Salomon Bros., in deep legal trouble over government securities trading, has taken a prominent Wall Street law firm off the case and is looking for new lawyers to represent it, a spokesman said Friday.
The firm, Wachtell, Lipton, Rosen & Katz, had been representing Salomon on the matter since early July, when it was asked to conduct an internal investigation of possible wrongdoing by the securities firm in Treasury auctions.
As reported, questions have been raised about when the law firm first learned of Salomon’s misdeeds and whether it immediately urged Salomon’s management to notify federal regulators. Neither Salomon nor the law firm has commented on those questions. However, Salomon spokesman Robert F. Baker Jr. said Friday that taking Wachtell off the case “does not in any way reflect adversely on the work that has been done by Wachtell Lipton, which has been of critical importance to Mr. (Warren) Buffett in his efforts since assuming the job of chairman.”
Buffett stepped in as Salomon’s chairman and chief executive Aug. 18, after then-Chairman John H. Gutfreund and two other top executives resigned. The firm acknowledged that Gutfreund and the others knew of improper bids in Treasury auctions for months without notifying federal regulators.
Wachtell is best known for its role in defending big companies in the takeover battles of the 1980s, and for its invention of anti-takeover strategies such as the “poison pill” defense.
Baker said Wachtell several times had offered to “step aside” since Buffett was named chairman. But he said Buffett asked the firm to stay on temporarily “because of the critical need for their talent and knowledge of Salomon” to help turn over information to government investigators.
He said Buffett on Friday decided to accept the offer “so as to get on with the task of forming a new team at Salomon.”
Baker declined to elaborate. A week ago, Donald Feuerstein, Salomon’s chief in-house lawyer, resigned at Buffett’s request.
Martin Lipton, a senior partner at Wachtell, didn’t respond to repeated requests for comment Friday.
Baker said Salomon is interviewing several law firms and no decision had been made on which one will replace Wachtell. In addition to the government securities investigation, Wachtell has represented Salomon’s mergers and acquisition department for several years. It couldn’t be learned immediately whether Wachtell would continue to represent Salomon on matters other than the legal problems linked to the firm’s activities in Treasury auctions.
In a press conference Aug. 18, Deryck C. Maughan, Salomon’s new chief operating officer, said Wachtell began the internal investigation at Gutfreund’s request on “July 6 or 8,” well after Gutfreund and other top executives had learned of the firm’s wrongdoing in late April.
Federal regulators weren’t notified until Aug. 9. During the press conference, Maughan and Buffett said they didn’t know exactly when Wachtell first learned of Salomon’s wrongdoing, or when the firm first advised Salomon’s management to contact regulators.
A Wachtell partner declined to comment when reached Aug. 18, and lawyers at the firm haven’t returned any of several calls seeking details since then.