May 14 (Bloomberg) — Mississippi’s pension system, the 65th largest in the U.S., has emerged as one of the nation’s most aggressive institutional litigants against companies it says committed securities fraud.
The Public Employees’ Retirement System of Mississippi is involved in at least 21 active federal securities-fraud class actions. It’s a lead plaintiff, either on its own or as part of an investor group, in at least 11 of them, including its May 12 appointment to co-manage litigation against Satyam Computer Services Ltd., the software-services provider at the center of India’s biggest corporate fraud inquiry.
“It certainly is at the high end of public pension fund participation,” said Michael Perino, a securities-law professor at St. John’s University School of Law.
The lead plaintiff in a class action manages the case, including approval of any settlement. It can push for corporate- governance changes at the targeted company.
“You have control of the litigation, and you’re going to make sure you not only protect your retirement system and the employees, but also other states and other retirement systems,” Mississippi Attorney General Jim Hood said in a phone interview. Hood’s office oversees the state’s lawsuits.
Under Hood, a Democrat elected in 2003 with support from trial lawyers, Mississippi has become a leader in the field, though Hood denies he’s doing the bidding of the plaintiffs’ bar.
The Satyam litigation in New York federal court is the third this month in which Mississippi PERS was appointed a lead plaintiff. Among institutional investors, Mississippi PERS was the most frequent lead plaintiff last year, with three cases, either on its own or as part of an investor group.
Teachers’ Retirement System of Louisiana was the most frequent lead plaintiff from 2000 to 2008, with 18 cases, according to Stanford Law School’s Securities Class Action Clearinghouse and Michael Klausner, a Stanford law professor. Mississippi PERS is now the second-most frequent, with 14.
Since 2005, Louisiana’s lead-plaintiff activity has fallen off while Mississippi PERS’s has risen.
Mississippi PERS, based in Jackson, ranked as the 65th largest U.S. pension fund or sponsor, with $18.8 billion, as of Sept. 30, according to Pensions & Investments magazine. The largest pension system is California Public Employees Retirement System, with $214.6 billion.
Under U.S. securities law, the person or entity with the largest financial interest is typically chosen to lead a class action, and so is often an institutional investor.
The lead plaintiff’s attorneys usually get the majority of the legal fees of a settlement or court victory. The lawyers only get paid if they win back money for their clients. Typically, contingency lawyers take a third of any recovery. Institutional investors, including Mississippi PERS, push for lower fees, allowing more money for injured shareholders.
For example, Mississippi’s standard contract calls for the law firm to receive — if a settlement is reached after fact- finding is completed and before a trial is started — 20 percent of up to $25 million, another 18 percent for any amount between $25 million and $75 million, and so on, with the percentage decreasing as the recovery amount increases.
Last year, New York-based Bernstein Litowitz Berger & Grossmann LLP, which represents Mississippi PERS in Satyam and other cases, had a median settlement of 6 percent of estimated damages in securities class actions, according to Cornerstone Research. That was the highest figure for the most-active plaintiffs firms.
“I view them as a terrific guardian of integrity in the capital markets,” Sean Coffey, a Bernstein Litowitz partner, said of Mississippi PERS. “They are folks who talk the talk and walk the walk, and they’re very active.”
Of six completed cases for which the pension system served as a lead plaintiff, four of the companies settled and two won dismissals. The rest haven’t been resolved.