Linklaters ‘could face litigation’ over explosive Lehman report

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  • Maybe Links signed off on this dubious opinion which they knew or should have known would be used to repo US securities and not purely English ones because they were hoping to grab market share for Linklaters' US operation?

    At the time they couldn't have foreseen that Lehman would go bankrupt, but considering how they later agreed to sue Bear Stearns in the US, it's ironic on how Linklaters fell short of its ambition to take advantage of the crisis.

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  • Very interesting article, but to me, the $64,000 question - or should that be £60m question, that being the sum they picked from this work - is which lawyer would dare to make an adverse comment on Linklaters' conduct?

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  • The comment "according to a leading ­professional negligence silk. “The trouble is, the sums involved are huge because this [was a factor] in ­precipitating the collapse of Lehman,” he said. “It would be over their professional indemnity limit, so partners would want to settle.”" is interesting for it evidencing the naivety of that QC; what about LLP status? I cannot see the other partners 'putting their hands in their pockets' ~ if the LLP holds up!

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  • According to the recent filing Lehman once had $639bn in assets. No idea how much potential litigants are after, if this was all 'lost', or if they would try to target Linklaters, but even 1% of these assets would be a significant multiple of the firm's annual profits and how an English LLP holds up to a $6bn+ claim I guess no one yet knows. (And that's not counting punitive US damages if any were envisaged). Meanwhile, to 'settle' as some suggest would be madness. What happens to PEP if you settle for even a fraction of this figure? That's a lot of cash out the window. Or would PI insurance cover that kind of settlement?
    The only logical solution is, if any US firm is crazy enough to even try it on, to fight this to a standstill, and fight it all the way and see who blinks first. It would be one hell of a distraction for Linkies, but what other choice would they have?

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  • Anonymous | 15-Mar-2010 3:30 pm: They may not be obliged to put their hands in their pockets (given the LLP status), but they may choose to do so to mitigate the risk of a big claim succeeding and the Links franchise being Andersen-ed (and all their goodwill with it).

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  • First off I am going to declare a personal interest in this: I am a former Linklaters structured finance lawyer.

    I find the reporting of this story amazing and really very unfair to my old firm. I took a look at the report - that actual opinion is annexed to it. It is an opinion about a market standard document. The opinion is one that any firm in London could and would have given and (with added emphasis) IS AN ENTIRELY CORRECT AND ACCURATE STATEMENT OF ENGLISH LAW.

    Linklaters has done nothing wrong at all. I am not surprised a New York firm couldn't give the opinion - the law in New York on this issue is different. The national press have tried make this sound as if it proves that something dodgy was going on but the reality is that it is just a statement of the bleedin obvious fact that laws are different in different countries - just like homosexuality is legal in England but illegal in Iran.

    If the bankruptcy examiner had thought there was any chance of suing Linklaters, don't you think he'd have said so? After all, he seems to have listed just about everyone else in the world he thinks could or should be sued. I'd say the fact that the examiner didn't say that he'd uncovered a claim against a Links means there isnt likely to be one. Ok maybe that wont stop some ambulance chaser having a pop at them but Linklaters is never going to be found liable for anything.

    That said, the Linklaters PR department seems to have royally screwed it up yet again. Talk about failing to get their message across! But 'twas ever thus. For a firm that is so highly managed it amazes me how bad their PR management is. Come on David Cheyne: let's see you coming out fighting. You're never going to win the PR battle hiding behind a three line press statement.

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  • Seriously, LLP status is not what this is about.

    Wanting to settle is not to do with partners paying out of their own pockets, it's to do with the fact that the insurance would not cover the amounts under talk here, if a court was to deliver damages, and thus the talk of settlement.

    Seriosusly..... before calling a QC naive, brush up on your basics.

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  • Here is a question that I haven't heard being asked. If "Repo 105" is then how may other business or European countries have used the same devices to do the same thing as Lehman?

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  • The comment about the 'naivete of that QC' needs a bit of nuance, If the judgement would be in excess of coverage, would not the creditor go after the assets of the LLP as well (e.g. recevables), leaving the debtor bare (albeit likely leaving the members without personal liability). That certainly would not be healthy. And if there are bank loans, that complicates the picture.

    Another question. If Links worked for Lehman's, how did they see the conflict in working for the Administrator; and did the Administrator take that into account. Was the issue even raised?

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  • Former Links Lawyer | 15-Mar-2010 7:48 pm

    Finally, someone speaks some sense.

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  • I don't think anyone has suggested that Links gave an opinion that is incorrect as a matter of English law, but that is unlikely to be the issue in any US litigation.
    Post-Enron, it is generally acknowledged in US circles that any firm giving an opinion that goes to off-balance sheet matters had better understand what the opinion is being used for, and be comfortable that it is not helping its client "hide" assets. That is why there has been speculation as to whether Links knew that US firms had refused to give an opinion - the question is not whether US and English law are different, but whether Links knew what Lehman was trying to achieve.
    If Links understood the background to the opinion request, and knowingly assisted Lehman to get billions off its balance sheet for a questionable purpose (e.g. misleading investors as to the size of its liabilities), then the fact that opinion was correct as a matter of English law may not be worth much in a US court.

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  • Former Links Lawyer - perhaps the fabled Links training isn't so good - the reason why no New York firm would give the opinion is because....the law in New York in respect of repo is different to that in England.
    I agree that Links did nothing wrong - however using an English law opinion as the basis for US accounting is suspect so both Lehman execs and Ernst and Young have questions to answer.
    But Links being innocent of any wrong-doing won't mean they won't get sued - it's a deep-pocket defendant so a claim against Links is inevitable.

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  • How interesting - Links has always been the PwC 'go to' firm for all aspects of its practice. Maybe it will now be forced to come off it's arrogant high horse and use another law firm in future. Magic Circle is not always the answer.

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  • maybe a US firm - they seem to have got it right in the US at least

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  • collective emperor's new clothes syndrome? The fact is that a repo is a repo in the US or the UK so Links are well and truly exposed

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