Criminal Charges Follow ‘Blatant Accounting Fraud’ at Storied Law Firm

Mar 6, 2014 3:16pm
GTY dewey leboeuf sk 140306 16x9 608 Criminal Charges Follow Blatant Accounting Fraud at Storied Law Firm

(Scott Eells/Bloomberg/Getty Images)

Four former leaders of the now-bankrupt law firm Dewey & LeBoeuf were charged Thursday in New York with what prosecutors called “blatant accounting fraud” and other questionable conduct.

The indictment of former chairman Steven Davis, former executive director Stephen DiCarmine, former chief financial officer Joel Sanders and ex-client relations manager Zachary Warren came two years after Dewey & LeBoeuf, once one of the most prominent firms in the world, collapsed in the largest law firm bankruptcy ever.  Some 3,000 people lost their jobs and creditors were out $500 million.

The firm was established in late 2007 as a result of the merger of Dewey Ballantine LLP and LeBoeuf, Lamb, Greene & MacRae LLP.  Dewey was former New York Gov. Thomas Dewey.  The firm had cash-flow problems from the start as the U.S. economy tanked, and, Manhattan District Attorney Cy Vance said, the defendants “simply lied” to cover them up.

“For years, these defendants had been fraudulently been claiming revenue that the firm did not have and pushing off expenses and financial obligations into the future,” Vance said.

Vance said seven unnamed Dewey finance department employees have already pleaded guilty for their role in a scheme that, he said, ran from 2008 until the firm’s collapse in 2012.

“As alleged, rather than speaking openly with creditors about mounting debt and shrinking revenue, the defendants deliberately manipulated the firm’s financial statements,” said FBI Assistant Director George Venizelos. “In the height of the crisis, the defendants used every trick in the book in an elaborate attempt to cover-up the increasingly dire situation.”

Davis and DiCarmine each are charged with multiple counts of grand larceny in the first degree. In addition, all four defendants are charged with multiple counts of falsifying business records in the first degree and one count each of scheme to defraud in the first degree and conspiracy in the fifth degree. Davis, DiCarmine and Sanders also each are charged with securities fraud.

The four defendants surrendered. Defense attorneys for two of the men said their clients committed no crimes.

“The actions taken by Steven Davis when he was chairman of Dewey & LeBoeuf were taken in good faith in an effort to make the firm a success,” attorney Elkan Abramowitz said.

Added attorney Austin Campriello: “Steve DiCarmine … did not cause the collapse of Dewey & LeBoeuf.  Steve was a salaried employee, not a partner, who worked tirelessly for Dewey & LeBoeuf.  This indictment is guilty of scapegoating.  It spins some inartful emails into crimes.  It also betrays a lack of understanding of some basic principles of law firm accounting. It is very easy for a prosecutor to bring an indictment.  The grand jury only hears one side.  But cases like this crumble when an innocent person gets to mount a defense in court.  And that is what we will do.”

Other defense attorneys could not immediately be reached for comment.

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