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An unusually public feud among corporate lawyers has left some of the whitest shoes in New York and Washington spattered with mud. The squabble, which both sides now say they tried to settle, also has members of the corporate bar questioning whether recent business scandals have further eroded the tradition of genteel courtesy among establishment law firms. Under the unwritten rules of this club, firms avoid publicly disclosing one another’s embarrassing professional lapses. Matters are most often resolved with a discreet settlement, perhaps a refund of fees to a client. Not this time. In a report released to the public last week, a committee of the board at Global Crossing Ltd. bluntly accuses Simpson Thacher & Bartlett, one of New York’s elite corporate powerhouses, of legal malpractice and conflicts of interest in connection with its once-prized client. The report, which was prepared by Coudert Brothers, another old-line New York firm, explicitly chastises one Simpson partner, D. Rhett Brandon, and casts other partners in a harsh light. Not to be outdone, Simpson Thacher last week took the unusual step of attacking its accusers in the press. On March 11, The Wall Street Journal quoted an unnamed spokesman for the firm as saying that “other than professional jealousy, there is not a clear reason that would justify Coudert Brothers’ issuing such a heavily critical report.” The story suggests that Stephen Best, the D.C.-based Coudert partner who handled the report, may have his own conflicts of interest. Best’s father, Judah Best, is a retired D.C. partner at Debevoise & Plimpton, which is defending Global Crossing in an array of civil suits and an SEC investigation. The Simpson spokesman appeared to suggest that Stephen Best may have favored the company, and scapegoated Simpson Thacher, in order to aid a client of his father’s former law firm. Stephen Best denies that the report’s treatment of Global Crossing was influenced by his father or by Debevoise. “I stand by the accuracy of the report,” he says. White collar defense lawyers, deal lawyers, and legal malpractice experts say they’ve rarely seen such public vitriol among law firms of this ilk. “This would not have happened a few years ago,” says Mark Foster, a partner at D.C.’s Zuckerman Spaeder who often counsels law firm clients on malpractice issues. “The notion of lawyers as gentlemen with a special code of ethics is going out the window. We’re coming into the real world and being treated like ordinary citizens.” The report itself deals with allegations of improper accounting and inflated financial reporting at Global Crossing. Roy Olofson, then an employee of the telecommunications enterprise, leveled the allegations in an August 2001 letter to the company’s then-general counsel, James Gorton. In the wake of Global Crossing’s collapse into bankruptcy in January 2002 and the regulatory and congressional inquiries into the company’s failure, the Global board tapped a special committee to try to unravel Olofson’s claims. The committee was also charged with investigating how the company had responded to Olofson’s letter. A trio of independent directors signed on to serve as members of the special committee. Jeremiah Lambert, a senior D.C. partner at Shook Hardy & Bacon, resigned from his firm to serve as committee chair. Lambert and his team later tapped Coudert Brothers to handle the probe. A new partner at Coudert, the 37-year-old Stephen Best, took the lead. After months of investigation and drafting, the special committee’s report concludes that the transactions Olofson criticized were in fact legitimate, albeit of dubious value to the company. The report takes Simpson Thacher to task for its handling of Olofson’s letter. According to the report, Coudert and the committee found no evidence that Simpson Thacher “intended to suppress or conceal” Olofson’s allegations. But, the report states, the firm “failed to satisfy its professional responsibilities to Global Crossing” by allowing the investigation to languish. The company “suffered significant injuries as a result,” the report argues. “The Special Committee believes that causes of action may be asserted against ST&B for malpractice and breach of fiduciary duty.” In particular, the report, which was filed in court in connection with Global Crossing’s bankruptcy, contends that if Simpson Thacher had conducted a thorough investigation, it would have disproved Olofson’s allegations and perhaps assuaged the Securities and Exchange Commission and Congress. The report also suggests that Global’s auditors, at Arthur Andersen, would have been able to certify the company’s 2001 financial statements. According to the report, Gorton, who had been a partner at Simpson Thacher until he joined Global Crossing in 1998, called his former firm on Aug. 7, 2001, the day after he received Olofson’s letter. Simpson had been the company’s primary outside counsel since 1997. The firm had handled Global’s initial public offering. Several Simpson lawyers had taken jobs within the company. Over 2000 and 2001, Coudert’s report observes, Global’s fees to Simpson topped $32 million. For those years, Simpson’s management confirms, the company ranked among the firm’s 10 most valuable clients. During that Aug. 7 discussion, Charles “Casey” Cogut, the head of Simpson’s M&A practice, argued that Olofson’s assertions should be handled by accountants, not lawyers. According to the Coudert report, Gorton indicated that he wanted Simpson to investigate Olofson’s claims. At the same time, Gorton wanted out of Global Crossing. At a congressional hearing last year, Gorton said that he had made plans to resign before the Olofson letter arrived. He did so soon after. Simpson Thacher promptly seconded another partner, Brandon, to the company. Brandon took on the role of acting general counsel in September 2001. He never gave up his role as a Simpson partner. Under the terms of an agreement between the firm and Global, the firm continued to compensate him. And it continued to bill Global for his time, at $680 an hour. The agreement was made public in a bankruptcy court filing. From that point on, what happened in the Olofson investigation gets murky. Summaries of interviews that Best and his colleagues conducted with Simpson Thacher lawyers, including Brandon, reveal extended and sometimes caustic arguments about whether the firm was ever retained to conduct a formal inquiry. Several Simpson Thacher partners insisted, according to the report, that the firm’s mandate was much more limited. The Coudert report finds otherwise, pointing to evidence from Simpson e-mail and billing records. By September 2001, for example, Simpson had created a new billing matter, headed “Olofson Investigation.” The firm was indeed retained to do the investigation, Best’s report concludes. But after Brandon stepped in, and the company’s financial troubles mounted, he and Simpson Thacher effectively dropped it. The report also asserts that when press scrutiny in January 2002 transformed Olofson’s allegations into a major controversy, Brandon and the firm “engaged in a course of conduct intended primarily to limit their professional exposure for a failed investigation, not to protect [Global's] interest.” At that point, the Coudert report indicates, the tension inherent in Brandon’s dual roles devolved into a conflict of interest. Richard Beattie, Simpson Thacher’s chairman, disputes many of Best’s conclusions and says the report’s treatment of Simpson is “blown out of proportion and out of context.” He stresses that Coudert ultimately concluded that the transactions Olofson criticized were legitimate. And he dismisses the report’s argument that Global would have been able to secure audited 2001 financial statements from Andersen if Simpson had handled the internal investigation better. “The company was under an SEC investigation and in bankruptcy,” he says. “It couldn’t possibly get audited financials under those circumstances.” Beattie says Simpson agreed to second Brandon to the company reluctantly and only after a strenuous request from Global’s then-chairman, Gary Winnick. “Winnick himself asked us to continue,” Beattie recounts. “We pointed out to him that we weren’t the appropriate ones to do it.” Once the company filed for bankruptcy, in January 2002, the question of Brandon’s role arose again. “We insisted that we wanted him out,” Beattie says. “It was too much work for him. He was overwhelmed.” But, Beattie recounts, executives at the highest level of the company again insisted that Brandon stay on. He remained acting general counsel until March 1, 2002, when he resigned “in accordance with the U.S. Trustee’s request,” according to a bankruptcy court filing. Simpson Thacher stopped representing Global last summer, Beattie says. “In light of the special committee’s investigation, I thought it would be appropriate to resign.” Brandon, who referred a request for comment to Beattie, remains a partner at Simpson Thacher. “His status is unchanged, and we have the utmost confidence in him,” Beattie says, calling the report’s treatment of Brandon “terribly unfair.” Beattie says the firm “did take on an investigation” for Global at some point. But, he stresses, “we did it in the context of litigation threatened by Olofson. We started looking at it in that context, and then, as the company was getting closer to bankruptcy, it started treating this as a back-burner issue,” he says. Within the company, officials “weren’t taking the investigation seriously at that point,” Beattie says. Compared with the company’s financial crisis, he explains, the Olofson matter “was a non-event for them.” As for Brandon, Beattie says, “In good faith, Rhett believed these were not real issues. They had been vetted by management, accountants, and attorneys. He was assured by management that Olofson’s allegations were meaningless, and that’s why he responded the way he did.” Last week, Simpson Thacher and Coudert confirmed that they discussed settlement at multiple meetings, including some last fall, when Simpson Thacher retained Robert Fiske Jr., a white collar defense partner at New York’s Davis Polk & Wardwell. Sources from both sides say those talks foundered — in large part over concerns related to the company’s bankruptcy proceedings. From Simpson Thacher’s perspective, these sources say, it made little sense to settle without an assurance that doing so would end the matter quietly. And because Global Crossing was in bankruptcy, any settlement required the creditors’ endorsement and the judge’s approval. The chances of keeping the entire process out of the public eye were slim. The special committee faced a bankruptcy-related obstacle as well: It was not at all certain that the company’s most hawkish creditors would agree to a settlement, sources close to the talks recount. “The right thing to do here for everybody was to settle this and get some money for the creditors and for the company,” Best says. “But we couldn’t get it done.” The special committee’s report now sits on the desk of Judge Robert Gerber, of the U.S. Bankruptcy Court for the Southern District of New York. When Global’s Chapter 11 case concludes, Gerber and a trustee appointed to handle litigation on the company’s behalf will decide whether to sue Simpson Thacher. But it’s not clear what such a suit would yield for the company. The biggest problem with the report’s arguments for damages against the firm, experts say, is the hard fact that Global Crossing collapsed into bankruptcy — and no amount of sleuthing by Simpson would have prevented that. As a practical matter, even if Best is right, and Simpson did “drop the ball” on the Olofson investigation, the quantifiable harm to Global Crossing may boil down to the roughly $5 million the company has spent investigating its earlier investigation. While that’s hardly a trivial sum, several observers at other top-tier firms say they would have expected Simpson and the special committee to negotiate a settlement around such a number. But in the post-Enron world, where law firms’ roles in corporate scandals have become suspect, and gigantic corporate bankruptcies force elite firms’ inner workings into the public record, such a quiet resolution proved unreachable. “We’re in a different world now, where you can’t play by club rules anymore,” Best says. “That’s what’s gotten people into trouble to begin with.”

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