Case Notes

SEC Rears Its Head over Wachtell Advice

A spat between Wachtell, Lipton, Rosen & Katz and billionaire Carl Icahn stemming from Icahn's hostile acquisition of CVR Energy Inc. took a new turn last month. CVR revealed that it's under investigation over securities disclosures it made before the takeover ' and it blamed Wachtell for putting the company in the SEC's sights.

In a letter to U.S. District Judge Richard Sullivan in Manhattan, CVR lawyer Herbert Beigel wrote that the U.S. Securities and Exchange Commission (SEC) is investigating whether CVR properly disclosed the structure of investment banker fees it agreed to prior to Icahn's successful 2012 takeover bid.

The filing came in a malpractice lawsuit that CVR, now controlled by Icahn, brought against its former lawyers at Wachtell over the 2012 deal. Wachtell, Goldman Sachs & Co. and Deutsche bank had all advised CVR as it was trying to fend off the takeover bid, but under the parties' fee arrangement, the investment banker fees would double to $36 million if Icahn succeeded.

CVR, an energy and oil refining business, claims that Wachtell and partners Benjamin Roth and Andrew Brownstein didn't fully explain the fee structure, which, the company says, created an incentive for Goldman and Deutsche Bank to favor the Icahn takeover. Wachtell also allegedly took steps to cover up its failure to properly advise CVR, the company claims. In its letter to Sullivan last month, CVR asked to amend its malpractice complaint to include details about the SEC probe, which the company claims resulted from Wachtell's advice regarding the investment banking fees. CVR has known about the SEC investigation since last year, but the letter says the agency's probe recently ramped up, with regulators planning to take depositions of current and former CVR employees.

“There now appears a significant risk that the SEC will proceed with enforcement or other action against CVR as a result of Wachtell's negligent and improper advice,” CVR wrote in a proposed amended complaint filed with the letter.

The disclosure of the SEC probe is just the latest in a nasty back-and-forth between Wachtell and Icahn that has spilled into both federal and state court. Wachtell has called the malpractice suit a “scare tactic” to intimidate lawyers who offer to defend clients against “Icahn's opportunistic attacks.”

The firm also maintains that it provided plenty of notice to CVR's board about the fee structure. ' Scott Flaherty, The Litigation Daily

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SEC Rears Its Head over Wachtell Advice

A spat between Wachtell, Lipton, Rosen & Katz and billionaire Carl Icahn stemming from Icahn's hostile acquisition of CVR Energy Inc. took a new turn last month. CVR revealed that it's under investigation over securities disclosures it made before the takeover ' and it blamed Wachtell for putting the company in the SEC's sights.

In a letter to U.S. District Judge Richard Sullivan in Manhattan, CVR lawyer Herbert Beigel wrote that the U.S. Securities and Exchange Commission (SEC) is investigating whether CVR properly disclosed the structure of investment banker fees it agreed to prior to Icahn's successful 2012 takeover bid.

The filing came in a malpractice lawsuit that CVR, now controlled by Icahn, brought against its former lawyers at Wachtell over the 2012 deal. Wachtell, Goldman Sachs & Co. and Deutsche bank had all advised CVR as it was trying to fend off the takeover bid, but under the parties' fee arrangement, the investment banker fees would double to $36 million if Icahn succeeded.

CVR, an energy and oil refining business, claims that Wachtell and partners Benjamin Roth and Andrew Brownstein didn't fully explain the fee structure, which, the company says, created an incentive for Goldman and Deutsche Bank to favor the Icahn takeover. Wachtell also allegedly took steps to cover up its failure to properly advise CVR, the company claims. In its letter to Sullivan last month, CVR asked to amend its malpractice complaint to include details about the SEC probe, which the company claims resulted from Wachtell's advice regarding the investment banking fees. CVR has known about the SEC investigation since last year, but the letter says the agency's probe recently ramped up, with regulators planning to take depositions of current and former CVR employees.

“There now appears a significant risk that the SEC will proceed with enforcement or other action against CVR as a result of Wachtell's negligent and improper advice,” CVR wrote in a proposed amended complaint filed with the letter.

The disclosure of the SEC probe is just the latest in a nasty back-and-forth between Wachtell and Icahn that has spilled into both federal and state court. Wachtell has called the malpractice suit a “scare tactic” to intimidate lawyers who offer to defend clients against “Icahn's opportunistic attacks.”

The firm also maintains that it provided plenty of notice to CVR's board about the fee structure. ' Scott Flaherty, The Litigation Daily

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