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Switching custodian banks can be an arduous business, as anyone contemplating it knows. But for the Fire & Police Pension Association of Colorado, the transition also created a potentially costly gap in its filing of class action settlement claims.
Like other institutional investors, FPPA relies on its custodian bank to file its settlement claims. But the new custodian was contractually responsible only for claims involving transactions with class periods dated after it came aboard. For those cases with earlier class periods – the vast majority – FPPA was on its own.
To complicate matters further, information from the prior custodian was stored in a non-spreadsheet format, forcing staff to spend hours tracking down claims for class periods preceding the custodial switch.
So FPPA faced a decision: devote significant staff time to filing claim forms or risk losing hundreds of thousands of dollars a year in settlement money.
"We were between a rock and a hard place,"FPPA General Counsel Kevin Lindahl said. "We knew it was our fiduciary duty to file our settlement claims and recover that money, but the cost of staff time was reducing the benefit."
The administrative struggles might have continued indefinitely for the $2.5 billion fund were it not for a casual encounter between Lindahl and Richard Lorant, Berman DeValerio’s director of client relations, at a 2005 Council of Institutional Investors meeting. At the time, the fund and the firm did not have a formal relationship.
Between conference sessions, the two men began chatting about portfolio monitoring issues. When Lindahl described the problem, Lorant realized Berman DeValerio’s customized online portfolio monitoring software could offer a solution.
One conversation led to others. Before long, Berman DeValerio’s partners approved a project to convert the prior custodian’s data into a workable electronic format and upload them to the firm’s secure database, where FPPA’s staff could easily identify likely settlement claims and gather the materials necessary to file them.
"At Berman DeValerio, we usually deal in the very long term. We spend years building client relationships and then waiting for the right case to recommend – not to mention the time and effort it takes for our lawyers to successfully litigate a case," Lorant said. "It was exciting to be in a position to make such a positive impact so quickly."
With the system in place, the change was immediate. Using Berman DeValerio’s secure client Web portal, FPPA staff could file potential claims in a fraction of the time it had taken before.
"Now it takes us minutes to do what took hours, leaving more money for our members and more time for our staff to focus on core concerns," Lindahl said.
The monitoring system automatically notifies FPPA of any settlement in which the fund may have a likely claim. It provides access to an array of legal documents, including the plan of allocation and the claim forms themselves. It also allows FPPA to download transaction details that can be attached as an electronic or paper proof of their claims.
FPPA also added the firm to its list of approved securities class action counsel after a thorough vetting process made easier by the firm’s roster of top-tier public pension fund clients. Berman DeValerio has yet to represent FPPA in litigation, though it regularly provides case evaluations for Lindahl.
The relationship gathered strength this year when longtime Berman DeValerio client Dan M. Slack took over as FPPA’s chief executive officer, after serving as executive director of the State Universities Retirement System of Illinois. In 2002, Slack was general counsel when SURS selected Berman DeValerio as a monitoring firm. The firm was selected again in 2007 and currently represents SURS in a pending class action against GE Capital Services.
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