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Former Sullivan & Cromwell Partner Resigns for Defrauding Clients and the Firm (to the tune of $500K)

Tuesday, September 23, 2008 8:33 PM - By David Lat

Carlos Spinelli Noseda Carlos J Spinelli Noseda Sullivan Cromwell Above the Law blog.jpgBack in July, we were the first to wonder about the mysterious departure from Sullivan & Cromwell of Carlos Spinelli-Noseda, a rising star at the über-prestigious (and profitable) law firm. Some commenters viewed our interest in his departure as unseemly, prying, or reflecting bias against S&C.

We don’t mean to gloat — okay, maybe just a little — but we’ve been vindicated by recent revelations. From a report by Anthony Lin in the New York Law Journal:

A former Sullivan & Cromwell partner has resigned from the bar for billing his clients and firm more than $500,000 in fraudulent travel and entertainment expenses.

Carlos J. Spinelli-Noseda, a banking and finance specialist who joined Sullivan & Cromwell straight out of Harvard Law School in 1994 and became a partner in 2003, was facing a disciplinary investigation over a pattern of improper billing dating from roughly July 1998 to February 2008.

In a June 3 affidavit of resignation he submitted to the disciplinary committee of the First Department, Mr. Spinelli-Noseda admitted he could not successfully defend himself against charges of professional misconduct. Such resignations are frequently tendered when further proceedings are almost certain to lead to disbarment.

Read more, after the jump.

Additional details, from Tony Lin’s article:

Mr. Spinelli-Noseda stepped down from his position at Sullivan & Cromwell in March. In a statement the firm said: “Upon discovery, the matter was promptly referred to the appropriate authorities. The Firm fully cooperated with those authorities, contacted affected clients and made restitution.”

Mr. Spinelli-Noseda’s lawyer, John B. Harris of Stillman, Friedman & Shechtman, said his client “deeply regrets” his conduct and had pledged to repay the firm.

Interestingly enough, the Stillman firm, an elite litigation boutique, is one of the firms S&C hired to defend itself in the lawsuit brought by Aaron Charney, a former associate who accused the firm of anti-gay discrimination. Between L’Affaire Charney and the Spinelli-Noseda case, Stillman Friedman must be privy to incredible amounts of S&C scuttlebutt.

Before you engage in too much schadenfreude, it’s worth noting that billing fraud isn’t unique to Sullivan. Other top law firms have had problem partners:

Earlier this year, Samuel A. Fishman, a former Latham & Watkins partner pleaded guilty to criminal fraud charges after submitting around $300,000 in fake expenses. In 2006, former Wilmer Cutler Pickering Hale and Dorr intellectual property partner William P. DiSalvatore resigned from the bar in part over fake expenses totalling $109,000.

Stephen Gillers, a professor of legal ethics at New York University School of Law, said such cases appeared to be on the rise but said they remained “head-scratchers” to scholars in his field because the sums involved, even at six figures, were usually puny next to the partners’ compensation.

“Head-scratchers,” indeed. Check this out:

Permitted by clients to fly first-class on international flights, Mr. Spinelli-Noseda said he sometimes flew economy or business-class, pocketing the difference from the first-class fare he would invoice.

To claim personal meals and lodging as business development expenses, Mr. Spinelli-Noseda said he would sometimes “list the names of business colleagues who were not actually present at these events and collect reimbursement from the Firm for expenses that the Firm would not have paid had it known the truth.”

In some cases, Mr. Spinelli-Noseda said, he submitted expenses for flights he did not take and meals he never ate.

Because $3 million in profits per partner just wasn’t enough. If S&C partners can run up half a million each in fraudulent SeamlessWeb charges, they can surpass Cravath in PPP.

Finally, one little juicy detail:

According to the affidavit, one Sullivan & Cromwell associate participated in the expense fraud with Mr. Spinelli-Noseda. The ex-partner said he submitted fake expenses on behalf of an unidentified non-New York-based associate and then passed back to the associate a portion of the proceeds. Mr. Spinelli-Noseda said he understood this associate was no longer at the firm. A spokesman for Sullivan & Cromwell declined to comment on the associate described in the affidavit.

We assume that this associate is also no longer a member in good standing of the legal profession. Wouldn’t Spinelli-Noseda and/or S&C have a duty to identify and report this person to the bar?

Ex-Sullivan Partner Resigns Bar Over $500,000 in False Billings [New York Law Journal]
Former S&C Partner Resigns from Bar for Bilking Clients, Firm [WSJ Law Blog]

Earlier: What’s Up at Sullivan & Cromwell?

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Posted in: Attorney Misconduct, Legal Ethics, Sullivan & Cromwell

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