Securities Litigation Remains High, Fueled by Credit Crisis
Shareholder class action filings in the first half of 2009 were on a pace to match last year’s high level annual total, driven by the continued surge of Ponzi scheme and credit crisis allegations, according to NERA Economic Consulting. However, filings have tapered off during the second quarter.
In 2008, filings hit a five-year high, driven up by the surge in litigation related to the credit crisis. This trend started with the subprime lending meltdown in 2007 and has continued into the first half of 2009. Through June 30, 2009, there were 127 federal securities class action filings. If filings continue at this pace in the second half of the year, 2009 will receive approximately the same number of filings as 2008, or more than 250.
Although filings peaked in March 2009 with 31 cases, and gradually declined each month in the 2nd quarter, filings currently remain on track to match the 2008 level.
Annual filings on average over 2008 and 2009 are on pace to come in above the average level of 230 standard filings over the 1997-2004 period. While in 2001 and 2002 total filings exceeded this average level, this was driven by the large number of one-time cases related to the IPO laddering filed during those years, and those IPO laddering allegations have not been repeated in subsequent years.
In 2009, cases related to the credit crisis continue to drive filings: 54 of the 127 filings this year, or over 40% of filings, had allegations related to the credit crisis. In addition, cases related to Ponzi schemes have made up a substantial fraction of the cases in 2008 and 2009, as the revelations of alleged schemes perpetrated by Bernard Madoff, R. Allen Stanford, Howard K. Waxenberg, Thomas Petters, and others led to many filings starting in December 2008.
NERA’s numbers and projections differ from those from a recent Stanford/Cornerstone analysis featured on Research Recap. That study projected a 22% decline for the year based on the first half results it found. However, if the second quarter trend of declining filings in NERA’s report continues, then filings this year would be lower than in 2008. Filings declined in the second quarter last year, but then rose again in the second half:
You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
