Received settlement for Iridium Securities Litigation settlement.IRA tax implications?


R

RFI-EMI-GUY

I just received a check from class action litigation against Motorola,
pertaining to Iridium stock (which I still hold) which became worthless.

It appears the majority of the settlement is from Motorola and a
fraction from others. I doubt any from Iridium estate as it was settled
long ago.

If I cash this check am I subject to a distribution penalty from my IRA?
(I am 55 yo). If not is this taxable?
 
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A

Arthur Kamlet

I just received a check from class action litigation against Motorola,
pertaining to Iridium stock (which I still hold) which became worthless.

It appears the majority of the settlement is from Motorola and a
fraction from others. I doubt any from Iridium estate as it was settled
long ago.

If I cash this check am I subject to a distribution penalty from my IRA?
(I am 55 yo). If not is this taxable?

Apparently the Iridium was in your IRA?

And the claim form should have named te IRA and the check made
payable to your IRA?

If so, deliver this check to your IRA custodian and tell them it is
a settlement for stock in your IRA and to deposit the check in your
IRA coded as a dividend, a settlement or a rollover, according to
their policy, so it will not seem to be a contribution.


And yes, cashing the check is a taxable event, most likely
an IRA distribution with no known early distribution exception.
 
C

Chip

RFI-EMI-GUY said:
I just received a check from class action litigation against Motorola,
pertaining to Iridium stock (which I still hold) which became worthless.

It appears the majority of the settlement is from Motorola and a
fraction from others. I doubt any from Iridium estate as it was settled
long ago.
I am not familiar with the lawsuit, but what were the grounds? I worked
for Motorola on Iridium during it's entire aborted life. We shot for
the moon and came up short when the tech (mostly) worked but the public
marketplace refused to buy. What did Moto do that was illegal? You
invested in a risky high flying stock with chances of enormous rewards.
It didn't work out. Everything was laid out in the prospectus.

Why should Moto have to pay for simply a failed business venture? This
is the new face of capitalism, invest w/o risk? Just sue the bastards
if it goes bad.

BTW, Moto took it in the shorts (~$5B) more than anybody.

Iridium is still doing business with the Gov and large Corps just down
the street from me.

Chip 1
 
R

RFI-EMI-GUY

Chip said:
I am not familiar with the lawsuit, but what were the grounds? I worked
for Motorola on Iridium during it's entire aborted life. We shot for
the moon and came up short when the tech (mostly) worked but the public
marketplace refused to buy. What did Moto do that was illegal? You
invested in a risky high flying stock with chances of enormous rewards.
It didn't work out. Everything was laid out in the prospectus.

Why should Moto have to pay for simply a failed business venture? This
is the new face of capitalism, invest w/o risk? Just sue the bastards
if it goes bad.

BTW, Moto took it in the shorts (~$5B) more than anybody.

Iridium is still doing business with the Gov and large Corps just down
the street from me.

Chip 1
Since it is a class action, I am sure the Lawyers found plenty wrong to
line their pockets and reward me with a tiny check ;'}.

Disclaimer: I am collecting a small pension from Moto, so have no
interest in their demise.

That being said, I once did a back of the napkin calculation, dividing
the entire Iridium indebtedness by the total number of available
transponder circuits of the 77 satellite constellation. The bottom line
is that Iridium could never have made a profit within the lifespan of
the constellation!

Furthermore, I was told by someone in the know at Iridium, that they
didn't actively market to maritime due to wanting to avoid conflict with
COMSAT signatories, so the potential call volume was further reduced to
satellites over land masses.

Wish I had done all this figuring before investing!

To keep investors at bay, Iridium marketeers did make silly and
technically flawed pronouncements such as "Engineers are working to
improve in-building coverage". I am sure you are aware the technology
could not, was not, designed for in building use.
 
J

John Levine

I am not familiar with the lawsuit, but what were the grounds?
Fifteen seconds of Googlage found this handy site with court documents,
if you want to know what the issues were:

http://securities.stanford.edu/1009/IRID99/
Why should Moto have to pay for simply a failed business venture? This
is the new face of capitalism, invest w/o risk? Just sue the bastards
if it goes bad.
The suit was not about "simply a failed business venture", it was
about seriously misleading claims about Iridium by Motorola. I don't
understand why, if you have any interest in this matter, you wouldn't
spend a few minutes finding out what really happened rather than
guess.

R's,
John
 
C

Chip

John said:
The suit was not about "simply a failed business venture", it was
about seriously misleading claims about Iridium by Motorola. I don't
understand why, if you have any interest in this matter, you wouldn't
spend a few minutes finding out what really happened rather than
guess.
Thanks, I should have Googled. It was a tiny settlement of $8.25M.
Still not sure why Moto payed it, nuisance I guess. Iridium was an
independent, then bankrupt, corp buying tech developed by Moto.
Iridium, not Moto, was charged with making "overblown" (see my comment
on marketeers) statements. Tell me that prudent investors thought that
a space based, worldwide, comm system based on newly invented tech was
not risky.

Moto invested $5B and we on the inside were telling ourselves that all
the claims would be met by roll-out. We came up short- simply a failed
business venture! Heck, we were looking forward for the bonuses and
certainly did not want it to fail.

Chip
 
C

Chip

RFI-EMI-GUY said:
marketeers did make silly and
technically flawed pronouncements
That is a redundant statement. I believe there is a class in every
marketeer's career that teaches that technique.

Iridium was intended for "Coverage Everywhere, Anytime" including inside
buildings. One of the little glitches they were working on for Ver. 2.

Chip
 
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S

Stuart A. Bronstein

Chip said:
RFI-EMI-GUY wrote:
That is a redundant statement. I believe there is a class in
every marketeer's career that teaches that technique.

Iridium was intended for "Coverage Everywhere, Anytime"
including inside buildings. One of the little glitches they
were working on for Ver. 2.
There's a difference between what is known as "puffing" (exaggerated
but vague statements of quality) and specific representations of
quality or features. In the case of puffing, courts figure that
consumers should understand that saying something is "better" or
"best" is really meaningless and can't be the grounds for recovering
damages. But if there's a promise that coverage is available
"everywhere, anytime" and it turns out to be false, that's
actionable.
 
C

Chip

Stuart said:
There's a difference between what is known as "puffing" (exaggerated
but vague statements of quality) and specific representations of
quality or features. In the case of puffing, courts figure that
consumers should understand that saying something is "better" or
"best" is really meaningless and can't be the grounds for recovering
damages. But if there's a promise that coverage is available
"everywhere, anytime" and it turns out to be false, that's
actionable.
Not being a lawyer, but when has ANY new super tech product met the
marketeer's hype right out of the box? MS is STILL trying to get
Windows right, 15 years later. Apple has introduced 2 new iPhone
versions in the last 2 years. We still don't have 100% Speech
recognition, some 45 years after Bell Labs tried to sell it. Seen any
flawless household robots recently?

Not working inside of a building was not what killed Iridium. The
business plan was flawed and the public (w/ new wider cell phone
coverage) didn't see the big advantage of being able to call from the
middle of the Gobi Desert.

It's still "simply a failed business venture", not an actionable scheme
to defraud.


Chip
 
R

RFI-EMI-GUY

OK lets get back on topic. The settlement check was made out to me
without any reference to my IRA.

The parties who were sued and paid up were Motorola and certain insiders
at Iridium, not Iridium itself.

The statement accompanying the check states: that it is a "qualified
settlement fund under Treasury Reg. Sections 1468B-1 through 5.

The rest are usual disclaimers to "consult your tax expert"


Is this a settlement that is tax deferred or is it a distribution?
 
J

John Levine

Is this a settlement that is tax deferred or is it a distribution?

If the security to which it was related was or is in your IRA, it's
a distribution if you cash it.

I'd endorse it to the IRA custodian noting your account number and
send it to them with a short letter explaining what it is. You're
unlikely to be the only customer who's gotten such a check.

R's,
John
 
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L

Luka

If the security to which it was related was or is in your IRA, it's
a distribution if you cash it.

I'd endorse it to the IRA custodian noting your account number and
send it to them with a short letter explaining what it is.  You're
unlikely to be the only customer who's gotten such a check.

R's,
John
I've received a few of these type settlements in the past for my IRA.
I had the IRA custodian handle it like a rollover without any
problem. I would be a good idea to give them a call first, explaining
that the settlement was from a security that was held in your IRA.
 

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