Whatever happened to the Manhattan district attorney’s investigation into the failure of Dewey & LeBoeuf? It seems like we haven’t heard about it for weeks. Today we finally have some news to pass along.
As we mentioned in Morning Docket, this morning the Wall Street Journal ran a piece about the current state of the investigation. There are a few additional details, but on the whole, we don’t know very much at this point.
We know more about how you can get your hands on part of Dewey’s art collection. Keep on reading for details on that subject….
We’ll start with the criminal investigation. From the WSJ piece, by Jennifer Smith and Reed Albergotti:
Prosecutors in Manhattan are investigating whether top managers at Dewey & LeBoeuf LLP purposely misled lenders about the law firm’s financial health, as a criminal probe into the firm’s failure intensifies, according to people with knowledge of the investigation.
Investigators also are looking into whether the law firm’s leaders made false statements to former partners about Dewey’s progress repaying loans on their behalf, according to a person briefed on the probe.
The Manhattan district attorney has sent subpoenas in recent months to Dewey and at least one of its lenders seeking information relating to communications Dewey’s leaders had with banks and former partners, according to people with knowledge of the investigation. Prosecutors have also met with Dewey’s bank lenders, according to one of these people.
It’s not clear what the basis is for the statement in the lede that the probe is “intesif[ying],” considering that subpoenas went out “in recent months” and prosecutors are still talking to people. In fact, here’s what we learn later on in the piece:
The investigation, which began about five months ago on the eve of the New York-based firm’s collapse, is still in its early stages and may not result in the filing of any criminal charges.
Where the WSJ advances the ball concerns what subjects the prosecutors are reportedly looking into:
A major focus in the continuing probe is on statements made by Dewey’s leaders to a bank syndicate with which the firm had a $100 million revolving line of credit, according to the person briefed on the probe. The agreement with a consortium of lenders, led by J.P. Morgan Chase, expired earlier this year, and the firm’s managers were trying to extend it in the months leading up to Dewey’s demise. It isn’t clear what time period prosecutors are examining.
Two people familiar with Dewey’s finances in recent years said that they doubted that managers had engaged in criminal behavior, and said that lenders had always been given the firm’s audited financial statements.
The other focus of the district attorney’s investigation, according to the person briefed on the probe, is on bank loans that some former Dewey partners took out from Barclays corporate-banking division to buy equity in the firm, a common practice at large law firms.
When those partners left, Dewey was supposed to return their capital by paying down the balance of the loan, which, as previously reported by The Wall Street Journal, the firm had struggled to do.
As we’ve previously reported, there’s already litigation going on between a former Dewey partner and the bank that lent him money for his capital contribution.
A lawyer for Dewey’s former ruling troika — chairman Steven Davis, executive director Steven DiCarmine, and CFO Joel Sanders — denied wrongdoing by his clients. “As far as we are concerned they didn’t do anything wrong civilly — and they certainly didn’t do anything wrong criminally,” said Ned H. Bassen of Hughes Hubbard & Reed.
So that’s what’s going on with that. Let’s turn to a happier subject now, namely, how you can own a piece of Dewey & LeBoeuf’s art collection….