O’Melveny and others pay millions to Capital

Top-30 US firm O’Melveny & Myers is to stump up $8m (£5.5m) as part of a larger settlement with creditors of Capital Consultants

O’Melveny has joined four other law firms in agreeing to pay $50m (£34.3m) to settle investment fraud suits due to come before a federal court in Portland.
A total amount of $110m (£75.5m) is to be paid by legal and financial advisers to Capital and related companies. The payments will prevent claims against them, involving their roles in the collapse of Portland investment management firm Capital, from going to court.
Of the five law firms targeted, Lane Powell Spears Lubersky has the largest settlement bill. It will cough up $25m (£17.2m). Portland’s largest law firm, Stoel Rives, has agreed to pay $12.5m (£8.9m), while McCarter & English and Weiss Jensen Ellis & Howard will pay $2.5m (£1.7m) and $2m (£1.4m) respectively.
Capital collapsed in September 2000 amid accusations that it has been concealing loan losses. Its clients, including pension and union funds and individual investors, lost around $500m (£343m). The settlement and asset sales take the total recovered to around $300m (£206m).
Stephen English, a partner at Bullivant Houser Bailey, was lead counsel for the plaintiffs. He said: “We’re extremely pleased with the results. We now have a recovery for the pensioners of 60 cents in the dollar. This puts money relatively quickly into the hands of the people who lost it.” He added that legal fees will be around 4 or 5 per cent of the settlement, as opposed to the 30 or 40 per cent often collected for similar work.
None of the law firms involved have admitted any wrongdoing and deny all allegations of fraudulent activity. Milo Petranovich, chair of Lane Powell’s litigation practice, said: “I think all the settling defendants understood that the expense and risk of pursuing a court resolution over years would not be a wise decision.”