Is Wachtell Lipton's Ed Herlihy On The Hook For The Merrill Bonus Fiasco?

Tyler Durden's picture

As Zero Hedge previously disclosed, when Judge Rakoff told the SEC to promptly reevaluate its Wall Street pandering ways, one of the notable highlights was his suggestion that the lawyers advising Bank of America themselves may "be held legally responsible" for the creation of the fraudulent proxy statement which blatantly misrepresented the reality over Merrill's bonuses. And the question then becomes: who were the lawyers representing Merrill? Why Bank Of America's darling law firm Wachtell Lipton, and specifically legendary partner Ed Herlihy. Quoting Forbes:

Wachtell's earnings have skyrocketed in recent years as the economy boomed. Its partners averaged profits of no less than $3 million every year since 2004, according to American Lawyer's annual surveys. Over that period, it's ranked highest among U.S. law firms in profits-per-partner every year but 2006, when it was ranked second highest. In 2007 that figure was just below $5 million. That year ended with Herlihy helping Bank of America seal its $4 billion takeover of doomed mortgage lender Countrywide Financial.

Wachtell is not the only prestigious law firm potentially in the hot seat. Lawyers at Shearman & Sterling (22nd in profits-per-partner among U.S. law firms last year, with $1.7 million) represented Merrill Lynch in the merger. A Shearman spokesperson declined to comment on the possibility the firm would itself be held liable for the inaccurate proxy and resulting penalty. Wachtell's spokesperson did not immediately respond to a request for comment on that issue.

As observent Zero Hedge readers will recall, Ed Herlihy was the very same person who in September was raining fire and brimstone all over the administration literally day after day, threatening systemic collapse unless such outright criminal behavior as shorting and trading in CDS was immediately reined in, and also lobbying for an immediate enforcement of the uptick rule:



As we did last time, we demand to know just whose perverted interests is Wachtell Lipton representing, especially now that disclosure of the partners' skyrocketing compensation has been made public? With the observation by Judge Rakoff that the law firm may have blatantly crossed the borders of legality with its "advice" to Bank Of America executives, this question has to be answered immediately. If Herlihy's skewed advice comes purely for the benefit of Wall Street, at seemingly any price, the much more salient question is who ends up footing the bill for these crony overtures that the law firm pretends are for the "greater good" (where have we heard this squid pro quo before?).

The bottom line is that either Bank of America's executive committee, or as the SEC claims, the lawyers advising it, were responsible for one of the most blatant public filing misrepresentations in history. A $33 million slap on the wrist which comes out of BAC's troulbed investors and by implication, taxpayers, is a ludicrous way to "punish" those responsible. The Attorney General must see through the smoke and mirrors of this scam and has to seek criminal punishment for whoever ends up being the responsible party in this "hot potato" blame game.

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Miles Kendig's picture

Have at 'em TD!

Even this old DOJ hack knows that what is happening in this area of the institution of Justice is beyond the pale.  The institution must find the capacity within itself to do what must be done.  If it fails to do so it will lose the power to do so by events overtaking the institution which is in essence where we are on the cusp of, looking into the abyss.

SWRichmond's picture

"If it fails to do so it will lose the power to do so by events overtaking the institution which is in essence where we are on the cusp of, looking into the abyss."

I agree; I wonder, though, whether this is correctly perceived within the system.  One of my principal concerns is the ease and speed with which legal protections for economic activities are being brushed aside.  The fate of capitalism itself rests on contract law and property rights recognition within the courts.  When the courts become widely recognized by major financial players as "compromised", anything goes [are we there yet?]. 

channel_zero's picture

When the courts become widely recognized by major financial players as "compromised"

What rock have you been living under?  Two of the last three companies I worked for were patent/trademark litigated into oblivion.  The way it is done is gruesome.  The larger competitor just keeps recycling the same complaint changing one or two sentences and then resubmitting the previously dismissed complaint. I'm not making this up.  One or two sentences.  The legal fees are murder.

The legal system has already been overtaken. 

SWRichmond's picture

"The legal system has already been overtaken."

Which was my point, which I attempted to make via understatement, and failed miserably.  Mea culpa.

iknowNOW's picture
iknowNOW (not verified) channel_zero Aug 27, 2009 4:12 PM

the system needs to be overhauled

<remaining content removed by Sacrilege>

Miles Kendig's picture

It depends on which Federal District, investigative Field Office & US Attorney is at issue.

As to your first question there are folks at various levels who know full well what is happening.  However, pure inertia, capture, self perception & corruption are proving to be far more entrenched that many late to the party types had hoped or believed possible.

In essence, in many judicial districts we are already there, more are rushing to join that party and as this process becomes more apparent to those that occupy the space we will see more instances of Judge Rakoff emerge. This will be the key determinant. Will the power of those within the bureaucracy that truly hold to the concept of "Loyalty to the institution" be able to assert enough influence to chart a course away from the abyss? After my experiences and observations I am not filled with hopium.

Stay tuned to WBZH for more updates as they become available. hehe

BTW, Tom a taxpayer's insights on the DNI a couple of days ago were on the money on the Bloomberg suit thread.  Not many folks are aware of the current condition of these structures.  This contributes to my "negative watch" outlook as infulence awakens from their slumbers only to discover that the task may well be insurmountable.


All The Best

Sqworl's picture

+ Billion...Squid pro quo...Wachtell Lipton legal boiler room for Matrix...

Cognitive Dissonance's picture

One by one, ZH (and others) is pulling down the bricks from the wall of deception the powerz have erected.


digalert's picture

Since punishment can't be meted without the taxpayer, consumer, shareholder paying, the only option is to hand out "change of address" notices. c/o federal penal institution.

Miles Kendig's picture

And not FPC land.  Send them to the "L's".  Lewisburg, Leavenworth or Lompoc.  Let them discover the true meaning of survival and the process of warehousing of assets off the balance sheet..

Sqworl's picture

Layne: should we short AIG?  Im wondering if they hold the malpractice insurance on these lawfirms???   Wait don't tell me, bailout for AIG goes to BoA??? another backend shag?

Miles Kendig's picture

Not BofA.  Look to the primary header shredders for that bit of regulatory arbitrage known as a side letter in the old language.

As for advice I haven't any.  I no longer actively trade since my efforts require a detachment from those events.

I need more cowbell's picture

"squid pro quo"

Y'all have to trademake that one quick, that is truly awesome

Sqworl's picture

TD: how much squid pro quo money went to politicians from Ambulance Chasers to the Street?  Names please!

iknowNOW's picture
iknowNOW (not verified) Sqworl Aug 27, 2009 2:25 PM


Anonymous's picture

After reading this one wonders why we are concerned about tort reform in reagrds to Helath Insurance. it looks like a better place to begin is at Wachtel and other law firms..

Can you imagine what Las vegas would look like with Goldman Sachs and NY Law firms running it? Perhaps its time to bring in the Nevada Casino Commission to replace the SEC. Those guys dont fool around. When Las Vegas reprots numbers you can rely on them. In the event you have a question you can always go back and replay the video tape of the cards being shuffled. I doubt there is a video clip of the Paulson/AIG meetings.

Miles Kendig's picture

I doubt there is a video clip of the Paulson/AIG meetings.

No, but there are audio tapes and computer storage of electronic communications.  One of the reasons we have the NSA & DIA my dear fellow citizen.

Anonymous's picture

I have been thinking for a long while that people who called themselves "masters of the universe" feel so above the law that they are bound to break it sooner or later. I have also think that all it would take to bring these people down is to look at what they have done in the past say 10 years to discover a huge amount of violations. Until now, however, we haven't had any one with either enough balls or who is not completely corrupted by them willing to do this. Perhaps, what is going on with this issue will be the inflection point where these pervs. start getting what they deserve. Perhaps...

SDRII's picture

When BAC bought Couontrywide, GS advised the beleagured firm to draw down from the FHLB system to the tune of $40 billion. BAC eventually swallowed the comapny, but the $40 billion in debt to FHLB wshed into the numbers. Question is whee di that $40 billion go? was it payed back? Not tio mention the $1 Trillion of FHLB debt out there


of course the secured loans are the key


Susancai's picture

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