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| 2001 News and Press Releases |
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HEADLINE ARCHIVED:
Market Downturn Feeds Lawsuit Boom
By: John Pletz
Law & Legal Issues. December 10, 2001
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Excerpt: There's nothing quite like a market crash to keep securities litigators working overtime. Securities class-action lawsuits have nearly doubled in 2001 from their normal pace, as law firms seek compensation for millions of investors who saw their fortunes drop. So far this year, 415 lawsuits have been filed, up from 216 in 2000, according to the Securities Class Action Clearinghouse at Stanford Law School. But there's a new wrinkle this year. Following an investigation by the Securities and Exchange Commission into questionable practices of how some securities underwriters allocated shares of new public offerings to big investors, plaintiffs' attorneys blanketed the industry with class-action filings. The suits accuse underwriters of agreeing to sell stock to some investors at the offering price -- a deal unavailable to the average shareholder -- in exchange for their commitment to also buy stock on the open market at pre-arranged prices. Such buying after the offering would drive the stock higher as investors interpreted it to mean Wall Street saw higher value in the newly issued stock, creating an impressive early runup. The practice is known as laddering.
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