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

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

Steve Shappell, managing director of the legal and claimpractice for Aon Financial Services Group, a branch ofChicago-based Aon, noted that the bulk of shareholder class actionlitigation has been handled by Milberg Weiss in past years,speculating that this may mean less class actions going forward. Infact, he noted that within the past few years, the number of theseclass action lawsuits have declined.