Judge Enters Record Judgment of $2.46 Billion After Jury Verdict in Historic Household International Securities Fraud Trial

Judgment Follows Successful Trial Testimony of Compass Lexecon’s President, Professor Daniel R. Fischel

Last week, Judge Ronald A. Guzman of the Northern District of Illinois entered a judgment against Household International (now HSBC Finance Corporation) and three officer defendants of $2.46 billion, the largest judgment following a securities fraud class action trial in history. Earlier, a federal court jury in Chicago delivered a verdict in favor of Compass Lexecon’s client, a class of investors. The jury determined that all four defendants violated federal securities laws and that a result, Household’s stock price was inflated by $23.94 a share for much of an 18 month period. Compass Lexecon expert Daniel R. Fischel provided expert testimony on materiality, causation, and the quantification of inflation on behalf of the plaintiff class in the case.

Professor Fischel at trial quantified inflation using two different methods – the first focusing on stock price reactions to specific disclosures and the second focusing on analysis of stock price movements over a longer period based on a leakage model. Professor Fischel also responded to various criticisms and claims by defendants’ experts as the only rebuttal witness. The jury adopted the per share inflation calculations taken directly from Professor Fischel’s leakage model in its verdict. A lengthy damages phase then followed the trial prior to the entry of the judgment.

A team from our Chicago office including Mike Keable, David Ross, Jessica Mandel, Jerry Lumer, Cliff Ang, and Peter Clayburgh worked on the case and provided valuable assistance. We worked with Mike Dowd, Spence Burkholz, Dan Drosman, Azra Mehdi, and Luke Brooks from Robbins Geller Rudman & Dowd LLP who successfully represented the plaintiff class.