Cashing in on Classes Actions

The Wall Street Journal Law Blog reports that prosecutors in Philadelphia recently unsealed an indictment against a group of people who concocted an elaborate scheme to game a number of major corporate class-action lawsuits:

According to the indictment, starting in 2001, a group of individuals created fake companies that submitted claims for a share of class-action settlements, including a $1 billion antitrust settlement involving the NASDAQ Stock Exchange and a $3 billion securities settlement with Cendant Corporation.

The defendants allegedly went to great lengths to perpetrate the alleged fraud. One conspirator traveled to Singapore as the vice president of a fake company in order to mail documents that would help make the fake company, “Keycorp,” look legitimate.

Apparently the scheme was a success (if you don’t count that pesky federal indictment):

On behalf of a fictitious Australian company, [the group’s attorney] in 2004 allegedly submitted a claim in the Cendant case and landed an $8 million check. She later secured a $5 million share of the Cendant settlement on behalf of a fake Chinese company.

If this group was able to obtain multi-million dollar settlements before being caught, who knows if smaller fraudulent settlements are ever uncovered?


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