This NY Times article reports on the settlement of the WorldCom class action lawsuit against Citigroup. The $2.65 billion settlement is the largest ever by a bank, brokerage firm or auditor to settle an investor fraud case based on the purchase recommendation advice that such an entity gave to investors. It is the second-largest amount ever paid to settle a securities class action, trailing only the Cendant Corporation‘s payment of $2.85 billion in 2000.
Nevertheless, neither of those records is expected to last long:

The bank also said that it would take a charge in the second quarter of $4.95 billion to reflect the settlement and an addition to its reserves to cover exposure to Enron and other pending litigation. The charge is equal to roughly three months’ worth of its earnings . . . Citigroup has set aside $6.7 billion in all to cover its litigation exposure.

Ouch!
A couple of quotes of note from the Bloomberg article on the settlement:

Chief Executive Officer Charles Prince said Citigroup faced claims seeking $54 billion in the WorldCom lawsuit. “We made a $1.64 billion insurance policy to avoid a roll of the dice in front of a jury,” Prince said on a conference call with investors. “We want to put the entire era behind us.”
Saudi Prince Alwaleed bin Talal, Citigroup’s largest individual shareholder, said Prince and Citigroup Chairman Sanford Weill called him this morning and he told them “I’m backing them all the way. If this was to go to court it would be so big, God help us,” Alwaleed said. “The trend in the U.S. and New York is against corrupt practices. Look at Martha Stewart.”

Galveston-based civil rights attorney Anthony Griffin has learned an $18,000 lesson that many local litigators know — do not get U.S. District Judge Sam Kent of the Galveston Division angry.
This Chronicle article reports on the $18,000 fine under Fed. R. Civ. P. 11 that Judge Kent recently levied against Griffin in connection with Griffin’s representation of a former Galveston Independent School District administrator in a wrongful termination-civil rights lawsuit.
As as his nature, Judge Kent did not mince words in sanctioning Griffin. He noted that the district “is currently fighting a severe and genuine economic crisis that has forced budget cuts resulting in the reduction of staff and programs.” He then observed that the money the district spent on the Boone lawsuit “does not come from a magic money tree.”

“Even a minimal investigation into the facts and the law of this case would have revealed the abject frivolity of all of plaintiff’s claims. Filing it shows either an ignorance of the law or an utter disregard for it, both of which are inexcusable.”

He went on to find that Griffin’s client’s claims were “utterly wanting in merit. This attorney, and all others similarly situated, must be made to realize that abusive manipulation of the legal system and attempts to legally extort money from public institutions, with no basis in fact or law, must and will be appropriately rebuked.”
Griffin has 30 days to pony up the $18,000.

This Chronicle story reports that former Dynegy executive Jamie Olis has been ordered to begin serving his 24-year prison sentence on May 20th for participating in an accounting scheme to disguise a $300 million loan as cash flow for Dynegy.

U.S. District Judge Sim Lake late Tuesday ordered Mr. Olis, 38 — who is married and the father of an eight month old and a soon-to-born child — to surrender May 20 at the minimum-security federal prison in Bastrop, Texas, which is just southeast of Austin.

Mr. Olis’ former Dynegy boss, Gene Shannon Foster, and former in-house accountant Helen Christine Sharkey pleaded guilty to a single count of conspiracy in connection with the same scheme for which Mr. Olis was convicted. They face no more than five years in prison and are scheduled to be sentenced in August.

During Mr. Olis’ trial, Mr. Foster testified that Sharkey, Olis, and he were among seven Dynegy employees and two outside attorneys who crafted the Project Alpha deal in April 2001 to meet financial expectations and reduce Dynegy’s taxes. None of those who Foster named — including former Dynegy finance chief Rob Doty — have been charged.

This NY Times article reports on the long brewing split into two firms of the large class action plaintiffs’ firm, Milberg Weiss Bershad Hynes & Lerach. One of the firms will be led by William Lerach, based in San Diego, and will be called Lerach Coughlin Stoia & Robbins. The other firm will be led by Melvyn Weiss, based in New York, and will be called Milberg Weiss Bershad & Schulman.
Mr. Lerach s the lead counsel in the main investor multi-district securities lawsuit pending in Houston against Enron Corporation‘s banks and several former officers. Grizzled veterans of that type of litigation have speculated that Milberg Weiss split has been one of the main reasons behind the glacial progress in settlement negotations in Enron-related civil litigation.

This NY Times article reports on U.S. District Judge Thomas F. Hogan’s order that KPMG turn over the names of its tax-shelter clients within 10 days pursuant to IRS summonses that were issued in 2002 (these matters take awhile to be worked out ;^)). KPMG is also the subject of a Justice Department investigation into the questionable tax shelters.
Judge Hogan’s order also noted that that opinion letters that law firm Sidley Austin Brown & Wood wrote regarding the tax shelters “appear to be nothing more than an orchestrated extension of KPMG’s marketing machine.” Moreover, Judge Hogan observed regarding KPMG that “the court has lost confidence in KPMG’s privilege log since it has been shown to be inaccurate, incomplete and even misleading regarding a very large percentage of the documents.”
Earlier posts on KPMG’s tax shelter woes may be reviewed here.

This NY Times article reports that U.S. District Judge Matthew F. Kennelly of the Northern District of Illinois upheld a government order for Sidley Austin Brown & Wood to turn over a list of client names involved in tax shelters that the firm allegedly promoted, and then approved a request from the group of about 50 clients to stay the order pending an appeal. The I.R.S. and the Justice Department filed pleadings late last year demanding that the firm produce the names of more than 600 clients that the government suspects bought abusive tax shelters from 1996 through mid-October 2003. Although Sidley Austin has turned the names of clients who did not object, the group of 50 clients sued to prevent the disclosure on the grounds that their dealings with the law firm are subject to rules governing confidentiality between lawyers and their clients.
In the meantime, U.S. District Judge James B. Moran of the Northern District of Illinois denied a Jenkens & Gilchrist motion to dismiss a government lawsuit seeking to force it to turn over the names of hundreds of clients who bought certain tax shelters. In his decision, Judge Moran concluded that the names of the clients were not protected by attorney-client privilege.
Sidley Austin and Jenkens & Gilchrist are among the targets of the government’s tax shelter inquiry because the firms wrote opinions attesting to the legitimacy of shelters that the U.S. Justice Department contends were questionable or illegal.

Chief Justice Thomas R. Phillips announced Thursday that he will resign on September 3, 2004.
Chief Justice Phillips, the 29th chief justice of the Texas Supreme Court, will have served almost 17 years by the time he leaves the Court. He was appointed by Gov. William P. Clements to replace former Chief Justice John L. Hill, who resigned, and took office January 4, 1988. Chief Justice Phillips was elected in 1988 to finish the remainder of Hill’s term and won re-election in 1990, 1996 and 2002.
He will assume the Spurgeon Bell Distinguished Visiting Chair this fall at South Texas College of Law in Houston. The following is Chief Justice Phillips’ statement:

This morning I visited with the Governor and delivered to him a letter advising that I intend to resign the office of Chief Justice of the Supreme Court of Texas, effective September 3, 2004.
I believe that no secular calling is higher than to sit in judgment over disputes brought by the people to their public courts for resolution. I am most grateful for the rare opportunity to serve this great state as both a district judge and as Chief Justice of the Supreme Court of Texas. I hope that my tenure as Chief Justice has been worthy of the high standards set by my predecessors, most notably my friends and mentors John Hill, Jack Pope, Joe Greenhill and the late Robert W. Calvert. I hope that my performance in office has to some extent justified the confidence placed in me by Governor William P. Clements, who appointed me in 1988, and by the voters of Texas, who four times have returned me to office.
I am one of those truly lucky persons who reached their ultimate career goal at age 38, when I became the youngest Chief Justice since Texas joined the Union. Now, more than sixteen years later, I have the opportunity to pursue new goals, some of which I have set already, some yet to be discovered.
I will always be proud of the Supreme Court of Texas and its accomplishments during my tenure. For instance, the Court has amended the rules of procedure, evidence and court administration to reduce delay, confusion and abuse in our legal system. We have enhanced both judicial and legal ethics through new conduct rules and disciplinary procedures. We have adopted procedures to make both court case files and administrative records more open to the public. And we have taken bold steps to make civil legal services more accessible to the poor. But beyond these important administrative reforms, I am proud of this Court’s commitment to the rule of law. Today, our opinions are respected across the nation for their scholarship and fairness. Our justices respect the Court’s proper role of interpreting and applying the law, not inventing it. The justices I leave on the Court are men and women of the highest intellect and integrity, and it has been a privilege to work with and learn from each of them.
Of course, the Texas judiciary is still far from perfect. Many of its problems may be traced to the structure of our judicial system, which is essentially a relic of the nineteenth century. I sought a fourth term in 2002 because I believed that this Legislature would make real changes in the way we select our judges and organize our courts. Some progress was made, but not enough. Perhaps new leadership can rally public support for comprehensive reform that will give our great state the court system our people deserve.
While I pursue future career opportunities, I will spend the next academic year as the Spurgeon Bell Distinguished Visiting Chair at the South Texas College of Law in Houston. While I am leaving public office, I am not renouncing my interest in public affairs. I will speak out on judicial and other issues if and when I have something useful to contribute. Finally, I must take a moment to thank those who have made my service possible. First and foremost, I acknowledge with deep gratitude my family’s sacrifices and their help. My wife Lyn left an important career at Rice University and my stepson Thomas Kirkham left his family, his friends and his school to move from Houston to Austin. They and my son Daniel, who was born since I became Chief Justice, have had to share me with boxes of petitions for review on evenings and weekends and with judicial conferences and commencement addresses on family vacations. Second, I appreciate the dedicated service of my Supreme Court staff, including my administrative assistant, staff attorneys, and law clerks, who have worked so hard to make me look good. Finally, I sincerely thank all those who supported my appointment, election, or reelection to this position.
I leave with the sure knowledge that Governor Perry will choose an excellent choice successor, just as he has chosen four excellent justices to previous vacancies on our Court. I hope that my successor finds this position as challenging and rewarding as I have.

Chief Justice Phillips is a class act and a fine jurist. He will be missed and difficult to replace. I wish him the best in his new professional undertakings.