Securities fraud suits plunge

Boston and Palo Alto -- Class-action lawsuits filed over securities fraud reached an all-time low in 2006, according to a Stanford Law School report.

Securities fraud suits dropped 38 percent from 2005, the report from Stanford Law's Securities Class Action Clearinghouse said. The number of suits fell from 178 in 2005 to 110 in 2006, putting the total down almost 43 percent from the 10-year historical average of 193, the report said.

"These numbers are potentially indicative of a new era in the securities litigation arena," John Gould, vice president of Cornerstone Research and a contributor to the study, said in a statement.

The study pointed to tougher federal enforcement on securities fraud, a stronger stock market with lower price volatility and the settlements of the slew of securities fraud lawsuits filed in the late 1990s and early 2000s as key reasons for the decline.

Moreover, removing the lawsuits filed over options backdating irregularities, such as at Apple Computer (Charts), United Health Group (Charts), Juniper Networks (Charts) and Comverse Technology (Charts), drops the number even further. Excluding those 20 lawsuits drops the total to 90, a 53 percent decline.

The study also found that so-called "mega-filings" - cases with disclosure dollar losses of more than $5 billion or maximum dollar loss less than $10 billion - dropped from five to one.

"These are unprecedented numbers, and my bet is that the private securities fraud litigation market is shrinking because corporations are engaging in less activity that gives plaintiffs an excuse to file a complaint alleging fraud," said Joseph Grundfest, a Stanford Law professor.

Apple says options probe clears Jobs

SEC investigates UnitedHealth