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Articles Posted in Class Action Lawsuits

A class action securities case has been brought against Western Union Company (UW) by purchasers of the company’s publicly traded securities. The purchasers would have bought the securities between 2/24/12 and 1/19/17. The lead plaintiff is an institutional investor. The lawsuit is UA Local 13 Pension Fund v. The Western Union Company.

The lawsuit contends that Western Union and a number of its current and ex-directors and/or officers made false and misleading statements and did not disclose adverse information about Western Union’s business and compliance policies. Instead, Western Union and senior management purportedly told investors that the Company’s compliance program was robust and in compliance with the laws, both of which the plaintiff claims were false.

Western Union is accused of aiding and abetting a network of international criminal activities, not putting into place compliance programs that were effective, and disregarding misconduct so as to profit. The alleged violations purportedly caused Western Union shares to become artificially inflated.

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$64M Pension Fund Fraud Settlement Reached Against Dana Holding Corp. Executives
Plaintiffs in the shareholder class action case brought against Michael Burns and Robert Richter have reached a $64M out-of-court settlement with the two ex-Dana Holding Corp. executives. The union pension funds include lead plaintiffs SEIU Pension Plans Master Trust, Plumbers & Pipefitters National Pension Fund, and the West Virginia Laborers Pension Trust Fund.

They accused Bornes and Richter, the company’s ex-CEO and CFO, respectively, of purposely misleading investors about Dana Holding’s financial woes in the months prior to its filing for bankruptcy in 2006. Although the securities fraud case was initially dismissed by a district court on the grounds that the plaintiffs failed to show that the two men and Dana knew they were engaging in wrongdoing, the 6th U.S. Circuit Court of Appeals in Cincinnati reversed that decision, saying evidence showed otherwise.

Federal Reserve Gives Banks More Time to Meet Volcker Rule Requirements
The U.S. Federal Reserve has extended the deadline for banks to rid themselves of ownership in certain legacy investments and cut ties with funds that are barred under the Volcker Rule. The rule, part of the Dodd-Frank Act, aims to stop banks with government-backed deposits from betting on Wall Street for their benefit. It doesn’t allow insured banks and their subsidiaries to own or be affiliated in any way with a private equity fund or hedge fund or take part in proprietary trading. Lenders are not allowed to trade using their own capital and are restricted from investing in funds.

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Massachusetts Mutual Life Insurance Co. has arrived at a nearly $31M settlement with plaintiffs of a class action securities case. They are accusing the retirement service provider of charging excessive fees in its retirement plans. The 401k lawsuit involved MassMutual’s $200M Agent Pension Plan and its $2.2B Thrift Plan. The settlement includes a $30.9M payment and non-monetary provisions that would benefit participants of the plan.

The case is Dennis Gordan et al v. Massachusetts Mutual Life Insurance Co. et al, and plaintiffs include ex-plan participants and current ones. They are accusing defendants of breaching their fiduciary duty under ERISA through the charging of excessive administrative fees and offering a costly and unnecessarily risky fixed-income choice, as well as investments that were expensive despite not performing well.

The non-monetary provisions of the settlement include the hiring an independent consultant to make sure that plan participants are not asked to pay excessive fees for record-keeping services or record-keeping fees based on asset percentages, a review of all investment options, and the consideration of a minimum of at least three finalists when making an investment selection.

The settlement has been submitted to a district court for preliminary approval. MassMutual has not admitted to liability or fault despite settling.

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Long-term-care insurance company Genworth has reached a $219M settlement with plaintiffs of a class action securities case claiming misrepresentations related to its business. The complaint alleges securities law violations by the insurer, its chief executive Tim McInerney, and ex-CFO Marty Klein, including misrepresentations of its core business’s profitability and the reporting of financial results that understated the needed reserves.

The inaccurate disclosures played a part in the significant drop in Genworth share’s price, causing shareholders to sustain damages. Meantime, Genworth continues to argue that the plaintiffs’ claims have no merit. The company said that it decided to settle to avoid the further cost and burden of continued litigation.

The lead plaintiffs in the case are the Canadian province of Alberta, which purchased over 1.2M Genworth common stock shares during the class period at issue, and the Fresno County Employees’ Retirement Association in California, which purchased nearly 200,000 shares. Genworth started reporting results of a review of its reserves for long-term-care insurance in October 2013.

The reserves are the funds put aside to pay for future benefits that are payable on policies. Shareholders were purportedly told that the reserves were “adequate” and that it included a “margin for future deterioration.”

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JPMorgan Chase & Co. (JPM) will pay $150 million to resolve investor claims accusing the firm of concealing up to $6.2 billion in losses caused by the trader Bruno Iksil, who was given the nickname “London Whale.” Pension funds filed a class action securities case accusing the firm of using its investment office in London as a secret hedge fund. According to the plaintiffs, the bank told them that the office was managing risk when what it was actually doing was making trades for profit. Investors were harmed when huge losses resulting from transactions made through the London office caused the bank’s share price to drop.

The pension funds said that they suffered tens of millions of dollars of losses because fund managers were provided with information that was “false and misleading.” They also believe that the bank knowingly concealed the growing risks that were occurring at the London office.

Plaintiffs of this lawsuit include the Ohio Public Employees Retirement System, which says it lost $2.5 million, the Arkansas Teacher Retirement System, the state of Ohio, funds in Arkansas, Swedish pension fund AP7, and other JP Morgan shareholders that purchased stock between 2/24/10—this is when the company submitted to regulators its 2009 earnings report—and 5/21/12. The latter date is when the firm announced that it was stopping a $15 billion share buyback program until it could get a better handle of the losses sustained.

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Fidelity Investments Unit Faces ERISA Fiduciary Breach Claims
Fidelity Management Trust Co. has been named a defendant in a class action securities case under ERISA law. The plaintiffs claim that the Fidelity Investments unit is in fiduciary breach under ERISA because it included a stable value fund as an investment alternative for 401(k) plan accounts. They believe that low investment returns and high fees made the fund an unwise investment for participants in a 401(k) plan.

William Perry and James Ellis are the lead plaintiffs. At different times through the Barnes & Noble Inc. 401(k) plan, they were invested in the Fidelity Group Employee Benefit Plan Managed Income Portfolio Commingled Pool (MIP) fund. Plaintiffs believe that the high fees and poor results were because of the deliberate omissions and actions of Fidelity Management Trust as MIP’s fiduciary and trustee.

According to the complaint, before 2009 Fidelity executed an investment strategy that proved unsuccessful when it placed mortgage-backed securities, asset-backed securities, and collateralized loan obligations, and others securitize debt in the portfolio. MIP lost value when the financial crisis struck. After that, Fidelity changed up its asset allocation to lower risk to the fund’s wrap providers, including AIG Financial Products, Monumental Life Insurance Company, JP Morgan Chase Bank, State Street Bank and Trust, and Rabobank Netherland. Plaintiffs believe it is this conservative strategy that led to lower returns. They said that excessive fees, which were paid to wrap providers, hurt them.

Plaintiffs represented by the class include everyone involved in ERISA-governed plans that use the fund.

Billionaire In Court Again for Pension Fund Fraud
Ira Rennert, the billionaire industrialist, is once again accused of pension fraud. This time, the allegations involve $70 million and the fund of another family-controlled company. According to the allegations, Rennert was able to avoid responsibility for pension expenses of his RG Steel company when he lied to the Pension Benefit Guaranty Corporation. The independent US government entity, which is the plaintiff in this pension fraud case, said it would have terminated RG Steel’s pension plan if it had known that the company was about to be sold. If that had occurred, Rennert’s Renco Group would have had to take care of pension costs.

The government entity claims that Renco president, Ari Rennert, omitted key information and lied when he told PBCG that he would keep them updated of changes. A week later, about 25% of Renco was bought by Cerberus Capital and the former no longer had a pension liability. Renco denies the allegations.

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SEC Names More Brokers in Penny Stock Rigging Case Filed Last Year
The Securities and Exchange Commission is charging three more people related to a $300M penny stock rigging case that it filed last year. In federal court, the regulator sought to lift the stay in its civil case to submit an amended lawsuit and now also name brokers Ronald Heineman and Michael Morris, as well as lawyer Darren Ofsink.

The SEC says that Morris and Heineman executed the scam through their brokerage firm awhile Ofsink made money illegally by selling unregistered shares even though no exemption for registration was valid. Meantime, the U.S. Attorney’s Office in New York is fling criminal charges against Ofsink ad Morris.

Per the amended SEC complaint, in 2013 Abraxas Discala, Marc Exler, and brokers Craig Josephburg and Matthew Bell were involved in a scam to raise the price of CodeSmart Holdings stock. The men intended to make money at the expense of Josephberg’s customers and Bell’s clients. Heineman and Morris, who own Halcyon Cabot Partners-the firm where Josephberg was employed-allegedly were involved in the securities scam. The two men are accused of secretly consenting to buy shares of CodeSmart at pre-set prices so that Discala could liquidate his positions at prices that were artificially raised. Meantime, Ofsink, who played a part in the execution of the company’s reverse merger into a public shell company, made money by illegally selling securities of CodeSmart that were not registered.

Trading in CodeSmart has been suspended because the company hasn’t submitted periodic reports since late 2014 and due to purportedly suspect market activity.

Former Ameriprise Adviser Gets Prison Term for Defrauding Clients of Over $1M
Former Ameriprise (AMP) adviser Susan Elizabeth Walker wills serve more than seven years behind bars for defrauding at least 24 retirement accounts of over $1.1M. Walker was convicted of tax evasion and mail fraud. She pled guilty last year to the criminal accounts.

Walker offered financial planning services through the firm from October 2008 through March 2013. She also was registered with the Financial Industry Regulatory Authority and was a securities agent under the Minnesota Department of Commerce.
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Deutsche Bank Reaches Swaps Violation Settlement with CFTC
The Commodity Futures Trading Commission and Deutsche Bank AG (DB) have reached a settlement over the regulator’s order accusing the firm of not properly reporting its swaps transactions from 1/13 through 7/15. The regulator also said there were supervisory failures and that the bank failed to modify the reporting errors at issue until after it found out that the CFTC was conducting a probe.

According to the regulator, Deutche Bank did not properly report swap transaction cancellations in all asset classes, resulting in somewhere between tens of thousands and hundreds of thousands of reporting errors, violations, and oppositions in its reporting of swaps. CFTC believes that the bank knew about the problem but did not notify its Swap Data Repository in a timely manner, nor did it properly probe, deal with, and modify the information deficiencies until last year when it became aware of the investigation. As a result of the reporting failures, the wrong information was put out to the public.

The CFTC believes that the bank’s reporting failures were partly because of deficiencies in its swaps supervisory system. A more adequate system could have better supervised Deutsche Bank’s activities involving compliance with reporting requirements.

Because the bank is a provisionally registered Swap Dealer, it has to abide by certain recordkeeping, disclosure, and reporting duties related to swap transactions. These requirements are supposed to improve transparency, encourage standardization, and lower systemic risk in swaps trading.

Investors File Class Action Securities Case Against Fifth Street Finance
An investor has filed a class action securities fraud case against Fifth Street Finance Corp. on behalf of shareholders. According to the plaintiff, and for those who bought Fifth Street Finance common shares between 7/7/14 and 2/6/15, the company, Fifth Street Asset Management, Inc., and specific directors and officers violated federal securities laws by allegedly taking part in a fraudulent scam to artificially inflate Fifth Street Finance assets and investment income to raise revenue of Fifth Street Management.

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In district court in Los Angeles, CA, plaintiffs are suing Pacific Investment Management Co., Allianz Global Investors, and parent company Allianz Asset Management for breach of fiduciary duty. The plaintiffs in the class action lawsuit contend that the fiduciaries of the Allianz Asset Management of America 401(k) Savings and Retirement Plan, which is the plan in which they are participants, violated their duty of prudence and loyalty under ERISA by placing a lot of high-priced proprietary funds in the plan’s core menu for investments.

The lead plaintiffs in the 401(K) lawsuit are Nathan Marfice and Aleksandr Urakhchin. They contend that the all-in plan costs are at 77 basis points, which was 75 basis points above the average retirement plan that holds anywhere from $500 million and $1 billion in assets. They said that this cost plan participants more than $2.5 million in excessive fees.

A spokesperson for Allianz says the class action case has no merit. Other parties listed as defendants include:

· The committee of the Allianz Asset Management of America 401(k) plan

· Allianz Asset Management of America LP

· Allianz Global Investors Fund Management

· Allianz Asset Management of America

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According to the amended complaint of an investor class action securities case, American Realty Capital Properties Inc. made over $900 million in commissions, fees and payments issued to company insiders after it started an acquisition binge to raise its share price and capital. The non-traded real estate investment trust purportedly started the buying frenzy, which lasted for three years, after completing its $69.8M IPO in 2011 and discovering that its share price was wallowing under the initial public offering price. The lead plaintiff in the case is the Teachers Insurance and Annuity Association of America, which is a retirement and annuities plan behemoth.

The securities lawsuit contends that because the lower than desired price was holding up ARCP’s ability to raise a significant amount of capital, the acquisition strategy allegedly involved artificially raising adjusted operation funds—a key metric for investors when evaluating an REIT’s performance. The plaintiffs believe that senior insiders at ARCP knew that the tactic was the only way to make the hefty fees. Over $917 million in payments went straight to ARCP insiders and the company’s affiliates.

Because of the acquisition binge, ARCP went from owning 63 properties and having $13 million in assets to owning over 4,400 properties and $21.3 billion in assets. The complaints claims that indirect and direct payments to ARCP insiders purportedly included $186.6 million subordinated distribution fees, and $333 million in fees and commissions. Some of the fees were allegedly triggered by ARCP’s buying of non-traded REITs American Realty Capital Trust IV Inc. and American Realty Capital Trust II, both defendants in the case. Other payments included $21.6 million for sales purportedly made to ARCP for equipment, fixtures, and furniture, $63.4 million for strategic advisory services, and $17.7 million for financing coordinating fees.

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