LESLIE FAY’S LAWYERS FINED $1M BY COURT

Byline:

NEW YORK — Bankruptcy Judge Tina L. Brozman Monday fined The Leslie Fay Cos.’ law firm $1 million for representing the audit committee of the Leslie Fay board of directors while failing to disclose it had ties to two committee members.
The fine was $200,000 over the minimum $800,000 penalty Brozman forecast in December. At the time, the judge levied an unspecified fine against the law firm, Weil, Gotshal & Manges. Brozman noted she needed more information before setting the amount, but said any fine would include the $800,000 cost of an examiner’s probe into Leslie Fay’s internal investigation of its accounting scandal.
The accounting scandal broke in February 1993 and resulted in revelations that Leslie Fay’s earnings had been overstated by $119 million over three years and forced the firm into Chapter 11. During Leslie Fay’s internal investigation, Weil, Gotshal represented the Leslie Fay board’s audit committee but did not disclose that it had previously represented the employers of two committee members.
On Dec. 15, Brozman denied a motion by Arthur Gonzalez, the U.S. Trustee, to dismiss Weil, Gotshal because, she ruled, that would cause irreparable harm to Leslie Fay.
The hearing Monday to set the fine was held in chambers. Following the chamber conference, Brozman’s clerk simply stepped into the courtroom and announced, “The fine is $1 million.
Stephen J. Dannhauser, managing partner of Weil, Gotshal, said the law firm would not appeal. “We are gratified that the court is allowing us to continue our work on the Leslie Fay case and are pleased that this matter is now behind us, particularly since the bankruptcy case is currently at a critical juncture,” he said. “In hindsight, we recognize that there were appearances as to which we probably should have been more sensitive and responsive.” — Fairchild News Service

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