Days after her 22nd birthday, college senior Vanessa Simmonds last month put her name to 55 lawsuits against the nation's leading investment...
Days after her 22nd birthday, college senior Vanessa Simmonds last month put her name to 55 lawsuits against the nation’s leading investment banks.
She is the plaintiff in an audacious new effort to recoup what her attorneys call the ill-gotten gains pocketed by insiders and underwriters in many dot-com-era stock offerings.
Her lawyers — among them her dad — say that despite the widespread investigation and litigation of abuses surrounding the IPOs that ballooned in 1999-2001 and then popped, no one has used their line of attack before. Their targets: Goldman Sachs and nine other top-tier Wall Street firms.
The suits, filed in federal court in Seattle, name local IPOs by Onvia, Concur Technologies and InterNAP as well as once-sizzling stock deals from such national names as Red Hat, Palm, TiVo, Brocade, Priceline.com and Martha Stewart Living Omnimedia.
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“We’re talking about enormous amounts of money,” says Jeff Thomas, one of the attorneys at Gordon Tilden Thomas & Cordell in Seattle, citing a California technology IPO where the firm’s suit targets more than $500 million in stock sales by insiders. “We believe this is an important series of cases.”
It’s no coincidence that the plaintiff’s father is David Simmonds, who was part of a legal team that won a whopping $247 million judgment against former InfoSpace chairman Naveen Jain over sales of company stock.
That case relied on what’s known as Section 16(b) of the Securities Exchange Act, which allows shareholders to sue on a company’s behalf to recover “short-swing profits” when insiders buy and sell stock within a six-month period.
It was the biggest verdict ever based on the 16(b) rule. Now Simmonds and the Gordon Tilden lawyers are aiming that legal weapon at investment banks’ handling of dot-com IPOs.
Attorney Jeff Tilden says there’s nothing novel about their legal theory.
“Is it a theory that so far has been overlooked by other lawyers around the country as an outgrowth of the excesses of the dot-com era? Yes.”
A leading expert on securities law, Donald Langevoort, of Georgetown University, calls their approach “interesting, and something I hadn’t heard of before.”
A Goldman spokesman, Ed Canaday, said the firm doesn’t comment on litigation.
The 16(b) rule defines insiders as officers, directors or any person or group controlling at least 10 percent of the company’s stock. The Gordon Tilden lawyers’ argument is that in each of these cases, the investment banks and insiders constituted such a group. They were linked, say the lawyers, by common financial interests through such activities as deliberately underpricing an IPO to guarantee big profits to their clients; “laddering,” where customers who got allocations of hot IPOs were required to buy more in the aftermarket to help boost the stock price; and “spinning,” where a bank allocated hot shares to its other clients to curry favor for future business.
The beauty of the 16(b) rule, they say, is that unlike other laws barring insider trading or securities violations, it doesn’t require proof of motives or special inside knowledge that can be tricky in a trial.
“It doesn’t matter what the insiders’ intent was” because 16(b) is strictly based on the timing of purchases and sales, says Tilden.
He asserts that “the SEC has done a lot of the investigation that proves the conduct,” so litigating the cases will be “more straightforward than you might think.”
Securities expert Langevoort isn’t convinced.
“If it were really that easy, the argument would have been made years ago,” he says in an e-mail. “It’s a good argument to make, but requires quite a few inferences (none of which is compelling) to be successful.”
How did Vanessa Simmonds, barely a teen in the dot-com heyday, get involved? Her shares — a “relatively small” number of each — were acquired this summer by her dad. Under 16(b), it’s not required that she owned shares when the alleged misdeeds occurred.
Of course, securities litigation is notoriously difficult against investment banks that hire Wall Street law firms by the floor. A consolidated series of more than 300 class-action lawsuits targeting scores of underwriters and issuers of dot-com IPOs was dealt a major setback by a federal appeals court in December. A similar basket of cases relying on antitrust law was tossed out by the Supreme Court in June. Tilden, whose firm has fewer than 10 attorneys, isn’t intimidated. “We don’t think we’ve bitten off more than we can chew.”
Gonna rock around the pollock tonight
A news release informs that the CEO of Seattle-based American Seafoods, Bernt Bodal, will perform Monday alongside musicians formerly in the classic rock bands Queen and YES at the opening gala of a seafood conference in Shanghai sponsored by the Icelandic finance firm Glitnir.
Bodal will be on bass — the guitar, not the fish.
There’s more info available on the other musicians, etc. But we’re just here for the fish jokes, so we’re done.
Don’t get carried away on this A380
Singapore Airlines provides luxury double-bed suites and serves champagne on its A380 superjumbo plane, but that’s where the fun stops. The Times of London reports that the airline prohibits sexual activity in this flying bedroom.
“We would politely ask them to desist,” an airline spokesman said.
Tony and Julie Elwood, the first couple to book a suite, were besieged by journalists during the Oct. 25 inaugural flight. Asked about the issue, 76-year-old Tony told them, “So they’ll sell you a double bed and give you privacy and endless champagne — and then say you can’t do what comes naturally? Seems a bit strange.”
Seattle Times researcher David Turim contributed to this column.
Rami Grunbaum: firstname.lastname@example.org or 206-464-8541