Case 1:05-cv JSR Document 851 Filed 06/18/12 Page 1 of 11 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

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1 Case 1:05-cv JSR Document 851 Filed 06/18/12 Page 1 of 11 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK x : : In re REFCO, INC. SECURITIES LITIGATION : 05 Civ (JSR) : : x DECLARATION OF STEPHEN J. CIRAMI IN SUPPORT OF LEAD PLAINTIFFS MOTION FOR SUPPLEMENTAL DISTRIBUTION ORDER STATE OF NEW YORK ) ) ss.: COUNTY OF NASSAU ) STEPHEN J. CIRAMI declares as follows: 1. I am the Senior Vice President of Operations for The Garden City Group, Inc. ( GCG ). GCG was retained by Lead Counsel, and approved by the Court, as the Claims Administrator in connection with the Settlements reached in the above-captioned Action. GCG presents this Declaration in support of Lead Plaintiffs Motion for a Supplemental Distribution Order. I have personal knowledge of the facts stated herein. 1 THE INITIAL DISTRIBUTION OF THE NET SETTLEMENT FUNDS 2. On May 2, 2011, the Court entered the Order Approving Distribution Plan (Dkt. No. 793) (the Initial Distribution Order ), which, inter alia, approved Lead Plaintiffs proposed plan for distribution of the Net Settlement Funds to Authorized Claimants. In accordance with the Initial Distribution Order, GCG issued 3,187 payments in the aggregate amount of 1 All terms with initial capitalization not otherwise defined herein shall have the meanings ascribed to them in the Stipulations and in the Declaration of Stephen J. Cirami in Support of Lead Plaintiffs Motion for Approval of Distribution Plan, dated April 18, 2011 (the Initial Cirami Declaration ) (Dkt. No 790).

2 Case 1:05-cv JSR Document 851 Filed 06/18/12 Page 2 of 11 $337,783, to Authorized Claimants between May 27, 2011 and August 5, 2011 (collectively, the Initial Distribution ). 3 Of these payments, 3,085 were issued on May 27, 2011 and 102 were delayed as a result of the motion filed by the Refco Private Actions Trust ( PAT ) seeking to modify the plan of distribution with respect to certain payments that had allegedly been assigned to the PAT. The Court entered an Order on July 27, 2011 resolving all remaining issues concerning the PAT assignments (Dkt. No. 805). All delayed payments to Authorized Claimants were issued on or before August 5, 2011, and a $1,371, wire payment to the PAT was made. THE CLAIMS-IN-PROCESS, LATE ADJUSTED CLAIMS, AND LATE SUBMITTED CLAIMS DISTRIBUTION 3. Pursuant to the Initial Distribution Order, a reserve in the amount of approximately 5% of the Net Settlement Funds was established for Claims-in-Process that were ultimately determined to be eligible to receive distributions if approved by the Court, as well as for other contingencies that may arise (the Reserve ). On September 30, 2011, the Court issued an Order Approving Payment of Eligible Claims-in-Process, Late Adjusted Claims, and Late Submitted Claims (Dkt. No. 812) (the Claims-in-Process Distribution Order ). In accordance with the Claims-in-Process Distribution Order, GCG conducted a Claims-in-Process Distribution between October 21, 2011 and December 20, 2011 using funds from the Reserve to bring the eligible Claims-in-Process, Late Adjusted Claims, and Late Submitted Claims into parity with the claims that were paid pursuant to the Initial Distribution Order. 2 In my previous Declaration, dated September 21, 2011, due to a clerical error, the amount reported as distributed to Authorized Claimants between May 27, 2011 and August 5, 2011 was $0.10 higher. 3 The Initial Distribution Order approved payments to 3,190 Authorized Claimants. However, when the proration factors were applied, three claims did not meet the de minimis threshold in the Court-approved Plan of Allocation. Thus, distributions were not made to those claimants. 2

3 Case 1:05-cv JSR Document 851 Filed 06/18/12 Page 3 of To that end, GCG issued 54 payments in the aggregate amount of $7,500, to Authorized Claimants between October 21, 2011, and December 20, Of these payments, 47 were issued on October 21, 2011, and payments on seven (7) claims, which were identified as potential PAT claims, were deferred at the direction of the Court until any potential objections were resolved. All seven (7) deferred payments were issued to Authorized Claimants on or before December 20, 2011, and a $130, wire payment to the PAT was made. 5. Following this Claims-in-Process Distribution, as with the Initial Distribution, GCG monitored the status of Authorized Claimants checks. To ensure that the maximum number of checks were cashed, GCG performed extensive follow up with Authorized Claimants whose checks were initially uncashed, either because those checks were returned to GCG as undeliverable, or because the Authorized Claimant simply had not cashed the check. For Authorized Claimants whose checks were returned as undeliverable, GCG searched for new addresses via the United States Postal Service National Change of Address database and, where appropriate, via internet search techniques. Where new addresses were located, GCG updated the mailing database accordingly, and reissued distribution checks to Authorized Claimants at the new addresses. 6. GCG also continued to utilize calling campaigns to obtain better addresses for Authorized Claimants whose checks were returned as undeliverable, and to urge Authorized Claimants who did receive their checks to cash them in order to avoid forfeiture of their recoveries. Where an Authorized Claimant advised GCG that he, she or it had lost or damaged the check, or otherwise required a new check, GCG performed check reissues. GCG reissued 4 The Claims-in-Process Distribution Order approved payment on 55 claims. As discussed below, prior to the distribution, one of those claims was determined to be a duplicate claim and, thus, no payment was made on it. 3

4 Case 1:05-cv JSR Document 851 Filed 06/18/12 Page 4 of 11 checks only upon receipt of written instructions from such Authorized Claimants, and provided that the Authorized Claimants returned the first check where appropriate. If a check was deemed lost, GCG voided the initial check prior to reissuing a substitute check. 7. In total, GCG has issued 3,241 payments to Authorized Claimants and two (2) payments to the PAT for total proceeds of $346,787, ($345,284, was distributed to Authorized Claimants and $1,502, was transferred to the PAT). As of June 11, 2012, payments for total proceeds of $343,796,180.85, or 99.9% of the $343,804, distributed to Authorized Claimants in the Initial Distribution and in the Claims-in-Process Distribution (net of the returned funds described below), have been cashed. As of June 11, 2012, nine (9) distribution checks, representing proceeds of $8,679.78, remain uncashed, either because the checks were returned to GCG as undeliverable or because the checks were simply not cashed by the Authorized Claimants. In addition, $203, remained in the Distribution Account because of the downward adjustments to the three claims discussed in paragraph 13 below. Also, $1,479, was returned to the Distribution Account because the payments were: (i) unwanted; (ii) duplicates of other claim filings; (iii) for clients of brokerage firms who had closed their accounts and could not be located by the brokerage firms; or (iv) for claims that were filed in error and withdrawn. Thus, the balance in the Distribution Account currently is $1,691, Additionally, GCG has been advised that there remains $24,448, in the escrow account comprised of the unused portion of the previously established Reserve and additional funds recovered by Lead Plaintiffs and Lead Counsel from victim restitution funds established by the government (collectively the Current Reserve ). 5 In total, $26,140, remains in the Net Settlement Funds ($1,691, in the Distribution Account and 5 This amount also includes interest earned, less bank fees and Taxes. 4

5 Case 1:05-cv JSR Document 851 Filed 06/18/12 Page 5 of 11 $24,448, in the Current Reserve) as of June 11, GCG is now prepared to conduct the Second Distribution of the Net Settlement Funds as authorized by paragraph 3.g. of the Initial Distribution Order. ADDITIONAL LATE SUBMITTED CLAIMS 8. In the Claims-in-Process Distribution Order, the Court approved payment of otherwise eligible Late Submitted Claims and Late Adjusted Claims that were submitted after the entry of the Initial Distribution Order. Since the submission of the Declaration of Stephen J. Cirami in Support of Lead Plaintiffs Motion for Approval of Payment of Claims-In-Process, Late Adjusted Claims, and Late Submitted Claims, dated September 21, 2011 (Dkt. No. 811) (the Supplemental Cirami Declaration ), GCG has received and processed 11 newly submitted claims (the Additional Late Submitted Claims ). 9. Four (4) of the Additional Late Submitted Claims, but for the fact that they are late, would be eligible for payment. Applying the same proration factors used in the Initial Distribution, these late but otherwise eligible Additional Late Submitted Claims would be entitled to Initial Distribution payments totaling $122, Those payments, together with the proposed payments described in paragraph 11 herein, are referred to herein as the Catch-Up Payments. Attached hereto as Exhibit A is a list of the 4 late but otherwise eligible Additional Late Submitted Claims and their corresponding Recognized Loss Amounts and Catch-Up Payment distribution amounts. 10. The remaining seven (7) Additional Late Submitted Claims are currently deficient. In order to afford these claimants the same opportunity provided to other claimants, we propose that they be given the opportunity to cure their claims. However, so as not to delay 5

6 Case 1:05-cv JSR Document 851 Filed 06/18/12 Page 6 of 11 the Second Distribution to Authorized Claimants and the additional distributions proposed herein, we propose that, if the claims are cured, they be paid, to the extent possible, out the funds remaining after the Second Distribution is complete. To the extent sufficient funds remain in the Net Settlement Funds, payment would be made on the cured claims using the same proration factors used in the Initial Distribution and in the Second Distribution. Additionally, in the event that any additional claims are either submitted or cured after the date of this Declaration, and are determined by GCG to be eligible for payment but for their late submission, we propose that these claims be paid only after the Second Distribution is complete, and only to the extent sufficient funds remain in the Net Settlement Funds to permit payment of these claims using the same proration factors used in the Initial Distribution and in the Second Distribution. Should there be less than sufficient funds remaining in the Net Settlement Funds to apply the same proration factors, each claimant whose claim is addressed in this paragraph would receive his, her or its pro rata share of the balance of the Net Settlement Funds. ADDITIONAL LATE ADJUSTED CLAIMS 11. In addition to the Additional Late Submitted Claims, since the submission of the Supplemental Cirami Declaration, GCG has received additional documentation for three (3) claims that had been previously rejected in the entirety (the Additional Late Adjusted Claims ). If the Court permits the consideration of the additional documentation, applying the same proration factors used in the Initial Distribution, these Additional Late Adjusted Claims would be entitled to Catch-Up Payments totaling $9, Attached hereto as Exhibit B is a list of the three Additional Late Adjusted Claims and their corresponding adjusted Recognized Loss Amounts and Catch-Up Payment distribution amounts. 6

7 Case 1:05-cv JSR Document 851 Filed 06/18/12 Page 7 of Of the Additional Late Submitted Claims and Additional Late Adjusted Claims, GCG has determined that one claimant, an Additional Late Adjusted Claim (Claim No ), appears on the list provided by the Trustee of the PAT as a person or entity that assigned a portion of its recovery in this Action to the PAT. To the extent that this claim is approved for payment, GCG proposes to follow the procedures established by the Court in its Order Modifying Distribution Plan dated June 2, 2011 (Dkt. No. 800), which were used in connection with the Initial Distribution and the Claims-in-Process Distribution. Specifically, GCG will defer payment of this claim until the Trustee has notified the claimant that a portion of its net settlement proceeds are subject to an assignment to the PAT, and until the claimant has had an opportunity to object. CLAIMS ADJUSTED DOWNWARD 13. Further, after the entry of the Initial Distribution Order, but before the Initial Distribution, the losses on two (2) claims were adjusted downward based on the claimants providing additional information to GCG reducing the value of the claims. The previous Courtapproved Section 10(b) aggregate Recognized Loss Amounts for these two claims totaled $393, After the downward adjustment, the Section 10(b) aggregate Recognized Loss Amount for these two claims is $290, Additionally, after the entry of the Claims-in- Process Distribution Order, but before the Claims-in-Process Distribution, one claim was determined to be a duplicate of another approved claim, and, thus, the Section 11 Recognized Loss Amount on the duplicate claim ($302,100.00) was eliminated. Attached hereto as Exhibit C is a list of the three Claims Adjusted Downward and their revised Recognized Loss Amounts. The three claimants whose claims have been adjusted downward were informed of and have not disputed GCG s reduction of their loss amounts. The distributions made to the two claimants 7

8 Case 1:05-cv JSR Document 851 Filed 06/18/12 Page 8 of 11 whose loss amounts were reduced were the lower adjusted amounts, and the claimant whose loss on the duplicate claim was eliminated did not receive a distribution as to that claim. GCG S FEES AND EXPENSES 14. GCG has been paid a total of $634, for its work performed on behalf of the Class through August 31, 2011, which includes the $11, that GCG estimated that it would incur after August 31, 2011 in preparation of, and to conduct, the Claims-In-Process Distribution. Attached hereto as Exhibit D is GCG s invoice reflecting its actual fees and expenses incurred from September 1, 2011 through May 15, 2012, which total $32, Thus, deducting the advance of $11, already paid to GCG, GCG has not been paid $21, for the work it performed on behalf of the Class from September 1, 2011 through May 15, As also set forth in the invoice attached hereto as Exhibit D, GCG estimates that it will incur an additional $22,500 in fees and expenses to distribute the Catch-Up Payments and to conduct the Second Distribution of the Net Settlement Funds described in paragraph 16.d. below The Initial Distribution Order and the Claims-in-Process Distribution Order each authorized payment of the fees and expenses that GCG estimated it would incur in connection with the respective, corresponding distributions of the Net Settlement Funds. See Initial Distribution Order 3.j.; Claims-in-Process Distribution Order 3.i. Further, in both orders, the 6 GCG s estimate to complete the Catch-Up Payments and Second Distribution includes fees and expenses to be incurred in connection with: (i) the calculation of distribution amounts; (ii) printing and mailing checks; (iii) monitoring uncashed and undeliverable checks; (iv) reaching out to Authorized Claimants who have not cashed their checks; and (v) searching for current addresses if checks are returned as undeliverable. It does not cover fees and expenses that may be incurred in connection with a third or further subsequent distributions of the Net Settlement Funds, should they become necessary. The Initial Distribution Order provides for the payment of these additional fees and expenses without further order of the Court. 8

9 Case 1:05-cv JSR Document 851 Filed 06/18/12 Page 9 of 11 Court stated that it retains jurisdiction to consider any further applications concerning administration of the Settlement. See Initial Distribution Order 4; Claims-in-Process Distribution Order 4. Thus, GCG respectfully requests that the Court approve the payment of GCG s fees and expenses set forth in the attached invoice, which total $43,785.75, from the current balance of the Net Settlement Funds. 7 PROPOSED MODIFICATION OF DISTRIBUTION PLAN FOR THE NET SETTLEMENT FUNDS 16. Should the Court concur with GCG s determinations concerning Additional Late Submitted Claims, Additional Late Adjusted Claims, and the Claims Adjusted Downward, GCG recommends the following modification to the existing distribution plan for the Net Settlement Funds: a. The eligible Additional Late Submitted Claims and Additional Late Adjusted Claims will be paid their pro rata share of the Initial Distribution amount from the current balance of the Net Settlement Funds. By receiving these Catch-Up Payments, these claims would reach a state of parity with the claims that were paid in the Initial Distribution and the Claims-in-Process Distribution; b. All Authorized Claimants whose Initial Distribution checks and/or Claims-in-Process Distribution checks are stale-dated and who do not request a check reissue prior to the date of entry of the Supplemental Distribution Order will irrevocably forfeit all recovery from the Settlements, and the funds allocated to all such stale-dated checks will be available for redistribution to other Authorized Claimants; c. GCG will be paid $43, from the current balance of the Net Settlement Funds for its fees and expenses incurred and to be incurred in connection with the Catch-Up-Payment Distribution and the Second Distribution as set forth on the invoice attached hereto as Exhibit D; d. Consistent with paragraph 3.g. of the Initial Distribution Order, GCG will conduct a second distribution of the Net Settlement Funds (the Second Distribution ) pursuant to which the balance remaining in the Net Settlement Funds (including the 7 GCG s invoice attached hereto as Exhibit D includes the costs to destroy all hard-copy documentation, which is now underway consistent with paragraph 3.k. of the Initial Distribution Order. 9

10 Case 1:05-cv JSR Document 851 Filed 06/18/12 Page 10 of 11 Current Reserve and the funds for all void stale-dated checks remaining from the Initial Distribution and the Claims-in-Process Distribution), after deducting the payments described in paragraph 16.a. and 16.c. above, and after deducting any payments for estimated taxes and the costs of preparing appropriate tax returns and any escrow fees, will be distributed to all Authorized Claimants who (1) were not Claims Paid in Full (as defined in the Initial Cirami Declaration), (2) cashed their distribution payment from the Initial or Claims-in-Process Distribution (or have submitted a re-issue request prior to the date of entry of the Supplemental Distribution Order) or are receiving Catch-Up Payments, and (3) would receive at least $20.00 from the redistribution based on their pro rata share of the remaining funds; e. In order to encourage Authorized Claimants who or which will receive payments pursuant to the Supplemental Distribution Order to cash their distribution checks promptly, and to avoid or reduce future expenses relating to unpaid distribution checks, all distribution checks will bear the following notation: CASH PROMPTLY, VOID AND SUBJECT TO RE-DISTRIBUTION IF NOT CASHED BY [DATE 120 DAYS AFTER ISSUE DATE] ; f. The currently deficient Additional Late Submitted Claims, if cured, as well as any claims submitted after the date of this Declaration which GCG deems eligible for payment but for their late submission, shall be paid so as to bring them into parity with the previously-paid claims, to the extent sufficient funds remain in the Net Settlement Funds after the completion of the Second Distribution, without further Order of the Court. Such procedure shall be followed with respect to any additional late claims that may be received until the Net Settlement Funds are exhausted or such time as GCG and Co-Lead Counsel determine that further redistribution is not cost-effective in accordance with paragraph 3.h.ii of the Initial Distribution Order. g. The procedures established by the Court in its Order Modifying Distribution Plan dated June 2, 2011 (Dkt. No. 800), which were used in connection with the Initial Distribution and the Claims-in-Process Distribution shall be applied to the one Additional Late Adjusted Claim that appears on the list provided by the Trustee of the PAT as a person or entity that assigned a portion of its recovery in this Action to the PAT. Such procedures shall also be applied to any additional late submitted claims that appear on the list provided by the Trustee of the PAT and that are determined to be eligible to receive a distribution from the Net Settlement Funds. h. In all other respects, the Distribution Plan approved by the Court in the Initial Distribution Order, as amended by the Order Modifying Distribution Plan dated June 2, 2011, will remain in effect. i. For the sake of clarity, the release of claims against Lead Plaintiffs, Lead Counsel, the Claims Administrator, the Escrow Agent or any other agent retained by Lead Plaintiffs or Lead Counsel in connection with the administration of the Net Settlement Funds as set forth in the Initial Distribution Order will be extended to cover 10

11 Case 1:05-cv JSR Document 851 Filed 06/18/12 Page 11 of 11

12 Case 1:05-cv JSR Document Filed 06/18/12 Page 1 of 2 EXHIBIT A

13 Case 1:05-cv JSR Document Filed 06/18/12 Page 2 of 2 Refco, Inc. Securities Litigation Exhibit A Additional Late Submitted Claims (4 Claims) Claim No. Section 11 Loss Amount Section 10(b) Loss Amount Distribution Amount 5396 $164, $2, $ 92, $12, $3, $ 8, $8, $2, $ 5, $28, $ 15, Totals $214, $8, $122,073.63

14 Case 1:05-cv JSR Document Filed 06/18/12 Page 1 of 2 EXHIBIT B

15 Case 1:05-cv JSR Document Filed 06/18/12 Page 2 of 2 Refco, Inc. Securities Litigation Exhibit B Additional Late Adjusted Claims (3 Claims) Claim No. Section 11 Loss Amount Section 10(b) Loss Amount Distribution Amount 2531 $5, $2, $6, $3, $5, $2, Totals $17, $9,559.60

16 Case 1:05-cv JSR Document Filed 06/18/12 Page 1 of 2 EXHIBIT C

17 Case 1:05-cv JSR Document Filed 06/18/12 Page 2 of 2 Claim No. Previously Approved Section 11 Loss Amount Refco, Inc. Securities Litigation Exhibit C Claims Adjusted Downward (3 Claims) Previously Approved Section 10(b) Loss Amount Downward Adjusted Section 11 Loss Amount Downward Adjusted Section 10(b) Loss Amount 8808 $212, $165, $302, $181, $125, Totals $302, $393, $290,822.50

18 Case 1:05-cv JSR Document Filed 06/18/12 Page 1 of 4 EXHIBIT D

19 Case 1:05-cv JSR Document Filed 06/18/12 Page 2 of 4 INVOICE INVOICE DATE 06/12/2012 PERIOD START INVOICE NUMBER THROUGH DATE 09/01/ /15/2012 Description Price Quantity Amount Includes handling undeliverable mail and sorting, prepping & scanning claim forms

20 Case 1:05-cv JSR Document Filed 06/18/12 Page 3 of 4 INVOICE Description Price Quantity Amount

21 Case 1:05-cv JSR Document Filed 06/18/12 Page 4 of 4 EXHIBIT A Description Amount