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If you’re a corporate executive, U.S. District Judge William Alsup may be your worst nightmare. Through a series of increasingly striking orders, Alsup has made it known that he is hellbent on making crooked executives who benefit from corporate fraud pay, even if it means raiding their personal assets. “Are there any individual defendants in this case?” Alsup asked plaintiffs lawyers at one recent hearing for In re NorthPoint Securities Litigation, 01-1473. “Well, there will be no settlement approved in this case until you depose every one of them, and I don’t mean just taking declarations. You have to depose them, find out where their houses are, their cars, their bank accounts, everything they’ve got that can be used to respond to a judgment.” Alsup may be intent on cleaning up Silicon Valley. But whether finding all the information he can about personal assets before approving a settlement hurts or helps investors who’ve lost money is a different question. The crusade pre-dates many of the recent accounting scandals. Less than a year ago, he suggested that executives be held responsible in a separate case. “Arguably,” he wrote in an order for In re Commtouch Securities Litigation, 01-0719, “they should contribute to a settlement from their own private resources where the [insurance] is inadequate or has been depleted.” Now he is more decisive. “You know,” he said on July 18, “I have learned, from looking at the news for the last six months, that there ought to be some accountability. If somebody wants to serve as an officer or director, then they’re putting their net assets on the line as far as I’m concerned. “The day of not investigating individual assets in an era where the CEOs have bank accounts in the Bahamas [is] no more.” However, both defense and plaintiffs attorneys have reason to cringe about going after executive assets. For one thing, it could make defendants dig in. It’s hard to imagine an executive voluntarily pitching in a yacht and beach house to the settlement fund. Furthermore, if executives refuse to pay once the case is settled, plaintiffs will have to spend more trying to collect the judgment. On the other hand, few executives would be willing to risk a trial during the current anti-corporate fraud climate, which will strengthen plaintiffs’ negotiating position, securities fraud lawyers say. A possible outcome is the elimination of individual defendants from fraud complaints. “Other than egregious frauds, you’re not going to see directors and officers named,” said Wilson Sonsini Goodrich & Rosati securities defense lawyer Boris Feldman. That would reverse a trend. “[Plaintiffs lawyers] have said for a while that their institutional clients have been pushing them” to sue executives, Feldman said. However, that isn’t much of an option in NorthPoint. The DSL provider filed for bankruptcy after its merger with Verizon Communications fell through following financial difficulties at NorthPoint Group Inc. (The company has since sued Verizon for $1 billion over the failed merger.) With no company assets available for investors to recover, Milberg Weiss Bershad Hynes & Lerach sued former NorthPoint CEO Elizabeth Fetter and CFO Michael Glinsky. Alsup told the firm he wants to see if individual assets could fatten what he characterized as the firm’s “low-end” settlements. Milberg Weiss partner Reed Kathrein, who represents investors in the case, was not available for comment. NorthPoint’s attorney, Jay Pomerantz, in the Palo Alto office of Latham & Watkins, declined to comment. Two plaintiffs lawyers with recent cases before Alsup offered differing views. “That’s fine with me,” said Lieff Cabraser Heimann & Bernstein partner James Finberg. “People should be held accountable for their actions.” But Berman DeValerio Pease Tabacco Burt & Pucillo partner Joseph Tabacco Jr. called it a Catch-22. “My personal view is that I’m very sympathetic to Judge Alsup’s point of view,” he said. “But that kind of rigid view, unfortunately, complicates things.” Alsup also has criticized lawyers from both sides of the bar for not only leaving too much insurance money on the settlement table, but chewing up more than their share through legal fees. In addition, he has railed against proposed settlements that come to him far below plaintiff lawyers’ initial estimates. But while pressuring plaintiffs to go for the jugular might satisfy the public’s growing bloodlust, Tabacco says that’s not his role. “I agree 100 percent. We’d love to collect as much as we can from any wrongdoers,” Tabacco said. “But that’s really a job for prosecutors and the SEC.”

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