PricewaterhouseCoopers has released a report showing an increase in federal class-action shareholder lawsuits last year, after two straight years of decline.

During 2007, 163 cases were filed, compared to 109 in 2006, 169 in 2005 and 206 in 2004. Subprime-related cases accounted for 37 of 163 cases filed in 2007, or 23 percent, and represented 29 percent of the total number of cases filed in the second half of 2007. PwC expects to see the proportion rise even more this year. "We will see the full fallout in 2008," said PwC partner Grace Lamont.

Accounting-related cases fell in proportion to the total number of cases filed in 2007 to 50 percent, compared to 61 percent in 2006. Of those, allegations relating to internal controls were cited most frequently, in 49 percent of the cases filed in 2007, similar to the 48 percent in 2006.

The next most commonly asserted category of allegation was estimates, appearing in 47 percent of filings in 2007, an increase of 38 percentage points from 2006. Understatement of expenses and liabilities fell to 23 percent in 2007 from a high of 59 percent in 2006. Overstatement of assets was asserted in 32 percent of filings in 2007, compared to 25 percent in 2006. Revenue recognition declined as a category to 17 percent in 2007 from 41 percent in 2006.

The number of federal class-action cases filed against foreign companies hit 27 in 2007 versus 14 in 2006. Thirty percent of those cases were accounting-related in 2007, according to PwC partner Patricia Etzold, compared to 79 percent in 2006.

The litigation field is more wide open now with the decline of Milberg Weiss, one of the leading class-action law firms, after its co-founder, Melvyn Weiss, pleaded guilty last month to conspiracy charges in California related to paying lead plaintiffs. "At the moment, there doesn't seem to be the next Milberg Weiss," said Lamont.

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