On May 3, 2012, U.S. District Judge Lewis Kaplan in Manhattan refused to allow insurers for former officers and directors of Lehman Brothers Holdings Inc. to settle a fraud lawsuit for $90 million. The lawsuit had been brought as a class action by shareholders of Lehman Brothers. Judge Kaplan was not satisfied with the independent determination from a former federal judge and former colleague of Judge Kaplan’s, as to the net worth of the individually named directors and officers.
Judge Kaplan referenced Kenny Rogers in his decision when he stated: “You ‘got to know when to hold ‘em’ by pressing on with a lawsuit, ‘know when to fold ‘em’ by taking the best settlement you think you can get, and know ‘when to walk away’ by dropping an unpromising case.”
Unsatisfactory Disclosure of Net Worth of D & Os
Judge Kaplan decided that the plaintiffs should hold ’em in refusing to accept the representation from the defendants that their net worth was under $100,000,000, and stated that due to the class action nature of the settlement, the court had to approve the settlement. If the proposed settlement had been approved, the 4 officers and 9 directors named in the lawsuit would not suffer any financial consequences as the insurance would completely cover their losses.
Judge Kaplan mused that if a former federal judge was entitled to see the documents allegedly containing the net worth of the defendants, then surely he was also entitled, even if in camera. Judge Kaplan expressed further skepticism noting that the review did not take into account other assets of the D & Os.
Once again, we find a federal judge not acquiescing to a former corporate giant in its attempt to sweep its problems under the rug. Cheers to Judge Kaplan for keeping Lehman and its D & Os’ feet to the fire.
A suggestion to Lehman’s D & Os from another Kenny Rogers’ classic, covering the original Eagles’: “Desperado, why don’t you come to your senses?”
Time to come clean. Judge Kaplan is waiting.