A NNALS OF LAW THE COLLAPSE

How a top legalfirm destroyed itse(f

BY JAMES B. STEWART

n an April morning in Manhattan A group of Dewey & LeBoeuf LLP part­ in his briefcase, and walked to the eleva­ last year, Steven Davis, the former ners has asked the New York district attor­ tor. He never returned. O ney to bring c(iminal charges against the chairman ofthe law firm ofD ewey & Le­ chairman of the totrering firm, which could A month later, on May 28, 2012, Boeuf, reached for his ringing cell phone. dose its doors as early as next week, a source Dewey & LeBoeuf.filed for bankruptcy. He was sitting in the back seat of a taxi, familiar with the matter said Thursday. The Times called it the largest law-firm The source told Law360 that an un­ on the way downtown to renew his pass­ disclosed number of partners from Dewey collapse in United States history. The port. Dewey & LeBoeuf, which was often asked the New York County district attorney firm embodied a business strategy that referred to in the press as a global "super to charge the chairman, Steven H. Davis, has begun to supplant the traditional part­ with embezzlement, wire fraud, mail fraud finn," was largely his creation. In 2007, he and other criminal activity. nership values of loyalty and collegiality had engineered the merger ofa profitable with an insistence upon expansion: by but staid midsized specialty firm- Le­ Davis immediately returned to his merging with another firm (and a Boeuf, Lamb, Greene &MacRae-with office, on the forty-third floor of a sky­ different culture) or by offering unwieldy a less profitable but much better- known scraper on Sixth Avenue near Fifty-sec­ financial packages to lure partners from firm, Dewey Ballantine. (Thomas E. Dewey, ond Street. He sat at his desk, wondering rival institutions. the former Republican Presidential nom­ what to do, and soon got a call from Ste­ It was just as well that DiCarmine had inee, was for many years the guiding part­ phen DiCarmine, the firm's executive di­ come up with a list of criminal-defense ner.) "Dewey married money, LeBoeuf rector, who asked him if he had seen the lawyers. ltwasn'tlong before he read news married up" was how some characterized Law360 article. T he source mentioned reports stating that he, too, was under the union. It was the largest merger of in the piece-preswnably a fellow-part­ criminal investigation. New York law .firms in history, and the ner- had referred to Davis as a "sinister new firm had more than thirteen hw1dred character," who was "running the firm THE TWO STEVES lawyers. Dewey & LeBoeuf handled like a mafia." A few weeks earlier, an­ high-profile transactions for an enviable other partner had walked by D avis's sec­ avis, who is sixty, wears wire­ roster of corporate clients: Lloyd's and retary and muttered, "Your boss is going Drimmed glasses and has the mild A.I.G. in insurance; Duke and BP in en­ to jail." marmer of a diplomat or a professor. H e ergy; JPMorgan Chase and Bardays in Davis and DiCarmine were known graduated from Stuyvesant High School, banking; Disney in media and entertain­ at the firm as "the two Steves." After the in Manhattan, near the top of his class ment; Dell and eBay in technology; and 2008 financial crisis, DiCarmine had car­ and went on toYale andYale Law School. Alcoa in manufacturing. Under Davis's ried out, at Davis's behest, the unpleasant He was offered a job at LeBoeuf on the leadership, a nwnber ofthe finn's partners tasks that Davis considered necessary for same day he interviewed. When he joined, had joined the ranks of the highest-paid the firm's survival. By D iCarmine's reck­ as an associate, in 1977, LeBoeuf was a corporate lawyers in the country. oning, he'd fired a hundred and thirty niche firm, focussing on utilities, energy, Now, five years later, Davis's vision partners, four hundred associates, and and insurance clients. was in ruins. He had been stripped of his three hw1dred and fifty support people­ L eBoeuf's compensation system tide ofchairman, and was being exiled to a bloodletting virtually unprecedented differed from that ofthe other white-shoe the London branch. The partnership was among big firms. Even so, he couldn't un­ law firms in New York Those firms still riven by intrigue, animosities, and defec­ derstand why anyone would despise D avis largely adhered to what is known as dle tions. I twas W1Certain d1atthe finn would enough to go to the district attorney. Cravath system, developed by Paul D. survive. DiCarmine offered to help find a Cravath, the presiding partner at Cravath, Davis saw that the call was from a col­ criminal-defense lawyer. Davis seemed Swaine & Moore from 1906 until his league in Dewey & LeBoeuf's Riyadh paralyzed. He had given up his life for the death, in 1940. Collective well-being took office. 'What about this lawsuit?" the col­ firm. He'd cut his own pay from four mil­ precedence over the self-interest ofindi ­ league asked. lion to three hundred thousand dollars, vidual partners. The firms were true part­ 'What are you talking about?" the same as the lowest-paid partner in nerships, in which financial risks and re­ The colleague e-mailed him an article good standing. 'Why don't you just leave, wards were shared equally. Partners were from a popular law Web site called go home?" DiCarmine suggested. generally chosen from among the finn's Law360. Davis read it on his phone as He was right, Davis thought. What associates, all of whom were steeped in he stood on the curb outside the pass­ am I doing here? He cancelled lunch with its culture and traditions. Partners were port office: a partner, put a notebook and a few papers paid the same "lockstep" compensation

80 THE NEW YOI\KEI\. OCTOilEI\ 14, 2013 A t one meeting, Steven Davis said, "'fit is only money that holds afirm and its partners together, then there is really no glue at all."

ILLUSTRATION BY BARRY BLITT THE NEW '101\KEI\, OClOBEI\ 14, 2013 81 and benefits, the total amount based on hw1ter for a law firm called, looking for a seventy-fifth-anniversary celebration, at seniority. "managing attorney," a job that tun1ed out Le Cirque, DiCarmine advised him not The Cravath system assumed that all to be administering the work of the firm to. But Davis did anyway, and he invited the partners worked together and contrib­ rather than practicing law. In 1998, he his ex-wife, too. No one seemed to take uted collectively to the firm's success. No made his way to LeBoeuf, whim needed it amiss. one had to be a "rainmaker," or client-get­ someone to help manage its expansion I n tl1e summer of 2003, Davis's co­ ter. The idea was distasteful. The way to and market the firm. chairman announced his resignation, attract and keep clients was not by selling, Cousin Vinny, meanwhile, worked in leaving Davis in charge. Davis wasn't marketing, or promoting oneself but by constmction, built condos, and went to a dictatorial partner, in ilie Randall Le­ doing solid work. It was all but unheard­ Hollywood and then Las Vegas. DiCar­ Boeuf mold, but he was ambitious. Run­ of for big corporations to pit one firm mine's aw1t died in 1993, and at her fu­ tung the firm became nearly a full-time against another, or to comparison-shop neral, in the Bronx, DiCarmine noticed job, which meant that he had few direct for lower fees. men who seemed to be bodyguards exam­ client relationships of his own. He oper­ LeBoeuf, founded in 1929, allocated ining the flowers. In tl1e receiving line, ated by consensus, shuttling among part­ compensation based on individual perfor­ men in dark suits bowed and kissed his ners and offices, and through the finn's mance. The dominant partner, Randall cousin's hand. During a Christmas Eve executive committee, relying on DiCar­ LeBoeuf, Jr., provided the financial un­ dinner at Vinn}ls house, a van filled with mine to carry out decisions. LeBoeufhad derpimtings. Around the firm, he was said F.B.I. agents arrived and parked outside. long prided itself on ilie fact tl1at the part­ to be the highest-paid lawyer on Wall Vinny bantered with them and invited nership had never taken a vote on any­ Street. He died in 1975. iliem in for meatbaUs. (They declined.) thing. As Davis put it, a vote meant that Davis, after becoming a partner, in DiCarmine was slow to acknowledge someone had to lose. 1986, did mergers and acquisitions and what was obvious to everyone else in the With ilie power delegated to them by gradually assumed a greater management family. His cousin had emerged as the the firm's executive committee, the two role. In 1999, he and another partner were acting head of the Bonanno crime fam­ Steves slashed costs by more than thirty named co-chairmen. ily- Vincent (Vinny Gorgeous) Basci­ million dollars annually and boosted By the competitive standards ofmajor ano. The family considered DiCarmine profits per partner from six hundred and law firms, LeBoeufwas a pleasant place to the young Micl1ael Corleone from 'The forty thousand, in 1999, to $1.2 million work, but, in terms ofprofits per partner, Godfatl1er''- ilie son who wanted noth­ five years later. But Davis began to think, it ranked among the lowest of the major ing to do with the Mafia. and DiCarmine agreed, that LeBoeuf firms headquartered in New York. To was an awkward size, caught between the bring about change, Davis had to push o one at Dewey & LeBoeuf knew global giants that were able to serve large out less productive partners, close low­ N anything about DiCarmine's rela­ corporate clients, with offices all over the margin regional offices, and reduce ex­ tives. (At a previous job, when members world, and firms that had chosen to re­ penses. To execute these ofi:en unpleasant of his cousin's crime family showed up, main smaller and focus on very profitable tasks, he turned to Stephen DiCarmine. looking like maracters from central cast­ types ofwork. Davis didn't see LeBoeuf While Davis had a pale complexion, ing, and wanted him to notarize a docu­ as a boutique firm; it didn't have the pres­ DiCarmine, who is fifi:y-six, was tan year­ ment, he insisted that iliey meet him in tige or ilie high- margin specialties that round. He dressed in designer suits and the lobby.) DiCarmine didn't know much such firms had. But he wanted to build drove a Porsche convertible. He was known about ilie fanU!y or personal lives of the something lasting and sigtlificant, and so as the colorful cow1terpart to the firm's LeBoeuf partners, eiilier, not even Da­ he had to grow. many staid lawyers. Growing up in Yon­ vis's, other ilian ilie fact that he was mar­ There were only two ways for a firm kers, he had never imagined a career in ried and had three children. Wiiliin a year like LeBoeuf to expand: merge with an­ such a respected profession. His father of DiCarmine's arrival at the firm, he oilier firm or raid other firms for "lateral" had been a U.P.S. driver. Afi:er his moth­ noticed that Davis wasn't around much. partners, who would bring major clients er's sister was divorced, she and her son When he asked a colleague about it, he with them. Davis looked at merger candi­ Vincent Basciano, known to everyone in was told that Davis was having some "per­ dates, but he was wary: many law-firm DiCarmine's family as Cousin Vinny, sonal problems." mergers had failed. No candidate seemed moved in with his fanU!y. Vinny was three Mter becoming co-chairman of the quite right. Then he heard from Stephen years younger than Stephen, and they firm, Davis divorced his wife and told a Best, a LeBoeufpartner in the Washing­ were as close as brothers. few ofhi s partners and some ofhis clients ton office, that his friend Ralph Ferrara, a With the encouragement of a local that he was gay. He figured that his career star securities litigator, might be willing to priest, DiCarmine attended college, first would be over. Mucl1 to his surprise, there consider a move. Ferrara had started a at Manhattan College and then at New was little apparent reaction. W ash.ington offioe ofDebevoise &Plimp­ York University. Afi:er graduation, he en­ In time, Davis learned that DiCar­ ton, one ofthe smaller New York firms in rolled in California Western School of mine, too, was gay, but the subject was the Cravath mold. Law, mostly so that he could go to the generally left unmentioned betw·een Davis visited Ferrara in Washington, beach. To his surprise, he excelled there. them. When Davis asked DiCarmine's and learned iliat the Debevoise pension But his California Western degree didn't advice about whether he should bring the plan was unfunded. If the firm ran into get him far in New York, until a head- man he was involved with to the firm's trouble, it might not be able to meet its

82 THE NEW YOI\KEI\. OCTOilEI\ 14, 2013 pension obligations. Ferrara was blunt Davis's moves attracted the atten­ DiCarrnine lumselfwasn't involved in or­ about what he wanted: a funded pension. tion ofAmerican Lawyer, whid1 in 2006 ganized crime, no one could blame him For tax reasons, he asked for a lump-sum dubbed LeBoeuf a "rainmaker magnet." for his cousin's situation or criticize him payment that would generate the equiv­ By tlus time, LeBoeufhad more than six for his loyalty. alent ofthe four-hundred-thousand-dol­ hundred and fifty lawyers on staff. In a DiCarmine visited Basciano in solitary lar annual pension that he'd earned at largely glowing profile, the magazine confinement as often as he was allowed, D ebevoise--an amount that turned out noted that "LeBoeuf has been able to usually every few monilis. On one occa­ to be sixteen million. skim the cream of partners from less sion, tlrree federal agents surrounded him Signing bonuses ofthat scale, however profitable firms, and to meet tl1e big up­ as he was leaving Foley Square and asked common on Wall Street and in Holly­ front payments necessary to bring in older ifhe could get his cousin to cooperate. Di­ wood, were practically unknown among rainmakers. It has also managed to con­ Carmine doubted that he could, but he elite law firms. In addition, Ferrara vince tl1em that ilie firm, long known for met with them to find out what they wanted a guaranteed annual salary to being limited to energy and insurance were offering: life in prison railier than match what he was making at De­ work, is a dynamic place to work and ilie deaili penalty. Basciano dismissed ilie bevoise-$1.6 million. It would not be grow a practice." idea out of hand. tied to his performance. Still, Ferrara was That year, DiCarmine's cousin Vin­ a big name in a coveted practice area, and cent Basciano, who had been charged PROBLEMATIC E-MAILS attracting such a partner would bestow ca­ witl1 multiple crimes, including murder, chet on LeBoeuf Davis worked out the was placed in solitary confinement, in tl1e uch of the power at LeBoeuf re­ details, and DiCarmine recalls personally Metropolitan Correctional Center, in Msided in the compensation com­ delivering the sixteen-million-dollar Manhattan. (Authorities had discovered nuttee, which met every spring to deter­ check to Ferrara's house. what they believed was a hit list he had mine partner remuneration. As at many DiCarmine spent the weekend before compiled whose targets included a judge non-lockstep law firms, partners were Ferrara arrived re-creating his Debevoise and several witnesses.) DiCarmine had to paid a base compensation-three hun­ office on the eleventh floor of the build­ get the approval of ilie U.S. Attorney to dred thousand dollars at LeBoeuf-sup­ ing where LeBoeufhad its Washington visit lum, and iliat required a letter iden­ plemented by their share of the firm's offices. Walls were torn down to simu­ tifYing his place of employment. DiCar­ profits. Partners set their salary expecta­ late his L-shaped space; the same carpet mine felt iliat he could no longer conceal tions with iliis additional compensation and wallpaper were installed; his numer­ the relationship, and went to see both in mind. To determine the additional ous photographs and two computers Davis and ilie firm's head oflitigation. "I compensation, the committee used a were arranged in precisely the same loca­ don't want to hurt ilie firm," DiCarmine complicated point system involving hours tions. Painters were applying the finishing said. "If iliis is really important, I'll re­ billed; quality of work; and pro-bono, touches when Ferrara walked in on sign." But Davis stood by him. As long as professional, and civic activities and Monday morning. LeBoeuf's investment in Ferrara paid offhandsomely . When Eliot Spitzer, the New York attorney general, decided to investigate LeBoeufs client Zurich Insur­ ance Group, Zurich initially hired another fum to litigate on its behalf But when that fum developed a conflict of interest Ferrara made a presentation to Zurich's general cmmsel, and the company chose to stay with LeBoeuf and use Ferrara for its class-action litigation. T hat case alone generated more than forty million dol­ lars in billings during Ferrara's first year. Ferrara also brought with him a major new client, Royal Dutch Shell. Davis, buoyed by his success with Fer­ rara, brought in tvrenty-two lateral part­ ners in the next ten months, with various signing bonuses and guarantees. The ex­ ecutive committee pretty much delegated to Davis the discretion to negotiate the deals, and DiCarmine executed them. Davis knew that if too many partners found out the exact pay packages there would be resentments and jealousies. kept his suits in the basement between his stays.) They told him mat DiCarmine wore an expensive Patek Philippe watch. He had a house in the H amptons and an apartment in Miami Beach. Dye knew nothing about DiCarrnine's ties to a crime family. But he had heard that DiCarmine had taken his staff to Rao's, an East Har­ lem restaurant long frequented by Mafia chieftains, where he was greeted like a family member. Dye asked Davis for an accounting of administrative expenses, and demanded to know DiCarmine's salary, along with that of the firm's chief financial officer, Joel Sanders. Davis resisted, but Dye says he was eventually told that DiCarmine's 2006 compensation was four hundred and "I solved the maze in.fifty-three seconds, but it was a Monday level" fifty thousand dollars. Dye thought that was too much. (In 2008, DiCarmine re­ • • ceived a base compensation of nine hun­ dred and fifty thousand dollars, plus an additional eight-hundred-thousand-dol­ service to the firm. The biggest factor, ties, the post-Internet-bubble expansion, lar profit payout; over the next few years, though, was bringing in clients, and total and even into the recession, Dye and his his compensation hovered around two compensation varied dramatically. insurance partners fared especially well, million dollars.) Alexander M . Dye, the head of the thanks to Spitzer's wide-ranging investi­ At a meeting to discuss projected com­ compensation committee and a member gation ofthe industry, which generated a pensation for 2007, D ye and Sanders ofthe executive committee, was probably wave ofinsurance work. nearly came to blows. Dye thought that the firm's most powerful partner aside Dye felt that he had a good relation­ the projected profits and the resulting part­ from Davis. Despite the potentially con­ ship with Davis. They had travelled to­ ner compensation were too high. He ac­ tentious compensation decisions, Dye was gether on company business to Beijing cused Sanders of not being prudent, and widely praised for his even-handedness, and Moscow, and Dye found Davis the conversation tumed into a heated ar­ and there was surprisingly little internal charming and well read, a pleasant col­ gument. (Sanders declined to comment on dissent over pay. Of course, his task was league who shared an interest in history. any aspect ofthis article.) D avis asked Dye made easier by the fact that LeBoeufrou­ Dye had supported hiring Ferrara and to step into the hall and told him that mat tinely exceeded its budget forecasts, which paying the large incentive to get him, but was no way to treat a colleague. Dye re­ meant that there were more profits to give he didn't agree that Ferrara was the reason plied tlut it was no way for two adminis­ out. With John M. Schwolsky, a corpo­ Zurich had retained the firm for the lucra­ trators to treat the partnership. (The firm rate-insurance lawyer, he oversaw tl1e cor­ tive Spitzer probe. Zurich was a longtime ultimately did meet the profit projections.) porate practice, where he also worked client ofDye 's, and his work had certainly Dye expected mat he would be made closely with another insurance lawyer, played a role in landing the case. None­ chairman in 2008, when Davis's five-year Michael Groll. theless, Dye lost Zurich as a client to other term was up. He'd been told as much by Dye, a solidly built, sandy-haired man partners in the firm. (Ferrara, true to his the senior partner who served as his men­ in his early fifties, was plainspoken, and Cravath- model roots, insisted on receiv­ tor. Dye intended to delegate administra­ had a temper- "my Achilles' heel," he ing no personal credit for generating busi­ tive duties to other partners and continue told me recently. The son of a car dealer, ness, on the ground that it was a corrosive to practice law. It went without saying that he was brought up in North Platte, Ne­ influence that undermined collegiality.) he would replace DiCarrnine and Sanders. braska, and had worked summers on con­ Dye was also troubled by the ascen­ On Thursday, March 8, 2007, a day struction sites. He joined LeBoeufstraight dancy ofDiCarmine. He had taken anal­ before the annual executive-committee out of the University of Michigan Law most instant dislike to DiCarmine, even retreat, Davis came to see him. Davis ex­ School. After representing British A.Iner­ though he couldn't really say why. Dye's plained that he had been talking with ican Tobacco successfully in a hostile sources within the firm's support staffre ­ other members ofthe executive commit­ takeover ofFarmers Group, Dye had sur­ ported that DiCarmine, who had no cli­ tee about the following year's chairman­ rounded himself with a loyal group of ents and generated no fees, lived extrava­ ship appointment. "They want to reap­ younger partners and associates, and gantly on the firm's tab, and maintained point me," he said. He hoped that Dye turned the firm's base ofinsurance clients an expensive suite at the One Aldwych and John Schwolsky, Dye's close ally, into a lucrative specialization in mergers hotel, in London, stocked with a stylish would support him. and acquisitions. Through the late nine- wardrobe. (DiCarmine says mat the hotel Dye was disdainful of most of the

84 THE NEW YOI\KEI\. OCTOBEI\ 14. 2013 partners Davis had put on the executive we are the smart guys who gave him wedgies And, after another: committee, who he felt had weak or declin­ all his life; he can't imagine working for us .. . . Why the fuck is Woods the one guy Same threat for you DiCarmine . . . . Don't ing practices, and were therefore too de­ who's determining the future of this firm. test me. pendent on Davis. Now he felt that Davis These are the assholes who are afraid of had gone to them a year ahead ofschedule melee, not us. I think many of our colleagues A third said: would be surprised to learn that squat, igno­ to insure his own continued tenure. rant motherfucker is the king maker here.... Suck my cock DiCarmine. "I'm not going to fight you," Dye said. Davis is the bad guy here. I think we need to be opportunistic about how we go after him. ''You have the votes. But I'm angry." D avis called an emergency meeting for At the no:t day's meeting, Davis raised At various points, Dye referred to that Stmday at 7:30P.M. It induded Jane the issue ofhis reelection, and volunteered other partners as "pathetic," "little prick," Boisseau and Jim W oods, from the exec­ to leave the room so that the partners and "fuckwad." utive committee, who had drawn particu­ could discuss it. DiCarmine and Sanders Schwolsky's reference to being "in larly contemptuous comments from Dye. left ,.vith him. Jim Woods, a partner from play" indicated that Dye and his group DiCarmine brought copies ofthee -mails the San Francisco office whom Dye dis­ were thinking ofj oining another firm. In for the group to read. When they finished, liked, began the meeting by turning to an e-mail chain with Groll, Dye said that Davis looked at DiCarmine and said, Dye and saying, "I think Alex should it was time to start putting dinners to­ ''You could sue the fum ar1d retire for the make the first statement in support of gether in "the private rooms at Le Ber­ rest of your life." Steve." nardin. Money is no object." In another, Davis consulted outside counsel, at Dye was fi.lrious. It wasn't enough for he added: Proskauer Rose. The Proskauer lawyer re­ the committee members to deprive him of viewed the e-mails and, according to Time to stan minding the clients closely the chairmanship-they had to humiliate and spending Momma LeBoeuf's money like Davis, advised that LeBoeuf had ample him while doing it. 'The firm has done it's water. grounds to fire Dye. But the decision well," he said tersely, not mentioning wasn't simple. The departure ofDye and Davis by name. There was a voice vote to By Sunday, Dye had calmed down, his allies could be a serious blow. D avis approve a new five-year term for Davis. and adopted a different tone. He sent agonized over what to do. H e decided Dye remained silent, and D avis was Davis a conciliatory e-mail: that Dye and Schwolsky could remain as reelected by acdamation. partners if they relinquished their man­ After a weekend of intense introspec­ After what for Dye was a painful din­ tion . . . I have decided to put all of this be­ agement positions and titles. Such a move ner in a conference room, at which Davis, hind me. ( will not discuss it again, and will would preserve the firm's income stream DiCarmine, and executive-committee be a loyal team player. I am truly sorry this and remove from mar1agement the part­ has clouded, at least temporarily, what I members celebrated Davis's reelection, think has been a very productive and colle­ ners most likely to challenge Davis's au­ Dye and Schwolsky retreated to Coco gial relationship between us. I will arrive at thority. Pazzo, an Upper East Side restaurant, the office on Monday morning and redouble Several weeks later, D avis summoned my efforts to build an even stronger corpo­ where they topped off the everting with rate practice. You have my word on that. Dye into his office. DiCarmine saw him Scotch. go in ar1d dose the door. TI1at night and the next moming, Dye But Dye's angry e-mails had already Davis handed D ye copies of the sent a series of e-mails to Schwolsky and come to light. According to an internal e- mails. "How could you say tlus?" Groll, which, even by Dye's standards, investigation, Stephen Best, in the Wash­ According to D avis, D ye seemed were intemperate. H e called Davis a "cow­ ington office, had asked Davis why Jane shaken, and replied, "I was just sort of ard," and cited another partner's comment Boisseau, a member ofth e executive and showing off to Schwolsky." that D avis had "no lawyer skills" and was compensation committees, was trying to "I have to tell you that there's a view in a "bad leader who was putting his interests cut his share of the firm's profits. (Bois­ the firm that you're homophobic, and also ahead of the firm's." seau could not be reached for comment.) misogynistic," D avis said. Dye indig­ Schwolsky responded: Compensation-committee deliberations nantly detued both allegations, pointing My only other comment is that we con­ were supposed to be confidential. Best out tl1at one ofhis brothers, to whom he trol a lot of business. I really don't think also mentioned that Dye had e-mailed was especially dose, was gay. Steve [Davis] and others have a good under­ him, saying, "So how come Boisseau has "I have to ask," Davis said. 'Were you standing how business is sourced in our department. All state, Aegon, Genworth, a hard on for you?" drinking when you wrote these?" He'd Nationwide, Liberty, MetLife, Sun Life, D avis was so disturbed by this that noticed that mar1y ofthe e-mails had been Goldman Sachs, Merrill Lynch, etc. Those he decided to haYe D iCarmine search written late in the evetung. Dye said tl1at are our relationships. Take them away and there's nothing. I think that it is really sad the firm's e- mail server for all of Dye's he was just letting off Stearn. (Dye said that we are being put in a position where we messages. much the same to me about tl1e e-mails, have to take the crown jewel of the firm and Dye seemed to be aware that DiCar­ and added, "T hey were inappropriate, put it in play. Even if we say nothing about any of this to anybody word will get out and mine might be monitoring his e-mail they were dumb, and I should never have the department will become less productive communications. At the end ofone mis­ sent them.") and unstable. sive, he wrote: Still, Dye was fi.u·ious tl1at Davis and Dye replied: DiCarmine had violated his privacy by BTW, Steve DiCarmine, if you are Davis thinks it's just you and me throwing reading this, I'll have your fucking head on reading his e-mails. The firm had a stan­ our weight around. Woods hates us because a stick. dard policy among its partners that all

THE NEW 'rOI\KEI\, OCTOBEI\ 14, 2013 85 WOI\K FOI\ HII\E LABORS BY NORMAN RUSH

urveying my motley history of perfectly encased in plastic, with what is now referred to as creative Simpromptu efforts to make the signature gone. nonfiction. money, I see something like a vast By the summer ofl955, I When my wife, Elsa, and I, mural by Hieronymus Bosch in was always on the qui vive for and our infant son, found refuge which all the victim characters employment that would allow me immediately after college in a distributed across the terrain of the time I wanted. At a marriage crumbling mansion generously Hell are me. Many of my employers party given for my new wife and given over to deserving writers and were decent people. Some were me in San Francisco by a then icon artists by a humanitarian patron demons, but mostly my discomforts of mine, the poet Keru1eth of the arts, Mrs. S. M. Ruff, of came from the nature of the work Rexroth, I got a good idea from sainted memory, my search for itself Mter college, and after I had Allen G insberg, who ''Vas then a time-sparing pickup work had to determined on being a writer, my snappily dressed, clean-shaven, and be conducted in the vastness ofthe choices of stopgap employment neatly coiffed part-time interviewer thinly populated woodland of were shaped by the need to for a market-research outfit. He Ulster Cowlty, in the Catskills. preserve free time to write. suggested I look for a similar Manual labor was what there was, It was my bad luck to learn part-time job back East. W hen, and it wasn't easy to get. I agreed to absolutely nothing from any category two years later, we moved to clear a vast, overgrown meadow ofwork. Wait, that's wrong. I did New York City, I found such work adjacent to the very fancy log cabin learn that picking cherries for a with a new company fow1ded by a of an anarchist couple living in week turns your hands almost group of social-science academics Bearsville, near W oodstock. We indelibly black, and that my wife who had earlier lost their jobs were situated about seven miles could pick cherries as fast as my as a result ofthe McCarthyite from their place. They must have brother and me combined. persecution. For some reason, we been Luddites, because they had To be accurate, I learned that were attempting to divine attitudes no mowing equipment and no car there's pathos almost everywhere in toward different, futuristic, as with which they might have come the world ofwork. Before leaving yet uninvented electrical devices. to pick me up for my task- me and for college, I spent a period assisting Each respondent received a my giant, vintage scytlle, which my father in his endeavors as a five-dollar bill. My first interviewee Elsa had found under the porch salesman ofprimitive photocopying was under the impression that and sharpened on an ancient and laminating equipment to small the light bulb had been invented whetstone that happened to be offices. In demonstrating the by a man named Con Edison. lying around. In any case, the job laminator to a business in I had a feeling ofhilarity about completed, I accepted fifteen Modesto, California, he was this job, because the assignment dollars from the anarchists. It proudly handed a letter to the was to conduct interviews in the had taken all day, and involved owner of the firm, praising P olish-Ukrainian neighborhood fourteen miles of hiking in August the owner for some service or around St. Mark's Place, and and the discovery that there is other, and signed by President communication was so difficult something so frightening about Dwight D . Eisenhower. The that on the report forms at times I a man carrying a large scythe letter emerged from the laminator resorted to sheer guesswork and to that not one of the usually

86 THE NEW YOI\KEI\. OCTOBEI\ 14. 2013 e- mails were the property ofthe firm. But and the insurance practice; it was just the Dye had never signed an agreement to kind of personnel imbroglio that Pierce that effect, and claimed never to have didn't want to deal with. He agreed that seen the policy. What was doubly galling Davis should run the combined firm, was that he was asked to sign only after freeing him to practice law full time. the e-mails came to light. But what choice The two men decided to go forward did he have? The damage was done. Dye with the merger negotiations, and Pierce and Schwolsky called a meeting of the urged Davis to "do it quickly, do it qui­ corporate department and announced etly." He wanted the deal wrapped up in that they were resigning from their exec­ six weeks. utive positions. It was an emotional mo­ Not long into their discussions, the ment, and many in the department re­ subject of Pierce's compensation came acted with disbelief up. Pierce had heard about tl1e Ferrara deal, and he wanted a contract and a THE DOWRY guarantee-of six million a year. In his view, iliat would lend credibility and sta­ espite the tmeasy truce, Davis feared bility to ilie new firm, assuring ilie law­ Dthat Dye and his allies would leave, yers at Dewey and in ilie outside world very friendly motorists on the creating a gaping hole that might be im­ that he intended to stay. Wittenberg Road would give possible to fill. Insurance work was still Davis was startled. He didn't have a me a lift. Our time in Mrs. Ruff's the mainstay of the firm's practice. Davis contract. (Pierce maintains that it was art commune came to an end felt that his only move was to quickly pur­ Davis who insisted on ilie contract.) In when animosity between an sue a merger with a firm that had a large any event, without Pierce ilie merger avant-garde writer and a genre corporate practice. DiCarmine arranged was pointless. Davis agreed to a five­ writer turned alarming. a meeting with Morton Pierce, the co­ year contract at an annual salary of five Exploitation by employers chairman of Dewey Ballantine. In addi­ million dollars with a million-dollar from whom you least expect it tion to managing the firm, Pierce was profit payout, plus a five-million-dollar (I considered myself in those its most prodigious partner, accounting signing bonus, for a total of ilii.rty-five days a comrade of the log-cabin for more than ten per cent of the firm's million. If Pierce left before the end of people, after all) is not exactly a revenues. (Most years, as a sought-after the contract, he'd pay back a million for red thread running through my mergers-and-acquisitions specialist, he each remaining year. memory, but it's something billed in excess ofthree thousand hours­ Negotiations moved forward quickly. like it. When I worked for an average of nearly sixty hours a week.) Davis hired McKinsey, the management Frances Steloff, the mistress His best- known client was Disney. He consulting firm, to do due diligence. of the world-famous Gotham Book was very slender, with dark curly hair and Dewey's financial situation was dire: ac­ Mart, in Manhattan, a basilica for a calm, patrician manner that fit D ewey's cording to financial statements submitted worshippers of modern literature image as a venerable corporate firm. as part ofa bond offering, net income had (she had an awful painting by But, after the death ofThomas Dewey, dropped from a hundred and thirty-four D. H. Lawrence hanging on the in 1971, the firm had slipped from its million, in ilie twelve months ending in wall ofher office), I observed that perch. Some ofits longtime clients under­ September, 2006, to fifty-four million, in the way she kept workers toiling went mergers and spinoffs, and sent busi­ the twelve months that followed-a sixty­ for her, for years, despite the mean ness to other firms, in search of lower per-cent decline-owing largely to part­ wages they were paid, was with the costs and greater expertise in specialized ner losses and defections. But, McKinsey oft-repeated promise that she was areas ofpractice. reported, Dewey and LeBoeufha d simi­ going to die soon, and that the Davis met Pierce for the first time in lar billing rates, a similar compensation workers would inherit the Gotham April, at breakfast at Michael's restaurant, range, and no obvious conflicts ofinterest as a co-op. Twice, I saw Steloffhit a few blocks from the offices of both among their top fifty clients. A month an aspiring poet, Bob, with her firms. He found him charming, surpris­ after ilie breakfast wiili Pierce, Davis un­ cane when he took longer than ingly self-effacing, even somewhat shy. veiled the proposed merger to his execu­ she felt he should to cart Pierce was impressed with Davis as well. tive committee, with orders not to discuss donkeyloads ofbooks to the post H e could see that Davis's low- key de­ it with anyone outside the group. office. He was still on the job meanor would be effective at building ThatJune, as details were being ham­ when I left, after a disagreeable six consensus, and he respected the fact that mered out, Davis remained concerned weeks. In her defense, it must be D avis was successfully 11Ultling a profitable iliat Dye and his group were still actively noted that she did from time to firm. Pierce didn't offer to pick up the exploring the idea of leaving. If they left time give Bob a glass offreshly check, and Davis paid-as he did on every just then, taking a good part ofLeBoeuf's squeezed orange juice. • subsequent occasion they ate together. corporate practice with them, Dewey In a later meeting, Davis told Pierce might back out ofilie merger. McKinsey about the conflict 'Mth Dye, Schwolsky, reported that "LeBoeuf is currently

Tl1E NEW YOI\KEI\, OCTOBEI\ 14, 2013 87 vulnerable to the financial risk posed by ior and his intemperate e-mails, he had stilted and awkward. But spirits were high individual 'rainmakers' leaving the firm," now been rewarded, at least monetarily. when, that spring, Davis announced because the top five per cent ofpartners T he precedent set by the Ferrara guar­ confidently that partners' profit payout generated forty-two per cent ofthe year's antee, which seemed to have paid off so targets would be increased by a cumu­ billings. McKinsey advised, "Create well, had spread not just to other lateral lative twenty-five per cent, based on a financial incentives for partners to re­ hires but to Pierce and now to disgruntled projected ten- per-cent increase in reve­ main at the Firm." LeBoeuf partners. nues. Davis and tl1e executive committee After speaking in confidence to a few thought tl1at it was ambitious but not un­ trusted partners, Davis decided to offer T eBoeuf's partners gathered in the firm's reasonable. LeBoeufhad increased its rev­ Dye, Schwolsky, and Groll contracts of L cafeteria on September 26th and enues by ten per cent or more every year three million dollars a year. H e knew that took a voice vote. Perhaps out ofloyalty to for at least five years. extending a contract to someone who was Davis, no one voted against the merger, Although Pierce was the only part­ already a partner might set a dangerous even though DiCarmine says he believed ner who received a five-year guarantee, precedent, and ignite jealousies, but he that few, if any, LeBoeuf partners really about fifteen key revenue producers got thought it a relatively small price to pay wanted to go through with it. contracts for "target'' compensation that for stability at a moment when the firm Davis says he was acutely aware that vested after three years ifthey remained desperately needed it. other law-firm mergers had failed, in at the firm. "Target" meant that the Schwolsky took the offer. Dye said large part, because key partners de­ guarantees applied only if the firm met he didn't know. He had dinner with a fected, taking big, revenue-generating its projected revenue. D avis says he partner at W eil, Gotshal & Manges, clients with them. Raiding partners was thought that the contracts, even though who urged him to move his practice now so routine that, Davis knew, the they created two classes of partners, there. He said he'd think about it. I n moment the merger was announced would provide stability during the tran­ August, he retreated to Rhode Island headhunters would descend on top­ sition. After three years, he hoped, they for three weeks, playing a lot of golf, producing partners. wouldn't be necessary. (Davis didn't going to the beach, and brooding about T o say that the merged firm lacked a give himself a contract, but his target his future. When Davis called to inform cohesive culture was an understatement. compensation was fixed at five million him about the merger talks, Dye said, Not only did the la\\yers in the respective dollars.) 'That makes no sense. Everyone knows firms not know each other; there were lin­ The merger ofDewey & LeBoeuf, as that firm is in trouble." gering suspicions on the Dewey side that the new firm was called-Thomas Dew­ Yet he still felt loyalty to LeBoeufand LeBoeuf lacked prestige, and on the Le­ ey's estate insisted that his name come many of his colleagues there. Along with Boeufside that unproductive Dewey part­ first in any Dewey Ballantine configu­ Schwolsky and Groll, he accepted the ners would be siphoning off profits. A ration- took effect on October 1, 2007. three-million-dollar contract. Far from hastily organized cocktail party for the LeBoeuf moved into Dewe)ls building, being punished for his uncollegial behav- partners to get to know each other was and D avis was named the firm's sole chairman. "To put it simply, we want to be the best," Davis told the assembled partners in January, at the newly combined firm's ' first annual meeting. 'That means being at or near the top of the tables in terms ofs ize, revenue, and profitability. But it also means handling pro-bono projects that make tl1e world a better place and make headlines at the same time. It means being the firm of choice for the best law-school students. It means being a diversity champion in the legal profes­ sion. It means being a leader in every­ thing we do." And he revealed his own ambitions in undertaking the merger. "I would much rather try--and fail- to be as great as I know we can be than to sit back, take the clients and work that just happen to come our way, and settle for a comfort­ able mediocrity." - - Dye and his group of partners and as­ sociates established themselves on the 'Tm bored-let's buy a house in the country that has lots ofproblems." thirty-first floor. Pierce never came to see them there. Nor, for that matter, did any so-called service partners-the lawyers As billable hours and revenues contin­ other former Dewey partners. There who assisted the rainmakers but had no ued to drop during the summer of2010, were virtually no meetings of the newly client relationships of their own. This D avis lean1ed through a headhunter that combined corporate department. Dye group suffered the deepest cuts and had Pierce was negotiating an eight-million­ stopped attending partner meetings. He the least leverage. Despite the cuts, and dollar contract with another large firm and his allies thought of themsdves as a for all the bad feeling they engendered, with an old- line name, Cadwalader, firm-within-a-fum, isolated from man­ D ewey &LeBoeufwas still promising its Wickersham & T afr. Davis was incensed. agement, free to pursue their own prac­ partners far more than it earned in Pierce was only two years into the five­ tices. They found the arrangement sur­ profits. year contract that he'd signed, and which prisingly congenial. Davis and DiCarmine planned to cut Davis had agreed to only as a way to lock future expenses even more dramatically­ him into staying. D avis had D iCarmine R.ECE5510N by a hundred million in 2009 alone--and examine Pierce's e-mails, and learned that he was in discussions with at least two n September 14, 2008-a Sun­ other firms as well. Oday-Davis was in Los Angeles to Davis confronted Pierce, who said, meet with clients, but, as Lehman Broth­ "I'm just talking to people." Since the start ers teetered, he took the red-eye back. By of the .financial crisis, Pierce's revenues Monday, Lehman Brothers was in bank­ had fallen to about half ofwhat they had ruptcy, and A I. G., one ofDewey &Le­ been at their peak, in 2008. Boeuf's large clients, was asking for a D iCarmine advised Davis to let Pierce bailout. go, but other advisers said unanimously At major law firms, stock offerings and that the firm couldn't afford to lose Pierce mergers and acquisitions-two of the while its finances were still so fragile. most lucrative areas--collapsed. Corpo­ assumed that, as the economy recovered, Davis felt that he couldn't negotiate per­ rate clients scrutinized every cost, includ­ revenues would rebound. In essence, the sonally with Pierce, whom he no longer ing expensive outside law firms. At firm paid its 2008 compensation by bor­ trusted, so he dispatched DiCarmine to Dewey & LeBoeuf, billing for 2008 rowing against 2009 revenues. For ac­ hammer out a new agreement. stayed strong, thanks in part to work re­ counting reasons, the firm referred to de­ To keep P ierce, DiCarmine would lated to the crisis. Schwolsky managed to ferred compensation as ''bonuses." But in have to promise eight million dollars. complete a large stock offering for a life­ 2009 revenues fell by nearly a hundred Pierce also demanded that, if D avis insurance company in October. But then and fifty million, to $809 million. D iCar­ ceased to be chairman after the next elec­ nearly every corporate deal in the pipeline mine fired more than seventy partners. tion- for example, in the event ofanother froze. Lawyers are typically paid for such Davis exhorted partners to drum up more merger- full payment ofPierce's contract deals after they close. Now the deals were business and to collect on outstanding would occur immediately. Davis inter­ all in limbo. Hours billed kept piling up, bills, and was frustrated that the former preted this as evidence that Pierce feared but collections stalled. Dewey corporate practice, in particular, a new chairman might try to renegotiate Dewey &LeBoeufdidn't come close to seemed to resist. He felt that Dewey had such a generous deal. It was the one pro­ meeting the revenue target on which the been run like a country club, and that vision that D avis rejected. Davis says he twenty-five-per-cent raise in partner com­ Dewey partners considered rustling up was especially taken aback by a provision pensation was based. In 2008, D ewey & work beneath them. stipulating that Pierce would receive his LeBoeufhad revenues of$954.8 million, As D avis put it at that year's annual fiill contract payment should D avis die. more than a hundred million below its partners' meeting, 'We cannot ask those Davis had to take out a life-insurance pol­ targeted budget. It was the first time in a of you who work hard every day either icy wotth sixty- four million dollars, with generation that LeBoeufpartners had ex­ getting clients or servicing our business to the firm as the beneficiary, which cost a perienced a shortfall. continue to carry those seriously and con­ hw1dred thousand dollars in annual pre­ Davis had to make some painful tinuously underperforming partners." At miums, just to make sure that his death choices. Ordinarily, when profits decline the same time, he said, presciendy, "As far wouldn't ruin the firm. (The firm paid compensation declines, but at Dewey & as I am concerned, ifit is only money that the premiums.) LeBoeufmany of the partners with con­ holds a firm and its partners together, In the end, Pierce got almost every­ tracts had been promised their full com­ then there is really no glue at all." thing he wanted. Davis promised that he pensation. For other partners, the com­ Pierce, who, of course, had his own would bring compensation into line with pensation committee graded their compensation arrangement, shared that the firm's profits. performance for 2008. Those receiving view. He had vocally opposed paying the I nevitably, word spread among the an A were supposed to get their full tar­ target compensation when the firm fell other partners that Pierce had renegoti­ get amounts. Those with lower grades short of its revenue goals. He advised ated his guarantee on astonishingly fa­ had their expected com pensation re­ Davis, "T ell people, 'Sorry, this is what vorable terms, even as the partnership duced accordingly-some drastically, you earned. Live with it. It's a good liv­ continued to struggle. For Dye, it only as a message to leave. T here was wide­ ing.'" No firm could be run as a hostage confirmed his view ofPier ce as interested spread grumbling, especially among the to the whims of a few partners. primarily in himself Now other partners,

THE NEW '101\KEI\, OClOBEI\ 14, 2013 89 and, in some instances, entire practice groups, came to Davis with new de­ mands. In many cases, he granted them.

THE RECKONING

y the fall of 2010, revenues were Bdown an additional fifty million. That year, the compensation committee announced that there would be no de­ ferred payments for 2010, though again some exceptions were made for partners with contracts, first-year partners, and senior partners aged sixty-two and older. Outstanding 2009 "bonuses" would be paid in full Davis stressed that this would only be temporary. Still, the firm was promising to pay out far more than it earned. The firm toldAm erican Lau:ver that its 2010 revenue was $910 million, and that profits per partner were S1.77 million. But Davis and members of the executive committee knew these were not the num­ bers that the firm gave its bank lenders, or that appeared on its audited financial re­ WORK FOil. HIRE sults. The submission was justified as a marketing effort. D avis and DiCarmine PURE BLEACH had the impression that many other firms BY ED RUSCHA were doing the same thing. At one con­ ference where the American Lau:ver re­ sults were discussed, a banker estimated that more than halfo f the top fifty firms n 1951, when I was fourteen, I myself, but after looking around I similarly inflated their results. I landed a job in an Oklahoma was told that no such product In March, 2011, the economy was be­ City law1elromat. The pay was existed- at least, not in Oklahoma. ginning to recover, and D ewey & Le­ respectable-fifty cents an hour, Then it came to me: I would Boeuf's finances seemed to improve. Bill­ up from forty-five. In a swampy, make my own. I brought a pair of able hours rose fifteen per cent, and bunkerlike back room with a large bluejeans from home, doused them continued to grow during the ensuing concrete center drain, I had to mix in undiluted Clorox bleach, and months. Even though the firm was get­ bleach and water together in brown placed them in a washing machine. ting welcome new business, collecting glass bottles for the customers to I let them sit for halfa n hour, the what it was owed was a challenge. C lients use. It was sweaty and dank, but I mystery and suspense building. delayed paying their bills as long as possi­ got to listen to a faraway radio, When I finally opened the door, I ble. The cash-flow shortfall was so severe faint but distinct, playing music by found, to my astonishment, a pair that management created an "overhang" the likes ofL efty Frizzell, Hank ofpure-white, radiantly glowing committee to deal with deferred compen­ Williams, and Faron Young. Levi's. A triumph. sation from previous years. By the end of One day, I saw a news item Or so I thought. Reaching in to the year, the firm was able to pay only about the murder of a nurse grab them, I felt my hand sweep twenty per cent of the target compensa­ in Ann Arbor, Michigan. A through a puffy lump ofdead white tion for partners without contracts. Many photograph ofone of the teen-age fibres, softer than cotton candy. partners with contracts got fifty per cent killers showed him in handcuffs, The rivets and the buttons were the oftheir target compensation in 2011, with being escorted by police. H e was only parts that had survived. the balance to be paid in 2012. Pierce got wearing what looked to me At the time, I was banking on even less than that, but his agreement like white Levi's. White Levi's! white Levi's coming into fashion. I stipulated that his full payment would be What style! I was overcome by an had to wait twenty years to buy a due by the end of]anuary, 2012. immediate urge to get a pair for pair offthe rack. + Dye, Schwolsky, Groll, and their en­ tourage of insurance lawyers were largely oblivious of these disturbing develop-

90 THE NEW YOI\KEI\. OCTOBEI\ 14. 2013 ments. Thanks to the financial crisis and junior partners waiting for profit pay­ today. We're looking at the situation on a the work it generated for insurance law­ outs. Schwolsky demanded an explana­ daily basis and will keep you updated. yers, they had thrived during the reces­ tion; Davis assured him that the pay­ Pierce went to Davis's office, where sion. They were on pace to bill sixty mil­ ments would be made by January 15th. D iCarmine joined them. 'We're thinking lion dollars in 2011. Their leverage had That date came and went, too. ofways to work this out," Davis told him. never been better, and, for the most part, OnJanuary 25th, Davis met with Dye "What ways?" Pierce asked. they'd been able to spare their group the and his allies, and outlined the severity of 'We haven't come up with anything," cuts in pay and the layoffs that had the firm's cash crisis. 'We'd like each of Davis said. afflicted much of the rest of the firm. you to give up four hundred thousand Pierce went back to his office and They called their offices on the thirty-first dollars a year," he said. The Dye people wrote, "This e-mail constitutes notice of floor "the fortress." weren't necessarily against the idea, but failure to pay base compensation," pursu­ In October, Dye heard about a saving a little over a million dollars from ant to his agreement. "I hereby also resign standoff between Davis and junior part­ them wouldn't make much difference. as vice chairman of the firm." The next ners who were demanding to know when \Vhat long- term plan had D avis, D iCar­ day, he sent another e- mail: they'd be paid their profit payouts. Some mine, and the executive committee In July 2010 you expressed to me your had taken out loans to pay tuitions and worked out to restore the firm to sol­ great disappointment at discovering that I mortgages. At the meeting, Davis dis­ vency? There didn't seem to be one. was talking to other firms, specifically, as I closed that there were about a hundred Other partners rejected any cuts. recall, you told me that I was the person you thought least likely to think about leaving partners with some kind ofspecial agree­ Pierce, however, said that the failure to the firm. If you think about your feelings at ment. When D ye and his colleagues make more cuts would violate his con­ that time, maybe you can begin to under­ heard about it, they were shocked at the tract. At a meeting with D iCarmine, he stand how disappointed and angry I am right now. I recommitted to the firm back then and large number. Among other concerns, threatened to declare the firm in default turned down significant offers based upon they no longer felt that their own guar­ and demand the sixty million dollars due my trust in you. You knew today was coming antees were so special. him under the life ofhis contract. since we signed the agreement in October 2010. It is virtually beyond comprehension Weighing on Davis that fall was a This was especially galling to D iCar­ to me that without discussion you can today hundred-million-dollar line ofcredit that tnine, because of the firm's frustrations inform me in an e-mail that the firm cannot was due to expire in April, 2012. In No­ with Pierce's brother, Robert Pinkas pay me when it bas paid more to others dur­ ing the last year. vember, Citigroup, the firm's primary (Pierce had changed his name), an invest­ lender, said that it would not renew the ment adviser in Shaker Heights, Ohio, Pierce hired outside counsel, and credit line- a decision probably influ­ whom Ferrara represented in a Securities Davis got a letter from them formally enced by Dewey & LeBoeuf's many and Exchange Commission action. Pierce declaring the firm in default and de­ layoffs and by the plight oflaw firms gen­ had asked Ferrara to take on the case. manding payment of the full an1ount erally. Since revenues tend to come in Pinkas amassed significant legal bills, due over the term ofthe contract. Under waves, often at the end of the year, no more than nine million dollars of which Pierce's agreement, the firm had thirty large firm can continue without a line of he failed to pay. Pierce declined to step in, days to hand over the sixty-million-dol­ credit to smooth out payments to partners which infuriated just about everyone at lar check. and employees. Still, D avis figured that he the firm who knew the circumstances. could find other lenders. (The case was settled in 2010, on what umors were swirling that Pierce and On December 1st, Dye, Schwolsky, were deemed relatively favorable terms for Rhis allies were orchestrating a coup and Groll got an e-mail from Sanders, the Pinkas: a fine of nearly a million dollars. to replace D avis as the firm's chairman. chieffinancial officer, asking ifthey would He was sued again, in 2012, for misap­ The leading candidate to replace him was agree to defer the payments due them that propriating client funds- to pay the Jeffrey Kessler, a former Dewey Ballan­ month to the first businessdayinJanuary, fine-and died soon afterward, before the tine partner who was the head oft he liti­ 2012. "I'm in the process ofnegotiating a case was resolved.) gation department ofthe combined firm, very favorable financing package for the At the same time, Pierce's large J anu­ a member of the compensation commit­ firm and it would be a huge plus to end ary payment was due, and the firm tee, and co-chair of the firm's spOtts-liti­ the year with as large a cash balance as couldn't afford to pay it. To draw further gation practice. Kessler was frequendy in possible," he wrote. "It will improve the on its already depleted line ofcredit would the news, as he represented d1e National terms of the financing." They agreed to likely doom the ongoing negotiations Football League Players Association and the postponement, but renewed a request with the banks. the National Basketball Players Associa­ to have their contracts extended. Davis re­ On January 31st, Davis sent Pierce an tion, and had handled the landmark anti­ sisted. "Let's put this off into the new e-mail suggesting that they and D iCar­ trust case that established free agency in year," he said. mine meet that Friday. Pierce responded: the N.F.L., but his most lucrative work Dewey & LeBoeuf was clearly run­ was complex antitrust matters for clients Fine. I'm due $5.5 million. Will I be get­ ning out of cash. Dye, Schwolsky, and ting that amount today? like Panasonic. Groll got their deferred payments (of Dewey &LeBoeuf's partners' meeting $1.4 million each) as scheduled, in the Davis wrote back: was scheduled for the end ofJanuary. On first week ofJa nuary, but a fourth part­ We're being very conservative on manag­ the day of the meeting, Davis was still ner in their group got nothing, as did ing our cash and probably can't get it out nominally in charge, but Kessler took a

THE NEW 'rOI\KEI\, OCTOBEI\ 14, 2013 91 seat at a table facing the other partners. two million dollars for the next several that the firm needed new management. D avis used a pie chart to show the extent years as the firm moved toward a lockstep That night, D ewey &LeBoeufiss ued of the firm's precarious finances, which compensation plan. D avis, D iCarmine, a press release announcing a new "office of came as a shock to the lavvyers. "Many of and Sanders would have to be fired. Later, the chairman" arrangement, consisting of you have expressed concern about the when D avis asked Dye ifhe wanted to be Davis, Kessler, and wee other partners. number ofpartners who have the benefit chairman, Dye replied, "Absolutely not." Davis would be relocating to London, far ofspec ific compensation arrangements­ A few weeks later, DiCarmine saw from headquarters in New York, and you may hear them called 'deal partners,'" Kessler and Schwolsky come out of a would likely have been ousted altogether D avis said. 'The executive committee has meeting at which management changes had he not been leading the negotiations decided that, going forward, we will were discussed. T hey hugged, which with the banks for a new credit line. The significantly reduce the number of part­ seemed to suggest that the Dye group release also said that DiCarmine's respon­ ners with expectations of these arrange­ would remain loyal to the firm. sibilities were being transferred to another ments"-to no more than ten per cent by 'T hey'll leave by Friday," DiCarmine lawyer. He was fired about a month later. 2014. It was clear that even lawyers with predicted to Davis. 'T hat was a knife in contracts would have to accept cuts and the back." H e'd seen similar scenes in his t took j ust six weeks for Dewey & delayed payments. cousin's family. I LeBoeuft o disintegrate. W ith the loss "I have the sense that we have lost O n Friday, March 16th, at 4 P.M., ofthe core insurance practice, headhwlt­ focus on our culture and what it means to D ye, Schwolsky, Groll, and one other ers descended on the firm, seeking to hire be a Dewey & LeBoeuf partner," D avis partner met with Davis and resigned. its most productive partners. Every week concluded. 'We all now need to reconnect D avis looked haggard. He said nothing. brought new defections, accompanied by with what is best about D ewey & Le­ "This isn't personal," Schwolsky said. increasingly unconvincing claims from Boeuf and our culture-collegiality, col­ "You're not the only person to blame. A the firm's new leaders that they wouldn't laboration, and commitment." lot ofpeople should have known better." file for bankruptcy. As Davis was sitting down, Kessler "You're a good man, but you sur­ The only option seemed yet another grabbed the microphone. "I want to add a rounded yourself with bad people," Dye merger, though this time Dewey & Le­ few words," he said, and law1ehed into an added. He meant DiCarmine and San­ Boeuf was negotiating from weakness. impassioned speech about the future of ders. D ye walked over to the offices of Davis, still a member of the office of the the firm- a future in which guarantees Willkie Farr & Gallagher, a firm that chairman, participated in talks with the were unnecessary, partners cooperated, had been courting him, and into a cock­ fast-growing Greenberg Traurig, but his and profits rebounded. According to tail party to welcome new partners. heart wasn't in it, especially since Green­ some partners, he proclaimed, his voice Twelve partners eventually joined him, berg was interested in only about half the rising, 'W e'll tear up the contracts!" representing the core oft he firm's insur­ firm's lawyers, and he wasn't among them. H owever w1realistic the notion ofsud ­ ance practice. T he next morning, Dye In any event, once news of the district at­ denly abrogating the contracts, the mono­ left for the British Virgin Islands and a torney's investigation broke, the talks logue left the impression that Kessler, and week of sailing. Nearly all his existing collapsed, and D avis got an e- mail that not D avis, was leading the firm. After­ clients followed him to his new firm. the office ofthe chairman had voted to re­ ward, Pierce began negotiating his con­ move him. tract and payments with Kessler and other O n May 3rd, Pierce announced that partners. D avis recalls Kessler telling him he was going to White &Case. In his res­ that the only thing that would satisfY ignation letter, according to the Times, he Pierce was his ouster as chainnan. again told the firm that it owed him some On February 9th, Davis met with Dye sixty million dollars. and his allies and told them that he was Kessler left a week later, taking nearly convening a meeting of"senior leaders" to seventy lawyers with him, for W inston & address the compensation issues. Strawn. Ralph Ferrara, whose lavish guar­ "Steve, I'm not a senior leader," Dye antee had arguably set the precedent for said. "I was kicked out, in case you don't the contracts that led to the firm's demise, remember. So don't tar me with your On March 22nd, Kessler came to see joined Proskauer Rose on May 17th. brush." D avis. "People feel we need a change in D ewey & LeBoeuf filed for bank­ Nonetheless, a group ofe ighteen or so leadership," Kessler told him. Davis ar­ ruptcy protection on May 28th, saying highly compensated partners, including gued that the timing was bad. "Let's close that it planned to liquidate. The bank­ Pierce, D ye, and Ferrara, gathered on the line ofcredit," he said. Then the exec­ ruptcy judge rejected arguments that part­ February 13th to work out a way to save utive committee could look at the issue of ners who, like Pierce, had contract guar­ the firm. The meeting wasn't fruitful. firm governance. "All options will be antees had enforceable claims against the Pierce and D avis got into a heated argu­ considered," he pledged, including his firm. On the contrary, the judge ruled, ment. Ferrara asked Dye to join a small replacement. they, too, would be at risk for the firm's group that would devise a plan. Dye de­ Four days later, Kessler, Pierce, and debts. A total of$71.5 million was pledged clined. He and Schwolsky held the view about forty other partners met to decide to the firm's creditors by the former part­ that partners' income should be capped at D avis's fate. All but one partner voted ners, including Pierce ( $1 million), Dye

92 THE NEW YOI\KEI\. OCTOBER 14. 2013 ($1.7 million), Schwolsky ($1.7 million), Groll ($1.7 million), Kessler ($1.8 mil­ lion), and Ferrara ($3.4 million). Davis and DiCarmine weren't allowed to partic­ ipate in the settlement, but the judge later settled the firm's remaining claims against them, with Davis owing just over five hundred thousand dollars out ofhis future earnings, ifhe sees them.

n the legal profession generally, as I Davis predicted, small and midsized firms have been squeezed, and large fums have had to grow, through mergers and by / _...- poaching partners. Some of these mega firms are no longer partnerships at all, in the strict sense, or even law firms, but are what are known as "vereins," a constella­ tion of separate legal entities doing busi­ ness under a single brand name. OfAmer ­ ican Lawyer's top ten global firms by revenue last year, the top two were vereins. The durability ofthe verein model re­ mains to be seen. None of the top ten firms based on profits per partner are "Must I sacrificefamily for career?" vereins, and none have grown through a merger. More than halfof them, includ­ • • ing Cravath, are lockstep or near-lockstep compensation firms, and they continue to attract the top law graduates once coveted spokeswoman for the D.A. declined to rather than any deep- seated interest in by Davis and D iCarmine, to groom most comment on the investigation.) law or administration, that led him to oftheir partners from within, and to focus Late last year, Davis had surgery for Dewey &LeBoeuf Now he was possibly on demanding, high-margin assignments prostate cancer. He is living under what the subject ofa criminal investigation. Di­ from wealthy corporate clients. D espite he describes as severe financial stress, since Carmine didn't want his life to be defined the upheavals of the financial crisis and he is personally liable for $1.8 million that by his legal career. H e didn't think it was changes in the profession, their rankings he borrowed to make his capital contribu­ too late to try something new. At Parsons have remained remarkably stable for de­ tion to the firm, and which was wiped one day, he noticed a flared skirt in a dis­ cades. What these firms seem to have­ out by the firm's bankruptcy. He made play case. It was beautifully made. The and what Dewey & LeBoeuf so mani­ comparatively little during Dewey & Le­ idea ofw orking with his hands appealed festly lacked- is a culture that fosters Boeuf's last years, and hasn't worked since to him, and he enrolled in a night fashion cooperation and mutual respect. its collapse. 'The firm failed," he told me. course, Construction I. Last fall, he en­ "But it didn't fail tor want of me trying. I rolled at Parsons full time. EPILOGUE worked like a dog. I did the best I could Even more than D avis, DiCarmine under the circumstances." has been excoriated in the legal press. '1t ince leaving the office, more than a Stephen DiCarmine took the stand looks like Steve DiCarmine is being Syear ago, Davis has spent much ofhis at his cousin's death-penalty hearing in forced to take a break from his rigorous time with lawyers, both on the bank­ May, 2011, the only family member to class schedule at Parsons to testify at a ruptcy settlement and on the criminal in­ testify. "My cousin Vinny is loved by his D ewey bankruptcy hearing next week," vestigation, which was brought before family," he said. DiCarmine shared fam­ the American Lawyer Daily Web site a grand jury that convened on Septem­ ily photographs with the jury, including wrote in February. "He'll be happy to hear ber 17th for a six-month term. Prosecu­ several of him and Basciano as young orange is in this spring." tors told prospective jurors that they would boys. "I don't want to imagine a world DiCarmine told me this summer be hearing evidence and testimony about where he doesn't exist," he said. T he jury that he feels a new sense of freedom to whether partners and managers in the firm sentenced Basciano to life in prison. "get rid of the uniform and let the hair falsified audits and records in order to be While DiCarmine was still at Dewey & down." At the end of the semester, he able to pay millions of dollars in bonuses LeBoeuf, he enrolled in a continuing­ showed m e a portfolio of his fashion and income. No names were mentioned. education course in architecture at Par­ drawings, along with his report card. He (Davis and DiCarmine have heard noth­ sons. It may have been a longing for re­ had received nine A's and one B, and ing from the district attorney's office; a spectability, given his family backgrow1d, had made the D ean's List.+

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