Lehman Sept 11

Client Attorney Privileged/Attorney Work Product/At Request of Counsel

Ernst & Young

1. E&Y Beats Attorney's Suit Over $1M In Lehman Warrants

   Sep 10, 2015 | Law360

   By Kat Greene
   
   
   Ernst & Young LLP beat an attorney’s attempt to force the auditor to cover his $1 million in unpaid warrants backed by Lehman Brothers Holdings Inc. for allegedly masking the investment bank’s deteriorating financial state Thursday, when a New York federal judge ruled the attorney’s case was untenable.

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Client Attorney Privileged/Attorney Work Product/At Request of Counsel

Ernst & Young

1. E&Y Beats Attorney's Suit Over $1M In Lehman Warrants

   Sep 10, 2015 | Law360

   By Kat Greene

   Ernst & Young LLP beat an attorney’s attempt to force the auditor to cover his $1 million in unpaid warrants backed by Lehman Brothers Holdings Inc. for allegedly masking the investment bank’s deteriorating financial state Thursday, when a New York federal judge ruled the attorney’s case was untenable.
   
   U.S. District Judge Lewis A. Kaplan granted summary judgment to the Big Four accounting firm, finding that the plaintiff, attorney Arthur N. Abbey, had put forward an unworkable theory of loss causation, according to the decision.
   
   Abbey had purchased about $1 million worth of warrants to track the performance of an investment fund, essentially exposing him to Lehman’s credit risk, according to the suit. He argued that E&Y’s alleged misstatements fraudulently induced him to make the investment, according to court papers.
   
   Judge Kaplan found that Abbey’s argument would mean that the fact that Lehman couldn’t pay up on the warrants when it went bankrupt “is basically happenstance,” a view that can’t be reconciled with loss causation or the Private Securities Litigation Reform Act, according to the decision.
   
   “If a meteor had hit lower Manhattan and wiped Lehman off the map, Abbey still would argue that EY was liable to him — notwithstanding the absence of anything like proximate cause — because EY’s alleged misstatements were what caused him to make the initial purchase,” Judge Kaplan wrote. “Abbey has litigated this case on a theory of causation that simply is not tenable.”
   
   Abbey initially filed suit with a real estate investment group in 2011, alleging that the accounting firm helped Lehman use the controversial Repo 105 accounting technique to hide the bank's woes and fool them into investing with the company, according to the complaint, which originally named former Lehman CEO Richard S. Fuld Jr. and former Chief Financial Officer Christopher M. O'Meara as defendants.
   
   The use of Repo 105 and another technique, Repo 108, allowed Lehman to move securities assets off of its books in the days ahead of filings with the U.S. Securities and Exchange Commission, making the bank appear less leveraged than it actually was, according to the complaint.
   
   Abbey and the investment group each invested about $1 million in a $28 million private placement Lehman floated to raise funds in 2007, court records show. The placement consisted of warrants that tracked the performance of Highbridge Capital LP, a hedge fund unaffiliated with Lehman, according to the complaint...

   For full story: http://www.law360.com/articles/701475/e-y-beats-attorney-s-suit-over-1m-in-lehman-warrants
   

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