Jury in Dewey & LeBoeuf Criminal Trial Acquits on Some Charges, Deadlocks on Others

A Manhattan jury today (October 7, 2015) cleared three former executives of Dewey & LeBoeuf on falsifying business records charges. However, the jurors remained deadlocked on dozens of other charges. The three executives, all trained as lawyers, are being accused of masterminding a four-year scheme to manipulate the finances of the once-prominent law firm in an effort to keep it afloat during the financial crisis.  They were charged with a range of crimes including grand larceny, scheme to defraud, and falsifying business records. Prosecutors working under Manhattan district attorney Cyrus R. Vance, Jr. called more than 40 witnesses to support the prosecution’s case. Recent update on the case is here. Prior blogposts can be found here.

Jury Deliberations Begin in Dewey & LeBoeuf Accounting Fraud Case

Yesterday, on September 16, 2015, in the New York State Supreme Court in Manhattan, the jury began deliberating whether the three former executives of the now defunct law firm of Dewey & Leboeuf conspired to manipulate the finances in an effort to defraud investors and bank lenders.  In a daring move, defense lawyers chose not to call any witnesses and rested their case. For more detailed information about the trial, it is reported that one legal newswire, Law360, has been live blogging the event. Warning: the testimony “has often been dull and focused on arcane accounting treatments.” Latest news of the trial can be found here. Prior posts can be found here and here.

Defense Plans to Rest in Dewey & LeBoeuf Criminal Trial

Those of you who are teaching Chapter 6, Part II (Duties to Third Parties and to the Law) may want to refer to the ongoing criminal trial of three former executives of Dewey & LeBoeuf, who are being tried for larceny, fraud and falsifying business records. The trial began in late May and the defense team plans to formally rest its case on Tuesday without calling a single witness. Prosecutors working under Manhattan district attorney Cyrus R. Vance, Jr. have called more than 40 witnesses to support the prosecution’s case. Recent update on the case can be found here. Prior blogpost can be found here.

Guest Blogger Jennifer Pacella

We are pleased to welcome Jennifer Pacella of the City University of New York, Baruch College, Zicklin School of Business as guest blogger. Jennifer is Assistant Professor of Law at the School of Business. She has taught Fundamentals of Business Law, The Law of Business Organizations, and the Law of GRC (Governance, Risk Management, and Compliance) & Whistleblowing. Her research interests include attorney whistleblowing and the Dodd Frank Act. She received her J.D. from SUNY Buffalo, her Master’s in Political Science from UNC, and her Bachelor’s in Political Science from SUNY Geneseo. Her prior professional experiences include clerking for the Third Circuit Court of Appeals and working as an associate at Shearman & Sterling LLP in New York City in its Financial, Securities & Commercial Law group. I am an admirer of her recent work on in-house counsel and whistleblowing. Welcome, Jennifer!

Davis Polk Law Firm Rebuked by Judge in A.I.G. Case

What ethical obligations do lawyers have if they harbor serious doubts about the legality of their client’s plan of action?  What if that client is the federal government (the Treasury Department and the Federal Reserve Bank of New York) and the plan of action is bailing out A.I.G. to avert (or mitigate) a nationwide financial crisis?

Yesterday (June 15, 2015), Judge Thomas C. Wheeler of the United States Court of Federal Claims issued a ruling, which–among other things–rebuked the law firm of Davis Polk for blessing the transaction which gave the government a nearly 80 percent equity stake in A.I.G. The ruling cites an email from a Davis Polk lawyer in which the lawyer noted that the government “is on thin ice and they know it.”

The full story and the link to the 75 paged ruling are here.

 

 

Dewey & LeBoeuf Criminal Trial Has Begun

It is a rare event when the top managers of a major, venerable U.S. law firm are being criminally prosecuted for fraud.  So those of you who plan on teaching Chapter 6, Part II (Duties to Third Parties and to the Law) may want to take advantage of the ongoing trial involving top executives of the law firm of Dewey & Leboeuf, which collapsed in bankruptcy in May 2012.   The trial is expected to last (by some accounts) until Labor Day.

Opening statements began on May 26, 2015 in the New York Supreme Court before Justice Robert M. Stolz. The defendants, former chairman Steven Davis, executive director Stephen DiCarmine, and chief financial officer Joel Sanders were charged with concealing Dewey & LeBoeuf’s failing financial situation from lenders and creditors, including insurers that invested in a debt offering to raise about $150 mililion.

Natasha Lydon from Above the Law is reporting on the trial.  Her recent post about the opening statements can be found here.

For background on the case, The New York Times has a fairly informative article here.

Wal-Mart, Attorney-Client Privilege, and In-House Counsel

This isn’t exactly current news but nonetheless very noteworthy. A Delaware Supreme Court en banc opinion, Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, Del. Supr., No. 614, 2013 (July 23, 2014), explicitly endorsed the Garner exception to the attorney-client privilege in a Section 220 books-and-records proceeding. Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970) recognized an exception “where the corporation is in suit against its stockholders on charges of acting inimically to stockholder interests, [and] protection of those interests as well as those of the corporation and of the public require that the availability of the privilege be subject to the right of the stockholders to show cause why it should not be invoked in the particular instance.”  Huge victory for shareholders who can show cause, and huge loss for those who think that the attorney-client privilege should be absolute.

Also noteworthy is the resignation of Maritza Munich, the general counsel of Walmart International. Munich had tried to stop a bribery scandal as it was unfolding at Walmart. Michael Scher of the FCPA Blog provides some interesting detail on the scandal and Munich’s resignation.

For teaching purposes, one can construct a hypothetical based on the facts of the Wal-Mart case and ask the student to put herself in the shoes of an in-house attorney (such as Munich) who uncovers serious law violations within her corporation: what would she do? Good opportunity to talk about how to comply with Sarbanes-Oxley 307 (SOX 307) and the meaning of an attorney “appearing and practicing before the Commission” under SOX 307 covers. If you want to add a psychological perspective to the discussion, I talked about the  pressures of being in-house counsel in prior work.