Recoveries for investors hit record highs in 2006

Average recoveries for shareholders in class-action fraud suits reached record highs in 2006, a year when new cases dropped to a 10-year low, according to a study released Tuesday.

The settlements in 2006 included four of more than $1 billion, the most ever to top that amount, according to the report by Nera Economic Consulting. Average settlements, even excluding those of more than $1 billion, rose to $34 million, according to the study.

“The high end is extremely active, and we’re seeing a continued disappearance of the smallest settlements,” said Ronald Miller, one of the study’s authors.

The increase in settlement amounts comes at a time when the number of securities fraud class actions filed by shareholders declined for the second consecutive year, according to the study. There were 129 shareholder suits filed in 2006 through Dec. 15, the lowest total since 1996, the report said.

In 2006, suits were settled against Time Warner Inc., for $2.7 billion and Royal Ahold for $1.1 billion, the study said. Nortel Networks Corp. agreed to two settlements during the year for a total of $2.2 billion, Nera said.

The dissolution of Enron Corp. has generated $7.4 billion in settlements by some defendants, the study said, making it the biggest shareholder fraud case in history. Some suits are still pending.