In a step forward for long-suffering Kentucky Retirement Systems (now Kentucky Public Pension Authority) beneficiaries, attorneys for so-called Tier 3 Plaintiffs beat back a scheme by Attorney General Russell Coleman to settle claims against private equity kingpins KKR and Blackstone on the cheap…oh, and completely drop claims against their top partners, here the famed Henry Kravis, George Roberts, Steve Schwarzman, and Tomlinson Hill.
This “settlement” was brazen since the Attorney General intended to extinguish claims by plaintiffs he did not represent, here the so-called “Tier 3 Plaintiffs” who have what amounts to hybrid defined benefit and defined contribution plans. Even though they may seem to represent a small portion of total fund assets, their lack of a state guarantee (unlike those in the defined benefit plans) puts them in a first loss position. And demonstrating the seriousness of their claims, their attorneys have filed for what on a current basis (as in with updated interest) would be $807 million of damages, penalties and interest on a single violation by one of the four hedge funds targeted in this case.
In a show of cheekiness, Coleman presented the settlement as $227.5 million, when that figure included $145 million of monies owned by the KRS pension funds that were improperly seized by KKR. The local press wised up to what was going on, including the possibility of a grotesque payout to crooked attorney Ann Oldfather, who after being fired by the original plaintiffs in the case, took their records and information to get hired by the Attorney General. What makes this situation even more offensive is that the earlier Attorney General and protege of Mitch McConnell, Daniel Cameron, who engaged Oldfather ,was widely seen as taking up the case at such a late juncture solely to settle it cheaply so as to curry favor with these powerful Republican donors.
The Courier-Journal recapped the meager returns to pensioners and the possibility of an egregious payout to Oldfather:
The deal Cameron’s office signed with Louisville lawyer Ann Oldfather’s office after the initial case was dismissed set terms for fees those attorneys could collect once the lawsuit was settled: 20% of the gross recovery’s first $250 million; 15% of the gross recovery between $250 million to $1 billion; and 10% of the gross recovery past $1 billion.
If the gross recovery is $227.5 million — a figure that includes the $145 million Kentucky had given to KKR (one of the four hedge funds in the case) that has been withheld as the litigation moved forward — then attorney fees would rise to $45.5 million, a higher sum than the $37 million in new money the state would receive. If the gross recovery does not include that $145 million, attorney fees would reach $16.5 million, with $66 million in new funds going to the state,
The Attorney General had asked for the court to approve the settlement, with a hearing date of February 26. The Tier 3 Plaintiffs had asked either for a stay on their case to be lifted (appeals, which look unlikely to succeed, are pending) or to have their case go to mediation. As you can see from the short order below, Judge Wingate approved of the motion to proceed to mediation.
This development is fatal to the settlement. Recall that the moneybags had refused to come to terms with Daniel Cameron earlier because they were unduly confident that their big building, white shoe lawyers had the upper hand against the tenacious plaintiffs attorneys headed by Michelle Lerach. But their big fear is not simply the possibility of having to make a big payout, but of discovery confirming the depth of deceptiveness of their business practices, not just damaging their reputation but also potentially leading to other lawsuits.
Confirming our assessment, Michelle Learch said in a statement:
In light of Judge Wingate’s order, it is extremely unlikely that the Attorney General‘s settlement will go forward as currently attempted — if at all. The Court ordered our case to mediation and we intend to mediate with the hedge fund sellers to reach a real settlement. If that cannot be done, we will be able to go ahead and litigate our claims without any further interference from the Attorney General.
Another contact confirmed that this ruling represented a “crushing defeat” for Attorney General Coleman.
So a toast to the victors. May they continue to clear the considerable legal obstacles thrown in their path since 2017 to prevent this case from moving forward and the long-suffering Kentucky pensioners getting a measure of justice.
(2025-02-14) Order Referring Case to Mediation
