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The Times: Queue to sue

16 May 2007

Class-action lawyers on both sides of the Atlantic can only be encouraged to redouble their efforts, and their potential fees, by the $3 billion settlement with aggrieved shareholders that Tyco has finally agreed. Everyone else should be appalled.

When shareholders sue a company, for instance for issuing misleading information to the stock market, they are in effect suing each other. Unless settlements are covered by insurance, which would be prohibitive at this level, the winners merely extract money from other shareholders who are not party to the action.

In this American case, anyone who bought shares in the conglomerate near the top of the stock market boom, when Dennis Kozlowski was splashing $6,000 a time on shower curtains, is a potential beneficiary. Those who bought before December 1999 and lost equally from the frauds, now suffer a further hit, as do blameless investors who bought after the June 2002 cut-off. The fraud benefited only those who sold before the fall. They pay nothing.

Settling may suit today’s Tyco managers, because they cannot otherwise get on with breaking up this obsolete conglomerate. Like previous settlements, for instance at Shell, it tells investors to be the first in the suing queue: free advertising for lawyers. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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