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NEW YORK - (Mealey's) Investors on Nov. 6 asked a federal judge in
New York to preliminarily approve a potential $80.25 million settlement of
claims that defendants concealed that the investors' funds were being placed in
accounts that were part of Bernard L. Madoff's massive Ponzi scheme (Pasha
S. Anwar, et al. V. Fairfield Greenwich Ltd., et al., No. 09-0118, S.D.
N.Y.; See September 2010, Page 30).
Under the terms of the partial settlement, which is
subject to court approval, 10 officers and directors of FG or one of its
subsidiaries will pay "$80,250,000, including a minimum of $50,250,000 that
will be distributed to the Settlement Class (the 'Settlement Fund') upon final
approval and an additional $30,000,000 that will be distributed if not used to
resolve other claims."
"In addition to this guaranteed recovery of $50,250,000,
the Settling Defendants, funded by the FG Defendants, also will transfer
$30,000,000 into a separate account (the 'Escrow Fund'), which will be
distributed to the Settlement Class to the extent it is not used to pay certain
other claims or judgments against the FG Defendants. In the event that
the Escrow Fund is used to settle claims against the Settling Defendants that
have been brought by the Trustee in the liquidation of BLMIS [Bernard L. Madoff
Investment Securities LLC], the Settling Defendants must make an additional
payment to the Settlement Fund of up to $5,000,000, measured by 50% of the
amount, if any, by which such a settlement exceeds $50,125,000," the investors
"As additional consideration, the Settling Defendants
have agreed to waive (i) indemnification claims they hold against the Funds for
the $80,250,000 payments that they will make under the Settlement; and (ii)
$20,000,000 of indemnification claims they hold against the Funds for legal
fees and expenses incurred in defending the Action."
Not Subject To Settlement
Claims against defendants PricewaterhouseCoopers (PwC)
International Ltd. and member firms PwC LLP and PwC Accountants Netherlands
N.V. (collectively, PwC defendants); Citco Group Ltd., five of its subsidiaries
(collectively, Citco) and directors Brian Francoeur and Ian Pilgrim; and
GlobeOp Financial Services LLC (collectively, nondismissed defendants) are not
subject to the stipulation of settlement.
The stipulation of settlement also contains provisions
barring the nondismissed defendants "from asserting claims against the FG
Defendants for contribution and indemnification and providing for reduction of
any judgment that may be entered against the Non-Dismissed Defendants to
account for Plaintiffs' recovery under the instant Settlement."
"The Stipulation is subject to additional terms,
including terms contained in a Supplemental Agreement dated as of November
6,2012, which provides that if class members representing a Net Loss of
principal in excess of a certain amount seek exclusion from the Settlement
Class, the Settling Defendants may terminate the Settlement. In the event
the Settling Defendants elect to terminate, but the Net Loss of opt-outs does
not exceed a separate threshold specified in the Supplemental Agreement, the
Settling Defendants shall incur a break-up fee in the amount of $1,000,000,
which shall remain in the Settlement Fund," the investors state.
Moreover, the investors seek certification of a class of
"All Beneficial Owners of shares or limited partnership interests in the Funds
as of December 10, 2008 (whether as holders of record or traceable to a
shareholder or limited partner account of record), who suffered a Net Loss of
principal invested in Fairfield Sentry Limited, Fairfield Sigma Limited,
Fairfield Lambda Limited, Greenwich Sentry L.P. or Greenwich Sentry Partners,
FG, which managed several funds that invested in Madoff
and BLMIS, was sued by a number of investors who lost money in the scheme and
now are seeking to recover under various tort and contract theories. The
cases were consolidated in the U.S. District Court for the Southern District of
New York under Judge Victor Marrero.
The investors filed an amended complaint in the District
Court, alleging that FG, five of its subsidiaries, 10 officers and directors of
FG or one of the subsidiaries (collectively, the FG defendants); 13 FG partners
(the fee defendants); the PwC defendants; Citco; Francoeur; Pilgrim; and
GlobeOp Financial violated Sections 10(b) and 20(a) of the Securities Exchange
Act and Securities and Exchange Commission Rule 10b-5 by concealing FG's
exposure to the Madoff Ponzi scheme.
Additional Claims Made
Additional claims for fraud, negligent misrepresentation,
negligence, breach of fiduciary duty, third-party beneficiary breach of
contract, constructive trust, mutual mistake, gross negligence, aiding and
abetting breach of fiduciary duty, aiding and abetting fraud and unjust
enrichment were made.
On July 29, 2010, Judge Marrero ruled that the investors'
state law claims are not preempted by New York's Martin Act (Anwar I),
and in an Aug. 18, 2010, ruling (Anwar II), Judge Marrero held that the
investors have properly stated a claim against the FG defendants and the fee
defendants and have properly pleaded their securities law claims under the
group pleading doctrine.
The investors are represented by David Boies of Boies,
Schiller & Flexner in Armonk, N.Y.; David A. Barrett and Howard L. Vickery
of Boies Schiller in New York; Stuart H. Singer, Carlos M. Sires and Sashi Bach
Baruchow of Boies Schiller in Fort Lauderdale, Fla.; Robert C. Finkel, Carl L.
Stine and James A. Harrod of Wolf Popper in New York; Christopher Lovell and
Victor E. Stewart of Lovell Stewart Halebian in New York; Robert S. Schachter
and Hilary Sobel of Zwerling Schachter & Zwerling in New York; Steven J.
Toll and S. Douglas Bunch of Cohen Milstein Sellers & Toll in Washington,
D.C.; Daniel W. Krasner and Gregory M. Nespole of Wolf Haldenstein Adler
Freeman & Herz in New York; and David A Gehn of Gusrae, Kaplan, Bruno &
Nusbaum in New York.
PwC Accountants N.V. is represented by William R.
Maquire, Sarah L.
Cave, Savvas A. Foukas and Gabrielle
S. Marshall of Hughes Hubbard & Reed in New York. Francoeur is represented by
Kenneth A. Zitter of New York.
GlobeOp is represented by Jonathan D. Cogan and Michael S. Kim of Kobre &
Kim in New York and Grant B. Rabenn of Kobre
& Kim in Washington, D.C.
The Citco defendants are represented by Lewis N. Brown
and Amanda M. McGovern of Gilbride, Heller & Brown in Miami
and Eliot Lauer and Michael Moscato of Curtis, Mallet-Prevost, Colt & Mosle
in New York.
Lion Fairfield Capital Management Ltd. is represented by Lawrence P. Eagel,
Paul D. Wexler and Jeffrey A. Carpenter of Bragar Wexler Eagel & Squire in New York. PwC
International is represented by Howard M. Shapiro, Fraser L. Hunter Jr., Anne
K. Small and Brad E. Konstandt Wilmer Cutler Pickering Hale and Dorr in New York.
PwC LLP is represented by Andrew M. Genser of Kirkland
& Ellis in New York and Emily Nicklin and
Timothy A. Duffy of Kirkland & Ellis in Chicago. The fee defendants are
represented by Edward M. Spiro of Morvillo, Abramowitz, Grand, Iason, Anello
& Bohrer in New York and Mark G. Cunha,
Michael J. Chepiga and Peter E. Kazanoff of Simpson Thacher & Bartlett in New York.
The FG defendants are represented by Cunha, Chepiga and
Kazanoff of Simpson Thacher in New York; Marc E. Kasowitz and Daniel J.
Fetterman of Kasowitz Benson Torres & Friedman in New York; Andrew Levander
and David Hoffner of Dechert in New York; Glenn Kurtz and Andrew Hammond of
White & Case in New York; and Mark Goodman and Helen Cantwell of Debevoise &
Plimpton in New York.
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