BRIEF-SEC sues five former officials at Dewey & LeBoeuf over alleged fraudulent 2010 bond offering

March 6 Thu Mar 6, 2014 9:57am EST

March 6 (Reuters) - * SEC files civil lawsuit against five former officials at dewey & leboeuf --

court filing * SEC files charges against steven Davis, Stephen Dicarmine, Joel Sanders,

Francis Canellas, Thomas Mullikin Related to alleged fraudulent April 2010

bond offering * SEC says investors relied on dewey's fraudulent and materially misstated

financial results for 2008 and 2009, which were incorporated into offering

documents * SEC says defendants orchestrated "a bold and long-running accounting fraud"

to conceal law firm's precarious finances * SEC says CFO sanders, director of Finance canellas, and controller mullikin

orchestrated the accounting fraud * SEC says senior management, including chairman Davis and executive director

dicarmine, were aware of and supported efforts to falsify dewey's financial

results * SEC says Davis, as chairman, authorized law firm to raise $150 million via

the bond offering, in which the "blatantly falsified" financial results were

presented to investors * SEC accuses defendants of violating federal securities laws; seeks to recover

illegal profits, impose civil fines on all defendants * SEC seeks to ban Davis, dicarmine and sanders from serving as officers or

directors of public companies * SEC lawsuit filed with U.S. district court in Manhattan

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Comments (2)
It seems the firm certainly could have prevented its collapse by cutting the guaranteed pay packages of the partners. Would some of them have left if their guarantees were cut from, say $4 million per year to $3 million? Maybe, but given the overall upheaval at big law firms, it is more likely most of them would have stayed.
A 25% reduction in partner salaries looks like it would have freed up enough cash for the firm to satisfy its covenants and therefore avoid the accounting fraud.
There is a great summary of the charges against the Dewey execs and why it matters for investors at the truthorfinance site (google ‘truthorfinance dewey’).
So why didn’t the execs just reduce compensation? Ego? Some sort of ironic fear that the firm would collapse if salaries were cut because of a loss of confidence?

Mar 06, 2014 9:33pm EST  --  Report as abuse
It seems the firm certainly could have prevented its collapse by cutting the guaranteed pay packages of the partners. Would some of them have left if their guarantees were cut from, say $4 million per year to $3 million? Maybe, but given the overall upheaval at big law firms, it is more likely most of them would have stayed.
A 25% reduction in partner salaries looks like it would have freed up enough cash for the firm to satisfy its covenants and therefore avoid the accounting fraud.
There is a great summary of the charges against the Dewey execs and why it matters for investors at the truthorfinance site (google ‘truthorfinance dewey’).
So why didn’t the execs just reduce compensation? Ego? Some sort of ironic fear that the firm would collapse if salaries were cut because of a loss of confidence?

Mar 06, 2014 9:33pm EST  --  Report as abuse
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