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With the recent prosecution of prominent plaintiffs’ attorneys, and with the Stoneridge case now pending before the U.S. Supreme Court, the securities fraud class action has come under a lot of scrutiny in the press and the blogosphere. Some commentators have used these events as a springboard to argue that such cases are often fraudulently brought and have the chief consequence of disrupting U.S. markets. But the recent indictment of Melvyn Weiss and guilty plea of William Lerach do not demonstrate that securities fraud litigation is itself often fraudulent. The crimes or alleged crimes at issue have to do with the race to become lead counsel in certain cases, not the underlying merits of the cases themselves. Other law firms, not the defendants, were the injured parties. While the class action process is not a perfect system, it represents the only way many defrauded investors can recoup their losses. Defendant corporations may be entitled to force plaintiffs to make a better showing of loss causation than past case law has required, but plaintiffs are surely entitled to seek restitution from corporations whose fraudulent actions caused them losses � as well as from other actors, such as banks and accountants, when they join in the fraud. Moreover, such suits may well have a salutary effect on the markets by deterring fraud.

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