Questioning a questionable plaintiff
On behalf of a public company that experienced a sudden drop in share price, Nardello & Co. was retained to investigate the plaintiffs of the resulting class-action lawsuits. The lead plaintiff – a municipal pension fund whose chairman opposed settlement of the matter – claimed the client had made false statements regarding its financial health, statements the fund’s chairman, who claimed to be an unsophisticated investor, relied upon to the detriment of the fund. Contrary to his claims, Nardello & Co.’s investigation determined that the chairman had held himself out as an investment expert and had spoken regularly at conferences as an authority on pension fund management. Moreover, the chairman’s expenses for attending these conferences, which were typically held in exotic locales, had apparently been paid by various investment fund managers. In addition, Nardello & Co. obtained and reviewed audits of the municipal pension fund that identified long-standing, unresolved bookkeeping irregularities, ranging from failure to reconcile bank statements to contravention of established procedures for making multi-million-dollar transfers. Further, the audits criticized the pension fund’s use of “alternative investments,” such as those in hedge funds and private equity funds. The fund’s alternative investment holdings were reportedly four to five times larger than those of similar funds. Armed with Nardello & Co.’s findings, the client reached a favorable settlement.
