Shapiro v. JPMorgan Chase, et al. (S.D.N.Y.)
The Firm has handled and continues to prosecute a number of important litigation matters stemming from the Bernard Madoff Scandal. The Firm was appointed co-lead counsel in consolidated proceedings instituted in behalf of all persons who were holders of limited partnership interests in the Rye and/or Tremont Funds, the principal feeders into Bernard L. Madoff Investments Securities LLC. These actions asserted federal securities and state law breach of fiduciary duty and other claims for failure to conduct adequate due diligence before and after investing in Madoff. We negotiated an initial settlement with the Tremont defendants (their parent companies and investors) consisting of a cash fund in the amount of $100 million together with all remaining monies in Tremont’s accounts after the wind down of its operations. In addition, we were able to obtain the assignment of valuable legal claims and litigation interests as part of the settlement, including claims against Tremont’s outside auditors, fund administrators and other parties, which the Firm continues to pursue. We also continue to manage the process of distribution to approved claimants of all monies recovered together with recoveries due back to the Funds through the Madoff Trustee Liquidation Proceedings.
In Shapiro v. JP Morgan Chase, et al. (S.D.N.Y.) a class action was brought by the Firm in behalf of all persons who directly had capital invested with Bernard L. Madoff Investment Securities (“BLMIS”) as of December 11, 2008 and having net losses, claiming that JPMorgan failed to disclose or otherwise act to report facts to investors and regulators related to Bernard Madoff’s ponzi scheme. As Madoff’s primary banker, JPMorgan oversaw a principal Madoff customer depository account which, our investigation revealed, was used to facilitate numerous round trip transactions with close associates which had no apparent business purpose and that none of the tens of billions of dollars which flowed through this account was used to purchase a single security. We also discovered additional facts which evidenced knowledge of the Madoff ponzi scheme through due diligence and other activities by JP Morgan related to efforts to structure and issue feeder fund related products. Notwithstanding the strengths of the claims asserted factually, the claims as a matter of law faced serious risk and uncertainty, based on then pending matters in the federal appellate courts (including the United States Supreme Court) on the issue of whether claims under state law related to the purchase and/or sale of a security were preempted and/or extinguishable by federal law.
Following a complex and extensive process of negotiations with JPMorgan, the Liquidation Trustee and the United States Attorney’s Office, contemporaneous and related settlements were achieved totaling $2.243 billion, which were finally approved by United States District Court Judge Colleen McMahon in early 2014.