Melissa Shelk, vice president of federal affairs at the American Insurance Association, said Sen. Specter's "misguided amendment would essentially make nearly every business that ever had a commercial relationship with a company alleged to have engaged in financial fraud 'guilty by association'."

It would overturn the Jan 15, 2008 U.S. Supreme Court decision in the Stoneridge v. Scientific Atlanta case that fraud claims are not allowed against third parties that do not directly mislead investors but are business partners companies involved in such activity.

The 5-3 decision came in a case of accounting fraud by a cable provider.

Ms. Shelk said the proposed amendment would permit plaintiff security lawyers to file class action lawsuits against third parties who are alleged to have "aided and abetted" someone else's violation of securities laws, thus raising the status of "secondary" actors to primary violators of security fraud.

In their efforts to defeat the amendment, 14 trade groups sent a letter to all 100 U.S. senators Monday afternoon outlining their opposition

Signers included the AIA and the Property Casualty Insurers Association of America.

The Chamber of Commerce, the American Financial Services Association, the Business Roundtable, the National Association of Manufacturers and the Securities Industry and Financial Markets Association were also among Washington trade groups that signed the letter.

Insurance industry lobbyists now believe that efforts will be made to limit debate on the bill to 30 hours either Thursday or Friday, a move that if passed will mean that a final vote on the bill will occur by next Tuesday.

According to the letter, the Specter amendment does not require that a defendant have "actual knowledge" that his conduct is assisting a fraud; rather, it requires only that the defendant have "actual knowledge of the conduct underlying the violation."

The business groups wrote that under the proposed amendment, even if the plaintiff's allegations are just as consistent with negligence, recklessness, or innocence as they are with "knowledge," the complaint will not be dismissed.

As a result the letters said the defendant company "will become subject to potentially crippling discovery costs and a trial at which it may face joint and several liability for any damages" awarded in the case.

The groups said this liability could potentially amount to billions of dollars, even when the company's alleged involvement with the primary violator relates to only a tiny portion of the alleged fraud.

"That most of these suits ultimately would fail if decided on the merits provides little solace for defendants forced to choose between a settlement and the enormous costs of defending against a potentially ruinous verdict," the letter said.