Ride the Lightning
Cybersecurity and Future of Law Practice Blog
by Sharon D. Nelson Esq., President of Sensei Enterprises, Inc.
Did Dewey & LeBoeuf "Cook the Books?"
March 10, 2014
Last Thursday, the New York Times posted a story that rapidly went viral in the legal world.
Four men were charged by New York prosecutors with orchestrating a scheme over nearly four years to manipulate Dewey and LeBoeuf'’s books to keep it alive during the financial crisis. Allegedly, they talked openly in e-mails about “fake income,” “accounting tricks” and their ability to fool the firm’s “clueless auditor,” the prosecutors said.
The messages were included in a 106-count indictment against Steven Davis, Dewey’s former chairman; Stephen DiCarmine, the firm’s former executive director; Joel Sanders, the former chief financial officer; and Zachary Warren, a former client relations manager. They were charged with larceny and securities fraud. One of the men even used the phrase “cooking the books” to describe what they were doing to mislead the firm’s lenders and creditors in setting the stage for a $150 million debt offering that was supposed to solve the firm’s financial woes, according to the messages.
The firm found it could not meet provisions in bank loans that required it to meet certain cash-flow projections. To make it appear as though Dewey was meeting those conditions, the top executives schemed to make a series of fraudulent accounting entries that either increased revenue, decreased expenses or appeared to diminish distribution payments to partners, prosecutors said.
The authorities said the accounting scheme was laid out in a document called the “Master Plan.”
The firm filed for bankruptcy in May 2012. The firm once had 26 offices around the globe and employed more than 1,300 attorneys. Through their lawyers, all of the defendants denied the charges.
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