NEW YORK — Fighting conflict of interest charges, Weil, Gotshal & Manges, counsel for The Leslie Fay Cos., warned Thursday that the apparel company would suffer “serious disruption and harm” if they were disqualified as its bankruptcy attorneys.
In a 58-page response to a motion by U.S. Trustee Arthur J. Gonzalez to remove the law firm from the case, Weil, Gotshal warned that the “disruption of this [reorganization] process in order to retain new counsel would threaten — not enhance — the reorganization of the debtors.”
Gonzalez asked for Weil, Gotshal’s removal after concluding that the law firm did not qualify as a “disinterested party” because it had as clients several companies represented on Leslie Fay’s board — including Odyssey Partners, BDO Seidman and Bear Stearns — during Leslie Fay’s investigation into its accounting scandal. The accounting fraud forced the apparel maker into Chapter 11 in April 1993.
Defending itself against Gonzalez’ assertions, Weil, Gotshal called the Trustee’s position “extreme and inconsistent with the application of disinterestedness standards in Chapter 11 cases generally.”
The firm said it has “at all times been disinterested” and noted that the Trustee’s allegations are based on “horrible imaginings” that are actually premised on “mere speculation.”
The response echoed the reaction last month of Leslie Fay to the Trustee’s motion. The company said removal of Weil, Gotshal would have a “devastating impact” on its reorganization efforts.
The next step involving the conflict of interest charges lies with Gonzalez, who, under guidelines set down by Bankruptcy Judge Tina Brozman, will issue a rebuttal on Nov. 10. A hearing on the matter is scheduled for Nov. 28.