Bankruptcy, Biglaw, Dewey & LeBoeuf

Dewey Know A Third Former Partner Driven Into Personal Bankruptcy?

How does a rainmaker earning millions of dollars a year wind up in personal bankruptcy?

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Earlier this year, we covered the sad story of Gregory Owens, a former Dewey & LeBoeuf partner and current White & Case partner who filed for personal bankruptcy in the wake of Dewey’s collapse. The headline of “Biglaw Partner Files For Bankruptcy” might have been shocking to someone, but closer scrutiny made it less surprising: Greg Owens was not an equity partner and not a major rainmaker, and he made “only” six rather than seven figures, so one could understand how he wound up in such dire financial straits.

Today’s tale of a Dewey partner turned bankruptcy petitioner is far more improbable. It involves John Altorelli, a major Dewey rainmaker who now serves as co-chair of the U.S. finance practice at DLA Piper. If his name sounds familiar, it should; Altorelli has appeared in our pages not just because of his prominence in practice but because of his love affair with a beautiful Russian spy, Anna Chapman.

Altorelli earned millions a year at Dewey and presumably earns millions today at DLA, but he still wound up filing for personal bankruptcy. Sara Randazzo broke the story back in November, and over the weekend, James Stewart of the New York Times took a deeper dive into Altorelli’s messy finances:

At his peak, he was credited with generating more than $33 million in annual revenue for [Dewey]. In 2011 alone, his compensation was $6 million. That same year, the firm was so eager to keep him as a partner that it offered a contract guaranteeing him $5 million a year for three years.

Befitting his status as a top rainmaker, he had his own car and driver. He was out on the town nearly every night, often in the company of celebrities and models, and he was the host of countless parties and client events….

Despite all these trappings of success, Mr. Altorelli, who is 57, filed for personal bankruptcy protection on Nov. 25 in Connecticut, where he owns a sprawling home currently on the market for $3.9 million.

Sounds like good fodder for a future Lawyerly Lairs post. Anyway:

In a cautionary tale for any firm that may be contemplating a bankruptcy filing, the trustee overseeing Dewey & LeBoeuf’s bankruptcy is suing him for $12.9 million. He’s surrounded by lawyers and is personally responsible for his legal fees. He’s been grilled by prosecutors and cited as a potential witness in the pending criminal trial against Dewey & LeBoeuf’s former leaders. The Internal Revenue Service is on his back.

“Filing for bankruptcy is the worst possible outcome,” Mr. Altorelli said when I reached him this week. “It’s hard to imagine that 20 years of effort could be wiped out in this fashion.”

How did Altorelli wind up in this predicament? It’s less than perfectly clear because his petition, posted in full on the next page, leaves out many details, such as itemized debts. (The court issued an order to show cause as to why the petition shouldn’t be dismissed due to these deficiencies; the last docket entry, filed on December 10, was Altorelli’s motion for an extension of time to file the required schedules and other information.)

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But Stewart did some digging, speaking to former Dewey partners and others, and came up with some theories:

At least some of Mr. Altorelli’s problems appear to be self-inflicted. Mr. Altorelli could have settled the trustee’s claims — as most other former Dewey & LeBoeuf partners did — for a comparatively modest amount, about $1.4 million. (Two other former Dewey & LeBoeuf partners have also filed for bankruptcy protection, but neither was a rainmaker.)

One of those was Gregory Owens, mentioned above. The other was litigator Geoffrey Coll, now of counsel at Schiff Hardin, who filed for Chapter 7 earlier this year.

Not joining the Partner Contribution Plan was one mistake, but Altorelli made others as well:

And Mr. Altorelli, the proverbial grasshopper in Aesop’s fable, didn’t exactly save for a rainy day. The very qualities that made him such an effective rainmaker — generosity, gregariousness, his tireless socializing — contributed to his current predicament. “Money is not important to me. I shared my good fortune with people I care about, including the many charities I support,” Mr. Altorelli told me….

At a 2008 event, “Masquerade in Venice,” given by the supermodel Petra Nemcova to benefit her Happy Hearts Fund charity, Mr. Altorelli asked the firm to pay for two $25,000 tables, but paid for another out of his own pocket.

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That was just one example of Altorelli’s generosity. Recall how he also offered to donate $10,000 to help displaced Dewey staffers find work. Now he’s the one who’s a charity case.

Still, most of Altorelli’s problems appear to be due to Dewey. For all the dirty details about the clawback litigation against Altorelli and his tax troubles, check out the Times piece. The bottom line, according to John Altorelli’s Chapter 7 petition: he has total assets of $1 million to $10 million and liabilities of $10 million to $50 million.

It’s too bad that Altorelli’s relationship with Anna Chapman didn’t work out. Otherwise he could pull an Edward Snowden and flee to Russia with love.

(Flip to the next page for Altorellli’s complete bankruptcy petition and links to news articles about his misfortunes.)

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