The most interesting thing about Heller Ehrman is its afterlife. Because even though it had smart lawyers, it was an incredibly inept organization.
Just how inept is becoming more clear with every leaked report from the Creditors Committee, which filed its Second Interim Status Report with the bankruptcy court last week.
In it, Thomas Willoughby of Felderstein Fitzgerald, http://www.ffwplaw.com/willoughby.htm, paints a picture of a Byzantine partnership structure approaching breakdown in 2007 after a failed attempt to globalize. Money was running out, partners were starting to leave, the firm was desperately trying to merge. The managers needed to keep the partners happy, so, according to Willoughby, they arranged approximately $106 million in payments benefitting the shareholders at a time the firm was officially broke. That’s the claim he says he’s “likely” to make under fraudulent conveyance law.
Specifically, Willoughby writes, “someone” in the firm instructed the accounting department to distribute $9 million in profits it did not have in early 2008. “Someone” then apparently asked the accounting department to cover up the fake dispersal, according to The Recorder. http://www.law.com/jsp/article.jsp?id=1202432938898&Heller_Profits_That_Werent_and_Checks_That_Were_in_the_Mail
The accounting department originally recorded the $9 million as “excess distributions” but was later told to record them as “shareholder loans,” according to the report.
Matthew Larrabee, now of Dechert, http://www.dechert.com/lawyers/lawyers.jsp?pg=detail&id=9983, was chairman of Heller from March 2005 until its dissolution. The report does not indicate who in management it is targeting. (Though you can click here for a glimpse of Heller in happier times, when Larrabee moved to New York to lead its global expansion. http://www.law.com/jsp/article.jsp?id=1202422161536)
As we’ve reported before, http://www.lawdragon.com/index.php/newdragon/blog/1294/, we have questions about the aggressiveness of the Heller estate. However, its representatives are raising some very interesting questions…