(Reuters) - Nearly three years after the demise of law firm Dewey & LeBoeuf, a Manhattan prosecutor opened the criminal trial of three of the firm’s former executives on Tuesday by accusing the trio of directing employees to make millions of dollars in bogus accounting entries to hide Dewey’s deteriorating financial condition from investors and lenders.
Former Dewey Chairman Steven Davis, 62; ex-Executive Director Stephen DiCarmine, 58; and ex-Chief Financial Officer Joel Sanders, 57, are accused of cooking the books in an attempt to stave off the largest law firm collapse in U.S. history.
The men have pleaded not guilty to grand larceny, falsifying business records and other charges.
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.
Manhattan Assistant District Attorney Steve Pilnyak told jurors in Manhattan state court that seven former Dewey employees will testify during the trial. They include the firm’s former finance director and controller, who have already pleaded guilty and have signed cooperation agreements with the district attorney’s office.
“Much of the dirty work … was done by Dewey & LeBoeuf employees who were acting at the direction of these three defendants,” Pilnyak said.
While some employees were being laid off, Davis authorized DiCarmine and Sanders to receive millions of dollars in salary, even though they did not generate revenue for the firm, Pilnyak said.
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 and filed for bankruptcy in 2012.
The trio have been accused of stealing approximately $200 million from a range of insurance companies and banks.
In his opening remarks, Davis’ attorney, Elkan Abramowitz, blamed the firm’s collapse on the financial crisis and “a group of greedy partners” who sought greener pastures at other firms. The firm’s dissolution had nothing to do with accounting adjustments concocted by “anxious people in the accounting department,” he said.
Moreover, Abramowitz, along with Austin Campriello, DiCarmine’s attorney, said their clients were relying on their employees’ expertise and knew nothing about any accounting improprieties.
Sanders’ attorney, Andrew Frisch, is expected to deliver his opening statement Wednesday.
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.
The case is People v. Davis et al, Manhattan Supreme Court No. 773/2014.
Reporting by Christine Simmons. Editing by Noeleen Walder, Alexia Garamfalvi, Andre Grenon, Peter Galloway and Lisa Shumaker