A couple of days ago, while perusing the Boston Globe, I found an article covering CVS'
The lawsuit accused CVS and CEO Thomas M. Ryan of delaying merchandise discounts to prop up earnings, and withholding material information to keep the stock price afloat while exercising millions in options.
According to CVS, the lawsuit was settled to avoid the distractions associated with a trial; naturally, the company denies any wrongdoing. In case you missed the memo, nobody does anything wrong anymore -- or if they do, they certainly won't own up to it.
My Foolish colleague Seth Jayson and others have previously noted the amazing speed with which shareholder lawsuits pop up after a stock falls. Recent examples include DreamWorksAnimation
The merits of these lawsuits (or lack thereof) may make for an interesting discussion, but they don't really interest me. If I felt that these lawsuits actually helped improve company disclosures, I would feel positive about the whole process, regardless of a few bad apples here and there.
But it's hard to see how these lawsuits do much to improve disclosure, because the people who committed -- or are accused of -- the actual wrongs aren't being asked to pay up or serve time. Instead, one group of shareholders (most likely former shareholders) sues the company as a whole. Current shareholders, or the company's insurance, end up footing the bill.
There's little risk here for management that plays a little fast and loose with its disclosure, other than bad press. Until there's a way to require companies to improve their disclosure when slapped with a lawsuit, it's hard to see the majority of these suits as anything other than a giant waste of everyone's time and money.
We've entered this CVS-related Foolishness as evidence: