On Friday, US District Judge Melinda Harmon chose the University of California system to represent the interests of all shareholders – both institutional and individual – in the case. The UC system lost roughly $145 million across all its portfolios – roughly 0.30% of the university’s total investment funds of some $54 billion at November 30.
The suit is seeking $1.1 billion gained by current and former Enron executives and directors who sold stock from October 1998 through November last year.
Lead plaintiff status is much sought after in class-action cases, because it allows one plaintiff to manage and coordinate the litigation on behalf of all other plaintiffs. While the lead plaintiff collects no more than it would be otherwise entitled to, the lead plaintiff’s lawyers stand to profit handsomely from their representation of the entire class.
Milberg Weiss Bershad Hynes & Lerach LLP, a firm that specializes in representing institutional investors damaged by corporate malfeasance, securities fraud and insider trading, represents UC.
California beat out two other groups of government pension and investment funds that sought lead plaintiff status: a group including Florida and the City of New York – both of which lost more money than the Golden State.
They also beat out a four-state group consisting of Ohio, Washington, Georgia and Alabama.
The suit, currently pending in the U.S. District Court for the Southern District of Texas in Houston, alleges that purchasers of Enron securities between October 19, 1998, and November 27, 2001, were the victims of a ‘fraudulent scheme’ as a result of the dissemination of false financial statements, which artificially inflated the price of Enron securities. The suit alleges that inflation allowed defendants to engage in $1.1 billion of illegal insider trading.
The original class-action fraud case was filed in Houston on behalf of Amalgamated and several investment funds just days after Enron filed for bankruptcy on December 2.
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