Growing up in suburban New York in the 1950s, my friends and I would occasionally talk about what we wanted to do after college. It was assumed that most of us would embark on a “professional” career. Sure, there were a few who aspired to become scientists, or even politicians, but the most sought after professions were law and medicine.
Early on, we were at least vaguely familiar with Dewey Ballantine, probably the most famous and prestigious law firm in the legal world.
If a career in the law with a New York firm was in our very distant aspirations, we learned that the legal world was divided strictly by religion and race. There were law firms for white Christians, and Jewish law firms, and the barriers didn’t break down until, I would guess, the 1970s. But even though a career with Dewey Ballantine, founded by Thomas Dewey, two-time presidential candidate and former governor of New York, required a particular pedigree, which was beyond the reach of most of us, we had definitely heard of it.
To give you an idea of how powerful and profitable Dewey Ballantine was until just a few years ago, they were recruiting lawyers from other firms with bonuses of $5 million and more. In addition, a guarantee of at least $1 million a year for, say, five years, was not uncommon. A very important part of Dewey Ballantine’s business involved handling work for Wall Street firms, so it was well-known in the brokerage business. In addition, a corporation making an initial offering of its stock – an IPO – might well hire Dewey Ballantine just for the prestige of putting that name on their prospectus.
Those of us lesser mortals whose ancestors did not come over on the Mayflower probably had mixed feelings about Dewey Ballantine, assuming we cared at all. But, as I encountered Dewey’s name during my 40 years as a broker, I kind of had the same reaction as I did to the decades-long domination of baseball by the New York Yankees. So I must confess that when Dewey Ballantine declared bankruptcy two years ago, and then, just last week, generated this headline in The Wall Street Journal – “Fallen Law Firm’s Leaders Are Indicted” – I read the story eagerly.
The indictment had 106 counts, mostly based on emails among the partners about how to fool banks and other investors, so they could get a $250 million loan. Three senior partners were charged with a number of crimes including grand larceny, securities fraud, conspiracy and falsifying business records, according to the Journal. The New York Times also gave the allegations front-page coverage: “4 Accused of Systemic Fraud That Sank Global Law Firm.”
The firm, whose name was changed to Dewey and LeBoeuf after a merger in 2007, had 26 worldwide offices with 1,300 employees.
Dewey and LeBoeuf fell into bankruptcy, and the partners into handcuffs, as a result of lavish bonuses and guarantees paid to senior attorneys and new recruits, based on the assumption that future revenue would more than compensate for the expense. When that turned out to be wishful thinking and bad planning, the partners had a choice: let the bankruptcy run its course or commit brazen fraud, the largest in the history of the legal business.
Bud Stevenson, a retired stockbroker, lives in Fairfield. Reach him at [email protected]