Coalition of Seniors, Unions Pushes for Veto of Fraud Bill

A coalition of senior citizens, labor groups and Democratic organizations in California appealed to President Clinton on Thursday to veto proposed legislation that would make it harder for individuals to win securities fraud lawsuits.

The legislation, which will be considered soon in a House-Senate conference, is being strongly endorsed by major accounting and brokerage firms, and by high-technology companies, particularly in California.

The letter to Clinton, signed by 622 people representing 159 organizations in California, called the legislation “the most anti-consumer, anti-senior and anti-investor financial legislation ever passed by the U.S. Congress. Now it is up to you to stop it, Mr. President.” Among the groups supporting the letter were the California Senior Legislature, the Congress of California Seniors, the Retired Public Employees Assn. of California, the California Federation of Labor, the Los Angeles County Federation of Labor, locals of several unions and the Los Angeles County Democratic Central Committee.

The Senate and House have each passed versions of the bill by veto-proof margins. “There is not a single substantive point in the letter,” said Rep. Christopher Cox (R-Newport Beach), the prime author of the bill in House.

The lawsuits, he said, are frequently examples of “extortion money paid to lawyers.” Companies settle more than 90% of the suits, rather than fight them, “because it takes seven years to go to trial and distracts the entire management,” Cox said.

Advocates of the bill say it will give much-needed protection to high-technology companies, whose stock prices are particularly volatile because of the unpredictable nature of product development costs and highly variable sales.

A survey of the 150 largest firms in Silicon Valley found that more than 53% of the companies have been hit with lawsuits claiming securities fraud, said Kenneth Glueck, Washington vice president for the American Electronics Assn.

“Anyone who says there is not a problem with frivolous suits should look at the numbers,” he said.

Key provisions of the legislation would:

* Permit a judge to make the plaintiff pay the attorneys’ fees incurred by the company defending the suit. Advocates say it would deter frivolous litigation. Opponents claim it would frighten individuals from bringing well-deserved lawsuits.

* Give corporations and their chief executives protection from being sued when they make exaggerated or misleading statements about the firm’s future business. As long as they issue a disclaimer saying their predictions could be wrong, the companies would be protected, even if they made incorrect claims about future profits.

* Limit the financial liability of accountants, lawyers and others involved in a case. Currently, if several defendants are found liable, each one can be held responsible for the full financial claim, even if its role was minor.