A recent Law 360 story by Dean Seal, “Attys Seek $58.1M in Fees for Deloitte, Sidley Austin Deal,” reports that class counsel for investors in now-defunct Aequitas Management LLC are seeking a $58.1 million fee award for negotiating $234.6 million in settlements with Sidley Austin, Deloitte and others accused of aiding Aequitas' Ponzi scheme. Hagens Berman Sobol Shapiro LLP is among the firms representing investors who filed for final approval of the class action settlements, telling an Oregon federal judge that not a single class member has objected to, or sought exclusion from, settlements with several companies and law firms that allegedly participated in Aequitas' illicit securities offerings.
Should the attorney fee award and allocation plan be given final approval, the settlements and distributions from Aequitas' receiver will allow the investors to recover as much as 89% of their approximately $285 million in calculated investment losses. "If approved, this is believed to be the largest settlement in a securities case in Oregon history," the class said. "Such a result is remarkable in light of the fact that the securities issuer, Aequitas, was placed into receivership with the court-appointed receiver concluding that it operated as a Ponzi scheme."
Final approval would end 3½ years of litigation brought just weeks after the U.S. Securities and Exchange Commission sued Aequitas and three of its executives in March 2016. According to the SEC, Aequitas misled investors about the extent to which their investments had been poured into Corinthian College Inc., a for-profit education company that filed for bankruptcy in 2015 after facing its own false advertising debacle. The SEC claims Aequitas turned into a Ponzi scheme after Corinthian College tanked.
Hagens Berman, Stoll Berne and Samuels Yoelin Kantor LLP are representing investors who have sought to hold accounting firms Deloitte & Touche LLP and EisnerAmper LLP, law firms Sidley Austin LLP and Tonkon Torp LLP, Integrity Bank & Trust of Colorado, and companies TD Ameritrade and Duff & Phelps responsible for investor losses on the premise that each helped prepare Aequitas' securities sale documents and allowed audited financial statements to be used as marketing materials.
After Tonkon and Integrity had already agreed to separate settlements of $12.9 million and $1.7 million, respectively, the investors returned to court in July with $220 million in settlements reached with the other five defendants. The defendant firms deny any liability, but the deals they've agreed to would release the claims of 1,865 class members who bought securities from Aequitas between June 2010 and March 2016.
The global settlement received preliminary approval in August, leading the investors to seek certification for their settlement class and final approval of the deals. They assert that if class counsel receive their requested $58.1 million in fees and expenses, the remaining $176.5 million left for the class’ recovery would represent 84.9% of its effective net loss.
"This recovery percentage greatly exceeds the median securities class action settlement recovery percentage for cases in this size range of 4.2% in 2018," the investors said. The class counsel's fee and expense award is based on 25% of the $220 million in deals reached with the last five firms to settle and 20% of the earlier deals with Tonkon and Integrity, along with roughly $200,000 in claimed attorney costs.