THE SINKING OF DEWEY LEBOEUF
http://abovethelaw.com/2012/05/dewey-know-when-its-over-source-says-we-work-for-the-banks-now/
Yesterday, partners are Dewey & LeBoeuf received their $25,000 monthly partner draw. For many of them, that might be the last check they receive from the embattled firm.
Over 100 Dewey partners have left the firm since the start of the year. But today, we’ve got reports that as many as 200 people, including a large number of partners, will resign today. Apparently, “the banks” (i.e., Dewey creditors) are calling the shots now. As we reported yesterday, we seem to be moving forward toward a May 15th end date for Dewey.
But as they say in Lion in Winter: when the fall is all there is, it matters….
On Monday, we reported that Dewey had internally encouraged its partners to seek work elsewhere. It’s hard to imagine that any of them didn’t take the hint. A tipster reports:
100 partners resigned from D&L today; as of yesterday, banks took over and are running the firm; movers aren’t being let in the building…Banks have directed that nothing leave the building; certain ops staff were told “we work for the banks now.”
From another tipster:
Here’s the latest word around the office. Not sure if this is true, but it certainly is building up enough buzz. Supposedly, they will be letting go of about 200 employees today. Everyone else will follow sometime next week.We know from previous law firm dissolutions that creditors coming into the firm to protect what assets are left is the equivalent of an overweight woman clearing her throat.But some partners at Dewey insist that the firm is not done. From the New York Law Journal just this morning:But Jeffrey Kessler, a member of Dewey’s five-person office of the chairman, said in an e-mail “there is no plan to close on May 15″ and there are no plans for a vote of dissolution.Well, if there’s no plan to dissolve, what is the plan? Or is Kessler just being cute with words? Saying, “there is no plan to close,” is a lot different than saying, “we have a plan to extend our credit line past May 15th.”Interestingly, a source had this to say about Kessler:Kessler is in the process of taking his group out the door. He’s been shopping all week, and it’s looking like he’s pretty close to solidifying his deal.It seems like Dewey is trying very hard to keep up appearances even in the face of this steady stream of bad news:
Firmwide email was issued in NY office advising us to use freight elevator to remove bankers boxes from the firm, and we are not to stack boxes on top of chairs to wheel them out. They were not happy about the Fox 5 news cameras that caught an associate doing so and ran the footage in their story Wednesday night.
http://www.reuters.com/article/2012/05/04/us-dewey-idUSBRE8431GZ20120504
(Reuters) - Dewey & LeBoeuf has dismissed its executive director and he has retained a prominent criminal defense lawyer, a source close to the matter said, as the New York law firm suffered even more defections from its overseas offices.
Stephen DiCarmine, until recently one of the highest ranking executives at the firm, was terminated within the last week, the source said. Last week, the firm informed its partners that the New York District Attorney launched an investigation into allegations of wrongdoing by former Chairman Steven Davis.
No allegations of wrongdoing have been brought against DiCarmine. The reasons for his termination couldn't be determined. Davis has denied any wrongdoing and DiCarmine did not return phone calls seeking comment.
DiCarmine has hired Edward Little, a former federal prosecutor in Manhattan, according to the source, who declined to be named due to the sensitivity of the matter. Little, a partner at law firm Hughes Hubbard & Reed, declined to comment on whether he had been hired in connection with the DA probe.
The firing of DiCarmine is just the latest sign of the turmoil at Dewey & LeBoeuf, until recently among the top 20 largest law firms in the United States. Since January, the firm has lost some 120 of its 300 partners amid a mounting debt crisis. To date, the struggling firm has tried and failed to find a merger partner.
Defections from the firm spread oversees Friday, with a wave of departures in the UK, Germany, Kazakhstan, UAE and Russia.
DiCarmine, who the source said has been given about two weeks to leave the firm, has a long working history with former firm Chairman Davis. Before his role as executive director at Dewey, he had the same title at LeBoeuf, Lamb, Greene & MacRae where Davis was chairman before that firm merged with Dewey Ballantine in 2007.
On Friday, DiCarmine's name did not appear on the firm's website.
and.....
http://blogs.wsj.com/law/2012/05/04/dewey-warn-notice-to-staff-firm-could-shut-down/
Embattled New York law firm Dewey & LeBoeuf LLP warned its employees on Friday that they could soon lose their jobs and the firm may shut its doors, diminishing hopes that the once-storied institution will survive.
In a notice sent to Dewey’s employees, the firm said: “As you are undoubtedly aware, Dewey & LeBoeuf LLP has unexpectedly experienced a period of extraordinary difficulties in the last few days.”
“Although we could continue to pursue various avenues, it is possible that adverse developments could ultimately result in the closure of the firm, which would result in the termination of your employment,” said the notice, which was reviewed by The Wall Street Journal. Click here for the letter.
Such a notice, known as a WARN notice, is required under state and federal law to be sent to employees prior to a mass layoff or a shutdown of operations. Employers that fail to give such notice can be held liable for back pay.
A spokesman for the firm did not immediately respond to a request seeking comment.
The firm, which has been struggling to cope with a wave of partner defections amid disputes over compensation, also carries a heavy debt load. The firm’s top partners are still in talks with a syndicate of banks which are continuing to ask the law firm for financial information, according to a person familiar with the matter.
The leaders of Dewey, which owes about $75 million on a $100 million credit line, has said the firm is not preparing a bankruptcy filing.
“In order to give you as much advance notice as possible. . . this letter will serve as conditional advance notice . . . of the possibility that your employment may be terminated, and if that occurs your separation will be permanent, not temporary,” read the notice to employees.
“On behalf of the firm, we want to thank you for your support and dedicated service,” it said.
The 10th floor of the firm’s Manhattan headquarters was buzzing with activity on Friday as legal assistants, paralegals and other gathered in a room there to meet with recruiters and job-placement agencies, according to one Dewey employee.
At the job fair, which was organized by the firm, “hundreds” of employees handed in resumes and “milled around in groups,” according to the employee. “There was a palpable sense of fear and angst in the room,” the person said.
http://www.newyorklawjournal.com/PubArticleNY.jsp?id=1202551423362&Decline_of_Dewey__LeBoeuf_Accelerates&slreturn=1
Decline of Dewey & LeBoeuf Accelerates
New York Law Journal
May 4, 2012
The struggling law firm has lost more than 100 partners and its former chairman is being investigated by the Manhattan District Attorney's Office.
Newscom
Newscom
Attorney departures from Dewey & LeBoeuf have passed the 100 mark as firm leaders continued frantic efforts to save the struggling firm.
The Am Law Daily, a Law Journal affiliate, reported that sources inside and outside the firm said Dewey was poised to close by May 15.
Read the AmLaw Daily's ongoing coveragehere.
But Jeffrey Kessler, a member of Dewey's five-person office of the chairman, said in an e-mail "there is no plan to close on May 15" and there are no plans for a vote of dissolution.
Dewey faces mounting debt obligations, including a reported $75 million due to a syndicate of banks and another $150 million from a bond issued in 2010. Reuters reported yesterday that Dewey's lenders have given the firm a two-week extension as it seeks to renegotiate its bank debt.
Meanwhile yesterday, Morton Pierce, 62, the longtime chair of predecessor firm Dewey Ballantine and a mergers and acquisitions heavyweight, left to join the partnership at White & Case, taking seven partners with him. A three-partner team in London also left for Morgan, Lewis & Bockius yesterday.
The departures came in the wake of a firm memo earlier this week encouraging Dewey lawyers to seek other employment.
Pierce, in what he said was one of his last phone calls from his longtime firm, said he left because of "what's happening at the firm that you can read about in the papers and the blogs daily."
"Everyone is looking for stability in their lives," he said. "I've had 26 great years at Dewey. It's been a great place for me. It's a very sad day for me to leave the firm and to leave behind a lot of great people."
Some former partners have been interviewing counsel to represent them in civil actions, such as breach of contract claims against the firm.
Several white-collar criminal defense attorneys declined to discuss the implications of the Manhattan District Attorney Office's investigation of ex-Dewey chairman Steven Davis.
Davis has retained Barry Bohrer, a principal at Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer.
"Every action of Mr. Davis as chair of the firm was taken in good faith and in the best interests of the firm. He is confident that fair-minded professionals will conclude that he engaged in no misconduct," Bohrer said in a statement.
"One must keep in mind that stupidity, negligence and bad business judgment does not necessarily mean a crime has been committed," said Ira Sorkin, a white-collar criminal defense lawyer and member at Lowenstein Sandler who represented Bernard Madoff and is not involved in the Dewey matter.
Red Flags
In interviews, two former Dewey partners raised several questions about the handling of firm finances, including the guaranteed compensation to certain lawyers and the failure to return capital contributions to departed partners.
Some Dewey partners had paid their contributions in cash, while others borrowed to pay their share, said the two ex-partners, one based in New York and the other in Washington, D.C., both of whom spoke on condition of anonymity.
Under the partnership agreement, a copy of which was obtained by the New York Law Journal, a departing partner is entitled to "the credit balance, if any, in his capital account at the departure date after giving effect to any adjustments." Payments are made in three installments by Dec. 31 of each year after the partner leaves.
But the two ex-partners said when their own reimbursement checks were scheduled to arrive last December, they never came.
"They don't return phone calls, they don't send letters," said the former Washington partner, adding the firm gave no notice the reimbursement would not be coming.
The ex-partners said they expect they would never see the money. One claims to have taken out a line of credit and is now on the hook for an amount in the six-figures.
For partner compensation, the base pay, or "monthly draw," was about $25,000 and possibly more if the firm made its targeted revenue, the former partners said.
Many partners last year received only their monthly draws without the added distributions, they said.
Part of the firm's problem stemmed from guaranteed compensation offered to laterals who were expected to generate a large amount of business. Lateral partners naturally see a delay in collecting revenue after moving.
"When you change firms, there can be a little bit of a lag," said the former New York partner, adding the effect is exaggerated when "you have a little bit of a lag with dozens and dozens of people."
"In some cases, it's people who overpromised and underdelivered," the former New York partner said, adding the economic downturn also contributed to the cash flow.
As for why the firm gave out so many guarantees, the New York partner added: "They were focused on the headcount and the revenue numbers and they tried to achieve that quickly and easily by bringing in laterals rather than building toward that from within."
The two ex-partners also describe a sense of secrecy surrounding the offices of Davis and executive director Stephen DiCarmine, who traveled together and worked in tandem.
"The problem was that the firm was run in a very opaque fashion," said the ex-partner in New York. "They had been granted a tremendous amount of leeway by the sort of ruling committees."
According to the copy of the firm's partnership agreement, the firm had to keep "accurate books of accounts reflecting in a commercially reasonable manner all moneys received, paid, advanced or expended by the partnership."
It also says any partner has the right to inspect books and records of the partnership.
But since the 2007 merger of the firms that now make up Dewey & LeBoeuf, management had not provided audited financial information about the firm to all its partners, the former partners said.
"The communication was abysmal, they didn't explain anything," the former Washington partner noted.
and....
http://lawandmore.typepad.com/law_and_more/2012/05/dewey-leboeuf-the-end-is-near.html
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Meanwhile, the death watch is winding down. Bloomberg reports on plenty of the signs that the end is near. They include that more than a third of the partners have fled, the M&A chief Morton Pierce left today, the London office is liquidating, and the price of the firm's bonds have declined in private trades. Regarding the latter, they are going at about 45 to 55 cents on a dollar.
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