A Link Between Bernie Madoff and Class Action Plaintiffs?

One of the stranger elements of the Bernie Madoff mishegas emerged today in a post on the Overlawyered blog: the presence of people affiliated with class action law firms on the list of Madoff victims.

In addition to persons tied to class action lawyers at Milberg Weiss, Wolf Popper and Wolf Haldenstein,

[Securities lawyer Howard] Sirota believes that other persons and entities on the Madoff victims list have also served as lead plaintiffs in securities litigation or as plaintiffs in other litigation handled by class-action firms. All of which could be mere coincidence, or could suggest that either Madoff himself or others in his circle might have played some role in funneling lead plaintiffs to the class-action bar.

I don't share Overlawyered's anti-class action zeal, though I do feel that these suits yield little for investors. But there is something a bit fishy, or at least ironic, about the presence of people from class action firms on this list. If class action plaintiffs are on the list, that is a lead that the feds need to pursue.

© 2009 Gary Weiss. All rights reserved.

A Second Supreme Court Assault on Shareholders

The media today was alive with coverage of the Supreme Court decision on class action suits, and it even warranted the front-page lead in the New York Times. This was a bad decision, the second "drop dead" to investors from the Supremes in the past few days.

The high court ruling gave a ridiculously strict interpretation to the Private Securities Liitigation Reform Act 1995. This law requires that plaintiffs to demonstrate intention to deceive or "scienter." The law requires that the plaintiffs show a "strong inference" that the defendant "acted with the required state of mind."

The Wall Street Journal observed:

In her written opinion, Justice Ginsberg defined a new, stricter test to assess the viability of shareholder suits. The trial judge must "consider the complaint in its entirety," Justice Ginsburg wrote, specifically, "whether all of the facts alleged, taken collectively, give rise to a strong inference of scienter," or the intention to deceive. The judge must also consider "plausible opposing inferences," she wrote.

The effect of this will, of course, make it a lot tougher to bring class action suits. Putting aside the fundamental problem with class actions -- which is that they benefit the lawyers a heck of a lot more than investors -- what this means is that corporations have one less restraint against bad CEOs and bad companies.

That, added to a milquetoast SEC, means that Enron and the other corporate scandals of a few years back are a declining memory. It is business as usual in Washington, in its bear hug of Corporate America.

© 2007 Gary Weiss. All rights reserved.

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