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Could Dewey & LeBoeuf Be the Enron of the Legal World?

Could Dewey & LeBoeuf Be the Enron of the Legal World? 3

Writing incriminating material in emails was something that broke the cardinal rule for many lawyers – don’t put anything incriminating in emails – which could serve to lead to the criminal conviction of four former Dewey & LeBoeuf leaders, according to a report in the New York Times.

The report follows the charges laid against the four on Thursday, which related to an apparent campaign to orchestrate nearly four years of Dewey book manipulation.

The reports indicate that Dewey & LeBoeuf was run more like a criminal enterprise than a law firm.

The emails, according to the Times report, talked openly in emails about “fake income,” “accounting tricks” and their ability to fool the firm’s “clueless auditor,” the prosecutors said.

 

The messages were included in a 106-count indictment against Steven Davis, Dewey’s former chairman; Stephen DiCarmine, the firm’s former executive director; Joel Sanders, the former chief financial officer; and Zachary Warren, a former client relations manager. They were charged with larceny and securities fraud. One of the men even used the phrase “cooking the books” to describe what they were doing to mislead the firm’s lenders and creditors in setting the stage for a $150 million debt offering that was supposed to solve the firm’s financial woes, according to the messages.

It is the kind of rogue language that one might expect to find in emails unearthed during a corporate fraud case from the Enron era, but not at a law firm that carried the name of Thomas Dewey, the former governor of New York, who began his legal career by prosecuting organized crime. The indictment is an unusual coda to the collapse of a firm that was created by the 2007 merger of Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae, and that filed for bankruptcy in May 2012.

“Those at the top of the firm directed employees to hide the firm’s true financial condition from creditors, investors, auditors and even partners of the firm,” the Manhattan district attorney, Cyrus R. Vance Jr., said at a news conference announcing the indictment.

The case is also surprising in that it stems partly from a revolt within the firm itself. Lawyers at Dewey ousted Mr. Davis, an architect of the merger, as chairman just as the firm was preparing to file for bankruptcy. Soon afterward, several of them went to Mr. Vance, urging him to investigate Mr. Davis and his administrative team.

Through their lawyers, all of the men denied the charges.

The indictment paints a portrait of a law firm being run like a criminal enterprise. Mr. Vance said his office had already secured guilty pleas from seven other people who once worked for Dewey. A person briefed on the investigation said several were cooperating with the two-year-old investigation.

“I can’t say whether this is the Enron” of the legal world, Mr. Vance said. “Clearly this is the largest law firm bankruptcy that we know of in history.”

At its peak, the combined firm had 26 offices around the globe and employed more than 1,300 lawyers. The $550 million in claims against the firm’s estate made it the largest bankruptcy filing by a law firm on record.

The bankruptcy revealed that while Dewey was a brand-name operation, it failed to generate sufficient revenue to pay the big contracts of its star lawyers and meet its expensive overhead. The firm struggled to keep up with loan payments during the worst of the financial crisis.

But the indictment and a parallel civil complaint filed by the Securities and Exchange Commission surprised even some who had worked at Dewey.

See: The New York Times

Read more about the charges against the Dewey & LeBoeuf leaders – Click Here

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