I realize that I am likely preaching to the choir here since SCAS clients reading this probably already understand the importance of filing claims in securities class action settlements. The SEC proposal in the Qwest case, however, is worth highlighting because it the latest reminder that the economic cost of failing to file claims in securities class actions can and does go beyond the amount at stake in the class action itself.

There have been numerous other examples over the last 18 months of the SEC and even the U.S. prosecutors dumping settlement money from their own cases into the securities class settlement distribution process:

--September 2004: The SEC announced court approval of its plan to distribute the proceeds of its $150 million settlement with Bristol-Myers Squibb via the claims administrator appointed in a parallel securities class action against the company. This $150 million recovery was in addition to the $300 million recovered by the plaintiffs in the class action settlement.

--February 2005: The SEC filed a motion seeking to have its $25 million settlement with Lucent Technologies transferred to the account established by the claims administrator in the securities class action settlement involving Lucent. The SEC proposed that the claims administrator would distribute the funds to the class members who had already filed claims in that settlement (the claims deadline in the class action was March 2004).

--March 2005: A federal court overseeing the SEC's $1,450,000 settlement with a company called Measurement Specialties approved the SEC's plan to distribute all of this money on a pro rata basis to the class members who had already filed claims and qualified to receive funds under the allocation plan approved by the court in a securities class action against the company (the claim deadline in the class action was August 2004).

--July 2005: The U.S. Attorney's office handling the prosecution of former WorldCom CEO Bernie Ebbers announced that approximately $25 million to $33 million in restitution expected to be recovered from Ebbers would go to the victims of WorldCom via the securities class action settlement fund.

The past few years have seen an explosion in the dollar amounts of SEC civil penalties, to the point where settlements in the hundreds of millions of dollars are now almost routine. Following the enactment of the Fair Funds provision of Sarbanes-Oxley in 2002, these penalties are being distributed for the first time to investors (rather than to the U.S. Treasury). The SEC's distribution plan in the Qwest settlement, and all of the other cases above, demonstrate that in this new era, filing claims in securities class action settlements may be the only way for an investor to recover its rightful share of many significant SEC settlements.