In re Clarent Corporation Securities Litigation

Analysis Group was retained by Latham & Watkins on behalf of the defendant, Ernst & Young, in a securities fraud class action trial, one of a small number of such trials to go to a verdict in the past decade. The case involved alleged accounting irregularities at Clarent Corporation, a California-based Voice over Internet Protocol (VoIP) company, for which Ernst & Young had done auditing work. Plaintiffs claimed that Ernst & Young was liable for securities fraud and asked for approximately $125 million in damages. Analysis Group critiqued the plaintiffs' damages methodology and estimates.

Analysis Group Managing Principal Bruce Deal coordinated our consulting assistance on damages and causation issues, while affiliate Robert Sherwin served as the testifying expert on damages. In his testimony, Mr. Sherwin used a demonstrative exhibit that helped illustrate to the jury how much of Clarent's stock price decline could be attributed to market forces affecting similar companies, independent of the question of fraud. The stock price decline was a key aspect of the plaintiffs' damages claims.

After three weeks of testimony, the jury returned with a finding of no liability and no damages against Ernst & Young.