N.J. Plans New Suits To Recoup Stock LossDec 24, 2002 | AP
New Jersey's fight against corporate stock losses will get bigger, with more lawsuits to be filed shortly, says Attorney General David Samson.
Four companies are already the target of state action, but the goal is not simply to fight as many companies as possible, Samson said.
"The end game is not to engage in endless, extensive litigation," Samson said. "The end game is to get money to put it back in the pension funds. What we want to do is at every step possible from a litigation strategy to maximize our actual recovery."
The state's dramatic losses $22 billion in the stock market downturn of the past two years forced an intensive examination of pension fund performance, which resulted in the resignation of the director of the state Division of Investments and legal action against four corporations.
Sears Roebuck and Co., Qwest Communications, Electronic Data Systems, and Tyco International Ltd. became the initial targets of lawsuits in November.
Those complaints contend that faulty accounting practices, and in some cases outright fraud, misled investors, including the pension system.
Payments to retirees have not been threatened by the investment drain, but the losses mean taxpayers might have to pay $1 billion into the fund to meet reserve requirements, adding to the state's fiscal difficulties.
So far, 12 law firms that specialize in such complex and costly litigation have been selected to represent the state, Samson said. A retired Superior Court judge, with extensive experience in civil litigation and complex settlements, will oversee the litigation and report to the attorney general.
Hiring outside lawyers will better serve the state because those attorneys specialize in these cases, and have been following such actions across the country, in some instances for more than a decade, Samson said.
The casework also demands more time and resources than the state could provide, he said.
"What you need in this area is very sophisticated, very specialized people," Samson said.
Another bonus: These law firms pay for all the research and litigation costs.
"The law firms will not get paid unless we recoup our investments," Samson said.
"There's no public money in this. The law firms are running the complete risk. Everything is on them."
New Jersey is not alone. Attorneys for state pension funds in Ohio, California, and Illinois have considered legal action against corporations they claim cost public accounts.