California Voters Reject Securities Fraud Proposition
High-tech businesses rejoiced in the defeat of Proposition 211 and promised another fierce fight if the proposal’s supporters revive efforts to make it easier to sue companies for securities fraud.
“We expect them to come back again, maybe not in California, maybe somewhere else. They’ll have learned from their defeat,” said Tom Proulx, chairman of the Alliance to Revitalize California, which led the campaign that defeated Proposition 211 by a 3-1 margin on Tuesday.
“But we’ll be ready for them. We’ll jump on them and organize as quickly as we did this time,” said Proulx, the founder of software company Intuit Corp.
Proposition 211, which prompted the costliest campaign ever over a California ballot measure, lost 74 percent to 26 percent.
The measure would have eased obscure rules enabling shareholders to sue companies for fraud, letting investors sue on their own rather than as a group, relaxing standards for alleging fraud and extending liability.
It also would have made moot a federal “safe harbor” that protected companies’ predictions of future performance.
Silicon Valley companies claim they are frequent targets of such suits when their stock price drops. They contended that Prop. 211 would make California a magnet for baseless lawsuits and drive away businesses.
But supporters of Prop. 211 - including securities lawyers, labor and retirees’ groups - argued the measure would ensure individuals’ ability to sue.
And they also promised Tuesday night not to give up their struggle, which they see as protecting shareholders’ investments from dishonest businesses.
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