SVB Financial committee objects to payment of defense costs for D&Os

By Sarah Lizee

Olympia, Wash., May 12 – SVB Financial Group’s official committee of unsecured creditors objected Thursday to a motion for an order that would allow for the payment of defense costs of directors and officers of the company via insurance policies, according to documents filed with the U.S. Bankruptcy Court for the Southern District of New York.

The committee said 28 of the debtor’s current and former directors and officers are seeking “unfettered access” to the proceeds of the debtor’s director and officer policies to cover defense costs related to securities class actions that have been filed against themselves and the debtor.

Together, the movants are represented by 14 separate law firms.

The number of directors and officers and law firms representing them will likely continue to increase, the committee said.

The committee said that while its investigation into the failure of Silicon Valley Bank and the commencement of the Chapter 11 case is in process, multiple governmental agencies have already concluded that the directors and officers failed to properly manage and oversee the affairs of the bank.

“These same parties now seek access to the shared proceeds of the debtor’s D&O policies to protect themselves and their innumerable attorneys, while diminishing a potentially material source of recovery for unsecured creditors without limitation or oversight,” the committee said.

“Absent appropriate safeguards and limitations, the relief requested by the motion threatens to cause significant harm to the debtor’s estate.”

The financial services and bank holding company is based in Santa Clara, Calif. The company filed bankruptcy on March 17 under Chapter 11 case number 23-10367.

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