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July 31, 2007

Loss on Enron, Worldcom, etc.? It May Not Be Too Late!

Usually lawsuits must be filed within a few years after the wrongful acts, or when one knew or should have known of the wrongdoing. For example, federal and most state securities laws require lawsuits to be filed by 2 or 3 years after the problem is known or made public, but no later than 5 years in any event.

However, if a class action is filed on behalf of shareholders, this “tolls” the limit for filing a case for those the case seeks to represent. If, for example, if a shareholder decides to “opt out” of the class action, or it is later decided the class action can not be maintained, the “window” for such shareholders to file their own cases remains open. (Caution: The remaining time to file a case may then be quite short.)

WorldCom Inc. bondholders were in this position. A class action was filed, including a class of bondholders. Some of these bondholders decided to file their own case before the class was “certified” (when the court decides whether the class members have claims common to all of them, etc.) Using strange reasoning, the federal judge presiding over their case decided that, because these bondholders did not wait for the class to be certified, they could not use the tolling benefit of the class action. Because the case was otherwise filed too late, it was dismissed.

The U.S. Court of Appeals for the Second Circuit disagreed and reversed that decision. (In re WorldCom Securities Litigation, 2d Cir., No. 05-6979-cv, 7/26/07). The appeals court said that the initiation of a class action puts defendants on notice of the claims, whether or not plaintiffs choose to become part of the class and whether or not they file their cases before the class is certified.

Victims of securities fraud are often included in class actions without their knowledge. Often they are notified of class actions years later. Either way, class actions can keep the window open to file lawsuits for as long as a decade. Currently Enron shareholders await word from the U.S. Supreme Court whether the recent dismissal of their case against Merrill Lynch and others will become final. If so, they could individually or in small groups sue Merrill Lynch and the other defendants. All Enron shareholders should already be in contact with an attorney.

Shepherd Smith and Edwards represents victims of securities fraud. If you, your company or pension fund, or someone you know lost in Enron, it is worthwhile to learn whether it is too late to act. For more information contact us today to arrange a free consultation with one of our attorneys.

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Posted In: Class Action Lawsuits , Enron , Merrill Lynch

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July 19, 2007

Enron Victims, Now Victims of Their Own Government, Finally Find Friends in Former Regulators

Defrauded Enron shareholders recently lost again, this time as victims of federal judges who seem intent on helping Wall Street crooks rather than Wall Street victims. With their case before the U.S. Supreme Court, the Enron shareholders lost yet again when the SEC and Bush Administration, who had indicated they would intervene, missed a deadline. Now, three former SEC Commissioners are asking the Supreme Court to allow them to intervene to help.

In 2001, the total value of Enron shares plummeted from over $80 billion to almost zero. Enron officials and its auditors were indicted, several persons were convicted and some are now serving jail terms. The auditing firm of Arthur Anderson was forced to close. The scandal then turned to several Wall Street firms which are claimed ot have played a large role in assisting Enron to falsify its books.

Several individuals and firms were accused - and four former Merrill Lynch Brokers were convicted of by a jury - for arranging loans to appear as sales in order for Enron to book the loans as profits. Yet, just as the Enron shareholders’ claims against Merrill Lynch were headed for trial, business-friendly appointed appellate judges dismissed the case.

The judges’ decision stated that the federal securities law simply does not allow investors to recover from Wall Street firms that assist companies to defraud them. (Changes by Congress in the last decade forbid securities class actions to be filed under any other law.) The Enron shareholders then appealed to the Supreme Court to try to reinstate their case.

Because this is the same law the SEC must use to regulate Wall Street participants, one would think the “Wall Street police” would object to being hamstring by this outcome. However, the politically appointed SEC commissioners now take the side of Wall Street firms rather than the investors it is designed to protect. In fact, the SEC did nothing on the Enron case until embarrassed by the press into stating it would intervene on behalf of the investors.

The SEC says it submitted documents to the Office of the U.S. Solicitor General, which speaks for the Bush administration before the Supreme Court. However, the Solicitor General’s office says it did not accept the SEC's position and instead allowed the deadline to pass for filing legal briefs in the case. That decision came after both President Bush and Treasury Secretary Henry Paulson said that if the Enron shareholders were allowed to win this would put U.S. companies at a disadvantage to foreign rivals and expose businesses to liability for fraud.

Shocked by the situation, a bipartisan group of former SEC leaders, including former SEC Chairmen William H. Donaldson (R) and Arthur Levitt (D), and former SEC Commissioner Harvey J. Goldschmid (D), have now asked the Supreme Court for permission to submit their own post-deadline brief on behalf of the Enron shareholders calling this a "critical" case.

"Holding liable wrongdoers who actively engage in fraudulent contact that lacks a legitimate business purpose does not hinder, but rather enhances, the integrity of our markets and our economy," wrote their lawyers, New York University law professor Arthur R. Miller and former SEC lawyer Meyer Eisenberg. "We believe that the integrity of our markets is their strength."

Federal Prosecutors in the Bush Administration also seek to put the Enron shareholders' lead attorney in jail and recently indicted his former firm and law partners.

Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against investment firms. If they fail in their appeal, we plan to represent many of the Enron shareholders in individual claims against Merrill Lynch and others. To learn whether we can assist you in a claim contact us to arrange a free confidential consultation with one of our attorneys.

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Posted In: Class Action Lawsuits , Enron , SEC

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June 23, 2007

This Time the Feds -Not the SEC- Abandoned Enron Investors

According to reports, the SEC asked the Justice Department's Office of the Solicitor General to file an amicus curiae (friend of the court) brief to U.S. Supreme Court in support of the Enron investors' position in a seminal case involving "scheme liability" under a key provision of the federal securities law.

However, lawyers for the Justice Department failed to honor the SEC's request. After the deadline for such briefs was missed, a spokesman for the U. S. Solicitor General's Office confirmed that the brief was not filed, while declining to say "whether or when we would file something in the future."

The case, which has wound its way to the U.S. Supreme Court, was filed against Wall Street banks and brokerage firms for their alleged roles in assisting Enron to defraud its shareholders. Trial was eminent in a Houston Federal Court when a Court of Appeals in New Orleans intervened and said the Securities Exchange Act does not allow such claims. (Congress has forbid all class action claims by investors except under the federal securities laws.)

A high-profile lawyer for the Enron Shareholders publically called-out the SEC Chairman, who is a former U.S. Congressman and political appointee, to intervene in the case to protect investors. The SEC then suprised some by indicated it would take the investor's side before the Supreme Court. However, Wall Street got its way in the end, as no action was taken to assist the victims.

Others have filed amicus briefs on behalf of the Enron Victims, including The North American Securities Administrators Association, an organization of state securities regulators, warning that letting Wall Street firms off-the-hook for their role in scandals such as the Enron debacle will endorse their assistance of other companies to defraud investors.

The SEC said it had no comment on OSG's decision not to file a brief supporting the plaintiff investors' position. It appears that the SEC and Justice Department may be operating as a "tag team" in protecting Wall Street from liability for securities fraud rather than protecting investors.

Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against investment firms. To learn whether our firm can assist you or your firm, contact us to arrange a free confidential consultation with one of our attorneys.

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May 14, 2007

Coalition of Former Enron Shareholders Asks the SEC for Help In Holding Banks Accountable for Their Role in Enron’s Fraud Scheme

A coalition of consumer and labor groups that are plaintiffs in the shareholder litigation against Enron Corp. say that they are asking the Securities and Exchange Commission to talk to the U.S. Supreme Court on their behalf.

The University of California is a lead plaintiff in the case, and its attorney, Christopher Patti, says the shareholders deserve to have their case presented during trial before the Supreme Court. He also said that he felt that the law was broad enough so that parties, such as financial institutions that were active, key, and consenting participants in the Enron fraud case and had intentionally engaged in deceptive conduct to purposely mislead investors, could be included.

On May 8, a group of Enron shareholders that claim that the energy trading giant allegedly defrauded them sent a letter to the SEC asking it to file an amicus brief with the high court explaining why banks and other parties took part in Enron’s fraudulent scheme and should be held accountable.

On March 19, the U.S. Court of Appeals for the Fifth Circuit had reversed an earlier court ruling, concluding that even though Enron had a responsibility to shareholders for the fraud scandal, banks did not. It is this case that shareholders have asked the Supreme Court to review.

Also, in March, the Supreme Court agreed to take a look at a federal appeals court’s ruling that equipment vendors to cable television provider Charter Communications could not be held responsible for their alleged roles in Charter Communication’s alleged fraud scheme to make its financial performance seem better than it actually was. In this case, the U.S. Court of Appeals for the Eight Circuit decided that the vendors had—at the most—aided and abetted the violations.

Patti says the plaintiffs are encouraging the SEC to join them in asking for “their day in court.”

SEC Chairman Christopher Cox has stated that investors have a right, through the judicial process, to recover their losses.

Shepherd Smith and Edwards has an excellent track record for helping their investor clients recover their losses resulting from the inappropriate actions of members of the securities industry. To schedule your free consultation with one of our attorneys, call us at 1-800-259-9010 or contact Shepherd Smith and Edwards online.

It will be interesting to learn whether the SEC will continue to represent the Wall Street special interests by taking yet another a legal position against investors. By taking positions against the very investors it is charted to protect, the SEC encouraged the courts to side with white collar criminal. This further guts the SEC of its own regulatory powers. The position taken by the SEC in this Enron case can become a defining moment to determine whether the SEC is only a “Fox” in charge of the henhouse or whether the SEC “Fox” is actually going to publicly eat the chickens.

Related Web Resources:

Regents of University of California v. Credit Suisse First Boston (USA) (PDF)

Stoneridge Investment Partners LLC v. Scientific Atlanta Inc., (PDF)

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April 12, 2007

Enron Shareholders Want The U.S. Supreme Court to Review 5th Circuit Certification Decision

The Enron Corp. shareholders that are suing three big investment banks for their alleged roles in helping Enron hide its failing financial position have petitioned the U.S. Supreme Court to look at a ruling made by the U.S. Court of Appeals for the Fifth Circuit that reverses the certification of a single plaintiff case. The court had ruled on March 19 that while Enron had a duty to its shareholders, banks do not.

The appeals court concluded that the plaintiffs did not have a right to a presumption of reliance on the banks’ failure to reveal their alleged participation in the Enron controversy. It also ruled that the plaintiffs do not have a right to the presumption of reliance afforded by the “fraud-on-the-market” concept.

In their certiorari petition, filed by the University of California Regents on behalf of Enron shareholders, the plaintiffs say that the Supreme Court needs to review the case to resolve a “clear conflict” in the circuits and lower courts about the meaning of so-called “scheme liability.” They also said that the appeals court decision was not correct.

UC General Counsel Charles Robinson issued a statement saying that Enron shareholders were entitled to present their case at trial and that the plaintiffs believed the law was broad enough to include parties that engaged in deceptive conduct to purposely mislead investors.

Plaintiffs’ counsel William Lerach said that investment banks should be held accountable and that the fifth court’s ruling give other corporations permission to “commit fraud without consequences,” leaving investors without recourse.

Investors represented by the UC Regents include the Washington State Investment Board and the San Francisco City and County Retirement System. Defendants in the petition include Credit Suisse First Boston LLC, Pershing LLC, Merrill Lynch Pierce Fenner & Smith Inc., Credit Suisse First Boston (USA) Inc., Merrill Lynch & Co., Barclays Capital Inc., Barclays Bank PLC, and Barclays PLC.

Because of the Enron scandal, the university pension fund lost over $144 million. It oversees $71.5 billion in assets.

Shepherd Smith and Edwards represents investors who have lost money because of the inappropriate conduct and actions of members of the securities industry. If you are one of those investors, please contact Shepherd Smith and Edwards today for your free consultation.

University urges Enron class-action be reinstated, Pensions and Investments, April 5, 2007

Related Web Resources:

Enron

Enron on Trial, CNN.com

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March 30, 2007

SEC Charges Two Former In-House Enron Attorneys With Violating Securities Laws

The U.S. Securities and Exchange Commission filed a complaint on Wednesday against Rex Rogers, the former associate general counsel at Enron, and Jordan Mintz, the former general counsel for Enron’s finance group, with civil violations of securities laws because of omitting or fudging regulatory filing disclosures.

The SEC alleges that Mintz engaged in fraud by arranging the murky disclosure of Enron’s repurchasing of a power plant in Brazil from an LJM partnership that was run by former Enron finance chief Andrew Fastow. The SEC claims that Mintz knew that LJM had bought the plant with the understanding that it would sell it back to Enron and that this wiped out the sale’s legitimacy.

Mintz is also accused of delaying the closure of the resale for a number of months until after Fastow had sold his interest in LJM Partnerships so that Enron wouldn’t have to reveal that the deal was done with an Enron officer. Rogers is also being charged with not disclosing all the details of this deal.

The Commission also says that Rogers did not properly or fully disclose to investors the information that former Enron chairperson Ken Lay had resold over $86 million in Enron stock to Enron in 2000 and 2001 to pay back company loans. Rogers allegedly was the person who supervised the content of Enron’s SEC filings.

Enron’s Board had given Lay permission to acquire from Enron up to $4 million on more than one occasion and pay those loans back with company stock. Lay paid back $16 million in stock in 2000 and over $70 million in shares in 2001. At this time, Enron was falling into bankruptcy.

Although stock sales back to the company were supposed to be disclosed, Rogers approved a proxy statement saying only that Lay’s $4 million credit line was fully paid. The SEC says that each sale involving Lay should have been disclosed.

During his conspiracy and fraud trial last year, Lay testified that Rogers had advised him regarding these disclosures. Lay passed away last July, less than two months after being found guilty of fraud and conspiracy on multiple counts.

According to former Enron prosecutor John Hueston, the Enron board was shocked when they found out about the sales.

The SEC says that the attorneys used their legal expertise to “aid and abet” the massive fraud by Enron. Lawyers for both men say that their clients are not guilty of the alleged violations.

The SEC is seeking, as punishment, prohibition against serving as an officer in a publicly traded company, as well as fines. If convicted, the Texas Bar Association could also impose penalties on the two men.

If you are a victim of investor fraud and you have lost your investment as a result, please contact the law firm of Shepherd Smith and Edwards. We have helped thousands of investors in cities across the United States, including Dallas, New York, San Francisco, Chicago, Phoenix, and New Orleans, recover their losses. Contact Shepherd Smith and Edwards for your free consultation.

SEC goes after lawyers, Chron.com, March 29, 2007

Related Resources:

SEC Charges Two Former Enron In-House Lawyers With Securities Fraud And Related Violations, SEC.gov, March 28, 2007

The Enron Trials, An Enron Chronology, USA Today, January 30, 2006

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March 28, 2007

Enron Litigation Continues With Actions by Stockholders and Regulators of Accounts.

As class actions against investment firms face dismissal, attorneys for investors plan to go forward with claims for individual shareholders against those same firms. After the U. S. Court of Appeals for the Fifth Circuit decided that cases in Houston against Merrill Lynch and other investment banking firms could not go forward as class actions, the door was left open for victims of Enron stock fraud to file their own claims in court or arbitration against these investment firms.

The class actions stopped the clock for filing individual claims against the defendants until appeals are completed. Also, through the class actions substantial information was learned regarding the role of these investment firms in the Enron debacle.

Meanwhile, that same Court of Appeals affirmed a district court's order allowing Texas accounting regulators to gain access to confidential discovery material in the Enron Corp. shareholder litigation (Newby v. Enron Corp., 5th Cir., No. 05-20462, 3/16/06). The massive amounts of discovery material related to the Enron litigation led to a stipulation by parties that discovery be housed on a Web site. The district court overseeing the litigation issued a confidentiality order covering the deposition transcripts and other material, barring disclosure except to parties, their counsel, witnesses, a depository administrator, a court-appointed mediator, and a few others.

The board, which licenses and disciplines CPAs in the state, sought permissive intervention in the Enron litigation as a way of gaining access to materials protected by the district court order. It sought the materials as part of its investigation of suspected audit failures that may have contributed to Enron's collapse and bankruptcy and potential misconduct by CPAs licensed in Texas. The district court then allowed access by the accountants' board and the appelate court upheld that order.

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Posted In: Class Action Lawsuits , Enron , Investor Fraud , Merrill Lynch

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Stock Broker Fraud Blog

Published by Houston Securities Fraud Lawyers Shepherd Smith & Edwards

Loss on Enron, Worldcom, etc.? It May Not Be Too Late!

Enron Victims, Now Victims of Their Own Government, Finally Find Friends in Former Regulators

This Time the Feds -Not the SEC- Abandoned Enron Investors

Coalition of Former Enron Shareholders Asks the SEC for Help In Holding Banks Accountable for Their Role in Enron’s Fraud Scheme

Enron Shareholders Want The U.S. Supreme Court to Review 5th Circuit Certification Decision

SEC Charges Two Former In-House Enron Attorneys With Violating Securities Laws

Enron Litigation Continues With Actions by Stockholders and Regulators of Accounts.

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