This is the second in a series profiling Dewey & LeBoeuf’s former leaders.
Martin Bienenstock (University of Pennsylvania, B.S., Wharton School, 1974; University of Michigan, J.D., 1977) was heralded as “one of the most innovative, creative restructuring attorneys in the country” when the Dewey & LeBoeuf spin machine put him at the center of an April 21, 2012, article in The New York Times. He seemed to be the perfect candidate to save his firm.
One item that probably impressed the Times‘s readers was Bienenstock’s presence on the Harvard Law School faculty. That credential showed up on the private placement memorandum produced by the firm in connection with its 2010 bond offering, too. According to the school’s Web site, he taught the corporate reorganization course during the spring term 2012.
Apart from imparting substantive knowledge, Bienenstock—like any educator—also serves as a role model for students. In that respect, what have future attorneys been learning from him?
What does partnership mean?
Every law student learns the basic concepts: partners owe each other fiduciary duties; they share risk, gains, and losses; they’re accountable to all other partners. But theoretical partnership principles played out much differently at Dewey & LeBoeuf after he joined the firm and its executive committee in November 2007.
•Multiyear compensation guarantees went to some partners, including Bienenstock, but their pay didn’t depend on performance. Some partners say they were unaware of the scope and magnitude of such deals until an October 2011 partnership meeting.
•Partner income spreads reportedly grew to more than 20:1. In their American Lawyer article, “Spread Too Thin,” Patrick McKenna and Edwin Reeser describe the destabilizing effects of that ubiquitous big law trend.
•The 2010 bond issuance obligated future partners to payments of at least $150 million, starting in 2013 and continuing to 2023.
•Top Dewey partners, including Bienenstock, thought they were making great sacrifices when the firm missed its income targets in 2011: They “capped” themselves at $2.5 million and took firm IOUs to make up annual shortfalls from their guaranteed amounts. Continuing with the strategies that mortgaged the future, Dewey planned to dedicate 6 percent of its income from 2014 to 2020 to repay those IOUs.
•Questions have surfaced about the accuracy and sufficiency of the firm’s financial disclosures to fellow partners and third parties.
What does professionalism mean?
After Steven Davis left his management position, the Dewey & LeBoeuf spin machine put Bienenstock center stage as the go-to person who could work a miracle. Maybe it would be a “prepack”—a prepackaged bankruptcy that would allow the firm to shed some debts and become more attractive to a merger partner.
Maybe it would be a traditional merger.
Maybe, maybe, maybe.
One thing Bienenstock made clear throughout: “There are no plans to file bankruptcy. And anyone who says differently doesn’t know what they’re talking about.”
Ten days later, he and members of his bankruptcy group were on their way to Proskauer Rose.
Parsing Bienenstock’s statement about a bankruptcy filing is akin to dissecting President Clinton’s response to questions about his sexual encounters with a White House intern: “It depends on what the meaning of ‘is,’ is.”
What does leadership mean?
Did Bienenstock have an actual plan for the firm’s survival, or did chaos better serve the economic interests of a few top partners? Was he personally committed for the long haul or arranging his own exit? Was anyone really in charge?
Those questions went unanswered as speculation and uncertainty swamped the firm: One-third of Dewey’s partners gone by the end of April? A memo invites others to build their own lifeboats, but attorneys and staff should keep working diligently for clients? Use personal credit cards for client copying charges? No mailroom? No IT? Why do senior partners keep asking for empty packing boxes?
Leadership is needed most in times of crisis. As Dewey & LeBoeuf’s office of the chairman went from four to three to two to one to none, leadership was nowhere to be found.
When asked who or what was to blame for Dewey’s demise, Bienenstock demurred: “No one saw the new world coming.”
Except plenty of other people did.
Were any of the summer or permanent associates whom Dewey stiffed Bienenstock’s former students at Harvard? If so, their real-life experiences of the past three months have taught them more about the meaning of partnership, professionalism, and leadership in some big firms than Bienenstock or anyone else could have communicated in years of classes. The question now is whether Bienenstock will be on Harvard’s faculty list next year.
Steven J. Harper is an adjunct professor at Northwestern University and author. He recently retired as a partner at Kirkland & Ellis, after 30 years in private practice. His blog about the legal profession, The Belly of the Beast, can be found at thebellyofthebeast.wordpress.com/ . A version of the column above was first published on The Belly of the Beast.