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Verner, Liipfert, Bernhard, McPherson and Hand has been to hell and back. Now, one of Washington, D.C.’s most storied lobby firms is at a crossroads, talking with at least two firms about a potential merger. It is a different Verner Liipfert than it was 18 months ago: Much smaller and more fragile but, firm leaders hasten to add, more profitable as well. Verner Liipfert has shed all its satellite offices. Disaffected talent has left in droves. And the widely touted strategy of luring famous political names into its lobby ranks has netted mixed results at best. Yet there are signs the firm is stabilizing: Debt has been cleared away; the international lobbying practice is signing up clients; and a new chairman and CEO have brought the now-100-lawyer firm a measure of stability. Many of its leaders and top rainmakers are in their 70s, though, and the betting is that later this year or sometime in 2003, Verner Liipfert will be subsumed by a larger firm. “It’s just a matter of when and how,” says the head of one rival lobby shop. There is another viewpoint, though: that having returned to its advocacy roots and become what is, in effect, a very large lobby boutique, the firm could continue to make a go of it. “The most valuable enterprise in town is a very good public policy practice,” says Patton Boggs partner Thomas Boggs Jr. “Most of that stuff is pretty high-value billing — and Verner’s lobby practice is as good as it’s ever been. If they rebuild their image as a premier public policy group, their value a year from now will be greater than this year.” But Verner Liipfert is of interest to others right now. Chicago-based McDermott, Will & Emery, with a 200-person D.C. office, is currently looking at Verner Liipfert’s finances. There is at least one other, undisclosed, suitor. Timothy Waters, McDermott Will’s D.C. managing partner, says, “We need to enhance our government affairs and legislative capability to be a true full-service Washington firm.” Waters declined to comment on whether McDermott Will and Verner Liipfert are in merger discussions. But, he says, Verner Liipfert “is a franchise in this city in terms of their reputation in government affairs. Their name is branded.” A key issue for any potential merger partner is the fact that Verner Liipfert’s name partners and many of its biggest rainmakers are well into their 60s and 70s. Co-founder Berl Bernhard is 72, as is Harry McPherson, a counsel to President Lyndon Johnson. Lloyd Hand, who was chief of protocol in the Johnson White House, is 73. The firm’s biggest draw, former Senate Majority Leader Robert Dole, R-Kan., will be 79 next month. That could prove a complication for McDermott Will, which has a mandatory retirement age of 68 for partners. Under the policy, five Verner Liipfert partners — Bernhard, McPherson, Hand, John Zentay, and Lawrence Levinson — would have to strike separate employment contracts and perhaps lose their titles. (Dole and the firm’s other former Senate majority leader, George Mitchell, D-Maine, are special counsel.) There’s also no guarantee that all of Verner Liipfert’s remaining partners will stay, or that the two remaining practice groups in addition to lobbying — international law and employment law — won’t go their own ways. Both areas are lucrative. In 2000, Verner Liipfert hired away B. Donovan Picard and his international team from Baker Botts. Picard represents the government of Ethiopia before the United National Permanent Court of Arbitration in its border dispute with Eritrea, a case that has generated millions of dollars in revenue. Although Verner Liipfert has long represented other governments — Mexico and Puerto Rico are two well-paying clients that left in recent years — it has increased its foreign client roster significantly. Verner Liipfert now represents India and Taiwan (both have signed on since 1998) and more recently Cyprus, Thailand, Malawi, Montenegro, Slovenia, and Kazakhstan. In November, Verner Liipfert named Dole as the head of the international group. One lawyer who accompanied Dole on a foreign road trip said he was amazed at Dole’s popularity abroad. Of course, remaining independent presents its own complications. Verner Liipfert would still have to deal with the succession of its leaders, and would likely need to pare itself down even further. “Verner has always had a legislative base, it’s something they’ve always been good at,” recalls one former partner. “Now you have a reduced firm, and with all the practice areas they used to have lopped off. What remains is somewhat unwieldy. But then, it’s three boutiques, and there’s no reason for them to stay together.” In 1998, Verner Liipfert bought the 10-lawyer employment firm Pantaleo, Lipkin & Moss. Name partner Peter Pantaleo, who specializes in representing hotel, restaurant and casino management, became a board member at Verner Liipfert right away and in November of 2001 was elevated to chief executive. By all accounts, Pantaleo, whose style is disarmingly brusque, has succeeded in bringing some much-needed fiscal leadership to the firm. Verner Liipfert had been notoriously secretive about its finances. Pantaleo has said that every partner is now aware of every piece of financial information the firm generates. “This law firm had frankly adopted a management style that good news was the best news, and if there wasn’t good news there was nothing to say at all,” Pantaleo said in June 2001. “Now, good news, bad news, there’s going to be news every day.” Pantaleo, Bernhard, and partner John Merrigan all declined repeated requests for on-the-record interviews. But one Verner Liipfert source says the firm is ahead of budget this year, “and our budget, the point level per partner, is set at the highest level ever.” At least as important as Pantaleo’s promotion was the elevation of Mitchell, who joined in 1995 and was named firm chairman when Pantaleo took his post. Mitchell, 68, is extremely important to the firm, not only for his prestige but for his business contacts. It was Mitchell who spearheaded the firm’s representation of the tobacco industry in its failed bid for a global settlement, work which reportedly brought in $18 million between 1997 and 1999. Mitchell also brought the Walt Disney Co. to Verner Liipfert, courtesy of his position on Disney’s board. (Disney switched its lobby representation to Akin, Gump, Strauss, Hauer & Feld earlier this year.) “George Mitchell’s been very engaged in that firm,” notes Boggs. “If I were an acquiring law firm, he would be a very major part of my decision for that acquisition.” Adds Clinton Vince, a former Verner Liipfert partner who took his energy practice to the D.C. office of Sullivan & Worcester: “I think Mitchell will assist Verner in either doing well on its own or finding a great spot to land. When he sets out to do something, he does it.” Mitchell, in fact, was one of the firm’s earliest “rock stars,” part of a dubious strategy that at one time allowed Verner Liipfert to brag that its roster included two former Senate majority leaders and former Sens. Lloyd Bentsen, D-Texas, and Dan Coats, R-Ind., as well as three former governors — Michigan’s James Blanchard, Texas’ Ann Richards, and Hawaii’s John Waihee. It’s unclear whether the rock stars, as a whole, actually made any money for Verner Liipfert. One former partner states flatly that the rock stars were not a profit center. The firm opened an office in Austin for Richards and one in Honolulu for Waihee. Both have since been shuttered. Richards and former Verner Liipfert partner Jane Hickie left a year ago for Texas-based Public Strategies Inc. Coats left to became U.S. ambassador to Germany in August, Waihee is no longer with the firm, and Bentsen left a couple of years ago for health reasons. Dole and Mitchell, who continue to be serious rainmakers, are the only former big-name public officials left. Both have guaranteed salaries of more than $600,000. But when the firm’s revenues fell last year, those guaranteed minimums didn’t change at all, according to one former partner. For a while, Dole took part in a separate entity that led to considerable tension within Verner Liipfert: the DBM Group, an investment group with the first two initials standing for Dole and Bernhard. The M doubled for Verner Liipfert partners Merrigan and Joseph Manson III, who was DBM’s president and CEO. According to court documents, the DBM Group was designed to help companies raise investment capital while encouraging its clients to go to Verner Liipfert for legal advice. DBM would also take a portion of its fees as an equity stake in the client. Four former Verner Liipfert partners say they and most of their colleagues had no knowledge of DBM or its activities until spring 2001. DBM had earlier agreed to serve as exclusive financial adviser to the New York-based financial services company DataTreasury Corp. for a $42 million private placement. Verner Liipfert was the legal counsel on the deal. But DataTreasury balked after paying $10,000 in legal fees, and Verner Liipfert sued in U.S. District Court for the District of Columbia, seeking $392,000 in allegedly unpaid bills. DataTreasury hired R. Stan Mortenson of Baker Botts, who fired back with a 10-page counterclaim against the DBM partners and Verner Liipfert. DataTreasury sought $42 million, alleging among other things that Verner Liipfert breached its fiduciary duty and committed malpractice by not advising DataTreasury to seek independent legal counsel. The case, which one former Verner Liipfert partner called “an awful chapter,” was settled privately in April 2001. The DBM episode left a bitter taste in many partners’ mouths. “I’ve never seen a more blatant conflict of interest,” says one former partner. “And there was never any official explanation or apology.” Verner Liipfert was also hit with a series of defections in early 2001. Its Houston bankruptcy practice, led by Lenard Parkins, left for Houston’s Hayes and Boone. The head of the Miami office, Jorge Lopez, led several litigators to Steel Hector & Davis. In March, 21-year veteran James Hibey took his litigation group to Howrey Simon Arnold & White. The departures of Hibey and Parkins spooked many of the remaining partners. The two men had been part of a five-person executive committee designed to help the firm transfer power from co-founder Berl Bernhard to a younger generation of partners. The team did not ultimately work. Bernhard had trouble letting go of his authority, and the five partners, each representing different practice groups, did not speak with one voice. Vince’s energy practice left in November 2001, shortly after the firm formally put Mitchell and Pantaleo in charge. More senior partners have since departed. Thomas Keller left after 25 years to become a solo practitioner. Veteran communications lawyers Erwin Krasnow and Michael Berg went to Shook, Hardy & Bacon. International specialist Martin Mendelsohn and Neil Proto joined Schnader Harrison Segal & Lewis. Telecom experts Lawrence Sidman and David Siddall jumped to Paul, Hastings, Janofsky & Walker. And in March, appropriations specialist Denis Dwyer left for Williams & Jensen. While the exodus has cut revenue, overhead has shrunk commensurately. Still, neither Pantaleo’s practice nor Verner Liipfert’s foreign clients provide any ready synergy with its legislative group, which has always dominated the firm and is now also led by Dole. Dole, it is rumored, would be uncomfortable lobbying if his wife, Elizabeth Dole, wins her current bid to replace Jesse Helms, R-N.C., in the Senate. Even so, there is a strong current within Verner Liipfert to stay independent, and a wistfulness among former lawyers for the Verner Liipfert they used to know. “Verner had a great small-firm feel,” says Steven Johnson, who spent nine years at the firm before leaving in March for Schnader Harrison. “It was reasonably casual, old school, run like a firm years ago. “There was a sense of value of things outside work, of community service. People had no trouble leaving and coming back.” As for Verner Liipfert’s current lobby roster, notes one lawyer, “we still have some studs around here.” Besides Merrigan, a 30-year firm veteran and major Democratic fund-raiser, the list includes partners Andrea Grant, Gary Klein, Andrew Eskin, Evan Migdail, and Steven Phillips, a former legislative director to the Senate Foreign Relations Committee. But Verner Liipfert’s image and style has been mostly crafted by Bernhard, who is still nearly as active and influential as he has ever been. “Everybody always joked that Berl brought ad hoc-erie to a new level,” notes one former senior partner. “At Verner, there were no rules and few policies. Berl took care of things, people went to him and trusted him and rightly so. He was evenhanded and had the highest integrity and, for the longest time, he put himself aside.” For the firm’s founders, the question is who would benefit by saving a venerable name. “These guys have built that organization and they love it like a child, and they want what’s best for the institution,” says a lawyer familiar with the firm. “But they also want what’s best for the attorneys and the people that work for them.”

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