DEVELOPMENTS IN SECURITIES LITIGATION Prepared for the Atlantic Connection Conference 2013 Maya Saxena

Every Dollar Counts Caribbean governments face challenges with their economy A securities litigation policy may not raise new capital but helps public pension funds safeguard and maximize what they have

What Should A Monitoring Policy Cover? How to maximize returns in filed securities fraud cases Foreign securities litigation Ensuring proof of claim forms are timely filed Auditing recoveries for accuracy Unusual activity: Mergers & Acquisitions

How Does It Work? Data Received from Custodian Bank Data Analyzed in Real Time by Case Analysis Staff Notification Provided to Client with Recommendation Portfolio Monitoring is provided by law firms or third party vendors. Many law firms provide monitoring free of charge. If a fund decides to act as a lead plaintiff and chooses a law firm a contingent fee is sought

Part 1: Securities Litigation

There Is Real Fraud In The Marketplace Front page frauds like WorldCom, Enron, Lehman Brothers, Subprime mortgage situations And lesser known frauds: Aracruz, Household Financial, Dyadic International. There are 175 cases filed every year which represent billions in shareholder losses

Trading Data Is Constantly Analyzed Financial analysts employ tools such as “Bloomberg” financial terminals and monitoring databases which provide real-time data and client loss information

2012: Examples Of Securities Fraud Cases JP Morgan: “secret hedge fund” - made a wrong-way bet that led to the company’s single biggest trading loss and at one point wiped out as much as $51 billion in market value Hewlett-Packard Facebook

Governmental Oversight?

What If My Fund Has A Loss? Funds must be proactive to recover losses: can’t rely on SEC or public enforcement

Lead Plaintiff Options

Portfolio Monitoring As A Component Of A Fund’s Financial Recovery Public funds are better lead plaintiffs Settlements are significantly higher The 10 largest settlements in 2011 involved institutional investors as lead plaintiffs, and ranged from $90 million to $702 million Source: Cornerstone Research 2010 Securities Litigation Analysis

Can Your Involvement Maximize Plan Assets? " Institutional Monitoring through Shareholder Litigation“: Journal of Financial Economics, Vol. 95, pp , 2010Journal of Financial Economics, Vol. 95, pp , 2010

Securities Fraud Goes Global If a fund purchases foreign stock on a foreign market, you cannot file suit in the United States Morrison v. Australia Nat’l Bank

Foreign Securities Litigation Survey of public pension funds: Nearly 25% of assets are foreign stocks Generally Opt-in vs. U.S. class action model

Settlements And Audits $2.9 billion recovered in cases Prepare and file timely proofs of claims Prepare annual or quarterly reports to check that amounts are correct Take credit for funds received

Part 2: Merger Litigation

What Do Fiduciaries Of Public Funds Need To Know To Protect Plan Participants In Merger Situations Is it a good deal for shareholders Corporate management does not always act in the best interests of public shareholders Cases involve thwarting potential buyers by improper defensive mechanisms Tender offer situations where majority shareholders are trying to “go private” at prices which are unfair to public minority shareholders

Microsoft/Yahoo - Deal Or No Deal? - Reaction by shareholders and analysts: "This is totally insane," says Shareholder Value Management analyst Jeff Embersits. "There’s no way Yahoo’s worth $44 billion. Period. [Yahoo Management] should fall on their knees, kiss the ground and go home and buy Porsches." CONCLUSION: DEAL!

Microsoft/Yahoo Proposal What happens next? Yahoo rejects Microsoft offer despite the fact that it was a 62% premium over stock price

What Was Happening Behind The Scenes At Yahoo? Police, Fire and General Retirement System of the City of Detroit lawsuit: Board of Yahoo breached their fiduciary duties by refusing to respond in good faith to Microsoft offer Adopted improper change of control employee severance plans designed to improper costs for an acquirer Created over $2 billion in liabilities that an acquirer would have to pay RESULT: Claims are settled and improper change-in-control terms are removed IMPROPER MECHANISMS DESIGNED TO “ENTRENCH” MANAGEMENT AT THE EXPENSE OF PUBLIC SHAREHOLDERS ARE IMPROPER

COX RADIO TENDER OFFER

Deal Or No Deal?

Cox Radio – Behind The Scenes Coral Springs Police Pension Fund lawsuit – the tender offer price is unfair and is too low, undervalues the company

Cox Radio Settlement The lawsuit results in a 26% price increase $17 million of additional value for public shareholders

If Something Doesn’t Smell Right, It Probably Isn’t

TPC Merger Litigation TPC eventually negotiated an increased price of $45 per share, which resulted in TPC’s shareholders receiving approximately $79 million more in cash for their TPC shares than under the original offer

Summary: Protection Is Key Funds can take action to recover plan assets All funds should have a mechanism in place to make sure they are getting the right information Monitoring is provided free of charge

Thank You! Maya Saxena 2424 N. Federal Highway, Suite 257 Boca Raton, FL x13