Investors suing at record pace

By Bob Van Voris
Bloomberg News Service

PALO ALTO, Calif. — Shareholders sued at a record pace in the first half of 2002 after accounting irregularities were disclosed at companies from WorldCom Inc. to Adelphia Communications.

Investors sued 130 companies, including Tyco International Ltd. and Merrill Lynch & Co. Inc., for securities fraud in the first six months of the year, according to the Stanford Law School Securities Class Action Clearinghouse.

That pace was 53 percent faster than in 2001, when shareholders filed 170 such cases for the entire 12-month period.

"This is not a litigation explosion," said John C. Coffee Jr., a securities law professor at Columbia University. "This is an explosion of earnings restatements and falling stock prices."

Some lawyers who represent shareholders are surprised the number of suits filed wasn't even higher.

"You would think it would be a much bigger number, given what we're going through and all the disclosures that are coming out now," said New York lawyer Melvyn I. Weiss.

Most shareholder suits settle before trial. The median settlement in 2001 was $5.3 million.

Among the largest settlements of 2001 were those involving Rite Aid Corp., $193 million; MicroStrategy Inc., $153.5 million; and Sunbeam Corp., $110 million, according to Cornerstone.