DATE: October 18, 2016
TO: Board of Supervisors
SUBMITTED BY: Daniel C. Cederborg, County Counsel
SUBJECT: Settlement with UBS for Municipal Derivatives Litigation
RECOMMENDED ACTION(S):
TITLE
Board of Supervisors Sitting as the Board of Directors of the Fresno County Financing Authority (FCFA)
Approve and authorize Chairperson to execute Settlement Agreement with Defendants, UBS AG, UBS Financial Services, Inc., and UBS Securities, LLC (collectively, UBS), in connection with In re Municipal Derivatives Antitrust Litigation, MDL Docket No. 1950, Master Docket No. 08-2516 (VM) (GWG) (the MDL), including Fresno County Financing Authority (FCFA) v. AIG Financial Products Corp. et al., 09 Civ. 119 (VM), United States District Court, Southern District of New York, subject to execution of the Settlement Agreement by UBS AG and UBS Financial Services, Inc., and approval thereof as to form by FCFA's special co-counsel ($15,000 gross amount).
REPORT
ALTERNATIVE ACTION(S):
The County and FCFA each "opted out" of (i.e., exclude itself from) the class action MDL settlement with UBS. Therefore, the Board (as the FCFA Board) may elect not to enter into the recommended Settlement Agreement, and direct outside counsel to continue pursuing separate litigation against the UBS entities that are defendants in the FCFA's lawsuit, discussed below.
FISCAL IMPACT:
Under the recommended Settlement Agreement, the FCFA would recoup $15,000 of gross settlement proceeds (i.e., $12,000 net of special counsel's contingency fees and costs).
DISCUSSION:
When the Fresno County Financing Authority (FCFA) issues bonds for the County, the FCFA may temporarily invest the net bond proceeds in bond investment agreements until they are spent. Those bond investment agreements are known in the bond industry as "guaranteed investment contracts" or "municipal derivative transactions." The FCFA invested about $38.6 million (par amount) in bond investment agreements.
Nationwide, there are sever...
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