A new ruling by the state Supreme Court will mean new restrictions on the ability of victims of securities fraud to recover. Arizona Public Radio's Howard Fischer reports.
For more than 30 years the law of the state has been interpreted to say that victims can sue both the people who actually defrauded them and those who aided and abetted in the fraud. No more. The state's high court has revisited the law and concluded that, strictly read, there is no such permission to sue those not directly involved. Attorney General Tom Horne said this change is going to make a big difference. "It'll make it harder to recover because usually it's the other firms that have assets. And very often the actual perpetrator doesn't have any assets left", Horne said.
That was exactly the concern expressed by attorneys for the Arizona Corporation Commission when they filed a legal brief urging the justices not to do what they did. They cited the case of Baptist Foundation of Arizona, accused of operating a Ponzi scheme. When the commission stopped it from selling more investments it filed for bankruptcy. But, the state did pursue the accounting firm of Arthur Andersen, charging it helped the foundation misrepresent its condition by giving it a clean financial report. That firm eventually agreed to cough up a record $217 million.