Ex-Dewey LeBoeuf law firm execs charged in alleged fraud

NEW YORK, March 6 Thu Mar 6, 2014 10:29am EST

NEW YORK, March 6 (Reuters) - Former top executives from bankrupt U.S. law firm Dewey & LeBoeuf were expected to be criminally charged on Thursday for "cooking the books" at the once prestigious firm and defrauding investors and lenders, said a person familiar with the matter.

Charges were expected to be announced against former Dewey chairman Steven Davis, 60, former executive director Stephen DiCarmine, 57, and former chief financial officer Joel Sanders, 55, said the person, who spoke on condition of anonymity.

The U.S. Securities and Exchange Commission on Thursday filed a related civil lawsuit against Davis, DiCarmine, Sanders and two former Dewey finance officials, finance director Frank Canellas and former controller Thomas Mullikin.

The SEC complaint accused the former executives of defrauding investors by misleading them about Dewey's finances in marketing materials for a $150 million bond offering in 2010.

According to the regulator, the Dewey officials "orchestrated and executed a bold and long-running accounting fraud intended to conceal the firm's precarious financial condition".

Manhattan District Attorney Cyrus Vance Jr has scheduled a press conference for 11 a.m. Thursday. SEC enforcement chief Andrew Ceresney and FBI officials are expected to attend.

Vance has been investigating Dewey's collapse since April 2012, when some Dewey & LeBoeuf partners asked him to examine "financial irregularities" at the firm.

Lawyers for Davis, DiCarmine, and Sanders did not immediately return calls for comment.

A spokeswoman for the Manhattan District Attorney declined comment. A lawyer for Canellas declined comment.

Dewey & LeBoeuf was formed in 2007 through a merger of Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae. It became a megafirm with more than 1,400 lawyers around the world.

In May 2012 it sought bankruptcy protection, becoming the largest U.S. law firm to do so. The firm collapsed after lawyers left over disputes over unpaid compensation and questions about the firm's financial health.

At the time, Dewey's lenders were led by JPMorgan Chase & Co and also included Citigroup Inc's private banking unit, Bank of America Corp and HSBC Holdings Plc .

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Comments (1)
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 9:28pm EST  --  Report as abuse
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