Lawyers Debate Effect of New Securities Fraud Law

Article excerpt

The legislation adopted by Congress Friday over President Bill Clinton's veto will take control of securities-fraud cases out of the hands of the trial lawyers who were the bill's most vociferous opponents.

But the new law is likely to have less impact than last week's heated debate suggested, securities lawyers said. They predicted the measure will neither end all frivolous lawsuits - as backers of the bill promised - nor make it impossible for investors to win damages in court - as its foes warned.

Further, the bill limits only federal suits, the lawyers noted. Many securities-fraud suits are filed under state laws.

John Olson, a partner in the Washington law firm of Gibson, Dunn & Crutcher, said the law, most of which takes effect immediately, "isn't going to change the world as much as either the opponents or the proponents are saying."

David G. Keyko of New York's Winthrop, Stimson, Putnam & Roberts agreed. "The ultimate impact will be far less than envisioned," he said.

But the measure continued to draw harsh criticism from the consumer groups, state regulators and legal scholars who helped persuade Clinton to veto it - only to have his veto overridden.

Howard Metzenbaum, a former Democratic senator from Ohio, said,

"In overriding the president's veto, Congress sold out the small investor in order to satisfy a handful of powerful special-interest groups." He is now chairman of the Consumer Federation of America. "The securities industry, accountants and corporate insiders" will be the primary beneficiaries, Metzenbaum said.

Accountants - who paid hundreds of millions of dollars to settle lawsuits over the failure of savings associations they had audited - were one of two big industry groups that pushed the measure through Congress. …