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| World Home » Business » | Mon. Oct 6, 2008 |
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US Supreme Court gave a blow to investors MIL/NYT, Jun 22, 2007. IRS/Stephen Labaton Washington: June 22, 2007 (Friday) - The Supreme Court on Thursday gave a big blow to the investors who just want to sue companies and executives because of their suspected fraud. The decision was the second one this week by the court that was a defeat for shareholders and a victory for the defendant companies. On Monday, the justices ruled that securities underwriters on Wall Street are generally immune from civil antitrust lawsuits. It came as senior officials, led by Treasury Secretary Henry M Paulson Jr., have been pushing for limits on shareholder lawsuits. Mr. Paulson, along with other administration officials and some senior lawmakers, have maintained that such lawsuits and regulations, written in the aftermath of corporate scandals like those involving Enron and WorldCom, may be discouraging investment and causing too many companies to look overseas to raise capital. With only 18 months left until President Bush leaves the White House — and even less time for contentious policy issues to make their way through a capital that is preparing for elections — corporations and political supporters of the administration are pressing for a relaxation of some of those regulations and new restrictions on lawsuits. The court on Thursday waded into the debate on the defendants’ side. By a vote of 8 to 1, it said that investors must show “cogent and compelling” evidence of intent to defraud — a standard that makes it easier for companies and their executives to get shareholder complaints dismissed. The appeal involved a securities fraud complaint against Tellabs Inc., a maker of equipment for fiber optic networks, for financial statements made by senior executives that turned out to be overly optimistic. Investors accused the company and top executives, including Richard C. Notebaert, then the chief executive, of overstating projections of revenues and demand for products. A federal appeals court in Chicago said cases should go to trial if “a reasonable person could infer that the defendant acted with the required intent.” But the Supreme Court ruling said the bar should be higher. The decision was hailed by business groups and defense lawyers, although it did not go as far as some businesses had wanted.
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