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Dewey Ballantine has been on a mission to bolster its finances. In October 2003 the firm slashed retirement benefits and dismissed 15 partners. Then, in October 2005, Dewey changed its capital structure to require most of its partners to pony up more money — once up front when they make partner, and then in regular installments as their income rises. Although the partnership voted for the ongoing compensation and capital changes, they haven’t been a hit with everyone. In February 2005 former D.C. partner Joseph Dowley sued Dewey and five partners, including Chairman Morton Pierce, for breach of contract, breach of fiduciary duty, and age discrimination. Dowley, a 17-year veteran of the firm, was among the 15 fired in 2003. The suit, filed in D.C. Superior Court and since transferred to federal court, claims the 15 layoffs came right after retirement funds were slashed and that partners wouldn’t have voted for the cuts if they’d known the layoffs were coming. Dowley claims that 11 of the 15 partners who were dismissed were 50 or older and that he lost about 45 percent of his pension. Dowley also blasts Pierce for his compensation — $3 million per year plus a $3 million bonus in fiscal 2004, according to the complaint. The capital restructuring also has people grumbling. “Some partners were unhappy about it,” says one former partner, who asked not to be named. On the contrary, says Dewey Executive Director Dennis D’Alessandro, the recent restructuring was intended to make the system more equitable. According to D’Alessandro, partners at the same compensation level previously did not have the same amount of capital invested in the firm. The restructuring was coupled with the firm’s move from an accrual-based accounting system, which recognizes revenue when it is earned, to a cash-based system, which recognizes income when it is received. Very few firms use the accrual system, which consultants say can make a firm’s balance sheet look better than it actually is. Dewey wouldn’t say how much money it has raised, but the firm says it is using the infusion of capital to pay back some long-term debt. In the complaint, Dowley, now a partner at McKenna, Long & Aldridge, calls Pierce the instigator of the layoffs and claims he pushed the 15-member management committee to fire a slate of partners chosen by the firm’s four-member executive committee. Asked about Dowley’s allegations, D’Alessandro says the firm “made a strategic decision to eliminate certain practice areas that did not fit with our overall growth plan” and that partners in those groups were given more than a year to look for another job. Those practice areas included the environmental and real estate lending group, among others, according to D’Alessandro. Dowley advises corporations and individuals on tax, health, and trade issues. D’Alessandro says that while Dewey reduced retirement payments, it raised the cap on how much the firm pays out each year in capital returns and funds to those who have left the firm. As a result of the 40 percent cap increase, he says, the firm distributed $3.5 million more to partners in 2004 than in the previous year. Asked about Pierce’s income, D’Alessandro had no comment. Dowley’s attorney, Stephen Chertkof of D.C.’s Heller, Huron, Chertkof, Lerner, Simon & Salzman, declined to comment.
Brenda Sandburg is a reporter for The American Lawyer magazine, the ALM publication where this article first appeared.

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