Banks, Financial

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Economy

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Financial

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Financial

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Banks

RBS share drop accelerates on stress test flop

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Categorized | Insurance

Aviva files lawsuit over Dewey collapse


Posted on December 18, 2012

The fallout from the bankruptcy of Dewey & LeBoeuf has escalated after Aviva accused former senior executives at the law firm of misrepresenting its financial position before the insurer lent it money.

In a lawsuit filed in Iowa, where the US arm of the UK insurer is based, Aviva alleged Dewey had provided it with “false and misleading statements” that the three top officers “knew or should have known were deceptive”.

    Aviva, which bought $35m in senior secured notes in April 2010, said the defendants had assured them Dewey was financially sound when it was in fact “dire”.

    In particular, Aviva complained they hid remuneration that Dewey owed to some of its partners.

    The law firm had handed out multimillion-dollar guarantees to attract so-called rainmakers that would bring their books of business to Dewey. But it was unable to fulfil its obligations.

    Dewey & LeBoeuf filed for Chapter 11 bankruptcy protection in May, the biggest collapse of a US law firm by any measure. Former partners have filed other lawsuits relating to its collapse.

    Aviva’s law suit named Steven Davis, former chairman, Stephen DiCarmine, former executive director, and Joel Sanders, former chief financial officer, as defendants.

    Ned Bassen, partner at Hughes Hubbard & Reed, who represents Mr Sanders and Mr DiCarmine, said: “The lawsuit is frivolous. The insurance company purchased the notes from the law firm of Dewey & LeBoeuf LLP but has bypassed bringing a claim against the law firm in New York bankruptcy court to, instead, sue three individuals in Iowa . . . The lawsuit’s allegations are false and rely on second- or third-hand purported information, even media statements. This equates to legal muckraking.”

    Kevin T Van Wart of Kirkland & Ellis, who represents Mr Davis, said: “Aviva is a sophisticated entity that knew what it was doing. Rather than take responsibility for an investment decision that soured, it is looking for someone else to blame and resorting to revisionist history.”

    He added: “To the extent that Aviva has a claim, it is really a claim against the Dewey & LeBoeuf estate and belongs in the bankruptcy court.”