(Repeats item first released early on March 14)
* Lowest settlement totals in a decade - Cornerstone
* Pickup in SEC enforcement may spur more payouts
By Jonathan Stempel
March 14 Angry investors are seeing far
fewer financial benefits from lawsuits accusing corporate
America of securities fraud, but may be on the cusp of a
The number and size of securities fraud settlements that won
final U.S. court approval fell in 2011 to the lowest in a
decade, amid a drop in cases linked to accounting problems and
U.S. Securities & Exchange Commission enforcement activity.
According to a study being released on Wednesday by Stanford
Law School and Cornerstone Research, courts in 2011 approved 65
such settlements totaling a mere $1.36 billion, down from 86
settlements totaling $3.21 billion a year earlier.
The dollar amount is less than half the $2.78 billion
recovered in 2003, which had been the lowest since the adoption
the prior year of the Sarbanes-Oxley corporate governance law.
Still, Laura Simmons, a business professor at the College of
William & Mary and co-author of the study, said large
settlements involving American International Group Inc
and other companies, as well as increased SEC enforcement
activity, may make 2012 a more rewarding year for investors.
"As we look at the potential impact of whistleblower
lawsuits, we expect a further increase in SEC activity, which
could result in a greater amount of private settlements," she
said in an interview.
Last year, the SEC filed 735 enforcement cases, up 8.6
percent from 2010 and the most in its history, according to the
regulator's annual report.
The largest 2011 settlement in Cornerstone's study was a
$208.5 million accord by officers, directors, underwriters and
an auditor for Washington Mutual Inc, the largest
U.S. bank or thrift to fail.
"Lawyers will debate whether this decline is a result of
plaintiffs having brought weaker claims or pro-defendant changes
in the legal regime, or some combination," Joseph Grundfest, a
Stanford University law professor who works with Cornerstone,
said in a statement. "The really big litigation bucks were not
in the class-action securities fraud market in 2011."
Simmons said the drop in accounting-related cases may stem
from fewer restatements, which in turn may be attributed in part
to improved corporate governance under Sarbanes-Oxley.
She also said that some plaintiffs' lawyers may have focused
more in recent years on housing-related litigation, including
the sale of risky mortgage-backed securities, rather than more
traditional securities fraud cases.
Cornerstone's study excludes settlements challenging
mergers. Such cases accounted for 43 of the 188 new securities
fraud lawsuits filed last year.
Settlement totals for 2012 will include AIG's $725 million
settlement to resolve claims accusing the insurer of accounting
fraud and stock price manipulation.
Other accords topping $100 million that may also be included
are with Lehman Brothers Holdings Inc; wireless equipment
company Motorola Solutions Inc ; National City Corp, a
bank now owned by PNC Financial Services Group Inc ; and
private education company Apollo Group Inc.
The peak years for settlements were 2005 and 2006, when
settlements over WorldCom Inc's and Enron Corp's collapses
contributed to respective total payouts of $10.5 billion and
$19.19 billion, Cornerstone said.
(Reporting By Jonathan Stempel; editing by Andre Grenon)