Dewey management accused of 'running Ponzi scheme' in lawsuit brought by ex-partner
Dewey & LeBoeuf’s senior management ran a Ponzi scheme for the purpose of self-enrichment and maliciously misrepresented the firm’s finances, according to a lawsuit brought by a former partner.
Henry Bunsow
The defunct US firm faces a lawsuit from former IP partner Henry Bunsow, who claims over 200 Dewey partners including ex-chairman Steve Davis committed fraud and “acted with an improper and evil motive amounting to malice”.
The suit, brought in the Superior Court of the State of California in San Francisco, alleges the defendants engaged in “grand theft, grand larceny, false pretences and embezzlement”.
The defendants are Davis, litigation head Jeffrey Kessler, chief financial officer Joel Sanders, executive director Stephen DiCarmine and partner James Woods, as well as 200 unnamed individuals.
Bunsow, who now runs a San Francisco IP boutique, claims the defendants misrepresented the firm’s financial situation and insecure future when persuading him to join the firm on a $5m (£3.2m) guaranteed annual profit share from Howrey, another extinct US firm, in 2010.
He claims the defendants breached fiduciary duty owed to him by “misrepresenting and concealing material facts”, according to the filing. Bunsow also claims the firm’s demise damaged his client relationships.
He alleges the defendants “concocted and participated in a scheme and conspiracy intended to misrepresent the financial performance of Dewey” and claims that Davis and the other defendants “were running a Ponzi scheme in order to enrich themselves and select partners of the firm”.
The lawsuit also alleges that the defendants conspired to deprive Dewey partners of their capital investment in the business by requiring them to deposit 36 per cent of their estimated annual income in the firm’s capital account by the end of each year with no intention of returning the amounts to them. Rather, Bunsow alleges that the defendants “intended to selectively distribute said capital investments to themselves and others” and deny return of capital to most partners.
Bunsow also alleges that Davis withdrew his capital funds from the firm when he was ousted as chairman “to the disadvantage of the firm and his fellow partners”.
He is claiming damages for debts, guaranteed partnership draw and distributions and other amounts, instructing Lynch Gilardi & Grummer to represent him.
Kessler told The Lawyer: “The allegations against me are outrageous, baseless and without any merit.”
Woods and Davis declined to comment. Bunsow, DiCarmine and Sanders could not be reached for comment.
Readers' comments (13)
Gobbsmacked | 14-Jun-2012 1:19 pm
When I heard the phrase 'Ponzi scheme' used to describe the fiasco a Dewey some weeks ago, I first took it with a pinch of salt.
After reading the evidence contained in the complaint from Henry Bunsow it is hard not to see the Dewey partnership system, at least in its dying days, really as a true Ponzi scheme.
Quite incredible that such a prestigious firm could fall so low.
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Anonymous | 14-Jun-2012 2:45 pm
Where can we get a copy of said complaint? Link please (assuming it is online)?
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Anonymous | 14-Jun-2012 2:50 pm
It's like no ponzi scheme I've ever heard of - each 'victim' gets a guaranteed £3.2m dolla a year. Oh to be a victim.
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Anonymous | 14-Jun-2012 3:00 pm
Oh dear... an interesting perspective...
http://www.scribd.com/doc/96985827/Bunsow-Complaint
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Anonymous | 14-Jun-2012 3:07 pm
For those who want the essentials, skip to para 24.
Un-be-lievable.....
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Anonymous | 14-Jun-2012 4:02 pm
WOW
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The Lawyer | 14-Jun-2012 4:06 pm
A copy of the complaint is now embedded in the article but for ease, see here: http://www.thelawyer.com/pdfs/TheLawyer_Bunsow_Complaint.pdf
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Anonymous | 14-Jun-2012 4:30 pm
The identified defendants may not be the only ones dragged into this law suit.
Does anyone know how to spell RICO?
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Anonymous | 14-Jun-2012 4:50 pm
If it is the case, as this alleges, that Davis withdrew his capital when ousted as chairman: what a scumbag. If he managed to get his capital out, did any of the other ringleaders manage to do the same?
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Anonymous | 14-Jun-2012 5:10 pm
I hope Anon @ 2.50pm is being facetious. If not I have a great investment opportunity for them with huge guaranteed returns for a small (large) unsecured downpayment...
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Anonymous | 14-Jun-2012 7:26 pm
Ponzie scheme it is! Even partners who left Dewey in 2006-2008 never got their capital repaid, although it should have been repaid within 3 years. It is now clear that the capital was used to pay Dewey's management their guarantees and there was no intention on the part of the likes of Davis, DiCarmine, Kessler & Co to ever pay the capital back. RICO is the word.
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Anonymous | 15-Jun-2012 2:26 pm
Wouldn't you be put on notice that something was wrong if reported PEP was $2m (even if inflated) and they were offering you a guaranteed $5m. How many others are taking home more than the average? You don't need a lot more information before it doesn't add up.
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Anonymous | 15-Jun-2012 3:17 pm
Sorry, but OMG! This is a must read complaint. And how is it credible that he was guaranteed $5 million a year? The question that jumps out for me is, if Dewey was run like this, could it really be the only firm which made "aggressive" promises to attract laterals? In the uncoming downturn, as the tide recedes, we may see others who have also been swimming sans bathers.
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