Wednesday, 31 March 2010

Increase in Securities Fraud Class Action Settlements in 2009

After a two-year decline in securities fraud class action settlements, 2009 saw an increase in settlements to more than $3.8 billion. That was a spike from $2.35 billion in 2008. Much of the $3.8 billion settlement came from the UnitedHealth Group Inc. shareholder class-action settlement which alone amounted to $925.5 million.

There were a total of 103 settlements in 2009, an increase from 97 settlements in 2008. Besides, the United Health Group Inc. class action settlement, 2008 also saw a settlement in litigation against defendants over initial public offerings. Those settlements alone amounted to $586 million.

Securities fraud settlements could actually increase over the next couple of years. The settlements for 2009 involved cases between 2004 and 2006. They do not include any of the lawsuits arising from the stock market crash of 2008, and the credit crisis. Those lawsuits are still to reach a settlement, and when that happens, securities fraud class action lawyers are likely to find that the settlement figure for 2009 are eclipsed by the new numbers.

Securities fraud lawsuits tend to have better settlements when plaintiff lawyers can show that companies intended to deceive or defraud innocent investors. Settlements may not be so high if it comes across that the plaintiffs merely failed to guess the markets right. Lawsuits which involve a whistleblower like a former employee or any other internal source, or those where federal regulator agencies have found fraud, are more likely to lead to securities fraud class action settlements.

If $3.8 billion seemed like a good year for securities fraud class action lawsuits, it pales before the record $18.3 billion in settlements in 2006. That year included a $7.2 billion settlement over Enron. 2005 was a good year too with $10.02 billion worth of securities fraud class action settlements, including $6.2 billion involving WorldCom. 2007 was the last year before a two-year drop in settlements. That year, there were substantial securities fraud settlements with a total of $7.6 billion worth of settlements, including one for $3.2 billion for Tyco International.

1 comment:

  1. A securities-fraud class action is a group lawsuit brought by shareholders who typically claim a company or its officers falsely inflated the value of a stock by making misleading statements or failing to disclose information. Settlements of such cases in 2009 took an average of four years to reach, up from an average of three years in 2000 through 2005.

    Thanks for sharing......

    Securities Fraud Attorney