Biglaw

Biglaw Firm Still Fighting Allegations Of Impropriety On Part Of Former Partner

The real question is how much will it cost the firm?

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money-question-mark-value-valuation-300×169We’ve written… a lot about former Dechert partner Neil Gerrard — and that’s because the firm’s former head of white collar has been accused of some pretty questionable practices.

The biggest controversy surrounds Gerrard’s representation of Eurasian Natural Resources Corporation (“ENRC”). He was hired to investigate a whistleblower complaint about its Kazakhstan operations (the engagement began in December 2010 when Gerrard was at DLA Piper, but the matter moved to Dechert when Gerrard did in April 2011). However, the initial matter they were hired for quickly grew in scope, something Gerrard was largely responsible for, as he treated the billing code as a “cash cow.”

The Biglaw firm and Gerrard lost their case in London’s High Court when the judge found they breached their duty to ENRC. Indeed, though he denied it at trial, Gerrard allegedly referred to billing in the case as “rape mode.”

And the High Court judge in this case, Mr. Justice David Waksman, found Gerrard leaked confidential client information to regulators (and newspapers) in the hopes of expanding the engagement. As one might imagine, the judge did not take kindly to that move, calling it “at least in reckless breach of duty.” Gerrard was “so obsessed with making money from his work that he lost any real sense of objectivity, proportion or indeed loyalty to his client.”

For that breach of their professional duties, Dechert made an interim payment of £20 million for costs to ENRC. And this week, a trial begins to determine just how much more the Biglaw firm may owe their former client.

Plus, as reported by Bloomberg, there’s even more litigation stemming from Gerrard’s work at the firm for a separate client:

Dechert separately faces two more UK trials next year, and two US lawsuits, stemming from Gerrard-led representation for one of the United Arab Emirates. The firm is accused of aiding a hacking operation that targeted perceived enemies of the emirate, Ras Al Khaimah.

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The allegations in that case also involve hacking into private emails and releasing the content:

The emirate, Ras Al Khaimah, hired Gerrard in 2013 to aid an investigation into Khater Massaad, the former CEO of its sovereign investment fund who would later be convicted of fraud in the UAE.

A US aviation executive, Farhad Azima, who said he had been working with Massaad to publicize human rights abuses in the UAE, claimed that as part of Gerrard’s work his emails were stolen and posted online.

The emails allegedly showed Azima had made fraudulent misrepresentations in a prior commercial agreement with the emirate’s investment fund. The fund successfully sued him in the UK for $4.2 million.

Azima is fighting that judgment, saying it should be thrown out because it was the result of a hack and conspiracy to mislead the court.

Separately, he filed suit in the US, saying a hacking enterprise involving several parties, as well as a cover up that he claims Gerrard led and Dechert aided, violated the RICO Act.

A former Wall Street Journal reporter, Jay Solomon, is also suing, alleging it was because of the leak of his emails with Azima that he was fired.

Dechert and Gerrard have said they were unaware of the hacking operation. However, it’s not surprising the plaintiffs are utilizing RICO claims to try and go after the firm’s deep pockets:

It’s not surprising that plaintiffs are using RICO to target the firm, said Jeffrey Grell, a lawyer at Grell Feist PLC and RICO expert. “One of the reasons to use RICO is because it extends the scope of liability and you can get into deep pockets like banks and law firms,” he said.

But “it’s still a big hurdle to get over in proving intent by the law firm,” Grell said. “It is one thing to have a rogue partner. It would all depend on what the law firm knew, when they knew it, so establishing the law firm’s liability even if all the allegations are true is still a pretty big step.”

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Though Dechert and Gerrard are fighting the lawsuits and allegations of improper behavior, it does have folks wondering what costs — both monetarily and in terms of reputation — the firm will pay:

“Law firms have brands just like anybody else,” said James Jones, a senior fellow at Georgetown University Law Center and former Arnold & Porter managing partner. “It can certainly take a toll.”

And professional liability insurance may only cover some of the exposure:

“Some firms have huge deductibles, that would be a direct cost,” said Tom Sharbaugh, a professor at Penn State Law and former managing partner of operations at Morgan Lewis & Bockius. “The indirect costs are hard to estimate, but you may have an adverse impact with clients and on recruiting.”

It’s still an awful lot to deal with. No wonder the firm has distanced itself from Gerrard.

Kathryn Rubino is a Senior Editor at Above the Law, host of The Jabot podcast, and co-host of Thinking Like A Lawyer. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter @Kathryn1 or Mastodon @Kathryn1@mastodon.social.

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