SANTA CLARA, Calif. -- The directors of the now-defunct Technical Equities Corp. are liable for fraud and negligence, a jury found Thursday in a far-reaching decision in the largest investment fraud case in California history.
The decision could lead to tens of millions of dollars in settlements for the nearly 1,000 people, including dozens of well-known athletes and wealthy doctors, who lost money when the company went bankrupt in 1986.
Thursday's decision also included a nearly $7 million judgment on behalf of the seven test cases selected for the trial, including $300,000 for emotional distress to the investors.
'We got every penny we asked for, plus emotional damages,' said attorney Joseph Cotchett, who represents more than 400 plaintiffs. 'I wouldn't hazard a guess (as to what the settlements for all the clients) will be, but it's going to be huge.'
Because six dozen attorneys and mounds of paperwork were involved the county converted an auditorium at Techmart into a courtroom to accommodate the trial and store the files.
The San Jose-based firm, which invested in industries, real estate and other ventures, declared bankruptcy Feb. 7, 1986, taking with it nearly $150 million in investors' funds. Among the victims were elderly couples who invested their life savings, wealthy Silicon Valley executives and athletes such as San Francisco Giants pitcher Atlee Hammaker, former Los Angeles Dodgers' pitcher Don Drysdale, basketball great Rick Barry and several former members of the Oakland Raiders.
Technical Equities, founded by Harry Stern, the 58-year-old principal defendant in the case, once was listed as one of the 500 most profitable companies in California.
Thursday's verdict found that Stern and five other former directors of the company are liable for the funds lost by investors, either because of fraud, negligent misrepresention, breach of fiduciary duty or a combination of the three.
'This says that certain of the directors committed willful and malicious fraud and some of the others were simply careless,' said Allen Ruby, attorney for more than 300 plaintiffs.
After an almost three-month-long trial, the jurors deliberated for one week before reaching the verdict.
Although it applies only to the seven, Cotchett said he will ask the judge next week to apply the verdict to all the lawsuits. The exact dollar amounts on the remaining suits would then be settled out of court.
Among the findings of the jury was that Stern 'disseminated false and misleading financial information to the general public' and manipulated the price of Technical Equities stock on the common market.
Security Pacific Bank and several other defendants, who loaned money to Technical Equities and handled their stock or were connected to the case in some other way, settled out of court with the plaintiffs for more than $50 million before or during the trial.
Thursday's verdicts also mean that Stern, co-worker Herb Barovsky and Stern Management Associates could be hit with punitive damages as well. Arguments for those damages were scheduled for Monday morning by Santa Clara County Superior Court Judge Conrad Rushing, who is hearing the case.
In addition to the civil suits, both the U.S. Attorney's Office and the Securities and Exchange Commission are conducting investigations for possible criminal action.
