The kind of sweeping we have in mind requires a bar card.
Lawyers keep the messiness of commerce tidy. Tidier, anyway. In good times, they scriven articles of incorporation and write all kinds of nifty contracts. And when the fertilizer strikes the air conditioner, they draft and prosecute litigation.
What with the Lehman Brothers imbroglio, which took a nasty turn yesterday with papa Lehman’s entry into bankruptcy, Blawgletter couldn’t help but think about how trial lawyer types will aid in the sorting out of responsibility for the mess. And so we offer a preliminary forecast of the kinds of lawsuits (some of which Lehman itself may bring) to expect:
- Securities fraud: Against Lehman’s directors and executive officers; its accounting/auditing firm (E&Y); and (possibly) underwriters of recent stock and bond issues. For misleading buyers of Lehman securities about their actual value.
- ERISA: Against fiduciaries who required/encouraged/allowed Lehman pension plan participants and beneficiaries to buy/hold Lehman common stock.
- Insider breach of fiduciary duty: Against executive officers, directors, and other insiders (perhaps including bank lenders) who presided over Lehman’s swoon and crash.
- Guarantors/insurers of Lehman debt: Remember "credit swaps"? Apparently holders of Lehman debt, including its biggest (to the tune of $463,000,000) banker AOZORA, bought the things to hedge against the possibility of default. Debtholders will call on them to make good any shortfall.
- Trustees for $150+ billion of bond debt: Should they (including Citibank and Bank of New York) have kept a better lookout for bondholders?
We don’t mean to imply of course that any particular claim has merit. We don’t know one way or the other. Yet.
We do know that the house-cleaning will take years. Somebody’s gotta do it. The lawyers will.
