As we mentioned earlier, Dewey Ballatine was more “white-shoe” than LeBoeuf, with a more distinguished history — Thomas E. Dewey, the former New York governor, once ran the Dewey firm. And Dewey lawyers generally had better “pedigrees” than their LeBoeuf counterparts. As a legacy LeBoeuf partner told us, “LeBoeuf was a second-tier firm with delusions of grandeur. We had an inferiority complex; we wanted to be something bigger. We merged for the name.”
Here’s how Peter Lattman of the New York Times described the merger between Dewey Ballantine and LeBoeuf Lamb:
[T]he turmoil at Dewey & LeBoeuf has its origins in a boom-era law firm merger pushed by Mr. Davis. The firm was the product of a combination between the New York firms Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae in 2007. At the time, Dewey was having some financial difficulties, but Mr. Davis broached Dewey on the idea of the merger, arguing that law firms needed to get bigger to compete in a global economy. Mr. Davis was also said to be enamored with the Dewey name and its “white shoe” aura.
Is anyone surprised that a Yalie fell for perceived prestige and a “‘white shoe’ aura”?
The rest, as they say, is history. Davis ended up as chairman of the merged entity, in part because Morton Pierce, co-chair of Dewey Ballantine, wasn’t keen on management. Rumor has it that Pierce, who preferred practicing law over running a firm, would bill 3000 hours a year while at the same time leading Dewey Ballantine. (Interestingly enough, perhaps reflecting his aversion to management, Pierce recently told us that he is “not part of the management of [Dewey & LeBoeuf]” — even though his D&L bio describes him as vice chair of the firm, co-chair of the M&A group, and a member of the global Executive Committee.)
After the merger, sources said, Steve Davis ended up with excessive power over the combined Dewey & LeBoeuf. Dewey had a fairly collaborative culture, in which rank-and-file partners had significant input on major firm decisions, while LeBoeuf was more top-down in management. The LeBoeuf management model prevailed post-merger. “Davis had pretty much the unchallenged ability and power to do anything he wanted,” said a former D&L partner (from the legacy LeBoeuf side).
The unfettered power may have affected Davis. “I watched him go from a nice guy to a megalomaniac,” said a legacy LeBoeuf colleague who stayed on at D&L post-merger. “He became a power-hungry, arrogant crazy person,” opined this person.
In reshaping the combined Dewey & LeBoeuf, Davis was aided by Stephen DiCarmine, a non-practicing lawyer who became D&L’s “executive director.” The magnificently tanned DiCarmine exerted tremendous authority in this role. “He had the ability to make or break people’s careers at the firm, even as a non-lawyer,” an ex-D&L partner told us.
UPDATE (9:30 PM): DiCarmine has a law degree, from California Western School of Law, and he has been a member of the New York bar since 1984. But he does not practice, and he has not practiced in years. (You can access his capsule bio, which includes employment and education information, here.)
(The CFO of Dewey & LeBoeuf, Joel Sanders, was also influential — and may therefore deserve some of the blame. One commenter on a past thread opined that “[w]hen you are the chief financial officer and are not in control of the finances of the firm, then there is a big problem.” But even if Sanders had some power, it seems that Davis and DiCarmine were the true ruling duo.)
DiCarmine worked very closely with Davis. The two were “joined at the hip,” in the words of one former partner, with DiCarmine serving “as Davis’s facilitator, putting his plans into action.” As another former partner told The Lawyer, DiCarmine “was the Cardinal Wolsey. He was Steve Davis’s right-hand man.” One source told us that DiCarmine had “a Rasputin-like quality — even though he had no management experience, he was very good at getting people to listen to him and to think he knew what he was talking about.”
If you like, you can think of DiCarmine as Davis’s consigliere — and DiCarmine would probably enjoy being thought of in that way. He used to regale people at D&L with tales, perhaps tall tales, about his youthful misadventures and colorful past, before he entered the rarefied world of white-shoe law firms. He would jokingly refer to his “gangster” past and connections — and perhaps he wasn’t entirely joking. Steve DiCarmine is the first cousin of convicted Mob boss Don Vincent “Vinny Gorgeous” Basciano, and he even testified in support of Basciano not getting the death penalty.
What was Davis and DiCarmine’s vision for the future of Dewey & LeBoeuf? They wanted to create “a law firm of superstars,” as one former partner told us, “where every partner has $10 million in business.”
How did the Steves plan on assembling this constellation of superstars? By paying for it, with guaranteed contracts, both to retain rainmakers already at the firm and to poach stars from rival shops. From the NYT:
Legal industry experts [question] whether Mr. Davis’s rabid growth strategy was in the best interests of the firm. Mr. Davis extended dozens of lucrative long-term contracts to Dewey’s lawyers to keep the existing partners happy and poach star lawyers from other firms. While large corporate law firms have increasingly used guarantees to attract talent, the scope and scale of Dewey’s pay packages was an outlier.
Several Dewey partners had pay packages worth more than $5 million a year. These so-called rainmakers include Morton A. Pierce, a mergers and acquisitions deal maker; Michael L. Fitzgerald, a corporate lawyer specializing in Latin America; and Berge Setrakian, a partner with a large international practice. All three have remained at the firm.
Last fall, after it became evident that the firm’s profits would disappoint, Mr. Davis disclosed that about 100 lawyers had guarantees of some kind, putting the firm in financial straits. Salaries were slashed for several partners who had multimillion-dollar annual pay packages, including Henry C. Bunsow, a patent litigator in San Francisco, and Alan Salpeter, a Chicago trial lawyer. Neither has left Dewey.
According to a former partner, the guarantees, and partner compensation more generally, were used by Davis and DiCarmine to protect and reward their allies, mollify possible critics, and drive enemies from the firm.
“They ran the firm through intimidation, fear, and paying off people,” a tipster opined. “If you made too much noise and didn’t have a book of business, they cut your balls off. If you had a good book of business, you got a guarantee.”
But using guarantees as a management tool created problems. It gave rise to a snowball effect, requiring more and more guarantees to be doled out to sustain the enterprise. As reported last night by Casey Sullivan of the Daily Journal (sub. req.), “legacy partners would often approach Dewey management when they got word of guaranteed compensation being paid to laterals, demanding a re-up of their own compensations. One ex-Dewey partner said former Dewey Chairman Steve Davis, chief financial officer Joel Sanders, and executive director Stephen DiCarmine sometimes increased those partners compensation.”
The Steves “were very good at beating people down if you didn’t have a $10 million book or weren’t one of the chosen few,” a partner who left the firm told us. “If you were not one of the chosen few, you couldn’t get paid.” Certain partners outside the ranks of the chosen were taking home less than some associates or counsel, as has been recounted in these pages before (see here, noting that some partners had their pay docked by as much as 80 percent).
Meanwhile, “the boys who had the power paid themselves,” said this source. “It wasn’t a law firm any more. It didn’t behave like a partnership.”
And DiCarmine — not a partner, and not a practicing lawyer — also got paid. According to the Wall Street Journal, he earns $2 million a year at Dewey. Two million bucks will pay for thousands of visits to Hollywood Tans. We also hear that he has a termination provision that requires him to be paid $4 million — backed by a letter of credit, no less — if he’s terminated without cause. Four million bucks can buy DiCarmine a small private island where he can tan to his heart’s content.
One former partner compared the Dewey compensation system to the system at his new firm. At his new firm, “it’s based on the [allocation of the partnership] points. If budget is made, I get X; if we’re over budget, I get X-plus; if we’re under budget, I get X-minus. Everyone shares in the profits in proportion to their points.”
That wasn’t the case at Dewey, where a “star culture” prevailed. According to The Lawyer, because of the distorting effects of the guaranteed contracts, “at some points around 80 per cent of profit has been handed to 10 per cent of partners, with much of this 10 per cent made up of the ‘guarantee partners.’”
What was the problem with paying the stars and screwing the “little people”? There were several, actually. First, some of the stars were simply overpaid; some of the partners with multimillion-dollar guarantees simply didn’t have the books of business to justify their comp.
Second, the “little people” are the ones who actually service the clients. Even if a major partner charges $1,000 an hour and bills 2000 or 2500 hours, the firm won’t make a profit on him if it’s paying him $3 million a year. Instead, the bulk of the profit is made from all the other lawyers and paralegals who work on this rainmaker’s many matters. “Even if you have a $10 million book, you need people to support you, people the clients respect and can call directly,” a partner at another firm explained. If you screw the “little people” for long enough, eventually they leave (or stay on, but demoralized and disgruntled, and not doing the best work for clients).
Third, sometimes the “little people” turn into big people, especially if clients enjoy working with them. One of our sources left Dewey as a “little person”; he was not the relationship partner for most of the matters he worked on. But the clients liked his work and remembered him, and some of them eventually followed him over to his new firm (where he now makes far more than he did at Dewey).
The foregoing allegations against Steve Davis and Steve DiCarmine are harsh. What’s the other side of the story?