Cadwalader Wickersham & Taft has been caught up in a shareholder dispute with Northwest Airlines after it was revealed the firm was paid $1m (£550,000) for bankruptcy advice before the airline even filed for Chapter 11 protection.
A ‘statement of financial affairs’ court filing by Northwest earlier this month reveal-ed that the airline made three payments totalling $974,940 (£534,978) to Cadwalader.
However, the airline did not file for bankruptcy protection until 14 September 2005 – five months later.
It is common for companies to seek advice in advance of filing for bankruptcy, but the payments to Cadwalader came when executives said bankruptcy was a risk, not a certainty.
The shareholders’ lawsuit, filed last December, accuses Northwest chairman Gary Wilson of selling stock when he had non-public information about Northwest’s bankruptcy plans.
Cadwalader is the airline’s lead bankruptcy counsel. Milberg Weiss Bershad & Schulman is representing the shareholders. Both firms were unavailable for comment.