- Reuters
By Jennifer Smith and Reed Albergotti
The Manhattan district attorney’s office is investigating possible wrongdoing at the embattled New York law firm Dewey & LeBoeuf LLP, according to an internal firm memorandum reviewed by The Wall Street Journal.
According to the memorandum, the investigation is focusing largely on the firm’s former chairman, Steven H. Davis, who led the firm from 2003 until several weeks ago, when his responsibilities were diminished in a management shakeup. A call to Mr. Davis at his office was not immediately returned.
The firm has asked two of its lawyers, Harvey Kurzweil and Seth Faber, to conduct an internal investigation into the situation, the memorandum said.
“In addition, we have been in contact with the District Attorney’s Office and have told the District Attorney’s Office that the Firm intends to cooperate with that Office’s investigation,” according to the memorandum.
A spokeswoman for the Manhattan district attorney’s office, Erin Duggan, declined to comment.
The 1000-lawyer law firm, is currently facing a host of financial problems, and in recent days has been weighing a bankruptcy filing, according to people familiar with the matter. The firm has also recently explored a handful other options, including a variety of merger scenarios.
Since the start of the year, some 70 partners have left the firm, largely over disputes concerning pay, taking with them millions of dollars in business. The firm has also drawn down about $ 75 million on a $ 100 million credit line issued by a syndicate of banks. It is currently in eleventh-hour discussions with the banks to renegotiate the terms of the loan.
Dewey also owes at least $ 125 million to insurance companies that purchased a private bond the firm floated in 2010, according to ex-partners and people familiar with the matter.
A merger, or bankruptcy, would mark a striking turn for a firm that became one of the largest in New York five years ago with the linkup of two storied firms. With projected revenues of around $ 1 billion, the resulting Dewey & LeBoeuf sought to wrestle corporate work away from the elite Wall Street firms that dominate the market.
The firm aggressively recruited star lawyers and their big books of business, but was hampered by sagging demand for legal services in the wake of the financial crisis. This year saw a stream of partner departures, rooted in compensation promises made to some lawyers recruited by the firm that cut into money available to pay others.