Senate Votes to Protect Securities Fraud Lawsuits : Legislation: The claims seek billions of dollars and could have been thrown out because of a recent Supreme Court ruling.

The Senate voted Thursday to protect securities fraud lawsuits seeking billions of dollars, responding to warnings that the claims could be thrown out because of a recent Supreme Court ruling.

But at the same time, senators voted not to extend the time limits on such suits.

The measure, an amendment to bank reform legislation, comes after the Supreme Court ruled in June that investors must file suit within a year of discovering that they were defrauded, or within three years of the time the wrongdoing was committed.

The ruling set the time limits retroactively, so that pending lawsuits could be dismissed.

Critics of the decision said suits totaling more than $650 million have been dismissed as a result of the Lampf vs. Gilbertson case.

They also said motions to dismiss more than $4 billion in suits are pending, including those against Michael Milken, Charles Keating and other figures in recent financial scandals.

Thursday’s action, which was taken in a voice vote, represents a compromise among critics and backers of the high court’s decision.

Sen. Richard Bryan (D-Nev.) wanted to extend the time period for filing suits. But corporations, securities firms, banks and accountants are opposed to extending the limits, warning that it could trigger a slew of frivolous cases.

The Bush Administration said it would support the Bryan bill--but only if steps are also taken to curb “meritless” actions.

Critics charge that the Administration’s suggestions for curbing frivolous suits would discourage legitimate suits as well as meritless ones.

Bryan and Sen. Pete Dominici (R-N.M.) said they would continue work on a broader bill next year.

The Securities and Exchange Commission, state securities regulators and investor groups supported the original Bryan bill.

“Under the rule established in the Lampf vs. Gilbertson decision, by the time investors discover they are the victims of a fraud, they will often already be barred from bringing an action,” SEC Chairman Richard Breeden told a House Energy and Commerce subcommittee hearing.

“That would create an incentive for the perpetrators of fraud simply to work harder to conceal their actions to get beyond the three-year outer limit for a lawsuit,” he said.

Breeden said if the decision was applied retroactively, it would give many fraud defendants “windfall immunity”--including Milken, now serving a 10-year prison sentence for multiple fraud convictions.

Breeden said any legislation should also discourage unjustified or meritless lawsuits.