Former Shareholder Defense Brief

As reported at LegalPad and in The Recorder via Law.com, an ad-hoc group of former Heller Ehrman shareholders has filed a brief in bankruptcy court.  The document (here) asks that the Unsecured Creditors Committee not be appointed as representing the estate as representative for any and all claims against the Heller Ehrman LLP Retirement Plan.

The document disputes claims by the Unsecured Creditors Committee concerning under-capitalization of the firm and subsequent fraudulent transfers.  It attempts to pin the blame for the demise of Heller Ehrman on several issues such as unexpected shareholder departures or the current recession.

From what insiders have told us, the reason for the increase in shareholder departures was based on a management decision to dramatically change the way compensation was paid beginning in 2008.  The adjustment was an attempt to get under-producing (and over-paid) shareholders to leave.

Perhaps this new compensation plan was not made public in order to let those departing shareholders leave with a little bit of dignity.  Well they left with quite a bit more dignity than the employees who remained in late 2009 and were shown the door without payment for accrued vacation and other benefits – and in a very public way.

This latest spin by the former shareholders just adds more insult to the injury all to protect their own interests and to avoid responsibility for the hard-earned wages of their former employees.

© 2009, copyright Thomas MacEntee

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6 Responses to “Former Shareholder Defense Brief”


  1. 1 Former Associate 7 October 2009 at 11:04 am

    Your commentary sounds right, HD. I remember sitting in meetings in which Larabbee would tell us not to worry about SH departures because they were actually desired. As some would say, “addition by subtraction.” But the firm would not comment publicly on the reason for their departure because the SHs had been with the firm so long the firm did not want to hurt their reputation. So the public perceived Heller to be hemmorhaging SHs, as if it were a bad thing, when in fact, it was actually a healthy cutting of dead wood. In other words, the cure was perceived to be a symptom.

    I, for one, have never believed the firm’s downfall to be in any way related to the recession. And, until yesterday, I’ve never heard anyone in firm management take that position either. How many times did we all hear that the firm’s decline was caused by “a large number of significant lawsuits unexpectedly settlilng at the same time”? Countless. That’s not the recession.

    It sure is enlightening to see how the SHs react when threatened with the loss of employment benefits they contend they have earned. Gee, imagine how that must feel.

    Does anyone else have insight or anecdotal input undermining the SHs’ arguments? I’d be interested to hear them. Also, watch tomorrow for Heller to file its proposed Plan in the bankruptcy case. This is where they will lay out how they propose to pay off creditors.

  2. 2 LA Anon 7 October 2009 at 11:55 am

    The rumor that the compensation system was changed is bullshit. The firm apsolutely wanted some shareholders to leave, but not the ones that ultimately did leave (e.g. Goodwin, Fram/Haslam et al, Corp group in SD, several in LA, IP group in SV, etc. etc.). They left primarily because they did not aggree with the direction of the firm and, more specifically, because they had lost faith in the leadership. It’s really not any more complicated than that.

  3. 3 Former Associate 7 October 2009 at 12:08 pm

    Re compensation, I recall seeing a departure email and then a SH would look at the comp. schedule and notice that the SH had been bumped down one or two tiers of comp. So, I think a significant reduction in comp. was a hint to leave. But when people took the hint, the firm didn’t properly spin it, so it looked like we were losing lots of desirable partners, when the opposite was true.

  4. 4 SD Associate 7 October 2009 at 9:58 pm

    Bottomline is that everyone was deceived.

    Numbers were played with, lies aka stories were created because of a decision that caused the company to fall. So all the birds flew the coop. This is what happens when bad people make stupid greedy decisions.

  5. 5 Observer 8 October 2009 at 2:18 am

    >FA: From a purely legal perspective, the brief on behalf of the ad hoc group of former SH’s makes sound arguments. Particularly strong is their point that retirement account assets are immune from the claims of creditors. That is the law, and it will be interesting to see if the committee offers a counter-argument in reply.

  6. 6 Observer 8 October 2009 at 2:24 am

    Oh – I see that Montali has already considered the ad hoc group’s brief, and rejected it. At least as to the narrow point of letting the committee proceed with whatever claim against the pension plan the committee chooses to assert. But without any indication that the committee has shown that it would be likely to prevail on such claim.


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