Despite the blatant fraud uncovered at WorldCom and the many executives who have been sentenced to prison, damaged shareholders who believe they will only receive pennies on the dollar continue to look for other, nonbankrupt defendants under other "novel" theories. 

For instance, on August 15, 2003 (the very first day this blog was in existence, by the way), we posted here about the 71-year-old West Palm Beach retiree who lost $2 million when MCI and WorldCom stock plummeted and sued Citigroup for his pain and suffering, high blood pressure, anxiety attacks, and so on under the Florida tort of "outrage."

Now a different Florida investor who lost $600,000 in WorldCom stock has launched another theory at another quite unexpected defendant--Nasdaq.  Steven Weissman is suing Nasdaq because, he alleges, "advertisements by Nasdaq influenced his decision to purchase more than $600,000 of stock in WorldCom Inc."  According to a July 31, 2005 article in the South Florida Sun-Sentinel,

     Weissman says he took Nasdaq's newspaper, TV and Internet marketing as its stamp of approval for companies, including WorldCom, mentioned in the ads. TV commercials showing corporate chieftains such as Michael Dell of Dell Inc., Steve Ballmer of Microsoft Corp. and Howard Schultz of Starbucks Corp. have aired widely in recent years.

     The ads, with the slogan "Listed on Nasdaq," refer to the executives as visionaries. Though they are clearly promotional, the commercials don't explicitly suggest the purchase of the companies' stock. Other stock markets such as the New York Stock Exchange promote themselves, but Nasdaq has been especially aggressive featuring listed companies and their CEOs.

     "There are tens of thousands of people with the same claim as me who can say they saw the ads and relied on them," Weissman says. He viewed WorldCom as a "buy and hold" investment because it appeared to have an important role in the future of telecom infrastructure and claimed to be in excellent financial shape. He is suing both Nasdaq, which is a for-profit corporation, and the National Association of Securities Dealers, or NASD, which regulates trading on the Nasdaq.

     But why not go after the more obvious target, WorldCom? Weissman points out that WorldCom went bankrupt and already faces a barrage of shareholder suits. "It was obvious that shareholders could only recover, if anything, a few pennies on the dollar through lawsuits against WorldCom," he says.

***

Sitting at his dining room table, Weissman shows a copy of a two-page Nasdaq ad in The Wall Street Journal of April 11, 2002. "Keeping our markets true," the ad states. "It's all about character." The ad says a company's management, board, internal audit committee and independent auditors "share in a fiduciary obligation to investors to provide an accurate overall representation of performance, financial condition and risk."  The ad is endorsed by 63 chief executives, including Ebbers.

For those of you who are already muttering "Motion to Dismiss granted," the article notes that last year, U.S. District Judge William Zloch denied Nasdaq's motion to dismiss the suit, finding that Nasdaq was not immune to Weissman's allegations.  Oral argument in Nasdaq's appeal of that ruling is scheduled for sometime this month.