Blair A. Nicholas | Partner BLB&G Bernstein Litowitz Berger & Grossmann LLP High Bluff Drive, Suite 300 | San Diego, CA T | F |

In Larson, the 7 th Circuit Court of Appeals sent a strong message to public pension funds: Fiduciaries Are Assumed To Be Monitoring Securities Class Actions To Protect Viable Claims And Ensure Recovery Of Funds Lost As A Result Of Securities Fraud The Importance Of Monitoring Securities Class Actions Larson v. J.P. Morgan Chase & Co., Civ. No , 2008 U.S. Dist. LEXIS (7 th Cir. Jun. 23, 2008)

Larson: Background On Facts Notice Of A Proposed Settlement Sent To The Class Settlement Failed To Include Recovery For Certain Investors Whose Claims Were Dismissed Disputed Claims Were Initially Alleged In Securities Class Action But Dismissed Investors Were Unaware That Claims Were Dismissed Until Settlement Notice Issued Years After Dismissal Upon Receipt Of Settlement Notice, Public Pension Fund Sought To Intervene in Securities Class Action To Appeal The Dismissal of Claims Valued At Millions of Dollars

MOTION TO INTERVENE DENIED Public pension fund is a “sophisticated litigant with... no good excuse” for not intervening before expiration of the statute of limitations “Large pension funds have securities lawyers on retainer, and their lawyers would have known about and monitored the progress of the class action whether or not the trustees did.”

Monitoring Securities Class Actions Viable Claims In Securities Class Actions Are Assets Of The Fund That Fiduciaries Have A Duty To Monitor And Protect On Behalf Of Their Beneficiaries

“Assets” include not only the securities held, but also the rights attached to those securities … and “it would be a breach of fiduciary duty not to pursue a valid [securities fraud] claim.” -- Secretary of Labor’s Memorandum of Law as Amicus Curie, In re Telxon Corp. Sec. Litig., 67 F. Supp. 2d 803 (N.D. Ohio, 1999) U.S. Department of Labor:

National Association of Pension Funds: -- Securities Litigation, Questions for Trustees, NAPF March, 2007 “[I]t seems self-evident that trustees have a duty to protect the assets in their scheme and that they should therefore at the very least not neglect opportunities to recoup losses....”

Government Finance Officers Association: “Public pension governing bodies (the Board) and chief administrative officers (CAO) have a fiduciary obligation to recover funds lost through investments in public securities as the result of corporate mismanagement and/or fraud.” -- GFOA Recommended Practice, “Developing a Policy to Participate in Securities Class Actions” (2006) (CORBA)

“An increasing number of plan sponsors, litigation experts, plan counsel, academics and not-for-profit and professional organizations generally agree that, at a minimum, pension fund fiduciaries are required to monitor securities litigation and pursue recovery when securities actions are settled or judgments are awarded.” Council of Institutional Investors:

Monitoring Results In Material Recoveries: The LACERA Example LACERA has recovered more than $40 million from shareholder litigation since formalizing its securities litigation monitoring policies and procedures. LACERA’s recoveries result from serving as the lead plaintiff in securities class actions, opting-out of class actions and pursuing their own individual actions, and timely filing their settlement claim forms.

Since Congress passed the PSLRA in 1995, shareholders have recovered nearly $60 Billion… Total Shareholder Recoveries

Settlement Funds Left Unclaimed During that same time… Over $12 billion, or 20%, of settlement funds went unclaimed Recent study found that… Only 30% of institutions actually collected their settlement funds

Settlement Funds In Pipeline As of Q2 2008, over $15 billion in class settlements and SEC penalties are awaiting disbursement to institutional investors.

Best Monitoring Practices for Fiduciaries To ensure the protection of viable claims and collection of recoveries, institutions should implement procedures to: Monitor all shareholder actions filed Determine trading activity and calculate losses from new shareholder actions Understand all legal options for the protection of viable claims and recovery of assets lost as a result of the securities fraud Monitor all pending cases to ensure protection of viable claims and track settlements Complete settlement claim forms in a timely manner for the recovery of settlement funds

Challenges Implementing Best Monitoring Practices: Volume: Hundreds of securities cases filed each year to track simultaneously Resources: Insufficient internal resources to sufficiently monitor all new, pending and settled securities actions Expertise: Lack of internal securities litigation expertise to make evaluations and informed judgments on complex legal options Reliance on Custodians: Not part of contractual obligations, high turn over, and no legal advice on protection of claims or legal options

Options For External Monitoring And Claims Filing Custodians: If contractually obligated, may file claim forms for a fee, but do not provide legal advice to ensure protection of viable claims or best legal options for recovery of assets. Third-Party Case Monitor: For a fee, will monitor portfolio, provide loss calculations in pending securities class actions, and notify of pending settlements, but generally do not provide legal advice to ensure protection of viable claims or evaluation of best legal options for recovery of assets. Outside Securities Counsel: Retained at no cost to monitor portfolio, track viable claims, calculate losses, provide litigation summaries, evaluate and recommend best legal options to protect viable claims, and ensure the timely filing of settlement claim forms.

Protect The Fund’s Viable Claims And Recover Settlement Funds Given The Increased Scrutiny On The Importance Of Portfolio Monitoring, Every Fund Should Have Monitoring Procedures In Place That Track All Pending Securities Actions, Evaluate The Best Legal Options For Recovery Of Assets, And Ensure The Protection Of All Viable Claims And Timely Filing Of Settlement Claim Forms.

Blair A. Nicholas (858) People, Resources, Excellence... Results Mr. Nicholas has successfully represented numerous institutional investors in high-profile actions involving federal and state securities laws, accountants’ liability, and corporate governance matters. He has extensive trial experience, including having served as one of the lead trial counsel in In re Clarent Corporation Securities Litigation. After a four week jury trial, the jury returned a securities fraud verdict in favor of investors against the former Chief Executive Officer of Clarent. Mr. Nicholas has presented at institutional investor conferences throughout the United States and has written articles relating to the application of the federal and state securities laws, including the articles “Industry-Wide Collapse Defense Falls Flat in Recent Subprime-Related Securities Fraud Decisions,” Securities Litigation & Regulation Reporter (2008 WL , Vol. 14, No. 4, July 1, 2008) (co-author); “Auditor Liability: Institutional Investors Pursue Opt-Out Actions To Maximize Recovery of Securities Fraud Losses,” Securities Litigation and Enforcement Institute (PLI 2007) (co- author); and “Reforming the Reform Act and Restoring Investor Confidence in the Securities Markets,” Securities Reform Act Litigation Reporter (Vol. 13, No. 4, July 2002).