After nine months out of the spotlight, former Dewey & LeBoeuf executive director Stephen DiCarmine is set to make an appearance in court next week.
DiCarmine—a nonpracticing lawyer who held one of the most powerful positions at the now-bankrupt firm—must be available for questioning at a February 27 hearing scheduled to consider Dewey’s Chapter 11 liquidation plan, U.S. Bankruptcy Judge Martin Glenn in Manhattan ruled Wednesday.
Glenn’s decision came in response to an objection to the Chapter 11 plan filed late last week by former Dewey partners Andrew Fawbush and Elizabeth Sandza, who argue that the plan should not be confirmed because it does not pass the "good faith" requirement. If the plan is confirmed, the bankruptcy will be taken over by a pair of liquidation trustees whose mission will be to maximize returns to creditors who say they are owed some $600 million.
Should he wind up taking the witness stand, DiCarmine probably won’t provide Fawbush and Sandza much ammunition to support their objections. His lawyer, Hughes Hubbard & Reed partner Ned Bassen, made it clear Wednesday that because of an ongoing criminal investigation, DiCarmine is likely to invoke his Fifth Amendment rights in response to virtually any question he is asked that veers beyond the most basic facts. Dewey management confirmed in May that the Manhattan district attorney’s office had opened a probe into the circumstances surrounding Dewey’s collapse, saying it centered on the actions of former chairman Steven Davis. Davis has denied any wrongdoing.
"I’m not suggesting DiCarmine has anything to hide," Bassen said in court, growing increasingly exasperated once it became clear his client—who, in the wake of Dewey’s collapse, has been taking classes at Parsons The New School for Design—would be required to attend the February 27 hearing.
Glenn also ordered former Dewey finance director Frank Canellas to appear at next week’s hearing for possible questioning and directed former Dewey partner Martin Bienenstock to sit for a deposition scheduled for Thursday in lieu of attending the February 27 hearing (Bienenstock, now a partner at Proskauer Rose, said in court papers that he will be traveling and therefore unavailable that day.)
Despite allowing Fawbush and Sandza’s lawyers to take the additional testimony, and directing Dewey advisers to turn over copies of some 22,000 pages of documents related to the bankruptcy, Glenn was mostly critical of the pair’s effort to challenge the Chapter 11 plan.
He specifically scolded counsel for the two lawyers, Becker & Poliakoff partner Peter Smith, for focusing the three-page objection almost entirely on what they claim are flaws in the way the so-called partner contribution plan that is the linchpin of the Chapter 11 plan was constructed.
"You’re a little late to the party," Glenn said, pointing to several rounds of objections to the plan—which would release partners who participate from Dewey-related liability in exchange for contributions expected to total more than $70 million—that he has already considered and rejected. Glenn approved the partner contribution plan in October over the fierce dissent of two groups of Dewey partners, who agreed two weeks ago to forego their appeal of the judge’s decision and make their own contributions of between a few hundred dollars and more than $43,000 each to the estate.
Glenn was clearly unconvinced that Smith’s clients would have anything constructive to say about the Chapter 11 plan beyond criticizing the partner settlement—a subject he declared off limits. "The answer . . . isn’t registering," the judge said after Smith tried to explain several times why he thought Dewey’s onetime practice of deferring payments to partners from one year to the next was relevant to the confirmation of the Chapter 11 plan.
"I can only conclude that your clients [waited] until now to try and cause the maximum pain," Glenn said. Helen Davis Chaitman, the Becker & Poliakoff partner who brought the objection on behalf of Fawbush and Sandza, did not appear in court Wednesday.
Dewey’s advisers, including lawyers from Togut, Segal & Segal and restructuring advisers at Zolfo Cooper, as well as others involved in the bankruptcy, appeared eager to move on to next week’s hearing and, ultimately, confirmation of the Chapter 11 plan.
"Let’s not let this train come off the tracks," Kramer Levin Naftalis & Frankel partner Robert Schmidt, counsel for lead Dewey lender JPMorgan Chase, said during Wednesday’s hearing. Other creditors eligible to vote on Dewey’s Chapter 11 plan seem to agree. As of a Tuesday, 100 percent of 19 secured creditors and more than 91 percent of 208 other creditors have voted to accept the plan.
In what is proving to be busy week for the Dewey bankruptcy, another hearing is set for Thursday morning to review objections the Dewey estate has raised to claims filed by dozens of would-be creditors.