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BALTIMORE-BASED brokerage and investment banking house Legg Mason Inc. seemed in a race with a time bomb last week as the company groped for ways to sever its three-year-old relationship with its New Orleans subsidiary, Howard Weil Financial Corp. Discussions among principals of the two firms centered on the possibility of a buyout of Howard Weil by a group of its own employees at a price rumored to be significantly below the level of equity in the company.
While Howard Weil chairman and chief executive officer John P. Levert Jr. claimed that the potential for a buyout had been under examination since early March, he admitted that the negotiations had taken on a greater sense of urgency in the wake of two class action lawsuits filed recently by plaintiffs in other states. Howard, Weil, Labouisse, Friedrichs Inc., the investment banking subsidiary of Howard Weil Financial, was named as a defendant in the suits, along with several other investment banking firms that co-managed the underwriting of bond issues in Nebraska and Tennessee. The suits charged the underwriters with misstatements and omissions in the offering documents for the taxable municipal bond offerings, which were completed in 1986.
While the amount of liability these suits may carry for Howard Weil is unclear, the potential risk was apparently great enough to press the firm and its parent toward a parting of the ways. Sources familiar with the situation point out that Legg Mason, a conservative, century-old regional brokerage firm whose expertise and experience lie primarily in the delivery of retail brokerage service. They note that while the company has also engaged in corporate and municipal financing activity over the years, Legg Mason is unlikely ever to become completely comfortable with the old-line New Orleans investment banking house it acquired in 1987.
Speculation that Legg Mason chairman and chief executive officer Raymond A. "Chip" Mason was having an attack of nerves over his firm's New Orleans investment heated up in late April when a name change was ordered for the New Orleans retail operation and the name Howard Weil was taken off the stationery. Known as Legg Mason Howard Weil since 1988, when the Howard Weil operations were officially split into a "capital markets" group and a retail brokerage,...