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

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.

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.

Fifteen seconds of Googlage found this handy site with court documents, if you want to know what the issues were:

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

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

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

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

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?

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.