NEW YORK — The U.S. Trustee in The Leslie Fay Cos. bankruptcy case reiterated his belief Thursday that the company’s attorneys, Weil, Gotshal & Manges, should be disqualified from serving as its Chapter 11 counsel.
“[Weil, Gotshal] failed to adequately respond to — and in certain instances completely ignored — the critical issues raised in the motion,” the Trustee, Arthur J. Gonzalez, wrote in a 43-page filing made Thursday. This filing answered the law firm’s reply to his initial motion for disqualification and a return of fees.
Specifically, Gonzalez said, the law firm “failed to address the impact of” its many client relationships on the “credibility” of the accounting regularities report and its failure to disclose those relationships in a “proper and timely manner.”
In that response, Weil, Gotshal said it was a disinterested party when it represented Leslie Fay and two of its audit committee members that oversaw the investigation into the apparel maker’s accounting scandal.
The law firm noted that since it had no conflict of interest, its disqualification from the case, which would only hurt Leslie Fay and its creditors, is unwarranted.
Responding to the law firm’s contention that its dismissal would hurt Leslie Fay and its estates, Gonzalez said the court should first consider what message might be sent if Weil, Gotshal is not adequately punished.
“The court must weigh the harm to the integrity of the system against the harm to the debtors and creditors and their shareholders,” Gonzalez said.
— Fairchild News Service

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