False statements about securities can cover a wide range of communications to investors, but underneath each is a misleading statement about the true nature of the security. In some cases, securities fraud involves false statements about the actual security itself, and how vulnerable to risk it is. Other false statements may involve a company’s performance or success - or alternatively, hiding negative information about the company - false quarterly statements and incorrect statements about a company’s accounting practices.
The effects of such false statements are that they can artificially inflate the price of a company’s stock. That artificial inflation is corrected when the truth becomes known, but investors who bought the stock or securities at an artificially inflated price lose money when the investment loses value. This is not just a natural risk associated with investing, because the company or its officials misled investors to benefit the company. Investors, had they known about the true risk, may not have purchased those stocks.
Further, not all investors are individuals with money to lose. Many times in securities fraud cases, the plaintiff is a pension plan or charity that has invested that organization’s assets in a stock, believing it to be relatively risk-free.
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The lawsuit is In Re Computer Sciences Corporation Securities Litigation, 11-cv-00610, U.S. District Court, Eastern District of Virginia (Alexandria).
Meanwhile, Fannie Mae and KPMG have also agreed to settle a lawsuit filed by Ohio pension funds and other plaintiffs, alleging the two companies issued false financial reports. According to Reuters (5/7/13), the companies will pay $153 million to settle the lawsuit, which started in 2004. That lawsuit is In Re Fannie Mae Securities Litigation, U.S. District Court for the District of Columbia, No. 04-01639.