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Largest law firm bankruptcy ever pits old mates against each other in criminal filings

Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “How do I find a bankruptcy attorney in Charlotte?”

 

The Great Recession combined with the voracious greed of law-firm partners led to the collapse of Dewey & LeBoeuf, a law firm that employed over 1,300 attorneys in 26 offices around the world at the time of its 2012 bankruptcy filing. So say defense attorneys for former Dewey chairman Steven Davis, former chief financial officer Joel Sanders, and former executive director Stephen DiCarmine.

Law firm logo Charlotte Bankruptcy Lawyer North Carolina Chapter 13 AttorneyThey were charged in March with larceny and securities fraud. Prosecutors said the men cooked the firm’s accounting books during a four-year conspiracy to keep the law firm afloat. One of the men actually used the phrase “cooking the books” in an email describing their efforts to mislead lenders and creditors.

The $550 million in creditor claims against the firm gave it the dubious distinction as the largest law-firm bankruptcy ever. Bankruptcy filings appear to show that the firm struggled to generate enough revenue to pay its star lawyers and keep up with other expensive overhead costs.

The book-cooking allegedly began in November 2008 at the height of the Great Recession. Top executives were accused of making fraudulent accounting entries that increased revenue, decreased expenses, or lowered payments to partners. By the end of 2009, however, the firm still owed its lenders $206 million and owed its own partners $240 million, but only had $119 million in cash on hand.

In 2010, the firm made a private debt offering, raising $150 million from insurers and another $100 million from banks. This, executives hoped, would buy the firm time to meet its obligations while economic woes caused by the recession sorted themselves out. The numbers that justified the firm’s acquisition of those loans, however, were fudged, according to prosecutors.

Defense attorneys for the men charged say there was no evidence they tried to permanently deprive the insurers and banks. Interest payments had been made on a timely basis, and the men said they were forced by partners on the firm’s Operations Committee to effect drawdowns on the $100 million credit lines from the banks. A lawyer for Sanders said his client broke no laws and was merely a public scapegoat for a financial disaster.

One of the men charged—29-year-old Zachary Warren—was a former client relations manager. His attorney asked the court to dismiss charges against him, arguing that he was merely present at meetings during which “book-cooking” tactics were discussed, but had no access to accounting system and lacked the knowledge and expertise to engage in accounting fraud.

If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.

 

 

About the Author

Bryan 1Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.

Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.

In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.

 

 

Sources:

http://blogs.wsj.com/bankruptcy/2014/07/15/dewey-leaders-seek-dismissal-of-criminal-charges/

http://dealbook.nytimes.com/2014/03/06/former-top-leaders-of-dewey-leboeuf-are-indicted/?_php=true&_type=blogs&_r=0

http://en.wikipedia.org/wiki/Dewey_%26_LeBoeuf

 

 

Image Credit:

http://upload.wikimedia.org/wikipedia/commons/2/2f/Dewey.gif

 

 

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