Third Law Firm that Turned Down Treasury Role Identified
Four law firms declined to pursue work as the Treasury Department’s adviser on acquiring ownership stakes in banks, and now three have been identified.
The latest firm to confirm it opted to pass up a chance to do the work is Cleary Gottlieb Steen & Hamilton, the American Lawyer reports. The others are Davis Polk & Wardwell and Wachtell, Lipton, Rosen & Katz.
While Davis Polk turned down a role advising the Treasury, it did counsel Treasury’s partner—the Federal Reserve Bank of New York—on the bailout plan, the Am Law Daily reports. The story says Davis Polk worked with Simpson Thacher to craft the capital injection plan over the weekend.
Davis Polk partner Randall Guynn told the Am Law Daily the law firm worked to make sure Treasury’s equity purchases would not discourage private sector capital or dilute too much the shares of existing stakeholders.
The Treasury Department had asked six law firms for proposals on counseling it on acquiring ownership stakes in banks, but only two submitted proposals. The department selected Simpson Thacher & Bartlett to perform the work.
Client conflicts apparently played a role. Davis Polk advised Citigroup in its failed bid to buy Wachovia. Wachtell has long represented Bank of America and advised it in its buyout of Merrill Lynch. Citigroup and Bank of America are among nine financial institutions in which the Treasury will buy equity stakes.
One lawyer from a firm that turned down the work told American Lawyer about conflicts concerns. “The Treasury procurement process was pretty inflexible,” he told the publication. “This is prime work, but we were unable to obtain sufficient comfort that we would be able to represent our regular clients on the program, even with separate teams, if we bid for the Treasury assignment.”
Simpson Thacher chairman Richard Beattie doesn’t share those concerns. His firm represents one of the nine banks, JPMorgan Chase. He told American Lawyer there was no pressure from Treasury about dropping clients.
“They did not say that,” he told the magazine. “It’s ridiculous. We represent JPMorgan Chase and would not give up a client like that.”
