http://blogs.wsj.com/law/2012/08/29/dewey-asks-court-to-approve-70-million-partner-clawback-plan/
Dewey Asks Court to Approve $70 Million Partner ‘Clawback’ Plan
By Jennifer Smith
- Reuters
Failed law firm Dewey & LeBoeuf LLP has asked a judge to greenlight a $70 million “clawback” settlement with former partners that, if approved, would represent the first major recovery for creditors in the largest U.S. law firm failure to date.
It would also mark the swiftest settlement of such claims following a law firm’s dissolution. Claims against partners typically take years to resolve. The motion was filed Wednesday afternoon in federal bankruptcy court in lower Manhattan.
Dewey sought Chapter 11 protection on May 28 and owes at least $315 million to lenders, bondholders and a wide swath of trade creditors. Once among the largest New York law firms, Dewey now faces as much as $560 million in potential claims, according to ex-partners who were briefed on the numbers during settlement talks.
More than 400 ex-partners have agreed to give back a portion—about 16%, in total—of the approximately $432 million in payments they received in 2011 and 2012, as the firm headed into bankruptcy, according to the proposed settlement. Individual partners would pay in $5,000 to $3.5 million, depending on how much they earned and other calculations, including discounts for collection of unpaid client bills.
In exchange for participating in the partner contribution plan, or PCP, ex-partners will get immunity from most future lawsuits relating to the firm’s demise. Some partners and the new firms that they joined will face claims relating to unfinished legal business they brought over from Dewey.
Approval of the plan will “avoid years of costly and uncertain litigation, and millions of dollars in administrative expenses,” Dewey’s estate said in court filings. “It allows partners to go on with their lives and for creditors to get a quick return on their claims. It avoids years of litigation that would clog the Bankruptcy Court’s already crowded calendar.”
Not included in the plan: former Dewey chairman Steven Davis, former Executive Director Stephen DiCarmine or former Chief Financial Officer Joel Sanders, whom some ex-partners blame for the firm’s decline. A lawyer for Messers. Davis, DiCarmine and Sanders declined to comment.
An ad-hoc group of retired partners from the LeBoeuf side of the firm which opposes the plan has asked the court to appoint a trustee or examiner. They say the settlement drawn up by Dewey’s bankruptcy advisers protects former firm leaders and high earners at the expense of lower-paid partners who had little role in the firm’s downfall.
Dewey’s advisers, unsurprisingly, oppose that idea. On Thursday various members of the wind-down team, including former partners Janis Meyer and Stephen Horvath, filed objections to the retired partners’ motion. So did the official committee of unsecured creditors.
A hearing on the proposed settlement is scheduled for September 20.
and.....
Dewey Docket: Indebted Ex-Partner Accuses Citi of Fraud
By Jennifer Smith- Reuters
A former Dewey & LeBoeuf LLP partner on the hook to repay a $209,000 capital loan has accused Citibank N.A. of fraud, saying the bank colluded with Dewey’s leadership in a scheme to help shore up the firm’s ailing finances with loans from newly-hired partners.
The allegations came in an August court filing (first spotted by Reuters) from lawyers for Steven Otillar, who was sued by Citibank in May over repayment of the loan he took out in August 2011.
The filing called the capital loan program “a fraudulent scheme… designed to directly benefit Citibank and DL and its management at Mr. and Mrs. Ottilar’s expense.” It said the bank used capital loans from “countless other unsuspecting lateral hires” to offset money that Dewey owed the bank and was unlikely to repay. . .
Hmm, lawyers vs bankers, I don't know who to root for :)
ReplyDeleteYeah , I know ......if you read the Court filing you get the full picture , but the Reuters piece , you get the the flavor of defendant's beef with Citibank..... hard to believe by September of 2011 , C didn't have a clue as to what was going on at Dewey....
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