Icahn Making Sure Rust Really Sticks to Steel

As previously reported, Steel Partners is trying to stick it to investors by unilaterally deciding to do a reverse merger something or another, ultimately to prevent investors from redeeming in a pseudo-liquid public vehicle called WebFinancial Corporation. Now it seems this plan may be derailed by none other than corporate board bogeyman Carl Icahn (who recently posted an interesting analysis on amending bankruptcy laws that would make our earlier post about the half a thousand Lehman lawyers redundant). The corporate raider, an LP of Steel Partners II himself, has filed a lawsuit against Warren Lichtenstein and his fund in Delaware Chancery Court case # 4284-CC, Bank of America NA et al vs. Steel Partners II Offshore Ltd et al. with Judge William Chandler, claiming Steel is committing fraud by going thru with the reverse merger without obtaining prior approval from, or even notifying, investors.

In the suit Icahn is seeking his $15 million July 2005 investment (thru vehicle ACF Industries), as well as legal fees and damages, and, what is scarier for Warren, a court-appointed custodian to manage Steel Partners LP. With Icahn spearheading the charge, it is only a matter of time before all other investors join in litigation against Steel Partners, making the proposed deal impossible and likely clearing way for full redemptions.

So much for this brilliant approach to halt redemptions. Next up on the drawing board-reverse-SPACs.