Analysis

When Cadwalader Wickersham &Taft lost Paul Griffin to Herbert Smith, it not only put a question mark over the future of the firm's projects group but also the direction of the London operation. Catrin Griffiths asks where the firm goes from here

Remember Chadbourne & Parke? It offered lots of money, hired some people, they left. The London office has now sunk from view. Remember Sonnenschein? It offered lots of money, hired some people, then closed.

And CadwaladerWickersham &Taft? Stop right there. Despite the inevitable City rumour-mongering, Cadwalader is no basket case. But the departure of partner-in-charge Paul Griffin for Herbert Smith, following hard on the heels of John Walker for Milbank Tweed Hadley &McCloy, has prompted much serious thinking internally - and much anxiety that the market will perceive it as the next Chadbourne &Parke.

According to various insiders, discontent has been rife at Cadwalader. The New York management is perceived to be controlling and heavy-handed, and as part of this, the issue of perks and benefits - a crucial part of any firm's weaponry in retaining assistants - is fraught.

"There were always arguments about corporate membership to gyms and arguments over subsidies, issues about travel, taking taxis, authorisations for meals," claims a former lawyer. "We had to sweat to take people out to lunch."

Pay levels were not considered generous either. "We were on really crap salaries and then the Clifford Chance pay hikes happened," says an assistant bitterly.

Bonuses were badly handled too. "When it announced the bonuses, you had to work 2,000 hours to get on the first rung," says a lawyer. "It was only [a few] thousand, and you just think - what's the point?"

However, Cadwalader partner Andrew Wilkinson dismisses these claims as "historical bleating. It's not a fair reflection of Cadwalader - we're not a cheap firm". Certainly, the firm has suddenly responded on salaries. It is now paying some 35% above Clifford Chance rates across all associate levels and has boosted the bonus structure. Associates are now eligible for a 15% bonus on 1,900 billable hours, 25% bonus for 2,100 hours, and are put on New York salary levels if they work 2,400 hours.

Yet, in common with other US firms in London, the issue of New York management bedevils Cadwalader. "New York hasn't invested long-term and it wanted results too quickly," says one insider. "The perception here in London is that it is a critical time - they have got to stop imposing on us. Griffin got fed up with being bullied from New York, as [we all] are."

Responds Wilkinson: "Is the firm excessively short-term? That is not the view we have. We feel the firm is building for the long-term."

Yet three years ago when Cadwalader opened for business, it seemed to have got it right. It seems to have made great hires from day one - Andrew Wilkinson from Clifford Chance, James Starky from Freshfields and Russell Jacobs and John Walker from Wilde Sapte. With the later arrival of Paul Griffin from Ashurst Morris Crisp, Cadwalader proved that it had the knack of hiring quality partners from snob-value firms.

But were their practices portable? It would appear not - with the exception of Wilkinson. Starky has now moved in-house, and Walker has moved to Milbank Tweed.

Cadwalader should have expected some hiccups. The truth is that structured finance and capital markets have proved notoriously tricky for US firms to build up. Sidley & Austin has succeeded to a minor degree with Graham Penn. And Jacky Kelly at Weil Gotshal &Manges has managed to leverage her old Clifford Chance contacts at what was Greenwich NatWest, building a credible practice servicing the likes of Chase Manhattan, JP Morgan and Barclays Capital. But both Sidley &Austin and Weil Gotshal have been going for nearly six years in London.

The same is true for project finance, which is another long-term game. Ken MacRitchie and Nick Buckworth took a while to make any money at Shearman & Sterling. But the firm was happy to sit it out, with the result that its projects practice, if not booming, is certainly busy.

Griffin's early departure has been a blow to the firm's project finance profile. Perhaps mindful of Paul Biggs' arrival from CMS Cameron McKenna later this summer, Cadwalader is now publicly backing its project finance ambitions. Much of the future of the group rests not only on Biggs, but on whether senior assistant Vinay Ganga - formerly of Jones Day Reavis & Pogue, and with a very tidy India practice - decides to leave.

In fact, there are questions about whether projects fitted in the first place. One insider says ruefully that there must have been "selective listening on both sides" before Griffin joined. After all, Griffin is an exceptionally strong energy lawyer, but not a conventional projects specialist. What's more, Griffin's constituency was essentially corporate, rather than lender-based (hence the nice fit with Herbert Smith). And while Cadwalader can point to Bob Vitale in the US, the firm is hardly famed for its projects expertise.

Yet Griffin - who appears to have been widely liked in the firm - must have been pretty confident. One insider claims that he was the only London Cadwalader partner who joined on a no-guarantee basis, "because he said he'd live or die on his practice. He was a great guy."

It's as well for Cadwalader that Andrew Wilkinson is currently loyal. The financial restructuring group, the practice led by Wilkinson, is by far the London office's strongest card. It has performed creditably in financial terms, and at the same time managed to put the office on the map in the first place - most notably through prominent roles on the Ionica insolvency, the Sphere Drake restructuring and the Barings bondholder wrangle. In this context, the recruitment of finance litigator Michelle Duncan from Weil Gotshal looks rather astute.

Cadwalader had just better pray that it can hang on to Wilkinson, who was a rare bird in being able to make revenue from early on, and unlike others, had a portable practice. And as for the reaction of the City firms - well, Schadenfreude doesn't come near it.