Judge Gives Early OK to Deal in Net IPO Suits

A federal judge Tuesday granted preliminary approval of a $1-billion settlement of lawsuits accusing scores of companies that went public during the Internet boom of rigging their stock offerings to defraud investors.

The settlement, reached in June 2003, resolves legal claims that 298 start-ups including CNet Networks Inc. and Corvis Corp. conspired with 55 investment banks to drive up shares in their initial public offerings. Investors’ claims against banks such as Goldman Sachs Group Inc. and Credit Suisse First Boston Inc. are still pending.

If investors succeed in recovering more than $1 billion from the banks, the Internet companies won’t have to pay anything under the accord. The ruling by U.S. District Judge Shira Scheindlin in New York may increase pressure on the banks to settle.

The judge “made it very clear that this is just a foundation for the rest of the case” against the banks that underwrote the IPOs, said Melvyn Weiss, lead lawyer for millions of investors covered by the class-action cases.

Scheindlin noted in her 52-page opinion that the Internet start-ups agreed to aid investors in lawsuits against the banks. “The value of 298 willing allies in litigation, as opposed to the specter of hundreds of uncooperative opponents, is significant,” she wrote.

Lawyers for the banks and the Internet companies had no comment.