Nearly three years after the demise of law firm Dewey & LeBoeuf L.L.P., three of its former top executives will go on trial on charges they cooked the books in an attempt to stave off the largest law firm collapse in U.S. history.
Opening statements are expected to begin on Tuesday in Manhattan state court in the criminal case against former Dewey & LeBoeuf chairman Steven Davis, 62; ex-executive director Stephen DiCarmine, 58; and ex-chief financial official Joel Sanders, 57.
The men face grand larceny, falsifying business records and other charges. They have pleaded not guilty.
Dewey, which once had more than 1,400 lawyers, could not cut costs quickly enough to combat a plunge in revenue and mounting debt following the financial crisis. Many of its problems arose from big pay packages guaranteed to dozens of partners, who often did not produce enough revenue to justify them, spurring resentment and eventually mass defections.
Prosecutors from the Manhattan District Attorney’s office say the defendants overstated revenue and created fraudulent accounting entries to hide the true financial condition of the firm, which filed for bankruptcy in 2012.
The trio are accused of stealing nearly $200 million from 13 insurance companies and two banks, HSBC Holdings P.L.C. and Bank of America Corp.
Defense attorneys have argued their clients fully intended for Dewey to pay back the money, and say the criminal investigation was set into play by disaffected partners seeking to make them the scapegoats for the firm’s problems. They say partner defections and the recession led to Dewey’s collapse.
The trial, the result of a nearly two-year investigation, is one of the most significant white-collar cases brought by Manhattan District Attorney Cyrus Vance since he took office in 2010.
The outcome could factor into his legacy, particularly following the recent mistrial of the man accused of kidnapping and murdering 6-year-old Etan Patz and the mixed verdict in the trial of Sergey Aleynikov, the ex-Goldman Sachs programmer convicted of stealing some of the bank’s trading code.
Prosecutors have said the trial could last up to six months. The top count against all three defendants carries a minimum sentence of one to three years in prison.
Seven people in Dewey’s accounting department have already pleaded guilty in connection with the alleged fraud.