The investigation and indictment of a New York law firm that made its reputation pursuing shareholder class action lawsuits could be one explanation for a recent decline in investor suits–a good sign for D&O insurers, one insurance broker suggests.

On May 18, the U.S. Attorney for the Central District of California, Debra Wong Yang, announced a federal grand jury indictment in Los Angeles of Milberg Weiss Bershard & Schulman and two senior partners, David J. Bershad and Steven G. Schulman. The 20-count indictment charges that going back 20 years, the partners, along with other members of the law firm, engaged in a scheme to pay secret kickbacks to individuals who agreed to act as defendants in more than 150 class action and shareholder derivative action lawsuits.

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