Dewey asks ex-management to top up settlement contributions
27 July 2012 | By Joshua Freedman
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Dewey & LeBoeuf’s wind-down chiefs have asked former senior management figures to top up their contributions to the estate as part of the defunct US firm’s bankruptcy settlement.
Members of the firm’s executive committee will now be required to pay an extra amount of up to 20 per cent of their original contributions to the deal, with the figure calculated on a pro rata basis according to how long they served on the oversight board between 2007 and 2012.
A Dewey ex-partner who dialled into yesterday’s (26 July) conference-call announcement by the firm’s US bankruptcy counsel Albert Togut of Togut Segal & Segal and chief restructuring officer Joff Mitchell of Zolfo Cooper said the arrangement would mean many executive committee members would end up paying roughly 10 per cent more than under the proposal originally put to partners.
The settlement deal has also been amended so that partners at the top of the income scale will have to pay more as the cap has been increased to $3.5m (£2.2m), up on the previous maximum amount of $3m (£1.9m). However, this only affects one partner, understood to be corporate star Mort Pierce.
The amendments follow opposition from many partners who felt the deal favoured Dewey’s top earners, with the deadline for opting in also extended (20 July 2012).
The deal, details of which were first revealed earlier this month by The Lawyer, gives partners the option of paying a proportion of their 2011 and 2012 income from the firm to the estate in order to absolve them of future liability (11 July 2012).
Partners wishing to participate are required to give back between 10 per cent and 30 per cent of their total drawings, distributions, debt repayments to them and other income for the two years, with the percentage depending on how high up the income scale they were. Those who took home more cash have been asked to give a larger proportion, with a minimum payback amount originally set at $25,000 (£16,000) and a maximum at $3m (£1.9m).
The percentages remain unchanged following yesterday’s call, but as well as the upper cap increasing, the minimum amount has been cut to $5,000 (£3,190), affecting a large number of partners who now get a more favourable deal.
The total amount the firm is asking for as part of the deal has also been cut from $103.6m (£66.1m) to $90.4m (£57.6m), although the threshold for avoiding a conversion to a Chapter 7 case remains at $50m (£31.9m).
Unsecured creditors are set to file a motion to convert the case into a Chapter 7 case imminently, with one partner saying the bankruptcy team was “desperate” to seal the settlement deal fast. Partners have until 7 August to opt in, but the wind-down team currently needs to get approval from secured creditors to extend the Chapter 11 beyond the original 31 July deadline.
The motion means the wind-down will have to fight to keep the Chapter 11 going, even if the settlement cash is in by 7 August.
Partners on the call expressed a large degree of anger towards the remuneration given to former executive partner Steve Horvath for his role in the wind-down - $50,000 (£31,880) per week - and at the fact that both Horvath and Dewey general counsel Janis Meyer are absolved from liability without having to contribute. At least one partner on the call expressed the view that he or she would happily carry out Horvath’s job for half the pay. Togut responded that the compensation rate was required.