A drop in the ocean?

By | 8th September 2009

Last weekend’s Sunday Times Business section carried an article by Danny Fortson and Kate Walsh about the advisers working on the collapse of Lehman Brothers.

The pictures at the top of the article showing a grim faced Dick Fuld, former Chief Executive, and one of the workers who lost her job that fateful day almost one year ago brought home what a momentous event the collapse of such a major investment bank actually was. The banks in the UK were deemed to be too big to fail and have been bailed out with huge amounts of taxpayers’ money but Lehman Brothers went under owing an eye watering $613 billion.

The thrust of the Sunday Times article was the bill to be incurred for sorting out the claims arising as a result of the bank’s collapse. Apparently, advisers liquidating its remains have already billed $500 million. It is said that Enron cost $725 million to unravel, currently the world record!

This figure is likely to be dwarfed if Tony Lomas is to be believed. He is the PwC partner   leading the UK liquidation and he has said that the costs could exceed a massive $4 billion once litigation costs are included.

The article reports that there are at present some 76 actions going on in courts around the world from Luxembourg to Germany to Japan with more to come as claims are notified, the deadline for which is in 3 weeks’ time, some 53 weeks after the bank filed for bankruptcy.

All these figures made me wonder how much was being spent on processing the paper and electronic documents involved. I would hazard a guess that it will be more than a drop in the ocean as lawyers and other advisers struggle to get to grips with the complexities of the arcane trading in which the traders at Lehman excelled in the good times.

For any advisers reading this, may I offer a few thoughts on how their job might be simplified? Unsurprisingly (since this blog is about Smart e-Discovery) I return to a favourite theme of mine –  the imperative to reduce the costs of discovery, as noted by the judge in the recent Multiplex/Cleveland Bridge judgement and referred to elsewhere in this blog [see: The Road from Wembley]

A few tens of thousands saved here and there on discovery costs, even if seemingly a small proportion of the billions involved overall, can have significant impact particularly if the cost of the advisers themselves can be reduced as fewer people need less time to understand the issues and litigate them.

I shan’t recite the Millnet mantra here but if you are curious about the scope for cost reduction in the e-Discovery process, take a look at our Introduction to Smart e-Discovery Services [PDF – 531KB]