CITY lawyers are rallying round Slaughter and May, the Government's lawyers for the electricity generator (Genco) share sale, despite unanswered questions about what and when they knew about the Littlechild gaffe that led to a u3.5 billion share crash in the electricity sector.
Lawyers have distanced Slaughters from the debacle but speculation still exists as to whether the firm failed in its required verification procedure by not obtaining crucial information from the Government.
One leading corporate lawyer says: “An interesting issue is did the lawyers know what they were told, and did they ask the right questions. You have a responsibility to make sure your clients tell you anything material.”
But he adds: “Slaughter and May is an absolutely top class firm, and I am entirely confident that their behaviour was impeccable.”
Slaughters is remaining tight-lipped and has declined to comment on what is a client matter.
Professor Stephen Littlechild announced his review of regional electricity company (RECs) pricing structures the day after dealing in the Government's 40 per cent Genco holding – a piece of bad timing that hit share buyers immediately.
The REC's market capitalisation fell u3.55 billion in the first two days and since then has hardly recovered, while Genco lost u400 million, say analysts.
Trafalgar Group's bid for Northern Electric and the REC's plans to float the National Grid were badly hit.
The City's blame falls on Littlechild. He has claimed, however, that he warned the Government a week earlier he was considering this decision.
The Prime Minister later told Parliament that the Government's decision to go ahead was based on advice from its lawyers and bankers.
“If, between the prospectus and the listing, this new event came to their knowledge, the advisers should have put out supplementary listing particulars and given publicity to it. Did they adequately consider it?” says another top lawyer.
“If it was not known, the risk is passed to share-buyers. There is nothing that could be done,” he says.
“I think they [Slaughters] will be examining what they were told by their clients and what they should have found out,” he says.
“To be honest, I think they would be fine, but it is a tricky area, and there will be some worried people looking at this.”