The End of One of the World’s biggest law firms
Several large law firms have failed over the years but none as spectacularly as Dewey & LeBoeuf, the namesake “global super firm” of the former U.S. Presidential nominee Thomas E. Dewey.
Dewey & LeBoeuf once had 26 offices and as many as 1,400 lawyers, before going bankrupt in May 2012. They had offices in New York, London, Moscow, Hong Kong, Dubai and in many other major cities all around the world. Its collapse now scrutinized by prosecutors and the court is the largest of a U.S. law firm, costing thousands of jobs and hundreds of millions of dollars of estimated losses for lenders.
The most epic thing about this mismanaged law firm is that several former leaders of this high-flying law firm apparently violated a cardinal rule that lawyers always tell their clients: don’t put anything incriminating into an email.
The case prosecution said, that four managers, who orchestrated a nearly four-year scheme to manipulate the firm’s books to keep it afloat during the financial crisis, talked openly in emails about “fake income”, “cooking the books”, “accounting tricks” and their ability to fool the firm’s “clueless auditor”.
The messages were included in a 106-count indictment against four of the former leaders of the law firm. They were charged with grand larceny and securities fraud. “Those at the top of the firm directed employees to hide the firm’s true financial condition from creditors, investors, auditors and even partners of the firm,” the Manhattan district attorney, Cyrus R. Vance Jr., said at a news conference announcing the indictment. He also said that he can’t say whether this is something like Enron case of the legal world, but clearly, this is the largest law firm bankruptcy that we know of in history.
The former managers have all asserted their innocence. If convicted, they face up to twenty-five years in prison.
The Baltic legal services market so far has not seen comparable failures in part due to the set-up of law firms that are organized as closed and rather small partnerships. One of the challenges Baltic law firms face is the potential of conflict of interests between their clients. In small markets larger firms inevitably serve clients that may have conflicting interests from time to time, hence the importance of an early conflict of interests check within the firm, also on a Pan-Baltic level.