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Technology Stocks : Intel Corporation (INTC)

INTC 50.57

+4.8%

Feb 6 3:59 PM EST

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To: Paul Engel who wrote (4010)	10/11/1996 2:53:00 PM
From: Joel R. Phillips	of 186894

Paul, The problem is, what do you do about the guy who tries to pass off cubic zirconia as investment-grade diamonds? Investors need protection against genuine fraud, but without the drag of frivolous suits. The problem I have with the prop-211 system is not mainly with the intent of the law, it's with the enforcement mechanisms. The incentives are all wrong in civil securities suits. Lawyers have an incentive to sue companies, regardless of whether actual fraud took place. A standard akin to "plausible deniability" seems to be used. These weak cases create incentive to try to force settlement through threat of massive legal costs. Companies have no incentive to fight the suit because it costs less to settle. Shareholders just end up paying off lawyers, with little real protection against actual fraud, since any true shysters can just pay off the sharks with shareholder money. Investors would be better served by leaving fraud enforcement to criminal proceedings. Public prosecutors don't benefit financially from shotgun lawsuit tactics, but they do win political points from rooting out real scamsters. --joel

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