Transcript of September 29-30, 2005 1 Access to Justice for the Victims of Fraud – The Finance of Complex Fraud...
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- September 29-30, 2005 1 Access to Justice for the Victims of
Fraud The Finance of Complex Fraud Recovery Investigations and
Litigation Martin Kenney & Co., Solicitors Second Floor, Geneva
Place Building, Road Town, Tortola, B.V.I. A Meeting of Fraudnet,
International Chamber of Commerce, Monaco, 29-30 September,
2005
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- September 29-30, 2005 2 Cost of Asset Recovery Proceedings
Expense of large scale litigation Expense of large scale litigation
Assets transferred through several jurisdictions? Assets
transferred through several jurisdictions? Location = Expenditure
of Professional time of: Location = Expenditure of Professional
time of: Forensic Accountants Forensic Accountants Investigators
Investigators Specialised Lawyers Specialised Lawyers Litigation in
a Number of Different Jurisdictions Litigation in a Number of
Different Jurisdictions Applications for Interim Relief Burn Time
Applications for Interim Relief Burn Time Up against Experienced
Asset Protection Counsellors Up against Experienced Asset
Protection Counsellors
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- September 29-30, 2005 3 Costs How Does the Victim Pay for: How
Does the Victim Pay for: Evidence Gathering? Evidence Gathering?
Evidence Analysis? Evidence Analysis? Legal Costs Solicitors,
Barristers? Legal Costs Solicitors, Barristers? Court Fees? Court
Fees? Simple Administration? Simple Administration?
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- September 29-30, 2005 4 Methods of Funding Quick, Partial
Recoveries Quick, Partial Recoveries Conditional Fees (U.K.)
Conditional Fees (U.K.) Contingency Fees (U.S.) Contingency Fees
(U.S.) After the Event Litigation Costs Insurance After the Event
Litigation Costs Insurance Litigation Expenses Insurance Litigation
Expenses Insurance Venture Capital / Third Party Investment Venture
Capital / Third Party Investment Sale of Shares in Litigation Sale
of Shares in Litigation
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- September 29-30, 2005 5 Quick or Partial Recoveries The
Simplest Approach The Simplest Approach Based on Speed Based on
Speed Rule of Thumb: $100m fraud recovery matter = $5m risk
management problem Rule of Thumb: $100m fraud recovery matter = $5m
risk management problem Can Assets be quickly identified and
frozen? Can Assets be quickly identified and frozen? Source of
Funding for Investigation and Litigation Source of Funding for
Investigation and Litigation
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- September 29-30, 2005 6 Conditional Fees (U.K) Contingency Fees
allowable for non-contentious work Contingency Fees allowable for
non-contentious work Conditional Fees Courts & Legal Services
Act 1990; S. 27 Access to Justice Act 1999 Conditional Fees Courts
& Legal Services Act 1990; S. 27 Access to Justice Act 1999
Uplift not percentage increase permissible Uplift not percentage
increase permissible Provision for fees payable only in certain
circumstances Provision for fees payable only in certain
circumstances CFA that does not satisfy all conditions shall be
unenforceable CFA that does not satisfy all conditions shall be
unenforceable
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- September 29-30, 2005 7 CFA Considerations Inherent Conflicts
of Interest Inherent Conflicts of Interest Need for Negotiation and
Independent Advice Need for Negotiation and Independent Advice How
is Success Defined? How is Success Defined? What Protection for
Lawyers if Client withdraws Instructions? What Protection for
Lawyers if Client withdraws Instructions? Warranties as to Clients
Version of Facts Warranties as to Clients Version of Facts
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- September 29-30, 2005 8 Contingency Fees (U.S.) Fee = Agreed
Percentage of Recovery Fee = Agreed Percentage of Recovery Theory
is that Risk Inherent counterbalances Potential Windfall Recovery
Theory is that Risk Inherent counterbalances Potential Windfall
Recovery Typical Contingency Fee should take account of: Typical
Contingency Fee should take account of: Quantum of Risk Quantum of
Risk Expertise of Attorney Expertise of Attorney Level of Client
Support Level of Client Support Possibility that Recovery Exceeds
Expectation Possibility that Recovery Exceeds Expectation Staggered
Percentage Rate to Cover Large Recovery Staggered Percentage Rate
to Cover Large Recovery Can Partner in Recovery be Impartial? Can
Partner in Recovery be Impartial?
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- September 29-30, 2005 9 After the Event Litigation Costs
Insurance Cover for own costs and potential costs of opposition
Cover for own costs and potential costs of opposition Belt and
Braces Belt and Braces Benefits Benefits Accounting certainty
Accounting certainty Incentive for opposition to settle Incentive
for opposition to settle Security for Costs Security for Costs
Raising Finance to fund the litigation Raising Finance to fund the
litigation
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- September 29-30, 2005 10 Litigation Expenses Insurance L.E.E.
can cover: L.E.E. can cover: Own Costs and Disbursements Own Costs
and Disbursements Defendants Costs and Disbursements Defendants
Costs and Disbursements Calculated as Percentage of Total Costs
Insured Calculated as Percentage of Total Costs Insured
Underwriting Considerations Underwriting Considerations Analysis of
Issues Analysis of Issues Strengths and Weaknesses of Claim
Strengths and Weaknesses of Claim Likelihood of Recovery of Assets
Likelihood of Recovery of Assets
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- September 29-30, 2005 11 Premiums for Litigation Expenses
Insurance Calculated on % of costs insured Calculated on % of costs
insured 15% 30% 15% 30% Underwriting Claim analysis Underwriting
Claim analysis Independent Legal Opinion Independent Legal Opinion
May be recoverable S.29 Access to Justice Act 1999 May be
recoverable S.29 Access to Justice Act 1999
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- September 29-30, 2005 12 Third Party Finance Ability to Assign
All or Part of Proceeds of Recovery = Effective Financing Method
Ability to Assign All or Part of Proceeds of Recovery = Effective
Financing Method Is Third Party Financing Legal / Acceptable? Is
Third Party Financing Legal / Acceptable? Consider Remnants of
Common Law Doctrines of Champerty and Maintenance Consider Remnants
of Common Law Doctrines of Champerty and Maintenance Are there
Statutory Barriers? Are there Statutory Barriers? How does Public
Policy View the Practice? How does Public Policy View the Practice?
Jurisdiction Clause Consideration Crucial Jurisdiction Clause
Consideration Crucial
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- September 29-30, 2005 13 Champerty & Maintenance
Restriction on assignment of claims and funding of litigation
Restriction on assignment of claims and funding of litigation The
real concern Control of Litigation The real concern Control of
Litigation Bare Right to Litigate cannot be assigned Bare Right to
Litigate cannot be assigned Exceptions: Exceptions: Transfer of
property with right of action attached Transfer of property with
right of action attached Assignment of damages or future property
provided consideration is provided Assignment of damages or future
property provided consideration is provided
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- September 29-30, 2005 14 United States Different Approaches
Depending on State Different Approaches Depending on State States
that maintain Common Law Prohibition against Champertous Agreements
States that maintain Common Law Prohibition against Champertous
Agreements States where Champertous Agreements may be considered
contrary to Public Policy States where Champertous Agreements may
be considered contrary to Public Policy States where Statutes
proscribe Champertous Agreements States where Statutes proscribe
Champertous Agreements States where Doctrines abolished in toto
States where Doctrines abolished in toto
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- September 29-30, 2005 15 Is the Agreement Champertous? Merits
of lawsuit Merits of lawsuit Fairness and reasonableness of
agreement Fairness and reasonableness of agreement Do the facts
lead to the evils? Do the facts lead to the evils? Motive in
providing assistance Motive in providing assistance Motive of party
seeking to have agreement declared void Motive of party seeking to
have agreement declared void Relative economic strengths of parties
Relative economic strengths of parties
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- September 29-30, 2005 16 An Analysis in the Context of Modern
Day Realities Champerty should be analyzed by examining Champerty
should be analyzed by examining Use of the Investment Funds Use of
the Investment Funds Nature of the Cases Nature of the Cases
Plaintiff/Investor Relationship, Plaintiff/Investor Relationship,
Ratio of Risk and Reward Ratio of Risk and Reward Does third party
finance level the playing field or encourage meritless and
speculative litigation? Does third party finance level the playing
field or encourage meritless and speculative litigation? Proper
Controls can encourage the former while minimizing the latter.
Proper Controls can encourage the former while minimizing the
latter.
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- September 29-30, 2005 17 Court Approval Analysis should
sufficiently demonstrate why Investment in Asset Recovery Plan
should not be deemed champertous Analysis should sufficiently
demonstrate why Investment in Asset Recovery Plan should not be
deemed champertous Approval of Third Party Finance Agreements ought
to be obtained from a Court of Competent Jurisdiction at Outset
Approval of Third Party Finance Agreements ought to be obtained
from a Court of Competent Jurisdiction at Outset Court Sanction
Provides Certainty Court Sanction Provides Certainty
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- September 29-30, 2005 18 Understanding why Investment in the
Asset Recovery Process should not be considered Champertous The
socials ills champerty was created to remedy either no longer exist
or are addressed by other legal checks The socials ills champerty
was created to remedy either no longer exist or are addressed by
other legal checks Fee regulations; sanctions rules; and the
doctrines of unconscionability; duress and good faith are more than
sufficient to prevent the evils that champerty was originally
designed to address Fee regulations; sanctions rules; and the
doctrines of unconscionability; duress and good faith are more than
sufficient to prevent the evils that champerty was originally
designed to address
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- September 29-30, 2005 19 Why Third Party Finance? Public
Interest in Preventing Unlicensed and Unregulated Market in
Litigation v Desirability of Litigating Bona Fide claims Public
Interest in Preventing Unlicensed and Unregulated Market in
Litigation v Desirability of Litigating Bona Fide claims
Development of Regulated Market will: Development of Regulated
Market will: Expand Options Available to Victims Expand Options
Available to Victims Allow Adjustment of Level of Risk; Amount and
Timing of Recovery and Other Variables Allow Adjustment of Level of
Risk; Amount and Timing of Recovery and Other Variables Lower Cost
of Capital Over Time Lower Cost of Capital Over Time
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- September 29-30, 2005 20 Sale of Shares in Litigation
Investment Contract Considerations Investment Contract
Considerations Level of Information Disclosable Level of
Information Disclosable Description of Legal Team Description of
Legal Team Description of Litigation Legal Opinion Description of
Litigation Legal Opinion Detailed Breakdown of: Detailed Breakdown
of: Expected Costs Expected Costs How Investment Funds Will be Used
How Investment Funds Will be Used Amount Claimed Amount
Claimed
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- September 29-30, 2005 21 Conclusions Regardless of Mechanism
Funding Option must be Flexible enough to cover: Regardless of
Mechanism Funding Option must be Flexible enough to cover: Expert
Witness Fees Expert Witness Fees Security for Costs Awards Security
for Costs Awards Cross Undertakings in Damages Cross Undertakings
in Damages Unforeseen Eventualities Unforeseen Eventualities Cost
Risk Relationship Proportionality Cost Risk Relationship
Proportionality Conditions of Funding Should Not Compromise Victim
or Litigation Conditions of Funding Should Not Compromise Victim or
Litigation