Victims of VW Scandal May Be Eclipsed by Lawsuit Underwriters
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The real victims of Volkswagen’s diesel-emissions scandal may end up being eclipsed in court.
That’s the risk, at least, when firms that specialize in underwriting lawsuits for profit get involved. One of them, Bentham Europe, is already funding a case that claims that the German carmaker duped shareholders. The financial muscle may improve the odds for large awards – but also hefty gains for Bentham and others.
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That may depend on litigation financiers like Bentham Europe, which is partly backed by Elliott Management, the hedge fund run by Paul Singer. The litigation-financing industry started in Britain decades ago, largely because rules that limited class-action lawsuits, barred lawyers from sharing awards and required losers to pay winners’ fees often made suing prohibitively expensive. Outside funders stepped in to finance the bill in return for up to a third of the proceeds.
It’s a decent business. The Australia-based IMF Bentham, Elliott’s partner in Bentham Europe, says it has made a 158 percent return on investment since 2001. Its rival, Burford Capital, reports a 71 percent net return over six years, and last month it announced a joint venture with the law firm Hausfeld to bring antitrust cases in Germany.
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