Adam Kaiser, a former Dewey & LeBoeuf litigation partner now with Winston & Strawn, was among those with a vested interest in the charges laid out Thursday against the former firm leaders. As for many of those contacted for reaction to the alleged fraud scheme that helped bring down the firm, the criminal indictment and civil complaint “provide no solace at all.”
As a participant in the partner contribution plan hammered out with the Dewey estate as a way of repaying creditors, Kaiser said he repaid the firm’s bankruptcy trustee $370,000 “to convince them not to sue me, even though the firm owed me $600,000 in deferred compensation. … It was the worst financial event of my life.”
Punishing Steven Davis, Stephen DiCarmine and Joel Sanders, Kaiser said, won’t make him whole. “Nothing will comfort me for that loss, that chunk of my kids’ inheritance is gone. I’m still recovering from the economic [hit].”
That’s not to say that Kaiser doesn’t want to see justice served. “While I would like to see DiCarmine, Sanders and Davis suffer [financially] … it’s not going to erase or diminish in any way the economic impact that their mismanagement placed on me or my family. It inflicted an enormous toll on my family.”
As far as whether the trio should be locked up, Kaiser was uncertain. “Do I want to see Davis go to jail for five years?” he said. “I’m not sure about that. I’d like to see them financially suffer. … But do I want them getting beaten up in jail? I don’t know if I’d feel good about that.” He said other former Dewey partners share his ambivalence. “People have mixed views” when it comes to Davis, he said. “Some people have known him for decades and while they’re mad at him and angry at him, they won’t want him to see him physically punished with incarceration.”
Another former Dewey partner, onetime executive committee member Martin Bienenstock, was less voluble in his reaction to Thursday’s news. “If the allegations are true, it’s extremely sad and disheartening,” said Bienenstock, who is now at Proskauer Rose. “If the allegations are true, they need to face up to it like anyone else.”
Speaking on the condition of anonymity, meanwhile, leaders of two Am Law 100 firms expressed a mix of concern and bafflement at the allegations lodged against the former Dewey leaders.
One of those firm leaders said, “What’s different here is, this is systemic fraud within the top legal and nonlegal management team. Putting aside the bad-versus-good people aspect, it’s fundamentally related to the firm culture and a way a firm organizes its finances.” A fully transparent firm has an edge in preventing large-scale frauds, as does a lockstep firm, said this firm leader, adding that the extent to which the Dewey team was allegedly able to get away with duping auditors and lending banks can’t be ignored. “It will have an impact on lenders and investors,” this person said, with firms likely to “to face a more rigorous due diligence exercise” when seeking to borrow from banks.
The second Am 100 firm leader described Thursday as “not a happy day for the profession. Certainly not something anyone would wish on another law firm head. What’s most surprising is that this morphs from something that looks like a reasonably attractive law firm business in 2007 to something that isn’t just incompetence, it really crosses a line.”
This firm leader said he was having trouble coming up with an explanation for the alleged behavior: “What’s going through their minds? My guess is, and this is total speculation, that they probably convinced themselves, ‘If I just tell a little white lie, everything will all work out.’ It turns out once you start making that little white lie, you’ve got to double down, and double down on it, and it becomes a big problem.”
As Manhattan District Attorney Cyrus Vance noted in outlining the criminal charges against Davis, DiCarmine, Sanders and low-level Dewey employee Zachary Warren, hundreds of firm employees were among those affected by that big problem. Outten & Golden attorney Jack Raisner, who represents a class of former Dewey employees in litigation that accuses the firm of failing to provide adequate notice before closing its doors, expressed uncertainty about how the criminal and civil cases would affect that action.
“There has been, certainly, a cloud concerning the activities of the management committee and the office of the chairman before the indictment, and so if that cloud gets a little darker or more oppressive to them, it is really not that pertinent to the merits of the WARN claim,” Raisner said. “It would be very short-sighted to say it has nothing to do with us whatsoever, but how it would impact this case in particular, I don’t know.”
Staff reporters Tom Huddleston Jr. and Julie Triedman contributed to this story.