Academic journal article Journal of Accountancy
Litigation Reform Bills Introduced; Drive for Passage Builds
LITIGATION REFORM BILLS INTRODUCED; DRIVE FOR PASSAGE BUILDS
With the strong backing of over 300 organizations, including the American Institute of CPAs, securities litigation reform legislation was introduced in the House and Senate. Although not passed before Congress adjourned, the legislation will be reintroduced next year.
The Securities Private Enforce - Senator Pete Domenici and Congressman "Billy" Tauzin the bipartisan sponsors of the bills. ment Act (S 3181 and HR 5828) would require judgments against codefendants to be based on their proportionate contributions to claimed losses rather than on their ability to pay most or all of the entire judgments. Plaintiffs and attorneys would pay defendants' legal fees if their allegations are deemed meritless, under certain circumstances.
This, sponsors say, would eliminate abusive, meritless litigation associated with securities fraud.
"There is something wrong when accountants are paying more in legal fees than any other expense except salaries," said Senator Pete Domenici (R-N. M. ) who introduced the bipartisan bill with Senator Terry Sanford (D-N.C.).
"There is something wrong when real victims of fraud receive as little as five cents for every dollar of the loss and the lawyers receive the lion's share of any settlement," Domenici added.
"Defendants must be given incentives to fight unjustified claims and settle only meritorious ones," said Congressman W.J. "Billy" Tauzin (D-La.), who cosponsored the House version along with Congressmen Ralph Hall (D-Tex.), Norman Lent (R-N.Y.), Don Ritter (R-Pa.), Dan Burton (R-N.J.), Clay Shaw (R-Fla.), Dan Glickman (DKan.), Alex McMillan (R-N.C.), Andrew Jacobs (D-Ind.) and G.V. (Sonny) Montgomery (D-Miss.).
AICPA support. Securities litigation reform is strongly supported by independent auditors, investment bankers and others often named as codefendants. "Proportionality is especially welcomed by the accounting profession and others who are sued only because they are deep pockets," commented Philip B. …