I later found out that during this whole period of time… when I was being romanced by Citibank, that they had reason to believe — in fact, they knew — that Howrey was in default of material covenants, and they didn’t tell me that.
– Stephen O’Neal, a former partner of Howrey LLP, in a deposition in his pending litigation against Citibank. O’Neal and another former Howrey partner, David Buoncristiani, allege that Citibank committed fraud by encouraging them to finance their capital contributions with Citi, claiming that Howrey was financially sound when the bank knew Howrey wasn’t.
During the Great Recession, it felt like associates were being laid off in droves. In the past year or so, the big trend has been staff layoffs (often fueled by sending staff functions to an outside service provider).
Associates, staff — what about partners? Well, it seems that their time has come, at least according to some new surveys….
It’s the last day of December, so it’s a good time to look back on the year that was. We’ll do what we’ve done for the past three years (wrap-up posts from 2009, 2010, and 2011 can be found here, here, and here) and identify the ten biggest stories of the past year as decided by you, our readers. With the help of Google Analytics, we’ve compiled a list of our top ten posts for 2012, based on traffic (as represented by pageviews).
By the way, for the third year in a row, the most popular category page on Above the Law was Law Schools. People have now been intensely focused on the declining value proposition of going to law school for as long as it takes to earn a Juris Doctor degree. Isn’t it time that we graduate from the current educational model?
The second and third most-popular categories on ATL in 2012 were Biglaw and Bonuses. Although this year brought us the largest law firm failure ever, nearly all other firms indiscriminately doled out offers to summer associates, and bonus season looked better for the first time in years. While the legal profession is still in transition, things are certainly looking up, and through the highs and the lows, we’ve been there to cover it all.
So what were the ten most popular individual posts at Above the Law in 2012? Let’s find out….
Today we have some updates about Steve Guynn (all via Teri Buhl). First, Guynn is reportedly getting divorced from his wife, Kristie Guynn. Second, the criminal case against him no longer appears in the online docket for the Connecticut courts (perhaps because it has been moved to a domestic violence docket). Third, he is no longer at King & Spalding.
(We reached out to King & Spalding to confirm Guynn’s departure from the firm. They did not respond to our inquiry, but Guynn’s bio has been pulled from the firm website. Here is a cached version, which shows Guynn’s impressive educational and professional background, including the two other top firms where he was once a partner.)
The allegations against Steven Guynn have never been proven. But here is one thing established beyond a reasonable doubt: his multimillion-dollar mansion is fit for royalty. Shall we take a peek?
I told careful readers six months ago that I would soon be moving to London. I made the move on September 1, and here’s the local news:
Senior partners at major London law firms can’t afford to live!
Well, not quite: But senior partners at many major London law firms can’t afford to live in London itself.
I recently had lunch with — prepare yourself — a senior partner at a major London law firm. When I told him where I was now living, he said that it was nice that my commute would be so short:
“Twenty years ago, the senior partners at most big law firms lived in London. But today, unless you have inherited wealth or bought your home long ago, most senior partners at London firms can’t afford to live anywhere near the City. Partner pay just won’t cover the cost.”
As an expatriate American, this startled me: I’m confident there’s no American city where senior partners at major law firms can’t afford local real estate. But in London, this has the ring of truth to it. From an American’s perspective, everything in London is nauseatingly expensive (or “quite dear,” as the locals so quaintly put it). But the cost of housing goes far beyond “nauseatingly expensive”; it’s eye-poppingly, grab-your-chest-and-drop-to-the-ground, out of sight. It leaves partner pay in the dust. Here’s what I mean . . . .
The most shocking result of the recent survey on partner compensation conducted by Major, Lindsey & Africa was how much better the average partner does in firms with open compensation systems — almost $350,000 better on average, year in and year out. To me, that is the difference between retiring at 55 or 65. A big deal.
Have some fun. Tell your average law student that the average compensation for Biglaw partners at closed compensation shops (irrespective of equity status and seniority) was only $465,000, and see the reaction. Or pop an associate’s bubble. And realize that with demand for Biglaw services trending down, there is only so much time left before partner compensation generally starts to take a hit. I always knew about the disparity between open and closed firms, and I had heard about it anecdotally (I think Lat mentioned in an article a few years ago a personal friend who saw his comp climb dramatically after lateraling away from a closed comp firm). But I never really appreciated the scale until this survey came out.
I would think that anyone (especially younger partners with growing books) who could get out of such a firm would at least be trying to (ergo the need for a growing book). Even if your numbers are stellar, and your book is growing along with your traditional working collections, it is too easy for a closed comp chieftain to declare that you need to repeat the performance to make sure its sustainable. Whereas in a open system, you have leverage right away, and can convincingly argue to the compensation committee that failing to reward you would risk discouraging other potential achievers. And that you will leave — but one needs to be subtle on that front. Threaten to leave a closed comp place, and if they really like you, they’ll offer to match whatever new offer you get (thereby confirming they have been skimping on you all along)….
The recent survey on partner compensation conducted by Major, Lindsey & Africa, which I discussed last week, is full of interesting information. First off, I never really knew how many Biglaw partners there are. The answer? Around 75,000, which includes partners from all firms ranked on the Am Law 200, NLJ 350, or Global 100 in the last five years. Throw in another 1,000 or so partners who were Biglaw partners but left to form high-end boutiques — not included in the survey, but I consider them Biglaw partners since they typically work for similar clients — and you still have a pretty small number relative to the number of lawyers in the world. The figure of 75,000 amounts to less than two years’ worth of new U.S. law school graduates.
Very interesting, especially considering the forty-year-or-so age spread between active partners. Seriously, how realistic is it for any one law graduate (irrespective of pedigree) to think they will beat the odds and eventually make partner? So many things need to go right — it is amazing.
Lat had it right last week. There is a big, and growing, partner compensation spread at nearly all Biglaw shops. And as I mentioned in an earlier column, it is not uncommon to make partner and not see a bump in guaranteed pay at all. Factor in the additional expenses Lat references, such as tax and insurance outlays, and the first few years of partnership can be a net loss for some partners. Even if you finance your buy-in. And especially if you were the beneficiary of some big bonuses, for the suicidal hours you had just put in (big profits for your Biglaw firm!) as a counsel or senior associate in order to get elected.
So please don’t assume that every one of the people you see named as new Biglaw partners (usually in a breathless press release, and sometimes even with an ad in the American Lawyer) are signing contracts for their dream “lawyerly lairs” straightaway. If they are, it’s because they have family money or are a two-professional, no-kid type-family. Otherwise, they are headed for some tight times once they realize that they have to pay federal taxes (including Medicare and Social Security), state taxes (often in every state their firm operates), local taxes (for their beautiful new property), and a real accountant who can figure the whole mess out for them.
Most people don’t realize this, and Biglaw is in no rush to pop the fantasy bubble. Better to have associates motivated by dreams of what Lat referred to as “instant riches.” Better to maintain the prestige of the profession by pretending that making partner at a Biglaw firm is a tremendous achievement, regardless of what firm, practice group, or locale. It’s an achievement, sure. Just like getting elected to some political office. But there is a big difference between getting elected to the U.S. Senate and getting elected as deputy tax commissioner somewhere….
Is being a partner that different from being an associate? Contrary to popular belief, becoming a law firm partner is not a path to instant riches. In the early years, your compensation might not be that much higher than it was when you were an associate or counsel. Your taxes might go up, you might have to pay for your own health insurance and other benefits, and you might have to buy into the partnership. Sure, you might be able to borrow the capital contribution from a bank — but remember, you’re liable on that loan, and the bank might pursue you if it doesn’t get repaid.
Our partner readers sometimes complain about the stereotype that they’re all fat cats. As one of them recently wrote, “[Please don't write] about being admitted to partnership and instantly becoming rich…. At virtually every firm, you become a partner and then start to hope that, over the course of a career, your income will increase to ‘average partner income’ and your hours will decrease to ‘average partner hours.’ Rainmakers reach that goal quickly, but many partners — perhaps a majority in most firms — spend a lifetime waiting for, and never reaching, those goals.”
Of course, that’s the subjective experience of one reader. What does the big picture show? There’s a new report out about partner pay that contains lots of interesting information….
Many of our readers get highlights from Above the Law in their inboxes every day. Our ATL Newsletter spotlights our top content from the day, so you’ll never miss the story that everyone is talking about.
But what if you just can’t get enough of our partner-level coverage? From partner issues to partners with issues, from law firm implosions to notable lateral moves, we’ve got lots of content for — and by — partners at leading law firms. So that’s why we’re rolling out another newsletter that’s dedicated entirely to partners.
What are you waiting for? Just click here to receive the latest and greatest news du jour from the world of Biglaw partnerships.
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When Chintan Panchal decided to leave a global BigLaw partnership to start his own firm, he could only hope that he would face the high-quality problem of firm building that many had cautioned him about. Focused on the uncertainty surrounding of a new firm launch, he decided to tackle staffing needs, IT challenges, and financial planning requirements after he had built up his legal practice.
Panchal Associates LLP–a corporate/finance and outside general counsel boutique–was quickly off to a great start. Clients and matters were flying in the door, and Chintan soon had a team of lawyers and staff with a variety of operational needs. To continue building an excellent team and provide them with a competitive benefits package, to expand his physical presence to include a European practice and additional partners, and to scale his operations and IT capabilities to support this growing enterprise brought with it demands of time, money, and expertise. Chintan knew he needed help.
“With the assistance of NexFirm, we have upgraded the capabilities of our firm to meet, and in some cases exceed, the standards we were used to at our former BigLaw firms. Operationally, we can now attract and service clients we didn’t have the bandwidth to support in the past, and continue to build our team with the best and brightest legal talent in the industry,” said Chintan Panchal, adding “It has worked out quite well in our case; NexFirm is an essential partner for us.”
The holiday season is upon us, and yet again, you have no idea what to get for the fickle lawyer in your life. We’re here to help. Even if your bonus check hasn’t arrived yet, any one of the gifts we’ve highlighted here could be a worthy substitute until your employer decides to make it rain.
We’ve got an eclectic selection for you to choose from, so settle in by that stack of documents yet to be reviewed and dig in…
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