A History of RFS Cases

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RFS was formed in 1996 by Mr. Richard C. Breeden to provide specialized claims administration and fund distribution services in cases involving securities fraud.  Mr. Breeden is a former Chairman of the U.S. Securities and Exchange Commission under Presidents George H. W. Bush and William J. Clinton, with extensive experience in capital markets and investments.

In December 2012, Mr. Breeden and RFS were appointed to serve as Special Master to oversee the administration and distribution of the settlements reached by the USAO for the SDNY in United States v. Bernard Madoff, and other related criminal and civil forfeiture cases. The Madoff Victim Fund (“MVF”) was created by DOJ as the vehicle to distribute the more than $4 billion in assets forfeited to the United States to victims of the crimes involving Madoff Securities. The Madoff case may well be the most complex claims administration ever undertaken, as it involves indirect investments through banking, securities and insurance products, as well as investments through swaps and other derivatives, in almost every currency and in nearly every country.  In many cases, eligible claimants invested through three or more intermediary investment vehicles before their funds reached Madoff securities, thereby requiring painstaking financial analysis to trace the flow of funds and to determine the correct eligible fraud loss amount invested in Madoff Securities.  As part of establishing MVF, we worked with numerous attorneys at DOJ to develop and write an innovative Distribution Plan to cover all potential victims and the calculation of eligible losses. This Plan was written in the form of a series of Questions and Answers published on MVF’s website at www.madoffvictimfund.com. DOJ has now approved over 40,000 claims from victims in over 120 countries based on recommendations from RFS.  MVF represents that largest effort by any government in the world to return forfeited assets obtained by law enforcement authorities to victims of securities fraud.

The SEC and BP p.l.c. (“BP”) entered into a Final Judgment which ordered BP to pay a civil money penalty in the amount of $525,000,000 to settle charges that BP violated federal securities laws when it made material misrepresentations and omitted material information known to BP regarding the rate at which oil was flowing into the Gulf of Mexico as a result of the explosion on the offshore oil rig Deepwater Horizon. RFS was retained as the Distribution Agent to distribute the civil money penalty to harmed investors pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended. In February, 2016, the Court approved a Plan of Distribution created by RFS that sets forth eligibility criteria and other rules governing the administration and distribution of the BP Fair Fund to injured investors. RFS initiated a full claims process in this case, which resulted in the receipt of nearly 100,000 claims.

In September, 2013, the SEC charged JPMorgan Chase & Co. with violating federal securities laws when it made material misstatements in its public filings with the Commission. The Order settled the Commission’s civil enforcement action against JPM, and ordered JPM to pay a civil money penalty in the amount of $200,000,000. The Commission appointed RFS as the Administrator to distribute the $200,000,000 civil money penalty to harmed investors pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended. After approval of the Plan of Distribution, RFS initiated a full claims process in this case, which resulted in the receipt of nearly 130,000 claims.

Citigroup Global Markets Inc. (“CGM”) consented to the entry of a Final Judgment that required it to pay $285 million to settle allegations of violations of the antifraud provisions of the Securities Act of 1933 (Sections 17(a) (2) and (3)), by making misrepresentations and omissions of material facts regarding the collateralized debt obligation (“CDO”) called Class V Funding III.

The Citigroup Global Markets Inc. Fair Fund (the “Citi Fair Fund”) was established May 23, 2017 by Court Order to distribute the disgorgement, prejudgment interest and a civil penalties paid by CGM. The Court appointed RCB Fund Services, LLC as the Distribution Agent for the Citi Fair Fund. The Citi Fair Fund will be distributed, pursuant to the Fair Fund provisions of Section 308(a) of the Sarbanes-Oxley Act, to investors in the Class V Funding III CDO that were harmed by misrepresentations and omissions of material facts made in connection with the marketing of the transaction.

On December 9, 2020, the U.S. Securities and Exchange Commission (“SEC” or “Commission”) issued the Order instituting and simultaneously settling cease-and-desist proceedings (the “OIP”) against General Electric Co. (“GE”). In the OIP, the Commission found that GE failed to disclose to investors material information related to two of its key reportable segments during the period from 2015 through 2017.

The OIP ordered GE to pay a civil money penalty in the amount of $200,000,000, and created a Fair Fund pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002 (the “GE Fair Fund”) to be used to distribute the penalty to investors harmed by the alleged misconduct.

On September 16, 2021, the Commission appointed RCB Fund Services LLC, as the fund administrator for the GE Fair Fund to oversee all aspects of the administration and distribution of the Fair Fund.

Select Previous Cases

RFS was formed in 1996 by Mr. Richard C. Breeden to provide specialized claims administration and fund distribution services in cases involving securities fraud.  Mr. Breeden is a former Chairman of the U.S. Securities and Exchange Commission under Presidents George H. W. Bush and William J. Clinton, with extensive experience in capital markets and investments.

In 1996, Mr. Breeden was appointed by the DOJ to serve as the Chapter 11 Trustee of the Bennett Funding Group, a privately owned leasing company that was the scene of the largest Ponzi-style fraud prior to the Madoff case. Over a ten year period the company financed approximately $2.5 billion by pledging non-existent or duplicate leases to tens of thousands of mostly elderly investors. As Trustee, Mr. Breeden and his team worked tirelessly to recover assets for the benefit of the creditors. Starting with essentially zero in liquid assets, Mr. Breeden and his team recovered more than $750 million.

In addition to identifying and recovering assets on behalf of the creditors, Mr. Breeden formed a group to handle the claims administration process internally. Several of our current executives obtained their first direct distribution experience managing claims and distributions during the Bennett Funding bankruptcy proceeding. Total creditor claims when the bankruptcy occurred were more than $5 billion, and claimants were located in 48 states. Most claims in the case involved loans, leases and other commercial transactions – including property foreclosures. Bennett had an international personal finance company that made loans secured by interest in residential property (mostly time share units), and there were many commercial and individual foreclosure-related issues in that administration. We ultimately determined through review of the claims that nearly 80% (or $4 billion of the $5 billion) of the total creditor claims originally filed were fraudulent, erroneous, unsupported or duplicates. Ultimately, unsecured creditors were paid nearly 60% of their claims. Approximately 25,000 former

The WorldCom Victim Trust (“WVT”) was the first Fair Fund created after passage of the Sarbanes-Oxley Act in 2002, and it remains one of the largest and most complicated claims administrations to date.

During the course of the WorldCom project, we researched the identities and communicated with approximately two million former holders of WorldCom debt and equity securities during the fraud period. WVT received almost 450,000 claims from both individuals and institutional investors claiming losses of approximately $40 billion on more than ten million transactions. More than 22,000 claims involving asserted losses of several billion dollars were received from investors in 120 foreign nations. RFS processed claims submitted in Arabic, Chinese, Czech, Danish, Dutch, French, German, Hebrew, Italian, Japanese, Portuguese, Slovak, Spanish and Swedish.

Our quality control efforts identified widespread false, duplicate and overstated claims. Ultimately RFS identified more than $28 billion in false or ineligible claims, including one false claim involving more than $1 billion that was referred to criminal authorities. This sharp reduction in invalid claims resulted in actual distributions to legitimate claimants that were nearly three times larger as a percentage of eligible losses than they would have been based on the original claims.

In total, WVT distributed 626,322 checks totaling $764 million to over 255,000 victims of the WorldCom fraud over the course of four distributions. In that case our SEC registered investment advisor affiliate managed the assets of WVT prior to distribution. The investment profits we achieved resulted in actual distributions after all fees and taxes of more than 100% of the starting value of the fund

In April 2007, Richard Breeden was appointed Distribution Agent to oversee the distribution process for the $450 million recovered by the SEC following the fraud at Enron. An additional $65 million recovered by DOJ was later distributed through the Enron Victim Trust, which RFS created as the vehicle for handling the overall distribution. RFS staff drafted the plan of distribution for the Enron Fair Fund, including designing the loss methodology that was used.

RFS identified and sent claim packets to more than 873,000 potentially eligible claimants. Over 213,000 claims were ultimately received covering more than four million underlying transactions in eligible securities and claimed fraud losses amounting to over $11.2 billion. A dedicated website, toll-free customer hotline staffed by our experienced customer service representatives, and an email account were created to assist claimants in processing their claims.

Through our rigorous claims process, we identified and eliminated approximately $6 billion in claims that were fraudulent or ineligible, or roughly 54% of all claimed fraud losses. As a direct result of our success in preventing improper claims, the distribution payout rate grew 100%, thereby more than doubling the cash payout to legitimate victims. Ultimately, RFS issued checks to over 112,000 eligible claimants totaling $521 million.

Mr. Breeden was appointed Special Master in August 2006 to oversee the administration and distribution of the settlements reached by the United States Attorney’s Office for the Southern District of New York (SDNY) with Adelphia Communications Corp. and the Rigas family. Settlement proceeds totaled approximately $715 million in cash and equity. The settlement proceeds were payable to the Adelphia Victim Fund (“AVF”) at various times over what proved to be a period of several years as proceeds from the sale of assets and litigation recoveries were obtained. Together with the SDNY and SEC, RFS jointly developed a Distribution Plan that was used to govern the administration and distribution of the settlement proceeds. The joint administration of the DOJ forfeiture fund and SEC Fair Funds in Adelphia, the first of its kind, avoided potential inconsistency in the treatment of claims and yielded substantial efficiencies in the administration and distribution processes.

RFS received approximately 14,000 claims asserting more than $5.3 billion in losses. RFS performed the complex calculation of losses stemming from the Adelphia fraud, including netting out bankruptcy or litigation recoveries. In addition to Adelphia common stock, the company’s publicly held securities included four classes of preferred stock, fourteen classes of Senior Notes, and two classes of Adelphia Convertible Subordinated Notes. Through our work with claimants, the deficiency process increased the eligible claimant population by 247% compared with initial filings. This is direct evidence that successful processing involves both detecting false claims, and assisting legitimate victims to complete the documentation of their claims so they can participate in the recovery. RFS has now completed the distribution of $729 million to 8,700 claimants.

In February 2008, the District Court for the Southern District of Texas established a Fair Fund to hold disgorgement and civil penalties paid by Royal Dutch Petroleum Company and The “Shell” Transport and Trading Company, P.L.C. (“Royal Dutch Shell”) in the amount of approximately $120 million to settle SEC charges.

We distributed almost one million claim packets to potentially eligible claimants in 139 countries. We received over 310,000 claims from investors in 102 countries, representing an overall response rate of 31%, and an extraordinary non-U.S. claimant response rate of 69%. In order to assist claimants in processing their claims, we developed a website, email address and a toll-free hotline in both cases. For the SEC Fair Fund, RFS utilized eleven international toll free hotlines, staffed with representatives who spoke seven languages. RFS created a website available in six languages.

The claims process was conducted successfully under an aggressive one-year timeline for completion. After completion of the claims process, we identified and eliminated over $1.5 billion in fraudulent or inappropriate claims, ultimately increasing the payout rate by nearly 40%. In less than a year, RFS solicited and evaluated more than 300,000 claims from 102 countries, and was ready to distribute checks from the SEC Fair Fund to approximately 170,000 claimants totaling approximately $117.7 million.

In order to achieve certain administrative efficiencies, we also administered the Royal Dutch Shell U.S. Class Action Settlement. RFS satisfied all requirements in the class action proceeding, ultimately issuing another 105,000 checks to eligible class members.

Decades of Experience in Helping Real Victims Receive Real Recoveries

RFS was formed in 1996 by Mr. Richard C. Breeden to provide specialized claims administration and fund distribution services in cases involving securities fraud.  Mr. Breeden is a former Chairman of the U.S. Securities and Exchange Commission under Presidents George H. W. Bush and William J. Clinton, with extensive experience in capital markets and investments.