Cesar Alvarez, executive chairman of one of the most powerful and profitable law firms in the nation, sheepishly stood in front of U.S. District Judge Marcia Cooke.
The Miami judge called a two-day hearing in May to decide whether to hold Greenberg Traurig and TD Bank in contempt for withholding key evidence in a much-watched fraud trial involving Ponzi scammer Scott Rothstein.
“I want to apologize,” Alvarez said as onlookers looked on in stunned silence. “Obviously, mistakes were made. I am very saddened for the firm and for the lawyers.”
But Alvarez wasn’t completely contrite.
He told Cooke the lawyers in the case were above reproach and reminded her it was Greenberg Traurig that came forward to admit, among other things, it had misinformed her about the existence of a key bank policy document in the case.
“We have looked at ourselves internally, and I can assure you that the integrity and ethics of our lawyers were kept and there was nothing intentional that was done here,” Alvarez said.
Cooke agreed to a certain extent, finding TD Bank also was at fault for discovery misconduct. But in a scathing Aug. 3 sanctions order, the judge questioned Greenberg Traurig’s performance as a top-shelf litigation outfit, a practice area that represents more than a third of the $1.24 billion firm’s business.
She compared the litigation missteps by Greenberg to the bumbling Inspector Clouseau in the Pink Panther movies.
“The amount of production errors that occurred throughout these proceedings were simply incredible, especially coming from lawyers in a well-regarded firm like Greenberg Traurig, which in many ways earns its reputation from being able to litigate large, complex actions,” Cooke wrote.
Cooke found the firm acted negligently in its discovery work and ordered the firm and bank to pay the plaintiffs cost to litigate the sanctions issue, while at the same time making a finding in the order that TD Bank knew of Rothstein’s fraud. Greenberg had already lost the case. A jury awarded $67 million in January to Texas-based Coquina Investments LLC, which was cheated by Rothstein in his scam. The firm was then fired by TD Bank in three Rothstein-related cases.
The embarrassing sanctions were the latest public relations blowto Greenberg Traurig. Over the last decade, the firm has been battered by the prosecutions of lobbyist Jack Abramoff in 2004 and Chicago partner Mark McCombs in 2010; malpractice suits filed by former NFL players, a Jupiter-based bio-tech company, a New York real estate investment firm, an Arizona investor group and the failed law firm Heller Ehrman.
“We are very large, and we are a big target,” said the firm’s CEO, Richard Rosenbaum. “When people go looking for a deep pocket, they often go after a party that has resources. Many times these suits are brought in an attempt to force a settlement. When we don’t believe something went wrong, we won’t play into that nor agree to an unwise settlement.”
Under Rosenbaum, the firm laid off secretaries this year and issued its first capital call in a decade to raise $24 million by asking shareholders to contribute 1 percent to 5 percent of their salaries. Rosenbaum said the money was “for a rainy day.” (For more on Rosenbaum’s interview, see related story.)
There is no question the international law firm is a hugely profitable powerhouse, ranking 10th on The American Lawyer’s list of top law firms. It is a growing mergers and acquisitions advisory firm, with corporate work representing 23 percent of its revenue. Last year, Greenberg represented electric utility DPL Inc. in its $3.5 billion sale to the AES Corp. and Miami-based Terremark Worldwide in its $2 billion sale to Verizon Wireless. On the international front, Greenberg was tapped to lead a team hired by Wal-Mart more than a year ago to conduct a worldwide compliance review even before a bribery scandal broke in its the retailer’s Mexican subsidiary.
“We have high-quality lawyers,” said Barry Richard, a Tallahassee principal shareholder and former member of the firm’s board. “You’re going to occasionally get some bad apples when you hire a couple thousand lawyers. I love this firm.”
When Richard garnered international attention representing President George W. Bush during the 2000 election recount and received outside offers to double his salary, he decided to stay at Greenberg. He said what attracted him to the firm in 1991 is the offices are allowed to operate with autonomy.
“It’s not monolithic,” he said. “As long as we are operating professionally, we don’t get any interference, and we don’t have to ask permission for things. I like the fact that it’s entrepreneurial. Everything we do is related to our business clients.”
‘Eat What You Kill’
Anthony Alfieri, a professor specializing in ethics at the University of Miami School of Law, said it could be this very structure that contributed to the failure in the TD Bank case.
He said large, multinational law firms like Greenberg are driven by an “eat-what-you-kill compensation system that incentivizes risk-taking in transactions and litigation.”
Greenberg started in 1967 as a Miami transactional boutique. After 10 high growth years, it now has 1,750 lawyers in 35 offices around the world.
Referring to the sanctions in the TD Bank case, Alfieri said, “This kind of institutional failure raises hard questions of culture, compliance and institutional regulation for Greenberg and hundreds of other Big Law firms and likewise for regulatory bodies like The Florida Bar and the American Bar Association.”
Rosenbaum said the firm takes ethics seriously and noted it hired full-time auditors after the Abramoff scandal to check lawyers’ records and billings. Their work is supervised by a “commitment to excellence” committee comprised of 80 shareholders.
But other embarrassments have cropped up, including the six-year sentence of McCombs last September for billing a Chicago suburb more than $1 million for work he never performed.
Joe Ankus, a longtime legal recruiter with Weston-based Ankus Consulting and executive director of the National Association of Legal Search Constultants, said Greenberg’s experiences are on par with other major firms.
“My perception of them is based on Greenberg’s size, which has an international reach, it’s inevitable that you will have positive and negative things occur,” he said. “You can’t be a global powerhouse and not suffer ebbs and flows of good and bad news.”
Richard said he was not concerned that the malpractice suits or the outcome of the TD Bank case will cost the firm clients.
“Clients don’t really pay much attention to that kind of stuff,” he said. “At any given time, the issue is not that anything is going to go wrong but how any company deals with things when they encounter them. And it always does the right thing when there is a problem. It immediately takes action and fixes things. We don’t cover things up.”