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The former Citigroup broker for convicted WorldCom chief executive Bernard J. Ebbers is suing Paul, Weiss, Rifkind, Wharton & Garrison, claiming the law firm was conflicted when it advised Citigroup on the broker’s severance package. David H. Trautenberg, the former co-head of the bank’s private wealth management group, was a significant figure in litigation arising from WorldCom’s collapse, having orchestrated massive loans for Mr. Ebbers’ personal account. Shareholders and regulators had accused Citigroup of offering such perks as well as favorable research coverage in order to maintain its position as WorldCom’s chief investment bank. The bank ultimately paid close to $3 billion to settle claims relating to WorldCom. Paul Weiss defended Citigroup against shareholder and government suits, representing Mr. Trautenberg in his capacity as a bank employee. In a suit filed last month in Manhattan federal court, Mr. Trautenberg claims the firm and partners Brad S. Karp and Daniel J. Toal gained confidences in the course of that representation which it then used against him in subsequent negotiations over his 2004 departure from Citigroup. “Defendants were blinded to their fiduciary duty to Trautenberg by the legal fees they were receiving from Citigroup and its subsidiaries well in excess of $100,000,000,” the complaint claims. Mr. Trautenberg, who received a $5 million severance payment, claims he would have received $25 million but for Paul Weiss’ involvement. He is seeking $80 million in damages from the firm. In a statement issued yesterday, Paul Weiss said that “it discharged all of its ethical obligations to David Trautenberg and that his claim is entirely without merit.” According to the suit, Mr. Trautenberg was initially represented in the WorldCom litigation by Debora Grobman of Kramer Levin Naftalis & Frankel. He claims Paul Weiss requested a joint representation but Ms. Grobman expressed concerns that Mr. Trautenberg’s interests and those of Citigroup could diverge. Ms Grobman was traveling and could not be reached for comment yesterday. Mr. Trautenberg claims he relied on a representation at the time by Mr. Karp that Paul Weiss understood it had an obligation not to act against Mr. Trautenberg’s interests. The suit claims Paul Weiss lawyers subsequently interviewed Mr. Trautenberg extensively and obtained privileged information about his employment at Citigroup, including his alleged mistreatment by the bank and knowledge of other employees’ misconduct. Mr. Trautenberg claims this information was unexpectedly used against him when he negotiated the terms by which he left the firm. Citigroup in-house counsel initially handled that negotiation, in which Mr. Trautenberg was represented by Michael F. Armstrong of the firm then known as Kronish Lieb Weiner & Hellman and David B. Wechsler of Wechsler & Cohen. But the suit claims Mr. Karp began acting as lead negotiator for Citigroup in the matter. Mr. Trautenberg claims neither Mr. Karp nor anyone else from Paul Weiss sought a conflict waiver. Both Messrs. Armstrong and Wechsler allegedly complained that Mr. Karp’s representation was improper. The Paul Weiss partner allegedly told Mr. Armstrong on one occasion to “stop lecturing” him. Neither Mr. Armstrong, who is now at the Howrey firm, nor Mr. Wechsler returned calls seeking comment. Mr. Trautenberg maintains he is entitled to a $25 million payment because he left a sizable roster of high-net-worth clients at Citigroup. He notes in his suit that controversial telecommunications analyst Jack Grubman, who wrote many favorable research reports about WorldCom, received a $30 million severance package despite having “no valuable book of business.” The broker is represented by Alabama plaintiff’s lawyer J. Michael Rediker of Birmingham’s Haskell, Slaughter, Young & Rediker. The two apparently met in the course of one of the suits against WorldCom. Paul Weiss partner Leslie Fagen is representing his firm in the suit. Mr. Ebbers was sentenced to 25 years in prison in September 2005 for his role in the accounting fraud that led to the collapse of WorldCom. Anthony Lin can be reached at [email protected]

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