Blog: Spirit of Money, Financial Fluidity
by munificent

Investor Lawsuits

According to the investors that are suing based on research that was printed before the true state of affairs at Enron was revealed..are not winning their cases or if they are they are not being compensated at the tune of the losses...

Hmmm, now that the initial outrage and flack has died down-

Of course "firm" employed economists can easily claim they were mislead by Enron's duplicity and be telling the truth- so this make sense. I want to know what the employees are really getting out of their pension- are their lawsuits successful? And where will the settlement come from - The Board of Directors personal bank accounts? The real story lies in the fiduciary responsiblilty of the board- how many people directly involved can truthfully say "I didn't know it was so-in-so's fault" and can the Board be indemnified against fiduciary responsibility?

Date:   12/8/2005 11:48:11 AM   ( 16 y ) ... viewed 1373 times

Citigroup Wins WorldCom Arbitration

Individual investor claimed he relied on Jack Grubman's research reports; had sought $900 million.

Stephen Taub,
December 08, 2005

Score one for Citigroup Inc. and Wall Street. A three-person arbitration panel of the National Association of Securities Dealers rejected the claim of an investor that he should be compensated for holding on to nearly 21 million shares of WorldCom on the advice of former Citigroup telecom analyst Jack Grubman, according to The Wall Street Journal.

The wealthy 73-year-old investor, Donald Sturm, reportedly asserted that he had acquired his stake in WorldCom — worth $1.29 billion at its peak — in 1996, when the telecom giant bought a company in which Sturm held a large interest. After WorldCom (now MCI Inc.) filed for bankruptcy, its common stock was deemed worthless. Sturm reportedly sought $900 million from Citigroup.

In 2003, Grubman, without admitting or denying wrongdoing, agreed to a huge fine and a permanent bar from the securities industry for issuing allegedly fraudulent research, but not on WorldCom, the Journal pointed out. According to the newspaper, Sturm claimed he relied on Grubman's research reports and had "direct access" with the analyst, who he asserts personally influenced his decision to do business with Citigroup; Sturm also asserted that the research was flawed.

The Journal noted that the ability to prove reasonable reliance would have been crucial to Sturm's argument. For its part, Citigroup reportedly argued that Sturm was a sophisticated investor with many advisors of his own.

Like all securities-arbitration hearings, this case was conducted privately, according to the newspaper, and the NASD panel didn't release the specific reasons for its ruling. And unlike court decisions, the paper added, the results of arbitration don't set precedents.

Citing plaintiffs' lawyers and executives, however, the Journal did note that Wall Street seems to be winning many more research-related cases than it is losing. Several months ago, for example, about 300 investor claims against Merrill Lynch & Co. were settled for about 3 cents on the dollar.

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