Filed under: Deals, Bad news, Scandals, Lehman Br Holdings (LEH), Bear Stearns Cos (BSC)

There has been concern for several weeks that Lehman Brothers (NYSE: LEH) might have problems similar to Bear Stearns (NYSE: BSC). Customers might be worried about Lehman’s financial health and, if they were to withdraw huge sums of money, the brokerage could face liquidity problems.

Just as those concerns appear to be falling, Lehman has been hit by a fraud that might involve amounts as great as $250 million.

According to The Wall Street Journal (subscription required), “swindlers used forged documents from one of Japan’s biggest trading companies to bilk it out of as much as $250 million.” The money was to go to a division of Japanese firm LTT Bio-Pharma. The capital was secured by certificates from Marubeni, a large trading company. Marubeni may have to pay Lehman back the capital, but that’s not yet clear.

One consequence of the news is likely to be that investor confidence in Lehman will be eroded again. Why the brokerage would extend the money without complete due diligence is certainly a fair question for shareholders to ask.

One more straw on the pile of Lehman’s troubles.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Deals, Industry, Employees, Delta Air Lines (DAL)

Northwest (NYSE:NWA) does not care what the pilots union thinks. It plans to go ahead with a merger with Delta (NYSE:DAL) despite resistance from the sky captains. Pilots have held up a deal while they negotiate seniority provisions for a combined company.

According to The Wall Street Journal “a jumpstarted deal wouldn’t include terms of a combined pilot labor agreement and the salary enhancements previously foreseen.”

Aside from regulatory approval, the deal has two real problems. The first and most obvious is that the pilots might strike the airlines if they feel they have been mistreated. A shutdown, especially if it is prolonged, could cost tens of million of dollars in lost passenger revenue.

In addition, it is not clear that merging airlines has a clear benefit. Fuel costs don’t change. The number of employees might fall, but some of the unions involved might ask for higher compensation in exchange for supporting cuts. Customer service department mergers nearly always cause problems because putting together incompatible reservations platforms can take several quarters. This can damage relationships with consumers and cause them to use other carriers.

Pushing the merger may be a bad idea, whether the pilots are on board or not.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Deals, Industry, Employees, Delta Air Lines (DAL)

Northwest (NYSE:NWA) does not care what the pilots union thinks. It plans to go ahead with a merger with Delta (NYSE:DAL) despite resistance from the sky captains. Pilots have held up a deal while they negotiate seniority provisions for a combined company.

According to The Wall Street Journal “a jumpstarted deal wouldn’t include terms of a combined pilot labor agreement and the salary enhancements previously foreseen.”

Aside from regulatory approval, the deal has two real problems. The first and most obvious is that the pilots might strike the airlines if they feel they’ve been mistreated. A shutdown, especially if it is prolonged, could cost tens of million of dollars in lost passenger revenue.

In addition, it isn’t clear that merging airlines has a clear benefit. Fuel costs do not change. The number of employees may fall, but some of the unions involved might ask for higher compensation in exchange for supporting cuts. Customer service department mergers nearly always cause problems because putting together incompatible reservations platforms can take several quarters. This can damage relationships with consumers and cause them to use other carriers.

Pushing the merger might be a bad idea, whether the pilots are on board or not.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Deals, Law, IAC/InterActiveCorp (IACI)

Barry Diller has won his dispute with John Malone. Malone’s Liberty Media (NASADAQ:LCAPA) owns a a big piece of the company which Diller runs, IAC/Interactive (NASDAQ:IACI). Diller has the right to vote those shares under a long-standing agreement.

Diller has decided to break IACI into five companies because the businesses in the firm don’t have significant relationships to one another. Malone wanted to block the break-up and filed suit in court.

According to MarketWatch “Vice Chancellor Stephen Lamb ruled Friday that “Liberty has failed to demonstrate that Diller has breached or threatened to breach any contractual duty he owes to Liberty,” according to Lamb’s 78-page thought.”

Diller can now complete his plans.

That leaves open the question of whether IACI is worth more in pieces than it is as a conglomerate. The firm’s stock trades at $20, near its 52-week low and down from the period high of over $39. Some of the company’s divisions, especially Lending Tree and HSN had tough years in 2007. These would get very low valuations as independent operations and might not make up for the value of more attractive operations like Aks.com

Diller might have gotten his way, but it isn’t clear that it will help shareholders.

Douglas A. McIntyre is an editor at 247wallst.com.

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