They're willing to dig into their pockets and do whatever is necessary for their clients.

- Kenneth Feinberg, special master, Sept. 11 Victim Compensation Committee

$219 million Settlement Reached in Beacon Funds Litigation Related to Madoff Investments, On Behalf of ERISA-Covered Employee Benefit Plans

12/22/2012

Cohen Milstein is pleased to have represented clients in the Beacon Litigation, litigated along with other consolidated cases, in which a proposed $219 million settlement is now pending.  For all documents and complete information on the settlement, please visit its official website: www.gcginc.com (enter “Beacon Jeanneret Madoff Litigation” in case search) or if you do not have internet access, call the Administrator toll free at 1-877-308-2283.  Of course, you may also write to us (see information below). 

The settlement, if approved by the Court, will provide approximately 70% of the Class Members damages.  The settlement must be reviewed and approved by the Court; it will hold a hearing on the settlement on March 15, 2013.  Please see below for all important dates for filing of comments on or objections to the settlement, on the Plan of Allocation proposed for distribution of the recoveries, or on Plaintiffs’ Counsel’s request for Awards of Fees and Expenses (which also must be approved by the Court). 

Conference Call for All Interested Class Members

Settlement Class Members and their counsel are invited to participate in a teleconference on January 14, 2013 at 1:00 p.m. EST. On that call, Plaintiffs’ Counsel and their financial experts will address any questions Settlement Class Members have about the Settlement and/or Plan of Allocation.  To register and receive details about the teleconference, please visit www.gcginc.com (enter “Beacon Jeanneret Madoff Litigation” in case search) or if you do not have internet access, call toll free 1-877-308-2283 and leave your contact information.  A representative will contact you to assist with the registration process.

Summary of Litigation and Claims

Cohen Milstein represents 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 asserts 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 alleges 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 alleges 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 alleges 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 alleges 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. 

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 provides for $219 million in value from the Defendants to reimburse defrauded investors.  The parties filed a Stipulation of Settlement on November 13, 2012.  An order granting preliminary approval of the settlement was filed by the Court on November 30, 2012.  This order scheduled a fairness hearing before the Honorable Colleen McMahon, United States District Judge, at the United States District Court, Southern District of New York, Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, Courtroom 14C, New York, NY 10007-1312 on March 15, 2013 at 10 am.  As the case is being prosecuted as a class action, the settlement cannot be executed without first receiving approval from the Court.
The recovery represents approximately 70% of investors’ losses.  In accordance with the Plan of Allocation, the Settlement, if approved, will provide for payments to Settlement Class Members’ Plans that file a Proof of Claim, and certain individuals or entities that also invested directly with BMLIS.

Certain Class Members may object to or opt-out of the settlement.  All Class Members’ claims litigated in the cases will be released if the Court approves the settlement.  To participate in it, certain Class Members or their Pension/Welfare/Annuity plans must file a Proof of Claim, which has been mailed to the applicable parties. 

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, are applying for fees of 20% of the settlement amount, after reductions of $16 million, plus interest as earned by the settlement fund.  They are also seeking reimbursement of their out-of-pocket expenses spent on the cases.  The entire fee and expense petition and all its supporting papers are posted at www.gcginc.com

Important Dates

  • Proof of Claim submission postmark deadline is January 30, 2013.
  • Opt-Out postmark deadline is January 30, 2013 (for Rule 23(b)(3) Settlement Class Members only).
  • Objection postmark deadline is January 30, 2013.
  • Notice of Intent to appear deadline is February 13, 2013.
  • The Fairness Hearing will be held on March 15, 2013, at 10 a.m.

Applicable and Important Documents

All of the following documents are available at www.gcginc.com or by calling  1-877-308-2283:

  • Stipulation of Settlement, dated November 13, 2012
  • Preliminary Approval Order Providing for Notice and Hearing in Connection with Proposed Settlement, dated November 30, 2012
  • Notice of Preliminary Approval of Settlement of Class Actions and Notice of Certification of Settlement Classes (Rule 23(b)(1) Notice)
  • Notice of Preliminary Approval of Settlement of Class and Derivative Actions and Notice of Certification of Settlement Classes (Rule 23(b)(3) Notice)
  • Plan of Allocation
  • Proof of Claim form
  • Private Plaintiffs’ Motion for Final Approval of The Settlement and Plan of Allocation, Certification of Settlement Classes and Awards of Attorneys’ Fees and Expenses and its memorandum in support and all supporting documents
  • Plaintiffs’ Counsel’s Petition for Fees and Expenses

Whom To Contact For More Information:

If you are a Settlement Class Member and have questions about the case or its settlement, please feel free to contact:
Peter Black, Paralegal
pblack@cohenmilstein.com
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