Combating Corpor ate Fr aud and Abuse

Transcription

1 Sh e p h e r d, Fi k e l m a, Mi l l e r & Sh a h, l l p Attoreys at Law Combatig Corpor ate Fr aud ad Abuse Safeguardig ad Protectig Your Ivestmets

2 Shepherd, Fikelma, Miller & Shah, LLP ( SFMS or the Firm ), a law firm with exceptioal skills ad experiece i the fields of corporate fraud ad goverace actios, provides a variety of services to select pesio fuds ad other istitutioal ivestors related to the moitorig ad prosecutio of idividual ad class actio cases assertig causes of actio for securities fraud ad other breaches of legal duty. The missio of SFMS is to combat corporate fraud ad abuse. The services that SFMS provides have become icreasigly importat because it, ufortuately, has become clear that may facially reputable compaies ad the idividuals who maage them caot always be trusted to fulfill their duties to their shareholders eve if shareholders are sigificat istitutioal ivestors. As the experiece of the last several years has taught ivestors i cases such as Adelphia, Ahold, Bear Stears, Citigroup, Coutrywide Fiacial, Ero, HealthSouth, Lehma Brothers, Parmalat, Tyso Foods ad Worldcom, purported blue chip compaies, as well as the baks ad other professioals employed to maage ad advise them, ofte egage i itetioal fraud ad gross mismaagemet as a result of persoal avarice or misplaced arrogace. Securities fraud ad other corporate goverace litigatio has emerged as a importat tool for istitutioal ivestors to remedy losses ad obtai sigificat goverace chages, as well as to deter agaist future miscoduct. The Firm is committed to assistig select pesio fuds ad other istitutioal cliets i recoverig losses due to fraud ad related miscoduct, while also compellig the perpetrators of such malfeasace to adopt improved corporate goverace procedures as a prophylactic meas to protect agaist future abuses. The Firm s attoreys provide its cliets with a powerful combiatio of ivestigative ad prosecutorial skills ad experiece, as well as a commitmet to excellece i represetatio, cliet commuicatio ad advocacy. As described more fully i these iformatioal materials, the Firm offers the followig services to pesio fuds ad other istitutioal cliets: Develop Guidelies Ad Policy Statemets Regardig Securities Ad Derivative Litigatio, As Well As Other Corporate Goverace Iitiatives, To Meet Fiduciary Obligatios Moitor Securities Ad Related Litigatio That Affects A Cliet s Ivestmets Ivestigate Potetial Ad Pedig Litigatio To Evaluate The Appropriate Role, If Ay, For The Cliet Prepare Presetatios For Istitutioal Cliets Regardig The Status Of Potetial Ad Pedig Litigatio Ad Other Corporate Goverace Iitiatives Provide Updates Regardig The Settlemet Or Other Resolutio Of Litigatio Disputes Ad Iitiatives Assist Cliets, Whe Requested, I Completig Appropriate Claim Forms Ad Other Documetatio To Maximize Recoveries 1

3 Istitutioal Ivestors Fiduciary Duties Ad Private Eforcemet Actios Istitutioal ivestors have a tremedous resposibility to their beeficiaries ad other stakeholders to esure the fiacial security of their fud assets ad to esure that fud assets are ivested i corporate etities that coduct themselves i a resposible ad forthright maer. Istitutioal ivestors typically hire professioals to maage fud assets ad esure growth. To this ed, istitutioal ivestors ofte create sophisticated processes to moitor the performace of their ivestmet professioals ad the results they achieve. Oe of the most importat duties of istitutioal ivestors is the safeguardig of fud assets, icludig the duty to take reasoable steps to moitor ad, where appropriate, prosecute claims arisig from fraud or other malfeasace by corporate wrogdoers. Istitutioal ivestors curretly play a critical role i the prosecutio of private securities fraud actios. With the passage of the Private Securities Litigatio Reform Act of 1995 ( PSLRA ), Cogress dramatically altered the federal securities laws ad established may of the provisios that ow gover shareholder lawsuits. Oe of the pricipal goals of the PSLRA was to ecourage istitutioal ivestors to take charge of prosecutig securities class actio lawsuits by becomig lead plaitiffs i the case. Cogress explicitly stated its preferece for istitutioal lead plaitiffs whe it issued the followig statemet: The Coferece Committee believes that icreasig the role of istitutioal ivestors i class actios will ultimately beefit shareholders ad assist courts by improvig the quality of represetatio i securities class actios. I recogitio of the critical role that istitutios ca play i securities fraud class actios, i 1998, the Uited States Departmet of Labor ( DOL ) stated the followig i a amicus brief filed i I re Telxo Corporatio Securities Litigatio: Not oly is a fiduciary ot prohibited from servig as a lead plaitiff, the Secretary believes that a fiduciary has a affirmative duty to determie whether it would be i the iterest of the pla participats to do so. The Secretary has previously take the positio that it may ot oly be prudet to iitiate litigatio, but also a breach of a fiduciary s duty ot to pursue a valid claim. As a result of the DOL s positio, i the last several years, a sigificat umber of public ad Taft- Hartley pesio fuds, as well as other istitutioal ivestors, have elected to serve as lead plaitiffs i securities fraud litigatio ad have cosistetly demostrated a ability to icrease the size of the recoveries for shareholders. I fact, as a 2003 NERA Ecoomic Cosultig study, Recet Treds i Securities Class Actio Litigatio, cofirms: settlemets i securities class actios were foud to be about 20% higher where the plaitiff was a istitutioal ivestor. Moreover, the value of securities class actio settlemets reached over $18 billio i 2006 as compared to just $2.1 billio i It is estimated that the curret value of pedig securities class actios exceeds $15 billio, thereby providig a large source of potetial recovery for harmed ivestors ad especially istitutioal ivestors. 2

4 Creatig Policy Guidelies For Moitorig Ad Evaluatig Corporate Goverace Litigatio Although certai istitutioal ivestors have actively pursued securities ad corporate goverace litigatio, it was ot util the collapses of Ero ad Worldcom that a sigificat umber of istitutios bega takig a careful look at their ow obligatios ad the role that they might play i curbig corporate abuses. Few istitutioal ivestors fid the prospect of participatig i a class actio or other corporate goverace litigatio particularly attractive. May public pesio fuds ad other istitutioal ivestors, however, ow recogize the eed to establish securities litigatio policies, moitor fraud-related damages ad, where appropriate, cosider legal actio to fulfill their fiduciary duties. O Jauary 24, 2003, the Securities ad Exchage Commissio cadidly ackowledged its ow resource limitatios i makig the followig self-assessmet: The ability of ivestors to fully recover their losses, ideed may largely deped o the use of private actios. It is relatively simple for the prudet istitutioal ivestor to establish processes to evaluate its resposibilities ad make iformed judgmets regardig how to fulfill these resposibilities. Furthermore, based upo the icreased recoveries that istitutioal ivestor lead plaitiffs have bee able to obtai i securities class actios, it is i the best iterests of istitutioal ivestors to cosider takig a lead role i appropriate cases. I sum, based upo the realities of the ivestig ad legal marketplaces, out of self-iterest, as well as fiduciary duty, every istitutioal ivestor should develop a policy to defie its role i securities class actio ad corporate goverace litigatio so that it ca determie how best to protect its assets ad the iterests of its beeficiaries or other stakeholders. The policy guidelies that we develop with our istitutioal ivestor cliets typically address the followig cosideratios: (i) idetificatio of the idividuals or etities charged with idetifyig potetial claims (i.e., outside cousel, i-house cousel, portfolio maagers ad/or aalysts); (ii) the timig ad procedure for evaluatio of potetial claims; (iii) quatitative triggers for idetificatio ad ivestigatio of claims, icludig the dates ad timig of the ivestmet, the percetage of holdigs of outstadig shares or other securities, the relative size of a ivestor s holdigs relative to those of other ivestors, the potetial damages recoverable ad the magitude of declie i percetage terms of the ivestmet s value; (iv) qualitative triggers based o the character ad ature of ay alleged fraud or other miscoduct; ad (v) the procedure ad requiremets to authorize litigatio, as well as to esure that all claims are appropriately ad timely completed. Shepherd, Fikelma, Miller & Shah is committed to assistig our istitutioal ad other cliets i recoverig assets lost due to fraud ad other miscoduct. Please telephoe us toll-free at / or cotact us via at istitutioalservices@sfmslaw.com. 3

5 The Firm s Istitutioal Ivestor Services The Firm s attoreys ad other professioals provide a variety of services to moitor ad safeguard istitutioal ivestors equity ad other ivestmets. The Firm s missio is to idetify losses that cliets may have suffered as a result of potetial violatios of state ad federal securities laws, as well as related legal obligatios. The Firm works closely with its cliets to prepare mothly reports regardig potetial violatios of applicable law ad, at times, may recommed to a istitutioal ivestor that it istitute a idividual actio or seek to serve as the lead plaitiff i class actio litigatio i order to recover such losses. A istitutioal ivestor that chooses to egage the Firm ever has a obligatio to pursue litigatio that may be preseted for review ad cosideratio. Rather, as part of the services provided, the Firm periodically iforms its istitutioal cliets of potetial securities fraud ad similar actios that may affect a cliet s ivestmets ad the istitutioal cliet chooses whether to pursue ay further actio at that time. The Firm geerally provides these moitorig services to istitutios that choose to egage the Firm at o cost or other obligatio although certai cliets compesate the Firm for such services. I the evet that a istitutioal cliet chooses to participate i corporate goverace litigatio or similar proceedigs, icludig ay class actio litigatio, the Firm geerally is egaged o a cotiget fee basis pursuat to a fee agreemet that is specifically egotiated with respect to the litigatio or other matter at issue. The services that the Firm provides iclude the followig: We work with our istitutioal cliets to develop guidelies ad policies with respect to securities litigatio, icludig thresholds i both quatitative ad qualitative terms to trigger a evaluatio of whether (i) a ivestigatio is warrated, ad (ii) the cliet should cosider legal actio. We moitor the filig of other securities litigatio to esure that our istitutioal cliets are (i) aware of cases affectig their ivestmets, ad (ii) able to protect their rights by, amog other thigs, seekig appoitmet as a lead plaitiff or class represetative i securities litigatio. We evaluate potetial ad pedig litigatio, prepare presetatios regardig the stregth ad weakesses of such cases utilizig the skills ad expertise of our attoreys, ivestigators, foresic accoutats ad other experts, ad make recommedatios to the istitutio s staff or other desigee(s) as to the available optios ad reasos weighig i favor ad agaist the available optios, thereby assistig the istitutio i fulfillig its fiduciary duties ad creatig a record of the same. Whe appropriate, we litigate cases (both idividually ad o a class actio basis) o behalf of istitutioal ivestors util we are able to obtai a favorable outcome through hard-fought settlemet egotiatios or at trial. We esure that our istitutioal cliets receive updates regardig settled securities class actios so that all ecessary claim forms ad other paperwork ca be timely completed ad, whe appropriate, assist i completig such claim documetatio. If you would like to meet with us to discuss our services, please telephoe us toll-free at / or cotact us via at istitutioalservices@sfmslaw.com. 4

6 The Firm geerally provides these moitorig services at o cost to istitutioal, as well as certai idividual ivestors, for a very simple reaso if the Firm s cliets choose to istitute litigatio to recover losses as a result of securities fraud or similar corporate malfeasace, the Firm ofte will be retaied by these cliets to represet them i such litigatio. Pursuat to the terms of such a egagemet, the Firm typically will be etitled to be compesated for its work ad the costs icurred if it is successful. I other words, the Firm usually pursues such litigatio o a cotiget basis with respect to the attoreys fees, costs ad other expeses icurred so that the Firm oly is paid if the litigatio results i a favorable outcome. Thus, by egagig SFMS, istitutioal ivestors are able to fulfill importat duties while esurig that their fuds remaiig assets are ot placed at risk. Of course, the Firm oly recommeds that its istitutioal cliets become ivolved i those cases which we determie to be meritorious ad strog. O certai occasios, we also may recommed that our istitutioal cliets pursue idividual actios rather tha pursue relief o behalf of a class of similarly situated etities ad/or persos. I so doig, we recommed actios that, i our professioal judgmet, are i the best iterests of the cliet ad also protect the istitutioal cliet s reputatio ad stadig i the commuity. I sum, we offer importat services i moitorig ad, where appropriate, litigatig securities fraud ad similar actios o behalf of istitutioal cliets ad, i so doig, assist our cliets i fulfillig their fiduciary duties. The Firm has bee recogized i courts throughout the Uited States for the quality of its work ad the effectiveess of its advocacy. I fact, the Firm has bee successful i resolvig the securities fraud claims of certai istitutioal ivestors i a maer such that over 90% of the losses were ultimately recovered. With offices i six states, a active practice throughout the coutry, ad a team of attoreys ad professioals dedicated to meetig the specific eeds of each cliet, SFMS is well positioed to serve the istitutioal ivestors that choose SFMS as their cousel to assist i moitorig ad combatig corporate fraud ad abuse. I recogitio of its work o behalf of istitutioal ivestors, Securities Class Actio Services ( SCAS ) recetly amed SFMS as oe of the SCAS 50 i the Uited States. The SCAS 50 lists the top 50 law firms raked by the total dollar amout of fial securities class actio recoveries i which the law firm served as lead cousel. 5

7 The Firm s Backgroud Ad Experiece SFMS cocetrates its practice i the areas of complex class actio ad commercial litigatio, with a particular emphasis o litigatig securities ad ivestmet fraud, cosumer protectio, atitrust, derivative actios, healthcare fraud, ERISA, ad employmet litigatio class actios, as well as False Claims Act litigatio. SFMS represets state ad muicipal govermets, privately-held corporatios, healthcare providers, istitutioal ivestors, icludig pesio, health ad welfare fuds, ad private idividuals throughout the Uited States. SFMS s lawyers are a diverse group who have years of experiece i complex class actio ad commercial litigatio. The Firm has served as court-appoited lead cousel ad class cousel i state ad federal courts ad, i such cases, has recovered hudreds of millios of dollars o behalf of its cliets. I pursuig securities fraud ad breach of fiduciary duty cases, at times, SFMS has recovered i excess of sevety percet of the losses suffered by the istitutioal ivestors it represets. SFMS also has bee similarly successful i achievig sigificat corporate goverace chages, icludig the followig: Requirig Boards of Directors to act as ombudspersos by coductig o-site visits to corporate sites ad coductig ope door sessios o a cofidetial basis to discuss employee complaits ad cocers. Madatig aually elected boards cotrolled by idepedet directors. Separatig the Chairma of the Board of Directors ad Chief Executive Officer roles. Requirig at least 75% of the Board of Directors to be truly idepedet. Limitig the umber of corporate Boards of Directors upo which a idividual ca serve. Creatig eforceable attedace requiremets for Boards of Directors. Chagig corporate compesatio schemes to emphasize pay for log-term performace. Requirig forfeiture of proceeds of isider sales i the evet of subsequet restatemets of earigs by the Compay. Requirig immediate public disclosure of all sales or purchases of a Compay s stock by ay corporate officer or director, ad requirig pre-disclosure of sales or purchases of a Compay s stock i certai circumstaces. Requirig the creatio of appropriate Audit Committee, Compesatio Committee ad Corporate Goverace Charters. Requirig creatio of a Audit Committee Complait Procedure. Requirig the creatio of a Code of Ethics for Seior Fiacial Officers. SFMS is actively ivolved i the litigatio of idividual ad class actio securities cases ivolvig causes of actio for securities fraud, breach of fiduciary duty, ad shareholder derivative claims. The Firm has played a substatial role i a umber of these cases, icludig, to ame a few, the followig actios: I Re Adelphia Securities Litigatio; AFC Eterprises Securities Litigatio; Reardo v. Ameripath, Ic.; D Adrea v. CIGNA Securities, Ic.; Coca-Cola Eterprises Derivative Litigatio; I Re: FARO Techologies Securities Litigatio; Phoes Plus, Ic. v. The Hartford Fiacial Services Group, Ic. ad Neuberger Berma Maagemet, Ic.; Smith v. Iterstate Bakeries Corp.; I Re JDS Uiphase Securities Litigatio; I Re McKesso HBOC, Ic. Securities Litigatio; I Re Mercator Software Derivative Litigatio; I Re Sara Lee Corp. Securities Litigatio; ad SupportSoft Systems, Ic. Derivative Litigatio. I additio, whe appropriate, SFMS has represeted select istitutios ad idividuals i proceedigs before the Natioal Associatio of Securities Dealers ad the New York Stock Exchage regardig securities fraud ad related matters. 6

8 Why Shepherd, Fikelma, Miller & Shah? We are a mid-sized law firm with the resources more typically associated with a larger law firm. We are committed to providig you with small firm idividual attetio that less typically is foud at the larger firms with which we regularly compete. I choosig represetatio, we ecourage you to cosider the followig: Persoal Attetio At SFMS, every istitutio has oe desigated attorey resposible for providig regular ad timely updates to your fud(s), who also is available to immediately respod regardig ay questios you may have regardig your portfolio, legal rights ad optios. Sigificat Resources At SFMS, we maitai the resources ecessary to provide a broad rage of moitorig ad litigatio services for your fud(s). We regularly work with our team of ivestigators, foresic ecoomists ad fiacial experts to develop proprietary cases ad compile case specific reports before recommedig a course of actio with respect to pedig or prospective litigatio. Legal Ad Expert Talet At SFMS, we pride ourselves o our diversity ad commitmet to excellece, as well as the academic ad legal accomplishmets, of our team of attoreys ad other persoel. Most of the attoreys at our Firm bega their careers at large corporate defese firms ad uderstad exactly what it takes to litigate complex, high stakes litigatio. I additio, may of our attoreys have experiece as judicial clerks ad other work experiece that provides valuable case isight so that appropriate ad cosidered judgmets ca be made at all times. We ivite you to review our accompayig Firm resume to lear more about SFMS. Mothly, Detailed Ad Idividually Tailored Reports At SFMS, we provide every istitutio that we represet with detailed mothly reports. We fid that, i light of applicable legal deadlies ad the speed with which market developmets occur, it is importat ad cosistetly more helpful to provide mothly, as opposed to quarterly or bi-mothly, reports to our cliets. The reports are both detailed ad idividually tailored to meet the specific istitutio s eeds. You will ot receive a form report from SFMS. That is because, i our experiece, boilerplate reports deliver little value to cliets. Assistace With Admiistratio Ad Claim Submissio At SFMS, we uderstad that, for the istitutioal ivestor, the ultimate recovery o losses is ofte the most importat cocer for ay fud. For that reaso, i additio to moitorig ad litigatig appropriate claims, we also regularly assist our cliets i workig with settlemet admiistrators ad submittig claims eve whe the case is ot oe that SFMS has litigated. Ulike certai of our competitors, we uderstad that, at times, assistig our cliets with the less glamorous work of submittig claims ad obtaiig recoveries is just as importat as evaluatig ad, whe appropriate, assertig claims. I other words, at every step of the process, you ca cout o the diligece ad persistece of SFMS i recoverig losses ad assets. Shepherd, Fikelma, Miller & Shah is committed to assistig our istitutioal ad other cliets i recoverig assets lost due to fraud ad other miscoduct. The Firm is also committed to effectuatig meaigful corporate reforms, where appropriate, to remedy ad protect agaist future acts of corporate malfeasace. 7

9 Istitutioal Ivestor Frequetly Asked Questios Q: How should a istitutioal ivestor decide whether to serve as a lead plaitiff? A: The oly sesible way to make a iformed decisio is through a established screeig ad evaluatio process that idetifies istaces where such actio may be appropriate ad determies whether, i fact, such actio is appropriate, give the facts ad circumstaces of a specific case. The screeig ad evaluatio ca be performed i-house, by a outside service, or by qualified law firms such as SFMS. I 1998, the U.S. Secretary of Labor opied that pesio fuds have a affirmative duty as fiduciaries to determie whether pla participats ca beefit by pursuig a lawsuit. A appropriate moitorig ad evaluatio system assists istitutioal ivestors i meetig these importat obligatios, providig trustees ad other fiduciaries with the iformatio ecessary to reder a iformed decisio. Q: Are there istaces whe a istitutioal ivestor should pursue idividual actio as opposed to class actio litigatio? A: Yes. It is importat that a istitutioal ivestor evaluate each potetial case ad determie whether it should be pursued o a idividual or class actio basis. Although servig as a lead plaitiff i a class actio ofte creates sigificat leverage, there may be istaces where it simply makes more sese for the cliet to pursue a idividual actio. Q: Why would a relatively small istitutioal ivestor seek appoitmet as a lead plaitiff? A: Certai fuds may ever seek lead plaitiff status i a securities fraud class actio. There are several reasos, however, that smaller istitutios should cosider takig a lead role i securities litigatio. First, as a result of differet ivestmet strategies pursued by may istitutios, smaller fuds ofte have ivested i securities that their larger couterparts ever purchase. I these istaces, smaller istitutios ca serve as a effective force i importat securities ad other corporate goverace litigatio. Secod, there are times whe larger istitutios with sigificat losses may choose ot to serve as lead plaitiff because they are already ivolved i a umber of lawsuits or based upo uique circumstaces related to the istitutio s ivestmet losses. I such istaces, smaller istitutios have a uique opportuity to eforce their rights ad take a lead role. Third, although the size of a istitutio s losses is a importat factor i determiig lead plaitiff status, it is ot ecessarily the oly oe. Therefore, eve small fuds should set up a mechaism to scree cases before rulig out active participatio i a securities lawsuit. Q: What ca a istitutio do to protect itself eve if it chooses ot to become a lead plaitiff? A: Eve if a istitutio is ot a lead plaitiff, it ca exert ifluece i the case. For example, if the fud effectively moitors securities litigatio, it ca take actio to protect its rights by servig as a class represetative or, where appropriate, objectig to ay actio, icludig a proposed settlemet, if the terms are iappropriate or ieffective. I additio, by moitorig such litigatio, the istitutio ca opt out or exclude itself from a class actio to pursue a idividual lawsuit if it deems such actio appropriate. Fially, at a miimum, by moitorig litigatio, a fud ca esure that it participates i the beefits of ay settlemet or judgmet a right that it might ot otherwise eforce. Q: What are the fees ad costs of servig as a lead plaitiff? A: Sice the Firm geerally works o a cotiget fee basis ad advaces the expeses to prosecute the case, there are o up-frot costs for a lead plaitiff i a securities class actio ad other corporate goverace cases. The lawyers oly are compesated if they achieve a recovery o behalf of the class. The questio of expeses, therefore, largely relates to the time ad resources ecessarily devoted by the istitutio. Q: What resources ad time will a istitutio eed to devote to serve as a lead plaitiff or a similar lead role? A: The aswer to this questio is largely case depedet. Typically, most fuds are actively ivolved at the iitial stage whe a agreemet is egotiated with the Firm, a detailed cosolidated complait is filed, durig pretrial discovery, ad i settlemet egotiatios with defedats. I most istaces, it is oly a istitutio s i-house cousel ad/or the executive director (or his or her desigee) who are ivolved i a sigificat maer. Lawsuits do ot require cosiderable board ivolvemet or oversight. Istead, the goverig bodies of most istitutios simply wish to receive periodic updates from SFMS regardig the progress of the litigatio ad more detailed updates whe sigificat developmets occur. The Firm is pleased to preset these aswers to frequetly posed questios for iformatioal purposes oly. Noe of the aswers should be treated or cosidered as legal advice of ay kid or as coclusive i ature. If you would like to discuss the above topics or ay other matters, please telephoe us toll-free at / or cotact us via at istitutioalservices@sfmslaw.com. 8

10 Sh e p h e r d, Fi k e l m a, Mi l l e r & Sh a h, l l p Attoreys at Law Califoria Coecticut Florida New Jersey Pesylvaia Wiscosi Toll-Free: