SEC Homes In on Lehman, ‘Funds of Funds’ [WSJ]
“The Securities and Exchange Commission’s investigation into the collapse of Lehman Brothers Holdings Inc. is zeroing in on an accounting maneuver used to give the appearance that the company t levels, according to people familiar with the situation.
Agency officials also are probing whether former Lehman executives failed to adequately mark down the value of the huge real-estate portfolio acquired in the securities firm’s takeover of apartment developer Archstone-Smith Trust or to disclose the resulting losses to investors, these people said.
The narrowing probe could move the SEC closer to bringing civil charges related to Lehman’s collapse in September 2008, though a decision doesn’t appear imminent.”
Study Says Directors Favor Themselves, Not Shareholders [FINS]
“A new study found that directors who field whistleblowing claims are likely to discount charges that could threaten their board seats and will assign fewer resources into investigating such claims.
In weighing hypothetical charges, 83 veteran directors at large U.S. corporations said they would allocate 42% fewer resources on average to fraud tips that might ultimately cost them their board seats.”
Dubai World reaches $24.9 billion debt deal [Reuters]
“State-owned conglomerate Dubai World DBWLD.UL on Friday reached a formal deal to restructure around $24.9 billion of liabilities, partly easing recently heightened concerns over the Gulf emirate’s debt woes.
While Dubai World’s agreement with most of its creditors is seen as a positive step for Dubai, the announcement comes just days after a unit of Dubai Holding, the conglomerate owned by Dubai’s ruler, said it will delay repayment on a $555 million loan, the second time it has failed to meet a repayment deadline.”
Huguette Clark’s multi-million-dollar fortune remains in hands of her financial managers [NYDN]
“Millionaire recluse Huguette Clark’s $500 million fortune will remain in the hands of financial managers who are under investigation, a Manhattan judge decided Thursday.
Judge Laura Visitacion-Lewis tossed a request by Clark’s relatives to appoint an independent guardian to oversee her finances and property, including Fifth Avenue’s biggest co-op apartment.
The judge called the family’s concerns about Clark’s health and state of mind “speculative” and “insufficient” to merit wresting control from her lawyer, Wallace Bock, and accountant, Irving Kamsler.”
Control Freak Q&A With Caleb Newquist [Control Freak]
Approva’s Control Freak blog asked me what I liked about being “control freaky.” Check out this post for the answer and more bits of wisdom from Adrienne’s favorite blogger.
Trump Offers to Buy Out Islamic Center Investor [WSJ]
“Mr. El-Gamal, founder of SoHo Properties, is one of eight investors who paid $4.8 million for a building two blocks from the site of the Sept. 11 terrorist attacks.
The statement came following reports that real estate mogul Donald Trump was offering to buy one investor’s stake in the property.
In a letter to Hisham Elzanaty, an Egyptian-born Long Island businessman and a major investor in the project, Mr. Trump offered to buy his stake for 25% more than Mr. Elzanaty paid for it.”
Former GE Unit Executive Says He Was Pushed Out for Questioning Accounting [Bloomberg]
“General Electric Capital Services was sued by a former executive who claims he was forced out for questioning the company’s treatment of an asset.
Edward Gormbley, who worked for GE Capital from 2000 until he quit in September 2009, filed his suit today in state court in Stamford, Connecticut. The complaint also names parent General Electric Co. and its chief executive officer, Jeffrey Immelt.
Gormbley said he was punished for challenging the valuation of silicon-maker Momentive Performance Materials, an investment asset. GE Capital overstated Momentive’s value in December 2008 to improve its own balance sheet, he said. Valuing the asset correctly would have reduced ‘GE Capital’s earnings 100 percent,’ in the fourth quarter that year, according to the complaint.”
• Does New 10% Tanning Tax Discriminate Against Whites? [TaxProf Blog]
Are you being unfairly taxed just because you want some extra Vitamin D?!?
• Dubai World, Nakheel Get $9.5 Billion Injection [WSJ]
For now at least, it appears that Aidan Burkett, Deloitte’s rock star restructuring expert has saved the day at Dubai World. DW will get $9.5 billion from the Dubai Government and plans to pay $26 billion to its creditors that include HSBC, Lloyds, Standard Chartered and RBS.
The complex deal that has taken months to draw up involves Dubai World issuing two tranches of new debt and converting $8.9 billion, or 38%, of its existing obligations into equity, the company said.
The new debt won’t be guaranteed by Dubai government, which has previously been a thorny issue between creditors and the city-state’s advisors.
• Citi Loses Bid to Move EMI Trial [WSJ]
Remember Guy Hands, the founder of Terra Firma Capital, who hates taxes so much that he asks that his family come to visit him in Guernsey so that he doesn’t risk his non-resident status for England?
Well, you’ll be happy to know that Citi’s bid to get the trial moved to London was rejected by Judge Jed Rakoff so Hands won’t have to worry his pretty little head. Had the motion to move the trial been granted, Hands’ non-resident status could have been jeopardized and he may have had to pay taxes due to England. And, God forbid, do some of the traveling to see his family.
• Health-care bill clears crucial vote in Senate, 60 to 40 – “The vote was the first of three procedural hurdles that Democrats must cross before a final vote on passage of the measure, now scheduled for Christmas Eve.” [Washington Post]
• Bye-bye Bo-Tax. Hello, Tan Tax – Angelo Mozilo will not stand for this. [Don’t Mess With Taxes]
• Top Ten Ways to Ensure a Smooth Audit – Communication seems to be a theme. There’s a concept. [Mission Accountable]
• An Inside Look at JPMorgan Outplacement [FINS]
• Dubai World poised to press for loan extensions – No word if DW plans on actually paying the loans back. [Reuters]
• IRS Files $8.15 million in Tax Liens Against Sinbad – Despite filing tax returns, Sinbad didn’t pay the tax owed from 1998 to 2006. [TaxProf Blog]
• 2009: The Year of the Failed Banks – Seven more this past Friday, bringing the total to 140. [The D&O Diary]
Last week we touched on Deloitte and KPMG facing off in the whole Dubai World fiasco. Today we get the lowdown on the possible difficulties that Aidan Birkett — Deloitte’s MD of corporate finance and the Chief Restructuring Offficer of DW — could run into serving his finicky client.
Hard to believe that a group of über-wealthy sheiks (responsible for re-creating the Earth out of tiny man-made islands, no less) would resist outside advice but it sounds like Birkett will have his hands full.
Zawya Dow Jones:
Bankers say his biggest challenge will be getting Dubai’s government to listen. It’s unclear whether he’ll be given a free hand to remodel Dubai World without the interference of the emirate’s political elite.
“When a foreigner comes into the country, ultimately what happens is that the door closes, people speak Arabic, they come out and they say that’s the deal,” said a Dubai-based investment banker, who asked not to be named.
That doesn’t sound complicated. Go to meeting. Listen to your interpreter struggle to keep up. The sheiks nod in agreement at each other. Meeting adjourned.
Naturally, Deloitte is confident that their man will get what he wants:
People who have worked with Birkett in the past say he is a tough operator and will demand that his advice is heeded by Dubai’s powerful sheiks.
“He is robust and he’s absolutely straight, no nonsense,” said Deloitte’s Ward in Dubai. “He doesn’t have to upset everybody along the way but he gets his own way.”
Sounds like a perfect recipe for a boardroom blowup/storm out session to us. DW doesn’t sound like it has a lot of options since all their assets were purchased with debt, so it’ll be interesting to see how they rationalize their “we’ll do whatever the hell we want” attitude. Best of luck, Deloitte.
FOCUS: Deloitte’s Birkett Faces Struggle With Dubai Sheiks [Zawya Dow Jones via WSJ]
If you spent the last four days in a tryptophan-induced coma, you may have missed the news that there’s a bit of a problem in Dubai. A $59 billion problem.
Long/short: Dubai World, the state sponsored investment company, asked for a six month extension on repaying principal and interest maturities to its lenders.
While this spooked a lot of people, the latest reports indicate that Dubai is of the opinion that it’s NBD.
Despite the claims by DW that nothing is fucked, it’s being reported that at least two Big 4 firms will get to bill the hell out of the parties privy to this latest debt-related SNAFU.
Dubai World has hired Deloitte to help them restructure their
house of cards debt while KPMG is representing banks that hold $30 billion of the Dubai World debt in the negotiations. Now while we’d like to imagine tense, smoked-filled rooms with fists being slammed on conferences tables and screaming into speaker phones, it’s likely that it will be a much more cordial affair but we remain hopeful.
As for the other two usual suspects, why E&Y has been left out of the proceedings altogether is a mystery but the PwC/Becks/Dubai World connection seems like a good enough reason to us to keep P. Dubs on the sidelines. Call it a hunch.
We’ll keep you updated on the Big 4 angle of this story as it continues long into 2010.