Now that a criminal indictment has raised new allegations against former Dewey & LeBoeuf leaders, a bankruptcy judge said the trustee should amend a civil complaint against two of the firm leaders now­—­or else he may not have the chance later on.
Last November, the liquidating trustee of the defunct law firm, Alan Jacobs, sued former executive director Stephen DiCarmine and former CFO Joel Sanders in bankruptcy court, seeking to claw back up to $21.8 million that Dewey paid to DiCarmine and Sanders while the firm was allegedly insolvent. In March 2014, the Manhattan district attorney announced criminal charges against former chairman Steven Davis; DiCarmine; Sanders; and former client relations manager Zachary Warren.
At a bankruptcy court hearing Wednesday, Judge Martin Glenn suggested amending the complaint against Sanders and DiCarmine now and not wait months to raise allegations from the indictment. If the trustee won’t amend his complaint soon, Glenn told the trustee’s attorney, Christopher Murray, a partner at Diamond McCarthy, “don’t be sure I’ll let you do it” at a later date.
In that case, Murray told Glenn, his client would seek to amend.
Sanders’ attorney, Kathryn Coleman, a partner in Hughes, Hubbard & Reed, argued that the indictment’s alleged events occurred “well before” the suit against Sanders and DiCarmine was filed. Glenn, sounding skeptical, replied, “Are you telling me the debtors and the [trustee] knew of all the alleged facts that are in the indictment at the time the bankruptcy was filed?”
DiCarmine’s attorney, Mary Beth Buchanan, a Bryan Cave partner, argued if the trustee amends the complaint to include allegations in the indictment, “we would have to move to stay because those allegations cannot be answered” in bankruptcy court while the criminal indictment is pending.
But Murray said it costs money for the Dewey estate to remain open, and the trustee has the right to proceed with civil suits.
“I’m not going to wait for a disposition of the criminal case,” Glenn told the parties.