Record Settlement OKd in Nasdaq Price-Fixing Suit

A federal judge Monday approved a record $1.03-billion settlement of a class-action lawsuit by investors who accused 37 brokerages of overcharging them for Nasdaq-listed stocks in a price-rigging conspiracy that resulted in a government crackdown.

“There can be no doubt that this class action would be enormously expensive to continue, extraordinarily complex to try and ultimately uncertain of result,” U.S. District Judge Robert W. Sweet wrote, estimating the trial alone could last more than a year.

David J. Bershad, the lead settlement negotiator for the plaintiffs, said the lawyers expect to have a plan in place by early next year to distribute the money. He said investors must file claims to be eligible for payouts but that it is hoped that the claims can be filed over the Internet.

The price-fixing allegations, first brought in 1994, caught the interest of the federal government and led to an April 22, 1996, consent decree that forced permanent changes in the operation of Nasdaq, the nation’s second-largest stock market.

The companies making payouts in the deal approved Monday include the biggest names in the securities world--Merrill Lynch & Co., Goldman, Sachs & Co. and Salomon Smith Barney Holdings Inc. The firms denied any wrongdoing.

The judge awarded fees totaling $143 million for the lawyers representing more than 1 million individuals and institutions that were members of the class who bought or sold shares from May 1, 1989, to May 24, 1994. As part of a civil antitrust settlement with the Justice Department, 24 of the 37 brokerages agreed to improve their compliance procedures and tape-record some phone calls made and received by traders.

The government had alleged that Nasdaq dealers engaged in a widespread practice of quoting stocks for customers to the nearest quarter of a dollar rather than the nearest eighth, thus giving themselves extra profits.

The government was trying to end a practice in which some unscrupulous brokers would harass or refuse to deal with brokers who did not cooperate in their scheme.

The size of the settlement was even more startling because the Justice Department had decided not to bring criminal charges, a decision that sometimes weakens prospects for civil litigants.