Talk about creative accounting. When the government charged former leaders of now-defunct Dewey & LeBoeuf with fraud in March, the criminal indictment and SEC complaint included riveting details about the accounting gimmicks that Dewey management allegedly used to paint a misleading picture of the firm’s financial health. (The defendants deny the charges.) What to do about missed revenue targets, lagging collections, low cash flow and disappointing profits? Here’s how Dewey handled it, according to the Securities and Exchange Commission and the Manhattan district attorney’s office. (Don’t try this at home, kids.)
Treat nonequity partners as partners. By moving compensation for two salaried partners and three of counsel to an equity distribution account, Dewey allegedly cut its expenses and raised net profits by $14.5 million.
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