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and Insurance Litigation Website
This Homepage summarizes the Settlement involved in the In re Tremont Securities Law, State Law and Insurance Litigation. Please read the Court documents in their entirety for complete information.
The complaint in the State Law Actions asserted both class and derivative claims based solely on state common law. The complaint asserted claims against the Tremont Defendants for breach of fiduciary duty, breach of contract, and unjust enrichment. The complaint alleged that the Tremont Defendants, who organized, managed and operated the Rye Funds, breached their fiduciary and contractual duties by investing billions of dollars with Madoff and BLMIS without conducting an adequate investigation of Madoff's operations. The State Law Complaint further alleged that the Tremont Defendants turned a blind eye to Madoff's operations despite their knowledge of both "red flag" warnings regarding Madoff's operations and growing suspicions among other sophisticated corporate entities that those operations were not legitimate because the Tremont Defendants feared jeopardizing their lucrative relationship with Madoff, which had generated them hundreds of millions of dollars in fees over the years. Additionally, the complaint in the State Law Actions alleged claims against the Parent Settling Defendants for unjust enrichment and aiding and abetting the Tremont Defendants' breach of their fiduciary duties.
The complaint in the Securities Actions alleged that the Settling Defendants had possession of, or direct access to, material information regarding Madoff's operations - information that caused other investment professionals (who did not have direct access to Madoff) to avoid investing with him. Rather than refrain from investing with Madoff or investigating his operations, the Tremont Defendants turned a blind eye to the red flags without disclosing them to investors. The failure of the Tremont Defendants to disclose material information to investors and their intentional misrepresentations regarding the due diligence conducted on outside managers, such as Madoff, both before and after investment, are the basis for the Securities Subclass Plaintiffs' claims under the federal securities laws. In addition, the Securities Actions brought state and common law claims against the Tremont Defendants, including breach of fiduciary duty; common law fraud; negligent misrepresentation; gross negligence and mismanagement; and unjust enrichment. Finally, the Securities Action alleged claims against the Parent Settling Defendants, including control person liability under the federal securities laws, and unjust enrichment and aiding and abetting a breach of fiduciary duty under the common law.
The complaint in the Insurance Action alleged claims against the Settling Defendants for violations of common law fraud, breach of fiduciary duty, gross negligence, unjust enrichment, injunctive relief, promissory estoppel and violations of New York General Business Law § 349 in connection with the investment account of Insurance Subclass Members' Policies with Madoff. The investment accounts of most of the Policies were invested in certain Rye Funds that were managed by one or more of the Tremont Defendants who, in turn, invested those Funds' assets with Madoff. The Insurance Class Plaintiffs alleged, among other things, that the Tremont Defendants failed to conduct adequate due diligence and failed to monitor fund assets that were invested with Madoff, that the offering materials for the funds contained false and misleading statements, and that the Tremont Defendants unjustly enriched themselves by collecting outsize management fees. The Insurance Class Plaintiffs also alleged that the Parent Settling Defendants knew or recklessly disregarded that one or more of the Tremont Defendants was investing with Madoff. The Insurance Class Plaintiffs also asserted claims against the Argus defendants which were settled on July 21, 2009. The Argus settlement received final court approval on Jaunary 4, 2010.
By Order dated March 29, 2011, the Honorable Thomas P. Griesa of the United Stated District Court for the Southern District of New York directed the Actions to proceed as a class action for settlement purposes, consisting of the following subclasses:
- for the consolidated State Law Actions, all Persons other than the Settling Defendants who were holders of limited partnership interests in or shares of the Rye Funds (other than Rye Select Broad Market Insurance Portfolio LDC,except with respect to INTAC Independent Technical Analysis Centre Ltd., LifeInvest Opportunity Fund, LDC,Scottish Annuity Company (Cayman) Limited, The Scottish Annuity and Life Insurance Company (Bermuda) Ltd. and The Scottish Annuity Life Insurance Co. (Cayman) Ltd.) or the Tremont Funds as of December 11, 2008, and who sustained net losses thereby (the "State Law Subclass"); and
- for the consolidated Securities Actions, all Persons other than the Settling Defendants who purchased limited partnership interests in or shares of the Rye Funds (other than Rye Select Broad Market Insurance Portfolio LDC,except with respect to INTAC Independent Technical Analysis Centre Ltd., LifeInvest Opportunity Fund, LDC,Scottish Annuity Company (Cayman) Limited, The Scottish Annuity and Life Insurance Company (Bermuda) Ltd. and The Scottish Annuity Life Insurance Co. (Cayman) Ltd.) or the Tremont Funds between December 11, 2003 through and including December 11, 2008 for claims arising under the Exchange Act, and between May 10, 1994 through and including December 11, 2008 for claims arising under common law and state law and who sustained net losses thereby (the "Securities Subclass").
- for the consolidated Insurance Actions, all Persons who purchased or otherwise acquired variable universal life insurance policies or deferred variable annuity policies issued by Tremont International Insurance Limited or Argus International Life Bermuda Limited from May 10, 1994 - December 11, 2008 ("Class Period") to the extent those policies were invested in the Rye Select Broad Market Insurance Portfolio LDC and Rye Select Broad Market XL Portfolio Limited funds, including any and all past and present heirs, executors, administrators, successors and assigns, policy holders, policy owners, policy beneficiaries, parties responsible for payment of policy premiums, trusts, trustees, insureds, and/or any other party with any direct or indirect interest in the Policies during the Class Period and who sustained losses thereby, but excluding the Individual Settling Insurance Plaintiffs (the "Insurance Subclass").
A settlement fund of $100 million in cash ("Initial Settlement Payment"), plus interest ("Gross Settlement Fund"), is being established for the benefit of the Settlement Class. Additional monies are expected to be added to the Gross Settlement Fund from the amounts remaining in Tremont Group Holdings, Inc. after the wind down of its and its subsidiaries' operations ("Remaining Tremont Funds") and pursuant to the Settling Defendants' assignment of certain legal claims (the "Assigned Claims") and litigation interests (the "Fidelity Bond Recovery") as part of the Settlement. 8.2% of the Initial Settlement Payment, the Fidelity Bond Recovery and the Remaining Tremont Funds shall be allocated to the Insurance Subclass and the Individual Settling Insurance Plaintiffs.