Milberg Investigators & Forensic Accountants
Investigative Pioneers, Maximizing Recoveries for Investors & Consumers
Domestic Investigations
Alaska
Exxon Valdez
Milberg is a member of the Plaintiffs’ Coordinating Committee and co-chair of Plaintiffs’ Law Committee in the massive litigation resulting from the Exxon Valdez oil spill in Alaska in March 1989. A jury verdict of $5 billion was obtained, which, after years of appeals by Exxon, was reduced to approximately $500 million by the United States Supreme Court. Recently, the United States Court of Appeals for the Ninth Circuit held that plaintiffs are entitled to post-judgment interest of $470 million on the award. Exxon is presently seeking a rehearing in the Ninth Circuit on an issue involving award of costs. In re Exxon Valdez, No. 89-095 (D. Alaska) and In re Exxon Valdez Oil Spill Litigation, 3 AN-89-2533 (Alaska Super. Ct. 3d Jud. Dist.).
Arizona
Washington Public Power Supply System Securities Litigation (WPPSS)
This was a massive securities fraud litigation in which Milberg served as co-lead counsel for a class that obtained settlements totaling $775 million after several months of trial.
California – San Diego
Leap Wireless
This shareholder derivative action, filed in San Diego, involves Leap, a wireless communications carrier that offered digital wireless service under the Cricket Communications, Inc. and Jump Mobile brands in the United States.
Milberg’s investigation focused on events related to Leap’s earnings restatement in late 2007, which covered more than 3 years (14 fiscal quarters). The events investigated included the named defendants’ public statements regarding the company’s business, prospects and financial results (which were later restated). The investigation also covered whether the defendants concealed financial and operational information from the public, including Leap’s use of a billing system that contributed to inaccurate financial reporting and misstatements, other problems with Leap’s financial reporting processes and internal controls, and potential violations of accounting rules.
REMEC
In this securities litigation, Milberg investigated and brought an action against REMEC, Inc., which designed and manufactured high frequency subsystems used in the transmission of voice, video and data traffic over wireless communications networks. Milberg’s investigations supported plaintiffs’ allegations that REMEC’s securities were trading at inflated levels because of false and misleading statements regarding the company’s financial condition, including the inflated valuation of REMEC’s goodwill. Milberg serves as lead counsel for the certified class in this matter.
California – San Francisco
Blackie v. Barrack
Milberg investigated and represented plaintiffs in this case, which resulted in the seminal appellate decision on the use of the “fraud-on-the-market” theory, allowing investors who purchase stock at artificially inflated prices to recover even if they were personally unaware of the false and misleading statements reflected in the stock’s price. This theory is critical to the viability of securities class actions.
Colorado
Rhythms Netconnections Inc.
Milberg’s investigation in this securities class action supported plaintiff’s allegations that defendants artificially inflated the price of Rhythms common stock by issuing false and misleading statements about its business. Witnesses interviewed stated that Rhythms, a broadband provider, misreported subscriber line count, growth, and its financial condition. Investigation in this matter included the review of large electronic databases, electronic documents and hundreds of thousands of pages of discovery. The case settled for $17.5 million.
Delaware
W.R. Grace
Milberg investigated and served as lead counsel for the asbestos personal injury and property damage committees in two separate fraudulent conveyance actions brought in the wake of W.R. Grace & Co.’s bankruptcy. The actions sought to return the assets of Sealed Air Corporation and Fresenius Medical Care Holdings (both of which had been Grace subsidiaries pre-bankruptcy) to the W.R. Grace bankruptcy estate. Complaints in both cases were filed in March 2002, and agreements in principle in both cases were reached on November 27, 2002, the eve of trial in the Sealed Air matter. The total of the two settlements, which consisted of both cash and stock, was approximately $1 billion.
Florida
Sunbeam Securities Litigation
Milberg investigated and acted as co-lead counsel for the class in this securities fraud class action. Plaintiffs alleged that Sunbeam, its auditor, and its management engaged in a massive accounting fraud that led to a restatement of over three years of previously reported financial results. The court approved a combined settlement of over $140 million, $110 million of which was paid by Arthur Andersen LLP, Sunbeam’s auditor. The Andersen settlement is one of the largest paid by a public accounting firm to settle claims brought under the federal securities laws. The settlement with individual defendants was achieved on the eve of trial after almost four years of litigation against Andersen’s and Sunbeam’s insiders, including a personal contribution from Albert Dunlap, Sunbeam’s CEO and Chairman, of $15 million.
Illinois
Sears Roebuck and Co.
This case, investigated and spearheaded by Milberg in Chicago, involved allegations that Sears concealed materially adverse information concerning the financial condition, performance and prospects of Sears’ credit card operations. The action recovered $215 million to compensate injured investors. As an additional benefit to the class, Sears agreed to separately pay the costs of class notice and settlement administration.
In 2000 Sears launched a Gold MasterCard program. Milberg’s investigation supported the allegations that Sears wanted to increase its participation in the credit card business by automatically, and without consent, converting cardholders to the MasterCard unless they specifically opted out of the conversion.
Additionally, witnesses developed by Milberg investigators also supported allegations that Sears improperly accounted for reported outstanding collectibles, hid increasing delinquencies, and failed to write off bad debt. Witnesses also reported that fraud had increased and accounts that should have been written off as uncollectible were kept on the books.
Massachusetts
Raytheon Securities Litigation
This case concerned claims that a major defense contractor failed to write down assets adequately on long-term contracts. In May 2004, Raytheon and its auditor, PricewaterhouseCoopers LLP, settled for a total of $460 million.
Milberg’s investigation supported allegations that despite assurances to shareholders and the government, Raytheon knew that some of its extended defense contracts were running over cost, had developmental problems, and were on the brink of cancellation. Witnesses also stated that Raytheon’s president was aware of significant problems but did not disclose them. In addition, many witnesses stated that while Raytheon cut its work force and closed facilities, which saved money, the cuts were made without a transition plan in place, which led to Raytheon’s inability to meet demand for certain products.
Michigan
CMS Energy Corp Securities Litigation
Milberg investigated and served as co-lead counsel in this securities class action, whose core allegation was that CMS engaged in “round-trip” transactions with counterparties. These transactions invovled the resale by a buyer to CMS of product earlier sold to it by CMS. It was alleged that these transactions lacked a valid economic purpose and should not have been recignized as revenue by CMS. Milberg investigators contributed significantly to plaintiffs’ ability to plead their case. The litigation resulted in a settlement of $200 million.
Nebraska
ConAgra Foods
This case, investigated and filed by Milberg, resulted in an important decision in the securities fraud arena, reaffirming that the materiality of an undisclosed fact to investors is not an issue that can ordinarily be decided on a motion to dismiss. The court stressed that the materiality of corporate statements challenged as false under the securities laws hinges on the particular circumstances of the company in question.
Witnesses interviewed by Milberg’s investigators provided information that significantly advanced the case. For exemple, witnesses stated that sales reps would use a “magic pen,” or different colored ink pen to forge signatures on contracts. Other witnesses stated that bad debt levels were virtually out of control because there was no company-wide policy that applied uniformly to all ConAgra subsidiaries and/or units.
New Hampshire
Tyco
Milberg served as co-lead counsel in this litigation, which involved claims under the Securities Act of 1933 and the Securities Exchange Act of 1934 against Tyco and its former CEO, CFO, general counsel, and certain former directors arising out of allegations pertaining to Tyco’s $5.8 billion overstatement of income and $900 million in insider trading, plus hundreds of millions of dollars looted by insiders motivated to commit the fraud. Plaintiffs also asserted claims against PricewaterhouseCoopers LLP for allegedly publishing false audit opinions on Tyco’s financial statements during the class period and failing to audit Tyco properly. On December 19, 2007, the court approved a $3.2 billion settlement of the plaintiffs’ claims and praised the work of co-lead counsel.
New York
Computer Associates
Computer Associates (CA) perpetrated a massive accounting scam whose details were brought to light by the efforts of Milberg investigators, among others, leading to recoveries totaling $133 million for defrauded investors in two actions.
Milberg’s investigation supported allegations that CA inflated its stock price with misleading accounting, including improper revenue recognition and the misuse of proforma accounting reports. Milberg’s investigation supported the allegations that, in response to weakening business, defendant wanted to shed its workforce and engineered a company-wide layoff, but hid this from investors by characterizing the layoffs as individual performance-based firings.
IPOs
Milberg represented investors in 309 consolidated securities actions arising from an alleged market manipulation scheme. Plaintiffs alleged, among other things, that approximately 55 defendant investment banks, in dealing with certain of their clients, conditioned certain allocations of shares in initial public offerings on the subsequent purchase of more shares in the aftermarket, thus artificially boosting the prices of the subject securities. This fraudulent scheme, plaintiffs alleged, was a factor that contributed to the technology “bubble” of the late 1990s and early 2000s. As a member of the court-appointed Plaintiffs’ Executive Committee, and with partners appointed by the court as liaison counsel, Milberg oversaw the efforts of approximately 60 plaintiffs’ firms in combating some of the most well-heeled defense firms in the nation. In granting final approval to a $586 million settlement on October 6, 2009, the court described the law firms comprising the Plaintiffs’ Executive Committee as the “cream of the crop.”
Madoff
New York, NY
On December 11, 2008, the Securities and Exchange Commission charged Bernard L. Madoff and his investment firm, Bernard L. Madoff Investment Securities LLC, with securities fraud arising out of a multi-billion-dollar Ponzi scheme. Criminal charges have also been filed against Mr. Madoff. Since the discovery of this fraud, dozens of investors have retained Milberg to seek recovery of their assets. Within days, Milberg investigators identified all of the key players and obtained significant insight into Madoff’s operations. Compromising photographs were obtained of Madoff’s accountant, David Friehling, removing computers and other equipment from his office. These photographs were turned over to the FBI. Milberg’s investigative efforts have been reported and highlighted by many media sources, including a Fox News special called “Target Madoff.”
Martha Stewart
New York, NY
Milberg investigated and represented plaintiffs in this high-profile securities class action relating to the Martha Stewart insider trading scandal, which harmed investors in Martha Stewart Living Omnimedia, Inc. The recovery obtained in the case was unusual in that Martha Stewart personally contributed $5 million of her own funds towards the $30 million settlement fund. The settlement represented a significant portion of class members’ estimated damages arising from defendants’ alleged wrongful conduct.
North Carolina
Beazer Mortgage
In the Beazer Homes securities class action spearheaded by Milberg, Milberg investigators supported plaintiffs’ allegations that Beazer’s apparent success and high stock price were founded on selling homes to people who could not afford them and that the company used its lending arm, Beazer Mortgage, to facilitate loans that should never have been made. Witnesses relayed numerous improper business and accounting practices, including that Beazer closed on homes before they were completed and held fiscal quarters open to increase revenues and earnings. This case settled for $30.5 million.
Pennsylvania
Rite Aid Securities Litigation
In this securities case, Milberg, as co-lead counsel, achieved the largest recovery against an outside auditor ($125 million) in a case where the securities claims were limited to claims under section 10(b) of the Securities Exchange Act of 1934, which requires proof of knowing or reckless misconduct. That difficult standard was met with the help of information uncovered by Milberg investigators. The total settlement was $334 million ($207 million from Rite Aid, $125 million from the auditor, and $1.6 million from former Rite Aid executives).
Tennessee
Thomas & Betts Securities Limited
Milberg investigated and served as co-lead counsel in this securities action that resulted in a settlement of $46.5 million from the company and $4.65 million from its outside auditor. Plaintiffs alleged that Thomas & Betts engaged in a series of accounting improprieties while publicly representing that its financial statements were in compliance with accounting rules, and failed to disclose known trends and uncertainties regarding its internal control system and computer and information systems.
Witnesses interviewed by Milberg investigators stated that Thomas & Betts regularly engaged in the practice of channel stuffing in order to hit revenue numbers. Product would be shipped to customers, even though they had not ordered it. The company gave distributors great terms and liberal rights of return as inducements to hold on to the shipped products. Investigation and analysis of thousands of pages of documents produced by Thomas & Betts also indicated that quarters were held open to hit revenue targets and that obsolete inventory was carried on the books at inflated values.
Texas – Dallas
Enron
Milberg conducted hundreds of interviews that furthered plaintiffs’ claims in this infamous case. Milberg witnesses included many with significant knowledge of Enron’s offshore entities, used by the company to hide debts and losses. The witnesses were instrumental in providing a road map regarding the machinations of special purpose entities (SPEs); including the unraveling of the intricate financial quid pro quo relationships between certain financial institutions and Enron. Milberg’s information provided valuable insight into understanding the internally created SPEs and Enron’s financial accounting that allegedly reflected its investments in the SPEs, and the fraudulent financial transactions involving Nigerian barges and other prepay transactions with financial lending institutions.
i2 Technologies
This case alleged securities fraud against defendants relating to the company’s software product descriptions and alleged violations of Generally Accepted Accounting Principles.
i2 Technologies touted its supply chain management software, but Milberg’s investigation indicated that its software had significant problems. Witnesses indicated that one of i2′s most significant customers, Nike, Inc., was experiencing problems with the implementation of i2′s software, which put i2′s relationship with the client at risk- a risk that was not disclosed. The capabilities of the product were misrepresented and oversold.
The investigation further revealed that the product was so problematic that Nike hired consultants to bypass the i2 software. The resolution of this investigation resulted in an $84.85 million dollar settlement in May 2004 and i2′s adoption of a series of corporate governance reforms.
Utah
Paradigm Medical Industries
This securities action was investigated and filed by Milberg. The investigation supported plaintiffs’ allegation that Paradigm Medical was improperly touting receipt of an insurance code from the American Medical Association that would allow doctors to receive reimbursement from insurance companies for using a product material to Paradigm Medical’s business. Milberg investigators also interviewed witnesses who stated that a $105 million dollar purchase order reported by the company was not a valid purchase order.
Washington – Seattle
Washington Mutual
This securities fraud case alleged that Washington Mutual misrepresented its ability to grow in the face of any interest rate increases. Milberg’s investigation indicated that the company principals knew the company would miss expectations, while publicly representing that the bank would not be impacted by interest rate hikes that securities analysts flagged as worrisome for Washington Mutual. Milberg’s investigation proved instrumental in plainitffs overcoming defendants’ motion to dismiss the case, a high hurdle in securities actions.
