Paying For Fraud

An article entitled Why Pay a Fraud Plaintiff to Sue? from the Washington Post online edition describes how Milberg Weiss LLP, the nation’s top securities class-action law firm, was recently indicted for recruiting fraud plaintiffs by paying them to sue.  It turns out that lawyers’ fees and the other costs concerned with securities fraud lawsuits are so large that they outweigh the potential benefits from an award for most investors, so potential litigants might just need an extra incentive to do something that harms them.  Indeed securities fraud litigation hurts investors in diversified funds, the majority of investors, by making the issuer pay damages, further driving down the price of the stock and increasing damages, all the while hurting investors in that company even more.