As KPMG’s settlement of the class action lawsuit against the firm over its promotion of tax shelters lurches toward final approval, this NY Times article reports that the number of class members opting-out of the proposed settlement is unusually high (almost 30% of all class members) and speculates that KPMG may elect to exercise its right under the settlement agreement to opt-out of the settlement itself if too many class members opt-out.
Although it was nice of the Times to deliver that message by KPMG to class members, there is little chance that the firm will terminate the settlement. Even if 30% of the class members opt out, that means that KPMG has still liquidated its liability to over 190 former tax shelter clients at an aggregate amount of the $180 million or so that KPMG will contribute to the $225 million settlement. That’s under a million per individual claim, which is the equivalent of a payout on a “slip and fall ” case for KPMG these days. No way KPMG rolls the dice that it can do better than that by defending the class action and even more opt-out individual claims at trial.

The long-awaited resentencing hearing in the sad case of Jamie Olis that was scheduled to take place today has been postponed indefinitely to give U.S. District Judge Sim Lake time to review recently-filed materials in the case relating to the key issue of market loss causation and to conduct another hearing on the market loss issue. You can download a copy of Olis’ lengthy memorandum on the market loss and related sentencing issues — which includes copies of letters from Olis and his wife to Judge Lake — here.
Although the delay in the resentencing is unfortunate, it is understandable. There is no harder working judge in the country right now than Judge Lake, who is literally snowed under with both the prodigious materials relating to the Olis resentencing and dozens of pre-trial motions in the run-up to the complex trial of former key Enron executives Ken Lay and Jeff Skilling that is scheduled to begin on January 30 in Houston. Given Judge Lake’s nature, I suspect that he will attempt to schedule the market loss hearing in the Olis case before the commencement of the Lay-Skilling trial.
Meanwhile, Doug Berman — who has provided the flat-out best analysis in the blogosphere of the Olis case from a sentencing perspective — added this informative post earlier in the week and this post today on the key issues to be addressed in the Olis resentencing hearing. As this earlier post notes, the prosecution misled Judge Lake in the previous sentencing hearing on the key market-loss issue, and I’m optimistic that Judge Lake will come to understand this time around the folly of attributing any meaningful market loss to Olis’ participation in the ill-fated Project Alpha, a point that is amply buttressed in Olis’ memorandum on resentencing by the expert reports of Rice University business professor Bala Dharan, former SEC economist Craig McCann, and well-known Houston energy securities analyst John Olson. In contrast, the Justice Department’s strikingly superficial response to the Olis memorandum and expert reports comes across as mean-spirited and baseless. If Judge Lake properly concludes that the reasons for market loss are simply too diffuse to attribute to Olis’ actions, then my sense is that he will reduce Olis’ sentence to considerably less than the 5-7 years that Professor Berman is predicting.
Update: Professor Berman comments on the postponement, as well as the resentencing hearing of Olis’ co-defendants (both copped pleas), which will proceed as scheduled today.