Claris Law Legal Blogging Community

Editor: Debra G. Speyer, Esq.
Profession: Attorney

Category: Fraud in the News

Per a report of the accounting firm PricewaterhouseCoopers, there were a total of 168 securities class actions that were filed in 2005. In 2004, 203 securities class actions were filed. Although this is a decrease of seventeen percent from 2004 and slightly below the ten year average of 188 cases per year, the value of settlements more than doubled in value.

One of the reasons there were less cases filed was because the major class actions firms were busy with very large class actions such as Enron and WorldCom and placed their energies on those cases. Deterring effects of Sarbanes-Oxley may also been a factor with corporate executives seeing former Enron, Dynegy, WorldCom and Tyco executives being handcuffed and brought to trial for fraud.

The doubling of awards is particularly interesting. Even if one excludes the billion dollar mega settlements in Enron and WorldCom, the 2005 average was $71.1 million compared to $27.8 million. The reason is likely that the fraud of the companies sued in class actions was much more egregious than in prior years.