Legal Business

Rare blow for Cravath as Freshfields hires Zoubek to co-head Wall Street M&A team

Rare blow for Cravath as Freshfields hires Zoubek to co-head Wall Street M&A team

Freshfields Bruckhaus Deringer has hired Cravath M&A partner Damien Zoubek to co-head its New York corporate practice alongside Ethan Klinsberg, a coup that is sure to make waves on both sides of the Atlantic.

The move is yet another indicator to the market that the Magic Circle firm has finally outgrown its reputation for patchy investment in its all-important US corporate offering, lending further kudos to global managing partner Alan Mason’s substantive efforts to bolster the US practice.

Zoubek (pictured) joined Cravath in 1999 and made partner in 2007, making a name for himself in the firm’s M&A mainstay, including shareholder activism defence and corporate governance.

His sector focus includes healthcare, life sciences, technology, fintech, consumer/retail, infrastructure and industrial, with recent high-profile transactions including Canadian National’s $33.6bn interloper bid to acquire Kansas City Southern, and Afterpay’s $29bn sale to Square.

Zoubek also this year represented GW Pharmaceuticals in its $7.2bn sale to Jazz Pharmaceuticals; AmerisourceBergen in its $6.5bn acquisition of Walgreen’s Alliance Healthcare businesses;  New Senior in its $2.3bn sale to Ventas; the $1.8bn acquisition of Luminex by DiaSorin; and GreenSky in its $2.2bn sale to Goldman Sachs.

Freshfields has kept critics of its US approach quiet in recent times, last year launching a seven-partner office in Silicon Valley and augmenting its technology, life sciences and antitrust practices with hires in its New York Washington DC and Silicon Valley outposts.

A major breakthrough came in 2019 when the City institution secured the hire of an M&A team in Wall Street from Cleary Gottlieb, led by prominent M&A veteran Klingsberg and including partners Meredith Kotler, Pamela Marcogliese and Paul Tiger, a move that is still considered a trophy acquisition.

That was the most significant US transactional move since Freshfields made its first substantive foray into New York corporate in 2014 when it secured the hire of former Fried, Frank, Harris, Shriver & Jacobson senior partner and head of global capital markets Valerie Ford Jacob along with two other corporate partners – Michael Levitt and Paul Tropp. The arrival of Peter Lyons, Shearman & Sterling’s former global public M&A head, the same week and the willingness to pay select recruits above the top of its lockstep were signals that the firm meant business.

Impactful departures from Cravath are so few and far between that people still talk about corporate star Eric Schiele’s 2018 transfer to Kirkland’s New York arm and the 2017 defection of Scott Barshay to Paul Weiss, at the time one of the most expensive moves ever in the legal profession.

Choice transactions for Freshfields in 2021 include advising the buyer consortium and Cargill Incorporated on the $4.5bn take-private of Sanderson Farms and the combination of Sanderson Farms with Wayne Farms; SITEL in the multi-billion-dollar take-private of Sykes Enterprises; Western Union on the sale of Western Union Business Solutions to a private equity consortium; and the IPOs of Zymergen and Viant Technology.

Klingsberg said of the hire: ‘Damien is a thought-leader among the M&A bar, an inspiring presence in the boardroom and at the negotiating table, and a client favourite.  He fits in perfectly with our powerhouse team of US corporate, regulatory, and litigation lawyers in New York, Washington DC and Silicon Valley working for clients across the nation on fast-paced, strategic projects.’

Sarah Solum, the firm’s US managing partner, added: ‘Damien is one of the most highly respected M&A lawyers of our generation, whose clients value his exceptional skill and creativity. Freshfields has consistently built its partner ranks with the highest quality lawyers, and Damien is the embodiment of this approach.’

Concluded senior partner Georgia Dawson: ‘The firm is providing clients with unparalleled corporate, regulatory and litigation expertise and depth on an integrated basis, both domestically in the US and worldwide. The inclusion of a lawyer of Damien’s calibre on the team is consistent with this uncompromising approach to client service that we have adopted and with what our clients need in these challenging times.’

nathalie.tidman@legalease.co.uk

Legal Business

Financials 2020/21: ‘Tremendous resilience’ from Freshfields yields 5% turnover and profit growth

Financials 2020/21: ‘Tremendous resilience’ from Freshfields yields 5% turnover and profit growth

Freshfields Bruckhaus Deringer has weathered the coronavirus crisis to report a 5% addition to its top line and profit per equity partner (PEP) respectively, a slight return to form after last year’s more subdued showing.

The firm said today (30 July) that revenue increased to £1.59bn from last year’s £1.52bn as PEP hit £1.91m – a notable increase on last year’s slight drop to £1.82m.

The figures mark a resurgence after last year when Freshfields had a hefty investment in an ambitious US strategy to thank for its more muted performance.

The firm has kept that momentum going, launching a seven-partner office in Silicon Valley and augmenting its technology, life sciences and antitrust practices with hires in its New York Washington DC and Silicon Valley outposts. America aside, Freshfields won praise during the year by becoming the first Magic Circle firm to elect a female senior partner in the form of admired Asia disputes head Georgia Dawson.

While there is never an easy time to take the helm of the leadership of an international giant, the leadership team that took over in January 2021 – which also includes managing partners Alan Mason, Rick van Aerssen and Rafique Bachour – has had its work cut out amid the ongoing pandemic.

In spite of that, the firm has delivered a fifth consecutive year of revenue growth, with standout mandates that include acting on AstraZeneca’s $39bn acquisition of Alexion Pharmaceuticals, London Stock Exchange Group on strategy for its $27bn acquisition of Refinitiv and Cazoo on its sale to a US SPAC for $7bn.

In the vein of the now ubiquitous ESG agenda, Freshfields said it achieved its five-year environmental targets set in 2016 and has set new targets as part of a new ambitious global environment strategy. That includes a commitment through the RE100 initiative to source 100% renewable energy for all offices by 2030 and having a sustainability focus for its new London office at 100 Bishopsgate.

The firm also set out new five-year global diversity and inclusion commitments and targets for gender, race and ethnicity and LGBTQ+ representation, as well as achieving a 50/50 gender split for partner promotions globally, exceeding the 40% target for female partners.

Van Aerssen commented: ‘This strong set of results reflects Freshfields’ continued success in our core markets, as well as our expansion in growth markets such as the US. The ability of our global platform to deliver for clients as a destination practice across all the key disciplines is a formula that works, shown by revenue growth across all our regions and practice areas against the backdrop of the pandemic.

‘The firm’s success could not have been achieved without the hard work of all our colleagues, who have shown tremendous resilience and dedication to deliver the best possible outcomes for our clients in the face of an incredibly challenging year.’

nathalie.tidman@legalease.co.uk

Legal Business

Comment: Hired guns and troubleshooting – privilege confusion in UBS rape probe another jolt for City law

Comment: Hired guns and troubleshooting – privilege confusion in UBS rape probe another jolt for City law

Legal hacks frequently stand accused of making sensationalist statements once the dust has settled when it comes to lawyer conduct in emotive matters, especially where the Solicitors Regulation Authority (SRA) is involved. In our defence, we largely base initial treatment of these cases on the views of numerous market contacts at the time.

The overturning of findings against former Freshfields Bruckhaus Deringer partner Ryan Beckwith last year springs to mind. Early sentiment was of general horror about unhealthy drinking cultures and abuse of power. Later many City partners reviewed their opinion to align with the High Court’s assertion that ‘popular outcry is not proof that a particular set of events gives rise to any matter falling within a regulator’s remit’ – the age-old dismissal of the case that ‘this sort of thing happens all the time’.

With this in mind, recent disclosures from an employment tribunal regarding a high-profile ‘independent inquiry’ by Freshfields employment partner Caroline Stroud into how UBS handled an alleged rape, reported in the FT, must therefore be treated with restraint.

The findings of the 2019 employment tribunal handed down by Judge Harjit Grewal assert that the report prepared by Freshfields was not covered by legal advice privilege, as UBS claimed. The publication of the ruling was prompted by a letter from the alleged victim (referred to as Ms A as she has life-long anonymity) to the judge, dated 1 April 2021.

The letter urges the judge to publish the order made in November 2019 ‘because it is firmly in the public interest’ to do so: ‘If made public, the order will create legal precedent and raise important points of law regarding legal advice privilege, its waiver, and independent investigations,’ Ms A wrote. ‘It would better place claimants, and the wider industry, to understand what these investigations are often about, whilst demonstrating the tactics used by employers when conducting them.’ She also raised concerns around corporations enlisting ‘hired guns’ to sort out their PR headaches.

In the ruling, the judge said UBS could not rely on legal privilege because employment partner Stroud had been hired to conduct an independent inquiry into how the bank’s HR team had responded, rather than acting in the capacity of legal adviser to the bank.

Stroud was drafted in by UBS in 2018 to review the way the bank dealt with allegations that Ms A, a former employee of the bank, had been raped by a colleague. While the 2019 employment claim – filed by Ms A against UBS for failing to protect her – was later settled confidentially, the new disclosures nevertheless beg some serious questions over what constitutes a bona fide independent investigation.

The crux is the apparent lack of accord between the parties on Stroud’s role.

The SRA is continuing to review complaints that Stroud did not make her role in acting for UBS clear to the alleged victim. Ms A claimed that she co-operated with the Freshfields investigation after being assured by senior UBS figures that Stroud had not been hired to give the bank legal advice.

Freshfields has declined to comment as it was not party to the tribunal. Stroud will be retiring from the partnership after 20 years at the firm – a move that is unrelated to the SRA investigation.

Controversially, Ms A was only handed a summary of the findings from the investigation that exonerated UBS – not the full report – on the grounds that the document was covered by lawyer-client privilege. According to the ruling, the judge found that ‘fairness would demand that . . . [UBS] did not cherry pick [what] it shared’, and that it had told Ms A that Stroud was not acting as a lawyer, but merely giving advice and suggestions about how the bank handled the claim. As such, the report was not deemed to be protected by privilege.

Judge Grewal said evidence from the bank’s managing director for group investigations, Neil Young, in which he said the bank had hired Stroud to give the bank legal advice, was ‘very difficult, if not impossible’, to reconcile with evidence regarding what other UBS employees had told Ms A. According to covert recordings of senior executives, which were cited in the decision, the then head of investment banking Andrea Orcel told Ms A that he did not originally know that Stroud worked at Freshfields. He said he had hired Stroud because she was someone who ‘understood this kind of situation’, the regulations, and banks; someone ‘thoughtful, experienced, and … had a good reputation for doing what’s right’.

Siobhan McDonagh, the bank’s head of HR in the UK, told Ms A that Stroud was acting ‘in a very different capacity, doing a very different role’ from her legal advisory role.  Conversely, Young said it had always been clear that Freshfields was being hired as outside legal counsel and the report would not be shared with Ms A.

Perhaps even more contentious is Stroud’s contesting Ms A’s account, arguing that Ms A had taken quotes out of context which were capable of being misinterpreted. Stroud explained that she had said of her team that ‘we’re not their lawyers’ because they were ‘newly appointed lawyers from Freshfields and not UBS’ normal advisors’.

Suzanne McKie QC, managing partner and founder of Farore Law, acted for Ms A in the employment tribunal and says firms have to be more rigorous. ‘There are too many Magic Circle firms conducting so-called independent investigations that are not truly independent. How truly independent are they from the person paying the money and do they have previous relationships with the bank or organisation requesting the report to be done? They need to think about that. I won’t be the first to argue it’s not covered by legal privilege and succeed in doing so.

‘Every lawyer doing this sort of exercise needs to ask themselves, what is my role in this? Am I going to shift somewhere during the course of this into providing legal advice? Is my client then going to say – “we’d better cover this with privilege” or this is covered as privilege?

‘As a lawyer it’s vital that you work out what your role is, you make it quite clear to the bank or the company that you will not be providing legal advice, that you’re not acting as legal adviser and this report will not be privileged. Only then can it be truly independent.’

And, at the risk of provoking the ‘#notallawyers’ retort, this should not be that difficult, given the general fastidiousness associated with the profession – with or without watchdog intervention.

nathalie.tidman@legalease.co.uk

Legal Business

Freshfields looks to bring involvement in German cum-ex tax scandal to an end with €10m payment

Freshfields looks to bring involvement in German cum-ex tax scandal to an end with €10m payment

Freshfields Bruckhaus Deringer has sought to draw a line under an uncomfortable chapter for the firm with a €10m payment to German authorities in connection with the cum-ex tax controversy.

The matter centres on what had been cited as the biggest tax fraud in Germany’s history, underpinning the resignation and subsequent jailing in 2019 of Freshfields’ global head of tax, Frankfurt-based Ulf Johannemann. He faces charges of fraud in connection with his advice to the defunct German arm of Maple Bank over the legality of a scheme to reclaim more than €380m in tax that was never paid.

Cum-ex transactions allegedly used a loophole in German law to allow investors to claim back dividend tax that was never paid. The practice is claimed to have started in the early 2000s and carried on for several years, costing European taxpayers up to €55bn, according to European Parliament estimates. Legal advisers are accused of having played a central role in exploiting the loophole.

In a statement released on Friday (29 January), a spokesperson for Freshfields said: ‘The Frankfurt General Public Prosecutor’s Office (PPO) will no longer pursue the inclusion of law firm Freshfields Bruckhaus Deringer as a concerned party in the proceedings in connection with share transactions carried out by Maple Bank around the dividend record date.

‘The PPO has closed the Administrative Offences Act (OWiG, Ordnungswidrigkeitengesetz) proceedings against the firm. The firm has made a voluntary payment in the amount of €10m to the German fiscal authorities.

‘This is the result of a constructive dialogue with the PPO in coordination with the court and does not involve an admission of guilt and/or liability. It is a further step forward for the firm as it looks to address these legacy matters reaching back to more than a decade ago and to focus on its future development.’

At the end of August 2019, Freshfields agreed to pay a settlement of €50m after being sued by the liquidator of Maple Bank for €95m. The firm said in a statement at the time that it was ‘convinced that our advice always complied with applicable law’.

For Freshfields it will be a relief to have closure on this saga after an awkward couple of years that has inevitably taken its toll on the firm’s reputation in Germany, one of its key markets and its largest single practice outside the UK.

The scrutiny prompted the firm last May to establish an ethics committee governing its German business.

nathalie.tidman@legalease.co.uk 

Legal Business

Der Freshfields-Skandal

Der Freshfields-Skandal

It’s 9 September in the German parliament. Stefan Liebich of the democratic socialist party, Die Linke, stands up to quiz finance minister Olaf Scholz, a member of the Social Democrat Party. His question: ‘Have there been any thoughts on your part whether firms like Freshfields or others should be excluded from receiving future instructions?’

Scholz responds: ‘In relation to the law firm you mentioned… I cannot imagine that new assignments will be placed there’.

Legal Business

Falling angels: Freshfields faces cum-ex repercussions

Falling angels: Freshfields faces cum-ex repercussions

It has been a difficult year for Freshfields. In PR terms it has been an annus horribilis, and the enormity of the challenge faced by the firm’s first female senior partner, Georgia Dawson, cannot be understated.

Seemingly unable to move on from damaging #MeToo allegations; suggestions of an inappropriate drinking culture; an incomplete UK move to Bishopsgate; and a succession of high-profile departures culminating in Skadden’s poaching of Bruce Embley on the eve of Dawson’s appointment; all have contributed to keeping Freshfields in the press for the wrong reasons.

Legal Business

Glass ceiling finally shattered for Magic Circle as Freshfields elects female senior partner

Glass ceiling finally shattered for Magic Circle as Freshfields elects female senior partner

While the upper echelon of City law has seen senior female leaders before in Penelope Warne at CMS, Sonya Leydecker at Herbert Smith and Lovells’ Lesley McDonagh before them, Freshfields Bruckhaus Deringer has beaten Allen & Overy, Clifford Chance and Linklaters to the punch by electing the first-ever woman to a top leadership role in the Magic Circle. The firm today (24 September) announced it has elected Asia disputes head Georgia Dawson as its new senior partner. 

And as has long been rumouredthe new senior partner will head up a reconfigured leadership team, including the hotly-tipped Alan Mason and Rick van Aerssen, as well as Rafique Bachour. 

Dawson will take over from Edward Braham, who has in recent months been credited for throwing his weight behind the firm’s crucial US strategy, while the rest of the leadership team will be in lieu of the managing partner role currently held by Stephan Eilers. The new leadership will take the helm in January 2021. 

This will be a welcome, progressive move as Freshfields becomes the first of its direct peers to elect a female senior partner, especially in light of the firm’s recent struggles with unedifying #MeToo publicity. 

Bachour was not a name bandied about as a favourite in the early stages of the firm’s election process, but the rationale of having a Brussels-based antitrust partner in a leadership role in the current climate is plain to see. 

Meanwhile Mason has long been touted as a front-runner with appeal to various constituencies and, given he is spending around 50% of his time in the US, is a credible choice given Freshfields lofty American investments and ambitions.  

Van Aerssen, the Frankfurt-based M&A lawyer who is currently head of global transactions until Julian Pritchard takes over in November for four years, is an influential continental partner who enjoys a strong profile in London and is noted for his work supporting the expansion of Freshfields’ US practice. 

The main surprise in the election outcome was no mention of Helmut Bergmann, the Berlin-based managing partner of continental Europe that was so frequently cited in the months leading up to the election as a future progressive leader. 

Braham described the leadership team as ‘highly regarded’ and ‘dynamic.’ 

Dawson commented: ‘With this team we have broad experience and a diversity of perspectives, and a shared purpose and vision for Freshfields. We intend to preserve the very best of our culture, marketleading practices and standards of client service, while leading the firm into the next chapter of its long history. 

I would also like to take this opportunity to thank Edward and Stephan for their commitment to the firm over many years and particularly during their term of leadership. Their investment in strengthening and deepening our global platform has led to expansion into new markets such as Silicon Valley, creating an exciting foundation for future growth.’ 

Nathalie.tidman@legalease.co.uk 

For more on Freshfields at a leadership crossroads, see: ‘The devil you know – the two visions for Freshfields’ (£)

 

Legal Business

Freshfields tax drama back in spotlight as Germany’s finance minister throws future mandates into doubt

Freshfields tax drama back in spotlight as Germany’s finance minister throws future mandates into doubt

Freshfields Bruckhaus Deringer has been dragged into the spotlight yet again for its role in the cum-ex tax scandal, with Germany’s finance minister suggesting that the firm should no longer be handed government contracts for its involvement.

Finance minister Olaf Scholz of the Social Democrat Party made the remark on Wednesday (9 September) at the German Bundestag during questioning around what has widely been dubbed the biggest tax fraud in the country’s history.

The minister was quizzed by Stefan Liebich of the leftist Democrat Socialist Party as to whether firms like Freshfields implicated in the scandal should be excluded from future government contracts.

Scholz replied (in translation): ‘Of course, we have to draw conclusions for what we do when we work with companies. In relation to the law firm you mentioned, I said for myself: “I cannot imagine that new assignments will be placed there.”’

This is the latest twist in the long-running cum-ex scandal in which the City giant has been accused of having a pivotal role. It centres on transactions that took advantage of a loophole in German law that allowed investors to claim back dividend tax that was never paid. The practice is claimed to have started in the early 2000s and carried on for several years, costing European taxpayers up to €55bn, according to European Parliament estimates.

In late November 2019, it emerged that Freshfields’ global head of tax, Frankfurt-based Ulf Johannemann, had resigned from the firm. A few days later, he was jailed as a flight risk. Released in December on a €4m bail, he is facing charges of fraud in connection with his advice to the defunct German arm of Maple Bank over the legality of a scheme to reclaim more than €380m in tax that was never paid.

This latest development will be an unwelcome one for Freshfields as it looks to mitigate the damage to the firm’s reputation. Freshfields declined to comment.

However, the cum-ex matter goes far beyond Freshfields’ involvement and is doubtless a political hot potato as Germany braces for its federal election next year.

Moreover, Scholz himself has been accused of intervening in a probe on Warburg Bank in his former role of mayor of Hamburg amid allegations that the tax authorities dropped a substantial claim surrounding the banks involvement in cum-ex transactions.

The minister denies intervening in investigations against the bank and its former boss, Christian Olearius, in relation to serious tax evasion.

For more on Freshfields’ involvement in the cum-ex saga, read Legal Business’ analysis of earlier this year.

nathalie.tidman@legalease.co.uk

Legal Business

Beckwith appeal date set as ex-Freshfields partner challenges liability and costs in #MeToo case

Beckwith appeal date set as ex-Freshfields partner challenges liability and costs in #MeToo case

An appeal by former Freshfields Bruckhaus Deringer partner Ryan Beckwith against the Solicitors Disciplinary Tribunal’s (SDT) decision in his misconduct case is set to be heard in October.

Beckwith filed the High Court appeal against the SDT’s decision on liability and the costs award in February, with the hearing now listed for Wednesday 21 October. 

The appeal follows last October’s high-profile judgment that Beckwith knew or ought to have known that the junior member of staff he engaged in sexual activity with was intoxicated and her judgement impaired and that he knew or ought to have known that his conduct was inappropriate.

Beckwith’s appeal comes after the Solicitors Regulation Authority (SRA), which brought the case to the SDT for prosecution in June 2018, in February said it would not be appealing the sanctions handed down of a £35,000 fine and an order to pay legal costs of £200,000.

Beckwith’s challenge is specifically in relation to the SDT’s decision on liability and the costs awards and does not relate to the fine itself, it is understood.

Also in February, the SDT released its written judgment explaining that the controversial decision to fine instead of ban Beckwith was because his misconduct was ‘a lapse in his judgement’ and ‘unlikely to be repeated’.

In the judgment, the SDT said: ‘There had been no clients involved and there was no suggestion that the work of the respondent was anything other than highly competent. Nor did it consider that the respondent posed a future risk to the reputation of the profession.’

The sanctions were made in light of the tribunal’s decision that ‘this was a one-off incident where there was no suggestion that he [Beckwith] had coerced or manipulated Person A [the junior lawyer]. It was not the applicant’s case that the respondent had deliberately plied Person A with drink with a view to getting her into such an intoxicated state that she would then engage in sexual activity.’

‘Nor was it the case that he had used his position of seniority and authority to engineer the sexual encounter,’ the decision added.

The tribunal found that, although Beckwith had ‘engaged in inappropriate conduct in circumstances where his judgement had been affected by the amount of alcohol he had consumed,’ it did not find that the circumstances of the case were such that a restriction order was necessary in order to protect the public.

Beckwith is being represented by criminal defence partner Nick Brett of Brett Wilson, who has instructed Alisdair Williamson QC of Three Raymond Buildings.

nathalie.tidman@legalease.co.uk

Legal Business

Freshfields refutes partner misconduct in handling alleged rape case as SRA confirms probe 

Freshfields refutes partner misconduct in handling alleged rape case as SRA confirms probe 

Just when Freshfields Bruckhaus Deringer probably thought its #MeToo woes were behind it, a fresh spotlight has been shone on a prominent partner over allegations of misconduct in handling an alleged rape case involving UBS and a Solicitors Regulation Authority (SRA) investigation underway.

The matter came to light on Thursday (13 August) when the The Financial Times reported that influential Freshfields employment partner Caroline Stroud was being investigated by the watchdog for her conduct in dealing with a review of the investment bank’s handling of a rape allegation. 

In a statement, Freshfields said only: ‘We refute the allegations’, made against Stroud after she was drafted in by UBS to review the way in which the bank investigated a complaint of an alleged rape victim against a colleague.

Nevertheless, the SRA has seen fit to launch a probe into the allegations, but would not be drawn on the timeframe. A spokesperson for the SRA said: ‘We are investigating before deciding on any next steps. Our work on this matter continues, but we cannot discuss any details about our work while it is ongoing.’

The regulator is reportedly reviewing complaints that Stroud did not make her role in acting for UBS clear to the alleged victim, referred to as ‘Ms A’, something that the firm and Stroud are said to deny.

This will be another unedifying disclosure after restructuring partner Ryan Beckwith was last October fined by the Solicitors Disciplinary Tribunal (SDT) following a referral from the SRA over inappropriate sexual conduct with a junior lawyer.

The saga prompted the firm to usher in reforms to its handling of such behaviour, including financial penalties, at the end of last year.

There is little doubt that the regulator has, having long been accused for years of enjoying too much of a cosy relationship with City firms, taken an increasingly hard line both on lawyers committing misconduct or attempting to cover it up. However, it took the worldwide #MeToo movement that started in autumn 2017 and triggered a wave of uncomfortable allegations, to galvanise the regulator into action.

As incidents of workplace misconduct must inevitably have all but disappeared with the majority of lawyers and clients still working from home amid the Covid-19 pandemic, this latest episode is a sharp reminder that there are several other ways to be implicated in such controversy. It also begs the question – how many other disclosures relating to historic events have yet to be brought to light?

nathalie.tidman@legalease.co.uk