Former Partner Accuses Dewey of Running Ponzi Scheme, Files Lawsuit

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Henry Bunsow, a former partner at Dewey & LeBoeuf and an intellectual-property lawyer in San Francisco, sued members of former Dewey management on Tuesday, claiming that the management had misrepresented the finances of the law firm prior to its bankruptcy filing. Bunsow said that members of the Dewey management, including former chairman Steven Davis, was “running a Ponzi scheme in order to enrich themselves and select members.” According to Bunsow, the defendants misrepresented Dewey’s stability and financial performance to keep recruiting partners from other firms.

The case, filed in the California Superior Court is the first publicly filed lawsuit against Dewey or its management by a former partner after the law firm’s collapse. While several Dewey partners and groups of partners have already retained lawyers and law firms to save themselves from lawsuits by the firm’s bankruptcy estate, their tactics have largely been defensive. Though, several have been mulling of filing their own claims against Dewey and others, this is the first such formal move.

Bunsow has included the following members of Dewey’s former management in his lawsuit: Steven Davis, the former chairman, Jeffrey Kessler, the former head of litigation, Joel Sanders, the law firm’s former Chief Financial Officer, Stephen DiCarmine, Dewey’s former executive director, and James Woods, a one-time executive committee member who convinced Bunsow to leave his previous law firm and join Dewey.

  

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Kessler, who is now working at Winston & Strawn, said in an email that the allegations were “outrageous, untrue and without the slightest bit of merit … It is sad that Mr. Bunsow, who received more of his compensation for 2011 than I did, would lash out with such false allegations against me.”

Bunsow has alleged that Dewey’s leadership lured him to join the firm in January 2011 with a promise of $5 million a year in guaranteed compensation. Bunsow, who was vice chairman at Howrey, took the bait and left for Dewey. He said Davis and others in leadership positions at Dewey “knew they would be unable to keep that promised guarantee in view of the huge debt of guaranteed income then owed to prior partners,”

The news of the lawsuit reached the Dewey management as they struck a deal with lenders for funding the bankruptcy proceedings. Albert Togut, the lead restructuring lawyer for Dewey told the Manhattan U.S. Bankruptcy Court that the primary task was now to reach a global settlement by and between the parties under which former partners would be made to pay varying amounts to enable creditor paybacks by Dewey.

Currently, Dewey is in a position to spend as much as $10.5 million through July 31 on recovering receivable accounts, and on other administrative tasks, Togut told the court. Dewey’s current budget also has a reserve of $8.3 million for lawyers’ fees and for paying other professionals representing the creditors’ committee and a committee of former partners.