NEW YORK (Reuters) - A life insurer that purchased $35 million in notes issued by Dewey & LeBoeuf has sued three of the defunct law firm's former top executives, accusing them of concealing the firm's "serious financial problems" to raise money from potential bondholders.
U.S. units of Britain's Aviva Plc (AV.L) filed the lawsuit in Iowa federal court on Friday, naming former Dewey chairman Steven Davis, former executive director Stephen DiCarmine and former chief financial officer Joel Sanders as defendants.
Dewey & LeBoeuf, which in May became the largest law firm in U.S. history to file for Chapter 11 bankruptcy, was not named as a party to the lawsuit.
The lawsuit alleges that the three former executives violated federal and state securities laws by concealing critical information about Dewey's financial health in the years leading up to its failure. They not only hid information from investors, but also from the public, the firm's auditors and even its own partners, according to the complaint.
Dewey raised $150 million in a 2010 bond offering in a bid to refinance its existing debt, according to the lawsuit. The bond issuance was rare for law firms, and marked a departure from typical sources of law-firm funding - banks and partner capital.
A lawyer for Davis, Kevin Van Wart, said the complaint has no merit. Lawyers for the other defendants did not immediately return calls seeking comment. A spokesman for the Dewey estate declined to comment.
The plaintiffs are Aviva Life and Annuity Company and a New York subsidiary of the insurer.
The case is Aviva Life and Annuity Co v. Davis, U.S. District Court for the Southern District of Iowa, no. 12-603.
Reporting by Jessica Dye; Editing by Noeleen Walder and Nick Zieminski