Shareholder Suits
I posted on shareholder suits over at Overlawyered. A reader sent me this great article from 2000 in Fortune on Bill Lerach, the kind of shareholder suits. These thoughts echo my own (or, since I guess this was written long before my post, my thoughts echoes these):
Stanford law professor Joseph Grundfest, a former
SEC commissioner, goes so far as to describe the current system governing
securities fraud as "nuts." As he sees it, class-action settlements amount
to nothing more than an unproductive "transfer payment" from current shareholders
to past shareholders--with big contingency fees skimmed off the top. "The
plaintiffs lawyers are getting a cut of the money that flows from our left
pocket to our right pocket," he says. Even in those cases involving genuine
wrongdoing, he adds, the individual perpetrators rarely pay anything out
of their own pockets, thanks to insurance and indemnification policies.
Nor do the shareholders get much--generally no more than 15% of their losses,
studies show. "Fraud is wrong," says Grundfest. "It has to be punished.
But what we have here is a shell game."
Read the whole article. In many of the anecdotes, Lerach seems to be channeling Tony Soprano.
