One of the major problems with having relatively few restructuring advisors and a whole slew of newly bankrupt companies, is that sooner or later advisors will trip over their own feet as previously undisclosed conflicts of interest come to light. This is exactly what may soon force Lazard to forfeit over $16 million in revenue it had hoped to generate by advising bankrupt Tribune in its chapter 11 plight.
On February 16, the U.S. Trustee overseeing the Tribune bankruptcy filed an objection to Lazard's retention by the company, claiming the company had not disclosed a substantial conflict of interest, as at the time of its retention it was still advising the Chicago Sun-Times, and had also advised its predecessor company Hollinger international in 2003. Lazard claims it formally terminated it advisory relationship with the Sun-Times on January 30.
Joseph McMahon, attorney for the U.S. Trustee, claims Lazard's failure to disclose the relationship was intentional and grounds for denial of employment. As Lazard stands to lose its $200,000 monthly retainer, and a $16 million success fee, managing director Jim Millstein is vigorously objecting to the allegation of impropriety. In the meantime, restructuring shops have worked all weekend preparing pitch books with the hope of replacing Lazard in the desired position of advisor to one of the largest media bankruptcies in history.
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