BakerHostetler. (Photo: Diego M. Radzinschi/ALM)
Still making money from the wind-down of Bernard Madoff’s massive Ponzi scheme, Baker & Hostetler saw gross revenue increase slightly in 2016, the first year after the firm moved to an all-equity partnership model.
Baker & Hostetler saw revenue rise 1.4 percent last year, to $642.5 million. The year of modest financial growth for the Cleveland-based firm saw its revenue per lawyer remain flat at $700,000, as head count rose to 920 from 905 in 2015.
The firm’s biggest increase came in the profits per partner metric, which ticked up 3.8 percent, to $965,000, largely thanks to a unanimous vote in September 2015 to restructure Baker & Hostetler’s partnership. The move also resulted in fewer partners receiving 50 percent of their compensation from equity in the firm, which is The American Lawyer’s definition of an equity partner.
Baker & Hostetler’s equity partner ranks are now spread among 142 partners that receive 100 percent of their compensation from shares in the firm and another 216 who receive between 10 percent and 40 percent of their compensation from the firm’s profits.
That restructuring, which followed similar changes at Akin Gump Hauer Strauss & Feld and DLA Piper, for the first time last year created an impact on Baker & Hostetler’s financials. Kilpatrick Townsend & Stockton also rejiggered its partnership by granting smaller equity stakes to more partners, and, as a result, saw a 32 percent increase in profits per partner from 2014 to 2015.
Baker & Hostetler chairman R. Steven Kestner, who has led the firm for more than a decade, said that its decision to move from an all-or-nothing equity partnership to the new structure allows its lawyers to more quickly benefit from the firm’s success, and to feel empowered as owners.
“We’ve got more people who are very interested in how we perform as a firm,” Kestner said. “The management in the firm is pleased with how this has worked.”
The fallout from Madoff’s Ponzi scheme continues to benefit Baker & Hostetler, which has received more than $800 million for its work since picking up the assignment in late 2008. The firm received nearly $64 million in fees through July 2015 for its work led by partner Irving Picard’s appointment as liquidation trustee of Bernard L. Madoff Investment Securities, according to bankruptcy court documents. (Baker & Hostetler hired Picard in December 2008 from Gibbons.)
Kestner said the firm’s non-Madoff-related revenue also grew in 2016, driven by the firm’s privacy and data protection, energy and health care practices, as well as growth in Atlanta. The firm’s office in the city, which it picked up in 2013 after acquiring Philadelphia-based intellectual property boutique Woodcock Washburn, has grown to 57 lawyers from 11 just two years ago, Kestner said. AT&T Inc. and Atlanta’s Northside Hospital are key clients of the firm in the city.
In 2015, Baker & Hostetler bolted on a group of health care lawyers in Atlanta from McKEnna Long & Aldridge as the latter prepared to combine with Dentons. The firm named a new Atlanta managing partner in 2016 and last fall Baker & Hostetler recruited Schiff Hardin partner Ronald Gaither in the city, where the prominent sports lawyer has represented clients like Major League Baseball’s Atlanta Braves.
The firm’s data privacy group counseled clients on more than 450 data security incidents last year, the firm said.