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Securities Class-Action Suits Fall 15% in First Half of Year, Study Finds
Securities-fraud class-action lawsuits fell 15 percent in the first half of the year from the same period a year earlier, according to study by Stanford University’s Securities Class Action Clearinghouse and Cornerstone Research.
“The securities fraud litigation wave stimulated by the credit crisis now appears to be history,” Stanford Law School Professor Joseph Grundfest said in a statement.
Eight of 71 U.S. cases filed in the first half of 2010 related to the credit crisis, the study showed. Such cases totaled 53 in all of 2009 and 100 in 2008. Overall, the 71 total cases so far in 2010 compared with 84 in each half of last year.
Contributing to the drop this year is the lack of Ponzi scheme cases, according to the study. There were no securities- fraud filings stemming from such frauds like the one for which Bernard L. Madoff is serving a 150-year prison sentence. There were 18 Ponzi-related class action filings last year.
All filings collected by the Clearinghouse and Cornerstone are in U.S. federal courts.
New suits fell to the lowest semi-annual level since 2007. The decline in new filings this year follows a trend that started in 2009, when there were 169 new lawsuits, compared to 223 the year earlier.
Except for 2008 each year since 2005 has seen a decrease, data from the Class Action Clearinghouse show.
‘Real Shift’
“It could be we are having a real shift,” said John Gould, a senior vice president at Cornerstone. “Plaintiffs will say it’s because court rulings have made it harder to file cases. Defendants will say it’s because there’s less fraud going on.”
He attributed the decrease in case filings in part to decreased stock market volatility.
Four of the 71 new cases represented two-thirds of the disclosed losses, according to the study, which didn’t identify the cases.
Goldman Sachs Group Inc. was sued in April by investors for failing to disclose information about its true financial condition, including that it had received a notice from the Securities and Exchange Commission about an investigation into a mortgage investment, according to the Class Action Clearinghouse.
The company fell 13 percent in a day after being sued by the SEC in April, according to a case summary on the clearinghouse’s website. On July 15, Goldman announced it agreed to settle the SEC’s lawsuit for $550 million.
To contact the reporter on this story: Carlyn Kolker in New York at ckolker@bloomberg.net.
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