Academic

Citibank, Bank Of America, And A $50 Million Clerical Error: The Heller Ehrman Bankruptcy

By Dan Filler

According to a story in the reputable law publication, The Recorder, Citibank and Bank of America may get slammed in the bankruptcy of failed law firm Heller, Ehrman, White & McAuliffe.  (Faithful readers may recall that I am a Heller alum, having worked there as a paralegal during the mid-1980's.)   Heller's creditors committee is seeking the return of $50 million paid to these two banks during the three months prior to Heller's dissolution.  Apparently, the banks thought they were secured creditors - but as a result of a clerical error, actually were not.  I'm not a bankruptcy law expert - so I'll leave it to Tim to give a more in depth analysis - but I know that unsecured creditors receive far less preferential treatment in Chapter 11.  It's hard to know whether there will be enough cash to adequately compensate unsecured creditors of Heller, but whatever the financial outcome... this should be an object lesson for every junior associate who ever worked a finance deal.  In coming weeks, we may hear a lot about bank failures.  This one may be small in the grand scheme.  But assuming this claim holds, this failure is truly, truly ugly.

Image: 333 Bush Street, former home to Heller, Ehrman

Full post as published by The Faculty Lounge on February 26, 2009 (boomark / email).