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A wave of stock option backdating litigation against public companies who issued the options and the executives who benefited by exercising them, recently began hitting the American judicial system. Yet even as class, derivative and criminal actions filed by the Securities and Exchange Commission (SEC), the Department of Justice (DOJ), state Attorneys General and private plaintiffs, including investors, wind their way through the American justice system, the question arises: who benefits from these cases?

"The majority of participants in securities class action suits are institutional investors who trade more than $100 million a year. They don't have to pay for any gains they made from selling the inflated stocks, and once they're compensated for their losses, they actually come out ahead," Thakor said. "Institutional investors are trading such a large volume. The net trading loss they suffer from buying inflated stocks is only 20 percent of their gross losses. Of the more than 2,300 firms we studied, 40 percent were shown to have realized a net benefit from the settlement proceeds."

The trend may be coming to an end however, as the effects of legislation, such as the Sarbanes-Oxley Act of 2002 and the Class Action Fairness Act of 2005, are felt.

"Since the beginning of 2006, we've seen perhaps a greater decline than we've seen in the last decade. It has led to speculation that there is something to this," Bruce Carton, vice president of Institutional Shareholder Services securities class-action practice, told the St. Louis Dispatch. "On the other hand, it's six months of data. It's probably going to take a year and a half to determine if it's something that's going to stick."

Whatever the reason for the current decline in the number of class-action filings, some attorneys see another wave of securities litigation on the horizon. This time it won't be against companies and executives but against the attorneys and auditors who advise them, especially those consulted regarding the mechanics and disclosure of offending options programs. Faulty advice, leading to the failure to adequately disclose, properly account for and remit appropriate applicable taxes on such programs, can place professional advisors squarely in the sights of shareholders, their attorneys and regulators.

For more information about the class-action securities litigation, read the entire article "Class Action Securities Lawsuits: Winners and Losers", Click Here.

Additional information concerning this spring's outbreak of corneal infections associated with the use of a specific contact lens solution is being published in the Journal of the American Medical Association (JAMA) this week.

Douglas C. Chang M.D., of the Centers for Disease Control and Prevention (CDC) in Atlanta and colleagues, conducted to a study to determine which specific activities, contact lens hygiene practices or product were associated with an increased incidence of Fusarium keratitis. Preliminary findings resulted in the withdrawal of ReNu MultiPlus from the worldwide market. Further study indicates that the prevalence of Fusarium associated with the reported use of ReNu solution was similar between case patients and controls, although Fusarium was not recovered from the factory, warehouse, solution filtrate or unopened solution bottles.

"Our findings, together with the results of environmental testing, suggest that exposure to Fusarium was likely the result of extrinsic contamination of contact lens solution bottles or lens cases occurring outside the manufacturing or storage processes, perhaps in patients' homes," the researchers write. "However, suboptimal contact lens hygiene practices appear unlikely as the major explanation for the outbreak.

"Ongoing studies may help to determine if the infections were caused by an interaction of its ingredients with Fusarium that might have permitted growth of the organism. In the meantime, clinicians should be vigilant in diagnosing and treating fungal keratitis, and users of MoistureLoc should discontinue the use of this product. Soft contact lens users should follow the instructions of their ophthalmologist or other eye-care professionals and continue to pay careful attention to optimal hygiene practices, including washing and drying hands prior to handling lenses, storing lenses in new contact lens solution after each use, and carefully following directions for use of contact lens and contact lens solution products," the authors concluded.

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