Enron creditors attack Milbank over conflicts

Milbank Tweed Hadley & McCloy faces a challenge to its role as counsel for the 15-member Enron Corporation creditors’ committee

Some of the creditors have cried “conflict” over Milbank’s role as their representative because it has received more than $17m (£11.6m) in fees from Enron and related companies during the past five years.
Dallas-based energy company Exco Resources is leading the push to have Milbank removed. A lawyer for the company described Milbank as “hopelessly conflicted”.
Judge Gonzalez, who is presiding over the Enron bankruptcy, has scheduled a hearing for 15 May to receive arguments for and against Milbank’s position.
Partner and co-chair of the firm’s financial restructuring group Luc Despins has given the allegations short shrift. “Any major firm that would be vying for the role we have would face conflict issues in one form or another,” he told The Lawyer.
Milbank has already taken steps to guard against conflicts. It has instructed Squire Sanders & Dempsey to step in should its previous dealings with Enron throw up problems, a move that Despins said is standard practice in Chapter 11 claims. It has also provided the bankruptcy court with a disclosure statement, outlining around 125 Enron-specific matters dealt with prior to the energy trader’s collapse.
Milbank has joined banks JP Morgan Chase and Citigroup as the chief targets for a disgruntled element of the creditors’ committee. The banks have already fallen foul of some fellow creditors for their involvement in advising Enron on structuring the partnerships that are widely regarded as part and parcel of Enron’s downfall.
Judge Gonzalez has already agreed to Securities and Exchange Commission (SEC) prompting to appoint an independent examiner to assess the links between Enron and Wall Street.
SEC assistant enforcement director Alistaire Bambach said: “The SEC is very concerned about the allegations of conflict.”
While Milbank awaits Judge Gonzalez’s decision, its financial restructuring practice has been hiring. Gibson Dunn & Crutcher partner James Ricciardi has joined the group in New York.