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At the end of the month, seven months after their firm was partially consumed by the much larger Winston & Strawn, the former partners of New York’s Whitman Breed Abbott & Morgan will find out what kind of ending their old firm has in store for them. It has already been an unhappy one. The question now is whether it will get downright nasty. Accountants attempting to close the books on the now-defunct firm are due on March 31 to issue a preliminary tally of how much of the partners’ capital contributions is left to be distributed. The 48 former Whitman Breed partners have a lot at stake: $7.2 million in capital, as well as compensation for the first eight months of 2000, before 180-lawyer Whitman Breed merged with the Chicago-based, 725-lawyer Winston & Strawn. Whitman Breed’s former co-managing partner, Berge Setrakian, is optimistic that everyone will be paid. But as of press time, the numbers weren’t adding up. The firm originally had until January 31 to make the bulk of its fee collections, and according to sources, about $14 million was received. But the firm must pay off liabilities of roughly the same amount — for example, bank debt and payments to vendors — before a penny of capital can be returned. As a result, the collections deadline has been extended for some matters. Fees of about $4 million for a few special cases can be collected until June 30. So, while Whitman Breed still could bring in more money, it would need much more than $4 million to return all the capital. As for getting compensated for last year, it seems that partners can forget that. “It’s startling that I would work for seven months and get nothing and lose part of my capital. If I had known in advance, I would have taken a trip or a bike tour or written a novel instead of showing up at the office,” says former partner Randolph Mayer, now of counsel at New York’s Willkie Farr & Gallagher. Some partners are owed up to $250,000 in capital and compensation, more than enough to make them bitter. And we know what happens next. There’s already talk that some partners who did not join Winston & Strawn are going to sue. Considering how the merger has gone, it’s only fitting that the firm’s last act leaves many feeling screwed. Like so many others of its kind, Whitman Breed had thought that merging with a larger firm was the answer to its mid-size troubles. Partners hoped for a boost in profits while keeping Whitman Breed largely intact within Winston. But, like so many other firms that have folded amid a merger, it soon learned two things. First, the money pinch that led to a merger search may only get worse, once the end is in sight. Second, the firm learned that not all lateral partners were welcome. In all, only 13 of Whitman Breed’s 42 remaining partners retained their equity status at Winston & Strawn. Whitman Breed’s entire 29-lawyer Los Angeles office, as well as four other smaller offices, were summarily cut out of the deal. The L.A. office, which couldn’t be a part of Winston & Strawn because of a conflict, joined Tampa’s Holland & Knight last August. Mark Shipow, the former L.A. office managing partner, won’t comment on financial details, but he and his colleagues are bystanders in the current imbroglio, having disengaged already. As for those who are less able to forgive and forget, Robert Bostrom, Winston & Strawn’s managing partner in New York, agrees it’s unfortunate that so many were denied equity status, but insists that there was no way around it: “I think it reflects the very simple fact that, in some cases, the economics and practice areas [of the firms] were not in sync, and it reflects the ratio of equity partners to total lawyers at Winston & Strawn.” Whitman Breed, the product of a 1993 merger between 215-lawyer Whitman & Ransom and 100-lawyer Breed, Abbott & Morgan, was bogged down by chronic collections problems and too many overpaid, underproducing partners. Though 1999 was the firm’s best year ever, thanks to a relatively new tobacco client and a stepped-up effort to improve its realization rate, the partners knew that something had to be done. Its profitability was growing modestly, to $400,000 in profits per partner in 1999. But modesty has not been a virtue among Am Law 200 firms. Compared to others its size, Whitman Breed was a laggard. Winston & Strawn, on the other hand, boasted profits per partner of $715,000 in the most recent Am Law 100 rankings. Many Whitman Breed partners either didn’t understand or chose not to think about the gap in profits. “People thought a merger with Winston & Strawn would allow them to make more money,” says a former partner, who declined to be identified. “They didn’t ask why a firm with $700,000 profits per partner would want them.” Some partners look back and say that Winston & Strawn’s motive was to acquire Whitman Breed’s lease. They claim that the merger was essentially a real estate deal, since both firms have their offices in Manhattan’s Met Life Building, and Winston & Strawn was said to be desperate for extra space. “If Winston & Strawn was interested in the whole firm, why would it jettison all other offices but New York?” questions former partner Eugene Flanagan III, now at Stamford, Conn.’s St. Onge Steward Johnston & Reens. Bostrom strongly rejects this idea and says that his firm’s primary interest was picking up good lawyers. On top of being unhappy with the outcome, former partners grumble about how the merger was handled internally. “I heard about the merger from a partner who had heard about it from someone in the mailroom or a secretary,” says Flanagan. He adds, “It was standard operating procedure [at Whitman Breed] that the secretaries knew more than the equity partners, except for those on the executive committee.” But in this instance, even a member of the executive committee was kept in the dark. He heard about the merger when his client called to question him about it. Setrakian denies that’s how things happened, calling the complaints “bullshit.” Regardless of who is right, the act of demoting or freezing out partners — combined with a likely financial shortfall — has had former Whitman Breed partners seething for months. Another money dispute centers on what some call “phantom capital.” Former partners say that when Whitman Breed was formed in 1993, the founding partners wrote off their capital contributions — without such tax write-offs being reflected on the books — while partners who later joined the firm contributed real money that remains with the firm. Setrakian, who was one of the founding partners, says that phantom capital is a “pure accounting and tax issue among partners.” Some former partners think otherwise. They claim that the firm’s founding members essentially got their capital back through the write-offs. If they’re now treated as if that had never happened, say these disgruntled partners, the founding members will receive a greater share of the pot than they’re entitled to. Assessing all that has happened, one former partner says, “This merger had more than enough greed and arrogance to fuel and propel at least a half-dozen mergers.” He reached this conclusion before things were final. Even earlier, in the heat of the merger discussions, he e-mailed Lewis Carroll’s poem, “The Walrus and The Carpenter,” to his partners. In the poem, the Walrus and the Carpenter invite oysters to walk with them on the beach. The young oysters follow, and when they reach their destination the Walrus and the Carpenter proceed to dine on them. “Basically,” says Flanagan, “it was my take on the merger.”

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