Washington – U.S. Senator Arlen Specter introduced legislation to let investors sue law firms, accountants and investment banks that helped perpetrate fraud, seeking to overcome recent Supreme Court limits on such cases.
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The measure would make individuals or firms that provide “substantial assistance” in a fraud subject to investor lawsuits, Specter, a Pennsylvania Democrat, said on the Senate floor last week. The Supreme Court has decided two cases since 1994 that restrict investors from recouping losses from fraud accomplices. The House isn’t considering similar legislation.
“It would be an appropriate change,” said Donald Langevoort, a securities law professor at Georgetown University. “Secondary actors who play a big enough role in perpetrating a fraud should bear responsibility just like anyone else and shouldn’t be able to hide.”
Shareholders are barred from suing parties that have only an indirect role in a fraud after Supreme Court decisions that limited liability to those directly and publicly involved in the scheme. The Specter measure would upend rulings in Stoneridge Investment Partners LLC v. Scientific-Atlanta Inc. of 2008 and Central Bank of Denver v. First Interstate Bank of Denver.
Prior to the rulings, investor lawsuits against fraud accomplices were common, Langevoort said. The 1994 Central Bank decision was a “major gift” to individuals and corporations that aided in a fraud, he said.
“There’s not going to be any real functional limit to who they could go after,” said Matthew Webb, senior vice president for legal reform policy at the U.S. Chamber of Commerce Institute for Legal Reform. The bill may spur lawsuits, he said.
How about a law to sue the Gov’t when the SEC is asleep at the wheel?
Specter is a lawyer so of course he helps out his friends by making it easier to sue. What good this does for the rest of the country escapes me.
I Won a case that was 17 years old, ( jury Trial- $1.6 Million verdict ) and it was overturned on appeal ref: Central bank. Although I was right, and a jury agreed
that ancient ( 1934 ) law took my money away. So less for all those Mosdos, and Kollelim but who knows what the RS”O has in mind. Got job Arlen, but you turncoat will surely lose next fall ( I Hope )
It can’t help any Madoff investor’s unless they decide to amend the constitutions ex-post-facto-clause.
Spector knows a lot about fraud like getting elected as a rebublican and the for his own benefit switching to the democrats while his majority voter base was left behind
Yes, what we need is vague legislation which can potentially incriminate anyone who shared a coffee with a clerk of any conglomerate under investigation. That way, with this new law coupled and the patriot act together, the government will finally have cause to arrest whomever they want. G-d Save the King!