Dewey Gets an Extra Week to Renegotiate Debt, While Its Ex-Leader Defends Himself Amid DA's Probe
Dewey & Leboeuf’s onetime chairman Steven Davis is defending himself in an email sent to partners amid mounting turmoil at the firm and news of a preliminary criminal investigation.
Davis was ousted from his post as one of five co-leaders of the firm on Sunday, the New York Times DealBook Blog reports. In a memo obtained by the blog, the firm told partners that Davis was no longer a manager and also confirmed that it has broken off merger talks with Greenberg Traurig.
“We are in discussions with other firms about a possible transaction and will consider those and other options for the firm moving forward,” the memo said. DealBook says those firms are SNR Denton and Patton Boggs.
Meanwhile, lawyers at Dewey got some good news on Friday. The law firm will get an extra week to renegotiate its $100 million credit line, the Am Law Daily reports, citing two unnamed sources. The new deadline is May 7. Reuters, however, says that Dewey is close to receiving an extension.
The reported reprieve comes amid disclosures that the Manhattan District Attorney’s office is investigating possible wrongdoing at Dewey in a preliminary probe focusing on Davis. He defended himself in an email sent to partners, DealBook says. “My decisions as chairman were made in good faith and in the firm’s best interests,” Davis wrote. “I trust as this process continues, a dispassionate and disinterested review of the facts will confirm that I have not engaged in any misconduct.”
Several publications had stories on the probe last week, including DealBook, Bloomberg News, Reuters and the Wall Street Journal Law Blog. Law 360 (sub. req.) was the first to report that a group of Dewey partners had requested the DA’s investigation. A probe at the preliminary stage means there has been no determination whether any crimes were committed. Dewey has also launched its own internal investigation, led by partners Harvey Kurzweil and Seth Farber.
An anonymous source told DealBook that one issue is whether Davis misled lenders about Dewey’s financial condition.
Meanwhile, two former Dewey partners told the Am Law Daily of questions surrounding bank statements in a Barclays Bank loan program helping departing partners fulfill capital requirements. The partnership agreement called for the firm to repay loans to the bank on behalf of those who left, the partners said. Dewey distributed quarterly statements indicating the payments were being made, but a former partner learned in a phone call to the bank the payments were not made in 2011, according to the unnamed sources. Dewey reportedly made good on the payments in February.
Dewey owes four banks $75 million drawn on the credit line, and it will probably have to file for bankruptcy if the lenders call the loan, the Am Law Daily says. The publication reports on the latest partner loss: Gary Apfel, co-chair of the financial services group. So far, at least 73 partners have left the firm.
