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WASHINGTON � Mayer, Brown, Rowe & Maw is somewhere between the West of its youth and the East of its future. To the west is Chicago, the firm’s founding city, where a powerful vanguard resides. That includes a majority of its 13-member policy and planning committee, final arbiter on all decisions that matter. To the east is London and Paul Maher, the firm’s formidable 47-year-old vice chairman, ominously dubbed by some Mayer, Brown wags as the “Dark Sith Lord.” Between the two, of course, sits the Washington, D.C., office, which can’t be blamed for wanting to keep its head down. That’s because relations between the firm’s dueling power centers have become a bit frayed. In interviews, more than a dozen current and former partners described an ongoing struggle for power over the past year as the June retirement of longtime Chairman Tyrone Fahner neared.At 64, firm rules required Fahner to hand over his leadership spot. To replace him, Mayer, Brown unveiled a three-headed chairman’s office. The ruling triumvirate features two appellate lawyers, Chicago’s James Holzhauer, the de facto chairman and previous general counsel of the firm, and Washington’s Kenneth Geller, the vice chairman. Then there’s London’s Maher, also a vice chairman. He focuses on mergers and acquisitions. For many within the firm, the divided leadership was an untenable idea. “You can’t have three chairmen,” says a former Mayer, Brown partner who declined to be named for fear of offending his former partners. “It’s never worked in the history of U.S. business.” And although conflict within the trio hasn’t quite broken out into a shooting war at “Deadwood’s” Gin Saloon, current partners say the closed-door griping has grown steadily louder. There’s also the sense that in this lawyerly dustup, Maher holds a clear advantage. “Maher is younger, hungrier, tougher, and more energetic. And the other two aren’t businessmen,” says a former partner from the New York office. “What people fear, especially in Chicago, is that [he] doesn’t understand the U.S. market and the culture and legacy of Mayer, Brown.” For their part, Holzhauer, Geller and Maher laugh off the idea there is any power struggle within the troika. “The feeling was that we’re one of the largest firms in the world, and we need to increase our leadership bandwidth,” Geller says. “No threats were made by Paul. I can tell you, as one of the people in the three amigos, there’s no tension.” THE RAINMAKERS DEPART The transition at the top has come during a bumpy 18 months, which saw the loss of at least 20 partners from the firm’s New York office as well as this spring’s de-equitization of 45 partners (with many cuts, sources say, coming in Chicago, especially among the litigation, environment and labor practices. The Washington office was spared.). Current and former partners say the firm is also dealing with flagging profits in the New York and London offices � and a critical report by bankruptcy examiner Joshua Hochberg, a Washington partner at McKenna Long & Aldridge. In the report, Hochberg alleges that Mayer, Brown helped to move bad debt off a client’s books. The case involves the bankruptcy of Refco Inc., a brokerage firm that imploded in 2005 amid charges that the company manipulated its financial statements. “It’s a really sad story,” says another former New York partner. “There is still a tremendous amount of talent. But people got fed up with Chicago and all of the dead weight in that office.” As if matters weren’t bad enough, in May high-profile litigation partner Alan Salpeter left the firm. After a 35-year run, Salpeter landed at the Chicago office of LeBoeuf, Lamb, Greene & MacRae. Over the past five years, Salpeter was Mayer, Brown’s highest-paid partner, thanks largely to his handling of institutional clients such as Ernst & Young and the Canadian International Bank of Commerce. His departure followed that of New York litigator Dennis Orr, then Mayer, Brown’s second-highest-paid rainmaker, who left last year with a group of three other partners for Morrison & Foerster. Rumors swirled that Salpeter’s departure meant the loss of a $30 million book of business. But Mayer, Brown says it has retained nearly all of Salpeter’s clients. “Leaving the firm was about bigger, broader issues � it’s not compensation,” Salpeter says. “It’s the lack of including people. Why didn’t the firm’s management go to the biggest business generators and ask about these big decisions? They’re not being inclusive.” Salpeter adds that the amount of business he took to LeBoeuf is still in flux. Still, even with the bad news, Geller points out that 2006 was Mayer, Brown’s best financial year ever in terms of both gross revenue and profits per partner. And even with the departures, the firm has more than 1,350 lawyers at its command worldwide. VIOLATING A SOCIAL CONTRACT? Historically, Mayer, Brown is characterized as a place where smart people can practice complex law at a high level. It isn’t for lack of talent that the firm’s partners have left. It is for lack of leadership, those close to the firm say. Some trace those difficulties to the 2002 merger of Mayer, Brown & Platt with London’s 250-lawyer Rowe and Maw. But current partners and four former partners say that it goes back to the ineffective chairmanship of Fahner. Criticism of his leadership was withering, though none of the current or former partners interviewed would do so publicly. “Ty was at the helm for the integration, success, and mergers of this firm and to not give him his due is wrong,” says Hector Gonzalez, a partner in the New York office and member of the policy and planning committee. “He was a very strong leader who knew this institution and its people.” The animosity toward Fahner was concentrated in the New York office. Many former partners say his lack of stewardship in recent years allowed the New York office, filled with combative personalities, to spin out of control. “Fahner is a nice guy, he’s well-meaning, but he didn’t do anything to exercise strength and vision,” says a current Mayer, Brown partner. “It’s not about a philosophical difference in how to do business; the office is just in disarray, and partners left because they were tired of it.” Fahner was traveling, but wrote by e-mail about the New York office: “Our management is making changes that some may consider difficult, but we view as essential, in taking that office to an even higher level.” The firm says its New York presence is around 210 lawyers, though several former partners put that number lower � well below 200, which has left open an abundance of empty office space. Reasons for the recent partner defections vary. Some were client-driven. Some partners were seeking better pay � the profits per partner in this year’s American Lawyer 100 were just above $1 million, an underwhelming figure in the Manhattan market. And others were looking for relief from the recent turmoil at the firm. But all are tied in some manner to the growing pangs of an international law firm. Last September, the firm replaced Thomas Vitale, who had a three-year run as the head of the New York office, with Brian Trust, a bankruptcy lawyer who joined the firm six years ago and is well-liked by most everyone in the office. But that move has not stanched the flow of departures nor, recruiters say, the number of resumes coming out of the office.
‘Historically, Mayer, Brown is characterized as a place where smart people can practice complex law at a high level. It isn’t for lack of talent that the firm’s partners have left. It is for lack of leadership, those close to the firm say.’

“What’s hurting the office is a total lack of cohesion,” says a former New York partner. “That office is a confederacy of practices � it’s not a law firm. These issues were swept under the rug when the office was profitable. Now it isn’t, and people are leaving.” Geller doesn’t deny that New York’s profits are sagging, though he maintains that the firm no longer looks at revenue by office: “For a time it was the most profitable part of our firm. These things come and go in cycles. We have certainly one of the largest and best European platforms to offer clients in New York, and that’s how we plan to grow the office.” Aside from the tail-off in New York, former partners also point to the handling of a suit earlier this decade by the firm’s management as another indication of poor leadership. Mayer, Brown was sued in late 1999 in connection with its representation of a now-defunct Oklahoma company, Commercial Financial Services. The company marketed bonds supposedly backed by credit card receivables. When the company defaulted on $1.6 billion in bonds, bondholders accused Mayer, Brown of securities fraud. Partners say Mayer, Brown settled the suit confidentially in 2005. Holzhauer says emphatically that partners in the firm who were involved with the settlement handled it with appropriate care. “Anything about CFS is a big red herring,” Holzhauer says. “We’ve told them the impact it had on the firm’s bottom line and that the liability was within our insurance coverage.” But the four partners who’ve left the firm say that isn’t true. Each says the settlement was never fully disclosed to the partnership and that rumors have been left to fester in the halls of Mayer, Brown as to how high the number went. “Our settlement went well past the coverage limit,” says a current partner with knowledge of the settlement. “They had fiduciary duties to tell the partners what was going on. It’s an outrage, and it offended a lot of people.” Adds a former partner: “It was very upsetting because they never told us the truth. There were three lies: One is that it would settle within the insurance coverage. Two was that Fahner and Holzhauer held back money over several years to fund a future settlement. And three, they never told us the final amount. They violated the social contract with the firm.” Sources also say there were unanswered questions among the partnership as to whether Mayer, Brown was insurable for malpractice after the CFS settlement. And now comes the Refco case. The report alleges that Mayer, Brown lawyers, led by New York partner Joseph Collins, negotiated transactions as part of “round-trip” loan schemes designed to conceal Refco’s debt, opening a door for Refco’s creditors to sue Mayer, Brown. Bankruptcy examiner Hochberg said in his report that there was no direct evidence that Mayer, Brown knew the loans were bogus, but there was enough circumstantial evidence that the firm “assisted Refco by drafting and negotiating documents in connection with the round trip loan transactions, which Mayer, Brown knew or should have known were fraudulent and undertaken for the purpose of manipulating Refco’s financial statements.” Time will tell if Refco’s creditors take action against Mayer, Brown. GETTING THE STOCK UP But it was this year’s very public de-equitization of dozens of partners that put the firm squarely in the public eye. Most firms cleave unproductive partners from their ownership stake in the way the Colts left Baltimore, quietly � and, if possible, in the dead of night. In an earlier time such a large move against partners would have been unprecedented. Instead, many industry watchers wondered what took so long. Chicago rivals Sidley Austin and Sonnenschein Nath & Rosenthal de-equitized partners in 1999, nearly a decade ago. “The three of us in the Office of the Chairman do believe that whilst we’ve got a robust practice, we were becoming a little concerned that our profits per partner were lagging behind firms that we regard as equal of, and others, modestly, that we’re superior to,” Maher says. “When you look at Latham [& Watkins] and Sidley, they are not materially stronger than us � but their profits per partner look better.” He’s right. In 2006, Mayer, Brown’s profits per partner were $1.1 million, coming in as the 45th highest on the Am Law 100. In 2005 the profits per partner were $955,000. Those totals, however, are well behind Mayer, Brown’s Chicago brethren: In 2006 Kirkland & Ellis came in at $2.2 million, McDermott, Will & Emery averaged $1.4 million, and Sidley Austin $1.3 million. The decision to de-equitize was approved unanimously by Mayer, Brown’s 13-member management committee. But sources say it was London’s Maher who pushed the hardest for the move. “The board agreed unanimously on the decision to de-equitize.” Geller says. “This was a hard decision we all came to.” Still, critics latched onto the public manner in which Mayer, Brown went about removing partners. In a newspaper interview earlier this year, Holzhauer went so far as to say the demotions and firings were necessary because “we want to drive our ‘stock price’ up.” It was honest. And, from a public relations standpoint, disastrous, say many current and former partners. “In retrospect, it’s one part I regret,” Geller says. “We talked to a consultant and he told us the names of several law firms that had de-equitized. They did it very quietly. We should have not done it as publicly.” Still, Geller maintains that a more cold-eyed approach to firm management is long overdue, given the competition the firm faces in the international market. “We are an undervalued asset,” says Geller. “We have tremendous talent. We have key locations in every part of the globe. But we have allowed ourselves over the last 10 years to become a little flabby in the way we manage ourselves.” Indeed, the question on the lips of many Mayer, Brown observers is not whether Holzhauer and Geller have been too ruthless but whether they have been ruthless enough, a talent many believe Maher would have no trouble exhibiting. A former partner puts the matter bluntly: “When Maher takes over, there’s going to be a lot more bloodletting. He’ll have to fire half of Chicago and get rid of L.A. He fired a lot of his colleagues in London to get down to a very talented core. And that’s what he’ll do with Chicago.” Not everyone thinks that’s a bad idea. “If you’re a smart businessman in Mayer, Brown’s world, you’re evil,” says a former New York partner. “He’s a great thing for them.” Nathan Carlile is a reporter with Legal Times, a Recorder affiliate based in Washington, D.C.

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