Banks settle IPO litigation for nearly $600 million

By Emily Chasan

NEW YORK (Reuters) - A group of investment bank underwriters and companies have agreed to a nearly $600 million settlement with investors to resolve litigation over alleged fraud in the pricing of initial public offerings in the late 1990s, according to a lawyer involved in the case.

"The case is settled, and we're awaiting a decision on preliminary approval," Howard Sirota, a lawyer for the plaintiffs said on Monday.

A settlement agreement could end a series of investor lawsuits beginning in late 2000, that claimed IPO companies and their underwriters artificially inflated stock prices and hid the amount of compensation actually received by the underwriters.

The litigation has encompassed more than 300 initial public offerings of high-tech and Internet-related stocks that were marketed between 1998 and 2000, at the height of the technology boom.

The defendants in the case include some of the companies that were brought public, several officers and directors of those companies, and 55 investment banks, including Credit Suisse Group (CSGN.VX) and JPMorgan Chase & Co (JPM.N). Earlier attempts to settle the case for more than $1 billion have unraveled, as the case has gone through several appeals over the years.

"This is the best we can do, so we're doing it because at the rate things are going, there could be no recovery," Sirota said, noting the declines of key defendants and other parties in the case, like Bear Stearns, Lehman Brothers Holdings Inc (LEHMQ.PK) and American International Group (AIG.N).

"The parties, after quite a long period of mediation, reached a settlement," said David Ichel, a lawyer with Simpson Thacher & Bartlett representing JP Morgan in the case. "Our client is pleased with the outcome."

Lawyers representing Credit Suisse and some of the corporate issuers involved in the litigation were not immediately available for comment.