Dewey & Leboeuf’s former office at 1305 Avenue of the Americas (NYLJ/Rick Kopstein)
The Manhattan District Attorney’s Office said the evidence against former Dewey & LeBoeuf leaders amply supported a grand jury indictment, rebutting arguments that the ex-leaders expected Dewey to pay back money to banks and insurers.
“This was not some joy ride; the insurance companies and financial institutions were, even under the best of circumstances, to be separated from their money for years based on Dewey’s misstatements,” prosecutors said in court papers Friday.
They also opposed the request of Zachary Warren, onetime Dewey client relations manager, to dismiss the case against him “in the interest of justice.”
Manhattan District Attorney Cyrus Vance Jr. in March announced charges against Dewey’s ex-chairman Steven Davis, former executive director Stephen DiCarmine, former CFO Joel Sanders and Warren, alleging they engaged in a scheme to defraud. The four have pleaded not guilty. A trial is anticipated early next year.
Much of the indictment centers on the refinancing of Dewey’s debt in 2010 with a $150 million private placement of securities with insurance companies and a $100 million revolving line of credit with banks. Prosecutors said the firm leaders misrepresented Dewey’s financial condition to potential investors and lenders.
Last month, the defendants asked Supreme Court Justice Robert Stolz (See Profile) to inspect the grand jury minutes and dismiss counts not supported by the evidence.
In particular, Davis, DiCarmine, and Sanders have asked Stolz to dismiss the grand larceny counts, arguing the grand jury should have been provided with evidence demonstrating that the trio fully intended at the time the private placement was made for Dewey to make all payments when due.
But Assistant District Attorneys Peirce Moser, Steve Pilnyak, Michael Kitsis and Gregory Weiss said in court papers, “larcenous intent” does not require permanent deprivation and the defendants intended to withhold the property for a sufficiently long period to support the charges.
They cited People v. DaSilva, 2945/2010, and People v. Abacus Federal Savings Bank, 2480/2012, in which judges refused to dismiss larceny counts involving loans, even though the loan payments were current. They also noted that for more than century, New York law has prevented defendants from defeating larceny charges by the mere speculation that they could repay money wrongfully taken.
Prosecutors said they have provided the court with a transcript of the grand jury proceeding and consented to an in camera review.
DiCarmine and Sanders have argued that the private placement was authorized by Dewey’s executive committee, including lawyers who had expertise in such deals. Aside from Davis, no executive committee members have been charged.
“That lawyers at the firm authorized and worked on the private placement is not particularly enlightening if these lawyers were lied to and otherwise misled,” prosecutors said.
While the defendants have argued they lacked the requisite intent to defraud, prosecutors said, “it was enough that they intended for false entries to be made, and that they were made.”
Warren’s motion to dismiss was made in the interest of justice, claiming that he was a 24-year-old manager, less than two years out of college who knew little about Dewey’s accounting practices or the details of the covenants with lenders. A separate motion to sever his case also is pending.
After leaving Dewey in mid-2009, Warren went to Georgetown University Law Center, interned at the U.S. Department of Justice and Williams & Connolly and then served in two federal clerkships, his attorneys said.
But in a lengthy rebuttal, prosecutors said this is not one of those rare instances that warrant a dismissal in the interest of justice.
For instance, they said the harm “can be measured in the huge sums of money” lost by the lending victims. Prosecutors noted the fraud places a burden on “future dealings between lenders and law firms.”
They note Warren was paid handsomely to commit crimes, claiming in the last year he worked at Dewey, he earned $100,000 in base salary and received $115,000 more for his role in the fraud.
They also point to emails, where “the evidence of guilt is strong.” For instance, in January 2009, Warren forwarded a ‘Master Plan,” which listed false and fraudulent adjustments that could be made while Warren would receive a sizeable bonus as a result.
“Any argument that defendant Warren was just a bystander, which frankly was never colorable, certainly crumbles at this point,” prosecutors said.
Warren’s prestigious legal achievements say nothing of his character, they added. “This defendant has had advantages beyond those available to most people in this country, and certainly he has had advantages well beyond most who come into the criminal justice system.”
Warren’s father served as a judge in California and his mother is a professor at the Marshall-Wythe School of Law at the College of William & Mary. When he moved to Washington, D.C., in 2009, his parents bought him a residence, prosecutors noted.
“Having had access to these advantages, it is difficult to understand how this defendant is a person who should receive the rare and unusual remedy of dismissal of the charges against him,” prosecutors said. “The simple fact that he is a recent law school graduate at the start of his legal career is of no moment.”
Prosecutors also claim that, during a November 2013 interview with the Securities and Exchange Commission and FBI officials, Warren made statements directly contradicted by Dewey emails.
In an April interview with prosecutors, they said Warren was told that they had serious concerns about his conduct and they did not believe he was being honest, but if his memory improved or he retained counsel, he could contact the D.A.’s office.
“At that point, the defendant seemingly hid his head in the sand,” prosecutors said. “As an admitted lawyer, he exercised extremely poor judgment in not, at the very least, having an attorney of his choosing contact the People to try to learn what trouble he might be in and for which he asked for immunity.”
“The criminal justice system cannot maintain its vitality and credibility if it is seen as a club where lawyers and judges turn blind eyes to protect their own,” prosecutors said.
William Murphy and Paul Shechtman, partners at Zuckerman Spaeder who represent Warren, said they will file reply papers by Aug. 29.
“The allegations that Mr. Warren lied to the prosecutors are based on voluntary statements he made to the investigating attorneys that were consistent with his knowledge and belief that he did nothing unlawful and never participated in criminal misconduct,” the two said in a statement. “Because Mr. Warren had been told and believed that Dewey was on firm ground when he left the law firm in the summer of 2009, it cannot be fairly said that he ‘hid his head in the sand.’”
Meanwhile, Austin Campriello, a partner at Bryan Cave who represents DiCarmine, said, “We believe in the arguments we made and hope that the judge will agree with us.”
Attorneys for Sanders and Davis did not return messages for comment.