Securities fraud class-action lawsuits filed in 2005 fell 17% to 176 cases, from 213 in 2004, according to the Stanford Law School Securities Class Action Clearinghouse and its co-sponsor, Cornerstone Research. Last year's rate also was nearly 10% below the 1996-2004 annual average of 195, a statement from the groups said.
Investor losses related to these lawsuits decreased dramatically in 2005. The clearinghouse's Disclosure Dollar Loss index was $99 billion last year, down 33% from $147 billion in 2004. The DDL index "measures the decline in the defendant firm's market capitalization at the end of the class period (usually the time of the disclosure of the alleged fraud)," the statement said.
"Two factors are likely responsible for the decline," Joseph Grundfest, Stanford Law School professor and director of the clearinghouse, said in the statement. "First, lawsuits arising from the dramatic boom and bust of U.S. equities in the late 1990s and early 2000s are now largely behind us. Second, improved governance in the wake of the Enron and WorldCom frauds may have reduced the actual incidence of fraud."