Greenberg on defensive after Abramoff fraud
One the hottest topics of debate in the US legal market in recent weeks is the impact that former Greenberg Traurig rainmaker and disgraced lobbyist Jack Abramoff’s guilty plea to charges of fraud, tax evasion and conspiracy to bribe government officials will have on his former firm.
Abramoff pleaded guilty earlier this month (January) to defrauding clients of tens of millions of dollars by supplementing his income through side businesses, from which he received millions of dollars in kickbacks.
As part of the plea agreement, he will also cooperate with federal prosecutors investigating whether he bribed members of Congress, their aides or members of the Bush administration.
Industry commentators have been quick to question whether the Miami-headquartered firm turned a blind eye to Abramoff’s actions, leaving itself open to potential malpractice claims. Greenberg has, of course, strenuously denied any knowledge of Abramoff’s shenanigans, with many partners claiming they only learnt of the scandal through press reports in early 2004. The firm was subsequently quick to oust Abramoff and cooperate with the prosecution’s investigation.
In fact, when the plea agreement was announced this month, it painted the firm as an unknowing victim of the fraud, not a participant. This is sure to help Greenberg defend itself against any angry clients – although it has already agreed with a number of clients, including Tyco, and faces a lawsuit filed by the Louisiana Coushattas native American tribe.
The firm’s UK ally Olswang has distanced itself from Greenberg’s troubles, referring all queries back to the US firm. The gossip is further fuelled by the fact that several people who worked with him have been quietly dismissed.
Prosecutors have, however, given no indication that they are investigating Greenberg. But it will undoubtedly be some time until the politically well-connected firm, which most notably represented George W Bush Jnr over the disputed 2000 election, recovers from this sizeable blow.
B&M, Squire Sanders, Bryan Cave seek mergers
The New Year has also brought renewed speculation of consolidation within the US market, with a trend emerging for mid-market firms intent on growing into 1,000-plus-lawyer national giants.
During 2005 there was a particular focus on Washington DC, with San Francisco-based Pillsbury Winthrop merging with DC-based Shaw Pittman early in the year, although it was Bingham McCutcheon’s linkup with Swidler Berlin that stole the limelight.
As first revealed on www. thelawyer.com (8 December), the merger is still subject to a few formalities, but if all goes to plan the national giant will merge with the struggling DC firm by the end of March.
The apparent success of what will be Bingham’s sixth merger in just nine years has ruffled a few feathers, with a swathe of other US giants hitting the merger trail.
Bryan Cave and Squire Sanders & Dempsey are courting one another in the hope of creating a 1,600-lawyer national heavyweight with a revenue topping $800m (£452.9m). Squire Sanders appears to have taken a leaf out of Bingham’s book, as the national firm only merged with Miami firm Steel Hector & Davis in October.
Pittsburgh-based Reed Smith has also re-established its search for separate merger partners in Texas and Chicago following the demise of its merger talks with Wildman Harrold.
But the biggest mystery surrounds Baker & McKenzie, which is widely rumoured to be mulling a merger. The Chicago giant has hotly denied any such activity, although it was similarly reclusive about its discussions with Courdert Brothers. Hopefully, any current discussions will not end in the same way for the target.
Holland & Knight downscales offices
Flying in the face of current consolidation in the market, Holland & Knight has opted to downsize its operations after revealing that a swathe of mergers with regional firms has not resulted in the hoped-for profit boost.
Managing partner Howell Melton told The Lawyer that many of the firm’s mergers had failed and that it was now looking to offload nine of the offices it had gained through various mergers, or fold them into existing, nearby metro offices.
Melton said: “We’re divesting ourselves of some smaller firms we’ve acquired, so it’s more of a reconfiguration. I expect those lawyers will reconstitute themselves as independent, local firms and I expect that Holland & Knight will maintain a referral relationship with them.”
Its Providence, Rancho Santa Fe, Seattle and San Antonio offices will be split off, while Annapolis, Oakbrook Terrace, St Petersburg, Lakeland and Bradenton presences will be folded into nearby offices.
Perhaps the firm’s competitors that are so eager to merge should take note, as Holland & Knight’s expansion campaign has also had severe consequences for the firm’s management and, most importantly, its bottom line.
In a bid to increase profitability, Melton has also had to resort to overhauling the firm’s management structure (The Lawyer, 9 January). Its existing office-based practice group heads are to be replaced with firmwide heads by April. The number and size of the firm’s internal committees are also to be reduced, as is the number of equity partners.
Not exactly the result that was sold to the firm’s partnership when it gave the green light to the merger campaign.
Associates disappointed at bonus rates
As the US market eagerly awaits publication of local firms’ financial results for 2005 in the next few weeks, early indications are promising. Bryan Cave claims to have beaten “an aggressive budget” and Wilmer Cutler Pickering Hale and Dorr is crowing about an 8 per cent increase in revenue, although this is likely to be largely wiped out by the “merger costs still being bedded down”.
It is unlikely, though, that many of the country’s associates will lose sleep over the results after they received disappointing end-of-year bonuses. Many have made their views clear in internet chatrooms, with one such disgruntled associate describing the situation as “a joke”.
Cravath Swaine & Moore and Milbank Tweed Hadley & McCloy offered static bonuses, ranging from $30,000 (£17,000) to $60,000 (£33,900). Meanwhile, Cadwalader Wickersham & Taft, Paul Weiss Rifkind Wharton & Garrison, Simpson Thacher & Bartlett and White & Case offered bonuses starting at $35,000 (£19,800).
But it was Los Angeles and Atlanta-based firms that were the most generous, increasing base salaries for associates. Atlanta-based Alston & Bird, King & Spalding and Troutman Sanders hiked pay for first-year associates by $15,000 (£8,500) to $115,000 (£65,000). Meanwhile, despite the headache caused by Abramoff, or maybe in response to it, Greenberg Traurig increased base pay for first-year associates by $10,000 (£5,600) to $135,000 (£76,500).
But any soothing affect this may have had on the ranks is sure to be erased quickly by the results of an annual billing survey in the US by The National Law Journal.
Chairman of Baltimore-based firm Venable Benjamin Civiletti has become the country’s most costly lawyer, charging $1,000 (£566) an hour. Meanwhile, 2004’s top rate of $875 (£495), which was charged by an unidentified London partner at Reed Smith, was almost matched by an unnamed associate at Minneapolis-based Dorsey & Whitney. The associate charged $835 (£472) an hour, the highest rate of any associate in 2005.
Let us hope they received a shiny Christmas present from the firm for their hard work.
Europe: 23 Jan
Asia: 30 Jan
Europe: 6 Feb
US: 13 Feb