RPT-US securities fraud lawsuits slide as crisis ebbs

* Securities class-action cases fall 24 percent from 2008

* Credit crisis lawsuits move through system

* Shock to financial system could lead to more lawsuits

By Jonathan Stempel

NEW YORK, Jan 5 (Reuters) - U.S. securities fraud lawsuits
slid in 2009 as stocks rose and the credit crisis eased.

Investors filed 169 prospective securities class-action
lawsuits in 2009, down 24 percent from 223 in the prior year,
according to a study set for release on Tuesday by Stanford Law
School and Cornerstone Research.

The lawsuits allege a maximum $634 billion of damages, down
24 percent from $839 billion a year earlier.

Financial companies were targeted in half of all cases, the
same as in 2008, but the scope of alleged losses from the
credit crisis declined as the year wore on.

"Just about every major financial firm that can be sued has
been, so we've run out of inventory," said Joseph Grundfest, a
former U.S. Securities and Exchange Commission commissioner who
oversees Stanford Law's Securities Class Action Clearinghouse.

Experts said credit crisis claims are more likely to
succeed when plaintiffs show that companies intended to defraud
or deceive them, not simply that they guessed wrong about the
economy or marketplace.

"The general notion that there are no legal damages because
'the whole system fell apart' is being shown to be false," said
Thomas Dubbs, a senior partner at Labaton Sucharow LLP in New
York who represents pension funds in securities fraud cases.

Filings in 2009 were 14 percent below the annual average of
197 for the 1997-2008 period. Just 12 complaints alleged more
than $10 billion of damages, down from 25 in 2008.

Credit crisis filings alleged $287 billion of damages, down
nearly 38 percent from $459 billion in 2008 and just above the
$276 billion in 2007, when the crisis began, the study says.
Claims related to alleged Ponzi schemes also declined over the
course of the year.

DOWNWARD TREND

Last year was also quiet for big class-action settlements.

The largest, insurer UnitedHealth Group Inc's (UNH.N)
$925.5 million accord over stock options backdating, ranks 10th
all-time, NERA Economic Consulting said. Energy company Enron
Corp's $7.2 billion of settlements tops that list.

In 2010, senior NERA consultant Stephanie Plancich plans to
monitor whether a recent pickup in cases over alleged failure
to disclose risks in exchange-traded funds persists.

While the powerful stock market rally that began in March
has reduced losses for many investors, that may not be true for
those who sold when stock or bond prices were low.

"A rising stock market does not help investors who sold
after a fraud was disclosed, and locked in their losses," Dubbs
said.

Experts expect the downward trend in new case filings to
continue. "Given the trends in the second half of the year, it
seems the level of litigation is likely to be down," Grundfest
said, "unless there is another shock to the system."

FILING DELAYS

One unusual finding in the Cornerstone study is that it is
taking longer for some lawsuits to be filed.

While firms typically file lawsuits four weeks after the
market realizes fraud might have taken place, the average lag
was 100 days, or about 14 weeks, in the second half of 2009.

Experts said this may have occurred because as law firms
pursued financial sector claims in 2008 and early 2009, some
may have delayed potentially weaker claims that are more likely
to be dismissed or settled for lower amounts.

Law firm Coughlin Stoia Geller Rudman & Robbins LLP filed
more than half the lawsuits with the longest lags, Cornerstone
said. That firm did not return a request for comment.
(Reporting by Jonathan Stempel, editing by Matthew Lewis)