The following article appeared in the January 2004 edition of ISS's SCAS Alert:

Looking Ahead: What's in Store for 2004
By Bruce Carton, Executive Director

2003 was a particularly interesting year in the world of securities litigation and enforcement, with many notable events and trends: the ever-growing mutual fund scandal, which has already spawned criminal, SEC, and private litigation; the research analyst cases, which resulted in huge SEC settlements and, more recently, court dismissals of private litigation; the initial billion-dollar settlement in the initial public offering securities litigation; the developing trends of "institutional opt-outs" and settlements demanding corporate governance reforms; and much more.

ISS's Securities Class Action Services has analyzed these developments in 2003 for our clients. Here's what we see on the horizon for 2004:

Kerkorian-DaimlerChrysler Trial. As a general rule, billion-dollar securities fraud cases simply do not make it to trial. But somehow this one has -- all the way to trial in federal court in Delaware. Billionaire Kirk Kerkorian alleges that the union of Daimler-Benz and Chrysler was not the "merger of equals" it was said to be. Several days into the trial, which began in December 2003, Kerkorian announced after being cross-examined by DaimlerChrysler's lawyers that the dispute had grown "personal" and that he would never settle. On Dec. 16, the trial took another bizarre turn when the court indefinitely suspended the proceedings while it tried to get to the bottom of a mid-trial production by DaimlerChrysler to Kerkorian of 61 pages of documents that his lawyers said were critically important. DaimlerChrysler's lawyers said the failure to produce the documents was inadvertent. The trial is expected to resume in January.

Resolution of the WorldCom Civil Matters. WorldCom's massive $750 million settlement with the SEC should be finalized and distributed to investors next year. That hardly closes the book on the civil side of the WorldCom saga, however. Still outstanding are the securities class actions filed in federal court in New York and the related individual actions filed by many "opt-out" plaintiffs against the company, its executives, investment banks, and others. The losses in these cases are staggering. To the extent a settlement or judgment can be obtained in 2004, it will likely be of historic proportions.

Criminal Trials for Top Corporate Executives. Many have complained about the lack of criminal prosecutions of high-profile executives following the corporate scandals of the past few years. That should end in 2004, with criminal trials already slated for Tyco's Dennis Kozlowki, HealthSouth's Richard Scrushy, Martha Stewart Living Omnimedia's Martha Stewart, Adelphia Communications Corp.'s John Rigas, Enron's Andrew Fastow, and WorldCom's Scott Sullivan.

Sarbanes-Oxley Act Enforcement. The case against Richard Scrushy, scheduled for trial in 2004, is reportedly the first criminal prosecution under the Sarbanes-Oxley Act (SOX). Expect to see much more SOX enforcement in 2004, as prosecutors and the SEC start to line up "false certification" cases. The SEC also will likely begin enforcement of other provisions of SOX as long-looming SOX deadlines arrive in 2004. These include new strict requirements for corporate audit committees and for management disclosures concerning internal controls over financial reporting.

CalPERS vs. NYSE. On Dec. 16, 2003, the California Public Employees Retirement System (CalPERS) launched a putative class action alleging that fraudulent trading practices by the New York Stock Exchange (NYSE) and seven specialist trading firms had cost it millions of dollars in recent years. Everything about the case is massive: the potential class is every investor who purchased or sold shares of publicly traded companies listed on the NYSE over the five-year period between Oct. 17, 1998, and Oct. 15, 2003; CalPERS, with $154 billion in assets, is the 800-pound gorilla of pension funds; CalPERS' chosen counsel, Milberg Weiss Bershad Hynes & Lerach LLP, is itself an undisputed heavyweight in the class-action bar, and there is no doubt that the NYSE will respond with comparable legal firepower. It should be fascinating to watch this case unfold in 2004.

2004 already looks like it will be an interesting, eventful year in the securities litigation and enforcement arena, and Securities Class Action Services will be there to follow it. We thank all of our clients for a terrific 2003 and wish you a prosperous New Year.