Judgement Day Looms for Dewey & LeBoeuf

By DAWN ELIGIO & DANIEL CASSADY

Jury deliberations entered the second day on Thursday in the criminal trial of three executives of the law firm Dewey and LeBoeuf, accused of engineering a scheme that involved lying to their investors and lenders about their financial condition.

Charged with fraud, Steven Davis, Joel Sanders, and Stephen DiCarmine, awaited the verdict in a marathon trial that started on May 27 and for which deliberations also were expected to be long and complicated.

The defendants, facing potentially long prison sentences if convicted, nonetheless appeared calm in the Manhattan courtroom as they lounged in the pews conversing with one another or reading novels.

The defendants, two of whom had suntans, were all dressed in blue ties and dark suits. DiCarmine read Orient, a murder mystery by Christopher Bollen depicting the struggle between locals and the wealthy weekenders of Eastern Long Island.

The jury, which consisted of seven women and five men, requested a total list of the charges, a verdict sheet, and a printed copy of the law.

The case is widely considered one of the highest profile scandals of accounting fraud since Enron in 2001.

Dewey and LeBoeuf, known more informally as Dewey in the legal profession, was once a very prominent law firm employing more than 1300 lawyers and attending to top corporate clients such as Dell, Disney, and JPMorgan Chase. What was once a thriving business is now referred to in press reports as the largest law firm to go bankrupt in United States history.

The firm is under scrutiny for covering up its financial distress by “cooking the books” and concealing an impending crisis until it was too late to hide, said prosecutors.

Steven Davis, the firm’s former chairman, oversaw the merger of LeBeouf, Lamb, Greene & MacRae with Dewey Ballantine in 2007. The merger proved a success, however, the business strategy of acquiring employees led to decline. By offering lawyers large salaries to work for Dewey, the law firm hoped to gain profit from the clients that followed. The money that was made unfortunately did not compensate for the money that was spent on essentially “buying” employees, according to the indictment.

In 2008, the alleged scheme brewed that brought Dewey to its downfall. Numbers allegedly were manipulated and improper adjustments were made to fluff the success of the company. They deceived banks, investors, shareholders, and lenders of the truth and in turn continued to collect their substantial paychecks.

In March 2012, the firm cut back 5 percent on its staff of lawyers. By April of that year, questions arose about the company’s welfare. One month later, Dewey filed for bankruptcy under Chapter 11, a code that protects large corporations through reorganization.