Will Scandal Sink Swipe Fee Settlement?

A series of emails between lawyers may have a far-reaching impact on the $6 billion settlement of class-action antitrust claims between payment giants MasterCard, Visa and scores of merchants.

The Wall Street Journal reported Monday (July 27) that attorneys representing about 100 large merchants — among them marquee names ranging from Walmart to 7-Eleven — will seek to officially scuttle the deal, struck three years ago in a case that stretches back to 2005. WSJ quoted unnamed sources, citing “people familiar with the plans.”

The formal action by those attorneys, which as of Monday night was expected to come as early as Tuesday, could also have implications for another case, WSJ noted, wherein American Express and those retailers reached a $79 million settlement.

The aforementioned attorney actions trace their genesis to the November 2014 resignation of Keila Ravelo, an attorney with Willkie Farr & Gallagher LLP who had represented MasterCard during the antitrust case, which was settled in 2012. After the resignation, Ravelo and Melvin Feliz, her husband, were both charged with conspiracy to commit wire fraud. Feliz also faces a $10 million fine and a possible sentence of life in prison after having pleaded guilty in February 2015 for taking part in a plan to transport as much as 40 pounds of cocaine from California to New Jersey.

In reference to the wire fraud, the New Jersey U.S. Attorney’s office has said the couple had set up two “dummy companies” to bilk more than $5 million from Willkie Farr, law firm Hunton & Williams (a previous employer of Ravelo’s) and MasterCard, WSJ reported, citing “authorities and court filings.”

Willkie Farr’s investigation into Ravelo and Feliz and the alleged fraud turned up emails and other documents that detailed communications between Ravelo and attorney Gary Friedman, who in turn had been the attorney for merchants in the antitrust case through an eponymous firm, the Friedman Law Group LLC.

The communications between the two, according to WSJ, again citing unnamed sources, provide the basis of the argument by merchants involved in the antitrust settlement that they did not in fact receive due representation. The merchants and their attorneys are expected to argue that Ravelo and Friedman — who had worked together previously at another firm and worked on a pro bono case representing Feliz before he and Ravelo wed — shared confidential information.

WSJ reported that “many details” about the documents that were the basis of exchange between Friedman and Ravelo remain under seal or have been redacted in filings, as part of at least 10,000 pages of communications stretching across media including emails, text messages and files tied to the antitrust case.

Last week, a merchant group filed papers asking for a $32 million fee that Friedman’s firm stands to collect from the MasterCard settlement (the Friedman Group had also represented merchants in the American Express case) be struck down and returned to the settlement fund.

Representatives for retailers, including Walmart, MasterCard, Visa and American Express, and attorneys for Ravelo and Friedman either declined or were unavailable for comment, WSJ reported.

As for potential impact on the settlements, WSJ reported on Monday that “it isn’t clear if the exchange of documents” between Ravelo and Friedman “will be grounds for overturning the cases. Both MasterCard and American Express have said in court filings that the lawyers didn’t play large enough roles in the cases to justify an unraveling of the settlements.”


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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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