Landmark Events and Cases: Timeline
FOUNDING OF THE FIRM
BLB&G is founded by Paul Bernstein, Ronald Litowitz, Max Berger and Edward Grossmann.
Washington Public Power Supply System
After seven years of litigation and three months of trial, BLB&G obtains a $750 million recovery on behalf of investors in the largest municipal bond default ever. At the time, it is the largest securities recovery in history and is described by the Court as "a case of overwhelmingly unique proportions... a rare and exceptional case involving extraordinary services on behalf of Class plaintiffs..."
Congress passes the Private Securities Litigation Reform Act ("PSLRA"), calling upon institutional investors to serve as lead plaintiff in supervising securities fraud class actions. In adopting the PSLRA, Congress emphasized that "private actions perform a critical role in preserving the integrity of our securities markets." "Even more important to ensuring the success of our markets is investor confidence. That confidence is maintained because investors know they have effective remedies against persons who defraud them."
Roberts v. Texaco
BLB&G recovers $170 million on behalf of Texaco’s African-American employees, and engineers the creation of an independent "Equality and Tolerance Task Force" with broad powers over the company’s anti-discrimination, affirmative action and diversity efforts. The task force serves as a model for public companies going forward.
BLB&G prosecutes landmark deal litigation against the Board of Directors of Warner-Lambert for agreeing to a merger with American Home Products without giving due consideration to a competing, substantially higher offer for the company by Pfizer, Inc. Case settles and Warner-Lambert is acquired by Pfizer for $10 billion more than the original merger price proposed with AHP.
At a total of $3.2 billion for investors, the Cendant settlement becomes the largest recovery in history — from a public company and its auditor. In addition, Cendant agrees to the then most extensive corporate governance changes ever obtained from a public company in a class action.
Following revelations of massive accounting fraud at some of the nation's largest companies, such as WorldCom, Enron, HealthSouth and Adelphia, Congress adopts the Sarbanes-Oxley Act of 2002 ("SOX"), also called the "Public Company Accounting Reform and Investor Protection Act of 2002." SOX provides investors with important new protections, including new or enhanced standards for all U.S. public company boards, management, and public accounting firms. SOX established broader disclosure and certification standards for public companies and provided new SEC rules and enforcement tools. The law also established a new quasi-public agency, the Public Company Accounting Oversight Board ("PCAOB"), which is responsible for overseeing, regulating, inspecting and disciplining accounting firms that audit public companies.
In the first of several historic litigation results, the financing arms of major auto manufacturers are compelled to cease discriminatory "kick-back" arrangements with dealers, leading to historic changes to auto financing practices nationwide.
Baptist Foundation of Arizona
In 1999, the Baptist Foundation of Arizona files the largest non-profit bankruptcy in United States history, resulting from accounting improprieties by management and BFA’s auditor, Arthur Andersen. BLB&G, representing the bankruptcy trustee, obtains a cash settlement of $217 million from Andersen during trial – part of an unprecedented recovery of over 70% of investor losses.
After six years of demanding litigation, BLB&G obtains the most comprehensive corporate governance reforms ever achieved as result of shareholder legal action. The new governance plan is described by the court as "an exceptional benefit" to the shareholders -- and a model for corporate America.
BLB&G obtains over $6 billion in settlements from Citigroup, 17 investment banks, WorldCom's auditor Arthur Andersen and WorldCom's outside directors -- an unprecedented result. After three years of litigation and four weeks of trial, it is the largest securities recovery in history at the time. In addition, rulings in the case reinforce significant law ensuring Wall Street properly performs due diligence obligations to investors.
Just months after the merger of McKesson and HBO and Company, the new combined entity – McKesson HBOC – announces the discovery of prior financial reporting problems with HBOC. BLB&G’s investigation uncovers facts demonstrating that HBOC’s former auditor and McKesson’s financial advisor should have been aware of these problems prior to the merger. With the last remaining defendant settling just before trial, BLB&G obtains recoveries totaling over $1.04 billion.
After 4 weeks of trial and 3 days of deliberation, a San Francisco jury finds liability against Clarent's CEO for a knowing omission or misstatement in Clarent's public filings. Rare securities verdict – only the second in favor of investors since the PSLRA – sends strong message that institutional investors and their counsel are committed to holding wrongdoers accountable.
Canadian telecom giant Nortel Networks’ massive restatement of its 2003 and 2004 financials shocks the North American business community. BLB&G obtains the largest securities recovery – $1.07 billion – from a non-U.S. firm, and the largest recovery ever in a U.S. securities class action on behalf of a non-U.S. lead plaintiff. As allegations in the case heavily implicate numerous members of Nortel’s senior management, significant corporate governance relief is obtained in the settlement negotiations.
BLB&G and shareholder client bring precedent-setting action to contest the terms of proposed merger between Caremark Rx and CVS Corporation as Caremark board ignores higher competing offer. Pressure created by the lawsuit forces CVS to increase the consideration offered to Caremark shareholders by nearly $3.5 billion more than CVS' initial offer.
On behalf of a group of institutional investors, BLB&G obtains a groundbreaking $920 million settlement which requires restitution payments from UnitedHealth Group, Inc., its founder, Dr. William McGuire, and other of the Company’s former officers and directors, marking the largest derivative and stock options backdating recovery of all time. The New York Times comments: "investors everywhere should applaud the deal... it sets a standard of behavior for other companies and boards when performance pay is later shown to have been based on ephemeral earnings."
Buoyed by substantiated allegations of egregious fraud at Tyco International, including admitted accounting fraud and successful criminal convictions of Tyco's CEO and other former officers accused of stealing millions from the company, BLB&G pursues a direct action against Tyco on behalf prominent mutual funds, hedge funds and individual investors and recovers over $105 million for its clients – an amount representing over nine times the class action recovery.
BLB&G obtains an historic package of corporate governance reforms for Pfizer shareholders in a derivative litigation relating to the company's illegal marketing practices. The settlement establishes a Regulatory and Compliance Committee of the Pfizer Board that will be supported by a dedicated $75 million fund – a provision viewed by experts as a potential industry standard for similar highly regulated public companies. It also provides for an Ombudsman Program for employees to address concerns about legal or regulatory issues, and requires extensive analysis of Pfizer's compensation structure to ensure there are no incentives for employees to engage in unlawful behavior.
Once-prominent brokerage house Refco, Inc. disclosed that, for years, it had covered up uncollectable receivables by engaging in sham loans between the Company and an entity controlled by the Company’s Chairman and CEO. The pervasive fraud led to one of the largest bankruptcies in U.S. history. On behalf of the Company’s shareholders, BLB&G recovers over $407 million – a material percentage of investor damages – from multiple defendants including Refco’s former officers and directors; its auditor; an Austrian bank involved in the fraud; the banks who underwrote Refco’s IPO; and the private equity firm that owned and controlled the Company.
The infamous collapse of Wachovia Bank was a seminal moment in the subprime disaster. Investors were decimated by the mortgage-related assets Wachovia sold prior to its stunning 2008 fire sale to Wells Fargo. BLB&G’s representation results in an historic $627 million recovery on behalf of bondholders - the largest recovery in a subprime-related litigation. The successful Wachovia prosecution and recovery is particularly noteworthy as the case involved no financial restatement, no actual claims of fraud, and no parallel governmental actions.
A U.S. trial court excludes from a securities class action litigation non-U.S. investors who purchased stock of Swiss reinsurer Converium Holding AG (now part of SCOR Holding AG) outside the United States. Despite that ruling, BLB&G secures for non-U.S. investors an additional $58 million recovery which the Amsterdam Court of Appeals approves and rules legally binding in January 2012 – the first time it has ever done so involving a non-Dutch company. The decision is crucial to investors in the wake of 2010’s Morrison ruling by the U.S. Supreme Court as it establishes that there is a legally binding mechanism available in Europe to help resolve securities claims against non-U.S. companies, and a Court that is willing to take an expansive jurisdictional view in reviewing such settlements.
Bank of America
BLB&G obtains by far the largest recovery in any case related to the subprime mortgage meltdown and subsequent financial crisis – $2.43 billion. The Bank of America/Merrill Lynch merger lawsuit, which arose from allegations that BoA made misleading statements and omissions concerning its 2009 acquisition of Wall Street giant Merrill is one of the largest securities class action recoveries in history.
BLB&G holds Big Pharma accountable with combined $688 million recovery in coordinated securities class actions against Merck & Schering-Plough – among the largest recoveries ever in a case where there was no financial restatement. On the eve of trial, the second-largest securities class action settlement ever in the Third Circuit brings an end to nearly five years of litigation for investors who suffered losses when negative results of a clinical study for the drug Vytorin became public.
BLB&G obtains a $730 million cash recovery on behalf of Citigroup bondholders, whose debt securities had plummeted in value as the bank's extensive exposure to toxic mortgage-related assets became known – the second-largest securities class action recovery in a litigation arising from the financial crisis and the second-largest recovery ever in a securities class action for bond purchasers.
The bank that wasn’t “too big to fail.” The bankruptcy of Lehman Brothers Holdings Inc. dealt a devastating blow to the global economy and remains the veritable poster child for the financial crisis. BLB&G recovers $735 million for investors from former Lehman directors and officers, the underwriters of Lehman securities offerings, Lehman’s auditors, and UBS. Including one of the largest auditor settlements ever achieved, this recovery is also noteworthy because of the difficulties of recovering assets from a bankrupt entity, as well as when considering that there were no financial restatements issued, and that the auditors never disavowed the statements.
BLB&G develops novel strategies and navigates uncharted legal terrain in a variety of actions against major Wall Street banks to obtain hundreds of millions of dollars in recoveries on behalf purchasers of residential mortgage-backed securities. After six years of hard-fought litigation and extensive arm’s-length negotiations on behalf of former Bear Stearns clients, BLB&G obtains the largest ever such settlement – $500 million – in a U.S. class action against the Wall Street titan for packaging and selling the mortgage securities at the center of the 2008 financial crisis.
Big Pharma pays a record price for allegedly misleading the public about the risks of one of its blockbuster drugs — $1.062 billion recovery. Shares of pharmaceutical giant Merck & Co., Inc. suffer massive drop in response to revelations surrounding the Company’s concealment of health risks associated with its blockbuster painkiller VIOXX. Investors sue but the court dismisses the case on statute of limitations grounds. BLB&G’s efforts for Merck shareholders are instrumental in securing a rare, unanimous Supreme Court decision clarifying the standard governing statute of limitations in securities fraud suits. The decision is a significant victory — not only for Merck investors but for all investors as it makes it more difficult for corporate wrongdoers to evade liability by concealing their fraud. One of the largest securities recoveries of all time after more than 12 years of extraordinarily hard-fought litigation.
Landmark victory for shareholder rights against IAC/InterActiveCorp and its controlling shareholder and chairman, Barry Diller. For decades, activist corporate founders and controllers seek ways to entrench their position atop the corporate hierarchy by granting themselves and other insiders “supervoting rights.” Diller lays out a proposal to introduce a new class of non-voting stock to entrench “dynastic control” of IAC within the Diller family. BLB&G litigation on behalf of IAC shareholders ends in capitulation with the Defendants effectively conceding the case by abandoning the proposal. This becomes critical corporate governance precedent, given trend of public companies to introduce “low” and “no-vote” share classes, which diminish shareholder rights, insulate management from accountability, and can distort managerial incentives by providing controllers voting power out of line with their actual economic interests in public companies.
21st Century Fox
Before the birth of the #metoo movement, BLB&G leads the prosecution of an unprecedented shareholder derivative litigation against Fox News parent 21st Century Fox, Inc. arising from the systemic sexual and workplace harassment at the embattled network. After nearly 18 months of litigation, discovery and negotiation related to the shocking misconduct and the Board’s extensive alleged governance failures, the parties unveil a landmark settlement with two key components: 1) the first ever Board-level watchdog of its kind – the "Fox News Workplace Professionalism and Inclusion Council" of experts (WPIC) – majority independent of the Murdochs, the Company and Board; and 2) one of the largest financial recoveries – $90 million – ever obtained in a pure corporate board oversight dispute. The WPIC is expected to serve as a model for public companies in all industries.
As alleged in groundbreaking litigation, billionaire hedge fund manager Bill Ackman and his Pershing Square Capital Management fund secretly acquire a near 10% stake in pharmaceutical concern Allergan, Inc. as part of an unprecedented insider trading scheme by Ackman and Valeant Pharmaceuticals International, Inc. What Ackman knew – but investors did not – was that in the ensuing weeks, Valeant would be launching a hostile bid to acquire Allergan shares at a far higher price. Ackman enjoys a massive instantaneous profit upon public news of the proposed acquisition, and the scheme works for both parties as he kicks back hundreds of millions of his insider-trading proceeds to Valeant after Allergan agreed to be bought by a rival bidder. After a ferocious three-year legal battle over this attempt to circumvent the spirit of the U.S. securities laws, BLB&G obtains a $250 million settlement for Allergan investors, and creates precedent to prevent similar such schemes in the future.
Over 35 years of growth and change, the firm has remained committed to litigating with the highest level of excellence and integrity, and to protecting victims of corporate wrongdoing and workplace discrimination where the government's regulatory bodies do not. Working with our clients, we have achieved record recoveries and obtained meaningful corporate governance reforms. From obtaining many of the largest and most significant recoveries in history, to increasing market transparency,establishing greater director independence and holding wrongdoers accountable, our cases have changed corporate business practices for the better.