Joel Sanders during a break on the first day of the Dewey & LeBoeuf trial. (Rick Kopstein)
Dewey & LeBoeuf’s former chief financial officer, Joel Sanders, may have referred in emails to the firm’s “fake income” and requested a “clueless auditor” as the firm was struggling to remain profitable, but that’s not evidence of fraud, his lawyer Andrew Frisch told a jury.
On Wednesday morning, Frisch presented the third and final opening statement in defense of the three former leaders of now-defunct Dewey & LeBoeuf, who face charges of fraud, grand larceny and falsifying business records in a case brought by the New York County District Attorney’s Office. The other defendants are ex-chair Steven Davis and former executive director Stephen DiCarmine.
But Sanders’ defense differs from that of his two co-defendants, whose lawyers assert that their clients did not have the accounting backgrounds to know that what might be going on in their finance department was wrong. Sanders, a certified public accountant with a business degree who faces many more charges of falsifying business records than Davis and DiCarmine, can’t make that argument.
Instead, Frisch painted his client as a blunt talker who was just doing his job to keep the firm afloat during difficult financial times. He emphasized that under Sanders’ watch, the firm never missed a payment to a bank and that it was Sanders who permitted JPMorgan Chase to raise the $150 million in capital from 13 insurance companies, thereby inviting the bank to review the firm’s finances.
“What person intending to defraud invites the scrutiny of investigating outsiders?” Frisch asked the jury. “Joel Sanders is not polished. He’s not fancy,” added Frisch, an attorney with his own shop who signed on to represent Sanders earlier this year after the former CFO replaced his lawyers from Hughes Hubbard & Reed.
Frisch explained that Sanders went to school at night to get his business and law degrees from Baruch College and St. John’s University, respectively: “Some of you may relate to the blunt way Joel Sanders talks, and some of you may not.”
That language appeared in some of the emails sent between Sanders and other Dewey & LeBoeuf executives, but Frisch said it was typical accountant-speak. Phantom income, he said, is an accounting term, and he invited jurors to interpret the “clueless auditor” comment as sarcasm. Frisch added that if Sanders felt he was doing something wrong, he wouldn’t have disclosed his actions to Dewey & LeBoeuf’s partners, many of whom were accountants or former federal prosecutors.
Frisch read aloud another email, sent from Sanders to former finance director Francis Canellas, in which his client allegedly wrote: “We’ll go bankrupt. This is a disaster. The firm’s fate is in our hands, and 3,000 families are eating off a paycheck from Dewey & LeBoeuf. We can’t let this happen.”
Throughout Frisch’s opening statement, Sanders watched without revealing much emotion. The courtroom had far fewer audience members than the first day of trial, which brought more than 50 people to a criminal courthouse in downtown Manhattan. (In an ironic twist, Manhattan’s first district attorney was Thomas Dewey, a former New York governor and famous U.S. presidential candidate who later became a name partner at Dewey & LeBoeuf predecessor Dewey Ballatine.)
After the final opening statement, prosecutors did not hesitate to get into accounting details. They called Alan Frazier, senior vice president and managing director of executive benefits at Wells Fargo, and Jeffrey Leap, principal financial investigator at the district attorney’s office, to the stand.
Frazier reviewed an employment incentive plan that Wells Fargo’s predecessor bank Wachovia had made with Dewey & LeBoeuf for DiCarmine and Sanders in which the firm contributed $600,000 a year into trusts that were intended for the two former executives. Leap was asked to summarize the firm’s covenants with four banks, which required that Dewey & LeBoeuf maintain a cash flow of $290 million in 2008.
Later in the afternoon, prosecutors called to the stand Jane Boisseau, a former Dewey & LeBoeuf partner, executive committee member and co-chair of the firm’s insurance regulatory practice. During the first part of Boisseau’s testimony, assistant district attorney Peirce Moser asked her to explain her own career trajectory and the structure of large law firms.
Boisseau, who is from New Orleans, said she worked as a teacher before moving to New York to attend Columbia University’s Teachers College. She switched careers and ended up graduating from New York University School of Law and taking a job at Dewey & LeBoeuf predecessor LeBoeuf, Lamb, Greene & MacRae in 1985, she told the jury. Boisseau answered Moser’s questions about everything from the difference between an associate and partner to how law firms make money.
Looking over the rim of her glasses and speaking directly to the jurors, who listened attentively, sometimes laughing at her jokes, Boisseau spoke of how partner compensation was determined by LeBoeuf Lamb’s executive committee, with Davis determining executive pay as firm chair. Davis consulted members of the executive committee about his own pay, she said, and revealed to them how other committee members would be compensated.
“I always told [Davis] he deserved more,“ Boisseau said of those conversations.
Boisseau, who is now retired but spoke with The American Lawyer back in 2006 for a story about LeBoeuf Lamb’s lust for laterals, added that Sanders was responsible for financial matters at Dewey & LeBoeuf, with DiCarmine serving as the firm’s top administrator. Boisseau said she was friends with both Davis and DiCarmine and on friendly terms with Sanders.
After the 2007 merger between LeBoeuf Lamb and Dewey Ballantine, the executive committee grew from 11 to 22, Boisseau said. She no longer was privy to what each executive committee member took home in compensation, but other aspects of how the combined firm ran remained the same, such as Davis’ role.
Boisseau testfied that she knew Dewey & LeBoeuf had debt and that she understood it to be Sanders’ responsibility to ensure that the firm complied with its lender banking agreements. When asked whether she trusted the financial reports she was hearing from the firm’s administrators, Boisseau replied, “Absolutely.”
On Thursday, Moser will continue his questioning of Boisseau.