Biglaw, Dewey & LeBoeuf, Partner Issues, Securities and Exchange Commission, White-Collar Crime

Dewey Finally Have Criminal Charges Against Ex-Leaders Of This Failed Firm?

Dewey & LeBoeuf: it’s baaack (in the headlines).

Criminal charges are on the way for Steven Davis, Stephen DiCarmine, and Joel Sanders — the former chairman, executive director, and CFO, respectively, of defunct Dewey & LeBoeuf.

Almost two years have passed since the Biglaw firm’s bankruptcy filing, causing some observers to think that perhaps the Steves would never get charged. The argument, in a nutshell: they might have been poor managers or even downright moronic, but they didn’t commit any crimes.

Alas, sadly for Messrs. Davis, DiCarmine, and Sanders, it seems that Manhattan District Attorney Cyrus Vance doesn’t agree with that line of thinking. What types of charges can the trio look forward to?

(Please note the UPDATES added to this post, reflecting information from the indictment and the SEC complaint.)

It’s not clear yet — the charges are expected to be officially announced later today — but here’s a report from the New York Times:

[Two people briefed on the matter,] who spoke on the condition of anonymity, said that Mr. Vance would accuse the lawyers of grand larceny among other charges related to financial and accounting irregularities. The charges stem from accusations that former Dewey partners themselves presented to the district attorney’s office in 2012.

(By the way, which former D&L partners went to the authorities is a mystery that has not yet been revealed. Perhaps we’ll find out when the criminal case gets underway.)

New York prosecutors have been investigating accusations that Dewey’s leadership committee misled other lawyers about the firm’s financial health, along with investors in a private sale of debt to raise financing for the firm. A grand jury has been reviewing evidence, gathered by Mr. Vance’s office and the F.B.I. in Manhattan, since the fall, focusing on Mr. Davis and Mr. DiCarmine, who were known as “the Steves” inside the firm.

Back in 2010, Dewey raised money through a private placement of bonds. One can easily see how misrepresentations about the firm’s financial state made in connection with that nine-figure debt offering could trigger criminal charges, as well as civil charges from the SEC (which are also forthcoming, according to the Times).

Lying to other lawyers at Dewey about the firm’s financial health? That’s a more interesting case. There may be a cautionary tale here for leaders of other law firms who keep rank-and-file partners in the dark about how well their firms are doing.

Where are the defendants-to-be right now? The last we heard, Steve DiCarmine was studying fashion design at Parsons, so he shouldn’t be hard to get a hold of. If he can’t be found “making it work” over at Parsons, try checking the local tanning salons.

Speaking of jurisdictions known for excessive tanning, Joel Sanders is down in Florida — but it sounds like he might come back to New York to face the music. Earlier in the week, the firm that hired Sanders post-Dewey, Greenspoon Marder of Fort Lauderdale, issued a statement of support for its CFO: “It is important that we judge people based on firsthand knowledge and experience rather than allegations that have yet to be substantiated. We will continue to support Joel through this ordeal and look forward to a successful outcome.”

And what about Steven Davis? As we previously mentioned, he’s now working as the chief legal officer to the government of Ras al Khaimah, one of seven semi-autonomous emirates that make up the United Arab Emirates. The United States does not have an extradition treaty with the UAE.

Dewey know if Steve Davis will voluntarily return to fight the charges? I wouldn’t count on it. Living out the rest of his days as Steven of Arabia sounds a heck of a lot better than the prospect of becoming Steven of Sing Sing. You can say you live in Westchester, and that’s where the bragging rights end.

UPDATE (11:15 a.m.): The indictment has been unsealed, and there’s discussion of it over at the WSJ Law Blog. Some highlights:

  • Per the WSJ, the prosecution theory is that the defendants “misrepresented expenses and falsely claimed revenue to hide a cash flow shortfall stemming from the financial crisis. The scheme allegedly ran from November 2008 to early March 2012, shortly before Dewey fell into bankruptcy court and dissolved, and was designed to create the illusion that the firm had weathered the financial crisis and was set to grow.”
  • In terms of the specific charges, they include grand larceny, securities fraud, conspiracy, and falsifying business records.
  • There’s a fourth defendant now in the mix: Zachary Warren, a former client-relations manager at the firm, who graduated from law school and now clerks for a judge on the Sixth Circuit.
  • The high-powered defense lawyers involved — Elkan Abramowitz (for Davis), Austin Campriello (for DiCarmine), and Ned Bassen (for Sanders) — all emphasized to the WSJ the innocence of their respective clients. (Zachary Warren’s lawyer did not return a request for comment.)

To read the full indictment, flip to the next page.

UPDATE (5:45 p.m.): Matt Levine offers an excellent analysis of the SEC complaint over at Bloomberg View (via Non-Sequiturs).

UPDATE (3/14/2014): All four defendants, including Steven Davis, showed up to court to face the charges against them. See this New York Times article (featuring a photo of the foursome at the courthouse).

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