How would you like to be pursued by the Angel of Death? It doesn’t sound like much fun, right?
But it’s the latest plague to be visited upon certain former leaders of the now-bankrupt law firm of Dewey & LeBoeuf. Former D&L partner Henry C. Bunsow — nicknamed the Angel of Death by Alison Frankel of Thomson Reuters, due to his status as an ex-partner of three failed firms (Brobeck, Howrey, and Dewey) — has sued former leaders of Dewey, alleging that they misrepresented the firm’s finances.
Let’s learn about his allegations, as well as catch up on the latest wranglings in the Dewey bankruptcy case….
Former Dewey & LeBoeuf partner and noted IP litigator Henry Bunsow, who now has his own boutique law firm, filed a lawsuit yesterday in California state court against five former leaders of D&L (and a slew of “John Doe” defendants). As reported by Sara Randazzo of Am Law Daily, Bunsow’s suit “claims that [former chairman Steven H.] Davis and other former Dewey leaders engaged in a years-long pattern of deceit aimed at portraying the firm as stronger fiscally than it actually was in order to pursue a lateral hiring spree that the complaint likens to ‘running a Ponzi scheme.’”
The 14-page complaint contains six causes of action, including claims for fraud, breach of fiduciary duty, and conversion. The named defendants are former chairman Steve Davis, former Office of the Chairman member Jeffrey Kessler, former CFO Joel Sanders, former executive director Stephen DiCarmine, and former executive committee member James R. Woods. You can check out the full complaint, filed for Bunsow by Lynch Gilardi & Grummer, over here.
The gist of the complaint is Bunsow’s allegation that the defendants lied about the firm’s financial performance in order to attract lateral partners like himself — and to collect their capital contributions, which the firm then used to pay favored partners, not to run the firm. From Am Law:
Bunsow was one such [lateral partner] recruit. He joined the firm in January 2011 from Howrey as that firm began what would be its own spiral toward dissolution. (Joining Bunsow in making the move to Dewey at the time were Denise De Mory and Brian Smith from Howrey, as well as Craig Allison from Dechert. All four are now name partners at the newly formed Bunsow De Mory Smith Allison in San Francisco.)….
Bunsow says in his complaint that he relied on financial data provided to the [American Lawyer] magazine, as well as the firm’s promises that profits per equity partner were expected to reach $2 million in 2011, in deciding to join Dewey. What the firm’s leaders failed to tell him was that they in fact owed partners $300 million at the time “as a result of promises of compensation and bonuses awarded to select partners in prior years,” the complaint states. Bunsow received a guarantee of $5 million a year when he joined the firm, according to the suit, which also says he was underpaid by $3.6 million in 2011 and $1.65 million for the first few months of 2012.
It’s interesting to see that Bunsow was getting shortchanged by Dewey (according to his allegations). As some of you may recall, Bunsow defended Dewey when its troubles first started becoming public. When asked by the Daily Journal about reports of some partners not getting paid as promised, and instead having to take IOUs from the firm, he said:
“The deferred payments that you’re talking about are being handled by the firm in a long-range fashion that is going to result in almost no impact to profitability…. I have confidence that [partners] will be treated fairly within the parameters of what the firm is dealing with.”
It appears that Bunsow’s confidence was… misplaced. And it seems that Bunsow, at least according to his own allegations, wasn’t “treated fairly.” He claims in his lawsuit that the defendants induced him to borrow $1.8 million in order to make a capital contribution to the firm — $1.8 million that he has never seen again.
We’ll keep you posted on developments in Bunsow v. Davis. Now, on to the Dewey bankruptcy litigation….