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Archive for November 24th, 2008

Class action settlements are often criticized because claim verification requirements can seem onerous and seemingly intended to create a disincentive for class members to participate.  However, here is a story that may illustrate the legitimate rationale for including strict claims verification requirements.

According to a report published today on Alibaba.com, six individuals have been charged in federal indictments for an alleged scheme to file false claims in class action settlements totaling more than $40 million.  The defendants are charged with for a variety of crimes ranging from wire fraud to money laundering and tax evasion.  According to the report, the defendants are accused of creating fake corporations and falsifying documents in order to claim money from three class action settlements administered between 2001 and 2007.

It is unclear from the news report what verification requirements were used in connection with the three settlements and whether any additional requirements could have prevented the alleged fraud.  However, the story provides at least anecdotal support for the argument that a class action settlement must balance procedures intended to make it as easy as possible for class members to participate with with reasonable procedures intended to combat fraud by undeserving participants.

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