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LEGAL EXPERTS LEERY OF EFFORT TO NARROW SECURITIES FRAUD SUITS

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A panel of the nation's top legal experts dispute key arguments behind two bills aimed at weeding out frivolous securities fraud lawsuits.

Securities law professors from six leading universities spoke at a House telecommunications and finance hearing concerning securities litigation reform, one of the hottest business topics on Capitol Hill this year.Accounting firms and high technology companies say they're the victims of a number of new securities fraud lawsuits designed chiefly to enrich a handful of law firms.

Securities lawyers have counterattacked, saying the accountants are hypersensitive because they've paid $1.4 billion to settle a range of savings and loan fraud and securities lawsuits since 1991.

Sens. Chris Dodd, D-Conn., and Pete Domenici, R-N.M., have sponsored a bill that would limit liability for professionals that aren't direct participants in a fraud. Under the present structure, any defendant in a lawsuit could be held liable to pay the full penalty, even if they didn't mastermind the fraud.

The bill would replace that with a proportionate liability scheme aimed at making defendants pay according to their degree of fault. The bill also seeks to give shareholders more control in class action lawsuits and remove economic incentives for lawyers to file meritless lawsuits.

Rep. W.J. "Billy" Tauzin, D-La., has sponsored a similar measure that consumer groups consider much harsher than the Dodd-Domenici bill. With one exception, the far-reaching measure found little support from the panel of academics.

Securities law specialist Joel Seligman, a law professor at the University of Michigan, said "the case for fundamental reform and change of the rules governing federal securities class action suits has not been made."

Seligman, and the others, dismissed key arguments that Dodd and the other advocates have made to build the case for the bill:

-An "explosion" of securities fraud class action lawsuits exists, a frightening trend for business that affects the way firms raise money in the financial markets. Seligman said data from the Administrative Office of the U.S. Courts shows otherwise, with 265 securities class action lawsuits involving 113 companies filed in 1992, compared to 256 lawsuits and 122 companies in 1991.

Arthur Miller, a law professor at Harvard University, said securities class action cases amounted to "a microscopic percentage of the burden on the federal judiciary."

Tauzin disputed this, saying his reading of the statistics show a sharp rise in such cases in recent years.