Overview
In this class action lawsuit, Cohen Milstein represented the trustees and participants of ERISA-covered employee benefit plans whose assets were invested by Beacon Associates LLC I and Beacon Associates LLC II (the “Feeder Funds”) in and lost money by investment the investment schemes of Bernard L. Madoff, Bernard L. Madoff Investment Securities, LLC.
The lawsuit alleged that the defendants failed to conduct adequate due diligence which would have revealed the implausibility of the returns claimed by Madoff Securities and that if they had taken steps to assure that each Feeder Fund assigned its assets to a manager that had been subjected to prudent due diligence, and had the Defendants made decisions based on diligent investigation, employee benefit plan assets held by the Feeder Funds would not have been subject to misappropriation by Madoff Securities, and the losses caused by Madoff Securities to each Feeder Fund would not have occurred.
The lawsuit further alleged that Defendants’ Offering Memoranda described their “Managing Member’s Large Cap Strategy” as involving “investments in a portfolio of ‘large cap’ stocks and the utilization of various hedging techniques involving options, with the primary objective being preservation of capital while achieving the maximum possible investment return.” Contrary to the language of the Offering Memoranda, the lawsuit alleged that each Feeder Fund employed no such strategy itself, but instead turned the portion of the Feeder Fund’s portfolio committed to the “Large Cap Strategy” over to the complete discretion and control of Madoff and Madoff Securities. From those accounts, the lawsuit alleged that Madoff misappropriated Feeder Fund assets as part of his Ponzi scheme.
Settlement Class
The ERISA claims in this lawsuit were brought and settled on behalf of the following persons: All fiduciaries, participants and beneficiaries of any employee benefit plan covered by ERISA who invested in Beacon I or Beacon II at any time through the present (the “ERISA Class”). Excluded from the ERISA Class were defendants, their officers, employees, directors, partners, and members of the immediate families of any of the foregoing, or any of their heirs, successors or assigns.
History of the Litigation
The case brought by Cohen Milstein, entitled Towsley v. Beacon Associates Management Corp. was filed on May 8, 2009 and was then consolidated with related cases against the same Defendants in In re Beacon Associates Litigation, in the Southern District of New York. In representing their clients and the ERISA class, Cohen Milstein cooperated with the plaintiffs in related cases and filed a consolidated second amended complaint alleging ERISA, securities, and derivative claims. In the course of the litigation, Cohen Milstein successfully defeated Defendants’ Motions to Dismiss and a Motion for Reconsideration on the motion to dismiss. After the motion to dismiss was denied, Cohen Milstein successfully certified the class over Defendants’ opposition. Prior to reaching settlement, the parties had engaged in substantial discovery.
Settlement
After months of negotiation with the assistance of professional mediators, the parties in all related actions (including derivative suits, state court actions and individual cases and claims by the U.S. Department of Labor and the New York State Attorney General) agreed to a settlement that provided $219 million to reimburse defrauded investors. The Stipulation of Settlement was filed with the Court on November 13, 2012. 100% of all Class Members entitled to distribution under the Plan of Allocation filed proof of claim forms. The Final Fairness Hearing was held on March 15, 2013, at which time the Court explicitly noted the extraordinary response and participation by class members and the hard work of Class Counsel in achieving a global resolution of the case. The Court granted final approval to the settlement and the Plan of Allocation of the Settlement Fund at the final fairness hearing. On May 28, 2013, the Court dismissed the case and on July 17, 2013, the Court approved distribution of the Class Settlement Fund. This settlement, combined with money the victims are expected to recover from a separate liquidation of Madoff assets, is expected to restore the bulk of the losses to the pension funds whose trustees and participants were class members.