Jeffrey Kessler of Winston & Strawn. 2015. HANDOUT. (Laura Barisonzi)
It’s been five years since Dewey & LeBoeuf, fatally weakened by financial mismanagement and an accelerating partner exodus, spiraled into bankruptcy. And the saga of the firm’s fall continues to unfold: At press time the jury was still out in the second criminal trial of former chief financial officer Joel Sanders and former executive director Stephen DiCarmine. But what about the lawyers who didn’t wind up in the headlines—but who still had their lives disrupted, as they scrambled to find new jobs and coped with the loss of what in some cases had been their professional home for decades?
Five former Dewey lawyers offer reflections on the firm’s demise, and what they learned from the experience.
Not surprisingly, they all advise keeping a close eye on firm financials.
A Late Exit
A former litigation chair at the firm and member of the executive committee, Jeffrey Kessler spent his final months at Dewey trying to keep the firm afloat.
“I was not going to talk to other firms until it really was clear at the end that there was no choice but to leave,” says Kessler. “At about the time that we had decided that I could talk to firms, we needed to get out because we literally had to take dollars out of our pockets to give to the associates to run down to send a FedEx out for a filing.”
In early May 2012 he led a group of about 70 lawyers to Winston & Strawn, plus many staffers. “In all the firms we spoke to, we gave a lot of attention to how they were managed and what their financials looked like,” Kessler says. “The last thing we would want to do was to go to a firm that would be susceptible to the same types of management problems that we were just fleeing from.”
Five years later, Kessler is now co-chair of Winston & Strawn. He describes his transition out of Dewey as hectic but ultimately smooth, though he acknowledges that not everyone at his former firm had the same good fortune.
“All we really did for clients was change the firm name and the address where they sent their bills,” says Kessler. “Where it was very disheartening was in the people who we couldn’t bring with us, who didn’t all land on their feet quite the same way, especially some of the staff.”
Adam Kaiser was promoted to the Dewey & LeBoeuf partnership at the start of 2008. Now at Alston & Bird, he was one of the lawyers who initially landed with Kessler at Winston & Strawn in 2012.
In Kaiser’s view, one key contributor to Dewey’s collapse was its debt load—and he has focused on that metric while evaluating the firms he’s worked at since. (In its 2012 bankruptcy filing, Dewey reported debts of roughly $245 million against assets of $193 million.)
“People thought an IOU from Dewey was like having an IOU from a government, but it turns out it wasn’t,” he says. “Just because [a firm] has a fancy name and a long history doesn’t mean that it’s creditworthy.”
Easing Back Into Equity
When Stuart Saft, Dewey’s former global real estate practice leader, left his old firm for Holland & Knight, he initially asked to be excluded from Holland & Knight’s equity partnership.
“Originally, I didn’t want to become an equity partner because I knew that I was going to have huge financial obligations from the Dewey & LeBoeuf bankruptcy, as well as losing deferred comp that I was expecting to get,” says Saft, who now leads Holland & Knight’s New York real estate practice.
His nonequity status only changed after a year at his new firm, when he had a full grasp of what the Dewey bankruptcy would cost him. “By the end of the first year, I realized how well [Holland & Knight] was managed,” Saft says. “Because I had a leadership position at Holland & Knight, I felt I had to have skin in the game. It wouldn’t be fair if I didn’t.”
What You Don’t Know Can Hurt You
Jeremy Scholem was a midlevel associate in the tax controversy group when Dewey collapsed—an event he describes as “quite devastating” for him and other young lawyers at the firm.”The whole life I had set up under the assumption that I would be a Big Law associate fell apart,” Scholem says. “I think it was, for a lot of people, a moment to get out of Big Law completely. I took it as one of those.”
Scholem now works in criminal defense at the three-lawyer Manhattan law office of James Kousouros. Dewey’s ending taught him a few lessons, he says.
“The things you don’t think are going to affect you as an associate can have a huge impact,” he says. “You do have to worry about client strains, whether there’s a sufficient cash flow for the firm to keep paying you. It’s certainly made me more concerned about who I would take a job with.”
‘A Dislocation I Had Not Expected’
Alexander Dye spent most of his career at Dewey and its predecessor firm LeBoeuf, Lamb, Greene & MacRae, eventually leading the insurance regulatory practice.
“It’s hard to leave something after 31 years, particularly when you had concluded that this was where you were going to end your career. It was just a dislocation that I had not expected, and it was really traumatic,” he says.
But the firm’s collapse also gave Dye more insight into what makes a healthy firm tick. He’s now co-chair of Willkie, Farr & Gallagher’s insurance transactional and regulatory group. “One of the things that was important to us, especially after the situation at Dewey & LeBoeuf, was transparency. Willkie reminded me, in fact, of the old LeBoeuf back in the 1980s,” Dye says. “That is to say there was absolute transparency—financials were given once a month, there were regular meetings of the partnership, they were very open about how the firm was run and how it was performing.
“Willkie is a one-tier partnership,” he adds. “There’s a fairly compressed spread between the top end and the bottom end of the compensation structure. I think what that does is achieve a cohesiveness among the partnership that we didn’t have at Dewey & LeBoeuf.”
That’s not to say there was no cohesiveness at Dewey. “I left a lot of good friends who I would have loved to work with for the rest of my career. I try to keep in touch, but it’s never the same when you’re working under a different roof.”
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