Paul Weiss hit by $80m Citibank-WorldCom suit

Paul Weiss Rifkind Wharton & Garrison is being sued to the tune of $80m by a former Citigroup executive who claims the firm breached conflict of interest rules.

Paul Weiss advised Citigroup on its 2004 severance package deal with former co-head of the bank’s private wealth management group David Trautenberg. The deal saw Trautenberg leave with a $5m package.

One of Trautenberg’s key clients was WorldCom chief Bernard Ebbers, who, in July 2005, was sentenced to 25 years jail for his role in the corporate accounting fraud that led to WorldCom’s collapse.

Trautenberg’s suit alleges Paul Weiss lawyers learned confidential information about his employment during investigations to represent the bank in lawsuits filed by shareholders and regulators following the WorldCom collapse.

Trautenberg alleges that information was then used against him during his severance package negotiations and he should have been entitled to a package worth $25m.

Citigroup paid $2.7bn to settle a WorldCom bankruptcy class action lawsuit in 2004.

In a statement issued yesterday, Paul Weiss said that “it discharged all of its ethical obligations to David Trautenberg and that his claim is entirely without merit.”

Paul Weiss partner Leslie Fagen is representing his firm in the suit.

Trautenberg is represented by Birmingham, Alabama, trial firm Haskell Slaughter Young & Rediker.