Not So Fast: Indiana State Pension Fund Seeks To Block Chrysler 363 Sale, White & Case Retained

White & Case, made famous by its irreverent lawyer Tom Lauria, who led a valiant fight for the non-TARP lender committee until its disbandment after holdout after holdout decided fighting against the US government was not reasonable, has been retained again, this time by Indiana Pension Funds, holders of Chrysler first-lien claims, who are continuing where the non-TARP lenders dropped off.

In several motions with the Chrysler docket earlier, the Indiana State Teachers Retirement Fund, Indiana State Police Pension Trust, and Indiana Major Movers Construction Fund, fiduciaries for "approximately 100,000 civil servants, including police officers, school teachers and their families" have objected to the 363 sale, and demand Judge Gonzalez should block the sale, claiming "the plan is illegal and tramples their rights."

Among other things, the Indiana Pensioners seek to appoint both a trustee and an examiner in the case (an examiner was eventually retained in the Lehman bankruptcy), claiming that the company "has ceded control over their business and their restructuring efforts to the United States Treasury Department" which is using the Chapter 11 process to reward creditors that the "government deems politically important."

Not only that, but lawyers added that "the Treasury Department has taken constructive possession of Chrysler and is requiring it to adopt a sale plan in bankruptcy that violates the most fundamental principles of credit rights."

Whereas before it was easier to scapegoat certain evil, vicious hedge fund managers who could much easier be stripped of their fiduciary obligations and painted for the greedy, disgusting animals they are, Obama and Rattner will have a much more difficult time playing the blame game on this occasion, where the actual impaired party is so much closer to the people for whom it is a fiduciary, in this case, as the filing notes, roughly 100,000 ordinary men, women and children in the state of Indiana.

Lastly, this could significantly derail any plans for a fast and streamlined 363 sale: hopes were high that with the dissolution of the non-TARP committee it would be smooth sailing for Fiat and for the administration to get everything they wanted. With this last minute objection coming completely out of left field, Chrysler and its advisors will be stumped which lever in the media blame game to use now.

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White House Claims Head Of White & Case Restructuring Group Lied

In a story becoming more bizarre by the minute, ABCNews has now picked up on the Perella Weinberg scent with some new twists. According to ABC, White House deputy press secretary Bill Burton claims that the allegations by Tom Lauria, global head of the Financial Restructuring and Insolvency at White & Case are "completely untrue". As Zero Hedge already disclosed, Perella Weinberg was previously a client of White & Case, however, the firm run by former head of M&A at Morgan Stanley Joe Perella (where incidentally Steve Rattner was head of the Communications group until 1989), decided to fire the law firm after developments unknown, and in a radio show, Tom Lauria had this to say about the White House's alleged strongarming tactics:

"One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight...That was Perella Weinberg."

The White House has now stepped in and claims that this story is patently false:

"The charge is completely untrue," said White House deputy press secretary Bill Burton, "and there's obviously no evidence to suggest that this happened in any way."

What is more strange is that now Perella Weinberg itself is claiming Lauria's story misrepresented the facts:

"A Perella Weinberg Partners spokesperson told ABC News on Sunday that “The firm denies Mr. Lauria’s account of events.” The spokesperson would not elaborate."

What is strangest is that Lauria would stake his career and reputation on the line by stating on the record the facts previously disclosed. As such his downside is much bigger than that of Mr. Burton or of the PW's spokesperson, as they effectively side with the Obama's side of the story.

Granted there could be even more to this story than meets the eye, thanks to some keen observations by our friends at Finem Respice.

Ultimately, this will be a very interesting development, because without factual backing, Tom Lauria's career is now on the line, as he has taken on not just the administration but his very own, former client. The bottom line here is that someone is lying, and if any further facts emerge to substantiate White & Case's position, it could prove to be a massive PR blow to both the White House and the FDIC's advisor, Perella Weinberg.

The full statement by Perella Weinberg is presented below:

Suggestions have been made that the Perella Weinberg Partners Xerion Fund changed its stance on the Chrysler restructuring due to pressure from White House officials. This is incorrect. The decision to accept and support the proposed deal was made by the Xerion Fund after reflecting carefully on the statement of the President when announcing Chrysler’s bankruptcy filing. In considering the President’s words and exercising our best investment judgment, we concluded that the risks of potentially severe capital loss that could arise from fighting this in bankruptcy court far outweighed any realistic potential upside.

We have a very specific mandate from our investors, and that is to carefully weigh investment risks and rewards. It is not our investment mandate to pursue political or risky legal campaigns with our investors’ money. This was our assessment of investment risk and reward, nothing else.



While we did and still do believe that the lenders would be justified in pressing their objections under conventional bankruptcy law principles, we believe a settlement would now be in the best interests of all parties in the context of avoiding a drawn out contested bankruptcy litigation proceeding, and we encourage our colleagues in the loan syndicate to pursue this immediately.”

Lastly, should it be at all odd, that Mr. Arbess, fund manager of Perella Weinberg's Xerion, which is at the heart of this whole Chrysler fiasco, was not only a Partner, but also Head of Global Privatization at ... White & Case.

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