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Setting off the latest episode in the Dewey drama, the management of Dewey issued a memo on Monday stating “All partners … are encouraged to seek out alternative opportunities.” One firm was there from 1909, and the other there from 1929, and it took just five years for an ‘enlightened management’ to gamble away the capital and goodwill built over a century.
In a bitter attack on critics, Martin Bienenstock, the head of Dewey’s restructuring practice said late Monday, “There are no plans to file bankruptcy … And anyone who says differently doesn’t know what they’re talking about.”
On the same day, another 11 partners left the firm bringing the toll of partners to 85.
The release of the memo just one day after the biggest loan agreements of the firm were set to expire/renew indicates that the cracks are deeper than previously suspected. Even up to Sunday, industry sources had reported that a 90-120 days extension of loans was on the table. If despite a three-month extension or more Dewey is encouraging partners to leave, there’s absolute absence of any contingency plan, or the extension actually received is insufficient.
The new criminal investigations into the conduct of the firm’s former chairman, Steven Davis are also a concern of worry, as Davis was recently removed from all responsible positions in the firm.
The only real assets of Dewey & LeBoeuf are its lawyers. If Dewey is encouraging its partners actively to leave then the worst has happened. Even if Dewey files for bankruptcy it would only dissolve the firm and lead to the same result – of partners leaving the company.
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Partners who complained to the office of the District Attorney have alleged irresponsible behavior on the part of the firm’s former chairman leading to financial misconduct.
In 2007, Dewey Ballantine and LeBoeuf merged with Lamb, Greene & MacRae to create a 1300-lawyer firm with 25 offices. The deal was led by Steven Davis, the former chairman with big dreams. At a time when many had questioned the IPO and borrowing strategies of the firm, Mr. Davis had retorted, “You have to be bigger.”
Steven Davis launched a system within the firm where, against traditional patterns of law firm partnership, star partners had guaranteed contracts of millions of dollars each year. Most star partners made ten times more money than those at the bottom of office hierarchy.
After weathering through the recession, in 2010, Davis started lateral recruitments of partners with huge and multi-year contracts. And Davis did this when not in a position to pay existent partners of the firm.
In October 2011, Davis revealed that he had offered guarantees to nearly 100 lawyers and commitments that were impossible to keep. Non-star partners, to whom the firm already owed millions of dollars, were asked to accept additional pay reductions. The collapse began.
