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11/16/2015Monday, November 16, 2015 1:00 PM City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 Pension Trustees Meeting Agenda November 16, 2015Pension Trustees Meeting Agenda 1. Call To Order 2. Approval of Minutes 2.1 Approve the minutes of the October 12, 2015 Pension Trustee Meeting as submitted in written summation by the City Clerk. 3. Citizens to be Heard Regarding Items Not on the Agenda 4. New Business Items 4.1 Approve the new hires for acceptance into the Pension Plan as listed. 4.2 Recommend approval of the following request of employees Douglas Munson, Police Department and James Pyatt, Police Department, to vest their pensions as provided by Section 2.419 of the Employees’ Pension Plan. 4.3 Approve the following request of employees Nicholas Brems, Police Department; Donald Davis, Information Technology; Carolynn Duncan, Library Department; Michael Holmes, Housing and Economic Development Department; Brenda McLaughlin, Police Department; Victor Myerscough, Solid Waste General Services Department; for a regular pension as provided by Sections 2.416 and 2.424 of the Employees’ Pension Plan. 4.4 Approve the City of Clearwater Employees’ Pension Plan as lead plaintiff in litigation against Marvell Technology Group, LTD regarding investment losses to the Plan; retain Saxena White, P.A. as legal counsel in this regard and authorize staff to negotiate a retainer agreement with Saxena White, P.A. 5. Adjourn Page 2 City of Clearwater Printed on 11/12/2015 Cover Memo City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 File Number: ID#15-1869 Agenda Date: 11/16/2015 Status: Agenda ReadyVersion: 1 File Type: MinutesIn Control: Pension Trustees Agenda Number: 2.1 SUBJECT/RECOMMENDATION: Approve the minutes of the October 12, 2015 Pension Trustee Meeting as submitted in written summation by the City Clerk. SUMMARY: APPROPRIATION CODE AND AMOUNT: USE OF RESERVE FUNDS: Page 1 City of Clearwater Printed on 11/12/2015 Pension Trustees Meeting Minutes October 12, 2015 City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 Meeting Minutes Monday, October 12, 2015 1:00 PM Council Chambers Pension Trustees Page 1 City of Clearwater Draft Pension Trustees Meeting Minutes October 12, 2015 Roll Call Present 5 - Chair George N. Cretekos, Trustee Doreen Hock-DiPolito, Trustee Jay E. Polglaze, Trustee Bill Jonson, and Trustee Hoyt Hamilton Also Present – William B. Horne – City Manager, Jill Silverboard – Assistant City Manager, Rod Irwin – CRA Executive Director/Assistant City Manager, Pamela K. Akin – City Attorney, Rosemarie Call – City Clerk, Nicole Sprague – Official Records and Legislative Services Coordinator To provide continui ty for research, items are listed in agenda order although not necessarily discussed in that order. Unapproved 1. Call To Order – Chair Cretekos The meeting was called to order at 1:58 p.m. at City Hall. 2. Approval of Minutes 2.1 Approve the minutes of the August 17, 2015 Pension Trustees meeting as submitted in written summation by the City Clerk. Trustee Hamilton moved to approve the minutes of the August 17, 2015 Pension Trustees meeting as submitted in written summation by the City Clerk. The motion was duly seconded and carried unanimously. 3. Citizens to be Heard Regarding Items Not on the Agenda – None. 4. New Business Items 4.1 Approve the new hires for acceptance into the Pension Plan as listed. Name, Job. Class, & Dept./Div. Pension Elig. Date Chad Bugansky, Service Dispatcher, Gas Department 6/27/2015 Page 2 City of Clearwater Draft Pension Trustees Meeting Minutes October 12, 2015 Antwain Hamm, Recreation Specialist Parks and Rec.Dept. 6/29/2015 Felicia Dunn, Police Comm Operator Trainee, Police Dept. 6/29/2015 Stephany Maxwell, Police Comm Operator Trainee, Police Dept. 6/29/2015 Logan Bashline, Water Dist Operator Trainee, Public Utilities Dept. 6/29/2015 Zachary Harrell, Water Dist Operator Trainee, Public Utilities Dept. 6/29/2015 Joseph Gomes, Water Dist Operator Trainee, Public Utilities Dept. 6/29/2015 Marquis Cheeks, Solid Waste Worker, Solid Waste Dept. 6/29/2015* Harold Davis, Solid Waste Worker, Solid Waste Dept. 6/29/2015** Jacob Johnson, Survey Assistant I, Engineering Dept. 7/13/2015 Elizabeth Kirchoffer, Parks Service Tech I, Parks and Rec. Dept. 7/13/2015 Lakeisha Sims, Police Property Clerk, Police Dept. 7/13/2015 Anna Hancock, Public Info Coordinator, Public Comm. Dept. 7/13/2015 Gerimy Tisdale, Water Dist Operator Trainee, Public Utilities Dept. 7/13/2015 Andrew Schmidt, Police Service Technician, Police Dept. 7/13/2015 * Marquis Cheeks was employed in a temporary position from 4/13/2015 to 6/28/2015. He transferred to a full time position effective 6/29/2015 and will be eligible for pension as of 6/29/2015. ** Harold Davis was employed in a temporary position from 4/13/2015 to 6/28/2015. He transferred to a full time position effective 6/29/2015 and will be eligible for pension as of 6/29/2015. Trustee Jonson moved to Approve the new hires for acceptance into the Pension Plan as listed. The motion was duly seconded and carried unanimously. 4.2 Approve the new hires for acceptance into the Pension Plan as listed. Name, Job. Class, & Dept./Div. Pension Elig.Date Laura Del Valle, Graphics Designer, Public Communications Dept 8/10/2015 * Ryan Carrington, Fire Medic, Fire Department 8/10/2015 James Parks, Fire Medic, Fire Department 8/10/2015 David Sellman, Fire Medic, Fire Department 8/10/2015 Paul Sudduth, Fire Medic, Fire Department 8/10/2015 Joshua True, Fire Medic, Fire Department 8/10/2015 Carlos Pellitero, Fire Medic, Fire Department 8/10/2015 Cherise Wehinger, Personnel/Payroll Tech, Parks and Rec. Dept. 8/10/2015 Ramon Pires, Recreation Leader, Parks and Recreation Dept. 8/10/2015** Robert Diehl, Fleet Mechanic, General Services Department 8/10/2015 Clarence Yancey, Police Property Clerk, Police Department 8/10/2015 Sean Deeran, Solid Waste Equipment Operator, Solid Waste Dept. 8/10/2015 Page 3 City of Clearwater Draft Pension Trustees Meeting Minutes October 12, 2015 Roxana Grinov, Librarian I, Library Department 8/23/2015 *** Tabitha Green, Library Assistant, Library Department 8/24/2015 **** Brandon Mize, Parks Service TechI, Parks and Recreation Dept. 8/24/2015 ***** Schnyyder Louis, Recreation Leader, Parks and Recreation Dept. 8/24/2015 ****** Angel Gonzalez-Pagan, Parking Enforcement Specialist, Engin. Dept. 8/24/2015 Bryson Church, Solid Waste Worker, Solid Waste Dept. 8/24/2015 ******* * Laura Del Valle was employed in a temporary position from 1/26/2015 to 8/09/2015. She transferred to a full time position effective 8/10/2015, and will be eligible for pension as of 8/10/2015. ** Ramon Pires was employed in a temporary position from 5/16/2015 to 8/08/2015. He was hired into a full time position effective 8/10/2015, and will be eligible for pension as of 8/10/2015. *** Roxana Grinov was employed in a temporary position from 1/13/2014 to 8/22/2015. She transferred to a full time position effective 8/23/2015, and will be eligible for pension as of 8/23/2015. **** Tabitha Green was employed in a part time position from 1/27/2014 to 8/23/2015. She transferred to a full time position effective 8/24/2015, and will be eligible for pension as of 8/24/2015. ***** Brandon Mize was employed in a temporary position from 6/08/2015 to 8/23/2015. He transferred to a full time position effective 8/24/2015, and will be eligible for pension as of 8/24/2015. ****** Schnyyder Louis was employed in a temporary position from 5/30/2015 to 8/22/2015. He was hired into a full time position effective 8/24/2015, and will be eligible for pension as of 8/24/2015. ******* Bryson Church was employed in a temporary position from 7/13/2015 to 8/23/2015. He was hired into a full time position effective 8/24/2015, and will be eligible for pension as of 8/24/2015. Trustee Hock-DiPolito moved to approve the new hires for acceptance into the Pension Plan as listed. The motion was duly seconded and carried unanimously. 4.3 Approve the following request of employees Roger Duncan, Marine and Aviation Department, and Joseph Falcone, Police Department, for a regular pension as provided by Sections 2.416 and 2.424 of the Employees’ Pension Plan. Roger Duncan, Tradesworker, Marine and Aviation Department, was employed by the City on May 18, 1987, and his pension service credit is effective on that Page 4 City of Clearwater Draft Pension Trustees Meeting Minutes October 12, 2015 date. His pension will be effective October 1, 2015. Based on an average salary of approximately $49,767.33 over the past five years, the formula for computing regular pensions and Mr. Duncan’s selection of the 100% Joint and Survivor Annuity, this pension benefit will be approximately $37,350.12 annually. Joseph Falcone, Police Sergeant, Police Department, was employed by the City on February 6, 1995, and his pension service credit is effective on that date. His pension will be effective October 1, 2015. Based on an average salary of approximately $91,407.57 over the past five years, the formula for computing regular pensions and Mr. Falcone’s selection of the 100% Joint and Survivor Annuity, this pension benefit will be approximately $50,873.04 annually. Section 2.416 provides for normal retirement eligibility for non-hazardous duty employees hired prior to the effective date of this reinstatement (January 1, 2013), a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of fifty-five years and completed twenty years of credited service; the date on which a participant has reached age sixty-five years and completed ten years of credited service; or the date on which a member has completed thirty years of service regardless of age. For non-hazardous duty employees hired on or after the effective date of this restatement, a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of sixty years and completed twenty-five years of credited service; or the date on which a participant has reached the age of sixty-five years and completed ten years of credited service. Mr. Duncan has met the non-hazardous duty criteria. Section 2.416 provides for normal retirement eligibility for hazardous duty employees, a member shall be eligible for retirement following the earlier of the date on which the participant has completed twenty years of credited service regardless of age, or the date on which the participant has reached fifty-five years and completed ten years of credited service. Mr. Falcone has met the hazardous duty criteria. Trustee Polglaze moved to approve the following request of employees Roger Duncan, Marine and Aviation Department, and Joseph Falcone, Police Department, for a regular pension as provided by Sections 2.416 and 2.424 of the Employees’ Pension Plan. The motion was duly seconded and carried unanimously. 4.4 Approve the following request of employees Peter Hegedus, Solid Waste General Services Department; Kevin Matthews, Police Department; Janet McMahan, Planning and Development Department; Wadine Shawen, Planning and Development Page 5 City of Clearwater Draft Pension Trustees Meeting Minutes October 12, 2015 Department; and Gregory Turman, Public Utilities Department, for a regular pension as provided by Sections 2.416 and 2.424 of the Employees’ Pension Plan. Peter Hegedus, Building and Maintenance Supervisor, Solid Waste General Services Department, was employed by the City on January 3, 1985, and his pension service credit is effective on that date. His pension will be effective August 1, 2015. Based on an average salary of approximately $60,748.40 over the past five years, the formula for computing regular pensions and Mr. Hegedus’ selection of the 75% Joint and Survivor Annuity with a 10% Partial Lump Sum, this pension benefit will be approximately $45,988.80 annually. Kevin Matthews, Police Officer, Police Department, was employed by the City on August 2, 1999, and his pension service credit is effective on that date. His pension will be effective October 1, 2015. Based on an average salary of approximately $74,767.91 over the past five years, the formula for computing regular pensions and Mr. Matthews’ selection of the 100% Joint and Survivor Annuity, this pension benefit will be approximately $31,991.40 annually. Janet McMahan, License Inspector, Planning and Development Department, was employed by the City on December 3, 1984, and her pension service credit is effective on that date. Her pension will be effective August 1, 2015. Based on an average salary of approximately $55,345.54 over the past five years, the formula for computing regular pensions and Ms. McMahan’s selection of the 50% Joint and Survivor Annuity, this pension benefit will be approximately $45,121.20 annually. Wadine Shawen, License Inspector, Planning and Development Department, was employed by the City on August 27, 1984, and her pension service credit is effective on that date. Her pension will be effective August 1, 2015. Based on an average salary of approximately $49,587.63 over the past five years, the formula for computing regular pensions and Ms. Shawen’s selection of the 50% Joint and Survivor Annuity, this pension benefit will be approximately $40,009.92 annually. Gregory Turman, Public Utilities Coordinator, Public Utilities Department, was employed by the City on July 24, 1985, and his pension service credit is effective on that date. His pension will be effective August 1, 2015. Based on an average salary of approximately $65,105.35 over the past five years, the formula for computing regular pensions and Mr. Turman’s selection of the 100% Joint and Survivor Annuity with a 20% Partial Lump Sum, this pension benefit will be approximately $39,205.08 annually. Section 2.416 provides for normal retirement eligibility for non-hazardous duty employees hired prior to the effective date of this reinstatement (January 1, 2013), a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of fifty-five years and completed Page 6 City of Clearwater Draft Pension Trustees Meeting Minutes October 12, 2015 twenty years of credited service; the date on which a participant has reached age sixty-five years and completed ten years of credited service; or the date on which a member has completed thirty years of service regardless of age. For non-hazardous duty employees hired on or after the effective date of this restatement, a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of sixty years and completed twenty-five years of credited service; or the date on which a participant has reached the age of sixty-five years and completed ten years of credited service. Mr. Hegedus, Ms. McMahan, Ms. Shawen and Mr. Turman have met the non-hazardous duty criteria. Section 2.416 provides for normal retirement eligibility for hazardous duty employees, a member shall be eligible for retirement following the earlier of the date on which the participant has completed twenty years of credited service regardless of age, or the date on which the participant has reached fifty-five years and completed ten years of credited service. Mr. Matthews has met the hazardous duty criteria. Trustee Hamilton moved to approve the following request of employees Peter Hegedus, Solid Waste General Services Department; Kevin Matthews, Police Department; Janet McMahan, Planning and Development Department; Wadine Shawen, Planning and Development Department; and Gregory Turman, Public Utilities Department, for a regular pension as provided by Sections 2.416 and 2.424 of the Employees’ Pension Plan. The motion was duly seconded and carried unanimously. 4.5 Approve the following request of employee Linda Treuhaft, Legal Department, to vest her pension as provided by Section 2.419 of the Employees’ Pension Plan. Linda Treuhaft, Paralegal, Legal Department, was employed by the City on May 11, 1998 and began participating in the Pension Plan on that date. Ms. Treuhaft terminated from City employment on September 5, 2015. The Employees’ Pension Plan provides that should an employee cease to be an employee of the City of Clearwater or change status from full-time to part-time after completing ten or more years of creditable service (pension participation), such employee shall acquire a vested interest in the retirement benefits. Vested pension payments commence on the first of the month following the month in which the employee normally would have been eligible for retirement. Section 2.416 provides for normal retirement eligibility for non-hazardous duty Page 7 City of Clearwater Draft Pension Trustees Meeting Minutes October 12, 2015 employees hired prior to the effective date of this reinstatement (January 1, 2013), a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of fifty-five years and completed twenty years of credited service; the date on which a participant has reached age sixty-five years and completed ten years of credited service; or the date on which a member has completed thirty years of service regardless of age. For non-hazardous duty employees hired on or after the effective date of this restatement, a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of sixty years and completed twenty-five years of credited service; or the date on which a participant has reached the age of sixty-five years and completed ten years of credited service. Ms. Treuhaft will meet the non-hazardous duty criteria and begin collecting a pension in May 2017. Section 2.416 provides for normal retirement eligibility for hazardous duty employees, a member shall be eligible for retirement following the earlier of the date on which the participant has completed twenty years of credited service regardless of age, or the date on which the participant has reached fifty-five years and completed ten years of credited service. Trustee Jonson moved to approve the following request of employee Linda Treuhaft, Legal Department, to vest her pension as provided by Section 2.419 of the Employees’ Pension Plan. The motion was duly seconded and carried unanimously. 4.6 Approve the following request of employee Vern Erickson, Public Utilities, to vest his pension as provided by Section 2.419 of the Employees’ Pension Plan. Vern Erickson, Water Plant Operator A, Public Utilities Department, was employed by the City on March 7, 2005, and began participating in the Pension Plan on that date. Mr. Erickson terminated from City employment on July 30, 2015. The Employees’ Pension Plan provides that should an employee cease to be an employee of the City of Clearwater or change status from full-time to part-time after completing ten or more years of creditable service (pension participation), such employee shall acquire a vested interest in the retirement benefits. Vested pension payments commence on the first of the month following the month in which the employee normally would have been eligible for retirement. Page 8 City of Clearwater Draft Pension Trustees Meeting Minutes October 12, 2015 Section 2.416 provides for normal retirement eligibility for non-hazardous duty employees hired prior to the effective date of this reinstatement (January 1, 2013), a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of fifty-five years and completed twenty years of credited service; the date on which a participant has reached age sixty-five years and completed ten years of credited service; or the date on which a member has completed thirty years of service regardless of age. For non-hazardous duty employees hired on or after the effective date of this restatement, a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of sixty years and completed twenty-five years of credited service; or the date on which a participant has reached the age of sixty-five years and completed ten years of credited service. Mr. Erickson will meet the non-hazardous duty criteria and begin collecting a pension in April 2019. Section 2.416 provides for normal retirement eligibility for hazardous duty employees, a member shall be eligible for retirement following the earlier of the date on which the participant has completed twenty years of credited service regardless of age, or the date on which the participant has reached fifty-five years and completed ten years of credited service. Trustee Hock-DiPolito moved to approve the following request of employee Vern Erickson, Public Utilities, to vest his pension as provided by Section 2.419 of the Employees’ Pension Plan. The motion was duly seconded and carried unanimously. 4.7 Approve the recommended pension plan expenditures for fiscal year 2016, totaling $318,400. The Employees’ Pension Plan does not have a legally required budget, however all expenditures must be approved by the Trustees. The following are routine administrative expenditures that staff is requesting approval of for administrative efficiency. The recommended expenditures for fiscal year 2016 reflect a $9,400, or 3.0% increase from the fiscal 2015 expenditures. This increase is primarily due to increased administrative support charges from the Human Resources Department and the Finance Payroll Division, along with a $1,400 increase in estimated costs of post-employment physicals. Training and travel are the estimated costs of pension training and related Page 9 City of Clearwater Draft Pension Trustees Meeting Minutes October 12, 2015 travel, including fiduciary training for the Trustees and Pension Advisory Committee (PAC) members. This is a not-to-exceed amount given uncertainty regarding the number of Trustees and PAC members that may elect to pursue training. Reimbursements to the General Fund and Central Insurance Fund are for the cost of oversight and administration of the Plan. The reimbursements are for services provided by Human Resources, Payroll, and Finance personnel, along with related operating expenditures. The firm of Klausner, Kaufman, Jensen and Levinson currently serves as the Plan’s pension attorneys. Annual attorney fees also include medical bills for medical services authorized by the PAC. Money manager, performance measurement consulting, safekeeping, and actuary fees are all governed by contracts separately approved by the Trustees, and are not included in this agenda item total. APPROPRIATION CODE AND AMOUNT: 0646-xxxxx-5xxxxx (various pension plan expenditure codes) In response to a question, Finance Director Jay Ravins said the increased reimbursement to the General Fund/Central Insurance Fund (Human Resources) is for an additional five hours of staffing from Human Resources in support of the pension plan. The additional hours are based on recent experience; not an increased salary cost. Trustee Polglaze moved to approve the recommended pension plan expenditures for fiscal year 2016, totaling $318,400. The motion was duly seconded and carried unanimously. 5. Adjourn The meeting adjourned at 2:03 p.m. Chair Employees’ Pension Plan Trustees Attest City Clerk Page 10 City of Clearwater Draft Cover Memo City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 File Number: ID#15-1780 Agenda Date: 11/16/2015 Status: Agenda ReadyVersion: 2 File Type: Action ItemIn Control: Pension Trustees Agenda Number: 4.1 SUBJECT/RECOMMENDATION: Approve the new hires for acceptance into the Pension Plan as listed. SUMMARY: Name, Job. Class, & Dept./Div.Pension Elig.Date Kevin Poole, Solid Waste Equipment Oper, Solid Waste Dept 7/27/2015* Renardo Lowe, Parks Service Technician I, Parks and Recreation Dept 9/08/2015 Mario Zaccaria, Building Construct Insp, Planning and Development Dept 9/08/2015 Torey Castleberry, Solid Waste Worker, Solid Waste Department 9/08/2015 Terry Clemons, Solid Waste Worker, Solid Waste Department 9/08/2015 Walter Ramos Mendez, Fire Inspector II, Fire Department 9/08/2015 Wilton Hill, Senior Systems Programmer, Information Technology Dept 9/08/2015 *Kevin Poole was previously employed with the City of Clearwater from 8/18/2008 through 4/7/2015. He was rehired effective 7/27/2015 and will be eligible for pension as of 7/27/2015. APPROPRIATION CODE AND AMOUNT: N/A USE OF RESERVE FUNDS: N/A Page 1 City of Clearwater Printed on 11/12/2015 Cover Memo City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 File Number: ID#15-1781 Agenda Date: 11/16/2015 Status: Agenda ReadyVersion: 2 File Type: Action ItemIn Control: Pension Trustees Agenda Number: 4.2 SUBJECT/RECOMMENDATION: Recommend approval of the following request of employees Douglas Munson, Police Department and James Pyatt, Police Department, to vest their pensions as provided by Section 2.419 of the Employees’ Pension Plan. SUMMARY: Douglas Munson, Police Officer, Police Department, was employed by the City on April 28, 1997, and began participating in the Pension Plan on that date. Mr. Munson terminated from City employment on September 23, 2015. James Pyatt, Police Communications Operator, Police Department, was employed by the City on August 6, 1990 and began participating in the Pension Plan on that date. Mr. Pyatt terminated from City employment on September 26, 2015. The Employees’ Pension Plan provides that should an employee cease to be an employee of the City of Clearwater or change status from full -time to part-time after completing ten or more years of creditable service (pension participation ), such employee shall acquire a vested interest in the retirement benefits. Vested pension payments commence on the first of the month following the month in which the employee normally would have been eligible for retirement. Section 2.416 provides for normal retirement eligibility for non -hazardous duty employees hired prior to the effective date of this reinstatement (January 1, 2013), a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of fifty-five years and completed twenty years of credited service; the date on which a participant has reached age sixty -five years and completed ten years of credited service; or the date on which a member has completed thirty years of service regardless of age. For non-hazardous duty employees hired on or after the effective date of this restatement, a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of sixty years and completed twenty -five years of credited service; or the date on which a participant has reached the age of sixty -five years and completed ten years of credited service. Mr. Pyatt will meet the non-hazardous duty criteria and begin collecting a pension in September 2020. Section 2.416 provides for normal retirement eligibility for hazardous duty employees, a member shall be eligible for retirement following the earlier of the date on which the participant has completed twenty years of credited service regardless of age, or the date on which the participant has reached fifty -five years and completed ten years of credited service. Mr. Munson will meet the hazardous duty criteria and begin collecting pension in May 2017. Page 1 City of Clearwater Printed on 11/12/2015 File Number: ID#15-1781 APPROPRIATION CODE AND AMOUNT: N/A Page 2 City of Clearwater Printed on 11/12/2015 Cover Memo City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 File Number: ID#15-1782 Agenda Date: 11/16/2015 Status: Agenda ReadyVersion: 2 File Type: Action ItemIn Control: Pension Trustees Agenda Number: 4.3 SUBJECT/RECOMMENDATION: Approve the following request of employees Nicholas Brems, Police Department; Donald Davis, Information Technology; Carolynn Duncan, Library Department; Michael Holmes, Housing and Economic Development Department; Brenda McLaughlin, Police Department; Victor Myerscough, Solid Waste General Services Department; for a regular pension as provided by Sections 2.416 and 2.424 of the Employees’ Pension Plan. SUMMARY: Nicholas Brems, Police Officer, Police Department, was employed by the City on March 25, 1991, and his pension service credit is effective on that date. His pension will be effective October 1, 2015. Based on an average salary of approximately $76,403.52 over the past five years, the formula for computing regular pensions and Mr. Brems’ selection of the 100% Joint and Survivor Annuity, this pension benefit will be approximately $50,182.80 annually. Donald Davis, Senior Network Analyst, Information Technology Department, was employed by the City on September 16, 1985, and his pension service credit is effective on that date. His pension will be effective October 1, 2015. Based on an average salary of approximately $60,391.44 over the past five years, the formula for computing regular pensions and Mr . Davis’ selection of the Joint and Survivor Annuity, this pension benefit will be approximately $49,892.16 annually. Carolynn Duncan, Library Assistant, Library Department, was employed by the City on December 6, 1989, and her pension service credit is effective on that date. Her pension will be effective October 1, 2015. Based on an average salary of approximately $35,369.21 over the past five years, the formula for computing regular pensions and Ms. Duncan’s selection of the 66 2/3% Joint and Survivor Annuity, this pension benefit will be approximately $23,644.56 annually. Michael Holmes, Housing Manager, Housing and Economic Development Department, was employed by the City on January 7, 1985, and his pension service credit is effective on that date. His pension will be effective October 1, 2015. Based on an average salary of approximately $72,117.01 over the past five years, the formula for computing regular pensions and Mr. Holmes’ selection of the 100% Joint and Survivor Annuity, this pension benefit will be approximately $53,868.60 annually. Brenda McLaughlin, Police Communications Operator, Police Department, was employed by the City on December 25, 1995, and her pension service credit is effective on that date. Her Page 1 City of Clearwater Printed on 11/12/2015 File Number: ID#15-1782 pension will be effective January 1, 2016. Based on an average salary of approximately $50.808.67 over the past five years, the formula for computing regular pensions and Ms . McLaughlin’s selection of the 100% Joint and Survivor Annuity, this pension benefit will be approximately $26,727.72 annually. Victor Myerscough, Fleet Mechanic Supervisor, Solid Waste General Services De Department, was employed by the City on July 23, 1990, and his pension service credit is effective on that date. His pension will be effective October 1, 2015. Based on an average salary of approximately $59,626.34 over the past five years, the formula for computing regular pensions and Mr. Myerscough’s selection of the 50% Joint and Survivor Annuity, this pension benefit will be approximately $38,993.88 annually. Section 2.416 provides for normal retirement eligibility for non -hazardous duty employees hired prior to the effective date of this reinstatement (January 1, 2013), a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of fifty-five years and completed twenty years of credited service; the date on which a participant has reached age sixty -five years and completed ten years of credited service; or the date on which a member has completed thirty years of service regardless of age. For non-hazardous duty employees hired on or after the effective date of this restatement, a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of sixty years and completed twenty -five years of credited service; or the date on which a participant has reached the age of sixty -five years and completed ten years of credited service. Mr. Davis, Ms. Duncan, Mr. Holmes, Ms. McLaughlin, and Mr. Myerscough have met the non-hazardous duty criteria. Section 2.416 provides for normal retirement eligibility for hazardous duty employees, a member shall be eligible for retirement following the earlier of the date on which the participant has completed twenty years of credited service regardless of age, or the date on which the participant has reached fifty -five years and completed ten years of credited service. Mr. Brems has met the hazardous duty criteria. APPROPRIATION CODE AND AMOUNT: N/A USE OF RESERVE FUNDS: N/A Page 2 City of Clearwater Printed on 11/12/2015 Cover Memo City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 File Number: ID#15-1873 Agenda Date: 11/16/2015 Status: Agenda ReadyVersion: 1 File Type: Action ItemIn Control: Pension Trustees Agenda Number: 4.4 SUBJECT/RECOMMENDATION: Approve the City of Clearwater Employees’ Pension Plan as lead plaintiff in litigation against Marvell Technology Group, LTD regarding investment losses to the Plan; retain Saxena White, P.A. as legal counsel in this regard and authorize staff to negotiate a retainer agreement with Saxena White, P.A. SUMMARY: In December 2011, the Pension Trustees approved a contract retaining Saxena White, P .A. to provide monitoring of securities in the Plan ’s investment portfolio in connection with potential claims for damages suffered by the Pension Plan. There is no cost to the plan for the ongoing monitoring services. Saxena White has recommended that the Pension Plan apply for lead plaintiff status in a litigation action against Marvell Technology Group, incorporated in Bermuda with U .S. headquarters in Santa Clara, California. Marvell designs, develops and markets integrated circuits for communications -related markets that provide an interface between analog signals and digital information used in computing and communications systems. Marvell has disclosed an internal investigation into its accounting practices related to revenue recognition timing that could involve possible fraudulent misconduct. Additionally, Marvell disclosed a nearly $400 million increase to its litigation reserve while simultaneously disclosing a review of its controls surrounding the establishment of litigation reserves. In reaction to these disclosures and related analyst downgrades and negative comments, Marvell ’s stock price dropped by over 16% from $10.55 on September 10, 2015 to $8.84 per share on September 11, 2015. The City of Clearwater Employees’ Pension Plan sustained estimated losses of $515,000. Pursuing lead plaintiff status will serve to ensure the Trustees and Plan administrators are fulfilling their fiduciary responsibilities while conveying a clear message to the public and corporate world that the City is doing its due diligence in protecting Plan assets. The retained agreement will stipulate that the cost of litigation will result in no out -of-pocket costs to the Plan, with legal fees paid on a contingency basis. The pension plan’s attorneys, Klausner, Kaufman, Jensen, and Levinson, as well as the plan ’s investment consultants, CapTrust, concur with pursuing lead plaintiff status. Page 1 City of Clearwater Printed on 11/12/2015 File Number: ID#15-1873 Page 2 City of Clearwater Printed on 11/12/2015 Attorney Client Privileged Communication | Page 1 Boca Center, 5200 Town Center Circle, Suite 601, Boca Raton, FL 33486 ph 561.394.3399 fax 561.394.3382 www.saxenawhite.com INTRODUCTION This memorandum prepared for the City of Clearwater Employees’ Pension Fund (“Clearwater”) summarizes and discusses securities fraud claims that have been asserted against Marvell Technology Group, Ltd. (“Marvell” or the “Company”) and certain members of its senior management team on behalf of purchasers of the Company’s common stock during the period of November 20, 2014 through September 10, 2015 (the “Class Period”). The complaint was recently filed in the Southern District of New York and charges Marvell with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and U.S. Securities and Exchange Commission Rule 10b-5 promulgated thereunder. Clearwater purchased shares of Marvell during the Class Period and has sustained an estimated loss of over $500,000. As discussed in more detail herein, after reviewing the publicly-available information concerning the allegations against the Company and its executives, as well as an analysis of Clearwater’s trading and estimated loss in Marvell, Saxena White believes that continued monitoring and investigation of this situation is warranted to determine if Clearwater should move for lead plaintiff in this case. COMPANY BACKGROUND Marvell designs, develops and markets integrated circuits for communications-related markets. The Company’s products provide the interface between analog signals and the digital information used in computing and communications systems. The Company, which is incorporated in Bermuda, maintains U.S. corporate headquarters in Santa Clara, California. With over 500 million shares outstanding and a current market capitalization of approximately $4.4 billion, Marvell’s shares are publicly traded on the NASDAQ under the symbol “MRVL.” Since 1995, Marvell’s Chief Executive Officer and Chairman of its Board of Directors has been Dr. Sehat Sutardja, who is one of the Company’s co -founders. Sutardja is described in the Company’s annual 10-K filing as being “deeply involved in the daily challenges of running a global growth company.” Ms. Welie Dai is another co-founder of the Company and has served as President of Marvell since July 2013. Sutardja and Dai are husband and wife and collectively hold over 70 million shares of Marvell’s outstanding shares, which holdings represent a 13.5% stake in the Company. On May 21, 2015, Marvell announced the retirement of its Chief Financial Officer which took effect the very next day on May 22, 2015. The Company has not yet appointed a full time replacement. MARVELL TECHNOLOGY GROUP, LTD. LITIGATION REPORT PREPARED FOR THE CITY OF CLEARWATER EMPLOYEES’ PENSION FUND MARVELL TECHNOLOGY GROUP, LTD. Symbol: MRVL (NASDAQ) Date of Preparation: September 25, 2015 Headquarters: Santa Clara, California Class Period: November 20, 2014 through September 10, 2015 Class Period High: $16.59 (06/09/14) Current Price: $9.025 (09/24/15) Attorney Client Privileged Communication | Page 2 Boca Center, 5200 Town Center Circle, Suite 601, Boca Raton, FL 33486 ph 561.394.3399 fax 561.394.3382 www.saxenawhite.com RECENT EVENTS On September 11, 2015, Marvell’s share price plunged the most in almost 13 years after disclosing that it had launched an internal investigation of its accounting practices and reporting weakening demand for personal computer parts. Specifically, regarding the investigation and softening demand, the Company disclosed the following in a press release titled “Marvell Technology Group Ltd. Reports Preliminary second quarter of Fiscal 2016 Financial Results”: [T]he Audit Committee of the Company’s Board of Directors is conducting an independent investigation of certain accounting and internal control matters in the second quarter of fiscal 2016. Senior management has cooperated fully with the Audit Committee's investigation, and is fully committed to supporting the Audit Committee in this process. The investigation consists of a review of certain revenue recognition issues in the second quarter of fiscal 2016 and any associated issues with whether senior management’s operating style during the period resulted in an open flow of information and communication to set an appropriate tone for an effective control environment. More specifically, the investigation has focused on the approximately 7 to 8 percent of revenue recognized in the second quarter of fiscal 2016 that, based upon the original customer request date, would have been received and earned in the third quarter of fiscal 2016 and is now no longer available for receipt in that quarter. Such percentage represents an increase over the prior four quarters and is indicative of softening demand for certain of the Company’s products. This was particularly the case in the storage end market where, as a result of a weaker global economy and a slow-down in the PC market, the Company saw weaker than expected demand for HDD products as the overall total available market declined. The Audit Committee’s investigation to date has revealed no material issues regarding the Company’s 2016 second quarter financial results, and the Company believes the investigation will have no material impact on its previously issued financial statements. The Audit Committee is also reviewing certain aspects of the Company’s internal control over financial reporting, including controls for the establishment of reserves for litigation and whether senior management’s operating style resulted in an open flow of information and communication to set an appropriate tone for an effective control environment. The Company’s review of such internal controls is ongoing and may ultimately affect management’s conclusion of the effectiveness of internal control over financial reporting as of the end of the second quarter of fiscal 2016. For these reasons the Company has experienced a delay in the completion of its financial statements, Management's Discussion and Analysis of Financial Condition and Results of Operations and other related components of the Quarterly Report. The Audit Committee and Company management are also discussing potential enhancements to the Company’s internal controls and remedial actions to address the items discussed above and the adequacy of financial reporting resources. Attorney Client Privileged Communication | Page 3 Boca Center, 5200 Town Center Circle, Suite 601, Boca Raton, FL 33486 ph 561.394.3399 fax 561.394.3382 www.saxenawhite.com Marvell also disclosed that it was preliminarily reporting a surprisingly large loss of $382 million for the second quarter of fiscal 2016 (“2Q 2016”). The loss was almost entirely attributable to a nearly $400 million litigation accrual. THE LITIGATION ACCRUAL The litigation accrual related to a successful patent infringement suit brought by Carnegie Mellon University (“Carnegie”) against Marvell, was originally filed March 6, 2009 in the U.S. District Court for the Western District of Pennsylvania (the “District Court”). On May 7, 2014, the District Court entered final judgment for $1.5 billion against Marvell. The appellate decision summarized the proceedings as follows: Carnegie Mellon University (“CMU”) sued Marvell Technology Group, Ltd. and Marvell Semiconductor, Inc. (collectively “Marvell”) for infringing two patents related to hard- disk drives. A jury found for CMU on infringement and validity, and it awarded roughly $1.17 billion as a reasonable royalty for the infringing acts, using a rate of 50 cents for each of certain semiconductor chips sold by Marvell for use in hard-disk drives. The district court then used that rate to extend the award to the date of judgment, awarded a 23-percent enhancement of the past-damages award based on Marvell's willfulness (found by the jury and the district court), and entered a judgment of roughly $1.54 billion for past infringement and a continuing royalty at 50 cents per Marvell-sold chip.1 Although the Company disclosed the ongoing litigation with Carnegie in its public filings, Marvell failed to record any liability until the second quarter of fiscal 2016, even after the District Court entered final judgment in May 2014. Three factors indicate that Marvell was deficient in failing to record this liability earlier. First, the District Court entered final judgment of $1.5 billion in May 2014. The general guidance on accounting for contingencies under U.S. Generally Accepted Accounting Principles (“GAAP”) is contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 450, Contingencies. According to ASC Topic 450-20-25-2: An estimated loss from a loss contingency should be recognized as a liability and an expense if both of the following conditions are met: a. It is probable that, at the date of the financial statements, an asset has been impaired or a liability incurred. b. The amount of loss can be reasonably estimated. 1 Carnegie Mellon Univ. v. Marvell Tech. Group, Ltd., 2015 U.S. App. LEXIS 13622, 2-3 (Fed. Cir. Aug. 4, 2015). Attorney Client Privileged Communication | Page 4 Boca Center, 5200 Town Center Circle, Suite 601, Boca Raton, FL 33486 ph 561.394.3399 fax 561.394.3382 www.saxenawhite.com On June 4, 2015, the Company filed its Form 10-Q for the first quarter of fiscal year 2016 ended May 2, 2015 (“1Q 2016”), in which the Company disclosed that it had no accrued liability related to its litigation with Carnegie. Marvell asserted the following: The Company and MSI believe that the evidence and the law do not support the jury’s findings of infringement, validity and the award of damages and do not believe a material loss is probable. The Company believes that there are strong grounds for appeal and the Company and MSI are currently pursuing an appeal before the U.S. Court of Appeals for the Federal Circuit in Washington, D.C. which held a hearing for oral argument on April 7, 2015. The Company believes the low end of the possible range of loss is zero, but it cannot reasonably estimate the upper range of the possible loss, as a number of factors could significantly change the assessment of damages. (Emphasis added). Marvell’s 1Q 2016 10-Q also represented “that the Company is currently unable to predict the final outcome of these lawsuits and therefore cannot determine the likelihood of loss nor estimate a range of possible loss.” Contrary to the Company’s assertion, the upper range of the loss was $1.5 billion – the District Court’s final judgment. ASC Topic 450-20-25-5 makes clear that it is improper to delay accrual of a loss until only a single amount can be reasonably estimated. To the contrary, when the condition in paragraph 450-20-25-2(a): is met and information available indicates that the estimated amount of loss is within a range of amounts, it follows that some amount of loss has occurred and can be reasonably estimated. Thus, when the condition in paragraph 450-20-25-2(a): is met with respect to a particular loss contingency and the reasonable estimate of the loss is a range, the condition in paragraph 450-20-25-2(b): is met and an amount shall be accrued for the loss. In a speech during the 2004 AICPA National Conference on Current SEC and PCAOB Developments, Scott A. Taub in the SEC’s Office of the Chief Accountant remarked the following: While the low end of a range of possible losses is the right number if no amount within the range is more likely than any other, I find it somewhat surprising how often "zero" is the recorded loss right up until a large settlement is announced. Second, in not recording a liability, Marvell failed to consider the high hurdle in obtaining a complete reversal of the District Court decision. For example, in the 12-month period ending March 31, 2011, the Third Circuit reversed only 8.6% of the time.2 Third, the appellate court noted that that there was substantial evidence to support the jury’s verdict: The jury found that Marvell both directly and indirectly infringed the two (method) claims at issue by developing, testing, and selling to its customers--notably, some of the 2 http://www.floridabar.org/DIVCOM/JN/JNJournal01.nsf/c0d731e03de9828d852574580042ae7a/ 64e2374ed9060b9985257ae200635805!OpenDocument&Highlight=0,Scharf* Attorney Client Privileged Communication | Page 5 Boca Center, 5200 Town Center Circle, Suite 601, Boca Raton, FL 33486 ph 561.394.3399 fax 561.394.3382 www.saxenawhite.com world's leading makers of hard-disk drives--products that practice the claimed methods. Marvell rests its challenge to the jury’s finding solely on arguments about whether its chips’ operation and one of its testing activities meet the claim limitations. Marvell raises no issue about other elements of infringement, such as the knowledge element of indirect infringement. We reject Marvell’s challenges, concluding that the jury had substantial evidence to support its verdict. Marvell, however, did not accrue any liability until the 2Q 2016—over two years after the District Court entered final judgment. The September 11, 2015 press release disclosed the following: Cost of goods sold includes a litigation accrual of approximately $394 million recognized by the Company under ASC Topic 450, “Contingencies,” in connection with the Carnegie Mellon University and certain other pending litigation. MARVELL’S STOCK PRICE PERFORMANCE Analysts reacted negatively to the disclosures discussed above, with as many as three ratings cuts by various analysts. One analyst at Susquehanna Financial Group wrote in a note to investors that “[W]e consider the stock to be ‘unownable’ during such an investigation, and it will likely take a considerable amount of time for investors to regain confidence in management.” In reaction to these disclosures and analyst ratings cuts and negative comments, Marvell’s share price dropped $1.71 per share or over 16% from $10.55 per share on September 10, 2015 to $8.84 per share on September 11, 2015—wiping out $885 million in market capitalization in one-day (on unusually large trading volume). Below is a chart depicting Marvell’s common share price from the start of the Class Period on November 20, 2014 through the present: Attorney Client Privileged Communication | Page 6 Boca Center, 5200 Town Center Circle, Suite 601, Boca Raton, FL 33486 ph 561.394.3399 fax 561.394.3382 www.saxenawhite.com PENDING LITIGATION On September 11, 2015, a securities class action complaint was filed against Marvell in the Southern District of New York asserting claims under the Securities Exchange Act of 1934 for purchasers of Marvell common stock during a Class Period of November 20, 2014 through September 10, 2015. The action is captioned Luna v. Marvell Technology Group, Ltd. et al, Case No. 15-cv-7214 (S.D.N.Y.). The complaints allege that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operational and accounting policies. Specifically, defendants made false and/or misleading statements and/or failed to disclose that: (1) Marvell had engaged in inappropriate revenue recognition practices; (2) Marvell’s management permitted an inappropriate and ineffective internal control environment; and (3) As a result of the foregoing, Marvell’s key accounting metrics were misstated and that the Company lacked adequate controls at all relevant times. The deadline to move for appointment as lead plaintiff is November 10, 2015. CLEARWATER’S FINANCIAL EXPOSURE In calculating a client’s losses,3 Saxena White uses both the FIFO and LIFO methodologies. Clearwater did not hold any shares of Marvell at the beginning of the Class Period on November 19, 2014. During the Class Period, from November 20, 2014 through September 10, 2015, Clearwater purchased 116,600 shares of Marvell for a cost of approximately $1.54 million, while selling none. As a result of its trading in Marvell shares during the Class Period, Saxena White estimates that Clearwater sustained a FIFO/LIFO loss of $515,000. Clearwater is also a net purchaser and retained all the Marvell shares it purchased during the Class Period through the alleged final corrective disclosure, and thus is well-suited to move for lead plaintiff in this case. 3 In order to properly assess whether it would be prudent for Clearwater to move for appointment as lead plaintiff in this litigation, it is necessary to calculate the losses that Clearwater has suffered from its investments in Marvell’s securities. While the securities laws require that a lead plaintiff movant file a certification containing a list of transactions in the underlying securities, the laws do not provide a specific method for calculating a financial loss. Two competing methodologies have emerged as the principle loss calculation methodologies, the “FIFO” (first-in, first-out) and “LIFO” (last-in, first-out) methods. Historically, the FIFO method was commonly used and accepted by courts; however, most courts in recent cases have adopted the LIFO methodology in conducting their lead plaintiff evaluations. Attorney Client Privileged Communication | Page 7 Boca Center, 5200 Town Center Circle, Suite 601, Boca Raton, FL 33486 ph 561.394.3399 fax 561.394.3382 www.saxenawhite.com EVALUATION OF SECTION 10(B) CLAIMS AGAINST MARVELL Claims against Marvell have been brought under Section 10(b) of the Securities and Exchange Act of 1934 based on the Company’s materially false and misleading statements and omissions concerning Marvell’s business operations and financial results. In order to assert a claim under Section 10(b), the following six elements must be pled: “(1) a material misrepresentation (or omission); (2) scienter, i.e., a wrongful state of mind; (3) a connection with the purchase or sale of a security; (4) reliance, often referred to in cases involving public securities markets (fraud-on-the-market cases) as ‘transaction causation;’ (5) economic loss; and (6) ‘loss causation,’ i.e., a causal connection between the material misrepresentation and the loss.” Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 341 (2005) (citations omitted). Of the six elements needed to assert a Section 10(b) claim, three elements—pleading false statements, loss causation, and scienter—are often considered the most important factors when assessing the merits of a securities fraud complaint. MATERIAL MISREPRESENTATIONS The potential misrepresentations by Marvell would center on the Company’s representations about its revenue recognition and litigation reserve policies. Based on the content of the Company’s statements during the Class Period, and in light of the ongoing internal review, it appears that Marvell and its senior management made numerous actionable misrepresentations during the Class Period. In addition, the Company made material misrepresentation as to the quality and effectiveness of its financial internal controls. “In order to determine whether a misleading statement is material, courts must engage in a fact- specific inquiry.” Basic Inc v. Levinson, 485 U.S. 224, 240 (1988). The focus of the Court’s examination will be on the potentially misleading and inaccurate financials and false guarantees of adequate internal controls, which courts routinely consider material. LOSS CAUSATION “Loss causation…is the causal link between the alleged misconduct and the economic harm ultimately suffered by the plaintiff.” Emergent Capital Inv. Mgmt., LLC v. Stonepath Group, Inc., 343 F.3d 189, 197 (2d Cir. 2003). “[L]oss causation may be established by demonstrating that the loss was foreseeable and caused by the materialization of the risk concealed by the fraudulent statement.” Charney v. Zimbalist, No. 07 Civ. 6272(AKH)(GWG), (S.D.N.Y. Sept. 29, 2014) (internal quotes omitted). To plead “loss causation,” a plaintiff must plead that it purchased stock at an inflated price and held the stock after a corrective disclosure revealed the true value of the stock. See Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 337 (2005). The steep decline in Marvell’s stock price in reaction to the corrective disclosures is highly indicative of loss causation. See, e.g., In re UTStarcom, Inc. Sec. Litig., 617 F.Supp.2d 964, 977 (N.D. Cal. 2009) (finding loss causation element satisfied where plaintiffs pled “correctiv e disclosures and corresponding stock price drops that connect to allegations of material misstatements.”). Attorney Client Privileged Communication | Page 8 Boca Center, 5200 Town Center Circle, Suite 601, Boca Raton, FL 33486 ph 561.394.3399 fax 561.394.3382 www.saxenawhite.com SCIENTER In order to adequately allege scienter, “a plaintiff must plead ‘with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.’” Abbey v. 3F Therapeutics, Inc., 2009 WL 4333819, at *10 (S.D.N.Y. 2009) (quoting 15 U.S.C. § 78u-4(b)(2)). An actual intent to deceive, manipulate or defraud, as well as extreme recklessness will satisfy the scienter standard. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 127 S. Ct. 2499 (2007). Scienter is often the centerpiece of any motion to dismiss a securities case. Because the issues in this case revolve around the Company falsely representing its financial health and accounting controls, and in particular revenue recognition timing and cut-off issues, there is a strong chance that such practices will be found to be the result of intentional misconduct, or at the very least deliberate recklessness by senior Marvell executives. CONCLUSION AND RECOMMENDATION Marvell has disclosed an investigation into its accounting practices, and the fact that the investigation is related to revenue recognition timing is a significant red flag. Potential accounting irregularities may be indicative of a larger problem, including possible fraudulent misconduct. In addition, the amount in question, 7-8% of revenue pushed into a prior quarter, is material and indicates that the Company was attempting to falsely show improved performance during a time of industry and company-specific challenges. Notably, revenue is a key financial metric for both internal and external reporting purposes and improper revenue recognition has historically been alleged as having been used to falsify or manipulate numbers. Federal securities class actions commonly involve allegations of revenue-related fraud, particularly for cut-off or timing differences when recognizing sales (as appears to be the situation here). Marvell also disclosed a nearly $400 million increase to its litigation reserve, while simultaneously disclosing a review of its controls surrounding the establishment of litigation reserves. The two issues appear related and raise concerns that management may have intentionally under-reserved for this expense despite clear regulatory guidance suggesting that an accrual should have been recorded earlier. Further, the public disclosures by the Company indicate that management may have created an inappropriate “tone” for proper internal controls. This type of disclosure warrants concern as it implicates management directly for having a role in creating the environment for these irregularities. In sum, the underlying issues here appear to be serious in nature. Clearwater was a substantial net purchaser of Marvell shares during the Class Period and has sustained a material loss as a result. Clearwater, as a sophisticated institutional investor with a substantial financial interest in the outcome of the litigation, is thus well-suited to serve as Lead Plaintiff of the action. Accordingly, Saxena White recommends that Clearwater authorize Saxena White to file a motion for appointment as Lead Plaintiff on Clearwater’s behalf on the lead plaintiff deadline of November 10, 2015.