Structured settlements

Stroock & Stroock & Lavan LLP, a national law firm with offices in New York, Los Angeles and Miami, announced today that Christopher McGlashan has joined Stroock's Insurance Practice Group as Special Counsel effective immediately. Mr. McGlashan's focus will be corporate insurance work.

Stroock's Insurance Practice Group represents financial institutions, insurers, brokers and other corporate clients in mergers, acquisitions, joint ventures, company formation, public and private securities transactions, and financing and derivative transactions involving the insurance industry. Stroock's attorneys work with insurance and reinsurance company and investment banking clients to develop innovative products, often combining insurance or reinsurance risk transfer methods with capital market risk-transfer devices.

Mr. McGlashan has over 20 years of experience as a lawyer and banker in both corporate and private practice. He was most recently the Managing Director (Group Head Insurance Solutions Group/Global Capital Markets) at Citigroup. Mr. McGlashan has expertise in insurance and reinsurance financing transactions, including life insurance reserve funding, capital markets and bank programs, and property catastrophe bonds. Mr. McGlashan has developed variable annuity, life settlement, structured settlement and other capital/surplus relief products. He has also represented financial institutions and other entities in the acquisition, sale, merger and reorganization of insurance companies, brokerage firms and holding company systems. Mr. McGlashan has been active in the regulatory arena as well, co-authoring the special purpose financial captive legislation adopted in South Carolina.

Prior to Citigroup, Mr. McGlashan worked as an in-house counsel and Senior Vice President at Lehman Brothers in the Structured Finance Insurance Solutions Group. Mr. McGlashan's experience also includes five years as an attorney at Dewey LeBoeuf (formerly LeBoeuf, Lamb, Green and Macrae) in the Corporate and Insurance departments, and five years as a corporate/mergers and acquisitions solicitor at Speechly Bircham in London, England.

Stroock & Stroock & Lavan LLP is a law firm providing transactional and litigation guidance to leading multinational corporations, investment banks and venture capital firms in the U.S. and abroad. Stroock's emphasis on client service and innovation has made it one of the nation's leading law firms for 130 years. Stroock's practice areas include capital markets/securities, commercial finance, mergers and acquisitions and joint ventures, venture capital, private funds, derivatives and commodities, employment law and benefits, energy and project finance, entertainment, environmental law, financial restructuring, financial services litigation, insurance, intellectual property, investment management, litigation, personal client services, real estate, structured finance and tax.

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Public Service Commission not pleased with possible agreement after hundreds of filed complaints from customers.


Verizon's John R. Gilbert testifies as the company's David A. DeWalle (left) and Harold E. West III listen.

State utility regulators and union officials questioned yesterday what consumers will gain from a proposed agreement with telephone provider Verizon in settling concerns over delayed repairs as well as deregulating some services.

The settlement stems from a 2007 Maryland Public Service Commission investigation into hundreds of complaints that Verizon technicians routinely missed repair appointments with customers, leaving thousands without service for more than four days.

Verizon and PSC staff members structured a settlement that must be approved by the five-member commission. Commission members began hearings yesterday in Baltimore that will continue today. A ruling will be issued later.

"What I see here is a lot of benefit for Verizon, and not for consumers," said Commission Chairman Douglas Nazarian. "What's in it for the people?"

If approved, the settlement calls for Verizon to pay $10.88 to current residential customers who were without service for more than four days, as well as $2.77 to those whose appointments were not honored. In addition, in the future, if the average time to restore service is more than two calendar days, the company would pay up to $4 million, to be divided among affected residents.

Verizon, Maryland's largest telephone provider, would also lower the price customers in the region pay to avoid long-distance charges to areas such as Washington and Baltimore if they sign up for bundled telephone packages. That fee would be lowered to $2 from its current $14 under the settlement.

Also, the company would raise basic dial-tone service rates by $1 in June, in addition to 38 cents under the existing price-cap plan. That service is typically the bare-bones calling plan that ranges from $6 to $15. In exchange, the company would agree to freeze rates for the next three years for that service. That would bring in about $14 million, company officials testified yesterday.

Vincent Trivelli, an attorney for the Communication Workers of America, which represents 5,000 Verizon employees, questioned how company representatives will ensure reliable and available service. He complained that the agreement did not specify how much money will be spent on the existing copper wire network or staffing levels.

He said the company has offered some staff retirement packages and has said that they have too many workers."We don't know exactly what will be required going forward," said John R. Gilbert, Verizon's vice president for regulatory affairs. "We need to have freedom to run the business as appropriate at the time."

Nazarian took issue with the settlement's limit on penalties for meeting service benchmarks. For example, the proposed agreement says penalties will not be enforced if Verizon's market share drops below 50 percent. Gilbert would not detail how much market share Verizon currently has in Maryland.

The company wants regulators to allow it some flexibility in pricing on bundled packages so it can better compete with cable companies and others that offer telephone services but are not subject to PSC oversight.

During questioning, Gilbert said the two-day average repair time would include fixes for business customers, who are given priority over residential lines.

"How should we have any confidence that the market will demand adequate service quality of Verizon if these [penalty] payments go away?" Nazarian asked.

Gilbert said after the hearing that even if the terms of the agreement are accepted, the commission still has the authority to penalize Verizon for poor service. "They can still enforce all of the existing regulations," he said.

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A federal judge this afternoon approved the city's $150,000 settlement to the family of a man killed during a 2005 traffic stop.

U.S. District Judge Elizabeth Kovachevich said the settlement is "fair, adequate and reasonable," despite disagreements among Musa Yazid's relatives as to how the money is being divided.

The settlement also includes a provision that Police Chief Stephen Hogue write a letter to the family that will be "at least an acknowledgement, if not apologizing for the conduct of the officers that night," said Chad Pilon, an attorney for the family. That aspect was not subject to the judge's approval.

Ursula Richardson, an attorney for the city, said the letter, which has not been finalized, will not be an apology. Rather, she described it as "an acknowledgement that even though we believe the officers did what they were supposed to do, that we understand that they lost somebody who was important to them."

Yazid was pulled over for a traffic violation May 19, 2005, and police said the stop went awry after he gave a false name. They said there was a struggle and two officers, David Joyner and Jason Brocato, used stun guns to try to control Yazid.

Yazid, of Tampa, got back in his car and tried to drive off, police said. When his car headed toward one of the officers, they shot Yazid.

The lawsuit, filed in 2007, alleged police tried to take Yazid into custody with "no information or probable cause to believe Yazid was dangerous, violent or a threat to anyone."

Yazid questioned and argued with the officers, the lawsuit states, but was gathering his belongings to prepare to leave his vehicle.

"Impatient with the speed at which Yazid was exiting the vehicle, defendants Joyner and Brocato forcefully began to pull him from the vehicle, assaulting and battering him in the process," the suit says.

An internal investigation found the use of deadly force was justified and states witnesses said Yazid didn't comply with officers' repeated commands.

Yazid's wife, Virginia "Tracey" Deneed Yazid, and two children, Khalid Earl Alphonso Yazid, 9, and Jameisha Williams, 19, will divide approximately $100,000 of the settlement left after $16,500 in attorneys' fees is deducted, along with other costs. Pilon stressed that the attorneys' fees amount to about 11 percent of the award, while state law allows up to 25 percent.

Yazid's widow is to receive 60 percent of the remaining award and his children 20 percent each.

Khalid Yazid's guardian ad litem, Michael A. Tonelli, said in a report that the agreement is in the child's best interests in light of issues as to whether the officers violated Musa Yazid's constitutional rights or used excessive force.

Tonelli recommended that the $20,406 for Khalid Yazid be divided, with $13,225 being paid to the state's College Prepaid Fund and the remaining $7,181 to be placed in a structured annuity from which the child will receive monthly payments of $226 for four years, beginning in 2017.

But the boy's mother, Enriqita Marshall, questioned why the children aren't receiving the same share as Virginia Yazid.

"She can replace her spouse," Marshall told the judge. "The children can't replace their father."

After the hearing, Marshall said she wasn't happy with the outcome but respected the judge's decision. Williams said she was "at a loss of words."

Yazid's widow did not speak at the hearing and declined to talk to a reporter.

That aspect was not subject to the judge's approval. Ursula Richardson, an attorney for the city, said the letter, which has not been finalized, will not be an apology. Rather, she described it as "an acknowledgement that even though we believe the officers did what they were supposed to do, that we understand that they lost somebody who was important to them." Yazid was pulled over for a traffic violation May 19, 2005, and police said the stop went awry after he gave a false name. They said there was a struggle and two officers, David Joyner and Jason Brocato, used stun guns to try to control Yazid. Yazid, of Tampa, got back in his car and tried to drive off, police said. When his car headed toward one of the officers, they shot Yazid. The lawsuit, filed in 2007, alleged police tried to take Yazid into custody with "no information or probable cause to believe Yazid was dangerous, violent or a threat to anyone."

Yazid questioned and argued with the officers, the lawsuit states, but was gathering his belongings to prepare to leave his vehicle. "Impatient with the speed at which Yazid was exiting the vehicle, defendants Joyner and Brocato forcefully began to pull him from the vehicle, assaulting and battering him in the process," the suit says. An internal investigation found the use of deadly force was justified and states witnesses said Yazid didn't comply with officers' repeated commands.

Yazid's wife, Virginia "Tracey" Deneed Yazid, and two children, Khalid Earl Alphonso Yazid, 9, and Jameisha Williams, 19, will divide approximately $100,000 of the settlement left after $16,500 in attorneys' fees is deducted, along with other costs. Pilon stressed that the attorneys' fees amount to about 11 percent of the award, while state law allows up to 25 percent. Yazid's widow is to receive 60 percent of the remaining award and his children 20 percent each. Khalid Yazid's guardian ad litem, Michael A. Tonelli, said in a report that the agreement is in the child's best interests in light of issues as to whether the officers violated Musa Yazid's constitutional rights or used excessive force.

Tonelli recommended that the $20,406 for Khalid Yazid be divided, with $13,225 being paid to the state's College Prepaid Fund and the remaining $7,181 to be placed in a structured annuity from which the child will receive monthly payments of $226 for four years, beginning in 2017. But the boy's mother, Enriqita Marshall, questioned why the children aren't receiving the same share as Virginia Yazid. "She can replace her spouse," Marshall told the judge. "The children can't replace their father."

After the hearing, Marshall said she wasn't happy with the outcome but respected the judge's decision. Williams said she was "at a loss of words." Yazid's widow did not speak at the hearing and declined to talk to a reporter.">read more

Lawyers for ConnectU are bragging about winning a $65 million settlement for their clients from Facebook. But what did Divya Narendra and Cameron and Tyler Winklevoss really get from Mark Zuckerberg? Almost nothing.

The Winklevosses and Narendra, Harvard classmates of Zuckerberg, sued him after he launched Facebook, claiming he had done work for their project and then stolen code from it to start Facebook. They reached a settlement last summer in which Facebook agreed to acquire ConnectU for cash and stock — $20 million in cash and 1.25 million shares of Facebook. But then they fired their former lawyers, Quinn Emanuel, amid a contest over legal fees, the value of the settelement, and new evidence they said they'd discovered.

Based on the price Microsoft paid for its 1.6 percent stake in Facebook in the fall of 2007, the stock component of that settlement was worth $45 million. Quinn Emanuel is seeking $13 million in a contingency fee — 20 percent of the total take, which is $65 million as far as ConnectU's former lawyers are concerned.

But the appraised value of the stock last summer was far less — $11 million, based on a valuation Facebook sought for its own stock-option plan. That's $34 million of $65 million gone.

Even on that lower value for the stock, plus the cash, ConnectU's founders owed taxes. (We hear the deal was structured as a taxable acquisition.) Assuming a capital gains rate of 15 percent and a negligible cost basis for the startup, 15 percent of $31 million. That rounds up to $4.7 million.

Their lawyers want $13 million, leaving them with $2.7 million from the cash component — which they have likely already spent in legal fees.

What about those 1.25 million shares of Facebook? They are essentially worthless. If they could sell them, they would likely get $2.50 to $3 a share. But Facebook recently changed its bylaws to forbid private transfers of its stock without board approval. ConnectU's founders cannot sell them, nor can they give them to their lawyers in lieu of cash, without Facebook's okay. And it is hard to imagine a board of directors essentially controlled by Zuckerberg voting to make life easy for his college rivals. Unless Facebook sells or goes public — both unlikely prospects in the short term — ConnectU's founders have no way of realizing value from their stake. So we can discount their $11 million in notional value from the ConnectU take.

What's left: $2.7 million. Here's a chart showing how you go from $65 million to less than $3 million in four easy steps:



Which explains why the Winklevosses are dragging this thing out. After years of fighting in court, they have essentially nothing to show for their troubles. They come from a wealthy family. Their father, Howard, has a fortune from his company, Winklevoss Technologies, which makes software for analyzing pension plans. So they can afford to fight, and it's not like they need Mark Zuckerberg's money. But how else do the rich keep score? read more

With the economy in the dumps, credit availability strained, and unemployment on the rise, readily available sources of cash are extremely valuable. Some people may have a source of upfront cash that they are unaware, though. The small percentage of the population with a structured settlement annuity as a result of a personal injury award can convert those fixed, periodic payments to an immediate lump sum. Or, if you do not have a structured settlement but do know someone who does, most companies will offer referral fees for brokering business.

Electing to change a structured settlement can be done in a matter of weeks, and there should be no tax consequences as a result of the transaction. Leading companies offering these services handle all of the legal work required, and cover any lawyer’s fees at no additional cost.

A final consideration is that the structured settlement process is very open-ended. This means that an entire annuity can be converted, only part of the annuity over its entire life, or some part of the annuity over a specified period of time. If you are interested in turning your structured settlement into fast cash, it is recommended that you talk to an established company to help navigate through the process.

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“While CDS contracts did not cause the current financial crisis, they may have exacerbated the problems and complicated the process of dealing with the issues. CDS contracts can amplify losses in credit market. For example, when Lehman Brothers defaulted the firm had around $600 billion in debt. This would have resulted in a maximum loss to creditors of that amount. In addition, according to market estimates, there were CDS contracts of around $400-500 billion where Lehmans was the reference entity (the outstanding volume of CDS contracts is not known with certainty reflecting the lack of information about trading in the OTC market).

If the CDS contracts were used for hedging, then the CDS contracts would merely have resulted in the losses to creditors being transferred to the sellers of protection leaving the total loss unchanged. However, market estimates suggest that only around $150 billion of the CDS contracts were hedges. The remaining $250-350 billion of CDS contracts were not hedging underlying debt. The losses on these CDS contracts (in excess of $200-300 billion) are additional to the $600 billion. The CDS contracts amplified the losses as a result of the bankruptcy of Lehmans by (up to) approximately 50%.

In addition, Lehman Brothers was included as a reference entity in other structured credit products, such as Collateralised Debt Obligations (“CDOs”) and credit indices, and additional losses would have resulted therein. Documentary asymmetries in the contracts may also increase the losses.”

“The derivative industry’s indefatigable support of the CDS market (motivated undoubtedly by the specter of regulation and greater scrutiny) centers on the fact that all the CDS contracts related to the high profile defaults have settled and the overall net settlement amounts were small. Strictly speaking, this is correct.

In practice, there are actually two settlements. The ‘real’ settlement where genuine hedgers and investors deliver bonds under the physical settlement rules (i.e. those who actually own bonds and were hedging). Then there is the parallel universe where the dealers and large hedge funds settled via the auction. Dealers tend to have small net positions (large sold and bought protection but overall reasonably matched).

For example in the case of Lehman Brothers, the net settlement figure of $6 billion that was quoted refers to the second process. Real CDS losses from Lehman CDS were higher, probably around $300-400 billion. Some banks and investors that had sold protection on Lehmans did not participate in the auction. They chose to take delivery of defaulted Lehman debt resulting in losses of almost the entire face value. For example, one German Landesbank reportedly took delivery of $1 billion of Lehman bonds that are now worth $30 million. read more

Liquidnet, the global institutional marketplace, today announced that Z/Yen's 2008 survey of Operational Performance of Brokers ranked Liquidnet, Inc. and Liquidnet Europe Limited best in clearing and settlement as chosen by leading investment managers and hedge funds. In Europe, Liquidnet was named best broker for core processing of European securities for the third year in a row. In the United States, Liquidnet was selected best broker for equities operations and most improved broker.

"The value of the institutional marketplace is the ability to allow the buy side to safely trade the size they want, when they want and within the price range they want," said Seth Merrin, CEO of Liquidnet. "We deliver this functionality with best-in-the-world execution that settles trades efficiently and reliably, thereby reducing counterparty risk."

The survey recognizes operational excellence and dedication to exceeding client expectations through superior product and services. The results were based on interviews with 61 European and 44 US based buy side investors using a structured questionnaire. All large brokers were rated on various metrics of operational performance including accuracy and timing of trade confirmations, settlement rate, exception/fail management and client service. The survey developed by Z/Yen and participating brokers is conducted yearly in Europe, Asia and United States.

A registration statement relating to the Class A Common Stock of Liquidnet Holdings, Inc. has been filed with the SEC but has not yet become effective. The Class A Common Stock of Liquidnet Holdings, Inc. may not be sold nor may offers to buy be accepted prior to the time that the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

About Liquidnet

Liquidnet is an electronic marketplace that facilitates institutional equities trading for asset management firms worldwide. By giving buy-side traders a first look at a global natural liquidity pool of more than 8.74 billion shares ($94.7 billion in principal value) per day of liquidity on average, Liquidnet consolidates and delivers the institutional equities market directly to the desktops of more than 550 buy-side trading firms (as of 30 September 2008). Institutional investors use the Liquidnet marketplace to enhance the quality and speed of trade execution, gain price improvement for their trades, and, ultimately, lower overall trading costs. Launched in 2001, Liquidnet now trades in 29 equity markets across five continents. Liquidnet is headquartered in New York with offices in London, Toronto, Tokyo, Hong Kong, Sydney and Singapore. Additional company information is available online at www.liquidnet.com.

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"The US secondary market for traded life insurance policies has reached a respectable size and matured significantly over the last decade. Given this trend a broad range of products have been developed and launched offering investors access to life settlements as an alternative asset class, however, investors have thus far lacked a reliable benchmark which reflects the performance of the various funds dedicated to this market. This issue has been solved with the launch of the AAP Life Settlement Index," says Beat Hess, Managing Partner of AA-Partners Ltd.
Reasonable index composition

The AAP Life Settlement Index was developed to provide investors a transparent, representative benchmark of different investment funds that are majority invested in the area of traded US life insurance policies. The index is constructed and calculated following clear rules. Along the lines of other well known indices in the area of non-traditional investment strategies, the AAP Life Settlement Index reflects the performance of the according fund universe.

A fund qualifies for the index if it meets ALL of the following conditions:

(a) The fund follows a strategy in the area of traded US life insurance
contracts. The part of other strategies in the portfolio is
permanently smaller than 25% of the fund volume.
(b) The fund is open-ended, which means it accepts new investors and
allows redemptions. Funds with a soft-closing or restricted
liquidity for the investors still qualify for the index.
(c) Subscriptions can be made at least quarterly.
(d) Redemptions can be made at least quarterly.
(e) The fund calculates monthly a NAV in USD and the NAV is publicly
available or is provided for the calculation of the index.
(f) The fund is not US domiciled.
(g) The fund is not a fund of funds. The fraction of open-end or
closed-end funds is persistently smaller than 33%.


Index calculation

The AAP Life Settlement Index is calculated using the NAV of the index components. The index components are equally weighted as per each calculation date. The index is calculated in USD and starts with a value of 100 as per the end of December 2006. If a new fund is enclosed, the historic index values will not be recalculated using the historic performance data of the new fund. The same is true if a fund is excluded from the index; the historic index values will not be recalculated without this fund. read more

You need the green stuff, and your bank isn't lending. Here are six options.

Lenders aren't just skittish these days--they're downright terrified. But bank loans, credit lines, angel investors and even generous uncles aren't the only ways small-business owners can raise a few bucks.

The alternative-finance industry is massive, employing some 35,000 people at U.S. commercial banks, thrifts, credit unions, independent finance companies and hedge funds, among other lenders.

The outstanding dollar amount of business-to-business loans hit $545 billion in 2007, nearly triple the total from a decade ago, according to the latest figures from the Commercial Finance Association. Save for two contractions, during the 1990-91 recession and the 2001 tech bust, the total dollar amount of asset-based loans has grown each year since 1976. Throw in business-to-consumer transactions, and that debt pile is now north of $1 trillion.

Six Ways To Raise Cash Now

Tapping that fat spigot of liquidity will cost you. But then, taking a haircut is better than going out of business. Here are six financing alternatives--some more expensive than others--for those who need the money right now.

Factoring

This maneuver involves selling the receivables on your balance sheet at a discount to raise money today. The invoices can be for anything from manufactured goods to medical services purchased by a business or government. Factors have a first lien on those cash flows, so factoring arrangements are hard to strike if you have a judgment against your business or if your bank has a blanket lien on your assets to secure a loan.

Some banks have factoring practices, and there are many established stand-alone factoring firms. Now, with credit so tight, smaller shops are springing up. You can find scores of factoring organizations through the International Factoring Association or with a simple Google (nasdaq: GOOG - news - people ) search.

Consumer Installment Financing

This is a twist on factoring, but for business-to-consumer arrangements with longer time frames. Say you sell delivered-food plans to people too busy to shop. Your customers might sign up for a monthly installment plan, to be paid out over two years, but you need cash now. A consumer-installment financing firm is happy to buy those contracts at a discount to their present value. But that's not your only cost of funds: You'll also have to set aside a percentage to cover the deadbeats who don't pay up; if the paper eventually performs, you'll get that money back, but you're still short that cash today. read more