In August 2003, Eddie Liu, a longtime legal assistant at top Taipei law firm Lee and Li, asked for a year’s leave of absence to study for the bar exam, which he had previously failed. His request was granted, and firm managing partner C. V. Chen recalls personally wishing the 41-year-old Liu the best of luck on his studies and the exam.

“Eddie Liu had been with the firm for 13 years,” says Chen. “He was a senior assistant and had never acted out. Till today, it still puzzles us why he did it.”

What Liu did was steal $92 million that belonged to a major client—U.S. flash drive maker Sandisk Corp. Lee and Li uncovered the theft on Oct. 13, 2003, just four days after Liu departed the 101-lawyer Taiwanese firm for the leave from which he would never return.

To observers of today’s international legal scene, accustomed to seeing partners squabbling over money issues or firms falling apart ahead of lease renewals, what the partners at Lee and Li did next may be even more shocking. Ten years ago this week, they agreed on a plan to fully repay Sandisk out of their own pockets.

Today, Lee and Li’s partners are finally almost finished repaying their client; Chen thinks next year they will finally be free and clear. At that time, the 40 partners who were at the firm at the time of the theft will have paid an amount in cash and free legal services rivaling the largest legal malpractice settlements ever paid by U.S. firms, and they will have done so without the help of professional liability insurance, which Lee and Li did not have.

Liu, widely believed to be hiding somewhere in mainland China, is still one of Taiwan’s most-wanted fugitives, and the money he stole remains unrecovered. For a while, the firm hired private investigators to try to find him, but Chen says it’s no longer trying. Lee and Li today is stronger than ever, and remains Taiwan’s leading law firm with clients like Apple Inc., Microsoft Corp., The Carlyle Group and, of course, SanDisk.

“When I think about it now, all the money proved worth paying, ironically,” Chen says.

“Since this crime happened, something must have been very wrong with our firm,” he explains. As a result, the firm went through a “thorough soul-searching, from top to bottom, inside and outside.”

In 2002 Sandisk had authorized Lee and Li to open a trading account in which it could deposit the shares of Taiwanese companies in which it held an interest, with an eye toward selling them and reinvesting the proceeds. SanDisk placed 183 million shares of Taiwanese semiconductor maker United Microelectronics Corp. into the account in July 2003.

Lee and Li had been granted a power of attorney over this account and held its associated chops—seals often used in China and Taiwan in place of authorizing signatures. Liu somehow gained access to these chops as well as the account passbooks and, in August 2003, used them to forge documents authorizing the transfer of the UMC shares to several brokerage accounts he had set up in Taiwan and Hong Kong. He sold these shares for $92 million, which he then converted to diamonds and traveler’s cheques. By the time Lee and Li realized what had happened, Liu had fled the country.

Chen, Paul Hsu and Kwan-Tao Li, the firm’s three senior partners at the time, were shocked by the news. But Chen says they knew they had to try to make Sandisk whole. “The client is the client,” he says. “We made a mistake, we didn’t control well.”

Was there another way?

“I guess one thing we could have said back then was that we didn’t have that much money, so we could have negotiated with the client [to pay] 10 percent, 20 percent or maybe 30 percent [of the total value],” says Chen. “Or we could have said, ‘Sorry, we are not paying you a dime, you can sue us.’ But we didn’t think that was the right thing to do. We never really even considered these options.”

Lee and Li was and remains a general partnership, meaning that all partners are personally liable for claims against the firm. Most international firms today are limited liability partnerships, meaning that liability can be confined to those partners directly involved in a claim. But such a structure is still is not available to firms in Taiwan. Nor, says Chen, is suitable, cost-effective insurance.

“There is simply no meaningful policy available,” he says.

New York University legal ethics professor Stephen Gillers says it’s hard to exactly compare Lee and Li’s situation to that of U.S. firms because of its lack of insurance. “It would be quite unusual for a US firm that handled that amount of money not to have insurance against employee theft,” he says.

Gillers notes, though, that Lee and Li would clearly be liable for a theft under similar circumstances if it were a U.S. firm.

“This is no different from, say, FedEx being liable if its driver is negligent and causes injuries in an accident or if a driver steals a package containing valuables,” says Gillers, adding, “In the U.S., the firm would have to pay—or, more likely, its insurer would pay up to the limit of the policy.”

Chen and his partners quickly accepted that they were responsible for Liu’s actions, and decided they wanted to act in “a professional and noble way” and not force SanDisk to take them to court. “If this had become a lawsuit, the client wouldn’t be satisfied,” he says, “It would also have seriously tarnished the firm’s image among the Taiwanese public.”

Just a month after discovering the theft, Lee and Li reached a deal with SanDisk. Though Liu sold the UMC shares for $92 million, SanDisk had acquired them for $83.3 million and agreed to value their loss at this amount. Over the next few weeks, Lee and Li paid SanDisk $20 million in cash. It then paid $45 million in 16 quarterly installments over the next four years. The firm also gave Sandisk an $18.3 million credit toward legal services that the company could use over the next 18 years. It is this credit that Chen says should be exhausted by next year.

Though SanDisk did not respond to a request for comment for this story, the company highly praised the Lee and Li when it announced the deal on Nov. 15, 2003. “We do not believe that the acts of a single rogue employee should alter the 40-plus-year solid reputation of one of the region’s premier law firms,” then–general counsel Charles Van Orden said in a statement at the time. “In the past several weeks, we have come to know several of the firm’s fine partners. As we pursue extensive new opportunities in Taiwan and mainland China, we look forward to continuing our relationship with the firm.”

The agreement required major sacrifices at Lee and Li. All of the partners contributed to make the initial $20 million payment to SanDisk, and none drew a profit share in 2004. Hsu retired from the firm soon after the incident, and Chen and Li, the two remaining senior partners, agreed not to take a profit share from the firm for the next four years, until the second phase of the repayment was complete.

During this time, though, all the firm’s associates and administrative staff were paid all the compensation they were due, including year-end bonuses. New partners promoted or recruited after the incident were also not required to contribute to the SanDisk payments. Such steps helped keep lawyers from leaving and made it possible for the firm to continue to recruit top talent.

In that way, Lee and Li managed to avoid the downward spiral of many Western firms facing massive liability. The largest public settlement paid by a U.S. law firm appears to be the $81.6 million that Dallas’ now-defunct Jenkens & Gilchrist agreed to pay investors suing the firm over illegal tax shelters it had blessed. That firm also agreed to pay the Internal Revenue Service another $76 million. The legal troubles hanging over Jenkens & Gilchrist led to an exodus of lawyers, with the firm’s head count falling more than from 611 in 2001 to 285 in 2006. It closed in 2007.

Lee and Li spent all of 2004 reviewing the firm’s internal controls. Partner Nigel Li led a group of partners and consultants that, after over 30 meetings and discussions, determined that Liu was able carry out his scheme because the firm’s management was overly centralized. More junior partners weren’t empowered to supervise staffers like Liu, and senior partners were too overstretched to monitor their activities. They decided to open up both the firm and its management, drafting a new partnership agreement that broadened firm equity, decision making, profit-sharing, and accountability. The number of practice groups was also increased from five to over 20 to give more partners management responsibilities.

An 11-member executive committee was established to take over the management role previously exclusively held by three senior partners. Chen was elected managing partner and chief executive officer of this committee, with Nigel Li named as his deputy. Kwan-Tao Li retired in 2009 but remains a chief counselor.

Though the firm still doesn’t have insurance, Chen says partners have pooled some of their own money as “self-insurance.”

“It’s more of a symbolic gesture, but in case something happens, at least we’ll have something,” he says.