Tag Archives: Morton Pierce

THE DEWEY TRIAL: FOUR EXAMPLES OF NOT-SO-FUNNY COMIC RELIEF

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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?”

Riveting.

Only three more months to go.

DEWEY’S MORTON PIERCE: ACCEPTING RESPONSIBILITY

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This is the first in a series profiling Dewey & LeBoeuf’s former leaders. Morton Pierce (Yale University, B.A., 1970; University of Pennsylvania, J.D., 1974) is an appropriate place to begin because on May 3, 2012, he told The Wall Street Journal that he hadn’t been actively involved in Dewey’s management for years and had stepped down from the firm’s Executive Committee in 2010.

Pierce is widely acclaimed as one of the country’s top mergers and acquisitions attorneys. He was chairman of Dewey Ballantine when its attempt to merge with Orrick, Herrington & Sutcliffe failed in 2007.

A partnership within a partnership

Pierce was a principal architect of Dewey Ballantine’s merger with LeBoeuf Lamb. Based on Bruce MacEwen’s analysis of the financial data, Dewey got the better end of that deal. As for Pierce himself, The Wall Street Journal reports that he “had negotiated a pay package that guaranteed him $6 million a year for six years, according to a person with direct knowledge of the arrangement.” The subject of my next post, Martin Bienenstock, said that there were many such deals to lock up talent for at least four years after the merger.

Early in 2010 — the year Pierce says he left the firm’s Executive Committee — Dewey mortgaged its future with a $125 million bond offering (repayment due from 2013 to 2023). In 2011, the sixty-two-year-old Pierce negotiated a new deal for himself. The Journal continues: “[H]e secured a new, eight-year contract that would pay him $8 million for several years and wind down to $6 million in later years, that person said.”

Dewey’s next gambit: IOUs to the oxymoronic group — guaranteed compensation partners — when the firm didn’t earn enough current income to pay them in full. Committing future profits to make up for prior periods of missed earnings is, at best, a dubious strategy. At worst, it transforms a partnership into something that looks like a Ponzi scheme. It’s difficult to envision an attorney recommending the idea to a client.

A firm leader?

Pierce’s effort to distance himself from management is interesting. He’s featured prominently as part of the firm’s “Executive Office” in the 2010 Private Placement Memorandum for its bonds. Two years later, an April 11 2012 article identified Pierce as “one of seven key lawyers” who determined Dewey’s fate.

Until the day he left in May 2012, the firm’s website still introduced his biographical page as follows:  “Morton Pierce is a Vice Chair of Dewey & LeBoeuf and co-chair of the Mergers and Acquisitions Practice Group. He is also a member of the firm’s global Executive Committee.”

Not my job

From a self-proclaimed distance, Pierce described Dewey’s leaders in the third person. When asked about an April 2012 meeting at which senior partners supposedly recommitted themselves to the firm and its survival, Pierce’s only comment was: “There was a meeting and I was there.”

Three weeks later, he told the Journal, “I think the executive committee did the best job that they could under the circumstances.” That article continued, “Mr. Pierce didn’t assign blame for the firm’s current situation.”

Pierce told the NY Times, “I am sorry about what happened”  — as if some external event or rogue actor was responsible.

The nature of leadership

Even so, Pierce kept his sense of gallows humor while packing up for White & Case. Describing how he’d like to merge all of the wonderful firms that had expressed interest in taking him as Dewey imploded, he told The Wall Street Journal on May 3: “Although looking at the Dewey & LeBoeuf merger, maybe mergers aren’t such a good idea.”

I suspect that most of the 2,000 Dewey lawyers and staffers who once worked at the firm don’t think Pierce has much of a future in comedy. He didn’t mention his other non-joke: that his resignation letter reportedly claimed that the firm owed him $61 million.

If the Dewey spin machine and website description were accurate, Pierce remained at the center of power until the moment he resigned from the firm. If, as he claims, he wasn’t involved in management after 2010, that’s worse. The notion that someone of Pierce’s professional stature would remain on the sidelines as his firm pursued misguided strategies and then would watch it spin into oblivion is stunning.

Senior partners in big firms often complain about young lawyers’ unwillingness to take responsibility for mistakes and their consequences. Perhaps some of the profession’s so-called leaders could set a better example.

DEWEY: PROFILES IN SOMETHING

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Some key players in the Dewey & LeBoeuf debacle are also among the profession’s leaders; that makes them role models. Some teach at law schools; that means they’re shaping tomorrow’s attorneys, too. But how do they look and sound without the Dewey spin machine?

Some readers might worry that spotlighting them erodes civility. But civility goes to the nature of discourse; it can never mean turning a blind eye to terrible things that a few powerful people do to innocent victims. Sadly, the personalities and trends that unraveled Dewey aren’t unique to it.

As to former chairman Steven H. Davis, David Lat’s analysis at Above the Law and Peter Lattman’s report at the NY Times  are sufficient; there’s no reason to pile on. Rather, I’ll look at the “Gang of Four” plus one: the men comprising the four-man office of the chairman who replaced Davis as the firm came unglued, and Morton Pierce. Here’s a preview.

Morton Pierce was chairman of Dewey Ballantine when merger discussions with Orrick, Herrington & Sutcliffe failed and LeBoeuf, Lamb, Greene & McRae entered the picture. After spearheading the deal with Davis, Pierce locked in a multi-year $6 million annual contract that he reportedly enhanced in the fall of 2011. In his May 3 resignation later, he reportedly claimed that the firm owed him $61 million.

As he spoke with The Wall Street Journal while packing boxes for White & Case, Pierce said that he hadn’t been actively involved in firm management since 2010. But the Dewey & LeBoeuf website said otherwise: “Morton Pierce is a Vice Chair of Dewey & LeBoeuf and co-chair of the Mergers and Acquisitions Practice Group. He is also a member of the firm’s global Executive Committee.” [UPDATE: Two days after this May 15 post, Pierce’s page on the Dewey & LeBoeuf website finally disappeared. Such are the perils of losing an IT department too early in the unraveling process.] My post on Pierce will be titled “Accepting Responsibility.”

Martin Bienenstock, one of the Gang of Four, was an early big name hire for the newly formed Dewey & LeBoeuf. In November 2007, he left Weil, Gotshal & Manges after 30 years there. He got a guaranteed compensation deal and sat on the Executive Committee as his new firm careened toward disaster. As Dewey & LeBoeuf’s end neared, he maintained a consistent position throughout: “There are no plans to file bankruptcy. And anyone who says differently doesn’t know what they’re talking about.”

No one asked if he had a realistic plan for the firm’s survival. Ten days later, he and members of his bankruptcy group were on the way to Proskauer Rose. The title of my upcoming post on Pierce could work for Bienenstock, too. But because he teaches at Harvard Law School, I’m going to call it “Partnership, Professionalism, and What To Tell the Kids.”

Jeffrey Kessler, another of the Gang of Four, was also a lateral hire from Weil, Gotshal & Manges. He joined Dewey Ballantine in 2003. As a member of Dewey & LeBoeuf’s Executive Committee, he became a vocal proponent of the firm’s star system that gave top producers multi-year, multimillion-dollar contracts — one of which was his.

A sports law expert, Kessler analogized big-name attorneys to top athletes: “The value for the stars has gone up, while the value of service partners has gone down.” The title of my post on Kessler will be “Stars In Their Eyes.”

Richard Shutran, the third of the Gang of Four, was a Dewey Ballantine partner before the 2007 merger. He became co-chair of Dewey & LeBoeuf’s Corporate Department and Chairman of its Global Finance Practice Group. At the time of the firm’s $125 million bond offering in 2010, he told Bloomberg News that the bonds’ interest rates were more favorable than those from the firm’s bank. In March 2012, he said Dewey was in routine negotiations with lenders over its credit line. He also dismissed The American Lawyer’s retroactive revision of Dewey’s 2010 and 2011 financial performance numbers as much ado about nothing. My post on Shutran will be “Running the Numbers.”

L. Charles Landgraf, the last of the four, began his career at LeBoeuf Lamb 34 years ago. I don’t know him (or any of  the others), but my hunch is that Charley (as people call him) is a decent guy. My post on him will be called “The Plight of the Loyal Company Man.”

In future installments, we’ll take a closer look at each of them. Sometimes it won’t be pretty, but neither is what some of them personify about the profession’s evolution.