ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Saturday, September 7, 1996 TAG: 9609090026
SECTION: BUSINESS PAGE: A-4 EDITION: METRO
DATELINE: WASHINGTON
In an unusual move, the nation's stock exchanges have spent more than $500,000 to defeat a California ballot initiative that would make it easier for investors to sue companies for securities fraud.
Opponents say Proposition 211 would reverse the impact, in California at least, of a federal law passed in December that limited such lawsuits.
``We think what happens in California will have national ramifications,'' Arda Nazerian, spokeswoman for the American Stock Exchange, said Friday. ``It will serve as a model for other states.''
The nation's biggest stock market, the New York Stock Exchange, and the second biggest, Nasdaq stock market, each contributed $250,000 to defeat Prop 211, spokesmen for the exchanges said. In addition, the American Stock Exchange kicked in $20,000.
Other financial services interests also generously contributed to defeat Prop 211: the Securities Industry Association contributed about $1 million, and six of the nation's biggest accounting firms collectively contributed $3 million.
A coalition of trial lawyers, labor, investor and senior citizen groups backing the initiative say out-of-state interests have financed about 70 percent of the $5.2 million raised to defeat Prop 211.
The stock markets rarely contribute directly to political campaigns, but they say defeat of Prop 211 is essential to the well-being of companies listed on their markets and the economy as a whole.
``If enacted, this would decimate Silicon Valley,'' said Nasdaq spokesman Michael Robinson.
Corporations fear the measure will make them more vulnerable to shareholder lawsuits, which rarely go to trial and are frequently settled out of court. High-tech companies complain they're targets of such suits, which are expensive to settle and drain money away from creating new jobs.
But lawyers and investor groups reel off a number of notorious fraud cases involving high-tech companies. Federal regulators, for example, recently sued California-based Comparator Systems Corp., accusing the company, formerly listed on Nasdaq, of misleading investors about its finances and development of new fingerprint identification technology.
President Clinton, who vetoed the federal measure limiting securities lawsuits but then saw it become law when Congress overrode that veto, reversed course on the overall issue last month when he told high-technology executives that he opposes Prop 211.
The proposition would broaden California law to make it easier for individuals to sue for securities fraud and recover money looted from their retirement savings accounts. It also would prohibit the state legislature from changing laws concerning attorney-client fee arrangements.
Prop 211 would allow punitive damages for securities fraud claims, which aren't allowed under federal law, and make a number of other significant changes to securities laws. The initiative is needed, proponents say, because Congress went too far last year.
``Congress left the states free to enact special protections for retirement savings. That's what Prop 211 does,'' said John Cuneo, a staff member of the campaign for the proposition.
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