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COViSAL's objection to BDO's proposed agreement

COViSAL
For Justice & Restitution
_______________________________________________________________


July 1, 2015

Clerk of the Court
United States District Court
Northern District of Texas
1100 Commerce Street
Dallas, Texas 75242

ATTN: Chambers of the
Honorable David Godbey

Case 3:09-CV-0298-N, Case No. 3:12-CV-01447-N and Case No. 3:11-cv-01115-N.


We object to the BDO settlement amount in Case No. 3:12-CV-01447-N and Case No. 3:11-cv-01115-N, for $40 million, of which attorneys will receive $10 million dollars, and innocent families pennies.

The lawsuit was originally seeking actual damages of $10.7 billion, and the proposed settlement of $40 million is less than one half of 1 percent. Why are the attorneys accepting such meager amounts?

There are 75 lawsuits awaiting ruling by the Court listed in the Receiver’s and Examiner’s sixth joint advisory to the court regarding pending motions that have been fully briefed in cases filed by the Receiver or the Official Stanford Investors Committee (“OSIC”).

According to the US Receiver Ralph Janvey, in his open letter concerning Asset Recovery Litigation dated February 14, 2014 to all affected by the Stanford fraud, “…These lawsuits seek to recover in excess of $680 million in total …Nonetheless, the claims are the single largest potential source of funds which may be recovered for the benefit of the eligible claimants…”

Despite the enormous potential for recovery, Janvey has been largely unsuccessful in retrieving this money. If the US Receiver and the Official Stanford Investors Committee’s attorneys continue to settle cases for less than half a percent of the original amounts sought, what hope do we have of receiving a meaningful recovery?

We understand that the attorneys have been working thousands of hours on this case, most of them at a profit of over $600 per hour. In contrast Stanford’s depositors have endured over 55,224 hours of pain and suffering, for less than 2 cents on the dollar of compensation.
This settlement is but a miniscule portion of the $7.2 billion in actual losses from the scheme, and Janvey has admitted that for the most part, “the money is gone.”

"I think about the victims every day," Janvey told CNBC in an exclusive interview, his first since being appointed five years ago. If that is the case, does it make sense for his attorney's fees to be 25%, when in the past courts have authorized 20%? So far, expenses and attorney's fees have consumed nearly half of the money recovered. Considering the low return to investors, these fees seem exorbitant.

Courts must closely examine the manner in which a class action has been negotiated to determine whether the deal was the result of an arm’s-length process.

The settlement negotiations must also involve all the right people. If members of the class have divergent interests and plaintiffs’ counsel cannot fairly represent the interests of all class members, then plaintiffs’ counsel should identify potential subclasses and appropriate representatives who can be brought into settlement discussions.

Currently, the Official Stanford Investor's Committee is made up entirely of attorneys. How can the victims' interests be represented when they have little to no representation on the committee? If the Committee's purpose is to offer oversight to the recovery process, it appears they have conflicting interests when attorneys’ are taking such a large portion of the recovered monies. 

In addition, the efficacy of the negotiations seems questionable when so little time was invested. “The mediation lasted a full day with numerous back and forth offers and demands, ultimately resulting in the $40 million settlement for which approval is sought…” an OSIC attorney declared. (See Appendix in Support of Motion to Approve Settlement Agreement; page 12, paragraph 23; Case 3:0-9-cv-00298N Document 2138-2 Filed 05/15/15, Page ID 59823; APP 0088).

How many hours of real negotiations took place? Is it possible that the settlement was negotiated wisely in such a short amount of time? Is this a fair and reasonable settlement? For whom?

The lawyers are reaping huge fees while handing out paltry benefits to the innocent depositors.

I am enclosing a recent letter from COViSAL titled: “The U.S. Receivership and Liquidation Processes - Hope, Punishment or Fraud? That speaks for itself.

We ask the Court to demand meaningful settlements for the families of this horrendous fraud.

Respectfully,

Jaime R. Escalona
On behalf of COViSAL


cc  by email:

James R. Nelson at jr.nelson@dlapiper.com
Karl G. Dial at karl.dial@dlapiper.com
Michael S. Poulos at michael.poulos@dlapiper.com
Douglas J. Buncher at dbuncher@neliganlaw.com
Edward C. Snyder at esnyder@casnlaw.com
John J. Little at jlittle@lpf-law.com
Ralph Janvey at rjanvey@jkjllp.com

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ATN: Cámara delHonorable David Godbey
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