Ralph Lerner at the November 2012 launch party at Gagosian Gallery in New York for Art Law, which he coauthored with his wife. (Patrick McMullan)
Ralph Lerner knew what he was doing was wrong. He just couldn’t stop doing it.
For nearly a decade, the longtime Sidley Austin partner had been padding client bills with improper car service charges. Some were for rides he’d taken himself but billed to accounts where they didn’t belong. Others were for trips taken by family members that had no connection whatsoever to his work.
Unable to end the stream of inappropriate expense entries, Lerner began to concoct a justification for his behavior instead. He’d spent years going into the office on weekends and slipping in extra hours without passing the costs on to his clients, he reasoned. Certainly the car charges weren’t more valuable than that. It was bound to even out in the long run.
At a different law firm, or in a different time, maybe things would have worked out that way. Maybe no one would have noticed the tiny deceits, which began to pile up in 1998 and continued through the mid-2000s. Maybe Lerner, a respected trusts and estates lawyer at Sidley Austin who helped create art law as a niche practice, would have entered the twilight of his career with his sterling reputation intact.
But in October 2007, Sidley’s chief financial officer, Christian Cooley, spotted something in Lerner’s expense reports that he didn’t understand. As Lerner later recalled, Cooley called him from the firm’s Chicago headquarters to say that “there’s an awful lot of car charges, and he wanted to know what the reason was.’”
Lerner left Sidley within months of Cooley’s call, and in February 2008 moved his practice to Withers Bergman, a private client–focused firm where his wife, Judith Bresler, serves as of counsel. As he tried to move on, New York’s attorney discipline body launched an investigation into his actions that resulted in formal charges being brought against him in 2011.
The disciplinary inquiry ended last October, when New York’s Appellate Division, First Department, suspended Lerner’s law license for one year after considering the gravity of the inappropriate car service charges, which totaled more than $42,000. The 448 trips at issue included: 336 taken by Lerner’s wife, sister and two daughters; 46 taken by Lerner for personal reasons; and the rest related to Sidley business but billed to the wrong clients or attributed to one client for work done for another. In issuing the suspension, the appellate panel ruled that Lerner’s “professional accomplishments and character evidence are outweighed by the repeated and protracted nature of his misconduct.”
For Lerner—who, in addition to repaying his clients, has reimbursed Sidley $840,000 from his capital account to cover the cost of the firm’s investigation into his malfeasance, records show—the suspension wasn’t the end of his legal woes.
Around the time his license was pulled, he was accused in a lawsuit filed in Delaware state court of overbilling a foundation created by the late artist Cy Twombly, a longtime client, by hundreds of thousands of dollars. Though the claims made against Lerner in that litigation are unrelated to his expense account trickery, lawyers for the plaintiffs have suggested that the events surrounding his license suspension show he has a problem telling the truth.
Meanwhile, the question remains: Why would a lawyer who by all accounts lived a comfortable life and earned nearly $1 million some years risk it all for something so petty? As a referee who weighed in during an early phase of the disciplinary process said, “The reason a successful attorney resorted to such continual unethical conduct has not been really explained.”
But in the thousands of pages of documents contained in Lerner’s public discipline file, the outlines of Lerner’s own explanation begin to emerge. He comes across in the filings as a man juggling competing sets of demands: wealthy clients who required his personal attention on every matter versus a family whose private struggles Lerner attempted to cope with even when he was not physically present.
Citing the firm’s policy of not discussing personnel matters, Sidley partner William Conlon, a member of the firm’s office of general counsel, declined to comment. And while Lerner, through his lawyer, Ronald Minkoff, of Frankfurt Kurnit Klein & Selz, also declined an interview request, his side of the story is present throughout the disciplinary record.
“A day doesn’t pass when I don’t have serious regret as to what I did and my actions,” he said at one point during the disciplinary proceedings. “I abused the trust that my clients had put in me.”
An Artful Approach to the Law
Lerner, now 70, came of age professionally at a time when—at least in his case—all a lawyer needed for admission to the Sidley Austin partnership was experience at a string of small firms and a low-profile trusts and estates practice.
Raised on the affluent North Shore of Long Island, he did not become a lawyer immediately upon earning his degree from Boston University School of Law in 1967. He tried teaching first, taking a job at a public school in the South Bronx out of a combination of what Minkoff describes as “youthful idealism” and a desire to earn an LL.M. in tax law before applying to firms. After attending night classes at New York University School of Law to gain the specialized tax knowledge, Lerner joined trusts and estates firm Turk Marsh Kelly & Hoare. He became a partner there after four years.
By 1986, Lerner was at a crossroads. The firm at which he had worked for six years, Kassel Neuwirth & Geiger, was on the verge of breaking up. His plan was to join a team of colleagues headed to Webster & Sheffield, a New York firm founded in 1934 that counted Goldman Sachs, Consolidated Edison and Carnegie Hall among its clients. On the eve of the move, he got a call from a fellow Kassel Neuwirth attorney bearing bad news: “Webster & Sheffield doesn’t need another trusts and estates lawyer.”
Lerner continued the job search on his own. Within six weeks, he had convinced Sidley that he had his own book of business and would be a low-risk hire. At the time, the Chicago-based firm—which ranked 12th on The American Lawyer’s list of the country’s highest-grossing firms in 1987—had fewer than 20 attorneys in its New York office.
Even before joining Sidley, Lerner had begun to brand himself as an art lawyer specializing in the purchase and sale of fine art. His first significant move into the field had come while he was still at Turk Marsh. After delivering a lecture on estate planning and art law at the Practising Law Institute, he received a call from a collector of Japanese art in Oklahoma who had been in the audience. Lerner helped the collector, Joe Price, obtain a ruling from the Internal Revenue Service that allowed Price to donate his collection to the Los Angeles County Museum of Art, which subsequently created a new Japanese art wing.
Word began to spread about Lerner’s expertise. “Once you get one major client in sort of the art world, he will tell other people,” he said during the disciplinary proceedings. “Then the prices started going up in the art world. That’s when the practice really started to grow.”
Over the years, Lerner’s client list for art-related assignments and general trusts and estates work grew to include the estate of author Maurice Sendak; Steven Cohen, the founder of the hedge fund formerly known as SAC Capital Advisors; private equity billionaire Leon Black; prominent art collector Hubert Neumann; modern and contemporary art seller the Gagosian Gallery; and scores of other artists, collectors, foundations, galleries and museums. In addition to his regular work, Lerner bolstered his credentials by serving as the longtime general counsel to the Appraisers Association of America, as a director of the Volunteer Lawyers for the Arts, and as chair of the art law committees of city, state and national bar associations. When Federal Bureau of Investigation agents wanted information about the art industry, they called Lerner.
“Ralph Lerner literally changed the way of doing business in the art world by taking an industry that was conducted with winks and handshakes and transforming it into an industry that was guided by organized and honest practices,” John Perna, a New York accountant who advises art industry clients, wrote in one of 30 character letters submitted to the disciplinary committee on Lerner’s behalf.
“No Ability to Say No to Anybody”
By the late 1990s, Lerner was routinely billing between 2,200 and 2,400 hours per year and earning as much as $900,000 in annual partnership distributions. To maintain his busy practice, he often left his Westchester County home on the 6:30 a.m. train and returned after 8 p.m. Some nights after finishing up at the office, he would stay in Manhattan to meet with clients over dinner or attend art openings before calling Sidley’s regular car service, Lotus Ride, for the 25-mile trip home. Back in Scarsdale, Lerner said, the work never truly stopped.
“There’s a lot of emotion involved in art,” Lerner explained during one disciplinary hearing. “I needed more help, but the clients wanted me personally on the various matters, and that was, that was the problem.” One of just a handful of trusts and estates lawyers in Sidley’s New York office, Lerner said his clients around the world expected him to be on call. “[Clients] were very fond of me because I gave that 120 percent type service,” he said in testimony. “And to the detriment of my family.”
Philip Rickey, a longtime client who has worked with Lerner in connection with the estate of his father, the late sculptor George Rickey, thinks of him as more than a lawyer.
“Ralph on numerous occasions was someone I personally called upon to help sort out difficult decisions that had to be made,” says Rickey, including when he needed to lay off employees after his father developed Alzheimer’s and lost his memory. “He was someone I could turn to, to sort through things not necessarily only about legal issues but about how to deal with this man he respected and I loved.”
As the demands of Lerner’s work grew, he devised a stopgap way to support his family. Whenever his wife, two daughters or sister needed to go somewhere and either couldn’t drive themselves or preferred not to, he told them to call Lotus Ride. In his mind, it was a way to ensure that his daughter wouldn’t have to rely on public transportation when coming home from late classes at John Jay College of Criminal Justice in Manhattan. It meant his sister, who was battling anorexia and lived in an apartment on which Lerner paid the mortgage, could get to doctor’s appointments easily.
But in March 1998, rather than logging those rides on a personal tally that could be deducted from his paychecks, Lerner began to attach them to client bills. His own car service charges—for trips taken after an office holiday party, a night out at the theater and into the office while carrying the manuscript of an art law treatise he and his wife had written—also started to make random appearances on client bills.
By 2003, with Lerner working around the clock to keep up with what he estimates was $4 million in business, the number of rides spiked. His wife, Bresler, began to make frequent trips to Philadelphia to visit her mother, who had been diagnosed with terminal cancer. An uneasy driver, Bresler preferred to use the car service to travel to and from New York’s Penn Station on her way to Philadelphia. Lerner encouraged her to do so, telling her that using the car service was in line with Sidley’s policies without sharing who ultimately paid the tab. “I told her I was allowed to do this,” he recalled.
Three years later, Lerner and his wife faced another complication at home: following a suicide attempt, their teenage daughter needed to make frequent trips to Manhattan to meet with a therapist.
“I, you know, had no ability to say no to anybody,” Lerner said during the disciplinary proceedings. “I was working like ‘round the clock. My wife’s mother was dying of cancer and she was under extreme stress. And I had a daughter that was suffering from severe depression, and we had a very serious suicide attempt. And I’m in the office and the pressure was enormous.”
“It’s Like the World Was Ending”
In addition to blaming his personal circumstances, Lerner also tried to link his actions to what he called a look-the-other-way culture at Sidley when it came to the firm’s car service.
“I wouldn’t say it was condoned, but nobody said anything to me,” Lerner said of how he accounted for the rides. Asked if others were also attributing personal rides to firm clients, Lerner said that though he didn’t know how rides were being charged, “I knew there were tons of these cars out all the time being used by—by everybody.”
In fact, Lerner isn’t the first Sidley partner to be publicly censured for fabricating expenses related to car travel.
Last June, the Illinois Attorney Registration and Disciplinary Commission filed a complaint against Lee Smolen, a Chicago-based DLA Piper partner previously with Sidley, claiming he had falsified nearly $120,000 in expenses during his final years at the firm. Between 2007 and 2012, Smolen submitted more than 800 reimbursement requests for taxi rides that “he knew he had not taken,” according to the disciplinary complaint. He also submitted requests for entertainment expenses not incurred for “legitimate firm purposes,” including restaurant gift cards, sporting events and meals at his country club, the complaint alleges.
In his formal response, Smolen admitted filing the claims but said he didn’t do so for personal gain. Submitting the false receipts, a lawyer said in his defense, “was a poorly conceived shortcut around the firm’s expense reporting procedures in order to secure more time to address his substantial and demanding commitments to the firm.” Other expenses were “the result of inadvertent error or his occasional failure to pay sufficiently close attention to detail.” (The next hearing in Smolen’s case is scheduled for May 13, and the matter could go to trial in June.)
Like Smolen, Lerner’s system for submitting expense began to go awry. As Lerner said, “I had so many clients and I was so overwhelmed, so I put the wro … I’d put, just put any number in there that I was probably working on.”
The sloppiness eventually caught up with him. In that October 2007 call, Cooley told Lerner he was falling behind on his paperwork. In a rush to finish it, Lerner says, he allocated everything to his personal account. Then, while attending a conference in Florida in January 2008, he got a follow-up call from firm management that involved more questions about his expenses. (Cooley, who left Sidley to become Kirkland & Ellis’ chief financial officer earlier this year, declined to comment.)
From there, the end came quickly. Sidley leaders, including Conlon, gave Lerner an ultimatum: Report the bogus expenses to New York’s Appellate Division himself, or let the firm do it. Lerner resisted at first, but eventually turned himself in through a letter addressed to the disciplinary committee on Feb. 19, 2008. Sidley also asked Lerner to resign, a fate he accepted.
“I was depressed,” Lerner said. “It’s like the world was ending.”
During his testimony, Lerner recalled one exchange with Sidley’s New York management after his lies were exposed as relatively civil. “Their response was that Ralphy, we—we are very fond of you, but we have to do what’s best for the firm. So we’re going to hire outside counsel to advise us.”
The firm did just that, bringing in top Debevoise & Plimpton litigator Mary Beth Hogan to help pore over years of Lotus Ride car vouchers in an effort to match each one with legitimate client activity. The inquiry ultimately cost the firm $65,000 in outside counsel fees and $720,000 in internal costs, according to Lerner’s discipline file. Sidley deducted the sum from his $1.25 million capital account. (No accounting of the bill appears in the public record).
According to the discipline file, in April 2008, after Lerner asked Sidley to return his capital and pay him his adjusted income for 2007, the firm accused him of committing a series of other infractions that included failing to report executor and trustee fees totaling nearly $830,000; improperly accepting an annual $4,000 gift from a client’s estate for more than a decade; charging a $3,300 dental bill to a client in the mid-1990s; and improperly using associates to help write his art treatise. The committee investigated the additional claims but chose not to pursue them, Minkoff says.
Prominent Backers Can’t Stave Off Suspension
The New York departmental disciplinary committee brought formal charges against Lerner in April 2011. The original recommendation was that his license be suspended for one year on the basis of allegations that he had engaged in conduct involving dishonesty, fraud, deceit or misrepresentation; conduct that adversely reflected on his fitness as a lawyer; and professional misconduct.
Following a trial at which Lerner and other witnesses testified, referee Patricia Hatry, of counsel at Davis & Gilbert, recommended that the suspension be nine months. The shorter term, Hatry reasoned, was sufficient given the “public humiliation” and financial loss he had already suffered.
“That he is a highly successful lawyer preeminent in his specialty does cut both ways, since, as such, he should surely have been scrupulously honest,” she wrote in her report. “Respondent needs no further punishment than that he has already endured but the public (and our profession perhaps) needs the assurance that we officers of the court will be worthy of their trust.”
A hearing panel that considered Hatry’s recommendation said the suspension should be reduced further, to six months. In its September 2012 report, the panel wrote that barring Lerner from practicing law longer than that “could well mean the end of a career,” in part because the process involved in reinstating a law license following a one-year suspension “as a practical matter, will at least double the length of the suspension.”
Ultimately, though, the appellate court panel with the final say followed the initial recommendation for a one-year suspension.
Withers management—which knew he faced potential disciplinary action when he joined the firm—has supported Lerner throughout. “We ran a very thorough investigation,” Withers chairman Ivan Sacks said in an interview. “And we determined Ralph was not a risk to any future clients. We made a careful determination about that before agreeing to bring him on.” Lerner was also required to tell every client about the pending action against him and barred from charging car expenses to firm accounts.
Even with the blemish on his record, Sacks says Lerner was someone Withers was eager to add to its ranks. “Ralph is unquestionably one of the preeminent attorneys in the field of art law,” Sacks says. “He’s very beloved by his clients.”
That sentiment is on display in the dozens of recommendation letters Lerner’s lawyers obtained from such high-profile figures as U.S. Sen. Frank Lautenberg (who died last year), U.S. Circuit Court Judge Pierre Leval, SAC Capital’s Cohen, Sotheby’s chairman Warren Weitman, neuroscientist and Nobel laureate Paul Greengard and Schulte Roth & Zabel founder William Zabel.
In one of those letters, Apollo Global Management founder Leon Black said of Lerner: “I believe this is a case of a person whose cup is 98 percent full, which I have found in life is more than good enough for me.”
Black’s view—that Lerner’s dishonest actions at Sidley are an aberration—is echoed throughout the other recommendation letters. It is also reflected in a testimony given by psychiatrist Mark Schor, who said Lerner’s expense account cheating was motivated by a desire to support his wife and care for his family.
“There’s nothing that would tell me that there’s a conscious motivation for gain, financial gain or greed or to enrich himself consciously or through his actions,” said Schor, who initially treated Lerner for an episode of major depression and later diagnosed him with generalized anxiety disorder. (Hatry was unmoved by Schor’s opinion, saying that his testimony did not “provide a cogent explanation for [Lerner's] admittedly dishonest actions.”)
Minkoff declined to comment on whether Lerner will seek the reinstatement of his license when his suspension ends Nov. 28. In the meantime, he says Lerner has started an art consulting practice, Art World Advisors. The new venture’s website makes clear in bold type that “Ralph is not currently performing any legal services.” Sacks confirmed that many of Lerner’s clients continue to be advised by other Withers lawyers.
Postscript: A Lawyer’s Legacy Threatened
Against the backdrop of the license suspension, Lerner now finds himself accused of improperly collecting $750,000 in fees from the Cy Twombly Foundation through his role as a foundation board member and legal adviser.
The suit, filed in Delaware state court by two members of the foundation’s board, claims Lerner inflated the value of Twombly’s art in an alleged attempt to increase his own fees; billed the foundation for time spent at board meetings and waiting for furniture to be delivered at a property the organization owns; and sent bills for Withers lawyers’ work to himself and then approved them on behalf of the board. The suit also accuses a fourth board member, Thomas Saliba, of improperly collecting fees for managing foundation investments.
One morning last month, attorneys on both sides of the case gathered in a Wilmington courtroom for arguments on a motion to dismiss the suit filed by Lerner and Saliba. (The judge hearing the case has not yet ruled on the motion, and the parties are discussing a settlement.)
In making his case, Minkoff maintained that the board member plaintiffs, Nicola Del Roscio and Julie Sylvester, had not even tried to ask Withers or Lerner about the allegedly improper charges before airing their grievances in court. “We’re talking about errors of billing judgment,” not the breach of fiduciary duty and fraud as alleged by Del Roscio and Sylvester, Minkoff argued. “Courts are constantly looking at bills by lawyers. … Very often courts reduce bills, alter bills. But very rarely when they lop off fees do they say the lawyer committed fraud.”
Try as he might, Minkoff was unable to keep the circumstances surrounding Lerner’s suspension from making their way into the hearing. Dentons partner David Baum, who represents the two plaintiffs, dropped in references to the disciplinary action at every possible opportunity.
“I’m not trying to tar him as a bad guy to be pejorative,” Baum said at one point. “I do think he’s a bad guy and stole some things.” Later, he sought to equate the allegedly improper charges sprinkled throughout Lerner’s Twombly bills to the car service expenses that cost Lerner his position at Sidley. “It’s a complete picture. And when you put it all together, it’s a pattern. He’s done it before. He adds up small little charges, and he gets it done.”
That his legacy as a lawyer could be challenged so directly after so many years may help explain how much remorse Lerner has expressed for his behavior.
“I so regret my actions,” he testified at one disciplinary hearing. “I just wish I could turn the clock back, but I know I can’t do that.”