Legal teams help clients through financial crisis

November 10, 2008
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Dickinson Wright has formed an Economic Recovery Team to advise clients on the best legal courses of action for every facet of their business that’s taking a hit from the current economic climate.

There are a growing number of law firms putting together such teams to meet their clients’ economic challenges.

Dickinson Wright decided to form the group as different versions of the bailout bill were being proposed, said attorney David Malson. The Emergency Economic Relief Act of 2008 was signed into law Oct. 3. At the heart of the legislation is the $700 billion Troubled Asset Relief Program, which authorizes the U.S. Treasury to purchase troubled assets outstanding from financial institutions, savings associations, credit unions, security brokers or insurance companies. The federal government’s intervention into the financial system was meant to attack the credit crunch and restore liquidity and stability to the system. 

“We felt it was something that would be important for us to get out in front of,” Malson said. “We pulled together different lawyers from different practice groups so we could take a cross disciplinary approach to looking at opportunities for our clients under the act.”

The team is comprised of 12 attorneys from the firm’s various offices. Collectively, they practice in all areas of law affected by the financial crisis, including real estate, insolvency, banking, corporate, litigation, municipal finance, regulatory and tax law. The recovery team will draft, publish and mail client alerts, which will also be posted on Dickenson Wright’s Web site. It also will host seminars on the credit crisis, the first of which is to be held simultaneously in Detroit and Grand Rapids on Nov. 13. The seminar will feature policymakers from the House Financial Services Committee, Senate Finance Committee, General Accounting Office and others. Malson said the seminars will be rolled out to other cities where the firm has offices and clients.

“This is a very unique act because it’s evolving on a daily basis,” Malson said. “A lot of what I would call the details of implementing the act were intentionally left to be sorted out as the process went along.”

Clients are interested in protecting the capital and assets they have but also want to take advantage of opportunities provided under the act, Malson said. He said the act actually provides opportunities for companies of all sizes, but the mainstream media treats the act as if it was geared only to bail out large financial institutions. Breaks for businesses include research and development tax credits, accelerated depreciation for qualified leasehold and restaurant improvements and higher deductions for donations of food to charities and donations of books and computers to qualifying schools. The act also extends a number of energy-related tax provision.

“There are accelerated depreciation schedules that you can tap into if you buy the equipment that’s earmarked in this statute: For example, if you’re a large corporate farming operation, you can amortize the equipment over five years, which is a much more rapid schedule,” Malson explained. 

However, a lot of the details about how the money is to be rolled out and how the tax credits are applied isn’t clear because many of the implementation rules are being drafted and revised daily, Malson added.

Dickinson Wright announced its new Economic Recovery Team Oct. 22. Five days later Miller Canfield announced it had organized a Financial Crisis and Recovery Team to help clients monitor, analyze, plan and respond to the challenges in the U.S financial markets. International corporate attorney Richard A. Walawender, assisted by commericial litigator Richard C. Sanders, is leading a multidisciplinary practice team of 20 attorneys from the firm’s U.S., Canadian and European offices.

Walawender said when the financial crisis really hit home, it became evident a lot of clients would need counseling because all of Miller Canfield’s client bases are affected one way or another by the fallout. They include corporations, financial institutions, insurance companies, pension funds and fiduciaries, and institutional investors. 

The Miller Canfield team stays in contact via e-mail, video conference calls and regular meetings. The team can provide immediate counsel to a client facing a liquidity crisis, to a client who can’t reissue securities or to a corporation that’s trying to pick up the pieces and become whole again, Walawender said. The team is prepared to counsel clients through the legislative and regulatory changes, as well as advise on issues involving the exposures they may have in derivatives, including credit default swaps, CDOs and other securities, he added.

“Because these instruments have been bought and sold widely and, in many cases, without use of the customary documentation, they have created a great deal of risk and exposure that are particularly serious in a stressful economic environment,” he observed. “There are a lot of parties looking at what their legal remedies are with respect to other parties that weren’t honoring their contractual obligations.” 

Litigation will likely be the last stage of the financial crisis, Sanders said. Sanders leads a 40-lawyer team that investigated and litigated on behalf of the Resolution Trust Corp. a series of  U.S. savings and loan association failures during the S&L crisis of the 1980s.

The S&L bailout was a crisis, but the present day crisis is much worse, Sanders said.

“I think it’s going to be very similar to that in this financial crisis,” Sanders said. “When pension funds, municipalities, banks and individuals start realizing they have large holes in their investment strategies, they will be looking to hold people culpable.”

The government will also be looking to hold people culpable criminally because it’s making large investments in banks at great taxpayer expense, and if there was criminal wrongdoing, the government is going to want to bring those people to justice, Sanders added.

People can expect to see further actions taken by Congress, the Treasury, the Federal Reserve, the Securities and Exchange Commission and state regulatory agencies in the months ahead. There will be additional legislation and regulations coming down the pipe, Sanders confirmed. Similar to the days of the Resolution Trust Corp., it started with a simple act that was passed that grew into thousands of pages of regulations, he said.

“This is a living organism that will continue to grow,” Sanders remarked. “It’s going to be a pretty wild and hairy ride for the next six to nine months. I think you’re going to see all kinds of cottage industries and a lot of subsidiary services growing out of this.”

The law firm of Foster, Swift, Collins and Smith, P.C. also announced the launch of an Economic Recovery Task Force. It, too, has put in place an inter-disciplinary group of attorneys who can counsel clients in regard to the multitude of challenges and decisions that confront them in today’s business environment.  Specifically, the Foster, Swift, Collins and Smith task force will assist banks, bank and financial holding companies, credit unions, insurance companies, and others in analyzing and responding to the Emergency Economic Stabilization Act of 2008. Its task force is led by Farmington Hills’ shareholder Randall L. Harbour, who leads the firm’s Banking, Finance and Real Estate Group.

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