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Maybe They Should Just Stick to Cash
By JLP | February 3, 2010
From a front page article in today’s WSJ (bold mine):
Norfolk County, Mass., has only a small pension fund, but it is a big player in court.
Two weeks ago, the fund joined with two others in a shareholder suit against drugstore chain CVS Caremark Corp., whose stock had fallen. It was the 12th time since 2006 the pension fund has gone to court after a stock it owned declined.
Twelve lawsuits in 3 years? Obviously they don’t understand the risk involved in investing. Perhaps the pension members should sue the pension managers for failing to properly research the companies they invest in. Better yet, maybe we should make a law that says pensions can ONLY hold index funds since they are skilled enough to pick individual stocks.
My thoughts totally miss the point of the article, which is about how law firms are making sizable contributions to out of state local elections. Although we don’t know the motivation for such contributions, we can speculate that it’s to win favor in any shareholder lawsuits. Getting appointed lead counsel in a shareholder lawsuit is quite lucrative. Can you say “pay-to-play?”
If you have a few minutes, give the article a read. It’s interesting.
Topics: Business News | 8 Comments »
February 3rd, 2010 at 11:29 am
JLP) I disagree.
They are not suing because the stock price fell, they are suing because they think there was fraud going on.
I’m glad these guys are keeping the corps honest, because without them, you can forget about any kind of accountability. You think your index fund gives a crap whether fraud is going on — they make money whether you do or not.
February 3rd, 2010 at 11:32 am
TWELVE LAWSUITS since 2006! All of that is fraud?
February 3rd, 2010 at 11:35 am
My point about index funds is that the risk of any particular company losing value is spread out.
February 3rd, 2010 at 11:45 am
#2 JLP) Honestly, I’m surprised there aren’t hundreds of lawsuits right now, or do you really think every corporation has been on the up-and-up, and there hasn’t been any fraud before or during this ‘crisis’?
Anyhow for this case: “…According to the complaint the plaintiff alleges that CVS Caremark Corporation and certain of its officers and directors violated the Securities Exchange Act of 1934 by issuing between May 5, 2009 and November 4, 2009 numerous positive statements regarding CVS Caremark’s financial condition, business and prospects and failing to disclose operating problems in the PBM business, the more than $6 billion in contractual losses for 2010 and the adverse impact this would have on its 2010 financial results….”
Hmm, failing to disclose $6 Billion in losses…that sounds a lot like Enron. Let’s let a judge sort it out.
It is a shareholder’s right to sue a company if they believe there is fraud. This pension fund is exercising that right, and it benefits _all_ shareholders.
February 3rd, 2010 at 1:50 pm
I don’t like silly lawsuits but what I like even less is that these law firms are pretty much paying these politicians to file lawsuits just so they can make some cash. It looks shady and it smells shady, it may be legal but it sure as he’ll seems unethical. Hopefully the aba will step in at some point and put an end to it.
February 3rd, 2010 at 3:56 pm
I am with BG on this one…What shareholder is going to go through the hassle and expense of bringing a lawsuit? Only the big ones, which happen to be, in most cases, pension funds/hedge funds/private equity.
If the suits were fivilous then the pension fund would have received negative publicity and the attorneys could be sanctioned.
February 3rd, 2010 at 9:33 pm
I suspect that one of the pension trustees is a buddy with the law firm doing the suing. And, if it is like most local pension funds, the guy running the pension is probably a union boss as well, who figures he’s got tax payer cash to back him up so why not hand out the cash while he’s got access to it?
Frankly, I think defined-benefit pensions and all other forms of deferred compensation should be abolished for all levels of government. There is far too much opportunity for insidery corruption and vote-buying if there are piles of $$ lying around for politicians to spend and future taxpayers to hoze buying votes for today.
February 5th, 2010 at 2:56 pm
Looks to me like there are some lawyers in Norfolk County, Mass. that have some extra time on their hands.