Photographer: Francois Guillot/AFP via Getty Images

Inside the Secret Society of Wall Street's Top In-House Lawyers

  • Wall Street general counsels have met for roughly two decades
  • Lawyers discussed banding together against plaintiffs’ lawyers

It’s a Wall Street club that’s virtually unknown on Wall Street. It has no name or official membership list, and it meets only once a year, in locations such as Switzerland’s Lake Lucerne, Connecticut’s Litchfield County, and, this year, Versailles. 

The attendees are top in-house lawyers for some of the world’s most powerful banks -- people who sit at the table for decisions that can shape multibillion-dollar litigation tabs for the likes of Barclays Plc, Citigroup Inc., Goldman Sachs Group Inc., Deutsche Bank AG and JPMorgan Chase & Co.

Trianon Palace Versailles

Source: Waldorf Astoria

For this year’s meeting, in late May, the lawyers descended on Trianon Palace Versailles, a luxury hotel less than two kilometers from the palace of Louis XIV and adjacent to the royal park. 

The gatherings, which were described by several people familiar with them who asked not to be identified, tend to feature discussions of nuts-and-bolts issues such as managing relationships with the board and whether compliance personnel should receive stock incentives.

Sticking Together

This year, according to two of the people, some attendees arrived at the marble and gilded hotel primed to focus on a common scourge: class-action lawyers who seek billions of dollars from top banks for alleged market manipulations and related bad behavior. Eric Grossman, chief legal officer at Morgan Stanley, implored his confederates to hang together and resist the temptation to settle quickly.

Months before, Citigroup Inc.’s general counsel, Rohan Weerasinghe, had made a decision that essentially forced several of the world’s biggest banks to pay a total of $1.9 billion to settle a class action over credit-default swaps. Investors, including the Los Angeles County Employees Retirement Association, claimed the banks had worked together to limit competition in the market, allowing them to earn extra profits. 

When multiple banks are sued in a class action, it’s common for them to share information and coordinate their defenses. But after years of practice, class-action lawyers have figured out a way to fracture these alliances. They reach a settlement with one bank, then ratchet up pressure on the others. Each bank knows that the last to settle will probably pay the heftiest price. That’s because of a legal theory called joint and several liability, in which a company found in court to be even partially to blame can end up on the hook for all the damages. 

In the swaps case, Citigroup broke first, agreeing in the summer of 2015 to pay $60 million. Others followed, with JPMorgan Chase & Co. settling last for $595 million. Looming over the banks was the possibility of an antitrust investigation of the swaps market by the European Union, which could have uncovered evidence that would then be available to the class-action plaintiffs. In the end, the EU closed its case, so the banks might have been better off waiting. 

Avoiding Criticism

Citigroup’s decision to settle highlighted the need for a conversation on the matter, according to the people familiar with the May meeting. Weerasinghe was there, but in keeping with the group’s collegial atmosphere, there was no direct criticism of him for deciding to cut a deal, the people familiar with the event say. 

“They realize they are stronger when they stick together than when they splinter,” says Dan Brockett of Quinn Emanuel Urquhart & Sullivan, a lead plaintiffs’ attorney in the swaps case. “But each general counsel has a fiduciary duty. Each bank will act in its own interest.”

The annual gathering, whose existence hasn’t previously been reported, is the brainchild of lawyer Robert Mundheim. A general counsel for the U.S. Department of the Treasury in the 1970s, Mundheim went on to become a dean at the University of Pennsylvania Law School, then general counsel for the former Salomon Smith Barney in the 1990s. He’s now with the firm Shearman & Sterling and has been hired by independent directors of Wells Fargo to investigate the bank’s retail sales practices and other matters. 

The Decider

Mundheim decides which top bank attorneys should be tapped for membership, according to the people with knowledge of the meetings, one of whom said they have been held for roughly two decades. The group includes banks that have in recent years grappled with investigations by the U.S. Department of Justice, the Federal Reserve and other regulators, as well as class actions. Besides the swaps case, major banks have paid settlements related to alleged manipulation of foreign exchange rates and the ISDAfix benchmark, which is used in the sale of interest rate derivatives. 

After inquiries by Bloomberg News, some members of the group complained to one another about a breach of confidentiality, according to the people. Mundheim declined to comment, as did Grossman and Weerasinghe.

The Trianon, nestled near the gardens of Versailles, features a Gordon Ramsay restaurant as well as a spa and indoor pool.

Also representing the U.S. banks at the Versailles gathering were current or departing general counsels including Stephen Cutler of JPMorgan, Gary Lynch of Bank of America and Gregory Palm of Goldman Sachs, according to the people familiar with this year’s meeting.

Across the Pond

Joining them were counterparts representing banks on the other side of the Atlantic, including Markus Diethelm of UBS Group AG, Richard Walker of Deutsche Bank, Robert Hoyt of Barclays, Romeo Cerutti of Credit Suisse Group AG, David Fein of Standard Chartered Plc, Stuart Levey of HSBC Holdings Plc and Georges Dirani of BNP Paribas SA, according to the people.

Through bank spokesmen, the general counsels and banks declined to comment.

Among the proposals put forward during this year’s meeting was a suggestion that all banks in a suit wait at least 60 days after the filing of a routine motion to dismiss the case before going their own way. Another was that any general counsel who wanted to enter into settlement talks consider giving his counterparts 48 hours’ notice so they wouldn’t be left scrambling.

The overnight gathering ended with a traditional group stroll outside. Then the lawyers went their separate ways, saying goodbye until next year’s meeting.

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