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Bernard Nussbaum was angry when he took the podium on the afternoon of May 24 in Delaware Chancery Court. The 64-year-old partner from New York’s Wachtell, Lipton, Rosen & Katz wasn’t motivated merely by the prospect of preserving his client IBP Inc.’s $4.7 billion merger with Tyson Foods Inc. This was personal. Nussbaum and the six other Wachtell partners present for most of the trial were protecting their firm’s reputation against harsh accusations by the Springdale, Ark.-based chicken producer, which was trying to escape from its deal to buy IBP. Among other things, Tyson claimed that Wachtell partner Seth Kaplan had failed to forward to it a 15-page letter about an IBP proxy statement that the U.S. Securities and Exchange Commission had sent him via e-mail just two days before the companies signed the deal. Tyson said that the letter cast enough doubt on the quality of IBP’s financial statements that Tyson would not have signed the deal had it read the letter. In making that argument, Tyson impugned both Kaplan’s competence and his integrity. And the Wachtell team responded in kind. First, Kaplan defended his conduct before Vice Chancellor Leo Strine Jr., the judge in the case. Then, Nussbaum turned the tables on Tyson in his cross-examination of Les Baledge, Tyson’s general counsel, suggesting that Baledge had lied about receiving a confidential document at the deal’s inception. Nussbaum’s attack on Baledge also targeted Anthony Clark, a partner at Skadden, Arps, Slate, Meagher & Flom in Wilmington, Del., who was Tyson’s lead outside lawyer on the case. Nussbaum also mentioned a person more familiar to him: James Blair, who had made $100,000 for Hillary Clinton in 1979 by trading commodities, in one of the scandals Nussbaum had faced as President Bill Clinton’s White House counsel. Though Blair had retired as Tyson’s general counsel on Jan. 1, 2000, he was present throughout the trial and seemed to take an active role in crafting Tyson’s strategy. Kaplan took the stand in the cramped courtroom on May 21. He began his testimony by explaining the bidding for IBP, out of which the SEC’s letter had emerged. The management of the Dakota Dunes, S.D.-based beef and pork producer had announced a leveraged buyout on Oct. 2 that required it to file a proxy statement with the SEC. The LBO, in turn, attracted a hostile bid from Smithfield Foods Inc. on Nov. 12, which prompted IBP to invite Tyson to make an offer. The bidding for IBP culminated in an auction that took place over the final weekend of 2000. At 6:35 p.m. on Dec. 29, Kaplan received an e-mail containing the SEC letter, which was addressed to IBP CEO Robert Peterson but which, for reasons unknown, the SEC sent to Kaplan, IBP’s lead lawyer on the deal. Scanning the letter, Kaplan concluded that it contained nothing more than comments on IBP’s proposed LBO, which was moribund by that time. A few minutes later, he forwarded the e-mail with the SEC’s letter to second-year Wachtell associate Ante Vucic, and returned to evaluating drafts of agreements with both Tyson and Smithfield. Vucic didn’t read the letter, either; he was in the middle of reading the agreements and discussing them via e-mail with IBP general counsel Sheila Hagen. On Jan. 1 Tyson signed an agreement to buy IBP. Had Kaplan read the letter on Dec. 29, as he calmly admitted at trial, he would have sent a copy to Tyson and Smithfield. But he hadn’t. So, when IBP finally did receive a copy of the letter, in early January, CEO Peterson was displeased with the SEC, and Hagen was upset with Kaplan, who, in turn, explained the oversight to Hagen and, who then, on Jan. 10, forwarded the letter to Roland Hlawaty, a partner at New York’s Milbank, Tweed, Hadley & McCloy, who was helping represent Tyson on the deal. Those apologies didn’t mollify Tyson’s Baledge, who on Jan. 11 sent Kaplan a scathing rebuke. “It was very strident, very angry, and very hostile,” Kaplan testified, recalling Baledge’s letter. “There’s an underlying accusation of wrongdoing, of concealment, and I take those charges very seriously.” Skadden’s Clark made the same charge at an April 16 hearing in the case in an Arkansas state court. (Tyson had sought to have the case heard in Arkansas.) As Nussbaum summarized it, Clark had argued “that the conduct of IBP and its advisers and representatives was less than candid. He suggested that IBP and its lawyers knew disclosure of the SEC letter would completely derail the auction, so the letter was withheld.” Although Tyson later credited Kaplan’s account, it continued to argue that his failure to turn the letter over to Tyson was grounds for annulling the deal. On cross-examination, Kenneth Shemin asked Kaplan if he thought in retrospect that he should have read the letter. “I guess if I were perfect, I would have, yes,” Kaplan replied. Shemin, a solo practitioner in Fayetteville, Ark., pointedly asked Kaplan if he had fulfilled his professional responsibilities with regard to the e-mail. Kaplan firmly replied that he had. For five minutes, Shemin continued to ask the question, restating it in various ways. Kaplan never raised his voice and never changed his answer. Finally, Vice Chancellor Strine told Shemin that such questions were unfair. “Mr. Kaplan testified to what was going on on Dec. 29, and it’s more than most human beings deal with,” Strine said. Kaplan’s counterpart Baledge testified three days later, but he did not come off as well. In his cross-examination, Nussbaum attempted to impugn Baledge’s credibility — and Tyson’s — by showing that Baledge had lied about a confidential document that he said he’d received when IBP and Tyson had begun talks in late November. That charge had been a key part of Tyson’s losing argument that the case should be heard in Arkansas. Suggesting that the accuracy of Baledge’s version of events threatened his credibility, Nussbaum rhetorically asked him: “Would you agree with me that if this court determines that it should not believe you about having the draft proxy on Nov. 22, it should not believe any of your testimony?” Baledge had testified that he had read a copy of IBP’s proxy statement detailing its proposed LBO several days before IBP filed the proxy with the SEC on Nov. 28 — a clear violation of insider trading rules on the part of whoever had sent Baledge the proxy. But in a video clip of Baledge’s deposition that Nussbaum played at trial, the 44-year-old former partner of Hillary Clinton’s at The Rose Law Firm in Little Rock said that he did not remember who had sent him a copy of the proxy, which he had not kept. Nussbaum pointed out that Tyson hadn’t mentioned Baledge’s premature receipt of the proxy when it first filed suit in Arkansas on March 29 to get out of the deal. Either because he was upset at the charges leveled at Kaplan or because he was appalled at Baledge’s conduct, Nussbaum was furious five minutes into the questioning: “I’ll try to calm down,” he said (as much to himself as to Strine). Self-soothed, Nussbaum noted in one of his questions that he had first heard of the proxy statement in the Arkansas court on April 16, when Skadden’s Clark had accused IBP of sending it to Baledge. “That document,” Clark charged, “is one of the key documents in this case because that’s the document they used to suck us into the process, to whet our appetite and to entice us to become a bidder.” Nussbaum noted that in an April 19 conference call with Strine, Blair had said that IBP’s investment bankers had improperly sent the proxy to Baledge in November. But, said Nussbaum, Blair’s accusation was contradicted by an April 25 e-mail from Tyson’s senior vice president Dennis Leatherby to Palden Namgyal, IBP’s lead banker at J.P. Morgan Chase & Co., in which Leatherby wrote that Tyson had received no information illegally from Morgan. As part of the two sides’ exchange of documents before trial, Tyson in-house lawyer R. Read Hudson forwarded the e-mail to Skadden on the afternoon of May 7, and, at 12:06 a.m. the next morning, Skadden sent it on to Wachtell. Taking a jab at Skadden, Nussbaum said: “They know we work hard, and we’ll be there and want to sort of make our night.” To Strine’s remark that Skadden’s e-mail wasn’t an SEC comment letter, Nussbaum quipped, “That’s right. We would have read this.” The one other person likely to have sent Baledge the proxy was George Gillett Jr., an important IBP shareholder who, a few days before Thanksgiving, had contacted Tyson CEO John Tyson about a possible bid for IBP. But Gillett testified at his deposition that he had followed his lawyers’ advice not to send Tyson a copy of the proxy before it was made public, since in doing so he would have violated insider trading laws. “This is a tempest in a teapot,” Baledge said in exasperation. “Oh, of course,” Nussbaum shot back sarcastically. “It’s a tempest in a teapot. Whether someone tells the truth is a tempest in a teapot.” Nussbaum then showed a clip of Baledge’s deposition on May 8, in which he repeated his story. Baledge stuck by his testimony. “It’s true,” Baledge said. “Sure. It’s true,” Nussbaum sneered. Strine reprimanded Nussbaum for that final bit of pique, and the lawyer apologized. Still, the judge complimented Nussbaum’s work: “I like a little passion in the late afternoon.” Strine also liked Wachtell’s arguments. On Friday, June 15, he ruled that IBP had not breached the merger agreement, and he ordered Tyson to complete the deal. The judge found that Kaplan’s failure to forward the SEC comment letter was an honest mistake that was irrelevant to the case, and he all but accused Tyson’s general counsel of lying. “I do not credit Baledge’s version of events, which is at best mistaken,” Strine wrote in his opinion. In defending his firm’s reputation, Nussbaum and his crew of litigators, including partners Kenneth Forrest, Peter Hein, Eric Roth, and Marc Wolinsky, also showed why so many companies willingly pay Wachtell’s stiff fees. On June 28 Tyson agreed to buy IBP for about $26 a share — meaning that IBP shareholders were almost $850 million wealthier than they would have been had Tyson won the case.

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