One of the most feared class-action legal firms in America appears to be gunning for the NAB in the $30 billion AUSMAQ case but, incredibly, the ASX still hasn’t insisted that the market be told. Barry Banker reports.

So far so bad.

The Australian Financial Review’s Ashley Crossland threw further light on “the letter”, reporting in the Weekend Edition of the AFR that ‘the letter says the US firm litigates “or are team members in cases that most large American firms would consider either too risky or beyond their financial or legal resources.”‘

It transpires that the NAB secretly obtained an ex parte (that means they didn’t tell their opponents they were doing it) temporary injunction on Wednesday which has been stood over until July 24.

Crikey will endeavour to bring to its readers a copy of the temporary injunction judgment issued by Justice Barratt of the New South Wales Supreme Court. The gist is that apparently NAB is scared that they might be attacked from the land of the brave and free and apparently wrapped themselves in the flag so to speak.

Mr Maconochie declined to comment and the tellers at NAB are apparently saying nothing either.

With the mystery deepening, Crikey decided to do a little investigative work. Just who is this letter writing firm Lieff Cabraser Heimann and Bernstein?

Readers can find it on the web here.

Here’s some selected extracts from their site:

Since our founding thirty years ago, we have been committed to redress corporate misconduct, to achieve justice for investors, consumers, employees, to promote safe products — including drugs and medical devices — and to protect our environment and the human rights of citizens worldwide. We have participated in the trial or settlement of over 225 class actions.

Our firm enjoys a national reputation for professional integrity and the efficient and responsible prosecution of our clients’ claims. We possess sophisticated legal skills and the financial resources necessary for the handling of large, complex cases. We take great pride in our innovative approach to the practice of law and our firm’s leadership role in cases resulting in landmark decisions and precedent-setting rulings.

Pretty good stuff, but Crikey’s interest was further piqued and increasingly amazed. Try this on.

Lieff Cabraser has participated in some of the most important civil trials in the United States over the last ten years. We served as co-counsel in the 1990’s litigation arising out of the Exxon Valdez oil disaster. We were co-counsel in the trial that led to a judgment of over $1 billion against State Farm, which was the largest judgment ever against a United States insurance company for violating its contract with policyholders and committing consumer fraud. On April 5, 2001, the Illinois Court of Appeal affirmed the judgment.

Of particular importance, we represented Massachusetts, several additional states and 18 California cities and counties in their lawsuits against Philip Morris, R.J. Reynolds and other cigarette manufacturers. This litigation resulted in a landmark $206 billion settlement, with approximately $12.5 billion allocated over 25 years to cities and counties in California. As part of the settlement, the tobacco industry was required to undertake extensive modifications of its marketing and promotion activities in order to reduce teenage smoking.

We have played a leading role in the litigation to recover assets taken from, and insurance benefits never paid to, Holocaust victims and survivors. As part of this effort, we served as one of ten members of a Plaintiffs’ Executive Committee that prosecuted and settled the case against Swiss banks. We were also instrumental in prosecuting Holocaust-era cases against German private enterprise for using slave and forced labor, and against German (and other) banks and financial institutions for “aryanizing” the property of victims of Nazi persecution. Together, settlements in these cases to date have totaled over $6.3 billion.

In 2001, we successfully settled two significant securities fraud cases, California Micro Devices Securities Litigation and Network Associates Securities Litigation. Commenting on Lieff Cabraser’s work in the California Micro Devices case, U.S. District Court Judge Vaughn R. Walker stated, “It is highly unusual for a class action in the securities area to recover anywhere close to the percentage of loss that has been recovered here, and counsel and the lead plaintiffs have done an admirable job in bringing about this most satisfactory conclusion of the litigation.” In the Network Associates case, U.S. District Court Judge William H. Alsup observed that our firm is “one of the foremost law firms in the country in both securities law and class actions.”

In April 2002, partner Richard M. Heimann conducted the trial for plaintiffs in Claghorn v. Edsaco, Ltd., a federal securities fraud class action lawsuit. Plaintiffs, former shareholders in Scorpion Technologies, Inc., alleged that Edsaco aided Scorpion in setting up phony European companies as part of a scheme in which Scorpion reported fictitious sales of its software to these companies, thereby inflating its earnings. The jury found for the plaintiffs and returned a $171 million verdict, to date the fourth largest civil jury verdict in the U.S. in 2002.

Now that puts the AUSMAQ $30 billion or so claim in perspective doesn’t it? Crikey was particularly attracted to Lieff Cabrasers’ $206 billion settlement in Uncle Sam dollars in the tobacco case.

Crikey’s interest was further piqued by the curious words “team members” reportedly used in the letter to NAB. Something stirred in Crikey’s memory.

Further web research into the tobacco situation showed that in 1996 two of America’s corporate raiders Bennett Le Bow and Carl Icahn teamed up to split Nabisco from RJR Nabisco. The tobacco litigation was apparently a deal breaker, but the tobacco settlement smoothed the way and Nabisco was later split off, going to Kraft (ironically a division of Philip Morris) in 2000, and giving Nabisco shareholders a windfall.

So just who might be the other “team members” that Lieff Cabraser plays with? No-one knows, but it appears the boys in long pants from big school are players with multi-billion payouts the norm.

And will the NAB’s temporary “anti-suit” injunction against Mr Maconochie and presumably the plaintiff Idoport in Australia have any effect at all? Who knows? A US “team” may play its own multi-billion game with the NAB in the US courts, RJR Nabisco-style. With a winged Board and incredible management, NAB is a pretty tempting target while it is weighed down with a mammoth tobacco-sized legal claim and close to zero market credibility.

It all depends what was in this mysterious letter from Lieff Cabraser that the NAB has been sitting on, and so far, they’re not publicly saying. The ASX is fast asleep as usual and hasn’t bothered to ask. It seems no-one at NAB has bothered to tell them yet.

Meanwhile, rumours are rife in the market about NAB.

The UK Financial Times (James Mackintosh and Virginia Marsh) reported that “NAB’s management is about as well regarded in Australia as Abbey’s is over here..Since Abbey’s (Abbey National) problems come down to management, NAB really wouldn’t help.”

JP Morgan is also reported in the Financial Times and the Weekend Financial Review that NAB should flog its UK banks and return capital to investors.

More worrying though for the NAB Board and management is that far from being a predator, they may be getting lined up in the cross hairs by opportunistic US raiders.

Market scuttlebutt has a deal brewing involving some major NAB shareholders, capping the AUSMAQ litigation risk, savagely renovating the board and management, flogging off the UK banks, drastically cutting costs and doubling the NAB share price. If the rumours are true, that will be great for NAB shareholders. No wonder the Lieff Cabraser letter was like a nasty cattle prod to NAB’s rear end.

Who knows, maybe NAB will enlighten the market this week with what is going on. Or may be they’ll just rev up the share buyback with shareholders funds. Wonder what the US shareholders will think of that?

Peter Fray

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