And Slim Just Left Town
Postings next week will be between slim and none. We'll be back in action on August 1.
p.s. Please cast a vote in the poll regarding the PSLRA--it is in the upper right-hand corner of this page.
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
July 21, 2005 |
 |
Counting Up the Securities Class Action Trials, Part IV
Count Carton is back, this time with a recently published article by Michael Tu of the Orrick law firm, who successfully tried the Thane International securities litigation to a defense verdict last month.
The article, which appears in the July 2005 Securities Reform Act Litigation Reporter, provides a detailed analysis of the securities class actions that have made it to trial since the enactment of the PSLRA. Happily, his findings appear to track closely with the collective knowledge on this topic of the readers of SLW, which most recently was collected and posted here (and I particularly like his footnote 1).
A copy of the article is available here.
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
July 20, 2005 |
|
SCAS Top 100 Settlements--Q2 2005 Update
Yesterday, SCAS released to clients the current version of its Top 100 Securities Class Action Settlements list, updated through the end of the second quarter of 2005. A portion of that report showing settlements in the Top 100 that exceeded $100 million can be viewed here. To be eligible for the Top 100 list, a case must have been filed after January 1, 1996 and the settlement must have been approved by the court (which excludes, for now, recently-anounced and yet-to-be-approved settlements like those in the Enron case).
The report also breaks down the Top 100 settlements by categories such as institutional lead plaintiff, lead counsel, and claims administrator. With respect to lead counsel, the leaders were
- Milberg Weiss Bershad & Schulman (lead or co-lead counsel in 35 of the Top 100 cases--including 26 cases in which Milberg Weiss Bershad and Lerach was lead counsel).
- Bernstein Litowitz Berger and Grossmann (lead or co-lead counsel in 13 of the Top 100)
- Berger & Montague (lead or co-lead counsel in 10 of the Top 100)
- Lerach Coughlin Stoia Geller Rudman & Robbins (lead or co-lead counsel in 9 of the Top 100).
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
Go Right at Kozlowski Hall, then Left at Scrushy Field, Part II
Back in the formative years of this blog, we posted about an interesting article that wondered what universities would do about the buildings, athletic fields and scholarships they had named after donors who later became indicted, white collar felons, etc. Today, this article from Bloomberg gives a good update. The highlights:
- Kozlowski Hall, Seton Hall University--Name remains intact. The article notes that "[a]t one point the school -- named for Elizabeth Ann Seton, the first U.S.-born saint -- found itself with three buildings bearing the names of indicted or convicted felons. There was a gym named after convicted money launderer Robert E. Brennan; a library named for Frank Walsh Jr., a former Tyco board member who pleaded guilty to securities fraud in 2002; and Kozlowski Hall. The board of regents voted in 2002 to remove Brennan's name."
- Walsh Library Building, Seton Hall University--Name remains intact. Seton Hall "has no plans to remove former Tyco board member Walsh's name from the library," and says "Walsh's involvement with the campaign was based on the totality of his life, work and contribution to the school.... Mr. Walsh accepted full responsibility for his actions."
- Rigas Family Theater, St. Bonaventure University--Name remains intact. The article notes that Rigas, the founder of Adelphia Communications Corp. and a former St. Bonaventure trustee, was sentenced to 15 years in prison for stealing from the company and lying about its finances. The St. Bonaventure "board hasn't yet discussed the naming issue and may wait until the outcome of any appeals."
- Adelphia Court (basketball gymnasium), St. Bonaventure University--Name removed.
- Kenneth L. Lay Chair in Economics, University of Missouri in Columbia--Name remains intact. (Lay has pleaded not guilty to involvement in the financial fraud at Enron).
Finally, it is not in the article but Arthur Andersen Hall seems to be alive and well at the Kellogg School of Management, and it is "play ball" at Scrushy-Striplin Field at the University of Alabama.
| Permalink | Comments (0) | TrackBacks (1) | Print Article | Back To Top |
July 19, 2005 |
|
Globalstar Securities Litigation Settles for $20 Million
The Globalstar Securities Litigation that went to trial July 6 (discussed in this post) settled late Sunday night, July 17. The case, which was proceeding only against Loral Space Communications CEO Bernard Schwartz (Loral apparently owned part of Globalstar) due to the bankruptcies of the corporate defendants settled for $20 million according to a lawyer from the plaintiffs' law firm, Cohen, Milstein, Hausfeld & Toll. The case settled midway through the defense's case.
The plaintiffs reportedly put on 10 "witnesses": two live witnesses (the lead plaintiff and a damages expert), one by videotape, and seven via deposition transcript. The defense had gotten through two witnesses--the COO and CFO of Loral--when the case settled. CEO Schwartz and a damages expert were also lined up to testify for the defense but did not following the settlement reached over the weekend.
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
10 Years Later: Evaluating the PSLRA
The nomination of Christopher Cox as Chairman of the SEC has placed the PSLRA back in the headlines. Please take a moment to answer SLW's first-ever poll question:
In hindsight, have the benefits of the PSLRA outweighed the costs?
Please vote using the poll in the upper right-hand corner of this page.
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
Nothing But Furniture and Silverware
According to Sean Coffey of Bernstein Litowitz, lead counsel in the securities class action against WorldCom, the recent settlement with Bernie Ebbers (discussed here) will only leave the Ebbers family "with their furniture and the silverware."
That doesn't quite meet the standard laid down by former SEC Chairman Richard Breeden, who once famously stated that he wanted to leave people who engaged in insider trading "naked, homeless and without wheels," but it is in the ballpark.
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
Copycats Caught
First there was the "Fraudulent Wrong Number Stock Tip," sniffed out by the SEC and discussed in this post. Now we have its hardcopy cousin, the Fraudulent Wrong Fax Number Stock Tip.
The SEC announced yesterday that it had filed charges against one Joshua Yafa concerning an alleged scam
designed to con investors into believing they had inadvertently received a confidential stock tip faxed from a stockbroker to his client. Unlike typical unsolicited junk faxes recommending penny stocks, the handwritten fax had the appearance of an urgent message from a financial planner intended only for his client, "Dr. Mitchel," urging "Dr. Mitchel" to immediately buy shares of a stock that was about to triple in price. In fact, according to the Commission, neither the financial planner nor "Dr. Mitchel" exists.
Unfortunately for the defendant in this case, a fax machine in the SEC's San Francisco office was among the more than one million recipients of the bogus fax. A copy of the Fraudulent Wrong Fax Number Stock Tip document is available here.
The SEC did not state whether the Fraudulent Wrong Fax Number Stock Tip was itself inspired by its voicemail cousin that circulated widely about four months earlier. The SEC did state, however, that it was also charging another individual who, after receiving a copy of the Fraudulent Wrong Fax Number Stock Tip , was allegedly moved to engage in a copycat scheme. According to the Commission's complaint, this second individual
obtained a copy of Yafa's "Dr. Mitchel" fax and had the AVLL ticker symbol replaced with the symbols of three different microcap companies Pickens had been promoting - Data Evolution Holdings, Inc. (ticker: DTEV), Infinium Labs, Inc. (ticker: IFLB), and Soleil Film, Inc. (ticker: SFLM). The Commission alleges that Pickens sent out nearly a million of the modified "Dr. Mitchel" faxes in December 2004. The share price of the three stocks climbed by as much as 100% on significantly increased volume, and Pickens made over $300,000 selling stock in the companies.
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
July 15, 2005 |
|
Settlement Pipeline Soars Past $15 Billion
The ISS Settlement Pipeline, which reflects the sum of all pending or tentatively announced securities class action settlements for which the claim deadline has not passed, has soared to an amazing $15.006 billion. Introduced in July 2004 at a then-impressive $5.5 billion, the ISS Settlement Pipeline has been boosted significantly by the historic settlements in the WorldCom and Enron cases. The top 10 settlements currently in the pipeline are as follows:
1. WorldCom (combined): $6.12 billion
2. Enron (combined): $4.7 billion
3. IPO Securities Litigation: $1 billion
4. McKesson HBOC: $960 million
5. Dynegy: $473 million
6. Broadcom Corp.: $150 million
7. TXU Corp.: $149.75 million
8. BankOne Corp (First Chicago): $120 million
9. Deutsche Telecom AG: $120 million
10. CVS Corp.: $110 million
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
July 14, 2005 |
|
Over a Decade Later, Two Former Andersen Partners Catch a Break
Back in the Stone Age when I was at the SEC's Division of Enforcement, the Division filed a May 1998 administrative proceeding against Jeffrey M. Steinberg and John Geron, two then-audit partners of Arthur Andersen, for allegedly "causing" a company called Spectrum Information Technologies to improperly account for certain transactions. According to the Division of Enforcement, the two caused these violations by concurring with Spectrum's improper accounting treatment for the first and second quarters of 1993 (yes, 1993) when they knew or should have known that the accounting was improper and that Spectrum would use their concurrence to justify the improper accounting.
Over three years later, in December 2001, an ALJ ruled in this Initial Decision that the Division of Enforcement had "failed to prove that Respondents caused Spectrum's violations of Section 13(a) of the Exchange Act and Rules 13a-13 and 12b-20 thereunder. Accordingly, the [case] must be dismissed."
According to this article by WebCPA, the Initial Decision was then subject to review by the Commission, and the Division of Enforcement argued again in September 2003 that "that the Andersen auditors helped their client, Spectrum Information Technologies Inc., manipulate its accounting through improper revenue recognition of $10 million in 1993."
Fast forward to July 2005: After nearly two years of "deliberation," less than a week after Chairman Donaldson departed the Commission, the case against these two was finally dismissed. On July 6, 2005, the SEC issued this Order stating that:
The Commission is evenly divided as to whether the allegations in the Order Instituting Proceedings in this matter have been established. Accordingly, it is ORDERED that the proceeding instituted against Jeffrey Steinberg and John Geron be, and it hereby is, dismissed.
By the Commission (Acting Chairman GLASSMAN and Commissioner ATKINS for dismissal; Commissioners GOLDSCHMID and CAMPOS against dismissal).
A footnote to the Order adds that "Former Chairman William F. Donaldson resigned on June 30, 2005. Prior to his resignation, he did not participate in this matter."
I'm not sure what this means--if Donaldson had not participated prior to his resignation, the Commission was presumably deadlocked 2-2 for nearly two years. His departure from the SEC, however, apparently resulted in a prompt dismissal of this case based on that same 2-2 split.
In any event, over a decade of wrangling with the SEC is now over for the two audit partners. Of course, in the meantime, their firm was convicted of obstruction of justice (which was later reversed on appeal) and driven out of business (not reversed).
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
July 13, 2005 |
|
Ebbers Gets 25 Years
The AP reports that Judge Barbara Jones of the SDNY sentenced Bernie Ebbers to 25 years in prison today for his role in the WorldCom financial fraud. According to White Collar Crime Prof Blogger Peter Henning, although there is no parole in the federal system, Ebbers can reduce his sentence by 54 days per year for good behavior and therefore may be able to cut about 4 years off of that sentence if he keeps his nose clean. That still leaves the 63-year-old Ebbers in prison until he is at least in his early 80's.
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
Seymour Lazar Indictment, Part II
A copy of the Seymour Lazar indictment is now available here. The link on the initial post has been updated.
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
Fight the Power
The DOJ has curiously removed the copy of the Seymour Lazar indictment, which was previously available here, from its website. A search for "Lazar" on the DOJ website results in a link to the press release but nothing else.
If anyone out there who may have downloaded the PDF file while it was available will email it to me, I'll repost it on SLW.
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
July 7, 2005 |
|
Donaldson's Farewell Remarks to SEC Staff
A transcript of SEC Chairman William Donaldson's farewell remarks to the SEC staff is available here (thank you to TheCorporateCounsel.net blog for the link). It is a nice farewell address that contains some creative speechwriting, particularly in some of his opening remarks about the SEC's new headquarters at Station Place:
Most recently, we’ve moved from the concrete bunker we fondly know at Judiciary Plaza, into this gleaming, sun-filled structure. With this move, the people who spend their days preaching the virtues of transparency now get to experience life inside a large glass box. That gentle irony aside, I can’t think of a more appropriate location than Station Place for the Securities and Exchange Commission. Here, with a great train station on one flank and the Thurgood Marshall building on the other, we find ourselves physically nestled between a dynamic hub of commerce and the protections of our legal system. This is precisely the juncture where our founding statute placed us 71 years ago.
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
Make it 6 out of 10
In my article from the July 2005 SCAS Alert (posted here), I noted that
data collected by SCAS shows that only nine securities class actions based on post-Reform Act conduct have reached trial. Notably, however, including the two trials in June, five of these trials have occurred in the last 12 months.
As of yesterday we can bump that up by one--ten securities class actions based on post-Reform Act conduct have now reached trial, six of which have come in the last 12 months.
Reports from the SDNY are that a trial began yesterday in the Globalstar Telecommunications securities litigation, with the selection of a jury and the presentation of opening statements. Steve Toll of Cohen, Milstein, Hausfeld & Toll delivered the opening statement for the plaintiffs and Francis Menton from Wilkie Farr did so for Bernard Schwartz (litigation is reportedly stayed as to all corporate defendants as a result of their bankruptcies). Plaintiffs are expected to present their first witnesses today.
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
See You in Court
The following article first appeared in the July 2005 SCAS Alert:
See You in Court: Examing the Recent Spike in Securities Class Action Trials
by Bruce T. Carton, Vice President, ISS’ Securities Class Action Services
In a span of two weeks in June, two law firm press releases crossed our desk alerting us to trials in securities class actions. First, on June 8, the Orrick law firm announced that direct marketing company Thane International Inc. had just received a defense verdict in a shareholder suit after a weeklong trial in federal court in California. Next, on June 17, the Grant & Eisenhofer law firm announced that it had successfully represented a group of institutional bondholders in a seven-week jury trial in federal court in South Carolina, ultimately obtaining a $200 million judgment against the former CEO and CFO, respectively, of Safety-Kleen Corp., as well as a last-minute settlement with PricewaterhouseCoopers.
The fact that two trials in securities class actions were ongoing at the same time was itself extraordinary--trials in such cases are the rarest of occurrences. Focusing on the post-Private Securities Litigation Reform Act era, the SCAS database indicates that since Jan. 1, 1996, there have been well over 1,300 settlements in federal securities class actions. By comparison, data collected by SCAS shows that only nine securities class actions based on post-Reform Act conduct have reached trial. Notably, however, including the two trials in June, five of these trials have occurred in the last 12 months:
- AT&T Securities Litigation (2004), (settled after three weeks of trial for $100 million);
- Clarent Corp. (2005) (plaintiffs' verdict);
- Thane International (2005) (defense verdict);
- Safety-Kleen (2005) (settled during trial with PricewaterhouseCoopers; $200 million judgment as a matter of law against two officers who did not show up for trial);
- WorldCom (2005) ($65 million settlement with Arthur Andersen after four weeks of trial).
Seeing no obvious reason for this spike in trials in the last 12 months, I sought answers from some of the lawyers involved in these trials. One reason suggested by several lawyers--and supported by the settlement data--is that the dramatic increase over the past few years in the dollar amounts of settlements has raised plaintiffs' expectations and caused some defendants to take a stand rather than pay what they consider to be an unreasonable settlement. Indeed, the SCAS database shows that there was a record $6 billion in final settlements in 2004.
Michael Tu of Orrick, who defended Thane International at trial along with his partner Dan Tyukody, believes that higher settlement demands may be a cause of the recent surge in trials. Tu observes that, "the post-Enron political climate and aggressive behavior by federal and state regulators in recent years are driving increasing settlement amounts against companies, financial institutions and their officers and directors. This has encouraged plaintiffs in shareholder class actions to hold out for even higher settlements, increasing the likelihood of trial." Tu adds that "while in past years companies with good facts and meritorious defenses might have chosen to settle for business reasons or because of the economics of defending such a case through trial, now in many cases the relative risk of going to trial is narrowing because of these increased settlement values."
Doug McKeige, a partner with Bernstein Litowitz Berger & Grossmann, agrees that settlement values are playing a role. Bernstein Litowitz was lead plaintiffs' counsel and handled the trials in both the Clarent case and the WorldCom case (which also had over $6 billion in settlements with other defendants). According to McKeige, "the old benchmarks to gauge settlement values are getting blown away. Strong minded institutional lead plaintiffs expect a full measure of damages--especially if they have confidence in their chosen counsel to out duel their adversaries in the courtroom."
There may be another explanation. Steve Toll, a partner with Cohen, Milstein, Hausfeld & Toll, whose firm is actively preparing to represent investors at trial in early July in the Globalstar securities litigation, believes that the fact that corporations now often have many layers of insurance coverage becomes an impediment to reaching a reasonable settlement. Toll believes that "when the primary carrier refuses to put its entire policy on the table, it allows the carriers who are the second, third, fourth and/or fifth tier of coverage to say they have no obligation to pay because the primary carrier (and possibly the initial excess carriers) have not exhausted their policy."
Finally, Stu Grant, a partner with Grant & Eisenhofer who recently tried the Safety-Kleen case, says that although he can't explain why there has been a surge of trials lately, the fact that these cases are actually going to trial poses some new challenges to the courts and to lawyers. Grant notes that "as more cases are being tried, the courts will have to take on some very tough issues regarding the PSLRA. While Congress gave very broad guidelines in passing the PSLRA, the district courts have to deal with specifics such as jury instructions, burdens of proof, notice issues and the like. The PSLRA is devoid of any such guidance, and thus provides Herculean challenges for the trial courts."
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
July 6, 2005 |
|
Rant from a Terps Fan
I fumed not-so-silently when Duke beat Maryland in the 2001 Final Four with some, shall we say, friendly calls from the refs. I changed the channels quickly, but peacefully, when Coach K's "I don't look at myself as a basketball coach, I look at myself as a leader who happens to coach basketball" American Express commercial was run 1,755 times during the NBA Finals (providing Duke with hourly propaganda for recruiting purposes--as the SportsGuy put it, "It's almost like a presidential candidate being the only one allowed to broadcast national commercials").
But as of today I've been pushed over the brink by the Duke propaganda machine following my receipt of this invitation to the Sarbanes-Oxley Conference & Exposition featuring former SEC Chairman Harvey Pitt, WorldCom whistleblower Cynthia Cooper and ... Coach K??!! What the...??? To add insult to injury, the conference is being held in Baltimore, Maryland.
What on earth is Coach K going to speak about at a Sarbanes-Oxley conference? Let me take a shot at this:
Ladies and Gentlemen, thank you for having me here at your conference. You may be wondering--"why is this leader who happens to coach basketball blathering on when all I want to do is get some CPE credits, learn how to survive the implementation of section 404, and get the heck out of here?"
Well, I'll tell you why. Because we actually have a lot in common--for instance, you don't look at yourself as a basketball coach and I don't look at myself as a basketball coach. You need to learn about whistleblowers, I blow a whistle almost every day....
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
NYT: "The Lawyer Companies Love to Hate"
Sometimes articles published over the weekend slip through the cracks but this one from the New York Times is worth resuscitating. Entitled, "The Lawyer Companies Love to Hate," it is a profile of Bill Lerach of Lerach Coughlin Stoia Geller Rudman & Robbins. It rehashes some of the Seymour Lazar news from last week, and provides some other pretty provocative background and information about Lerach:
- The article quotes Lerach's lawyer in the Lazar affair, John Keker, as stating that "Bill Lerach has done more to protect shareholders than this S.E.C. and the Department of Justice combined."
- According to the article, Lerach has sued 3com and Intel five times each. It notes that "Once when Alan Shugart, the C.E.O. of Seagate Technology, which was being sued by Mr. Lerach, started a campaign against 'abusive litigation,' Mr. Lerach sent him a note that said, 'Dear Al: More is coming.'"
Asked about the practice of filing "a lot of lawsuits that seem to be based on not much more than some bad news and a big drop in the stock price," the article notes the following response from Lerach:
"We like to have a lot of cases," he said. "That's our business model. It keeps you sharp. It's good training for your young lawyers." He described some of his competitors in the plaintiffs' bar, the ones who stick to big institutional clients and only file lawsuits against the likes of American International Group and WorldCom - as "living off the low-hanging fruit."
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
July 5, 2005 |
|
File Those Claims or Else, Part IV
OK, here goes nothing--I'm going to try to post this via email since Typepad.com has apparently melted
As discussed
The article states that before being sentenced in July, Ebbers will turn over $5 million in cash and permit the liquidation of most of his other assets. Seventy-five percent of the proceeds will go to the class settlement fund, which Hevesi estimates will be somewhere in the neighborhood of $25 million to $33 million. The article further states that "the co-lead counsel representing the plaintiffs in the WorldCom securities litigation, Bernstein, Litowitz, Berger & Grossmann and Barrack, Rodos & Bacine, agreed not to receive any fees from this settlement, although they were involved in the negotiations."
The bottom line is that investors who fail to file a claim in the WorldCom securities class action settlement also will miss out on their share of this restitution money coming from Bernie Ebbers.
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
Typepad going crazy!
Typepad.com, the software/website that supports this blog is going haywire today. Weird fonts are showing up in the posts, the archives are appearing with a blue background, I can't log on to post anything new.... Geez.
This is a test to see if I can Fight the Power and post via email.
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |
July 1, 2005 |
|
"Institutional Investors Leave Money on the Table"
The law firm Berman DeValerio has an interesting interview with Professor Randall Thomas in its most recent client newsletter. Prof. Thomas, who has authored several articles on the issue of institutions failing to file claims in securities class action settlements, also was the guest at our February webcast entitled, "The Fiduciary Duty To File Claims In Securities Class Action Settlements."
| Permalink | Comments (0) | TrackBacks (0) | Print Article | Back To Top |