Dewey paid top duo $1.1m bonuses on eve of collapse, filings show
2 August 2012 | By Joshua Freedman
Dewey & LeBoeuf paid special bonuses totalling $1.1m each to CFO Joel Sanders and executive director Steve DiCarmine in the months running up to the firm’s collapse, bankruptcy filings reveal.
The duo were each paid sums of $500,000 in January and $600,000 in February, according to the defunct firm’s financial statement, which was filed last Thursday (26 July), with the figures coming on top of their twice-monthly bonuses of $25,000.
The first bonus payment, dated 13 January, came two weeks before the firm’s climax conference call for global partners on 27 January, during which chairman Steve Davis told partners they needed to “own” the firm’s financial crisis (28 March 2012).
The second and larger bonus, meanwhile, is dated 29 February and occurred less than a week before the firm announced it would cut 5 per cent of lawyers globally (5 March 2012).
The filings, which show partners’ and senior staff’s earnings from May 2011 onwards, confirm DiCarmine’s basic salary of $79,166.66 per month, or $950,000 a year, with the executive director also receiving regular bonus payments of $66,666.66 per month. This amount was higher in August 2011, when he took home $99,999.99 in bonuses, although he only received one £33,333.33 bonus in September of that year.
His total bonuses for the period from 31 May 2011 to 15 May this year came to $1.77m on top of $910,417 in basic pay, giving him a total pay package of $2.68m. His expense reimbursements for the period came to roughly $275,000, adding up to overall payments of $2.95m.
Sanders, meanwhile, was paid twice-monthly bonuses of $40,000 up until the end of 2011, with the payments dropping to $25,000 twice a month in the new year. His wages were static at $75,000 per month, working out at $900,000 annually.
Both Sanders and DiCarmine received six-figure salary payments on 15 May this year, just under two weeks before the firm filed for bankruptcy in the US, with DiCarmine earning $112,660.26 and Sanders $106,730.77. These occurred on the day of the month on which they would usually receive their first twice-monthly wage instalment, but both figures account for more than a month’s normal basic salary.
The pair were both among the defendants in a lawsuit brought in June by former Dewey IP partner Henry Bunsow that alleged that the firm’s senior management maliciously misrepresented the firm’s financial situation (14 June 2012).
DiCarmine has been described by former partners as the ‘Cardinal Wolsey’ of Dewey and chairman Davis’s right-hand man. He was closely involved in administering the 2007 merger between Dewey Ballantine and Davis’s and DiCarmine’s legacy firm LeBoeuf Lamb Greene & MacRae (16 April 2012).
The filings for the US LLP, which excludes the London office, come amid fights over bonuses for staff working on the firm’s wind-down, with US media reporting that the firm won approval this week to pay up to $700,000 in bonuses to incentivise the remaining staff, whose numbers are dwindling.
The filings also confirm that the firm held merger talks with Baker & McKenzie, Greenberg Traurig, Patton Boggs, Reed Smith, SNR Denton and Winston & Strawn prior to the firm’s collapse, and that payments to partners, including drawings, distributions and expense reimbursements, for the year from May 2011 to May this year ranged from $15,033 to $6.75m.
The document states that the firm signed confidentiality agreements with and issued due diligence packages to the six merger suitors within the two years running up to the bankruptcy.
Meanwhile, a number of Dewey’s former UK staff members have received a letter from the firm’s US bankruptcy counsel, Togut Segal & Segal, informing them of a creditors’ meeting in New York.
The UK administrator’s proposals filed late last month show the firm’s unsecured creditors are likely to lose the bulk of the £5.2m owed to them, with administrators at BDO stating that there may be enough funds available to meet preferential claims of £420,000 from UK staff for unpaid holiday pay. The UK LLP is likely to be liquidated (30 July 2012).
Sanders and DiCarmine were unavailable for comment. Davis, who chaired the firm at the time of the largest bonus payments, declined to comment.