Ponzi scheme

Week Adjourned: 11.11.11

The weekly wrap up of Class Action Lawsuits and Settlements for the week ending November 11, 2011.

Top Class Actions

We’re Mad about Madoff! Still. Again. No kidding. Only this time someone’s naming a bank. Two former Bernard L. Madoff investors have filed a proposed consumer fraud class-action lawsuit against JP Morgan Chase & Co, claiming the banking giant was complicit in aiding Madoff in orchestrating the Ponzi scheme that robbed investors of more than $65 billion.

The lawsuit comes after a similar suit filed by the trustee appointed to represent Madoff’s victims was dismissed. The court ruled that the case filed by Irving Picard lacked standing, holding those claims belonged exclusively by the victims of Madoff’s fraud.

Among the allegations leveled in the lawsuit, investors charge that JP Morgan operated as Bernard L. Madoff Investment Securities LLC’s (BLMIS) primary banker for more than 20 years, and were faced with many indications that the fund was nothing more than a Ponzi scheme.

The lawsuit details that since 1986, all the money BLMIS collected from unwitting investors passed through JP Morgan in an account known as the 703 Account, where BLMIS co-mingled funds from investors.

The lawsuit contends that JP Morgan should have known that BLMIS’s activities were grossly inconsistent with those of an investment firm through a number of signs of impropriety.

JP Morgan, for example, was required to review a filing submitted by BLMIS to the SEC known as the Financial and Operational Combined Uniform Single Reports or FOCUS. That report, the lawsuit states, contained glaring irregularities that JP Morgan should have reported to the SEC, including factual omissions and errors, such as failing to report any commission revenue.

Beginning in 2006 JP Morgan sold structured investment products related to BLMIS feeder funds to its clients, profiting on those transactions as well. In the course of structuring those products, JP Morgan performed due-diligence on BLMIS and became suspicious that the BLMIS was a fraud but did not report its findings, the lawsuit alleges, but did redeem $145 million from BLMIS and $276 million from BLMIS feeder funds in 2008.

The lawsuit has been filed on behalf of Stephen and Leyla Hill, investors who incurred losses in BLMIS. It claims JP Morgan had knowing participation in a breach of trust, aided and abetted fraud, aided and abetted a breach of fiduciary duty, aided and abetted conversion and received unjust enrichment. The suit seeks damages for the plaintiffs.

Top Settlements

Big Banks paying Big Bucks: But are the bucks big enough? A $410 million settlement was approved this week—you may have seen it splashed all over the news—by a federal judge in Miami, ending an overdraft fees class action lawsuit against Bank of America (BoFA) that claimed the bank charged excessive overdraft fees.

Only thing is there are reportedly more than 13 million current and former customers who will be affected by the decision, customers who used debit cards over the past 10 years. Some reports suggest that most of the plaintiffs will likely only receive a fraction of the overdraft fees they paid. Ummm.

The lawsuit alleged that BoFA processed its debit card and check payments in such a way as to incur more customer overdrafts and consequently more fees. BoFA insists that its system was proper, despite the settlement. The settlement includes an estimated $123 million in legal fees for plaintiff’s lawyers…

Another bittersweet asbestos settlement this week. The widow of a man who died from peritoneal mesothelioma cancer has been awarded a settlement—a “substantial” sum—amount not publicly disclosed as compensation for loss of her husband, to put it bluntly. The settlement, negotiated on behalf of Mrs. Veraldo, was obtained midway through trial.

Mrs. Veraldo sued as executrix of the estate of her late husband, Randy Veraldo. He was 52 when he died in 2009, seven months after being diagnosed with peritoneal mesothelioma cancer, court records show.

Mr. Veraldo was a parts handler at a Teterboro, N.J., warehouse from 1978-85. The job required him to unpack clutch plates delivered on a near-daily basis from various suppliers. The clutch plates were said to contain asbestos, a mineral once widely used in the U.S. as a cheap insulating material until it was found to cause mesothelioma cancer.

Ok—That’s enough for this week. See you at the bar. And on this Veterans Day, a toast to all veterans, living and gone, the world over.

Week Adjourned: 3.4.11

Top Class Actions

Glass Ceiling with a $100M Price Tag at CIGNA? Well, this has certainly been a time for discrimination class actions. Filed, that is. Topping the list—Cigna Health Care—based on the number of potential plaintiffs—dollars. This one’s all about gender discrimination—in the form of a hostile work environment and differential treatment of males and females occurs company-wide the suit alleges.

The complaint, filed by Ms. Bretta Karp, a long-time contracting manager with Cigna, claims that Ms. Karp and other female employees were disriminated against by treating them less favorably than male employees in similar positions and by subjecting all females to intentional, deliberate and wilful discriminatory denials of promotions and pay raises, discriminatory evaluations, disparate terms and conditions of work, harassment, hostile work environments, and other forms of discrimination in callous disregard of their rights.

The complaint further details that CIGNA has created a hostile work environment where male supervisors harass and intimidate female employees, where management has made clear that it favors male employees over women, and where company investigations into complaints made by female employees are either nonexistent or superficial and inadequate.

And the amount sought in damages? $100 million baby—along with litigation costs and Continue reading “Week Adjourned: 3.4.11”

Week Adjourned: 12.18.10

Top Lawsuits

Un-Merit-orious Behavior. Well, it just wouldn’t be Christmas without some mention of banks. After all, ’tis the season for the ringing of cash registers, credit and debit cards and overdrafts!’ This week Akron-based FirstMerit Bank is front and center, facing allegations in a recently filed class action that customers in Ohio were charged overdraft fees based “unfair and deceptive overdraft fee practices.”

The lawsuit, filed on behalf of plaintiff Donald Stevens of Crestline, Ohio, contends that such practices violate Ohio law and FirstMerit Bank’s contracts with its customers. According to the suit, FirstMerit engaged in a systematic policy of re-ordering debit card transactions from highest dollar amount to the lowest dollar amount, depleting the customer’s available funds as quickly as possible while maximizing the overdraft fees. Sound familiar?

The suit further states that the bank charged overdraft fees in situations where a customer did not overdraw a checking account and, in addition, failed to disclose or properly disclose its overdraft policies. This resulted in the bank providing misleading account balance information and often charging overdraft fees on top of overdraft fees.

Ho, Ho, Ho! It’s off to court they go!

Top Settlements

Puts the Happy Meal Lawsuit in Perspective… Lorillard Tobacco Co, certainly made an impression this week, when a jury found the company guilty of attempting to entice African American children to become smokers, by giving out free cigarettes. Wouldn’t that also come under the heading of ‘drug dealing?’

The jury hearing the case has awarded $71 million in compensatory damages to the estate of a woman who died of tobacco-related lung cancer, and her son, Willie Evans. The facts, as presented by Mr. Evans, are frightening. In the suit, he claimed that his mother, Marie Evans, was introduced to smoking as a child in the 1950s when Lorillard gave her free Newport cigarettes at the Orchard Park housing project in Boston, where she lived at the time. Apparently, she was just nine years of age when she received her first free cigarettes. Initially, she passed them on to her older sisters or traded them for candy, but by the age of 13 she had begun to smoke. Mr. Evans claimed that as a result, his mother went on to smoke for the next 40 years, until her death from lung cancer at 54. And yes, Marie did try to quit, dozens of times, according to video testimony she made before her death.

Mrs. Evans’ estate was subsequently awarded $50 million in compensatory damages and the jury also awarded her son $21 million. A hearing on punitive damages is set to take place before the end of this year. Lorillard is expected to appeal the decision. No surprise there.

DanActive Don’t. Dannon Co Inc, agreed to a $21 million settlement this week, ending charges brought by federal regulators over claims that its DanActive drink and Activia Yogurt help boost a person’s immune system and relieve irregularity. The charges allege there is not enough evidence to support Dannon’s claims currently stated on the products’ packaging and in their marketing campaigns. Hey—if it sounds too good to be true…

Attorneys General from 39 states brought the case, which is the largest attorney general consumer protection multi-state settlement ever reached with a food producer, MSNBC.com reported.

The two lead states, Oregon and Tennessee, will receive $1.06 million under the agreement and the remainder of the money will be divided among the other states.

Attention Madoff-Watchers: The estate of Jeffrey M. Picower, a philanthropist and investor from Palm Beach, has reached a settlement with the Trustee charged with recovering assets from the Madoff bankruptcy, Irving H. Picard, and the United States attorney for the Southern District, Preet Bharara, that will see a total of $7.2 billion cash made available to compensate the victims of Bernard Madoff’s global ponzi scheme. The announcement comes on the heels of the suicide of 46-year old son Mark Madoff, who hung himself in his New York loft this week.

The terms of the settlement reportedly stipulate that $2.2 billion goes to a federal victims fund to resolve a lawsuit filed last year, and $5 billion will be placed in care with the Trustee.

Picower’s widow said in a statement released to the press on December 17, “I am announcing today that we have reached a settlement with the Trustee and the US Attorney for the Southern District of New York and that we will return every penny received from almost 35 years of investing with Bernard Madoff, an amount totalling $7.2 billion that will go to the Madoff victims’ compensation fund. “

The settlement constituted the largest single forfeiture in American judicial history, Mr. Bharara said.

Mrs. Picower said in her statement that she was confident that her husband had not been involved in the ponzi scheme, calling it ‘deplorable’, and that returning the gains was the right thing to do.

Okee dokee. That’s it for this week. See you at the bar…