Mayer Brown Rowe & Maw stands accused of securities fraud and negligence by institutional investors in bankrupt US company Commercial Financial Services (CFS). The investors have taken issue with work undertaken by Mayer Brown on securitisation transactions for CFS.
The case could spell trouble for partners at the Chicago firm, as the State of Illinois does not allow limited liability partnerships (LLPs). Rowe & Maw partners, however, can breath a sigh of relief. As revealed by The Lawyer in February, the firms remain technically apart until the LLP issue has been resolved.
Mayer Brown has instructed Williams & Connolly partner John Villa to mount its defence. Malpractice specialist Villa has also been retained by Vinson & Elkins to advise on Enron-related claims. “The case is in its early stages,” he said. In March, the firm failed to secure a motion to dismiss the case and had to appear at a Northern District of Oklahoma court to set a timetable for the case to proceed.
On dismissing the motion, the judge stated: “Plaintiffs adequately allege that Mayer Brown made misrepresentations upon which plaintiffs relied.” The lead law firms for the plaintiffs are Sachnoff & Weaver and Bingham Dana.
Villa said he was confident that, when all the facts were clear, the claim against Mayer Brown would not stand up.
The lawyers are not the only organisation facing this legal challenge. CFS auditor Andersen and Chase Securities are also under attack from the plaintiffs. Weil Gotshal partner Ralph Miller is acting for Andersen.
CFS is accused of failing to collect payments on credit card debt that it had used to back bonds issued to investors. The argument against Mayer Brown is that the firm disguised the difficulties so that the company could sell $700m (£480.6m) of asset-backed securities before going bankrupt.
Mayer Brown has contested the plaintiffs’ suggestion that there was a link between fees charged and the rigour with which the firm carried out its work. The firm said: “Plaintiffs shamelessly attempt to exaggerate the revenue Mayer Brown derived from CFS, alleging that bills amounted to as much as $700,000 (£480,600) a month. Total billings to CFS matters over five years amounted to approximately $4.5m (£3.1m). Nowhere near $700,000 per month.”
Mayer Brown referred enquiries to Villa, who said a damages figure had not been presented by the plaintiffs.
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