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Settlement amounts in securities class actions hit a record high in 2004, totaling $5.5 billion in 118 cases, according to a new national survey. The amounts are up from just above $2 billion in total settlement amounts and 96 total cases in 2003, according to Cornerstone Research, a national economic consulting firm that conducts the annual study. For the seventh consecutive year, the average estimated damages increased, this year by more than 45%. Seven cases settled for more than $100 million in 2004, the first year with that many cases of such size. “Corporate fraud is here to stay,” asserted Max Berger, the head of the litigation practice at New York’s Bernstein Litowitz Berger & Grossman. “It just seems like no matter what the law is, that there are those who are constantly looking for ways to steal investors’ money. Greed is palpable in public companies and in those who advise them, so there’s no letup.” A reason for the jump in settlement amounts is the significant market decline in 2000, said Laura Simmons, a co-author of the study. Numerous cases were filed that year due to market losses, and cases tend to settle about three years after they are filed, she said. Securities class action defense attorney Jonathan Lerner pointed out that the WorldCom case was settled for $2.6 billion in 2004, which could have caused a statistical aberration. “Year to year is a difficult way to measure a trend,” said Lerner, a partner in Skadden, Arps, Slate, Meagher & Flom’s New York office. The rise in cases settled may be due to a willingness to settle by defense counsel, Lerner added. “There’s a recognition by the defense bar that to defend securities litigation is tough, and that makes a willingness to settle cases, even if it means more money,” Lerner said. Plaintiffs’ attorney Melvyn Weiss of New York’s Milberg Weiss Bershad & Schulman, said that the large settlements are not necessarily a trend, but part of a temporary uptick. “I think the spike will continue for at least a year or two because of the residue of litigation that stemmed from the period where the abuses by corporate America reached record heights, so as a result you have in the mainstream still pending litigation,” Weiss said. “You also have the historic anomaly of having so many Fortune 500 companies being sued,” he said. The increased involvement of institutional investors as lead plaintiffs is also a factor, he added. According to the study, cases where institutional investors were lead plaintiffs had an increased likelihood of a higher settlement amount.

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