The long-awaited trial against three former Dewey & LeBoeuf executives, which will in part probe the causes behind the largest law firm collapse in legal history, started yesterday (26 May) concerning allegations the trio committed criminal fraud and altered accounts in a bid to prevent the firm’s demise.
Opening statements began in Manhattan state court yesterday afternoon for and against former Dewey chair Steven Davis; ex-executive director Stephen DiCarmine; and ex-chief financial official Joel Sanders.
The prosecution alleges the trio intentionally inflated revenue at the firm, which at its peak had about 1,450 lawyers, and used accounting tricks to comply with covenants over its debt arrangements.
The defendants deny the charges and argued in a memorandum of law that it was ‘disaffected partners of Dewey who sought to blame the financial travails of [the firm] on management, ignoring the fact the firm’s distress was caused by a combination of The Great Recession, the voracious greed of some of the firm’s partners, the decisions of several key partners to defect, and the publicity engendered by the District Attorney’s investigation that torpedoed an impending merger with another law firm, as well as Dewey’s ongoing negotiations with its lenders to renew its credit facility.’
The charges against the trio were unveiled in March last year after an investigation that ran for nearly two years two years. They were the first criminal charges following Dewey’s filing for Chapter 11 bankruptcy in 2012 after the ill-fated 2007 merger between Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae.
Representing the defendants is Morvillo Abramowitz Grand Iason & Anello lawyer Elkan Abramowitz for Davis; Bryan Cave partner Austin Campriello for DiCarmine; and Hughes Hubbard and Reed securities litigation co- chair Edward Little for Joel Sanders.
Speaking to Legal Business on the implications of the case, Marc Greenwald, co-chair of Quinn Emanuel Urquhart & Sullivan’s white collar and corporate investigations practice, says: ‘Accounting for law firms is complex. Every firm is going to be different and have different issues. This trial aims to prove they were cooking the books and criminal prosecutors typically look at proving fraud occurred – this is not so much a warning on how law firms operate.’
Greenwald added: ‘It’s not unusual for the case to take this long to get to trial. It’s going to be interesting to see how the prosecution will keep the jury interested in [what is expected to be] a six-month trial.’