New York Judge To Hear Test Cases In IPO Wrangle

by Glen Shapiro, LawAndTax-News.com, New York

15 July 2003

Southern District of New York judge, Shira Scheindlin has told lawyers for 55 securities firms and the investors involved in litigation over Wall Street manipulation of initial public offerings to have between ten and twenty test cases ready by January 2004.

According to the New York Law Journal, Judge Scheindlin will hear the focus cases 'as a precursor to a possible settlement of sweeping allegations concerning initial public stock offerings for 309 companies between January 1998 and December 2000.'

The defendants stand accused of having committed securities fraud during the IPOs in question by establishing deals with key clients to buy new stock at increasingly higher prices, a practice known as laddering.

The NYLJ went on to reveal that:

'In addition to laddering, the lawsuits charge that the firms labored under conflicts of interest and concealed extra compensation that they received from clients awarded shares in hot offerings.'

Last month, the 309 issuing firms implicated in the cases reached a partial settlement agreement with lawyers representing investors, setting a $1 billion floor on investor recovery, and transferring any claims that the firms may have had against the investment banks to investors.

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