NEW YORK-Perception equals reality for those who believe federal class-action securities fraud
cases are filed almost daily against publicly traded companies.
Last year’s tally of 235 companies named as
defendants in this kind of lawsuit broke the prior record of 227 set in 1994, according to the Stanford Securities Class
Action Clearinghouse.
“People frequently ask why the Private Securities Litigation Reform Act of 1995 has
not reduced the volume of litigation. (There are) dramatically different answers … depending on whether you pose [this
question] to plaintiffs or defendants,” said Joseph A. Grundfest, a Stanford University professor and former
Securities and Exchange Commissioner.
Grundfest, who is principal investigator for the clearinghouse, added,
“Plaintiffs claim fraud is common in today’s stock market and point to many examples of accounting restatements
and trading by corporate insiders while a fraud was allegedly alive in the market.
“Defendants claim that
honest conduct in volatile markets often is mistaken for fraud and that some courts have failed to implement the reform
act properly because they don’t subject plaintiffs’ complaints to sufficiently searching scrutiny.”
Since the
1995 federal law went into effect, at least 540 companies have been the subject of class-action shareholder lawsuits in
federal courts, according to the Stanford Clearinghouse. High-technology companies are the most frequent targets of
such charges, 59 percent of which allege accounting fraud and 55 percent insider sales of stock.
In the wireless
industry, corporate defendants in these kinds of lawsuits last year included: Alcatel, a Richardson, Texas, network
infrastructure supplier; AML Communications Inc., a Camarillo, Calif., developer of multicarrier and masthead
amplifiers; Anadigics Inc., a Warren, N.J., manufacturer of Gallium Arsenide semiconductor chips; Digital Lightwave
Inc., a Clearwater, Fla., manufacturer of telecommunications network performance measurement technology; Let’s Talk
Cellular & Wireless Inc., a Miami retailer of wireless products and services; Premiere Technologies Inc., an Atlanta
supplier of enhanced services for paging and other carriers; Spectrian Inc., a Sunnyvale, Calif., manufacturer of ultra-
linear, radio-frequency power amplifiers; Telephone and Data Systems Inc., a Chicago-based carrier; Transcrypt
International Inc., a Lincoln, Neb., manufacturer of wireless information security and land mobile radio products; and
Ultralife Batteries Inc., a Newark, N.J., manufacturer of lithium-ion solid-polymer rechargeable batteries.
Another
1998 shareholder-lawsuit target is Columbus, Ohio, prepaid calling card provider SmartTalk Teleservices Inc. It filed
for Chapter 11 bankruptcy protection sometime before AT&T Corp. announced in late January it was buying the
company.
SmartTalk announced Jan. 29 the departures of Erich Spangenberg, chief executive officer, and Jeff
Lindauer, president and chief operating officer. The company said Spangenberg would remain on the board of
directors.
World Access Inc., an Atlanta developer of switching, transport and access products, is the subject of
several shareholder lawsuits filed in January of this year in connection with its recent mergers with both Telco Systems
Inc. and NACT Communications Inc.
“We regard the claims made by the recent class-action suits filings
implicating fraud as frivolous, groundless and totally without merit,” said World Access John D. Phillips,
president and chief executive officer.
Citing the Stanford Clearinghouse report on 1998 shareholder-lawsuit activity,
Phillips continued, “These events have become (as) common as filing a tax return … Plaintiff lawyers are
utilizing the wire services as a form of advertisement as they compete for the court’s permission to become the lead
attorney in these types of class-action suits.
“We have every reason to believe that these lawsuits represent the
very type of shareholder strike suits that Congress has recognized as abusive.”
Phillips issued these remarks in
connection with a company announcement that it knows of no reason for “the recent decline in its stock
price.”
World Access said it will announce fourth-quarter results Feb. 11.
