Approval sought for $7.4M Merrill Lynch settlement

Attorney Joyce C. H. Tang, the trustee of the CNMI Settlement Fund, has requested the federal court to approve the $7.4 million settlement that the NMI Retirement Fund’s former investment consultant, Merrill Lynch, has agreed to pay the Fund.

According to court records, out of the $7.35 million settlement, $1.84 million will go to attorney’s fees and $390,535.60 will go to law firms’ expenses and costs. This leaves $5.12 million in net proceeds for the Settlement Fund.

The parties involved in the arbitration proceeding, pending before the Financial Industry Regulatory Authority in connection with the Settlement Fund’s claims against Merrill Lynch, reached a settlement during a final attempt to mediate in Miami, Florida last July 31.

The settlement requires designated judge Frances Tydingco-Gatewood of the U.S. District Court for the NMI to approve it. She will hear the request for approval of the settlement deal on Nov. 20, 2015.

Tang and NMI Settlement Fund counsel Dean A. Manglona asked the court to approve the FINRA settlement and the payment of attorney’s fees and reimbursement of costs in papers submitted to the U.S. District Court on Friday.

In her declaration, Tang said Manglona has reviewed the closing statement and detailed cost report, along with supporting invoices and/or receipts. Tang confirmed that the charges are supported by proper documentation, and are reasonable and necessary.

Manglona said the FINRA action settlement was the product of difficult, complicated, and often contentious negotiations.

Manglona said the settlement was reached after prolonged arms-length negotiations and hard-fought mediation sessions directed by Robert Herschman, a mediator with extensive FINRA experience.

Manglona said that Tang was directly involved in the mediation sessions and was adamant in pushing the Fund’s counsel to demand the highest possible settlement.

The lawyer said that based on Tang’s review of the evidence, her participation in the mediation sessions, and her consultation with her legal team and experts, she believes the settlement terms are fair and reasonable and represents the best result the Fund could achieve without taking the considerable risk of proceeding to an arbitration hearing.

In the FINRA action, the Settlement Fund retained the Florida-based Levin law firm as lead counsel, while the O’Connor law firm on Saipan was the referral counsel. The Clay law firm in Hawaii was the associate counsel.

Of the $1.8 million in attorney’s fees, the Levin law firm will get $1,340,625; the O’Connor law firm will receive $357,500; and the Clay law firm will get $89,375.

The Levin law firm agreed to reimburse Betty Johnson’s counsel, Bronster Hoshibata, $50,000 for legal services and expenses incurred in the arbitration.

Of the $390,535.60 in reimbursable costs, Levin law firm will get $338,616.93; the O’Connor law firm will receive $30,897.24; and the Clay law firm will obtain $21,021.43.

Merrill Lynch was the Retirement Fund’s consultant until 2010. During the time of the consultancy relationship, the value of the Fund’s assets reportedly declined substantially.

Mariano Taitano, Roman Tudela, and Patricia Guerrero, through counsel, sued the Fund’s board, Merrill Lunch, and others in Superior Court, alleging various causes of action for damage relating to the decline in the Fund’s assets.

The matter was submitted to arbitration before FINRA. Taitano, Tudela, and Guerrero subsequently transferred their claims against Merrill Lynch to the Settlement Fund.