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The difficulties the largest British law firms have encountered in New York are well known. But the problems facing their biggest rival from across the English Channel may be even greater. Paris-based Salans stole a march on the London firms when it sealed the first major transatlantic merger with New York’s 70-lawyer Christy & Viener in 1998, the year before Clifford Chance pulled off its combination with Rogers & Wells. But seven years later, only a handful of Christy & Viener lawyers remain and Salans’ New York head count is down to 37 lawyers from a high of 89 in 2002. Of the 30 partners in the office in 2003, almost two-thirds have since left for other firms. New York currently accounts for less than 10 percent of Salans worldwide roster of around 400 lawyers in 14 offices. “The New York office has been the biggest challenge for the firm over the last few years,” Stephen Finch, Salans’ London-based chairman, acknowledged in an e-mail interview. Departures in the last year have included New York corporate practice head Laurence Markowitz, who joined Baker & Hostetler in July; private equity partner Todd Peterson, who joined Nixon Peabody; tax partner John Settineri and trusts and estates head C. Michael Spero, who both joined Loeb & Loeb. Last month, derivatives practice head Ellen Clark left Salans to join DLA Piper Rudnick Gray Cary. Finch said the firm is now seeking to rebuild its New York presence through another merger, preferably with a firm with both a New York and Washington, D.C., presence. He declined to say which firms, if any, Salans has had merger discussions with. Finch said the firm also is seeking lateral growth in its U.S. mergers and acquisitions, litigation, banking and real estate practices. Of the partners who have left, Finch said the firm was “sorry to have lost a number of the New York partners and wished they had shown the patience to work with us to achieve the same success and appropriate critical mass in the [United States] as we have achieved in other countries.” But many of those partners say they had been patient. They say it is Salans that has failed in its commitment to New York, even after seven years in the market. Salans’ U.S. woes bear some resemblance to those experienced by Clifford Chance in recent years. Ex-Salans partners in New York point to incompatible practices, culture differences and a lack of support in Europe as reasons for the exodus. But the same partners also stressed that Salans’ problems should not be seen as the result of languid French lawyers clashing with their hard-charging New York counterparts. Though founded in Paris in 1978, two of the firm’s founders, Carl Salans and Jeffrey Hertzfeld, are, in fact, Americans, as are several of the firm’s overseas partners. Rather, they say, the firm’s problems in New York stem from its lack of strategy for the office, as well as a puzzling absence of leadership. One recently departed New York partner said he was not even sure who ran the firm. “Isn’t that weird?” asked the partner. “At any other firm, you would at least know whose fault things were. At Salans, you didn’t even know who to blame.” He said New York managing partner Claude Montgomery, who joined Salans in 2002, had lost a great deal of credibility in recent months by proclaiming the firm’s growth in meetings with associates and staff, even as the roster of U.S. partners dwindled. The former partner said contact with management from Europe was sporadic at best. He added that most of his New York colleagues were not only unaware of firm management, they were barely aware of being part of a larger firm. For most American partners, he said, the promised integration into a global network amounted to nothing much. “It’s a collection of solo practitioners who all have their own matters and who do their own work,” he said. Another ex-partner agreed with that characterization, and pointed to the firm’s extremely low leverage. Presently the firm’s New York office has almost two partners or counsel for each associate. By comparison, most major New York firms have a number of associates for each partner or counsel. “I don’t think there’s been enough work for them to have more [associates],” the ex-partner said. “Partners there are used to doing their own work.” CONTROVERSIAL TAX STRUCTURE Several partners said they were only reminded they were working for a global firm on payday. Salans’ largest and most profitable office remains Paris, and partners in New York and other offices are paid in large part from the French income pool. They are therefore also apportioned a share of the relatively high French taxes on that pool. The issue has been a contentious one with Salans’ New York partners, but one which many partners said they were told would be addressed. When the firm announced in the middle of the 2004 tax season that it would not alter its tax structure to accommodate U.S. partners, many former Salans partners said they felt betrayed. Finch declined to discuss the firm’s tax structure and New York partners’ objections to it. But he strongly rejected criticisms that the New York office suffered because of lack of leadership. “Frankly, it is inconceivable that any partner would not be aware of firm management,” he said, adding, “The global management of the firm has in reality spent a higher proportion of its time and effort focusing on the New York office than any other office.” He explained that the five-member global board was responsible for strategy and direction while the executive committee headed by Paris-based managing partner Dariusz Oleszczuk ran the firm on a day-to-day basis. He also defended the “energy and enthusiasm” of Montgomery, who deferred comment to Finch. GLOBAL ASPIRATIONS Finch said the global team had held numerous meetings with New York. He also said there had been many instances in which European offices and New York had worked together on matters. But he said some New York partners’ practices did not lend themselves to such opportunities. “Some of our former partners are clearly more suited to firms without any global/cross-border aspirations,” said Finch. It was such aspirations that drove the two firms together in the first place. At the time of the merger, both Salans, then known as Salans Hertzfeld & Heilbronn, and Christy & Viener had made progress with practices focused on clients doing business in the former Soviet Union and Eastern Europe. The merger was expected to help both firms leverage their strength in the area. But the region’s financial crisis at the time hit the former Christy & Viener’s practices very hard, said a former partner, and they subsequently dwindled. Though Salans has continued to grow in Russia and Eastern Europe, where in 2003 it acquired much of the practice of collapsing Chicago firm Altheimer & Gray, the former partner said this area no longer served to bind the firm’s European and American practices. Finch said the firm’s New York office now constituted “a core team which we consider will integrate well with any combination we achieve in the U.S.” The former partner who characterized the firm as a collection of solo practitioners said he also understood that the firm’s New York office was now busier than it had been before the wave of departures. But any further integration of the firm’s global and U.S. practices will depend on expansion of the latter, Finch said. “Ultimately our critical mass in the U.S. is too small,” he said. “Whilst we are happy with the current team in New York, it is clear that a significant expansion through a combination is required.”

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