All Sides Seek SEC Support in Liability Case
Saturday, April 21, 2007
Prominent plaintiffs' lawyer William S. Lerach met with staff members at the Securities and Exchange Commission this week in an attempt to persuade the agency to support investor lawsuits against banks that help corporate executives commit fraud.
The U.S. Supreme Court recently agreed to hear a case that will address the liability of secondary parties such as bankers, accountants and lawyers who remained silent when they saw corporate officials mislead shareholders.
The Supreme Court case, which involves cable television provider Charter Communications, is considered the most important securities-law dispute to reach the court in two decades. The clash carries significant consequences and will affect the ability of investors in Enron and other fraud-ridden companies to recover losses, potentially billions of dollars.
Trade groups that seek to limit banks' liability and consumer advocates who want to expand it are racing to build support for their positions. The approach that state and federal regulators advance in friend-of-the-court briefs may be particularly influential, and both sides are courting the regulators.
SEC officials have not yet tipped their hand. But plaintiffs' lawyers and former agency officials expressed concern about a court brief in another securities dispute the agency submitted this year. Separately, the commission is considering industry-supported proposals that could reduce the number of shareholder lawsuits by encouraging investors to agree to arbitration instead.
"I don't think anyone should take for granted what the SEC is going to do here," Lerach said in an interview yesterday.