But Liddle, 55, has many high points in his career, and they’ve earned him a rep as one of the meanest and toughest lawyers on Wall Street. His Manhattan firm, Liddle & Robinson, with about 20 attorneys, has built a track record of squeezing multimillion-dollar settlements out of big firms for clients that typically include aggrieved former employees and angry investors. Liddle is intimidating, and not just because of his broad shoulders and passing resemblance to Mr. Clean. His past victories include a record $25 million award in punitive damages for a broker who sued his former firm (it was overturned on appeal and is being retried).
He starts presenting evidence this week in what could be his biggest case yet. His target: Citigroup, which he’s suing for $100 million on behalf of David Chacon, a former Citigroup broker who blew the whistle on its practice of “spinning,” or awarding shares of hot initial public offerings to favored clients. Among other things, Liddle is scrutinizing Citigroup’s relationship with scandal-battered WorldCom (the company was given favorable research coverage by Grubman, who worked for Citigroup’s Salomon Smith Barney division, and handled banking deals at the same time he was promoting companies through his supposedly independent research). Liddle’s evidence, some of which he shared publicly for the first time with NEWSWEEK, offers new insights on just how blurred the lines may have been between banking and research.
Conflicts among research analysts have long been a sore point for Wall Street. Regulators crafted a “global settlement” in 2002 that included Citigroup and other firms for misleading investors. But Liddle’s not after the kind of major structural reforms won by regulators. He’s after money. Liddle maintains his clients are still owed millions, based on the evidence he’s unearthed. “It’s easy to point the finger at Grubman because of all his bulls–t research,” Liddle says. “But he’s also taking the heat for a lot of people.” Even other lawyers say Liddle’s opponents typically have cause to be worried. David Robbins, who’s familiar with many of Liddle’s cases, says: “The big firms won’t admit it, but they’re scared to death of him.”
Liddle’s evidence includes:
A memo in which Grubman’s bosses gave special permission for his wife to open a brokerage account outside the firm (firms generally prohibit this because they want to monitor trades of executives with potential inside information on stocks). Grubman said he didn’t invest in stocks he covered, which would have been a conflict of interest. But under cross-examination by Liddle, Grubman recently conceded his wife did own shares of WorldCom and other telecom stocks, and sold them in the fall of 2001 even as Grubman was touting them to investors. Grubman and Citigroup declined to comment, but did not dispute the existence of these and other memos.
E-mails showing that Grubman’s relationship with Scott Sullivan, the indicted former finance chief of WorldCom, was anything but arm’s-length. The e-mails show the two executives communicated regularly even as Grubman was promoting the stock while it plummeted. They discussed not only business but family vacations. Grubman, according to several e-mails, also gave drafts of his research on WorldCom to its former CEO, Bernard Ebbers, prior to publication (Ebbers has also been indicted). Lawyers for Ebbers and Sullivan could not be reached for comment.
Liddle has another internal memo that, he says, shows how Citigroup used its two biggest rainmakers, Weill and Grubman (who was supposed to be independent), to maintain a lucrative banking relationship with troubled WorldCom. The memo is from a Citigroup investment banker to Weill and Grubman, among others, discussing how Citigroup should react to an “assault” by JPMorgan to win WorldCom’s business. “To reaffirm the importance of our relationship with Worldcom, I would appreciate each of you placing a congratulatory call to Bernie Ebbers” for completing a bond deal, the memo said. It also asked Weill, Grubman and others to call Ebbers and “reinforce our desire to be as constructive and supportive of Worldcom’s agenda as possible.” Citigroup says calls by top management to congratulate clients on big deals was not unusual.
Liddle says these memos and others paint a portrait of Citigroup as a company where “almost anything goes” as long as it brought in new business. So far, Citigroup isn’t backing down, and the company has made general comments recently that Liddle’s cases have no merit.
By all accounts, Liddle has many secret weapons. David Greenberger, an associate at Liddle’s firm, knows what to look for among the mountains of documents he subpoenas. Liddle himself knows the inner workings of Wall Street from his earlier stint as a lawyer for Drexel Burnham Lambert. And Liddle is a brutal cross-examiner of the many witnesses he calls, including CEOs (he says he’s not easily cowed after a stint early on as a labor organizer for farmworkers). Most of all, he makes it clear to opponents that he’s willing to roll the dice on a trial rather than settle. It’s certainly paid off. He lives in a penthouse in Manhattan, drives a Porsche and calls celebrity chef Mario Batali a friend.
Liddle’s legal style–“I’m willing to play rough,” he says about himself–has cost him at times. The companies he sues often resent his tactics and dig in for a fight, rather than settle, says one lawyer who’s worked with Liddle. He has even sued an opposing lawyer for defamation over comments about one of Liddle’s clients. “This is a man who wants to be feared, and he will induce fear in others by attacking opposing lawyers, judges, anybody who gets in his way,” says Seth Lipner, whose law associate is the target of the defamation suit. “He gets into the mud.” A judge cited him for his “belligerent” behavior; another sanctioned him for walking out of an arbitration panel in disgust (the sanction was later reversed).
Right now, Liddle’s spoiling for a fight, and his case against Citigroup could mean a payday of millions. “Most of my competitors are afraid of being ground down to pulp by a company like Citigroup,” he says. “Not me.” If he wins, perhaps he’ll have a new favorite story to brag about.
