The Arkansas Teacher Retirement System's executive director has decided to remain as a class representative in a class-action lawsuit against financial services provider State Street Corp. in which there has been a $300 million settlement, even though the system's trustees on Monday recommended that he withdraw from that position.
Last week, a federal judge questioned whether the system should remain as the lead plaintiff in the case.
"I notified the judge that I followed his instructions and based on the review he ordered, the proper decision was to seek to stay as a class representative since, in my opinion, ATRS had done nothing wrong, the case started here, and ATRS is in a much better position to deal with any remaining issues on behalf of the class," Executive Director George Hopkins said late Wednesday afternoon in a written statement.
The system is state government's largest retirement system with more than $17 billion in investments and more than 100,000 working and retired members.
Hopkins said he doesn't know how much money the system will receive out of the settlement, but "we expect to receive our pro-rata share of the recovery -- like any other class member."
In an affidavit filed in federal court in Massachusetts on Wednesday, Hopkins wrote that the Arkansas system has become one of the top-rated public pension funds in the nation since he became executive director in December 2008. He also wrote that he has been class representative in some 30 cases that have recouped about $2.1 billion for the collective classes. Hopkins said Thursday that he doesn't have information immediately available about how much of that money was recouped for the system.
"ATRS pushed and guided this case from a position of denied liability to an extraordinary settlement for the class of $300 million," Hopkins wrote in his affidavit filed Wednesday. "I do firmly believe that we all can learn from this case, including a little more 'trust, but verify.' However, trusting those who have not previously given us a cause to distrust does not create a failure of duty."
Last week, a special master appointed in a billing probe found misconduct on the part of attorneys who led the $300 million class-action settlement with State Street Corp. In a hearing in Massachusetts, the special master recommended that a significant chunk of the $75 million awarded to attorneys be returned.
Labaton Sucharow LLP, Thornton Law Firm LLP and Lieff Cabraser Heimann & Bernstein served as lead counsel on the case. They said they overstated the value of their work by 10 percent by double billing for some work done by attorneys brought on for document review.
U.S. District Judge Mark L. Wolf appointed a special master, retired federal Judge Gerald Rosen, who said a fee paid to the attorneys in the case raised a red flag.
Last week, Wolf expressed concern about Arkansas Teacher Retirement System's ability to remain as the lead plaintiff.
Labaton Sucharow said Thursday in a written statement that law firm officials strongly disagree with the assertion that there was any misconduct in the State Street case.
"The $300 million settlement achieved by the class representative and the attorneys was an excellent result, praised by the court. This recent development involves a payment made to an attorney who originally referred our firm to ATRS," the law firm said. "Referral fees are legal and common, and Massachusetts permits lawyers who refer clients in a case to receive a referral payment. In the State Street case, class counsel provided such a referral payment which was made from the attorney's fees awarded to class counsel. We complied with all disclosure requirements."
The initial focus of the special master's inquiry was an allegation of double counting of attorney hours. The law firm said the error was inadvertent, immediately disclosed to the court and had no impact on the legal fees -- which were pre-established as a percentage of the overall award in the case.
Asked about Hopkins' decision to remain class representative, the the retiree system's board chairman, Jeff Stubblefield of Charleston, said Thursday he wanted Hopkins to know Monday that the board would support him no matter what he decided.
"He felt like he had to stay with this because it was expected," Stubblefield said. "He feels like it's his responsibility to get our money back."
But Trustee Andrea Lea of Russellville, who is the Republican state auditor, said Thursday in a written statement, "I was surprised to find out about the existence of this case, thus I've requested more documents and information from the Director."
"At this point, I feel that a more open discussion is warranted about this case as well as any others ATRS is involved in," she said.
Lea's chief of staff, Skot Covert, said, "Part of what the auditor has requested is the audio recording and minutes of the previous meeting to determine if the decision to remain as lead plaintiff is consistent with the recommendation of the board."
Hopkins said he provided the trustees with a list of 12 class-action cases still in litigation in which the system serves as a class representative.
The trustees Monday also asked Hopkins to review whether there were any lawsuits in which the system could stop being lead plaintiff and not be financially hurt.
Information for this article was contributed by Chris Villani of legal news website law360.com.
Metro on 06/08/2018