A former Dewey & LeBoeuf partner is charging Citibank with ‘fraudulently inducing’ them to sign a loan agreement with the bank to permit them to make capital contributions to the failed law firm, after Citibank sought summary judgment against the lawyer.
A former Dewey & LeBoeuf partner who has been accused by Citibank of defaulting on a loan is making a provocative countercharge: He claims the bank participated in a “fraudulent scheme” to help a few leaders of the now defunct law firm hide Dewey’s dire financial situation from him and the broader partnership.
In a 23-page motion filed in New York federal court this month, former Dewey partner Steven Otillar argues that he and other partners were “fraudulently induced” into signing up for a Citibank loan program that financed their capital contributions to the firm. The motion was filed in response to a request made by Citibank in May for summary judgment. In its lawsuit, Citibank argues that Otillar has no legal grounds to claim he doesn’t owe payment on the loan.
Otillar is believed to be the only former Dewey partner to have been sued for defaulting on his loan, though it could not be determined why he may have been singled out.
If the court denies Citibank’s motion for summary judgment, the case could move to discovery and then a trial. That would open a new, contentious chapter in Dewey’s wind-down, legal experts say. If the judge grants Citibank’s motion, Otillar could pay back the loan or appeal the ruling.
Otillar’s allegations against Citibank are based on an unusual legal argument that the bank had a fiduciary duty to alert him to Dewey’s shaky financial situation — but it is not the first time such claims have been made. In September 2011 two partners from the bankrupt Washington law firm Howrey sued Citibank in San Francisco Superior Court, accusing the bank of fraud for granting capital loans when it knew Howrey was foundering. A jury trial is scheduled for December.
Otillar has not sued, and his motion could be a negotiating tactic in an effort to settle Citibank’s lawsuit, said one lawyer who specializes in financial services litigation and is not involved in the Citi suit.
Citibank’s senior vice president for public affairs, Natalie Marin, declined to comment. Otillar, now an energy lawyer with Akin Gump Strauss Hauer & Feld in Houston, also declined to comment. Several former members of the Dewey management team declined to comment or did not respond to requests for comment.
