National Conference on Public Employee Retirement Systems

The Voice for Public Pensions


Maximizing Returns Through Asset Protection and Recovery

  • By: admin
  • On: 12/06/2023 13:45:30
  • In: News
  • Comments: 0

By: Javier Bleichmar, Erin Woods, Nancy Kulesa, and Ross Shikowitz, Bleichmar Fonti & Auld LLP
This article discusses recent scholarly work examining the prevalence of undetected corporate misconduct and the importance of institutional investors in seeking to recover losses to maximize asset values.

This is an excerpt from NCPERS Fall 2023 issue of PERSist, originally published October 24, 2023.
Pension trustees and staff are currently navigating a volatile and uncertain economic environment.  Runaway inflation over the past two years and the resultant spike in interest rates (which appears primed to persist) have dented and jeopardized the predictability of returns across a variety of asset classes.1 

To help maximize returns, certain trustees and staff have established procedures to monitor and ferret-out corporate misconduct that may have impacted the fund's portfolio. Through these procedures, a plan can pursue litigation to potentially recover funds lost as the result of misconduct, and thereby enhance the value of plan assets. Indeed, over the past ten years, investors have recovered nearly $39 billion through securities class action litigation. Many of the largest and most significant of these cases were led by institutional investors, particularly public pension plans.3  

Recent scholarly work indicates that the opportunity to increase returns through securities litigation may be even more significant than these historical results might suggest. According to a recent academic study titled How Pervasive is Corporate Fraud published in Review of Accounting Studies—which seeks to publish original research that makes empirical, theoretical, or methodological contributions to demography or other population-related fields—“evidence suggests that in normal times only one-third of corporate frauds are detected.  We estimate that on average 10% of large publicly traded firms are committing securities fraud every year. . . . we estimate that corporate fraud destroys 1.6% of equity value each year, equal to $830 billion in 2021.4 The authors further explained how “[a]ccounting violations are widespread: in an average year, 41% of companies misrepresent their financial reports, even when we ignore simple clerical errors.”5

The New York Times wrote that the study made waves “in the world of academia” in 2023 and “has become a fascination among general counsels, corporate leaders and investors.”6 According to Professor Alexander Dyck, one of the lead authors for the study who serves as a Professor of Finance and Economic Analysis and Policy at the University of Toronto, “[w]hat people don't get is how widespread the problem of corporate fraud is. . . . the amount of fraud perpetrated at any given time stays pretty steady.”7  What's more, the study only involved audited public companies. Professor Dyck explained that “misconduct is likely even more pervasive in privately held business, particularly in crypto, which is only loosely regulated.”   

Significantly, history further suggests that it remains important for public pension plans to continue to take the mantle and lead these cases to maximize potential recoveries and protect asset values. In every year over the past decade, securities class actions that were led by an institutional investor resulted in median settlement amounts that were multiples larger than those led by non-institutional investors.9 Last year, institutional investors achieved median settlement amounts over five times larger than non-institutions, which represents one of the largest disparities over the past decade.10    

In short, recent academic research indicates that there is a raft of misconduct (both detected and undetected) that has been negatively impacting plan asset values. Public pension plans have achieved great results in identifying fraud and subsequently recovering assets through securities class action litigation.  By continuing to take an active role in these matters, trustees and staff can help maximize asset values, particularly during this time of economic uncertainty.

About the authors: Javier Bleichmar, Erin Woods, Nancy Kulesa, and Ross Shikowitz are Partners of Bleichmar Fonti & Auld LLP focusing on securities class action and shareholder litigation as well as settlement claim form filing on behalf of institutional investors.  Each of their biographies is available at

Disclosure: The views set forth herein are the personal views of the authors and do not necessarily reflect the views of Bleichmar Fonti & Auld LLP.  This publication should not be construed as legal advice on any specific facts or circumstances.  The contents are intended for general information purposes only and may not be quoted or referred to in any publication or proceeding without the prior written consent of the Firm.  The mailing of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship.
1See e.g., What to do When Interest Rates Rise, Vanguard (Sept. 20, 2022),
2See Cornerstone Research, Securities Class Action Settlements 2022 Review and Analysis 3.
3See Id. at 12.
4See Alexander Dyck, Adair Morse, Luigi Zingales, How Pervasive is Corporate Fraud, Rev. Account. Stud., 1 (Jan. 5, 2023) (emphasis added).
5See Id. at 3.
6See Ephrat Livny, Just How Common Is Corporate Fraud, N.Y. Times (Jan. 14, 2023),commit%20securities%20fraud%20each%20year.&text=The%20DealBook%20Newsletter%20Our%20columnist,power%2Dbrokers%20who%20shape%20them.
7See Id.
8See Id.
9See Cornerstone Research, supra note 2, at 12.
10See Cornerstone Research, supra note 2, at 12.


There have been no comments made on this article. Why not be the first and add your own comment using the form below.

Leave a comment

Please complete the form below to submit a comment on this article. A valid email address is required to submit a comment though it will not be displayed on the site.

HTML has been disabled but if you wish to add any hyperlinks or text formatting you can use any of the following codes: [B]bold text[/B], [I]italic text[/I], [U]underlined text[/U], [S]strike through text[/S], [URL][/URL], [URL=http//]your text[/URL]