I found this on the LU board. It pertains to NSPR, too.C.-------------------------------------------------------Warning: long post.In view of recent lawsuits against LU, some may find this an interesting read. I was especially taken by the last paragraph.Starts -Class-action suits that shareholders file against companies theyhold stock in peaked in 1998 and are coming on strong againthis year. But shareholders who think they'll recoup lostinvestments are in for a surprise.By ROBERT TRIGAUX © St. Petersburg Times, published February 14, 2000 John Sykes just faced a modern corporate rite of passage. It wasn't pretty. His company, Tampa's Sykes Enterprises, last Monday restated its 1999earnings downward but admitted it had unresolved issues with its auditors.Speaking that morning to irate analysts and investors -- a teleconferencecalled "grisly" by one participant -- CEO Sykes wanted desperately to explainwhy the financial numbers of the company he founded did not add up. But the normally chatty Sykes could not. Withits stock in free fall, Sykes Enterprises wasdeluged by class-action lawsuits claimingshareholders were misled and defrauded. Under strict orders from hisattorneys to keep mum, Sykes could only apologize to his teleconferencelisteners. "I know that is hard to understand," a distressed Sykes said. "You certainlyhave known us for a long time, and you know that we have always beenstraightforward and honest." Sykes is the latest unwilling executive to join a growing club of companiesnailed by the explosion of shareholder class-action lawsuits. Since 1995,nearly 800 companies nationwide have been targeted by class actions allegingsecurities fraud, misleading information and funny accounting. These companies know the class-action drill by heart. Strike 1: Quarterly earnings slip and fail to meet analyst forecasts. Strike 2: Company's stock price falls when earnings expectations not met. Strike 3: Law firm is contacted by or finds shareholder plaintiff, looks back atrosier earnings statements by company and files class-action for securitiesfraud and misrepresentation. Many companies like Sykes must deal with multiple class-action suits. Onebesieged company, New Jersey's Cendant Corp., became the Mother of AllClass Actions when more than 70 lawsuits were filed claiming the franchiserof Ramada hotels and Avis rental cars had cooked its financial books foryears. Cendant settled most of those suits for a staggering $2.83-billion. To be sure, 90 to 95 percent of class actions never go to trial. Many aredismissed. But many more are settled by companies that chalk up litigation asjust another business cost to pass on to their customers. Unfortunately, experts say, the booming business of class actions often endsup costing everybody more. A company's litigation expenses often arepassed on to the consumer. And plaintiffs rarely win big sums. In mostsettlements, the lawyers end up with the lion's share of the money. Plaintiffs tend to win about 10 percent of the damages they seek, says JosephA. Grundfest, a Stanford University law professor and former Securities andExchange commissioner. Lawyers get as much as 30 percent off the top of aclass action. That's not to say all class actions are frivolous or driven by money. "We want securities fraud lawsuits because they help deter fraud," saysMichael A. Perino, who has tracked securities class actions and teaches at St.John's Law School in New York. "But we don't want so many that it's easyto bring lawsuits against companies that do not commit fraud. What we needto ask is: Are we at a place of reasonable policy compromise?" •••The relentless press of class actions against corporate America wasn'tsupposed to happen. Congress in 1995 passed reforms meant to raise thelitigation bar and curtail unfounded class actions. Instead, the pace accelerated for several reasons: * Several big law firms such as New York's Milberg Weiss Bershad Hynes& Lerach or West Palm Beach's Burt & Pucillo became extremely successfulby specializing in shareholder class actions and now dominate that niche oflaw with the skill and speed of highly trained SWAT teams. * The booming stock market and strong merger activity in the late 1990screated prime conditions for class-action lawsuits. The IPO boom also createdmany new public companies characterized by rapid growth, a limited productline and a dependence upon stock option compensation of executives thatmade them more prone to getting in trouble under federal securities laws. * Given Wall Street's willingness to punish companies that do not meet theirfinancial goals, corporations increasingly are under pressure to stretchaccounting rules or inflate investor perceptions. The result: a rash ofcompanies in the recent years forced by auditors to restate earnings fromearlier periods. * More people than ever are invested in the stock market and, as a result,more likely to sue in the event of an investment loss. Charles Elson, a Stetson Law School professor and expert in corporategovernance, argues that if class actions served their real purpose -- deterringcompanies from committing fraud -- then the volume of lawsuits should bedeclining. "But there are no signs that number is coming down," Elson said. Since mostclass actions are settled by companies and never end up in court, Elson saysmany suits get filed with a quick settlement fee in mind. Shareholder class-action suits hit a high in federal courts in 1998 when 244cases were filed. (Class actions are discouraged in state courts.) The federalnumber dipped last year to 216 cases. But in the first six weeks of 2000,class actions have hit a torrid pace. Just last week: * Friday: Philadelphia law firm Barrack, Rodos & Bacine filed a class-actionsuit against California software developer Legato Systems Inc. * Thursday: Stull, Stull & Brody of New York said it sued Michigan's LasonInc., which converts text documents into electronic formats. * Wednesday: Boca Raton's Shepherd & Geller filed a class-action suitagainst SunStar Healthcare Inc. of Florida. * Tuesday: Philadelphia's Spector, Roseman & Kodroff sued SunterraCorp., an Orlando vacation ownership company with 89 resorts in NorthAmerica, Europe, the Caribbean and Japan. * Monday: West Palm Beach's Desmond Law Firm said it was seeking classactions against companies ranging from network security firm V-One Corp.in Germantown, Md., to telecom giant Lucent Technologies in Murray Hill,N.J. •••If there's a 'king' of securities class-action lawsuits, William Lerach ofMilberg Weiss Bershad Hynes & Lerach may be it. With more than 300 suitsover the past several years under his belt, he's become a legal legend. In 1995, for example, a band of carolers paraded around a San Diego, Calif.,courthouse, singing songs (He sues if you've been bad or good . . .) just tomock the shareholder king. Lerach, who earns close to $12-million a year, described his firm's strategyfor choosing what company to sue in remarks at a recent legal seminar. If acompany's stock price declines, he starts hunting for possible cover-ups. "If you can't figure out a crisp, clear economic motive to deceive, the case isnot going to have any appeal. But the motives can be all over the place,"Lerach said. Does a company need a high stock price to pay for an acquisitionspree? Was there insider trading before the stock fell? As part of the 1995 reform act to trim litigation, judges must appoint theinvestor alleging the largest losses as lead plaintiff in a class action. That ruletends to favor institutional investors. To counter that, Milberg Weiss' Lerachtries to attract and aggregate numerous individual shareholders into one groupand argue the group suffered the largest loss. (The lead plaintiff can controlthe class action and tends to get the biggest rewards from a settlement.) To help its cause and recruit shareholders to its class actions, Milberg Weissmarkets its lawsuits vigorously. The law firm regularly publishes a list of thecompanies it has sued on wire services tracked by the media. And like manylaw firms, Milberg Weiss has an Internet Web site devoted to informationabout its securities class-action suits. Another way the 1995 law sought to trim weak class-action lawsuits was toreduce the role of "professional plaintiffs" -- small shareholders who crop upas plaintiffs in numerous legal actions. The law prohibits an individual fromserving as a lead plaintiff in more than five cases in a three-year period. In three class actions filed in recent weeks against Tampa's SykesEnterprises, plaintiff Richard Miller says he is not involved in any otherclass-action litigation. But in two separate suits, plaintiffs Katherine Pivenand James Biglan each acknowledge being involved in two other classactions. Still, that's a big step up from how some earlier plaintiffs played the game. One lawyer, San Francisco's Tower Snow, recently recalled his favoriteprofessional plaintiff: a Florida retiree, now deceased. Snow called him "themost defrauded man on Earth" for his role as a plaintiff in an estimated 120securities lawsuits. Ends.After reading this, is there anyone who honestly believes these lawsuits are REALLY in the interests of the shareholders???
One major thing not listed is that most of the time in these lawsuits the insiders sold a bunch before the fall. That's the real fraud.
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