Debra Speyer In The News - Philadelphia Inquirer, April 30, 2003
Brokers' tiny fraud payment may be just a start
During every poker game there's a fool at the table, experienced players like to say. And if you
can't figure out who it is, guess what? It's you.
If there were ever any doubts about who was taken for a fool during the 1990s stock market boom,
there shouldn't be after this week's announcement of a $1.4 billion settlement between prosecutors and leading
players in the securities industry. Just look in the mirror.
Ten leading investment houses were accused either of outright fraud in their research reports
or of dangerously blurring the wall that supposedly separated their investment bankers from their market analysts.
They produced "research" that shamelessly hyped companies to boost their investment-banking profit.
So what now? Against the backdrop of a broad market decline that cost investors trillions
of dollars after the Internet bubble burst, the restitution announced Monday - a total of $387.5 million -
hardly seems worth the name. If you lost a big chunk of your life's savings, the prospect of someday getting
back a few pennies on the dollar may not cheer you up.
But investor advocates say it's too early to despair, at least any more than you already have.
If they're right, the $387.5 million could be overshadowed by individual cases and class actions against the
brokerages who led the charge.
The key to investor victories may lie in the settlements and the documents made public along with
them - especially the massive volumes released by state prosecutors such as New York Attorney General Eliot Spitzer.
"This is the smoking-gun evidence that investors need to win cases," says Jacob Zamansky, the New
York lawyer whose groundbreaking suit two years ago against Merrill Lynch and its star Internet analyst, Henry Blodget,
prompted the investigations that led to Monday's announcement.
It's not yet clear how the $387.5 million pot will be divvied up. But investor advocates such as
Philadelphia's Debra Speyer say there are three basic approaches that individuals should consider, depending on
how much they lost in the market and why.
Wait for your share. The Securities and Exchange Commission says it will recommend a
court-appointed administrator for the restitution fund, who will be charged with distributing the money "in an
equitable, cost-effective manner" to brokerage customers who purchased the stocks in question.
In other words, you may eventually get something from the fund administrator. But don't
expect a large check.
Join a class action. These may be led by mutual funds or pension funds that lost big. If you invested
in a questionable stock through one of these brokerages, you may eventually get an offer to join a class action.
Or you can go directly to a firm that specializes in investor claims, such as San Diego's Milberg
Weiss (1-800-320-5081 or www.milberg.com). Again: Don't expect a big recovery.
Pursue an individual claim. If you have large losses that you believe are a result of your
brokerage's wrongdoing, this is probably the best approach.
You can file a claim on your own; the exchanges have arbitration procedures that allow it.
Contact the National Association of Securities Dealers dispute resolution service (1-888-696-3348 or
www.nasdadr.com) or the New York Stock Exchange (212-656-3000 or
But there's little question you'll have better odds with a lawyer, even with contingency
fees of 33 percent to 40 percent. The Public Investors Arbitration Bar Association (1-888-621-7484;
www.piaba.org) provides local lists.
So far, there's no single list of stocks at issue - different brokerages are accused
of hyping different stocks (see box for example). But there should be soon, because lawyers such as
Speyer are working feverishly through the documents to assemble them.
One other advantage of hiring a lawyer is that you may have claims beyond the obvious.
If you were a small investor nearing retirement, for instance, you should never have been steered toward
And whatever you do in the future, don't forget the fool at the poker table..
Contact Jeff Gelles at 215-854-4558 or .