Pinnfund Litigation Successfully Concluded; Many "Firsts" Achieved
BartkoZankel represented three investment entities and a class of investors victimized by a Ponzi scheme which resulted in some $300 million in losses. The firm brought four complex lawsuits against the promoters, accountants, a bank, and a law firm and recovered more than $118 million in settlements. The case against the promoters of the scheme resulted in a settlement valued at over $40 million and set the stage for the later suits.
In the suit against the accountants, Grafton Partners LP v. PricewaterhouseCoopers (No. 2002-056106), the firm obtained a $39.5 million settlement. This was after the California Supreme Court made its landmark ruling in our clients' favor that the predispute jury trial waiver in the accounting firm's retainer agreement was unenforceable. (Grafton Partners v. Superior Court, 36 Cal.4th 944 (2005).) The lead opinion and Justice Ming Chin's concurring opinion can be read by clicking here. Two other defendants in the case had settled earlier for $9.2 million.
In the suit against the bank utilized by the promoters, Grafton Partners LP v. Union Bank of California (No. RG03086160), the firm secured a $22 million settlement.
In the fourth lawsuit against a well-known 500 attorney law firm, the case settled for $12.5 million.
All four cases were filed as class actions, and not a single objection by a single investor was made to any of them.
The three lawsuits against the accountants, bank, and law firm were prosecuted following settlement with one of the key promoters of the scheme. The Firm worked closely with the SEC, the bankruptcy trustee, and a federally appointed receiver. The firm conducted an intensive internal investigation that resulted in the filing of the four lawsuits against one of the Big Three accounting firms, a large banking institution, an international law firm, and the principal that had organized the subprime investment scheme. Unlike other experiences, most litigation following most Ponzi schemes results in little or no recovery to the victims, and extreme delays. Among other unique aspects of the committee structure instituted to manage and supervise the litigation, recoveries were distributed to the victims as obtained, rather than at the conclusion of all the litigation. As Chief Judge Huff noted in her approval order,
Instead of the protracted litigation often associated with such complex cases, the settlement achieved by [BartkoZankel] in coordination with the SEC, the Receiver and the Trustee is unique in its coordination and unifying efficiency... It maximizes recovery for defrauded investors, establishes the foundation for future recovery, and settles the defendants' concerns. There is no similar model or approach in reported federal decisions. In fact, this case is exceptional among reported cases given the rapid resolution and the substantial amount ready for immediate distribution to investors.
The firm, working together as a team with the committee and three steadfast, skilled and hardworking class representatives, was able to recover over $115 million for their clients and in the process to design and put into practice a new vehicle for pursuing recoveries in future similar situations, one which has proven itself able to avoid the sort of internal conflicts and resulting needless delay and expense that typically plague litigation seeking recompense for large fraud schemes. For additional information, please contact John Bartko at jbartko@bztm.com or Chris Hunt at chunt@bztm.com.
