Beacon/Madoff ERISA LitigationPractice Area: Employee Benefits
Summary of the Lawsuit
Cohen Milstein represented clients in the Beacon Litigation, which, along with other consolidated cases, reached an agreement to settle for $219 million. At a final fairness hearing held on March 15, 2013, the Court granted final approval to the Beacon Jeanneret Madoff Settlement and the Plan of Allocation of the Net Settlement Fund. On May 28, 2013, the Court dismissed the case and on July 17, 2013, the Court approved distribution of the Class Settlement Fund.
This $219 million settlement resolved lawsuits brought by the Settling Plaintiffs, including Private Plaintiffs, the United States Secretary of Labor and the New York Attorney General, against the Settling Defendants involving the In re Beacon, In re Jeanneret and Buffalo Laborers class actions. Plaintiffs’ counsel estimated that the recovery represented approximately 70% of investors’ out-of-pocket losses.
Summary of the Claims and Litigation
Cohen Milstein represented Trustees and participants in the I.B.E.W. 43 Welfare Fund and Trustees of the Oswego Laborers’ Fund (now known as Central New York Laborers Fund) in this class action on behalf of ERISA-covered employee benefit plans whose assets were lost through investments made on their behalf by Beacon Associates LLC I and Beacon Associates LLC II (the “Feeder Funds”) in the investment schemes of Bernard L. Madoff, Bernard L. Madoff Investment Securities, LLC and their investment funds (“Madoff Securities”).
The lawsuit asserted claims against the Feeder Funds; Beacon Associates Management Corp.; Joel Danziger, President and Director of Beacon Associates; Harris Markhoff, Vice President, Secretary, Treasurer, and Director of Beacon Associates; Ivy Asset Management LLC; twenty-four individuals who were officers and directors of Ivy; Jeanneret Associates, Inc., John Jeanneret and Paul Perry (collectively “Defendants”). In general, the lawsuit alleged that Defendants failed to conduct adequate due diligence which would have revealed the implausibility of the returns claimed by Madoff Securities and that if Defendants 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.
The initial case, entitled Towsley v. Beacon Associates Management Corp. et al., No. 09-cv-4453 (S.D.N.Y), was filed on May 8, 2009. It was consolidated with related cases against the same Defendants in In re Beacon Associates Litigation, No. 09-cv-0777 (S.D.N.Y.). Plaintiffs in the Towsley action cooperated with all the related Plaintiffs and litigated the cases through the filing of a consolidated second amended complaint alleging ERISA, securities, and derivative claims; success in opposing Motions to Dismiss and a Motion for Reconsideration; and success in the Motion for Class Certification. The parties engaged in substantial discovery while also litigating all these motions.
Class Action Allegations
This lawsuit was brought by Cohen Milstein 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.
Summary of the Settlement
The parties subsequently agreed to enter into settlement discussions with the help of mediators. This included all Defendants, all Plaintiffs (including Plaintiffs that filed derivative suits, state court actions and individual cases), the U.S. Department of Labor, and the New York State Attorney General. After months of meetings, and then months of negotiations on settlement papers, the parties reached agreement on a landmark settlement that provided for $219 million in value from the Defendants to reimburse defrauded investors. The parties filed a Stipulation of Settlement on November 13, 2012. The Classes overwhelmingly supported the settlement and plan of allocation, with 100% of all Class Members who are receiving a distribution under the Plan of Allocation filing proof of claim forms. At the final fairness hearing, the Court noted:
In the history of the world there has never been such a response to a notice of a class action settlement that I am aware of, certainly, not in my experience. . . And, yes, the fact that there was no objection to it reflects the hard work that all of you put into trying to get a global resolution of all of these cases, whether class actions or private actions where ever they were pending, whether arbitrations or in court to get a global resolution of these disputes relating principally to Ivy achieved so that we can get them all behind us. You worked very hard. The settlement process really was quite extraordinary.
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 pension funds for the local unions and other class members. This is only a summary of the settlement; for all information on all of its terms and conditions, please review all the papers available at www.gcginc.com (enter “Beacon Jeanneret Madoff Litigation” in case search).
Plaintiffs’ Attorneys’ Request for Awards of Fees and Expenses
Plaintiffs’ Attorneys, including Cohen Milstein, applied for fees of 20% of the settlement amount, after reductions of $16 million, plus interest as earned by the settlement fund. They also sought reimbursement of their out-of-pocket expenses spent on the cases. Plaintiff’s motion for fees and expenses is posted on this website and at www.gcginc.com. This motion was approved by the Court on May 29, 2013.
Applicable and Important Documents
A number of documents related to the litigation are available on this website under Case Documents or on the official settlement website: www.gcginc.com (enter “Beacon Jeanneret Madoff Settlement” in case search). If you do not have internet access, you may call the Administrator toll free at 1-877-308-2283 or contact us at the address below.
Whom to Contact for More Information
If you are a Settlement Class Member and have questions about the case or its settlement, please contact one of the following persons:
Michelle Yau, Esq. firstname.lastname@example.org
Cohen Milstein Sellers & Toll PLLC
1100 New York Avenue, N.W., Suite 500
Washington, D.C. 20005
Telephone: 888-240-0775 or 202-408-4600