Estimating Financial Fraud Damages with Response Coefficients
14 July 2009
By Dr. Esther Bruegger with former NERA Senior Vice President Dr. Fred Dunbar
On August 12, in Fener v. Belo, a shareholder class action, the Fifth Circuit addressed a case where a corrective disclosure contained both fraud and non-fraud news. In affirming a defense verdict from the lower court, the panel found that plaintiffs had failed to show loss causation. In this paper, forthcoming in the Iowa College of Law's Journal of Corporation Law, NERA Senior Consultant Dr. Esther Bruegger and former NERA Senior Vice President Dr. Fred Dunbar demonstrate statistical techniques that can be used in a case such as Fener v. Belo when there is a need to isolate the impact of a corrective disclosure on a stock price in the presence of confounding, material news. They also show that these methodologies can apply to situations where: inflation per share builds up in magnitude over time in response to multiple misrepresentations; and it would be useful to put bounds on the proportionate liability of an auditor co-defendant.
