumstances, may require the book value of real estate assets to be decreased,often referred to as a “write-down” or “impairment.” A write-down of an assetwould decrease the value of the asset on our balance sheet and would reduce ourearnings for the period in which the write-down is recorded.

During 2008, we recorded total asset impairment costs of $60.5 million,$41.3 million of which primarily related to the write-down of capitalized costs atcertain projects and the impairment of completed homes in several of ourcommunities due to current market conditions. If market conditions were tocontinue to deteriorate, and the market values for our homesites, remaininghomes held in inventory and other project land were to fall below the bookvalue of these assets, we could be required to take additional write-downs of thebook value of those assets.

* * *

Impairment of Long-lived Assets and Goodwill. Our long-lived assets, primarilyreal estate held for investment, are carried at cost unless circumstances indicatethat the carrying value of the assets may not be recoverable. If we determine thatan impairment exists due to the inability to recover an asset’s carrying value, aprovision for loss is recorded to the extent that the carrying value exceedsestimated fair value. If such assets were held for sale, the provision for loss wouldbe recorded to the extent that the carrying value exceeds estimated fair value lesscosts to sell.

25


Depending on the asset, we use varying methods to determine fair value, such as(i) analyzing expected future cash flows, (ii) determining resale values by market,or (iii) applying a capitalization rate to net operating income using prevailing ratesin a given market. The fair value determined under these methods can fluctuate upor down significantly as a result of a number of factors, including changes in thegeneral economy of our markets, demand for real estate and the projected netoperating income for a specific property.

* * *

We review our long-lived assets for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. Homes and homesites substantially completed and ready for sale aremeasured at the lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain andcomplete the existing project and using management’s best estimates about futuresales prices and holding periods. The continued decline in demand and marketprices for residential real estate during 2008 caused us to evaluate certain carryingamounts within our residential real estate segment. As a result of our propertyimpairment analyses, we recorded aggregate impairment charges in ourresidential real estate segment of $40.3 million during 2008. In addition, werecorded a charge of $1.0 million related to the write down of a renegotiatedbuilder note receivable during 2008.

* * *

Asset Impairments

The Company reviews its long-lived assets other than goodwill, for impairmentwhenever events or changes in circumstances indicate that the carrying amount ofan asset may not be recoverable. Homes and homesites substantially completedand ready for sale are measured at lower of carrying value or fair value less coststo sell. For projects under development, an estimate of future cash flows on anundiscounted basis is performed using estimated future expenditures necessary tomaintain the existing service potential of the project and using management’s bestestimates about future sales prices and holding periods. The continued decrease indemand and market prices for residential real estate indicated that carryingamounts of certain assets within its residential real estate segment may not berecoverable.

As a result of the Company’s property impairment analyses for 2008, itrecorded aggregate impairment charges of $41.3 million consisting of$12.0 million related to completed homes in several communities, $28.3 millionrelated to the Company’s SevenShores condominium project and $1.0 millionrelated to the write down of a renegotiated builder note receivable.

26


The Seven Shores condominium project was written down in the fourth quarter of2008 to approximate the fair market value of land entitled for 278 condominiumunits. This write-down was necessary because the Company elected not toexercise its option to acquire additional land under its option agreement. Certaincosts had previously been incurred with the expectation that the project wouldinclude 686 units. Given the reduced potential scope of the project, the Companydoes not believe that those costs are recoverable.

In 2007 the Company recorded impairments totaling $13.6 million due to theadverse market conditions for residential real estate. Approximately $5.2 millionof the impairments related to capitalized costs at certain projects due to changes indevelopment plans, approximately $7.8 million related primarily to the reductionin market value of completed homes in several communities, and approximately$0.6 million related to the modified terms of certain promissory notes. Noimpairment charges were recorded in 2006.

The Company reviews its long-lived assets other than goodwill, for impairmentwhenever events or changes in circumstances indicate that the carrying amount ofan asset may not be recoverable. Homes and homesites substantially completedand ready for sale are measured at lower of carrying value or fair value less coststo sell. For projects under development, an estimate of future cash flows on anundiscounted basis is performed using estimated future expenditures necessary tomaintain the existing service potential of the project and using management’s bestestimates about future sales prices and holding periods. The continued decrease indemand and market prices for residential real estate indicated that carryingamounts of certain assets within its residential real estate segment may not berecoverable. [Emphasis added.]





Segment Results

Residential Real Estate

Our residential real estate segment develops large-scale, mixed-use resort,primary and seasonal residential communities, primarily on our existing land. Weown large tracts of land in Northwest Florida, including significant Gulf ofMexico beach frontage and waterfront properties, and land near Jacksonville, inDeland and near Tallahassee.

Our residential sales have declined precipitously from 2006 to 2008 (91%) due to

27


the collapse of the housing markets in Florida. Inventories of resale homes andhomesites remain high in our markets and prices have declined. With the U.S. andFlorida economies battling rising foreclosures, severely restrictive credit,significant inventories of unsold homes and worsening economic conditions,predicting when real estate markets will return to health remains difficult.Currently, we do not expect any significant favorable change in these trendsduring 2009.

In 1997, we recorded goodwill in our residential real estate segment in connectionwith our acquisition of certain assets of Arvida Company and its affiliates. Basedon the continued worsening of the residential real estate markets in 2008 we havenow determined that the remaining goodwill related to this acquisition is notrecoverable based upon a discounted cash flow analysis. Accordingly, animpairment of $19.0 million was recorded in the residential real estate segment inthe fourth quarter of 2008 to reduce the carrying amount of the goodwill to zero.

Homes and homesites substantially completed and ready for sale are measured atlower of carrying value or fair value less costs to sell. For projects underdevelopment, an estimate of future cash flows on an undiscounted basis isperformed. The overall decrease in demand and market prices for residential realestate indicated that certain carrying amounts within our residential real estatesegment may not be recoverable. As a result of our impairment analyses for2008, we recorded aggregate impairment charges of $41.3 million, consisting of$12.0 million related to completed homes in several communities, $28.3 millionrelated to our SevenShores condominium project, and $1.0 million related to thewrite down of a renegotiated builder note receivable.

* * *

THE ST. JOE COMPANY


DECEMBER 31, 2008(in thousands)



toAcquisition

Bay County, Florida

Land with infrastructure 3,346 639 — 32,323 32,962 — 32,962 75Buildings — — 1,296 11,887 — 13,183 13,183 1,594Residential — 2,203 — 62,408 64,611 — 64,611 353Timberlands 8,165 3,896 — 11,556 15,452 — 15,452 82Unimproved land — 1,504 — 16 1,520 — 1,520 —

Broward County, Florida — — — — — — — —

Building — — — — — — — —

28



Duval County, Florida — — — — — — — —Land with infrastructure — 255 — 5 260 — 260 —Buildings — — — 2,743 — 2,743 2,743 2,095Residential — — — — — — — —Timberlands — — — — — — — —

Franklin County, Florida — — — — — — — —Land with infrastructure — 44 — 10 54 — 54 3Residential — 9,003 — 32,215 41,218 — 41,218 —Timberlands 29 1,241 — 1,307 2,548 — 2,548 13Unimproved Land — 210 — 5 215 — 215 —Buildings — — 1,537 2,900 — 4,437 4,437 830


Gulf County, Florida — — — — — — — —Land with infrastructure — 1,588 — 3,107 4,695 — 4,695 —Buildings — — 930 14,533 — 15,463 15,463 1,459Residential — 29,756 — 165,630 195,386 — 195,386 221Timberlands 12,704 5,238 — 15,352 20,590 — 20,590 109Unimproved land — 506 — 693 1,199 — 1,199 —

Jefferson County, Florida — — — — — — — —Buildings — — — — — — — —Timberlands — 789 — — 789 — 789 4Unimproved land — 215 — 4 219 — 219 —

Leon County, Florida — — — — — — — —Land with infrastructure 672 573 — 3,270 3,843 — 3,843 57Buildings — — 5,718 11,412 — 17,130 17,130 3,559Residential 984 23 58 40,165 40,188 58 40,246 1,546Timberlands — 923 — 1,104 2,027 — 2,027 11Unimproved land — 238 — 290 528 — 528 —

Liberty County, Florida — — — — — — — —Buildings — — 611 215 — 826 826 209Timberlands 2,851 3,112 — 380 3,697 — 3,697 95Unimproved land — 24 — — 24 — 24 —

Manatee CountyLand with infrastructure — — — — — — —Buildings — 320 67 — 387 387 423Residential — 18,952 — 807 19,759 — 19,759 24

Osceola County —Land with infrastructure — — — — — — —Residential 393 5,588 — 5,606 11,194 — 11,194 —Buildings — — — — — — — —

Palm Beach County,Florida — — — — — — — —Land with infrastructure — — — — — — — —Residential — — — — — — — —Buildings — — 5 — — 5 5 5

Pinellas County, Florida — — — — — — — —Buildings — — — — — — — —

29


St. Johns County, Florida — — — — — — — —Land with infrastructure — 1,029 — 4,744 5,773 — 5,773 750Buildings — — 1,854 2,633 — 4,487 4,487 1,575Residential 30,276 9,142 — 68,001 77,143 — 77,143 —

Polusia County, Florida — — — — — — — —Land with infrastructure — — — — — — — —Buildings — — 1,644 2,001 — 3,645 3,645 837Residential — 13,761 — 56,259 70,020 — 70,020 2,211

Wakulla County, Florida — — — — — — — —Land with infrastructure — — — 377 377 — 377 —Buildings — — — 46 — 46 46 46Timberlands — 579 — — 579 — 579 3Unimproved Land — 22 — — 22 — 22 —

Walton County, Florida — — — — — — — —Land with infrastructure — 56 — 3,533 3,589 — 3,589 —Buildings — — 29,128 12,100 — 41,228 41,228 8,405Residential — 22,676 — 135,404 158,080 — 158,080 6,433Timberlands 213 354 — 1,008 1,362 — 1,362 7Unimproved land — — — — — — — —

Other Florida Counties — — — — — — — —Land with infrastructure — — — — — — — —Timberlands — 204 — — 204 — 204 1Unimproved land — 79 — 68 147 — 147 —




December 31, 2008 and 2007.” KPMG also expressed an unqualified opinion on the

effectiveness of the Company’s internal control over financial reporting:

We have audited the accompanying consolidated balance sheets of The St. JoeCompany and subsidiaries as of December 31, 2008 and 2007, and the relatedconsolidated statements of operations, changes in stockholders’ equity, and cashflow for each of the years in the three-year period ended December 31, 2008. Inconnection with our audits of the consolidated financial statements, we also haveaudited financial statement Schedule III — Consolidated Real Estate andAccumulated Depreciation. These consolidated financial statements and financialstatement schedule are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these consolidated financial statementsand financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes

30


examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of The St. Joe Company andsubsidiaries as of December 31, 2008 and 2007, and the results of their operationsand their cash flows for each of the years in the three-year period endedDecember 31, 2008, in conformity with U.S. generally accepted accountingprinciples. Also in our opinion, the related financial statement schedule, whenconsidered in relation to the basic consolidated financial statements taken as awhole, presents fairly, in all material respects, the information set forth therein.



Company (NYSE: JOE) Reports First Quarter 2009 Financial Results.” The press release


The St. Joe Company (NYSE: JOE) today announced a Net Loss for the firstquarter 2009 of $(11.7) million, or $(0.13) per share, which includes non-cashcharges of $1.5 million, or $0.01 per share after tax. This compares to Net Incomeof $32.1 million, or $0.40 per share, for the first quarter of 2008, which includednon-cash charges of $2.8 million, or $0.02 per share after tax. All per-sharereferences in this release are presented on a diluted basis.

“Although Northwest Florida’s real estate markets remain challenging, ourresidential communities have seen a relatively modest improvement in traffic andsales activity since the end of last year,” said Britt Greene, JOE’s President andCEO. “However, it is too early to predict a bottom or a trend. The actions we havetaken, such as adjusting pricing for our inventory of homes, has helped us torespond to a market that seems interested but remains timid. We are also seeingmeasured activity in our commercial markets throughout the region. Our primaryfocus is on planning for the opportunities presented by the upcoming opening ofthe new Panama City - Bay County International Airport. The airport, centrallylocated within our key land assets, is scheduled to open in 2010.”

31


“As we have said earlier, although we expect rural land sales to be our largestcontributor to revenues in 2009, we plan to sell significantly fewer acres in 2009than in 2008,” said Greene. During the first quarter 2009, JOE generatedapproximately $4.2 million of revenue from rural land sales, compared to $91.1million in the first quarter last year. While the average price per acre increasedduring the quarter, JOE is carefully monitoring the potential impact that thecurrent economic environment may have on pricing or overall demand for ruralland.

Liquidity and Balance Sheet

At March 31, 2009, JOE had cash and pledged treasury securities of $138.2million, compared to debt of $49.2 million, $28.5 million of which is defeaseddebt. JOE’s $100 million line of credit remains undrawn at March 31, 2009.

“In light of the current economic challenges, we strengthened our liquidityposition by virtually eliminating our debt, enhancing our cash position andsecuring a new credit facility in early 2008,” said William S. McCalmont, JOE’sExecutive Vice President and CFO. “We continue to take a very prudent approachas we manage our assets and continue to reduce capital expenditures, as well asoperating and overhead expenses. We have the flexibility to execute our strategyon our valuable land holdings proximate to the new international airport.”


Q. The Company’s Form 10-Q was signed by Defendants Greene and Connolly, and reaffirmed

the Company’s quarterly financial results, financial position, and the reported value of the

Company’s investment in real estate. The Company’s Form 10-Q also contained Sarbanes-



The Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Homes and homesites substantially completed and ready for sale aremeasured at lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain andcomplete the existing project and using management’s best estimates about futuresales prices and holding periods. In the first quarter of 2009 and 2008, theCompany recorded impairment charges in the residential real estate segment of$0.2 million and $2.3 million, respectively, related to completed unsold homes. Inaddition as discussed in Note 3, the Company recorded a $1.3 million impairmentcharge in the first quarter of 2009 related to a renegotiated builder note receivable.

32



Company (NYSE: JOE) Reports Second Quarter 2009 Financial Results.” The press release


The St. Joe Company (NYSE: JOE) today announced a Net Loss for the secondquarter 2009 of $(44.6) million, or $(0.49) per share, which includes pre-tax non-cash charges of $64.7 million, or $0.43 per share after tax. This compares to aNet Loss of $(20.8) million, or $(0.23) per share, for the second quarter of 2008,which included significant charges of $35.3 million, or $0.24 per share after tax.All per-share references in this release are presented on a diluted basis.

* * *

The remaining non-cash charges of $20.0 million pre-tax, or $0.13 per share after-tax, included the $7.4 million write-off of a note receivable from GVA Advantis,the $6.7 million write-down related to JOE’s SevenShores condominium andmarina development project, $5.5 million of impairments associated with homesand home sites in certain of JOE’s communities and $0.4 million of impairmentsfor the write-down of a builder note receivable.

Net Loss for the first half of 2009 was $(56.3) million, or $(0.62) per share,compared to Net Income of $11.2 million, or $0.13 per share, for the first half of2008.

Included in the results for the first six months of 2009 were the followingsignificant non-cash charges:

• Settlement charge on pension annuitization of $44.7 million, or $0.30 pershare after-tax; and

• Pre-tax impairment charges of $21.5 million, or $0.14 per share after-tax.

* * *

“With economic challenges unabated, we continue to take a very prudentapproach as we manage our assets and continue to reduce capital expenditures, aswell as operating and overhead expenses,” said William S. McCalmont, JOE’sExecutive Vice President and CFO. “Because we have managed our balance sheetin a conservative manner, we now have the flexibility to execute our growthstrategy as we begin to implement the initial development plans on our valuableland holdings near the new international airport.”



33






Impairment Losses. We review our long-lived assets for impairment wheneverevents or changes in circumstances indicate that the carrying amount of an assetmay not be recoverable. Homes and homesites substantially completed and readyfor sale are measured at the lower of carrying value or fair value less costs to sell.For projects under development, an estimate of future cash flows on anundiscounted basis is performed using estimated future expenditures necessary tomaintain and complete the existing project and using management’s bestestimates about future sales prices and holding periods. During the second quarterof 2009 we recorded impairment charges of $12.1 million in the residential realestate segment related to completed unsold homes and homesites and a write-down of our SevenShores condominium and marina development project. Duringthe second quarter of 2008 we recorded impairment charges of $0.2 millionrelated to completed unsold homes. In addition, we recorded a $7.4 million write-off of the Advantis note receivable and a $0.4 million write-down of a buildernote receivable during the second quarter of 2009 and a $0.8 million write-downof a builder note receivable during the second quarter of 2008.

During the first six months of 2009 we recorded impairment charges of$12.4 million in the residential real estate segment related to completed unsoldhomes and homesites and a write-down of our SevenShores condominium andmarina development project. During the first six months of 2008 we recordedimpairment charges of $ 2.4 million related to completed unsold homes. Inaddition, we recorded a $7.4 million write-off of the Advantis note receivable anda $1.7 million write-down of builder notes receivable during the first six monthsof 2009 and a $0.8 million write-down of a builder note receivable during 2008.

A continued decline in demand and market prices for our real estate products mayrequire us to record additional impairment charges in the future. In addition, dueto the ongoing difficulties in the real estate markets and tightened creditconditions, we may be required to write-down the carrying value of our notesreceivable and such notes may not ultimately be collectible.

54. On November 3, 2009, the Company issued a press release entitled “The St. Joe

Company Reports Third Quarter 2009 Results.” The press release reported that the Company’s

investment in real estate was $844.9 million, and stated:

The St. Joe Company (NYSE: JOE) today announced a Net Loss for the third

34


quarter of 2009 of $(14.4) million, or $(0.16) per share, which included pre-taxcharges of $12.9 million, or $0.08 per share after tax. This compares to a NetLoss of $(19.2) million, or $(0.21) per share, for the third quarter of 2008, whichincluded pre-tax charges of $13.0 million, or $0.09 per share after tax. All per-share references in this release are presented on a diluted basis.

St. Joe’s third quarter earnings included $11.1 million of pre-tax, non-cashimpairment charges including $9.0 million related to the settlement of the SaussyBurbank notes receivable, $2.0 million associated with various homes, homesitesand other long-term assets and $0.1 million related to various builder notesreceivable.

* * *

“During the third quarter, we continued to make progress in our efforts tostimulate demand for our land in Northwest Florida with an emphasis on our landproximate to the new international airport,” said St. Joe’s President and CEO BrittGreene. “The addition of a vice president of economic development and, ofcourse, Southwest Airlines’ game-changing announcement of planned service tothe new airport will help to create value for our shareholders for many years tocome.”

* * *

Year-to-Date Results

Net Loss for the first nine months of 2009 was $(70.7) million, or $(0.77) pershare, compared to Net Loss of $(8.0) million, or $(0.09) per share, for the firstnine months of 2008. Included in the results for the first nine months of 2009were significant pre-tax charges of $79.1 million, or $0.52 per share after tax,compared to pre-tax charges of $51.8 million, or $0.35 per share after tax, in thefirst nine months of 2008.

55. Also on November 3, 2009, St. Joe filed its Quarterly Report with the SEC on

Form 10-Q. The Company’s Form 10-Q was signed by Defendants Greene and Connolly, and





Impairment Losses. We review our long-lived assets for impairment wheneverevents or changes in circumstances indicate that the carrying amount of an asset

35


may not be recoverable. Homes and homesites substantially completed and readyfor sale are measured at the lower of carrying value or fair value less costs to sell.For projects under development, an estimate of future cash flows on anundiscounted basis is performed using estimated future expenditures necessary tomaintain and complete the existing project and using management’s bestestimates about future sales prices and holding periods.

During the third quarter of 2009:

• We recorded a $9.0 million write-down related to the settlement of theSaussy Burbank notes receivable, a $0.1 million write-down of buildernotes receivable and a $1.1 million impairment charge related to otherlong-term assets; and

• We recorded a $0.9 million write-down related to completed unsoldhomes and homesites within other communities.

During the third quarter of 2008 we recorded impairment charges of $1.3 millionrelated to completed unsold homes.

During the first nine months of 2009:

• We recorded a $6.5 million impairment charge related to completedunsold homes and homesites in our communities and a $6.7 million write-down of our SevenShores condominium and marina developmentproject; and

• We recorded a $9.0 million write-down related to the settlement of theSaussy Burbank notes receivable, a $7.4 million write-off of the Advantisnote receivable, a $1.9 million write-down of builder notes receivable anda $1.1 million impairment charge related to other long-term assets.

During the first nine months of 2008 we recorded impairment charges of$3.8 million related to completed unsold homes and a $0.8 million write-down ofa builder note receivable.

A continued decline in demand and market prices for our real estate products mayrequire us to record additional impairment charges in the future. In addition, dueto the ongoing difficulties in the real estate markets and tightened creditconditions, we may be required to write-down the carrying value of our notesreceivable and such notes may not ultimately be collectible.

56. On February 23, 2010, the Company issued a press release entitled “The St. Joe

Company Reports Full Year and Fourth Quarter 2009 Results.” The press release reported that

the Company’s investment in real estate was $749.5 million, and stated:

36


The St. Joe Company (NYSE: JOE) today announced a Net Loss for the full yearended 2009 of $(130.0) million, or $(1.42) per share, compared to a Net Loss of$(35.9) million, or $(0.40) per share, for the year ended 2008. Included in the2009 results were significant pre-tax charges of $163.1 million, or $1.07 per shareafter tax, compared to pre-tax charges of $109.5 million, or $0.69 per share aftertax, in the year ended 2008. All per-share references in this release are presentedon a diluted basis.

St. Joe’s President and CEO Britt Greene stated, “2009 was marked by many St.Joe accomplishments during a very turbulent economic year for the country. Wesignificantly strengthened our balance sheet, reduced overhead costs andincreased our financial flexibility. We also focused our efforts on positioning theCompany to benefit from the May 2010 opening of the new Northwest FloridaBeaches International Airport. We are energized by the significant opportunitiesthe airport will present since it is surrounded by some of St. Joe’s most valuableland holdings.”

* * *

Fourth Quarter 2009 Financial Results

For the fourth quarter of 2009, St. Joe had a Net Loss of $(59.3) million, or$(0.65) per share, which included pre-tax charges of $84.0 million, or $0.56 pershare after tax. This compares to a Net Loss of $(27.9) million, or $(0.31) pershare, for the fourth quarter of 2008, which included pre-tax charges of $57.9million, or $0.36 per share after tax.

St. Joe’s fourth quarter earnings included $73.3 million of pre-tax, non-cashimpairment charges including $67.8 million related to the sale of the remainingassets at Victoria Park ($6.9 million recorded in discontinued operations), $3.5million related to the sale of the St. Johns Golf & Country Club (recorded indiscontinued operations), $1.1 million related to the sale of the assets acquired inconnection with the settlement of our Saussy Burbank notes receivable, $0.8million associated with various homes and homesites and $0.1 million associatedwith a builder note receivable. The Company also wrote-off $7.2 million ofcapitalized costs related to abandoned development plans in certain of ourprojects and incurred a restructuring charge of $3.5 million related to one-timetermination benefits.

* * *

37




Assets

Investments in real estate $749,500,000 $890,600,000

57. Also on February 23, 2010, St. Joe filed its 2009 Annual Report with the SEC on

Form 10-K. The Company’s Form 10-K was signed by Defendants Greene and McCalmont,

among others, and reaffirmed the Company’s 2009 financial results, financial position, and the

reported value of the Company’s investment in real estate. The Company’s Form 10-K also

contained Sarbanes-Oxley required certifications, which were substantially similar to the

certifications contained in ¶33. With respect to the Company’s asset impairment costs, St. Joe’s

2009 Annual Report stated:

If the market values of our homesites, our remaining inventory of completedhomes and other developed real estate assets were to drop below the book valueof those properties, we would be required to write-down the book value of thoseproperties, which would have an adverse affect on our balance sheet and ourearnings.

Unlike most other real estate developers, we have owned the majority of our landfor many years, having acquired most of our land in the 1930’s and 1940’s.Consequently, we have a very low cost basis in the majority of our lands. Incertain instances, however, we have acquired properties at market values forproject development. Also, many of our projects have expensive amenities, suchas pools, golf courses and clubs, or feature elaborate commercial areas requiringsignificant capital expenditures. Many of these costs are capitalized as part of thebook value of the project land. Adverse market conditions, in certaincircumstances, may require the book value of real estate assets to be decreased,often referred to as a “write-down” or “impairment.” A write-down of an assetwould decrease the value of the asset on our balance sheet and would reduce ourearnings for the period in which the write-down is recorded.

If market conditions were to continue to deteriorate, and the market values for ourhomesites, remaining homes held in inventory and other project land were to fallbelow the book value of these assets, we could be required to take additionalwrite-downs of the book value of those assets.

38


* * *

Long-Lived Assets and Discontinued Operations

The Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Homes and homesites substantially completed and ready for sale aremeasured at the lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain the existingproject and using management’s best estimates about future sales prices andholding periods.

* * *

Investment in Real Estate:

We review our long-lived assets for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. Homes and homesites substantially completed and ready for sale aremeasured at the lower of carrying value or fair value less costs to sell. For projectsunder development, an estimate of future cash flows on an undiscounted basis isperformed using estimated future expenditures necessary to maintain andcomplete the existing project and using management’s best estimates about futuresales prices and holding periods. The continued decline in demand and marketprices for residential real estate during 2007 through 2009 caused us toreevaluate certain carrying amounts within our residential real estate segment,which resulted in the recording of significant impairment charges. [Emphasisadded.]





Segment Results

Residential Real Estate

Our residential real estate segment typically plans and develops mixed-use resort,primary and seasonal residential communities of various sizes, primarily on ourexisting land. We own large tracts of land in Northwest Florida, includingsignificant Gulf of Mexico beach frontage and waterfront properties, and landnear Jacksonville and Tallahassee.

39


Our residential sales remain weak due to the collapse of the housing markets inFlorida. Inventories of resale homes and homesites remain high in our marketsand prices continue to decline. With the U.S. and Florida economies battling theadverse effects of home foreclosures, severely restrictive credit, significantinventories of unsold homes and recessionary economic conditions, predictingwhen real estate markets will return to health remains difficult. Currently, we donot expect any significant favorable changes in these market conditions during2010.

* * *

THE ST. JOE COMPANY


DECEMBER 31, 2009(in thousands)



toAcquisition

Bay County, FloridaLand with infrastructure $3,358 $636 $ — $31,955 $32,591 $ — $32,591 $69Buildings — 13,639 11,436 470 14,054 11,494 25,548 1,855Residential — 22,762 1,300 44,843 67,524 1,381 68,905 173Timberlands 7,976 3,896 — 11,271 15,167 — 15,167 99Unimproved land — 1,504 — 18 1,522 — 1,522 —

Broward County, Florida — — — — — — — —Building — — — — — — — —


Duval County, Florida — — — — — — — —Land with infrastructure — 250 — 5 255 — 255 —Buildings — — — 2,752 — 2,752 2,752 2,152Residential — — — — — — — —Timberlands — — — — — — — —

Franklin County, Florida — — — — — — — —Land with infrastructure — 44 — 10 54 — 54 6Residential — 8,778 — 32,990 41,768 — 41,768 407Timberlands 28 1,241 — 1,234 2,475 — 2,475 16Unimproved Land — 210 — 5 215 — 215 —Buildings — — 731 1,830 — 2,561 2,561 526


Gulf County, Florida — — — — — — — —Land with infrastructure — 1,586 — 3,876 5,462 — 5,462 —

40


Buildings — 2,548 3,392 36,389 2,983 39,346 42,329 3,403Residential — 26,678 526 137,307 163,637 874 164,511 532Timberlands 12,006 5,238 — 14,916 20,154 — 20,154 132Unimproved land — 506 — 970 1,476 — 1,476 —

Jefferson County, Florida — — — — — — — —Buildings — — — — — — — —Timberlands — 721 — — 721 — 721 5Unimproved land — 193 — 39 232 — 232 —

Leon County, Florida — — — — — — — —Land with infrastructure 718 573 — 3,324 3,897 — 3,897 16Buildings — — — 21,054 8,614 12,440 21,054 5,050Residential 652 — 58 33,063 28,794 4,327 33,121 1,180Timberlands — 923 — 1,004 1,927 — 1,927 13Unimproved land — 11 — 561 572 — 572 —

Liberty County, Florida — — — — — — — —Buildings — — 611 215 — 826 826 269Timberlands 2,332 2,587 — 233 3,025 — 3,025 152Unimproved land — 21 — — 21 — 21 —

St. Johns County, Florida — — — — — — — —Land with infrastructure — 1,016 — — 1,016 — 1,016 —Buildings — — 255 644 45 854 899 288Residential 7,385 8,932 — 65,559 74,491 — 74,491 —

Wakulla County, Florida — — — — — — — —Land with infrastructure — — — 339 339 — 339 —Buildings — — — 46 — 46 46 46Timberlands — 457 — — 457 — 457 3Unimproved Land — 16 — 18 34 — 34 —

Walton County, Florida — — — — — — — —Land with infrastructure — 56 — 3,575 3,631 — 3,631 —Buildings — — 3,754 71,057 22,472 52,339 74,811 11,426Residential — 6,298 — 87,467 93,765 — 93,765 6,923Timberlands 511 354 — 982 1,336 — 1,336 9Unimproved land — — — — — — — —

Other Florida Counties — — — — — — — —Land with infrastructure — — — — — — — —Timberlands — 201 — — 201 — 201 1Unimproved land — 79 — 68 147 — 147 —

Georgia — — — — — — — —Land with infrastructure — 12,093 — 1,229 13,322 — 13,322 50Buildings — — 36 1,831 — 1,867 1,867 26Timberlands — 6,895 — 23 6,920 — 6,920 3Unimproved land — 76 — 90 166 — 166 —

TOTALS 41,012 136,857 22,099 622,498 650,557 131,107 781,664 35,000

* * *

Selected Consolidated Financial Date

The following table sets forth Selected Consolidated Financial Data for theCompany on a historical basis for the five years ended December 31, 2009. Thisinformation should be read in conjunction with the consolidated financialstatements of the Company (including the related notes thereto) andManagement’s Discussion and Analysis of Financial Condition and Results of

41


Operations, each included elsewhere in this Form 10-K. This historical SelectedConsolidated Financial Data has been derived from the audited consolidatedfinancial statements and revised for discontinued operations. ...

December 31,2009 2008 2007 2006 2005

Balance Sheet Data:Investment in real estate $749,500 $890,583 $944,529$1,214,550 $1,038,810Cash and cash equivalents 163,807 115,472 24,265 36,725 202,432Property, plant and equipment, net 15,269 19,786 23,693 44,593 40,176Total assets 1,098,140 1,218,278 1,263,966 1,560,395 1,591,946Debt 39,508 49,560 541,181 627,056 554,446Total equity 895,285 991,401 486,617 471,613 507,192




December 31, 2009 and 2008.” KPMG also expressed an unqualified opinion on the

effectiveness of the Company’s internal control over financial reporting:

We have audited the accompanying consolidated balance sheets of The St. JoeCompany and subsidiaries as of December 31, 2009 and 2008, and the relatedconsolidated statements of operations, changes in equity, and cash flow for eachof the years in the three-year period ended December 31, 2009. In connectionwith our audits of the consolidated financial statements, we also have auditedfinancial statement Schedule III — Consolidated Real Estate and AccumulatedDepreciation. These consolidated financial statements and financial statementschedule are the responsibility of the Company’s management. Our responsibilityis to express an opinion on these consolidated financial statements and financialstatement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of The St. Joe Company andsubsidiaries as of December 31, 2009 and 2008, and the results of their operations

42


and their cash flows for each of the years in the three-year period endedDecember 31, 2009, in conformity with U.S. generally accepted accountingprinciples. Also in our opinion, the related financial statement schedule, whenconsidered in relation to the basic consolidated financial statements taken as awhole, presents fairly, in all material respects, the information set forth therein.



Company Reports First Quarter 2010 Results.” The press release reported that the Company’s


The St. Joe Company (NYSE: JOE) today announced a Net Loss for the firstquarter ended March 31, 2010 of $(11.4) million, or $(0.13) per share, comparedto a Net Loss of $(12.0) million, or $(0.13) per share, for the first quarter of 2009.

“A positive regional transformation is beginning as we get closer to the openingof the country’s newest international airport,” said St. Joe’s President and CEOBritt Greene. “The new airport with service provided by Southwest Airlines andDelta Air Lines significantly improves the accessibility to Northwest Florida, itsworkforce and its beaches. Our nearly debt free balance sheet, efficient coststructure and more than 300,000 acres of land within 40 miles of the new airportposition us to take full advantage of the many opportunities that will arise fordecades to come.”

* * *

“With virtually no debt, streamlined operations and our announced relocation thatwill consolidate our corporate offices at the heart of our vast land holdings, we arewell positioned to pursue the opportunities that will contribute to buildingshareholder value for many years in the future,” said William S. McCalmont, St.Joe’s Executive Vice President and CFO.


Q. The Company’s Form 10-Q was signed by Defendants Greene and Connolly, and reaffirmed

the Company’s quarterly financial results, financial position, and the reported value of the

43





The Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Homes and homesites substantially completed and ready for sale aremeasured at lower of carrying value or fair value less costs to sell. The fair valueof homes and homesites is determined based upon final sales prices of inventorysold during the period (level 2 inputs). For inventory held for sale, estimates ofselling prices based on current market data are utilized (level 3 inputs). Forprojects under development, an estimate of future cash flows on an undiscountedbasis is performed using estimated future expenditures necessary to maintain andcomplete the existing project and using management’s best estimates about futuresales prices and holding periods (level 3 inputs). In the first quarter of 2010 and2009, the Company recorded impairment charges in the residential real estatesegment of $0.1 million and $0.2 million, respectively.

* * *

Impairment Losses. We review our long-lived assets for impairment wheneverevents or changes in circumstances indicate that the carrying amount of an assetmay not be recoverable. Homes and homesites substantially completed and readyfor sale are measured at the lower of carrying value or fair value less costs to sell.For projects under development, an estimate of future cash flows on anundiscounted basis is performed using estimated future expenditures necessary tomaintain and complete the existing project and using management’s bestestimates about future sales prices and holding periods. During the first quarter2010 and 2009 we recorded impairment charges of $0.1 million and$0.2 million, respectively in the residential real estate segment. In addition, werecorded a $1.3 million write down of a renegotiated builder note receivable inour residential real estate segment during the first quarter of 2009. [Emphasisadded.]


Company Reports Second Quarter 2010 Results.” The press release reported that the Company’s


The St. Joe Company (NYSE: JOE) today announced a Net Loss for the secondquarter ended June 30, 2010 of $(8.6) million, or $(0.09) per share, including apre-tax restructuring charge of $1.2 million or $0.01 per share after tax. Thiscompares to a Net Loss in the second quarter of 2009 of $(44.8) million, or$(0.49) per share, which included pre-tax non-cash charges of $64.7 million or

44


$0.43 per share after tax.

Net Loss for the first half of 2010 was $(20.0) million, or $(0.22) per share. Thiscompares to a Net Loss during the same period of 2009 of $(56.9) million, or$(0.62) per share, which included pre-tax non-cash charges of $66.2 million or$0.44 per share after tax.

* * *

Segment Results

During the second quarter in its residential business, St. Joe accepted contracts on20 homesites throughout its communities at an average price of $135,400. TheCompany also closed on 11 homesites at an average price of $109,000 in theresort communities of WaterColor and WaterSound West Beach in WaltonCounty and five homesites at an average price of $56,700 in the primarycommunity of Hawks Landing in Bay County.

* * *

“With our nearly debt-free balance sheet, efficient cost structure and more than300,000 acres of land within 40 miles of the new airport, we have positioned theCompany to take advantage of the increased economic activity that we expect torealize as a result of the opening of the new airport,” said William S. McCalmont,St. Joe’s Executive Vice President and CFO.



reaffirmed the Company’s financial results, financial position, and the reported value of the




The Company reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not berecoverable. Homes and homesites substantially completed and ready for sale aremeasured at lower of carrying value or fair value less costs to sell. The fair valueof homes and homesites is determined based upon final sales prices of inventorysold during the period (level 2 inputs). For inventory held for sale, estimates ofselling prices based on current market data are utilized (level 3 inputs). Forprojects under development, an estimate of future cash flows on an undiscountedbasis is performed using estimated future expenditures necessary to maintain and

45


complete the existing project and using management’s best estimates about futuresales prices and holding periods (level 3 inputs). The Company’s assets measuredat fair value on a nonrecurring basis are those assets for which the Company hasrecorded valuation adjustments and write-offs during the current period. For thesix months ending June 30, 2010, the valuation adjustments and write-offs were$0.1 million. ... Long-lived assets sold or held for sale with a carrying amountof $41.5 million were written down to their fair value of $29.2 million, resultingin a loss of $12.4 million, which was included in impairment losses for the sixmonths ending June 30, 2009.

* * *

Impairment Losses. We review our long-lived assets for impairment wheneverevents or changes in circumstances indicate that the carrying amount of an assetmay not be recoverable. Homes and homesites substantially completed and readyfor sale are measured at the lower of carrying value or fair value less costs to sell.For projects under development, an estimate of future cash flows on anundiscounted basis is performed using estimated future expenditures necessary tomaintain and complete the existing project and using management’s bestestimates about future sales prices and holding periods. During the secondquarter of 2010 and the first six months of 2010, we recorded impairmentcharges on homes and homesites of zero and $0.1 million, respectively, in theresidential real estate segment. During the second quarter of 2010 we alsorecorded a $0.5 million write-down resulting from a renegotiated builder notereceivable in the residential segment.

During the second quarter of 2009 we recorded impairment charges of$12.2 million in the residential real estate segment related to completed unsoldhomes and homesites and a write-down of a condominium and marinadevelopment project which was sold in the third quarter of 2009. In addition, werecorded a $7.4 million write-off of the Advantis note receivable and a$0.4 million write-down of a builder note receivable.

During the first six months of 2009 we recorded impairment charges of$12.4 million in the residential real estate segment related to completed unsoldhomes and homesites and a write-down of a condominium and marinadevelopment project. In addition, we recorded a $7.4 million write-off of theAdvantis note receivable and a $1.7 million write-down of builder notesreceivable.

A continued decline in demand and market prices for our real estate products mayrequire us to record additional impairment charges in the future. In addition, dueto the ongoing difficulties in the real estate markets and tightened creditconditions, we may be required to write-down the carrying value of our notesreceivable when such notes are determined to not be collectible. [Emphasisadded.]

46


64. The statements contained in ¶¶ 40 – 63 were materially false and misleading when

made because defendants failed to disclose that: (1) as the Florida real estate market was in

decline, St. Joe was failing to take adequate and required impairments and accounting write-

downs on many of its Florida based property developments; (2) as a result, St. Joe’s financial

statements materially overvalued the Company’s Florida based property developments; (3) the

Company’s financial statements were not prepared in accordance with GAAP; (4) the Company

lacked adequate internal and financial controls; and (5) as a result of the foregoing, the

Company’s financial statements were materially false and misleading at all relevant times.

The Truth Begins to Emerge

65. On October 13, 2010, St. Joe’s investors were shocked as Greenlight Capital’s

Mr. Einhorn detailed at the Value Investing Congress how St. Joe needed to take “substantial

impairments” and accounting writedowns on many of its properties, and that further building by

the Company “will drive the stock price to zero.” As subsequently reported by Reuters, Mr.

Einhorn’s presentation, entitled “Field of Schemes: If You Build It, They Won’t Come,” noted

that St. Joe’s “development plans have fallen flat, leaving it with ‘ghost towns’ and inevitable

writedowns.” For example, Mr. Einhorn said he would “generously” place a value of $17.8

million on the remaining residential development at St. Joe’s Windmark Beach property while

the company is carrying the property at $164.5 million on its balance sheet. Mr. Einhorn also

stated how the Company “was ‘stuck’ after making an aggressive bet on beachfront

developments that have gone nowhere, and that it was overvaluing the real estate holdings on its

books,” and that “[t]here’s little evidence of how Joe spent so much money on these

developments. Many developments are ghost towns and little value remains.” Additionally, Mr.

Einhorn stated that “[w]ith the popping of the bubble, Joe’s business has practically stopped,” as

47


he showed a 139-page slide show of the Company’s real estate holdings, including footage and

film of St. Joe’s developments.

66. On this news, shares of the Company’s stock fell $2.38 per share, or 9.7 percent,

to close on October 13, 2010 at $22.16 per share, on unusually heavy trading volume.

67. After the close of the market on October 13, 2010, Bloomberg published an article

entitled “Einhorn Says St. Joe Needs ‘Substantial’ Writedowns.” The article recounted:

St. Joe Co.’s shares plunged after David Einhorn, who profited from bets againstLehman Brothers Holdings Inc. in 2008, said the Florida real-estate firm musttake “substantial” asset-impairment charges and that further building will drivethe stock price to zero.

“The best properties have been sold, many lots were sold to speculators during theboom, and when the boom ended, business essentially stopped,” Einhorn, whoruns hedge-fund operator Greenlight Capital Inc., said today at the ValueInvesting Congress in New York. “There’s little evidence of how Joe spent somuch money on these developments. Many developments are ghost towns andlittle value remains.”

* * *

The company is accounting for untouched land as developed, Einhorn said. Also,St. Joe’s RiverTown community is a “moonscape,” and WaterSound is empty, hesaid.

“Joe’s highest and best use is to return to a rural land company,” he said.“Management should sell the company, but it can’t because the stock price is toohigh.”

68. The following day the Company’s shares declined an additional $2.42 per share,

or 10.9 percent, to close on October 14, 2010 at $19.74 per share, again on heavy trading

volume. Over these two days, St. Joe’s shares declined a total of $4.80 per share, or over 19.5

percent.

ST. JOE’S VIOLATION OF GAAP RULESIN ITS FINANCIAL STATEMENTS

FILED WITH THE SEC

69. These financial statements and the statements about the Company’s financial

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results were false and misleading, as such financial information was not prepared in conformity

with GAAP, nor was the financial information a fair presentation of the Company’s operations

due to the Company’s improper accounting for, and disclosure about its revenues, in violation of

GAAP rules.

70. GAAP are those principles recognized by the accounting profession as the

conventions, rules and procedures necessary to define accepted accounting practice at a

particular time. Regulation S-X (17 C.F.R. § 210.4 01(a) (1)) states that financial statements filed

with the SEC which are not prepared in compliance with GAAP are presumed to be misleading

and inaccurate. Regulation S-X requires that interim financial statements must also comply with

GAAP, with the exception that interim financial statements need not include disclosure which

would be duplicative of disclosures accompanying annual financial statements. 17 C.F.R. §

210.10-01(a).

71. Given these accounting irregularities, the Company announced financial results

that were in violation of GAAP and the following principles:

(a) The principle that “interim financial reporting should be based upon the

same accounting principles and practices used to prepare annual financial

statements” was violated (APB No. 28, ¶10);

(b) The principle that “financial reporting should provide information that is

useful to present to potential investors and creditors and other users in

making rational investment, credit, and similar decisions” was violated

(FASB Statement of Concepts No. 1, ¶34);

(c) The principle that “financial reporting should provide information about

the economic resources of an enterprise, the claims to those resources, and

49


effects of transactions, events, and circumstances that change resources

and claims to those resources” was violated (FASB Statement of Concepts

No. 1, ¶40);

(d) The principle that “financial reporting should provide information about

an enterprise’s financial performance during a period” was violated

(FASB Statement of Concepts No. 1, ¶42);

(e) The principle that “financial reporting should provide information about

how management of an enterprise has discharged its stewardship

responsibility to owners (stockholders) for the use of enterprise resources

entrusted to it” was violated (FASB Statement of Concepts No. 1, ¶50);

(f) The principle that “financial reporting should be reliable in that it

represents what it purports to represent” was violated (FASB Statement of

Concepts No. 2, ¶¶ 5 8-5 9);

(g) The principle that “completeness, meaning that nothing is left out of the

information that may be necessary to insure that it validly represents

underlying events and conditions” was violated (FASB Statement of

Concepts No. 2, ¶79); and

(h) The principle that “conservatism be used as a prudent reaction to

uncertainty to try to ensure that uncertainties and risks inherent in business

situations are adequately considered” was violated (FASB Statement of

Concepts No. 2, ¶95).

72. The adverse information concealed by Defendants during the Class Period and

detailed above was in violation of Item 303 of Regulation S-K under the federal securities law

50


(17 C.F.R. §229.303).

PLAINTIFF’S CLASS ACTION ALLEGATIONS

73. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal

Rules of Civil Procedure on behalf of all persons who purchased St. Joe securities during the

Class Period (the “Class”), including purchasers of the Company’s securities pursuant or

traceable to the Company’s public offering on or about February 27, 2008. Excluded from the

Class are defendants, directors and officers of St. Joe and their families and affiliates.

74. The members of the Class are so numerous that joinder of all members is

impracticable. The disposition of their claims in a class action will provide substantial benefits

to the parties and the Court. According to the Company’s Form 10-Q filed with the SEC on

August 5, 2010, St. Joe had over 92 million shares of stock outstanding, owned by thousands of

persons.

75. There is a well-defined community of interest in the questions of law and fact

involved in this case. Questions of law and fact common to the members of the Class which

predominate over questions which may affect individual Class members include:

(a) Whether the Securities Act and/or Securities Exchange Act were violated

by defendants;

(b) Whether defendants omitted and/or misrepresented material facts;

(c) Whether defendants’ statements omitted material facts necessary in order

to make the statements made, in light of the circumstances under which

they were made, not misleading;

(d) Whether defendants knew or recklessly disregarded that their statements

were false and misleading;

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(e) Whether the prices of St. Joe securities were artificially inflated; and

(f) The extent of damage sustained by Class members and the appropriate

measure of damages.

76. Plaintiff’s claims are typical of those of the Class because plaintiff and the Class

sustained damages from defendants’ wrongful conduct.

77. Plaintiff will adequately protect the interests of the Class and has retained counsel

who are experienced in class action securities litigation. Plaintiff has no interests which conflict

with those of the Class.

78. A class action is superior to other available methods for the fair and efficient

adjudication of this controversy.

LOSS CAUSATION/ECONOMIC LOSS

79. Defendants’ wrongful conduct, as alleged herein, directly and proximately caused

the economic loss suffered by Plaintiff and the Class. The price of St. Joe’s securities

significantly declined when the misrepresentations made to the market, and/or the information

alleged herein to have been concealed from the market, and/or the effects thereof, were revealed,

causing investors’ losses. As a result of their purchases of St. Joe securities during the Class

Period, plaintiff and other members of the Class suffered economic loss, i.e., damages, under the

federal securities laws.

SCIENTER ALLEGATIONS

80. During the Class Period, the Company and the Individual Defendants had actual

knowledge of the misleading nature of the statements they made or acted in reckless disregard of

the true information known to them at the time. In so doing, these defendants participated in a

scheme to defraud and committed acts, practices and participated in a course of business that

operated as a fraud or deceit on purchasers of St. Joe’s securities during the Class Period.

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Applicability of Presumption of Reliance:Fraud on the Market Doctrine

81. Plaintiff will rely upon the presumption of reliance established by the fraud-on-

the-market doctrine in that, among other things:

(a) Defendants made public misrepresentations or failed to disclose material

facts during the Class Period;

(b) The omissions and misrepresentations were material;

(c) The Company’s securities traded in an efficient market;

(d) The misrepresentations alleged would tend to induce a reasonable investor

to misjudge the value of the Company’s securities; and

(e) Plaintiff and other members of the Class purchased St. Joe securities

between the time defendants misrepresented or failed to disclose material

facts and the time the true facts were disclosed, without knowledge of the

misrepresented or omitted facts.

82. At all relevant times, the market for St. Joe securities was efficient for the

following reasons, among others: (a) as a regulated issuer, St. Joe filed periodic public reports

with the SEC; and (b) St. Joe regularly communicated with public investors via established

market communication mechanisms, including through regular disseminations of press releases

on the major news wire services and through other wide-ranging public disclosures, such as

communications with the financial press, securities analysts and other similar reporting services.

NO SAFE HARBOR

83. Defendants’ verbal “Safe Harbor” warnings accompanying its oral forward-

looking statements (“FLS”) issued during the Class Period were ineffective to shield those

statements from liability.

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84. The defendants are also liable for any false or misleading FLS pleaded because, at

the time each FLS was made, the speaker knew the FLS was false or misleading and the FLS

was authorized and/or approved by an executive officer of St. Joe who knew that the FLS was

false. None of the historic or present tense statements made by defendants were assumptions

underlying or relating to any plan, projection or statement of future economic performance, as

they were not stated to be such assumptions underlying or relating to any projection or statement

of future economic performance when made, nor were any of the projections or forecasts made

by defendants expressly related to or stated to be dependent on those historic or present tense

statements when made.

FIRST CLAIMViolation of Section 11 of

The Securities Act Against All Defendants

85. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein only to the extent, however, that such allegations do not allege fraud,

scienter or the intent of the defendants to defraud Plaintiff or members of the Class. This count

is predicated upon defendants’ strict liability for making false and materially misleading

statements in the Offering Materials.

86. This claim is asserted by Plaintiff against all defendants by, and on behalf of,

persons who acquired shares of the Company’s securities pursuant to or traceable to the false

Offering Materials issued in connection with the Company’s February 2008 Offering.

87. This claim is brought within one year after discovery of the untrue statements and

omissions in the Offering Materials and within three years of the effective date of the Offering

Materials.

88. By virtue of the foregoing, Plaintiff and the other members of the Class are

54


entitled to damages from the defendants and each of them, jointly and severally.

SECOND CLAIMViolation of Section 12(a)(2) of

The Securities Act Against All Defendants






90. Defendants were sellers, offerors, and/or solicitors of purchasers of the shares

offered pursuant to the Offering Materials.

91. This action is brought within three years from the time that the securities upon

which this Count is brought were sold to the public, and within one year from the time when

Plaintiff discovered or reasonably could have discovered the facts upon which this Count is

based.

THIRD CLAIMViolation of Section 15 of The Securities Act

Against the Individual Defendants






93. The Individual Defendants, by virtue of their positions and specific acts were, at

the time of the wrongs alleged herein and as set forth herein, controlling persons of St. Joe within

55


the meaning of Section 15 of the Securities Act. The Individual Defendants had the power and

influence and exercised the same to cause St. Joe to engage in the acts described herein.

94. By virtue of the conduct alleged herein, the Individual Defendants are liable for

the aforesaid wrongful conduct and are liable to Plaintiff and the Class for damages suffered.

FOURTH CLAIMViolation of Section 10(b) of The Exchange Act and Rule 10b-5

Promulgated Thereunder Against St. Joe, the Individual Defendants and KPMG


fully set forth herein.

96. During the Class Period, St. Joe and the Individual Defendants carried out a plan,

scheme and course of conduct which was intended to and, throughout the Class Period, did: (i)

deceive the investing public, including Plaintiff and other Class members, as alleged herein; and

(ii) cause Plaintiff and other members of the Class to purchase St. Joe securities at artificially

inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, these

defendants, and each of them, took the actions set forth herein.

97. St. Joe and the Individual Defendants: (i) employed devices, schemes, and

artifices to defraud; (ii) made untrue statements of material fact and/or omitted to state material

facts necessary to make the statements not misleading; and (iii) engaged in acts, practices, and a

course of business which operated as a fraud and deceit upon the purchasers of the Company’s

securities in an effort to maintain artificially high market prices for St. Joe securities in violation

of Section 10(b) of the Exchange Act and Rule 10b-5. These defendants are sued either as

primary participants in the wrongful and illegal conduct charged herein or as controlling persons.

56


FIFTH CLAIMViolation of Section 20(a) of

The Exchange Act the Individual Defendants


fully set forth herein.

99. The Individual Defendants acted as controlling persons of St. Joe within the

meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level

positions, and their ownership and contractual rights, participation in and/or awareness of the

Company’s operations and/or intimate knowledge of the false financial statements filed by the

Company with the SEC and disseminated to the investing public, the Individual Defendants had

the power to influence and control and did influence and control, directly or indirectly, the

decision-making of the Company, including the content and dissemination of the various

statements which Plaintiff contends are false and misleading. The Individual Defendants were

provided with or had unlimited access to copies of the Company’s reports, press releases, public

filings and other statements alleged by Plaintiff to be misleading prior to and/or shortly after

these statements were issued and had the ability to prevent the issuance of the statements or

cause the statements to be corrected.

100. In particular, each of the Individual Defendants had direct and supervisory

involvement in the day-to-day operations of the Company, and therefore are presumed to have

had the power to control or influence the particular transactions giving rise to the securities

violations as alleged herein, and exercised the same.

101. As set forth above, St. Joe and the Individual Defendants each violated Section

1 0(b) and Rule 1 0b-5 by their acts and omissions as alleged in this Complaint. By virtue of their

positions as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of

57


the Exchange Act. As a direct and proximate result of these defendants’ wrongful conduct,

Plaintiff and other members of the Class suffered damages in connection with their purchases of

the Company’s securities during the Class Period.

WHEREFORE, Plaintiff prays for relief and judgment, as follows:

(a) Determining that this action is a proper class action under Rule 23 of the

Federal Rules of Civil Procedure;

(b) Awarding compensatory damages and equitable relief in favor of Plaintiff

and the other Class members against all defendants, jointly and severally,

for all damages sustained as a result of defendants’ wrongdoing, in an

amount to be proven at trial, including interest thereon;

(c) Awarding Plaintiff and the Class their reasonable costs and expenses

incurred in this action, including counsel fees and expert fees; and

(d) Such other and further relief as the Court may deem just and proper.

JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury.

Dated: November 3, 2010 Respectfully submitted,

By: s/John W. Forehand KURKIN FOREHAND BRANDES LLPJohn W. [email protected]. Craig [email protected] N. Calhoun Street, Suite 1-BTallahassee, FL 32303(850) 391-5060(850) 391-2645 (fax)

58


Of Counsel: BARROWAY TOPAZ KESSLERMELTZER & CHECK, LLPD. Seamus Kaskelaskaskelag,,btkmc.comDavid M. Promisloffdpromisloffg,,btkmc.com280 King of Prussia RoadRadnor, PA 19087(610) 667 – 7706(610) 667 – 7056 (fax)

Of Counsel: GOLDFARB BRANHAM LLPCharles W. Branham, IIIjgoldfarbg,,goldfarbbranham.com Hamilton Lindleyhlindleyg,,goldfarbbranham.com2501 N. Harwood StreetSuite 1801Dallas, TX 75201(214) 583 – 2233(214) 583 – 2234 (fax)

Attorneys for Plaintiff

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Plaintiffs Certification of Investment ofThe St. Joe Company, Inc.

I, Robert J. Meyer, hereby certify that the following is true and correct to the best of my knowledge,information and belief.

I . I have reviewed the Complaint in this action and authorize the filing of this Certification.

2. If chosen, I am willing to serve as a representative party on behalf of the class (the "Class") asdefined in the Complaint, including providing testimony at deposition and trial (if necessary). I amwilling to participate on an executive committee of shareholders.

3. Plaintiffs transaction in JOE stock that is the subject of this action is.

# SHARES DATE PRICE CLASS OF IF SOLD, 9 DATE PERPURCHASED PURCHASED PER STOCK OF SOLD (if SHARE

SHARE ((-,.g. SHARES sold) SOLDCOMMON) SOLD PRICE

o^(^C; ^ -•^--:mfr

4. I did not purchase these securities at the direction of my counsel, or in order to participate in alawsuit under the Securities Exchange Act of 1934.

5. During the three-year period preceding the date of the Certification, I have not sought to serve,nor have I served, as a representative to any party or on behalf of any class in any action arising under theSecurities Exchange Act of 1934.

b. I will not accept any payment if chosen to serve as a representative party on behalf of the Classbeyond my pro rata share of an award to the Class, or as otherwise ordered and approved by the Court.

Signed under penalty of perjury, this 0,9 day of 0 C- l' , 2010.

ROB "TJ. R

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