(CN) – The head honchos of Dewey & LeBoeuf lied about the now-shuttered firm’s finances to attract new partners and then pocketed their investments through a Ponzi scheme, a veteran attorney claims in court.
The San Francisco County Superior Court complaint names as defendants former Chairman Steven Davis, former Global Litigation Chair Jeffrey Kessler, former Chief Financial Officer Joel Sanders, former Chief Operations Officer Stephen DiCarmine and former executive and partner James Woods.
Henry Busnow says that the executives squeezed multimillion dollar “capital contributions” out of its partners as part of a Ponzi scheme.
The con began as early as 2009 and continued through 2012, according to the suit.
American Lawyer published Dewey’s allegedly bogus financial reports, which stated the firm earned gross revenues of $910 million in 2010 and $935 million in 2011.
Though Dewey executives promised Bunsow $5 million a year in 2011 and 2012, they failed to mention that they owed existing partners $300 million in compensation and unpaid bonuses, the complaint states.
“Upon becoming a partner of Dewey on January 18, 2011, plaintiff was told that he would have to make a capital contribution to the operating capital of the firm in the amount of $1.8 million,” Busnow says. “The contribution was to be made by withholding 36% of ‘special distributions’ made to Plaintiff during the course of the year.
“Knowing that plaintiff was not going to receive the amount of income promised during 2011, thereby rendering plaintiff unable to earn the income necessary to fund the capital to be paid to Dewey out of special distributions during the year, Davis, Kessler, Sanders, DiCarmine and Does I through 200 came up with a scheme to get Plaintiff and other lateral partners to advance their payments of capital knowing full well that such capital would never be repaid.”
Busnow says accountants at Price Waterhouse Coopers reported in 2012 that privileged partners had pocketed 83 percent of Dewey’s profits, leaving other associates out in the cold.
The firm filed for Chapter 11 bankruptcy protection on May 28, claiming it owed $315 million to various creditors.
Bunsow seeks more than $7 million in punitive and exemplary damages for fraud and deceit, negligent misrepresentation, breach of fiduciary duty, conversion, unjust enrichment, interference with economic advantage and unfair competition. He is represented by Ronald Souza of Lynch Gilardi.