Back in March, I wrote about Zachary Warren. In 2007, his first job out of college was client relations coordinator at Dewey & LeBoeuf. In July 2009, he left the firm to attend law school. Unfortunately, his brief tenure was sufficient, years later, for the Manhattan District Attorney to name him as one of four undifferentiated “Schemers” in a 106-count criminal indictment.
When he joined the firm, Warren was a generation younger than his fellow alleged “Schemers”: former chairman Steven Davis, former executive director Stephen DiCarmine, and former chief financial officer Joel Sanders. Understandably, Warren would prefer not to be tried with his co-defendants, so he has moved to sever his trial.
Timing is Everything
In its latest filing, the Manhattan District Attorney acknowledges that Warren “was not the mastermind of the Dewey fraud scheme.” However, the government’s objection to Warren’s motion adds, “[H]e certainly was a willing foot soldier.” We learn some other things from the filing, too.
For example, it turns out that Warren was the first “Schemer” to be indicted. In December 2013, the grand jury charged him alone with six counts of “Falsifying Business Records in the First Degree.” But Warren first learned of the charges two months later, when a broader indictment named him along with Davis, DiCarmine, and Sanders.
Presumably, the timing of Warren’s indictment related to the five-year statute of limitations governing the claims against him. The government relies heavily on a handful of December 2008 events to make the case.
December 2008
According to the District Attorney, on December 30, 2008, Warren had dinner with two of his superiors, Joel Sanders and then-Dewey finance director Frank Canellas. To satisfy its year-end bank loan covenants, Dewey needed another $50 million by the end of the following day. Allegedly, Sanders and Canellas had developed a contingency plan of potential financial adjustments that Warren helped to implement.
The District Attorney emphasizes Warren’s supposed sophistication regarding accounting issues. But that’s a far cry from proving his competence to challenge directives from superiors holding CPAs and MBAs. In fact, the propriety of whatever transpired on December 31, 2008 with respect to Dewey & LeBoeuf’s financial statements is likely to become the subject of battling expert accounting witnesses at trial. Dive into those weeds at your peril.
Motive?
As for the aftermath of the alleged New Year’s Eve scheme, the Manhattan District Attorney cites Warren’s “$115,000 in bonus compensation in 2009” as evidence of something sinister. The government claims that the amount exceeded bonuses paid to all but five other Dewey employees. At best, that argument is disingenuous.
Warren received his $75,000 bonus for 2008 in early 2009, as expected. When he left Dewey in July 2009, Sanders promised Warren a $40,000 bonus for his half-year of service, payable in the fall.
Three months later, Warren was at Georgetown Law and still waiting for his final bonus. He left messages for Sanders, who eventually wrote, “If you’re wondering about your bonus, I have you down to receive $40k right after our year end close.”
Warren replied, “I didn’t take out any student loans this semester because I was anticipating the bonus to be paid in the fall as we discussed before I left.” (For unknown reasons, the District Attorney’s brief italicizes for emphasis the last phrase — “as we discussed before I left.”) When Warren still hadn’t received the bonus In November, he tried again and, shortly thereafter, the firm sent him $20,000 — almost the entire net amount. He received the final installment of $1,400 in April 2010.
For the District Attorney, Warren’s requests of his former employer are proof of his ongoing involvement in the original scheme: “In September 2009, he began chasing down the additional bonus that defendant Sanders had promised him.”
Seriously?
The Continuing Mystery
A fundamental question still begs for an answer: How does whatever happened in the presence of Zach Warren during December 2008 relate to the demise of a storied law firm in May 2012?
So far, it doesn’t. Unless the prosecution develops that connection, something will remain terribly wrong with this picture — and with the effort to put Zachary Warren in prison.
The Belly of the Beast 
This case is so overcharged that it is ridiculous. However, Warren may have a complete defense on the statute of limitations if he indeed severed his employment outside of the limitations period. There are several cases which hold that where the sole object of the conspiracy is to benefit the employer, termination of employment constitutes a withdrawal which sets the statute running. United States v. Steele 585 F.2d 793
Very well stated. That office has done little to stop public corruption, but is treating this kid the way prosecutors should have treated the heads of Countrywide, Bank America, Lehman, Bear Stearns, etc
This is an excellent post about a story which should receive much more coverage than it has received. The case is depressing. We have a bright young person who is admitted to law school who is now facing charges that he cannot afford to defend because he is reluctant to plead guilty and end his professional life. Worse still, the defendant is demonized for asking the law firm to pay salary that it owed him. I hope that Mr. Warren can come up with the resources to take the case to trial. With the right lawyer who is willing to do most of the work for free, Mr. Warren may have a future after all.