Missouri officials and a liquidator for General American Life Insurance are seeking $3 billion in damages from a law firm that advised the failed insurer.
Missouri Department of Insurance Director John Huff and Albert Riederer, special deputy liquidator for the Missouri-based company, have filed a lawsuit in Cole County. The suit claims New York-based Dewey & LeBoeuf gave the company bad advice that helped lead to its collapse in 1999.
General American was one of the country’s biggest life insurers before a credit-rating downgrade led to a massive run on the company.
The lawsuit claimed Dewey & LeBoeuf, who represented General American, was wrong to suggest the company seek administrative supervision. It also said the law firm recommended General American sell itself for the “substantially discounted price of $1.2 billion” to Metropolitan Life Insurance Co. Dewey & LeBoeuf later represented Met Life after the sale.
The law firm said in a released statement that it “categorically rejects the unfounded allegations in the complaint … involving its representation of General American in corporate matters some ten years ago.”
“The complaint makes profoundly erroneous misstatements of fact and is little more than a misguided attempt by a liquidator to attract media attention,” the statement said. “Dewey & LeBoeuf acted at all times in accordance with the highest professional standards and intends vigorously to defend these baseless and irresponsible claims.”
Riederer has filed a number of lawsuits in recent years to determine who contributed to the insurer’s collapse.
Goldman Sachs agreed late last year to pay $100.5 million to settle a lawsuit that claimed the investment bank and General American adviser had not told the insurer a series of guaranteed investment contracts could create liquidity concerns.
Others agreeing to settle lawsuits include investment bank Morgan Stanley, for $95 million; auditing firm KPMG, for $18 million; and General American’s officers and directors, for $29.5 million.
After subtracting legal fees and other costs, the money is being dispersed to General American’s more than 300,000 policyholders.
Information from: The Kansas City Star, www.kcstar.com
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