Tuesday, October 24, 2006

The Suit That Wasn't

Back in August, Interserve Plc (FTSE: IRV), a U.K. construction services company, announced that it was restating financial results for at least five years and would write down the value of its assets by 25 million pounds ($47 million).

As part of the restatement, KPMG, LLP and Linklaters were to conduct an "independent forensic review."

Predictably, shares of Interserve plunged (Bloomberg) following this news - the restatement - not the appointment of accountants and lawyers to perform a financial review.

Then things took some interesting turns.

A group of shareholders that had received their shares as a result of Interserve's acquisition of MacLellan Group plc hired law firm Mishcon de Reya to "consider whether to sue the support services company, its individual directors and its auditor Deloitte."

The independent review was completed (The Times of London) in late September and shares of Interserve soared (Reuters via Scotsman.com).

Of note - the acounting review resulted in 5 million pounds (about $9.3 million) in professional fees for KPMG and Linklaters. The total writedown was only 25.9 million pounds.

By comparison, Alston & Bird, LLP, the law firm of R. Neal Batson, the examiner appointed by the court overseeing Enron Corp.'s Chapter 11 bankruptcy was paid about $100 million. And Kirkpatrick & Lockhart Nicholson Graham LLP, the law firm of Richard Thornburgh, the examiner appointed in the WorldCom bankruptcy was paid in the neighborhood of $10 million.

Thanks again to reader Werner Kranenburg, a former Schiffrin & Barroway, LLP summer associate, and current law student in the United Kingdom for sending this one in.

Daily Trivia: Governor Thornburgh married not one, but two women named "Ginny." His first wife, Ginny Hooton was killed in an automobile accident. Several years later, he married his second wife, Ginny Judson.

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