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© St. Petersburg Times, published April 7, 2002
What does it take to keep tabs on a class-action suit?
Q. I read that a class-action lawsuit was filed against a company in which I am a shareholder. How would I get information about the case?
Q. Do you have any information about the class-action suit for investors in Enron stock? I sent one law firm an e-mail inquiring about registration requirements, but got no response. I've since seen no information. Can you help?
A. When you hear about a lawsuit being filed, that's just the beginning of a process that can go on for years. Staying informed is likely to be difficult unless the law firm handling the case has set up a Web site to keep class members up to date.
It may help to understand how the class-action process works. First, a judge has to decide whether a case qualifies as a class action and if so, who gets to be included in the class. In an investor class action, the class might include everyone who bought a particular stock during a particular time period.
If you meet the requirements to be a member of the class, you usually do not have to do anything to be included. In fact, you have to take steps to avoid being included.
"If the judge certifies the class, the court would require notice to be sent to everyone in the class," said Tampa lawyer Guy Burns, who has often represented investors in class-action cases. "At that point you have the right to opt out."
Normally you would opt out only if you have determined it's feasible for you to bring a lawsuit of your own. If you fail to opt out by the deadline, you are bound by the outcome of the case. That means you cannot bring your own lawsuit later if you don't like the results of the class action.
If the investor group prevails or reaches a settlement, members of the class are notified how to file a claim. Supporting documents, such as as brokerage statements, may be required.
This second notice might be sent by mail, or it might be publicized in other ways, such as an advertisement in a national magazine. Burns said Parade, Reader's Digest, People and TV Guide are commonly used.
Burns said you probably can get on a list for notification by mail by contacting the law firm or the claims administrator for the case.
There is a growing trend among law firms to use Web sites to allow investors to follow progress in a case. Milberg Weiss Bershad Hynes & Lerach, the law firm representing Enron investors, has created a Web site (www.enronfraud.com) and is offering investors the option of being placed on a mailing list by signing up on the Web site or calling the firm at 1-800-449-4900.
Q. I received a distribution from a retirement plan, which I rolled over to an individual retirement account. Do I have to report this on my tax return?
A. Yes. Distributions from retirement plans and individual retirement accounts must be reported in full. If you rolled over the entire amount, you just put a 0 on the line that asks for the taxable amount. You can even write "rollover" in the margin of the tax return just to make sure the IRS gets the point.
The reason you need to report this is that the IRS has a document-matching program. Your employer undoubtedly reported this distribution to the IRS. That means IRS computers will attempt to match the number sent in by your employer with what you reported on your tax return. If the number isn't there, you most likely will receive a letter from the IRS.
CPA and IRA expert Ed Slott said one of his clients neglected to tell him about a $90,000 pension distribution that had been rolled over. The return was audited as a result. Slott said that although the rollover was easily explained, the IRS agent went on to question other items on the return, never a desirable outcome.
Slott, who works in Rockville Centre, N.Y., said the distribution should be reported even if it was a direct rollover from your employer's plan to the IRA custodian.
If you're a woman who feels more comfortable getting your financial information in a feminine package, check out the Women's Institute for Financial Education. The content includes tips for reducing the financial pain of divorce.
-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.