Dewey & LeBoeuf’s liquidating trustee requested court permission Monday to extensively subpoena Dewey’s longtime auditor Ernst & Young as well as depose one of its employees, citing the need to investigate potential claims the estate could still bring against the auditor and others tied to the now-defunct firm.
Ernst & Young provided auditing and tax services to Dewey beginning with the firm’s inception in 2007 following the merger of Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae. Previously, the auditor advised LeBoeuf Lamb, according to the filing, including conducting due diligence on what would become its ill-fated merger with Dewey Ballantine.
Post-combination, E&Y signed off on Dewey’s financial statements, changes in partner capital accounts, and cash flows from 2007 to 2011, and also prepared the partnership’s tax returns and K-1 forms from 2008 to 2012, the filing says. Its work during those years earned Ernst & Young $1.7 million, and the company continued to advise Dewey in its bankruptcy from May 2012 through this past January.
Now, with a new set of advisers in place to carry out a liquidation plan that became effective in March, E&Y has become the target of inquiry. Lawyers for Dewey trustee Alan Jacobs request permission to subpoena documents falling into 45 categories that cover the scope of E&Y’s services to Dewey, the work that it delivered and the standards applied in executing its Dewey assignments.
Some of the specific requests are for documents and communications related to Dewey’s 2010 bond offering; its compliance with any debt covenants; partner capital; partner distributions and target compensation; pension and retirement obligations; and E&Y’s work for LeBoeuf Lamb related to the merger, which the document says was sometimes referred to as “Project Apollo.”
Another series of requests seek information concerning any “actual or potential fraud, illegal acts, or non-compliance with laws or regulations on the part of Dewey” and any documents or communications related to inquiries Dewey received from the New York District Attorney’s office. As The Am Law Daily has previously reported, the D.A. launched a probe in April 2012 into the actions of Dewey firm leaders that is ongoing.
In addition to the document collection, Dewey’s advisers request permission to depose a “corporate representative” of E&Y to further elaborate on the Dewey work, but “only if necessary” after the first phase of investigation is completed.
In backing up its need to subpoena the firm, Dewey says the discovery will help determine whether the trust “possesses any additional causes of action against parties, including EY, various Dewey officers, and former partners.” For instance, the filing says, the trust is investigating avoidance claims against former Dewey officers and partners that require “analysis of insolvency and partner compensation.”
The trust may also have claims against Ernst & Young itself, the filing says, stemming from “audit, tax or other services EY performed.”
An Ernst & Young spokeswoman declined to comment Tuesday, as did Jacobs.
Jacobs urges the court to move with haste on his request, citing a ticking tolling agreement on certain claims the trust can bring that will expire in May.