Corporate defendants are afraid of securities fraud class actions and rush to settle, says Marshall B. Grossman: “The damages are so high and the losses are so dramatic that the risks are enormous.”
Accounting firms carry an additional burden in these suits, Mr. Grossman, a partner at Los Angeles’ Alschuler Grossman Stein & Kahan L.L.P., believes: “The audit issues are difficult for a jury to understand. No auditor has ever conducted a perfect audit, and when you combine that with staggering losses, it’s too easy for a jury to nail the auditor.” As a result, he says, “accounting firms always settle.”
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