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Lehman 3/21
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Court Rejects Lehman Employees’ Appeal Against Ex-CEO
Mar 18, 2016 | The Wall Street Journal
By Patrick Fitzgerald
A U.S. appellate court on Friday ruled Lehman Brothers Holdings Inc.’s former chief executive isn’t accountable for squandering employees’ retirement savings on stock that was rendered worthless when the investment bank collapsed into bankruptcy. -
Lehman employees lose appeal over stock losses from bankruptcy
Apr 18, 2016 | Reuters
By Jonathan Stempel
Richard Fuld, the former chief executive officer of Lehman Brothers Holdings Inc [LEHLO.UL], is not liable to onetime employees who suffered millions of dollars in losses in company stock as the bank descended into bankruptcy, a federal appeals court has ruled. -
2nd Circ. Won't Revive Lehman Employees' ERISA Suit
Mar 18, 2016 | Law360
By Carmen Germaine
The Second Circuit on Friday declined to revive an Employee Retirement Income Security Act class action brought by former Lehman Brothers employees alleging their benefits plan should have dumped the bank's stock before it failed, ruling the employees can’t prove a breach of fiduciary duty even under new standards. -
IBM Says Lack Of Fraud Dooms Stock-Slump Class Actions
Mar 18, 2016 | Law360
By Jack Newsham
Judge Pauley declined to issue a ruling at the end of the hearing and requested more briefing on the impact of the Second Circuit’s Friday morning ruling in a long-running ERISA case brought by employees of Lehman Brothers Holdings Inc. -
Here's Ex-Lehman CFO Erin Callan's Stunning New Memoir
Mar 21, 2016 | Fortune
By Patricia Sellers
...Beyond providing an insider’s perspective that will engross people who savored Wall Street tomes like Too Big to Fail, Full Circle reveals details that make this book far more personal—and sometimes juicier—than the other books that have been published.
Client Attorney Privileged/Attorney Work Product/At Request of Counsel
ERISA Suit
Erin Callan Memoir
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Court Rejects Lehman Employees’ Appeal Against Ex-CEO
Mar 18, 2016 | The Wall Street Journal
By Patrick Fitzgerald
A U.S. appellate court on Friday ruled Lehman Brothers Holdings Inc.’s former chief executive isn’t accountable for squandering employees’ retirement savings on stock that was rendered worthless when the investment bank collapsed into bankruptcy.
A three-judge panel of the Second U.S. Circuit Court of Appeals in New York affirmed the decision by U.S. District Judge Lewis A. Kaplan to dismiss a class-action lawsuit against former Chief Executive Richard Fuld and a Lehman retirement plan committee’s directors filed by former Lehman employees, who saw hundreds of millions of dollars in retirement savings disappear when the bank filed for bankruptcy.
The former employees, who sued Mr. Fuld and the other directors under the federal Employee Retirement Income Security Act, failed to convince the appellate panel despite a 2014 U.S. Supreme Court decision involving Fifth Third Bancorp that made it easier for employees to pursue lawsuits against directors over losses to retirement plans containing shares of a company’s own stock.
“We agree with the District Court that, even without the presumption of prudence rejected in Fifth Third, Plaintiffs have failed to plead plausibly that the Plan Committee Defendants breached their fiduciary duties under ERISA by failing to recognize the imminence of Lehman’s collapse,” the court ruled in a 14-page decision.
Defendants’ lawyer Jonathan Youngwood, who represented the Lehman committee members who oversaw the plan, said Friday his clients were heartened by the ruling.
“It’s been seven years of litigation, we’ve seen the case dismissed three times on the district court level and affirmed twice at the appellate level,” said Mr. Youngwood, of the law firm Simpson Thacher & Bartlett . “We’re happy to see it at an end.”
Daniel Krasner, a lawyer for the employees, declined to comment. Lawyers for Mr. Fuld and other benefit plan directors couldn’t be reached to comment.
The Lehman employees initially sued Mr. Fuld and the plan’s other directors following the investment bank’s 2008 collapse, arguing their knowledge of the firm’s exposure to risky subprime mortgages and the use of accounting moves like the so-called Repo 105 transactions underscored the precarious position of Lehman’s business in the spring and summer of 2008.
The retirees claimed the directors failed to run the retirement plan prudently because they continued to purchase Lehman’s own stock for an employee retirement fund between the collapse of Bear Stearns in March 2008 and Lehman’s chapter 11 filing in September of that year...
For full story: http://www.wsj.com/articles/court-rejects-lehman-employees-appeal-against-ex-ceo-1458328623
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Lehman employees lose appeal over stock losses from bankruptcy
Apr 18, 2016 | Reuters
By Jonathan Stempel
Richard Fuld, the former chief executive officer of Lehman Brothers Holdings Inc [LEHLO.UL], is not liable to onetime employees who suffered millions of dollars in losses in company stock as the bank descended into bankruptcy, a federal appeals court has ruled.
By a 3-0 vote, the 2nd U.S. Circuit Court of Appeals in Manhattan said Fuld and a Lehman benefit committee were not legally at fault for letting employees participate in an employee stock ownership plan that invested in company stock.
Friday's decision upheld a July 2015 ruling by U.S. District Judge Lewis Kaplan in Manhattan, and could end one of the last lawsuits stemming from Lehman's September 2008 collapse.
The Lehman plaintiffs lost despite a 2014 U.S. Supreme Court decision involving Fifth Third Bancorp (FITB.O) that lessened the defenses available to banks in similar cases.
Daniel Krasner, a lawyer for the employees, and Fuld's lawyer, Todd Fishman, did not immediately respond to requests for comment.
Jonathan Youngwood, a lawyer representing benefit committee members, said the ruling "confirms that fiduciaries are not responsible for market and other forces beyond their control."
Lehman workers sued under the Employee Retirement Income Security Act, a law often invoked when the prices of stocks included in corporate investment and retirement plans plunge.
The employees said Lehman's benefit committee breached its duty of prudence by letting them invest in Lehman stock, while Fuld wrongly hid from the committee the imminence of the Wall Street bank's demise.
But the appeals court said there had been a "cacophony of mixed signals" from investors, credit rating agencies, analysts and media about Lehman, and committee members were not at fault for "failing to recognize the imminence of Lehman's collapse."...
For full story: http://www.reuters.com/article/us-lehman-brothers-fuld-lawsuit-idUSKCN0WK22R
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2nd Circ. Won't Revive Lehman Employees' ERISA Suit
Mar 18, 2016 | Law360
By Carmen Germaine
The Second Circuit on Friday declined to revive an Employee Retirement Income Security Act class action brought by former Lehman Brothers employees alleging their benefits plan should have dumped the bank's stock before it failed, ruling the employees can’t prove a breach of fiduciary duty even under new standards.
A three-judge panel affirmed U.S. District Judge Lewis Kaplan’s decision dismissing the third amended consolidated complaint filed by the employees, agreeing with Kaplan that although a recent Supreme Court ruling had changed the standard for deciding whether fiduciaries for plans that invest in company stock acted prudently under ERISA, the employees had still failed to plausibly allege a breach.
“The district court found — and we agree — that neither Fifth Third nor the substitution of one amended complaint for another changes our previous conclusion that plaintiffs have failed to plausibly allege a breach of duty claim,” the opinion said, referring to the Supreme Court’s decision in Fifth Third Bancorp v. Dudenhoeffer.
The suit alleged that former Lehman CEO Richard Fuld Jr. and seven former members of a benefits committee that oversaw the bank’s 401(k) plan should have known that Lehman was at risk of collapsing after the fall of investment bank Bear Stearns in March 2008 and should have sold the plan’s holdings in the company.
Two previous iterations of the case were dismissed, but the allegations were revived in July 2014 by the U.S. Supreme Court in the wake of its ruling in Fifth Third. That decision eliminated the so-called “presumption of prudence” for plan fiduciaries that invest in company stock, but it also placed limits on suits that allege fiduciaries should have sold stock on the basis of public information.
But Judge Kaplan in July ruled that the employees’ claims still fell short of classic pleading standards requiring plausible allegations, finding that the third complaint failed to allege that circumstances had changed sufficiently to trigger the committee’s obligation to review the prudence of the plan’s investment.
“[The] new bits of information do no more than add marginally to the cacophony of 'mixed signals' described in the SCAC. They do not nudge the allegations of the TCAC across the plausibility threshold,” the judge said.
In oral arguments at the Second Circuit in January, attorneys for the employees argued that the case should be revived because the committee should have seen that Lehman was in serious jeopardy based on public information, including the volatility of the company’s stock and the increased costs of its credit default swaps.
But the Second Circuit’s Friday order agreed with Judge Kaplan’s assessment that the newest complaint failed to plausibly allege that the public information was enough for the committee to know that the investment was risky.
The appellate court rejected the employees’ claim that orders issued by the Securities and Exchange Committee in July 2008 prohibiting short-selling in financial services firms including Lehman both warned that Lehman stock was subject to changed circumstances and actually created special circumstances themselves.
The orders didn’t provide notice of special circumstances because they didn’t purport to describe market conditions, while allegations the orders created new circumstances were only conclusory assertions, the Second Circuit said.
Addressing the employees’ alternative claims that the committee should have investigated nonpublic information regarding the risks to the plan, the appellate court cited the Supreme Court’s January order finding that Amgen employees needed to show that plan fiduciaries with nonpublic knowledge that Amgen shares were inflated had alternatives to purchasing company stock that wouldn’t have done more harm to the plan than good.
In this case, the appellate court said, the employees had first failed to elaborate on how any investigation of inside information would have revealed the plan investments were imprudent, and then to show that alternative actions like disclosing material nonpublic info or halting purchases of the stock would not have been more likely to harm the fund than help it.
“Such an alternative action in the summer of 2008 could have had dire consequences,” the appellate court noted...For full story: http://www.law360.com/articles/773477/2nd-circ-won-t-revive-lehman-employees-erisa-suit
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IBM Says Lack Of Fraud Dooms Stock-Slump Class Actions
Mar 18, 2016 | Law360
By Jack Newsham
...Judge Pauley declined to issue a ruling at the end of the hearing and requested more briefing on the impact of the Second Circuit’s Friday morning ruling in a long-running ERISA case brought by employees of Lehman Brothers Holdings Inc.
In that case, a district court threw out claims by the employees that their retirement plan fiduciaries should have sold company stock amid the financial meltdown. The Second Circuit upheld that ruling, but Sam Bonderoff of Zamansky LLC, who argued for the IBM employees, said he wasn’t worried because that case involved “remote” fiduciaries who didn’t know about supposed fraud.
“The case has absolutely no bearing whatsoever on our case, which involves knowledgeable, insider fiduciaries and artificial inflation of the stock,” he told Law360.
The lawsuits accuse IBM of telling investors its microelectronics plants were humming along when they were actually using old equipment and laying off workers, leading to loss of nearly 20 percent of the stock’s value after it revealed that IBM had to pay a company $1.5 billion to take the plants off its hands. One of the suits also accuses leaders of IBM’s employee stock ownership plan of abandoning their fiduciary duties.
IBM, however, has argued that the loss-making unit was a crucial part of its profitable systems and technology group, churning out chips for its mainframe computers and other products, not a freestanding “asset group” that it had to regularly test for its financial reports.
Portnoy and William Norton, an attorney for KBC Asset Management NV who argued IBM committed securities fraud, agreed on what tests were required to prove fraud, but they advanced competing views on other aspects of the case. Not only was IBM so determined to sell its chip plants that it would take a bad deal and sink its stock price, Norton argued, the company’s long strategy of divesting itself of its low-margin hardware divisions supports a “strong inference” that executives knew they were wrong to not to write down its microchip division until it was sold off.
“The biggest write-down in 20 years ... cannot happen overnight,” he argued...For full story: http://www.law360.com/articles/773737/ibm-says-lack-of-fraud-dooms-stock-slump-class-actions
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Here's Ex-Lehman CFO Erin Callan's Stunning New Memoir
Mar 21, 2016 | Fortune
By Patricia Sellers
The biggest shock is the book’s cover: a picture of a middle-aged woman wearing a sundress and long, red flowing locks, joyfully lifting a giggling baby in front of a deep blue sea. The author, Erin Callan, who was the chief financial officer of Lehman Brothers before the Wall Street giant collapsed in 2008, has a new name: Erin Callan Montella. And a new life, with an ex-firefighter husband and a one-year-old daughter. And to the surprise of just about everyone—because no one from her former business life saw this coming—Callan, who recently turned 50, has written a memoir. She self-published the book, and it’s available on Amazon today.
With Full Circle: A memoir of leaning in too far and the journey back, Callan takes control of her controversial career story and tells it with candor and finesse and self-understanding that comes only after many years, much distance, and a slow recovery from her critical role in the rise and fall of one of Wall Street’s most storied firms. Beyond providing an insider’s perspective that will engross people who savored Wall Street tomes like Too Big to Fail, Full Circle reveals details that make this book far more personal—and sometimes juicier—than the other books that have been published.
For example, on the night before Christmas Eve in 2008, six months after Callan lost her CFO job at Lehman, she admits, she tried to commit suicide. Her boyfriend, Anthony Montella, her onetime high-school classmate who is now her husband, found her and called 911. Soon after, Callan quit a new job that she had just taken, post-Lehman, at Credit Suisse—and, at least to Wall Street watchers, she fell off the face of the earth.
I’m the only journalist who wrote a major story about Callan after she quit Wall Street and disappeared. When I was reporting that Fortune story, “The Fall of a Wall Street Highflier,” in early 2010, I spent months trying to track Callan down; I never found her, instead getting my information from many people who knew her and had worked with her and had lost track of her as well. After the story appeared in Fortune in March 2010, I never heard from Callan. So, you can imagine my surprise last week when I got a voicemail from her. I called her back, and she told me that she had written her memoir—and she did not intend it to be a Lean Intype of guide to life and career. It’s simply her story, she said.
Whatever Callan’s intentions, Full Circle is, in fact, a worthy counterpoint to Sheryl Sandberg’s Lean In. While Lean In, which hit the market with extraordinary fanfare three years ago, counsels women to be more confident and risk-taking in their careers,Full Circle warns about the dangers of overconfidence and risk-taking—and in her book, Callan attempts to redefine success.
And she does that quite well. She offers valuable lessons not just for women, but for anyone striving for a successful life. Such as:
– Don’t do something just because you’re good at it. “I confused success with passion,” Callan writes. “I was a woman not only looking to take a leadership role in a male-dominated industry, but doing anything to make that happen.” After graduating from Harvard and building early success as a lawyer at Simpson Thatcher, she moved to Lehman and climbed the ladder nimbly, nourished by positive feedback—which she wasn’t getting in her personal relationships. As work became her source of identity, her ego-booster, and her joy, “the dirty underbelly of career narcissism wasn’t apparent,” she writes.
– Leaning in can be good—but know what you’re leaning into. In February 2007, when former Lehman president Joe Gregory told Callan, then 41, that he and CEO Dick Fuld wanted her to be the firm’s new CFO, Callan was shocked, reluctant, and ill-equipped for the job—even if the financial markets hadn’t started to melt down. Now, she realizes, “I was willfully distracted as I kept moving up the ladder from job to job, focused on the next rung. I was never forced to evaluate exactly where I was because I didn’t pause to catch my breath to even consider it.”
– Own your power. This is the irony of Callan’s success: As she climbed the ladder, she felt ever less powerful, because the more she took on, the less she was able to control in her professional life and her personal life as well. Six months after she became CFO and the first woman on Lehman’s 13-person Executive Committee, she lost her job. Her first marriage ended too...
For full story: http://fortune.com/2016/03/21/erin-callan-lehman-book/
Client Attorney Privileged/Attorney Work Product/At Request of Counsel
ERISA Suit
Erin Callan Memoir
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