Dewey & Leboeuf’s former office at 1305 Avenue of the Americas (NYLJ/Rick Kopstein)
A senior executive at JP Morgan Chase, Richard Walden, told a jury Monday at the criminal trial of former Dewey & LeBoeuf executives that the firm had assured the bank that it was meeting agreements that allowed it to borrow millions between 2008 and 2012.
Dewey & LeBoeuf filed for bankruptcy in May 2012 and three of its former leaders face charges of conspiring to commit fraud.
Walden was responsible for loans JP Morgan Chase made to Dewey & LeBoeuf, some of which he was questioned about by Manhattan Assistant District Attorney Peirce Moser.
The banker reviewed a $35 million JP Morgan Chase loan issued to the firm in late 2007 as well as a syndicated loan of $60 million from his bank, Wachovia and Barclays dated February 2008. He also discussed a $150 million private placement agreement the firm had with a group of insurance companies in 2010.
Each loan had various stipulations the firm had to comply with and sometimes the loans were amended, Walden testified.
Toward the end of 2011, Walden said that he had a meeting with Dewey & LeBoeuf executives, during which former Chief Financial Officer Joel Sanders said he was concerned that the firm would not be able to meet the covenant for one of its loans. Walden said he discussed the consequences of breaching that agreement and that soon after the meeting he heard from Sanders that “they didn’t need to deal with the potential covenant issue.”
Moser will continue to question Walden this morning before the defense begins cross examination.
Before Walden’s testimony began, both the defense and the prosecution finished questioning Gregg Sincoff, a managing director in the law firm services group at global accounting giant PricewaterhouseCoopers in New York, who analyzed the firm’s books in early 2012.
Sanders’ lawyer, Andrew Frisch, in questioning Sincoff, returned to an issue he raised in his opening statement when he suggested that when his client referred in an email to “fake income,” an exchange quoted in the indictment, he was using a common accounting phrase.
Frisch asked Sincoff whether the phrase “phantom income” is a common accounting term and if it means the same thing as “fake income.”
Sincoff agreed Monday that “phantom income” is an accounting term that refers to allocated income that exceeds the amount of cash a partner actually received.
But when Moser asked whether phantom income refers to “fake cash,” Sincoff responded that it did not.
Former Dewey & LeBoeuf controller Thomas Mullikin, one of the cooperating witnesses who has already pleaded guilty, is expected to testify after Walden today.