Dewey & LeBoeuf LLP’s former real estate group chairman said the firm, which is trying to stay out of bankruptcy by collecting bills to pay lenders, didn’t tell some senior executives the extent of guaranteed pay packages.
“We knew there were guarantees but I don’t think anyone imagined that it was 100,” former Dewey partner Stuart Saft told Bloomberg Law in an interview yesterday. “We thought it was 20 to 25. I was shocked when I learned how many there were. I am still surprised and shocked that it was such a high number.”
Dewey gave guarantees to about one-third of its 300 partners, according to a person with knowledge of Dewey’s compensation system. The firm is on the hook for well over $100 million in those guarantees, according to another person with knowledge of Dewey’s financials.
Dewey continually guaranteed compensation for partners who had been at the firm as long as 20 years, one of the people said. As much as 80 percent of the firm’s compensation was guaranteed, the person said.
Saft has left the New York-based law firm and moved to Holland & Knight LLP, taking several associates with him, he said.
Dewey’s collapse has left a lot of partners angry and confused about what really happened, he said.
Acrimony and Anger
“There’s a lot of acrimony and anger still to come,” he said. “But do we really want to spend our time litigating with each other?”
Dewey partners, who were getting less pay than expected as profit fell, learned at a partnership meeting in Manhattan that the firm had struck special deals with some partners who would have to be paid before others, according to a person familiar with those events.
Ex-Chairman Steven Davis said at the October meeting that the special deals -- requiring Dewey to defer pay for most partners -- involved about 100 lawyers, the person said. Pay at the firm ranged from about $300,000 for junior partners to as much as $5 million to $6 million for a handful of top lawyers, the person said, declining to be named as he wasn’t authorized to comment on these matters.
Davis’s lawyer, Barry Bohrer, declined to comment on Davis’s handling of the information about pay.
Formerly sole chairman, Davis was ousted from a newly formed five-man chairman’s office on April 29 after Manhattan District Attorney Cyrus Vance Jr. started a probe into possible wrongdoing at Dewey, according to an internal Dewey memo on April 29 to partners that was obtained by Bloomberg.
Bohrer, a criminal defense lawyer at Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, has said Davis believes “fair-minded professionals will conclude that he engaged in no misconduct.”
The new chairman’s office, which announced March 26 that it would bring “hands-on” management to the firm, lasted six weeks. Today, Proskauer Rose LLP said Dewey’s restructuring group head Martin Bienenstock would join the firm with five colleagues. Bienenstock was the third of the remaining four co-chairmen to leave, after Rich Shutran, head of the corporate department, was hired by O’Melveny & Myers LLP and Jeffrey Kessler, head of litigation, was taken by Winston & Strawn LLP.
“They’re voting with their feet,” said Chip Bowles, a bankruptcy lawyer with Bingham Greenebaum Doll LLP in Louisville, Kentucky. “That tells you their plan didn’t work very well.”
Not knowing what was happening in other parts of the firm may have been attributable to the fact that Dewey had grown after a 2007 merger to become an international law firm with about 1,400 lawyers around the world, Saft said.
“Law firms are no longer partnerships, they’re businesses,” he said. After Dewey’s merger, information going to partners was restricted because of concern that headhunters had gained access to confidential client lists and were trying to move certain partners to other firms, he said.
In Saft’s view, Dewey’s financial woes started with the merger during the 2007 credit crisis, and the “great recession” that took hold in the U.S. as Lehman Brothers Holdings Inc. collapsed in September 2008.
“Our recently created organization had to find a way of surviving,” he said. Managers might not have understood how much the world had changed, and were “using a pre-Lehman paradigm to keep the ship afloat,” he said.
The former Dewey Ballantine and LeBoeuf Lamb Greene & MacRae merged in October 2007 to form what was then the 11th-largest U.S. law firm, now ranked 28th by American Lawyer after revising revenue downward and losing more than 120 partners.