Law Firm Charged With "Cooking the Books" 2

Law Firm Charged With “Cooking the Books”

It’s as if its the final ignomy for failed Big Law firm Dewey & LeBoeuf who have this week seen criminal charges laid by the Manhattan District Attorney’s Office and the SEC against three of the firm’s former bosses.

The charges were filed on Thursday against Dewey’s former chairman, executive director and chief financial officer, who are alleged to have been involved in ”

This was the alleged fraud that lead to the collapse of Dewey in 2012, the largest bankruptcy of any law firm, ever.

Bloomberg BusinessWeek report that the firm arose from the 2007 merger of two old New York law firms, Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae—once had more than 1,100 lawyers spread across 25 offices.

At one point it ranked as the No. 3 legal adviser to the big banks that serve as financial advisers on mergers. By the time of its failure, the firm’s bankruptcy petition listed assets of $193 million and liabilities of $245.4 million.

Indictments Filed

The criminal indictment accuses Steven Davis, Dewey’s former chairman, Stephen DiCarmine, the former executive director, and Joel Sanders, the former chief financial officer, of stealing from the firm’s lenders and investors. The charges include grand larceny, securities fraud and conspiracy, and the theft of almost $200 million from 13 insurance companies and two financial institutions. At the center of the alleged scheme, prosecutors allege, was a 2008 effort to falsify the books to hide that the firm wasn’t complying with loan requirements.

All three have pleaded not guilty to the charges. Attorneys for Davis, DiCarmine, and Sanders described the indictment as a meritless effort to scapegoat their clients. A fourth individual, Zachary Warren, who had worked as a client relations manager at the firm, is charged with falsifying business records and conspiracy. He also pleaded not guilty; his attorney did not respond to a request for comment.

This is hardly the stuff of law firm partnerships, especially from the year 2000 and earlier, when partners were tight-knit, loyal, and cautious in how they ran their businesses. And the fraud charges mark a never-before-seen action in the world of New York’s white-shoe law firms. “Fraud is not an acceptable accounting practice,” District Attorney Cyrus Vance Jr. said on Thursday morning while announcing the charges.

So it must have seemed to several former colleagues of the indicted law firm leaders when, back in April 2012, they approached Vance’s office to press for criminal charges to be brought against Davis, accusing him of embezzlement, wire fraud, and mail fraud, according to press reports at the time.

DiCarmine, too, was soon under investigation. It was an unprecedented action for so-called partners to turn on each other in this way; whatever was really going on at Dewey in the months and years before, the action it prompted set off a series of events that led to Thursday’s indictments.

The ultimate demise of the firm and its former partners continues to provide fodder for the law profession and the media.  LawFuel will be reporting more in the coming weeks and months.

See: BloombergBusinessweek

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