A recent court filing refers to favors done to get a law firm a lucrative piece of work representing the Arkansas Teacher Retirement System in a class action lawsuit against an investment firm.

As reported previously, ATRS was lead plaintiff in a class-action lawsuit that won a $300 million verdict. Since then, questions have arisen about $75 million in legal fees, some in the form of an undisclosed “finder’s fee” to another lawyer.


A federal court in Massachusetts has been looking into the matter and a report was recently unsealed in the case. It referenced a $4.1 million fee paid to a Houston lawyer, Damon Chargois, described as an intermediary between ATRS and Labaton Sucharow, the firm that handled the lawsuit.

Forbes reported recently:


Chargois’s involvement was concealed from other lawyers within Labaton as well as most of the co-counsel on the case, the judge and, until stray e-mails turned up last August, the special master stated.

Among other materials Labaton later turned over was a 2014 e-mail in which Chargois complained about being undercompensated in some of the other cases where Labaton represented ATRS.

“We got you ATRS as a client after considerable favors, money spent and time dedicated in Arkansas,” Chargois said in that e-mail. That e-mail apparently caught the eye of Judge Wolf, who saw it as a possible indication of political payoffs in Arkansas similar to allegations federal prosecutors were investigating in Massachusetts. In a heated May 30 sidebar conference that recently became public, Judge Wolf asked Labaton’s lawyer Joan Lukey directly “whether all those millions of dollars stopped with Mr. Chargois.”

“I just have to tell you, your last comment, I am really in shock,” said Lukey in response

Labaton has defended its action and said payment of finders fees is legal in Massachusetts.

George Hopkins, director of ATRS, has defended his organization’s role in the case. Labaton was hired under a previous director. He’s also said he wanted to stay on the case as a lead plaintiff, though some members of his board have suggested disentangling from the lawsuit. It’s not the first suit for ATRS


The judge was concerned that the close relationship between ATRS and Labaton/Chargois – they were involved in at least nine prior securities lawsuits – might prevent ATRS from negotiating aggressively over fees on behalf of the rest of the class. When the special master recommended Labaton pay back more than $10 million to class members and other lawyers on the case, the judge said, that close relationship created “a very real potential conflict” between ATRS and the class.

Labaton and its experts maintain the payment to Chargois came out of their share of the fees, never belonged to class members and therefore didn’t need to be disclosed to anyone.

I’ve sent a note to Hopkins about the reference to time and money spent in Arkansas. I got an automated response that he’s out of the office until next week. He has said previously that former Sen. Steve Faris was an intermediary who introduced the Labaton firm to Paul Doane, the ATRS director who initiated the legal action.

UPDATE: The Labaton law firm provided a prepared statement:

Regardless of the way in which Mr. Chargois described introductions as “favors,” there was never a whiff of politics or political influence in the way in which our firm became counsel to Arkansas Teacher Retirement System. Mr. Chargois did indeed make the original introduction of our firm to ATRS as a potential client in 2007. A year later, we responded to a Request for Qualifications issued by ATRS to serve as monitoring counsel to help review and track the fund’s large investment portfolio for losses that might have a basis for litigation claims. Based on our longstanding record as one of the country’s leading investor class action law firms, and our success in recovering billions of dollars for institutional investors, ATRS engaged us as one of five law firms nationally to serve as its monitoring counsel, which ultimately led to our role representing the fund in several class actions – including State Street. Our selection to represent ATRS was predicated entirely on merit and qualifications, and not as the result of favors to anyone, elected or otherwise.

The National Law Journal has also delved into Arkansas political ramifications of the case.

Labaton and its lawyers have frequently made campaign contributions to both federal and state politicians, but their donations to Arkansas state election campaigns have been minimal, according to a search of records since 2002 at FollowTheMoney.org, the website of the National Institute on Money in Politics.

However, the article continues:


Hopkins became the executive director of the Arkansas pension fund in 2009. At the May 30 hearing, Hopkins told Wolf that even though Labaton had started working with them a year earlier, he hadn’t considered moving forward on potential lawsuits.

“Then our political leaders in Arkansas convinced me that I should,” he said.

“I’m sorry, what did you say?” Wolf responded. “The political leaders convinced you that you should be interested in these class actions?”

The judge pressed Hopkins to give names. Hopkins mentioned “several legislators,” “people at the governor’s staff” and “the Department of Finance Administration of Arkansas.”

But Wolf’s focus was on a retired state legislator named Steve Faris. In particular, he wanted to know how much Hopkins had talked to Faris about the law firms handling the pension fund’s class actions.

Faris, Hopkins explained, was a member of the Arkansas General Assembly, which has indirect supervision of the pension fund because it adopts the laws that govern the organization. He said Faris was co-chair of the public retirement committee in the state’s House of Representatives at the same time Hopkins co-chaired the public retirement committee in the state Senate. They grew up in the same county and went to the same college.

Hopkins acknowledged he’d talked to Faris and others about the case.

“You know, sometimes we’d get an interesting case, and I would tell him, here’s this case and Labaton represents us,” Hopkins told the judge, noting that the fund works with other firms such as Bernstein Litowitz Berger & Grossmann and Kaplan Fox & Kilsheimer. But he denied that Faris ever encouraged him to use Labaton.

“Did he ever tell you that he had a role in introducing Labaton to Arkansas Teacher?” Wolf asked.

“No, he never told me that.”

After the report came out, Faris acknowledged to Hopkins that “he had met a couple of Labaton attorneys” and introduced them to Paul Doane, who was the pension fund’s executive director at the time. Hopkins told the judge “he introduced some attorneys that he knew, and sort of rolled out of the room.”

In an interview, Faris, now a board member of the Arkansas Public Employees Retirement System, acknowledged that he called Doane to introduce him to Labaton—but that was the extent of it.

“All I did was call Paul Doane and say, ‘Here are these people,’” he said. “Every member of the retirement committee gets requests like that.”

Doane resigned in 2008 following a state audit that found he spent $34,515 on out-of-state travel expenses during the year he was executive director of the Arkansas pension fund.

Doane could not be reached for comment.