Securities fraud ranks among the largest of class action settlements

Class action lawsuits have been on the rise in recent years. While many individuals may associate class actions with dangerous or unhealthy consumer products, in fact, six of the top ten class action lawsuits involve securities fraud. These six securities class action cases resulted in settlement amounts totaling $24.6 billion. Although these cases are substantial, they only represent a drop in the bucket of the hundreds of currently pending lawsuits.

The largest securities class action settlement, and perhaps the most well-known, involved Enron, and resulted in a $7.2 billion settlement to investors. Enron was charged with engaging in fraud by concealing losses of Enron-controlled special purpose entities from investors. Enron shareholders’ stock became worthless during the company’s subsequent collapse.

Another significant class action case involving securities resulted in a $6.2 billion dollar payout when a World Com reached a settlement with investors. The company was cited for improperly classifying expenses as “capital costs”, as well as providing false revenue statements. It was determined by the Securities and Exchange Commission (SEC) that in doing so, World Com had inflated its reported earnings and stated assets by over $11 billion.

The remaining securities class action lawsuits in the top ten involved Tyco International, AOL Time Warner, Nortel Networks, and Cendant. While the majority of these lawsuit settlement payments were disbursed prior to Financial Recovery Technologies’ offering claim filing services for securities class action settlements, FRT has been able to recover over $7 million in funds for our clients related to these cases.

Stock crashAs instability in the financial markets continues, there is ever increasing pressure on companies to improve their total returns for their investors. Also, as history has shown in most recently in the credit crisis, such volatility often exposes fraudulent practices which are the basis for securities class actions. Based on these factors, we believe that the volume and scale of class actions will see a significant increase in the coming months and quarters, and that investors will demand that financial institutions do everything possible to recover the portion of the corresponding settlements which are rightfully theirs.

A securities class action settlement claim service provider, like Financial Recovery Technologies, helps institutions recover more settlement funds than they typically can recover on their own. Financial Recovery Technologies routinely compares clients’ trading history against a proprietary database to ensure that all investment holdings are evaluated against active securities class action cases.

Contact us today to find out how Financial Recovery Technologies can ensure your firm recovers all settlement funds that it is entitled to receive.

For more information, see the recent CNBC feature that explains the top ten class action lawsuits in more detail.

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