Judge OKs Initial Payout to Keating Investors
A federal judge in Tucson approved an initial payout Monday of $70 million to small investors in the civil securities fraud and racketeering case against Charles H. Keating Jr., his aides and professional advisers.
Small investors, who won settlements as well as a jury award, can expect to begin receiving their share of the first distribution of money within a month, said Ronald Rus of Orange, one of the investors’ lawyers.
U.S. District Judge Richard M. Bilby warned lawyers in the class-action lawsuits to stop fighting over fees or he would void an earlier fee formula he established and hire an accounting firm, at the law firms’ expense, to audit their books for proper fees, Rus said. His law firm is one of three that objected to the division of $38 million in attorney fees.
Bilby also ordered $1 million in fees be withheld from each of the two law firms represented by the main co-lead counsel, Joseph W. Cotchett Jr. of Burlingame and Leonard B. Simon of San Diego. Their initial fees would be reduced to $8.85 million each.
Cotchett and Simon recommended how fees should be split among 18 law firms working on the case over three years based on their own views of the contributions of each law firm. The split, however, appeared to favor those in the business of handling class-action securities cases at the expense particularly of Orange County law firms that also worked on the case.
The payouts to small investors in Keating’s bankrupt American Continental Corp. and to their lawyers come from the first batch of settlement money gathered by the lawyers. Most of the defendants settled for a total of $251 million, though that amount could rise by $10 million if the lawyers can get more money from the bankrupt estate of New York brokerage Drexel Burnham Lambert Inc.
Besides obtaining the settlements, the lawyers won jury awards in July totaling $4.4 billion against Keating and three other defendants, though it is unlikely much of that money will ever be collected. Keating, serving a prison term for his state securities fraud conviction last year, is broke. Two other defendants are bankrupt, and the fourth is an offshore company.
The settlements and jury awards stem from 15 class-action lawsuits consolidated before Bilby. The suits accused Keating and nearly 100 other defendants of fraud, racketeering, negligence and other wrongdoing that led to the collapse of his company and its main subsidiary, Lincoln Savings & Loan in Irvine.
