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Technology Stocks : Avant (AVNT)
AVNT 35.87-0.7%2:05 PM EST
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To: tonto who wrote (758)9/30/1997 5:28:00 PM
From: Bill Wexler   of 3441
 
Excerpted from "A Free Market Solution to Peristent Stock Fraud"

The following provides an excellent explanation why shareholder lawsuits are weak weapons against unscrupulous management. This is a dead on analysis of the situation in respect to the current shareholder lawsuit against Avant.

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By M. Asensio

...Shareholder class action lawsuits are also inefficient in controlling excessive stock promotions. There are several factors that contribute to this inefficiency. Defendants have no incentive to settle since they have practically unlimited access to the corporate treasury to fund their defense. The litigation is funded and controlled by plaintiff's attorney whose expertise and incentives are different than shareholders. Finally, the structure of modern portfolio management does not normally allow any one shareholder, or group of shareholders, to have a large enough interest to justify their active involvement in shareholder litigation. On the contrary, sophisticated investors have an interest in extracting themselves from these types of situations leaving the market exclusively to retail brokers and investors that are more susceptible to management's fraudulent promotion. All of these factors may explain the limited effect that some highly revealing shareholder lawsuits have on high profile stock frauds...
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