The NYT article is here.
The prosecution never should have happened - it will be fascinating to watch its dissection.
Friday, May 8, 2009
Update - Madoff, Stanford, UBS, Account Holders & Suits Against Advisers in the Referral Chain
Update: This post updates a Feb. 20 post. The new news is a Law.com article regarding a new Madoff-related lawsuit in Florida naming a feeder fund (Tremont) and KPMG as defendants for alleged failures in due diligence and monitoring of investments placed with Madoff. The same article includes links to yet another article on clawback suits by the Madoff trustee.
According to the Law.com article, the Florida lawsuit includes the following allegations:
"The lawsuit contends a number of red flags should have made Tremont wary of investing with Madoff.
The plaintiffs contend they depended upon the information supplied by Tremont in making their investment decisions and received false reports indicating the value of their investments was steadily rising.
Plaintiffs also said they were led to believe Tremont diversified its investments instead of putting all the money in one basket. The complaint contends Tremont promised clients it would monitor the investments and change the strategy if necessary. The lawsuit contends Tremont would have found the fraud with proper oversight.
Instead of finding problems, however, the complaint said Tremont's Rye Investment Management boasted its funds have "historically displayed steady and consistent performance, especially during market downturns," implying a conservative investment scheme.
The lawsuit also states several plaintiffs reached out to Rye managers about how the funds were doing. A supervisor told one plaintiff that his accounts had not lost value despite market weaknesses last fall. A supervisor told another investor around the same time that the fund had not suffered losses because it was shielded from the subprime crisis.
The plaintiffs also maintain KPMG did not adequately do its job as auditor despite saying it performed its audits to national standards.
"KPMG's audits failed to reveal the fact that the assets reported on each of the Rye funds' financial statements did not actually exist," the plaintiffs stated.
They sued for fraud, securities violations, negligence, negligent misrepresentation, breach of fiduciary duty, breach of contract and professional malpractice, and are seeking a jury trial.
"This is a case about the greed of investment professionals and their auditors taking priority over the most basic adherence to their contract, tort and fiduciary duties," the complaint contends."
________________________________________________________________
The DOJ's efforts against Stanford and UBS AG are much in the news these days, with a good UBS summary article here and images of DOJ litigation papers available here (look for links in the box on the right hand side.)
The question that occurs to me is: what kind of fall out and follow up lawsuits will emerge? We are seeing in the Madoff situation lots of efforts to pin financial losses and blame on advisers who connected investors to Madoff's enterprise, and thoughts from lawyers at Sonnenschein and elsewhere regarding potential clawback claims by trustees and/or others. One would think the same result will follow here. Some interesting law likely will evolve as to whether or how much one professional has a duty to investigate another before making a recommendation or referral. There are existing claims and case law. See for example a law firm (Brown McCarroll) website article addressing liability of call centers, and an American Bar Association page with links to articles on claims against lawyers for allegedly negligent referrals. This all should make for some fascinating legal wrangling, with global tort choice of law issues.
The situations also may be a boon for multilingual lawyers.
According to the Law.com article, the Florida lawsuit includes the following allegations:
"The lawsuit contends a number of red flags should have made Tremont wary of investing with Madoff.
The plaintiffs contend they depended upon the information supplied by Tremont in making their investment decisions and received false reports indicating the value of their investments was steadily rising.
Plaintiffs also said they were led to believe Tremont diversified its investments instead of putting all the money in one basket. The complaint contends Tremont promised clients it would monitor the investments and change the strategy if necessary. The lawsuit contends Tremont would have found the fraud with proper oversight.
Instead of finding problems, however, the complaint said Tremont's Rye Investment Management boasted its funds have "historically displayed steady and consistent performance, especially during market downturns," implying a conservative investment scheme.
The lawsuit also states several plaintiffs reached out to Rye managers about how the funds were doing. A supervisor told one plaintiff that his accounts had not lost value despite market weaknesses last fall. A supervisor told another investor around the same time that the fund had not suffered losses because it was shielded from the subprime crisis.
The plaintiffs also maintain KPMG did not adequately do its job as auditor despite saying it performed its audits to national standards.
"KPMG's audits failed to reveal the fact that the assets reported on each of the Rye funds' financial statements did not actually exist," the plaintiffs stated.
They sued for fraud, securities violations, negligence, negligent misrepresentation, breach of fiduciary duty, breach of contract and professional malpractice, and are seeking a jury trial.
"This is a case about the greed of investment professionals and their auditors taking priority over the most basic adherence to their contract, tort and fiduciary duties," the complaint contends."
________________________________________________________________
The DOJ's efforts against Stanford and UBS AG are much in the news these days, with a good UBS summary article here and images of DOJ litigation papers available here (look for links in the box on the right hand side.)
The question that occurs to me is: what kind of fall out and follow up lawsuits will emerge? We are seeing in the Madoff situation lots of efforts to pin financial losses and blame on advisers who connected investors to Madoff's enterprise, and thoughts from lawyers at Sonnenschein and elsewhere regarding potential clawback claims by trustees and/or others. One would think the same result will follow here. Some interesting law likely will evolve as to whether or how much one professional has a duty to investigate another before making a recommendation or referral. There are existing claims and case law. See for example a law firm (Brown McCarroll) website article addressing liability of call centers, and an American Bar Association page with links to articles on claims against lawyers for allegedly negligent referrals. This all should make for some fascinating legal wrangling, with global tort choice of law issues.
The situations also may be a boon for multilingual lawyers.
Wednesday, May 6, 2009
Expanded - Chrysler Bankruptcy - Asbestos and Other Tort Claimants and the Official Committee for Unsecured Creditors - Asbestos Claimants
Expansion: An ad hoc group of non-asbestos tort claimants sought a place on the official committee for unsecured creditors but did not receive a formal seat on the committee. The committee is represented by Schnader Harrison, and is comprised of persons who have filed personal injury lawsuits against Chrysler. The claims are said to worth over $ 600 million. The papers are available at the unofficial online website (link below) as docket items 287 and 273.
Note also that asbestos plaintiffs' firm SimmonsCooper filed an appearance on April 30. The papers are docket items 25, 17 and 13 or are collected here.
Prior: In the Chrysler bankruptcy, the US Trustee's office filed today papers designating the Official Commmittee of Unsecured Creditors. The papers designate a committee member who apparently will represent asbestos claimants because she, Patricia Pascale, is listed through the Brayton Purcell plaintiff's firm in California that handles asbestos claims, among others. The designation states:
Patricia Pascale
c/o Brayton Purcell LLP
222 Rush Landing Rd.
Novato, CA 94948
ATTN: Alan R. Brayton, Esq.
Telephone No. (415) 898-1555
Fax No. (415) 898-1247
An image of the US Trustee's designation paper is available through Chrysler's online copy of the court docket at docket number 366, or here.
Note also that asbestos plaintiffs' firm SimmonsCooper filed an appearance on April 30. The papers are docket items 25, 17 and 13 or are collected here.
Prior: In the Chrysler bankruptcy, the US Trustee's office filed today papers designating the Official Commmittee of Unsecured Creditors. The papers designate a committee member who apparently will represent asbestos claimants because she, Patricia Pascale, is listed through the Brayton Purcell plaintiff's firm in California that handles asbestos claims, among others. The designation states:
Patricia Pascale
c/o Brayton Purcell LLP
222 Rush Landing Rd.
Novato, CA 94948
ATTN: Alan R. Brayton, Esq.
Telephone No. (415) 898-1555
Fax No. (415) 898-1247
An image of the US Trustee's designation paper is available through Chrysler's online copy of the court docket at docket number 366, or here.
Monday, May 4, 2009
Asbestos Litigation Developments, Especially New Article by Mark Behrens
Pointoflaw collected several asbestos events links, some of which come back here.
Of particular note is Mark Behren's new Review of Litigation article: What's New In Asbestos Litigation.
For those who do not know Mark, he is with Shook Hardy in DC and has a great command of asbestos issues. Mark has been active in asbestos issues for a long time, especially legislation. Mark however goes far beyond legislative work to write several material articles. Mark also has given expert testimony in asbestos bankruptcies as to how and why the bankruptcy trust funds are defying state law. Mark is absolutely correct on that point, and that's why asbestos bankruptcy trusts are so much loved by the lawyers for non-impaired claimants. Simply put, they are using the chapter 11 trusts to avoid state law tort reform statutes, and are thereby continuing to collect massive amounts of money for persons who do not have any impairment of their daily activities.
You can obtain the full text of several of Mark's articles at his page on Shook Hardy's website.
Of particular note is Mark Behren's new Review of Litigation article: What's New In Asbestos Litigation.
For those who do not know Mark, he is with Shook Hardy in DC and has a great command of asbestos issues. Mark has been active in asbestos issues for a long time, especially legislation. Mark however goes far beyond legislative work to write several material articles. Mark also has given expert testimony in asbestos bankruptcies as to how and why the bankruptcy trust funds are defying state law. Mark is absolutely correct on that point, and that's why asbestos bankruptcy trusts are so much loved by the lawyers for non-impaired claimants. Simply put, they are using the chapter 11 trusts to avoid state law tort reform statutes, and are thereby continuing to collect massive amounts of money for persons who do not have any impairment of their daily activities.
You can obtain the full text of several of Mark's articles at his page on Shook Hardy's website.
Sunday, May 3, 2009
Deal Recounts the Long Strange Trip That is the Congoleum Asbestos Bankruptcy
Reuter's picked up a Deal article recounting the long strange trip known as the Congoleoum asbestos bankruptcy. It's well worth reading for those who care about mass tort bankruptcies.
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