Expert Witness In Class Actions Concealed Arrangements With Law Firms

LAWFUEL – Legal Newswire – In a plea agreement filed today in United States District Court in Philadelphia, a Princeton, New Jersey man agreed to plead guilty to perjury, admitting that he lied to numerous federal judges across the county who were presiding over securities class actions.

John B. Torkelsen, 62, who is currently housed at a federal prison facility after being convicted of unrelated charges, agreed to plead guilty to one count of perjury, a charge that carries a penalty of up to five years in prison.

From at least August 1985 through 2003, Torkelsen operated two companies – Princeton Venture Research, Inc. and Equity Valuation Advisors, Inc. Torkelson served as an expert witness for plaintiffs in hundreds of class actions and shareholder derivative actions that were litigated in federal and state courts throughout the United States. Torkelsen was retained by several different law firms, including one with a principal office in New York. Torkelsen provided expert testimony for the plaintiffs on issues such as the damages allegedly suffered by the plaintiff class and the appropriate value of settlements reached in those cases.

The law firms that hired Torkelsen told the various courts that he was an independent expert. Therefore, the law firms that hired Torkelsen, including the New York law firm, were precluded by rules of professional responsibility and common law from paying him on a contingent basis, meaning they could not pay Torkelson based on the result obtained in a particular case. Nevertheless, the New York law firm and other firms secretly paid Torkelsen on a contingent basis and concealed the payment arrangement from the courts, the defendants and the absent class members. To keep the payment arrangement secret, the New York law firm and other law firms would:

● submit to courts requests for “reimbursement” of fees already paid to Torkelsen when, in fact, the fees had not been paid and would not be paid unless the court awarded fees to the law firms;

● cause Torkelsen to submit declarations in which he falsely stated under oath that he had been retained on a “non-contingent basis” when, in fact, he had been retained on a contingent basis;

● cause Torkelsen to write-off fees he had incurred in class actions in which the law firms did not obtain a successful result; and

● cause Torkelsen to submit inflated fee requests in other class actions, billing for work that Torkelsen did not actually perform, in order to allow Torkelsen to make up for fees he did not recover in unsuccessful class actions.

Torkelsen submitted more than $60 million in bills to plaintiff’s class action law firms between 1993 and 1996. More than $7 million of those fees were written off or adjusted when the firms did not prevail. To make up for this, bills on other cases were fraudulently adjusted upward more than $7 million. For the New York law firm alone, Torkelson submitted bills with fraudulent upward adjustments of more than $4 million.

The perjury count to which Torkelsen has agreed to plead guilty relates to a false declaration he submitted on August 3, 1999 in the action Provenz, et al. v. Miller, et al., that was filed in United States District Court in San Jose. In the declaration, Torkelsen stated, under penalty of perjury, that he had generated fees in the case pursuant to a “non-contingent engagement by plaintiff’s counsel.” In fact, Torkelsen’s agreement with plaintiff’s counsel was that he was to be paid on a contingent basis.

“It is simply unacceptable for anyone involved in litigation to lie to the courts,” said Thomas P. O’Brien, the United States Attorney in Los Angeles. “Mr. Torkelson has compromised the pursuit of justice and potentially compromised the rights of shareholders involved in these lawsuits. The cases involving Mr. Torkelson should give pause to all courts tasked with the difficult job of determining the fairness and reasonableness of attorneys’ fee and cost requests in class-action lawsuits.”

Torkelsen’s plea agreement also resolves related tax matters, for the tax years 2003 through 2005, which occurred in the Eastern District of Pennsylvania. The United States Attorney’s Office for the Central District of California received substantial assistance from, and would like to thank, United States Attorney Patrick L. Meehan and his assistants in the United States Attorney’s Office for the Eastern District of Pennsylvania.

B. Bernard Ferguson, Inspector in Charge, U.S. Postal Inspection Service, Los Angeles Division stated: “This investigation has shown that often times greed trumps integrity. The magnitude and scope of lies told to courts about compensation paid to plaintiffs and experts simply shock the conscience.”

This case is the result of an investigation by the United States Postal Inspection Service and IRS-Criminal Investigation.

CONTACT: Assistant United States Attorney Douglas A. Axel

Chief, Major Frauds Section

(213) 894-0689

Assistant United States Attorney Richard E. Robinson

(213) 894-0713

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