Legal News

Class Action Fraud Alive and Well, Philly Prosecutors Say

By Nathan Koppel

Federal prosecutors in Philadelphia recently unsealed an interesting indictment alleging an elaborate ruse to claim a share of settlements in some major class actions. Here’s the indictment spelling it out all out.

According to the indictment, starting in 2001, a group of individuals created fake companies that submitted claims for a share of class-action settlements, including a $1 billion antitrust settlement involving the NASDAQ Stock Exchange and a $3 billion securities settlement with Cendant Corporation.

The defendants allegedly went to great lengths to perpetrate the alleged fraud. One conspirator traveled to Singapore as the vice president of a fake company in order to mail documents that would help make the fake company, “KimCorp,” look legitimate.

The defendants also enlisted an attorney, Deborah K. Rice of Florida, to file the settlement claims on behalf of the fake companies.

On behalf of a fictitious Australian company, Rice in 2004 allegedly submitted a claim in the Cendant case and landed an $8 million check. She later secured a $5 million share of the Cendant settlement on behalf of a fake Chinese company.

Rice, 47, and five other defendants are charged with mail and wire fraud and potentially face a long time in the slammer.

Rice’s attorney, David Vinikoor, was not immediately available for comment.

This case sets us to wonder just how easy it is to game the class-action claims process. Practically every sentient being in this country receives notices inviting him or her to take part in a class settlement. Sometimes, little more than a signature, attesting to losses, is required.

Full post as published by Law Blog - WSJ.com on December 03, 2008 (boomark / email).