The ongoing criminal trial against three former leaders of Dewey & LeBoeuf has consumed six weeks. Time flies when you’re having fun. For example:
#1: Funny, If It Weren’t So Sad
For a bunch of smart people, some senior partners did some dumb things. One of the prosecution’s first witnesses was a former member of Dewey’s executive committee who retired at the end of 2010. She had contributed more than $600,000 in capital to the firm and, upon retirement, expected to get it back. Although the partnership agreement permitted the firm to spread the payments to her over three annual installments, she testified that chairman Steve Davis had discretion to accelerate them.
Davis declined her request to do so. Instead, he encouraged her to get a bank loan from Barclays for the full amount and told her that over the subsequent three years the firm would repay the loan for her. She followed his recommendation and borrowed the money.
The firm failed to repay the Barclays loan. She remained on the hook and paid the full amount herself. Adding insult to injury, she lost again when the firm filed for bankruptcy and her $175,000 annual pension disappeared.
#2: Funny, If You Were Not a Fellow Partner
For a bunch of high-powered former Dewey partners who rose to the very top of the firm, titles typically associated with power didn’t mean leadership. Likewise, becoming a member of the firm’s governing structure apparently didn’t result in any duties or responsibilities that involved actual knowledge of the firm’s finances or operations.
For example, during the fifth week of trial, Ralph Ferrara testified that even though he had no equity stake in the firm, he held an impressive title — vice chairman — and had an agreement whereby the firm paid him a salary around $5 million a year. He told the jury that former chairman Steven Davis’ announcement that Ferrara would assume the vice-chairmanship became an offer that he couldn’t refuse.
“I’m embarrassed to say, my ego overcame my good judgment,” Ferrara, a former general counsel of the U.S. Securities and Exchange Commission, said on the witness stand.
That line could describe leaders of big law firms everywhere. But it’s a flimsy excuse for abdicating responsibilities that come with power. So is another of Ferrara’s quoted lines: “I’m a practicing lawyer. I’m not a law firm administrator.”
Dewey’s other vice-chairman was Mort Pierce. As the firm was failing and Pierce was jumping ship in 2012, he similarly disclaimed any leadership responsibilities associated with his title and position.
#3: Funny, For a Lawyer
For a bunch of lawyers who make a lot of money advising clients not to write stupid stuff, some of them sure wrote stupid stuff. As the trial plodded through its fifth week, the jury saw these colorful messages from former Dewey partner Alexander Dye:
“Fellas: Time to start spending Momma LeBoeuf’s money like its water.”
“Steve DiCarmine, if you are reading this, I’ll have your f-cking head on a stick.”
During week six, one former executive committee member, Richard Shutran, testified about his internal firm emails, including these nuggets:
“I spend most days bulls–ing people…”
“Do what I do. Work out a lot and do drugs…”
“If he calls me, I’ll kill him…”
A defense attorney for Dewey’s former chief financial officer Joel Sanders had Shutran explain that these were all jokes. Apparently, the strategy is to convince the jury that Shutran’s email jests were part of a culture producing defendants’ supposed email “jokes” about finding “a clueless auditor” and using “fake income” in crafting the firm’s financial statements. Good luck with that one.
#4: Funny, If You’re Not A Juror
At the end of week six, jurors listened as the presiding trial judge, Manhattan Supreme Court Justice Robert Stoltz, interrupted Stephen DiCarmine’s defense counsel in mid-question. He wanted counsel to explain a term he was using in cross-examining Dewey’s former budget and planning director:
“What does the phrase ‘unreconciled expense write-off’ mean?”
Only three more months to go.